Dec 1, 2009
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Guess holiday profit outlook sends shares up

Dec 1, 2009

By Alexandria Sage

SAN FRANCISCO (Reuters) - U.S. apparel brand Guess Inc (GES.N) posted a larger-than-expected quarterly profit on Monday 30 November and forecast holiday season earnings higher than Wall Street estimates, sending its shares up 9 percent.

Photo: www.guess.com

The apparel wholesaler and retailer cited strength in boots, accessories, premium and basic denim and jackets, and said more targeted promotions and more efficient sourcing helped boost results.

Chief Financial Officer Dennis Secor called it "an outstanding performance," given that some shipments usually delivered in the third quarter had shifted to the second quarter in Europe where the company has been trying to distribute orders earlier.

The company best known for its jeans said its third-quarter net profit was $64.1 million, or 69 cents per share, compared with $64.0 million, or 67 cents per share, a year earlier.

Analysts, on average, had been expecting earnings of 50 cents per share, according to Thomson Reuters I/B/E/S.

"Product, product, product, controlled inventories, and very targeted promotions toward key customers," is how Needham & Co analyst Christine Chen explained the robust results.

Guess, which operates stores across the globe, has been expanding its existing business in Europe and Asia.

The company cited controlled spending and tight inventories that helped nudge operating profit margin up by 10 basis points to 18.9 percent in the quarter.


Total revenue fell 1 percent to $522.8 million. Revenue in the company's wholesale division rose 10 percent.

Revenue fell 9.3 percent in the larger European unit, where the seasonal delivery shift to the second quarter affected results.

"The European business continues to be very strong. Even though Europe was down, it was down a lot less than they guided," said Chen, who added that Guess' fourth-quarter forecast could also prove conservative.

Guess -- which said its product margins rose more than 300 basis points in November due to better sourcing and fewer promotions -- said it ended the month with positive same-store sales up in the low single digits on a percentage basis.

Executives, speaking to analysts during a call, said retail revenues in Europe would be up over 40 percent in the fourth quarter.

The company said it expects fourth-quarter revenue of $585 million to $605 million on earnings of 77 cents to 80 cents per share. Wall Street had been expecting earnings of 69 cents in the fourth quarter on revenue of $563.8 million.

Guess shares rose nearly 9 percent to $40.30 after closing at $37.05, down 1 percent, on the New York Stock Exchange.

(Reporting by Alexandria Sage; Editing by Richard Chang, Leslie Gevirtz)

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