) first quarter 2013 adjusted earnings per share (EPS) of 30 cents
came in ahead of the Zacks Consensus Estimate of 26 cents, but it
fell significantly short of the year-ago EPS of 54 cents.
Prior-year earnings excluded 8 cents in net non-operating charges,
primarily unrealized mark-to-market charges related to foreign
currency contracts and balances.
A slight improvement in conditions in North America was offset
by lower spending in Europe, as the region adhered to austerity
measures undertaken by governments to combat the debt crisis. Lower
sales and margins in all the segments of the company also
contributed to lower earnings in the period.
Revenues and Margins
Revenues in the quarter dropped 2.2% to $579.3 million from
$592.2 million in the prior-year quarter. Total number of stores in
the first quarter 2013 was 1,595, out of which 767 were directly
operated stores compared to 1,421 stores in the year-ago quarter
out of which 686 stores were directly operated stores.
Operating income declined 44.8% to $39.1 million from $70.9
million in the year-ago quarter.
Operating income margin shrank 520 basis points to 6.8% year
over year, reflecting higher selling, general and administrative
expenses and investment in advertising and marketing coupled with
negative same-store sales.
Retail stores in the North American segment generated revenues
of $251.8 million in the first quarter, up 1.8% from $247.5 million
in the same period last year. Comparable store sales shrank 5.5%
from the year-ago quarter. Operating income decreased 9% to $17.0
million from $18.6 million in the year-ago quarter.
Revenue in the European segment slipped 9.7 % to $189.8 from
$210.2 million in the year-ago quarter. Operating earnings plunged
62% to $12.5 million from $33.2 million in the prior-year
The Asian segment's revenue increased 7.9% to $64.8 million from
$60.1 million in the year-ago quarter. Operating income slipped 17%
to $5.9 million compared with $7.1 million in the year-ago
Net revenue in the North American Wholesale segment slipped 3.8%
to $43.9 million in the quarter from $45.6 million in the year-ago
quarter. Operating income went down 16% to $9.3 million from $11.1
million in the year-ago quarter.
Licensing segment net revenue inched up to $28.9 million in the
first quarter from $28.8 million reported in the year-ago quarter.
Operating income came down 3% to $24.6 million from $25.3 million
in the year-ago quarter.
Other Financial Update
As on April 28, 2012, Guess? had $480.3 million of cash and cash
equivalents compared with $491.8 million in the prior quarter.
Stockholder's equity stood at $1.18 billion compared with $1.17
billion in the prior quarter.
Operating activities provided $36.6 million of cash, of which
$31.4 million was used in investing activities.
The Way Forward
The company's continuing expects to continue strong business
momentum, even in the face of the challenging weak consumer and
category growth environment and inflating input cost, is a strong
catalyst to drive its performance going forward. Management expects
new marketing campaigns aimed at increasing consumer reach and the
launch of innovative products to help boost the top line in the
coming quarters. The company is also focusing on unexplored growing
markets such as China, Germany and Russia.
The company expects second quarter 2013 earnings in the range of
48 cents to 52 cents. For fiscal 2013, the company expects EPS in
the range of $2.50 to $2.65. The Zacks Consensus estimate is pegged
at 61 cents for the second quarter and at $2.62 for fiscal
While operating margin is expected to be between 12.5% and 13.0%
for the second quarter 2013, it is expected to between 10.0% and
10.5% for fiscal 2013.
Net revenue is expected to be in the range of $625 million and
$635 million in the second quarter and between $2.70 billion and
$2.74 billion for fiscal 2013.
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.
ABERCROMBIE (ANF): Free Stock Analysis Report
GUESS INC (GES): Free Stock Analysis Report
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