Guess Profit Declines; Shares Plunge On Soft Outlook

(RTTNews) - Guess? Inc (GES) Wednesday reported a steeper-than-expected decline in second-quarter profit as the fashion apparel retailer was hurt by soft demand in North America and Europe, with margins under pressure.

Guess provided a pale outlook for the third quarter owing to weak demand for its Fall collection in North America, and slashed its guidance for the full year.

Investors were dismayed, sending Guess stock to a new low in a year, at $23.52 in after-hours trade on the New York Stock Exchange.

Guess CEO Paul Marciano said the North American market was soft due to weak traffic and promotional activity, adding the company would rationalize its portfolio in this region.

Guess has been struggling for the past quarters, with weak traffic, soft consumer sentiment and competition in the U.S. and Europe. The company earlier said it would sustain investment in new markets like Japan and Brazil, focus on online retail, and streamline its cost structure.

Guess, based in Los Angeles, California, posted quarterly net earnings of $22 million or $0.26 per share, compared with $39.9 million or $0.47 per share last year.

On average, 12 analysts polled by Thomson Reuters expected earnings of $0.29 per share for the quarter. Analysts' estimates typically exclude special items.

The company's sales for the second quarter fell 4.8 percent to $608.6 million from $639 million a year ago. Twelve analysts had a consensus sales estimate of $618 million for the quarter.

Guess said its sales from retail stores in North America fell 4 percent from last year, and same store sales in the region fell 5.4 percent.

Europe sales slid 6 percent from a year ago, and Asia declined 2.4 percent. North American wholesale sales fell 8 percent.

As of Aug. 2, Guess directly operated 837 stores out of a total of 1,685 stores.

Results for the quarter were also hurt by gross margin that shrunk to 35.6 percent from 38.9 percent last year, and operating margin dipping to 4.9 percent from 9.5 percent.

For the third quarter, Guess expects sales of $0.15 to $0.20 per share on sales of $590 million to $600 million. Analysts expect earnings of $0.37 per share on sales of $613 million.

For fiscal year 2015, Guess now projects earnings of $1.05 to $1.20 per share on sales of $2.44 billion to $2.48 billion. The earlier earnings expectation was in a a range of $1.40 to $1.60 per share on sales of $2.53 billion to $2.57 billion.

Analysts estimate earnings of $1.46 per share on sales of $2.53 billion for the year.

The company announced a quarterly cash dividend of $0.225 per share.

Guess stock closed Wednesday at $25.64, down $0.19 or 0.74%, on a volume of 1.8 million shares on the NYSE. In after hours, the stock dropped $2.12 or 8.27% at $ 23.52. In the past year, the stock traded in the range of $24.60 - $34.94.