Guess?, Inc. (GES)

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Guess?, Inc. (GES)

F4Q09 (Qtr End 01/31/09) Earnings Call Transcript

March 17, 2009 4:30 pm ET

Executives

Paul Marciano – Vice Chairman and CEO

Dennis Secor – SVP, CFO, Principal Financial and Accounting Officer

Carlos Alberini – President and COO

Analysts

Jeff Klinefelter – Piper Jaffray

Eric Beder – Brean Murray

Todd Slater – Lazard Capital Markets

Christine Chen – Needham & Company

Janet Kloppenburg – JJK Research

Chi Lee – Morgan Stanley

Betty Chen – Wedbush Morgan

Holly Guthrie – Boenning & Scattergood

Presentation

Operator

Good day and welcome to Guess fourth quarter fiscal 2009 conference call. Before we get started, please note that the company will be making forward-looking statements during this call, including comments regarding future plans and outlook. The company’s actual results may differ materially from current expectations based on risk factors included in the company’s quarterly and annual reports filed with the SEC.

Now for opening remarks and introductions, I would like to turn the call over to Paul Marciano, Chief Executive Officer of the company. Please go ahead.

Paul Marciano

Thank you. Good afternoon and thank you for joining us today to discuss Guess' financial results for the fourth quarter of fiscal year 2009. Also joining me are Maurice Marciano, Carlos Alberini, and Dennis Secor.

I am pleased to report a very solid quarter today, where we once again set a new revenue record increasing our business by 9% in spite of a challenging consumer environment and strong currency headwind.

This period ended the year of dramatic change. We entered the year with 20 consecutive quarters of positive comp, and continued delivering significant revenue growth and earnings expansion. We reported record revenue and record earning on each of the first three quarters of the year. Later, in the fourth quarter we saw rapid economic deterioration.

At the very first sign of that market correction, we acted quickly and decisively to streamline operation, reducing inventory ownership, and limit our capital spending. Considering the speed and severity of the crisis and its impact on the competitive environment, our company performed very well during the fourth quarter.

Excluding a non-cash charge that Dennis would describe, we exceeded our previously expected earnings for the period growing our fourth-quarter earnings by 12% and expanding our diluted earnings per share to $0.67, a 14% increase over last year fourth quarter of $0.59.

With this performance, we close the year to set a new sales record at $2.1 billion and increase adjusted earning by 23% with EPS reaching $2.35. This result highlights the benefit of our diversified business model and the strength of our brand. It also reflects the experience and dedication of our management team during the challenging time. I want to thank every one of them for their continued commitment and for their hard work.

Our retail business was the most impacted. We closed the quarter with a total revenue increase of 7% and a same-store sales decrease of 6.5%. Throughout the holiday season, consumers were more selective and certainly more price sensitive. These affected our (inaudible) concept most, but was also hurting our factory stores.

G by Guess performed well in the quarter. These stores are performing better and we believe the concept can benefit as fashion conscious consumer are motivated by the stunning assortment and more attractive prices of the G by Guess brand.

For the full year, we opened 57 new stores and ended with 425 stores for North America. In Europe, we are once again very pleased with our results in Europe, which performed well even as we faced adverse currency comparison, in that some European economies step into recession like Spain and the UK.

Our business in Europe recorded a revenue increase of 31% in euros for the fourth quarter. We expanded our retail business in Europe, which generated positive comp in the quarter and its revenues increased in Europe by almost 50%. We ended the fiscal year with 61 stores.

Our strategy to expand into international markets continued to be our top priority. For fiscal 2009, Europe generated almost half of our total operating profit for the company up from 38% in fiscal 2008.

Our wholesale segment also grew during the fourth quarter driven by South Korea and China, where we continue to invest with new stores and gain market share. With respect to our licensing business, the current environment has affected our licensees as well. Nevertheless, it was an outstanding year, delivering a double-digit growth for the full year, and the increase was mostly made by watches, handbags and footwear again.

Conditions today are unprecedented, but we believe that a company like ours with strong global brands, solid capital structure, strong cash flow and most importantly a seasoned management team are in a best position to (inaudible). Our strategy is very clear and simple, we will preserve our capital and resources. We will protect the integrity of our brand and our customers’ relationship, and continue to invest in key markets where we are under penetrated, specifically in Europe.

For capital, we already saw the capital spending. Last year we spent $83 million, far below the $102 million we had planned. We are currently spending only committed retail deals in North America and Europe. Beyond that we will look for opportunities, excellent location with very strong economics that will be acquired.

Regarding brand integrity, we continue to work hard to offer product consistency around the world. Our team of designers have been working together to develop a product that has one point of view. We have aligned our calendars globally, so deliveries are also consistent with all markets. With this collaboration, we will enjoy significant commonality for among assortment for certain product categories.

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