) fourth quarter 2012 adjusted earnings per share (
) of $1.05 came in line with the Zacks Consensus Estimate and
missed the year-ago EPS of $1.11 by 5.4%. Fiscal year 2012 earnings
went down 1.9% year over year to $3.05 per share compared with$3.11
per share in the prior year. Fiscal earnings missed the Zacks
Consensus estimate by a penny
A slight improvement of conditions in North America was offset
by lower spending in Europe, as the region adhered to the austerity
measures undertaken by the government to combat the debt crisis.
Moreover, the lingering debt crisis affected the company's profit
during the fourth quarter.
The Way Forward
The company's continuing strong business momentum, even in face
of the challenging weak consumer and category growth environment
and inflating input cost, boosts the confidence to perform better
going forward. Management also feels new strategic initiatives like
promoting its brands in North America will reap benefits in the
coming quarter. Additionally, management derives confidence from
unexplored markets in Europe and momentum in Asia. To bolster its
presence in the emerging markets, the company plans to develop a
joint ventures in Brazil, and expand its presence in India in
The company expects the first quarter 2013 earnings to be in the
range of 25 cents to 28 cents. The outlook includes benefit of
about 3 cents to 4 cents from inclusion of the53rd week and the
impact of last year's share repurchase. For the fiscal year
2013,the company expects EPS to be in the range of $2.50 to $2.65.
The company expects rate of earnings decline to gradually lessen
throughout the year and forecasts the fourth quarter of the coming
year to post first earnings growth.
In North America retail, the company plans to focus on better
product, lean inventory, tight markdown management, and increased
full price selling, thus improving profitability while maintaining
quality. In Europe, the company plans to develop in a balanced way
across geographies, while in Asia, it plans continued expansion
with productivity improvements.
Revenues and Margins
Revenues in the quarter climbed up 2.5% to $775.8 million from
$756.9 million in the prior-year quarter. Revenues for fiscal 2012
went up 8.1% to $2.69 billion from $2.49 billion in the prior
Retail stores in North American segment generated 1.4% higher
revenue of $343.5 million in the fourth quarter compared with
$338.6 million in the same period last year. Comparable store sales
shrank 5.0% from last year.
Asian markets reported 27.5% increase in revenues, while
European markets reported a drop of 1.4% in revenues. However,
North American Wholesale segment posted a year-over-year increase
of 7.5%, while licensing segment net revenue in the fourth quarter
was flat year over year.
Operating income grew 5.9% to $135.8 million, reflecting
unfavorable currency translation impact.
Operating income margin shrank 160 basis points to 17.5%, year
over year, as improved product margins were more than offset by
higher occupancy and Selling General & Administrative
As on January 29, 2012, Guess? had $491.80 million of cash and
cash equivalents compared with $427.03 million in the prior-year
Operating activities provided $364.5 million of cash, of which
$132.1 million was used in investing activities.
Commodity-price inflation, global recession and competition in
the highly fragmented apparel industry coupled with stiff
competition from rivals like
Abercrombie & Fitch Co.
) are matters of concern.
Currently, Guess? holds a Zacks #4 Rank, implying a short-term
Sell rating. On a long-term basis, we maintain an 'Underperform'
rating on the stock.
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