Guess Profit Falls; Outlook Weak

Guess Inc.'s (GES) fiscal second-quarter income fell 29% as the apparel maker saw continued weakness in Europe and lower sales in North America overshadow significant growth in its Asian operations.

Shares plummeted 15% after hours to $28.53 after the company predicted weak third-quarter results and again lowered its full-year guidance. As of Wednesday's close, the stock was up 12% so far this year.

The company lowered its full-year guidance, now seeing earnings of $2.15 to $2.30 a share on revenue of $2.62 billion to $2.65 billion. It had lowered its estimates in May to per-share income of $2.50 to $2.65 and revenue of $2.7 billion to $2.74 billion.

For the third quarter, Guess expects downbeat per-share earnings of 42 cents to 46 cents on revenue of $620 million to $630 million, missing estimates of 64 cents and $671 million from analysts surveyed by Thomson Reuters.

Guess last year was able to depend on strong sales overseas--fueled by growth in Asia and Europe--to compensate for weaker demand in North America. But lighter sales in Europe have started to drag on the bottom line. The company in July boosted its share-buyback program by $500 million, looking to boost shareholder returns.

In the latest period, North American retail sales shrank 3.1% as the region's same-store sales slumped 8.5%. European sales were down 15%. Asian revenue jumped 21%.

For the quarter ended July 28, Guess reported a profit of $42.9 million, or 49 cents a share, down from $60.7 million, or 65 cents a share, a year earlier. Excluding a settlement charge related to a European service provider, earnings a year ago were 84 cents a share. Net revenue sank 6.2% to $635.4 million.

The company in May forecast earnings of 48 cents to 52 cents on revenue of $625 million to $635 million.

Gross margin narrowed to 39.6% from 43.9%.

Write to Ben Fox Rubin at [e-mail]

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