Mar 17, 2011
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Guess profit rises but outlook below Wall Street view

Mar 17, 2011

Mar 16 - Guess Inc expects weak sales at its North American stores to persist early this fiscal year amid pressure on its profits from rising cotton and oil prices, and its shares fell nearly 5 percent.

Two of Guess' S/S 2011 ad campaign

The retailer and wholesaler, best known for its jeans, reported a higher profit for the holiday quarter but said same-store sales in North America slipped because of a disappointing amount of shopper traffic.

Chief Executive Paul Marciano said in a conference call with analysts that Guess had to offer "aggressive" bargains to lure shoppers, which dented profits.

The company's profit forecast for the year was below Wall Street's expectations.

Sales at Guess' North American stores open at least a year fell 1.1 percent during the holiday quarter.

So far this quarter, same-store sales are down by a low single digit percentage and the company said the trend would continue throughout the three-month period. North American retail sales make up about 45 percent of companywide sales.

"In North America, we feel that our performance does not currently reflect the true potential of our brand," Marciano said. Last week, he named Nancy Shachtman as head of the North American unit.

Adding to the pressure on Guess, rising cotton costs will lead to a double-digit percentage increase in prices later this year even though shoppers have shown they are still price sensitive.

Wholesale sales to chains such as department stores fell 5.2 percent during the quarter as those retailers cut back on their orders to maintain leaner inventory and avoid slashing prices, and Guess said it expects that trend to continue.

Guess forecast earnings of between $3.30 and $3.50 per share for the current fiscal year, a range largely below the $3.50 per share that Wall Street analysts expected on average, according to Thomson Reuters I/B/E/S.

Its current-quarter profit forecast of 41 to 44 cents per share was below the 61 cents expected by analysts.

For the current year, Guess expects revenues of $2.72 billion to $2.82 billion.
Still, net revenue rose 18 percent to $756.9 million, helped by a 32.5 percent increase in Europe expressed in U.S. dollars, and a 23.2 percent gain in Asia.

Europe and Asia accounted for nearly half of companywide sales and represent the thrust of its expansion plans.

Guess said net income was $105.4 million, or $1.11 per share, in its fiscal fourth quarter, ended January 29, compared with $87.9 million, or 93 cents per share, a year earlier. That beat the $1.06 per share analysts expected.

The company's shares were down $2.03, or 4.6 percent, at $41.84 from their close on Wednesday of $43.87. They had slipped 1.2 percent during regular trading hours on the New York Stock Exchange.

(Reporting by Phil Wahba; Editing by Steve Orlofsky, Bernard Orr)

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