Los Angeles—Bucking a generally soft second quarter for most apparel retailers, Guess Inc. reported Wednesday better-than-expected earnings helped by stronger-than-expected sales in North America.
For the quarter ended August 3, the apparel and accessories company posted net income of $39.8 million, or 47 cents a share, compared with net income of $42.9 million, or 49 cents per share, a year ago. Excluding restructuring charges, the company earned 52 cents a share, easily beating analysts’ average estimate for 36 cents a share.
Total sales edged up 0.6% to $639 million ahead of analysts’ estimate for $622.9 million in sales. Sales at the brand’s North American stores were up 0.5% to $254.3 million even though comparable store sales dropped 2%. Sales in Europe increased 1% as did sales in Asia. In Europe, its second biggest market, comparable-store sales fell by mid-single-digit percentage as wholesale shipments in Italy and France declined.
‘Encouraged by Improvements in North American Retail’
Net revenue from the North American Wholesale segment decreased 0.7% to $41.4 million. Licensing segment net revenue was slightly up at $27.1 million compared with in the $27 million a year ago.
Gross margin narrowed to 38.9% from 39.6%. However, adjusted operating margins were up to 10.5% from 9%, surpassing management’s call for a decline to 8.5%.
“The earnings not only reflect the achievement of our revenue expectations for the quarter, but also the benefits of our expense management and cost control efforts,” Guess CEO Paul Marciano said.
“We are very encouraged by the improvements in the trends of our North American Retail business in the second quarter, reflecting the enhancements in our product assortments,” Marciano said. “However, the economic climate in Southern Europe continues to be challenging and we are beginning to see a slowdown in China. Therefore, although we are encouraged by our overall results in the first half of fiscal 2014, the outlook for consumer spending in Southern Europe and China remains uncertain and we are planning our business accordingly.”
For its third quarter, Guess forecast earnings between 34 to 38 cents a share on sales between $610 million to $620 million. Analysts’ consensus expects earnings of 40 cents on sales of $615.4 million.
The fiscal full year forecast was raised, however. Guess said it expects to earn $1.78 to $1.92 a share an adjusted basis with revenue between $2.56 billion and $2.59 billion. That’s up from its previous forecast for earnings between $1.70 and $1.90 a share on revenue between $2.57 billion and $2.61 billion.
Analysts have forecast of $1.79 a share on revenue of $2.58 billion.
Guess saw its shares rise as much as 18% in early trading after the report was released.