Guess Profit Tops Estimates; Stock Down On Weak Guidance

(RTTNews) - Fashion apparel retailer Guess? Inc (GES), Wednesday reported a lower fourth-quarter profit, due mainly to slackening demand in North America and Europe, with margins under pressure. Nonetheless, results for the quarter topped Wall Street estimates.

Guess said it expects to report a loss for the first quarter as prospects appear dim, with its guidance for the full year none too impressive.

The announcement sent investors into panic mode, sending Guess shares sharply down over 6 percent in after-hours trade on the New York Stock Exchange.

The company, however, raised its quarterly dividend by 12.5 percent to $0.225 per share.

Guess expects fiscal year 2015 sales to be soft in its developed markets, especially at own stores in North America and European wholesale channel, said CEO Paul Marciano. Marciano said Guess will continue to invest in new markets like Japan and Brazil, while maintaining some optimism for online sales.

Guess has been struggling for the past quarters and has faced weak traffic, soft consumer sentiment and competition in the U.S. But some strength in online sales and its competitively priced products appear to provide some cushion. Also, conditions are not conducive in Southern Europe, where it sees weakness for its wholesale channel.

Guess has had cut costs and streamlined its businesses, but the poor guidance and the quarterly results indicate it has some way to go toward attaining a positive trajectory.

Los Angeles, California-based Guess posted fourth-quarter net earnings of $69.6 million or $0.82 per share, compared with $72.6 million or $0.85 per share last year.

Excluding items, adjusted earnings for the quarter were $71 million or $0.83 per share, compared with $81 million or $0.95 per share a year ago. On average, 14 analysts polled by Thomson Reuters expected earnings of $0.79 per share for the quarter. Analysts' estimates typically exclude special items.

Sales for the fourth quarter slid 5.7 percent to $768.4 million from $815 million last year. Thirteen analysts had a consensus sales estimate of $962.94 million for the quarter.

Sales from retail stores in North America declined 6 percent from last year. Guess, which operates 494 stores in the U.S. and Canada, said comparable store sales fell 4.4 percent.

Europe sales dropped 4.4 percent from a year earlier, while Asia sales were down 1.4 percent.

Gross margin for the quarter receded to 39.3 percent from 40.8 percent last year. Adjusted operating margin declined 110 basis points to 13.6 percent, partly on the impact of more markdowns.

For the first quarter, Guess expects a net loss in the range of $0.09 to $0.05 per share and sales of $520 million to $535 million. Analysts currently expect earnings of $0.11 per share on sales of $550.13 million.

For fiscal year 2015, the company projects earnings of $1.40 to $1.60 per share and sales of $2.53 billion to $2.58 billion. Analysts currently expect earnings of $2.01 per share on sales of $2.61 billion.

Guess stock closed Wednesday at $28.75, $0.52 or 1.78%, on a volume of 1.68 million shares on the NYSE. In after hours, the stock dropped $1.76 or 6.12% to trade at $27.00. In the past year, the stock trended in the range of $24.31 - $34.94.