Guess Swings to Profit But Gives Downbeat Guidance

Guess Inc. swung to a profit in the first quarter but gave downbeat guidance for its current quarter as revenue fell short amid the continuing strength of the strong U.S. dollar.

Shares were down about 1.6% in recent after-hours trading.

For the current quarter, the company forecast per-share earnings between 12 cents and 16 cents, below analyst estimates of 18 cents a share. The company's estimate includes a negative impact of 12 cents a share from foreign exchange rates.

However, it raised its guidance for the year ending in January 2016. Guess now expects per-share earnings between 86 cents and $1.02 a share, up from its previous estimate of 75 cents to 95 cents. This estimate includes a negative currency impact of 45 cents, up from the negative impact of 50 cents a share it had earlier forecast.

Analysts polled by Thomson Reuters have expected per-share profit of 87 cents.

The Los Angeles-based apparel company has struggled with the effect of the strong dollar. It generates big chunks of its sales overseas, deriving roughly a third of its sales in Europe.

For the April quarter, revenue in its European business segment fell 14%, though it would have increased 8% on a constant currency basis. In addition, earnings from the European segment rose 45%, due mostly to cost-cutting initiatives.

North American retail sales dropped 6%, while wholesale revenue decreased 5%. However, earnings from North American retail grew 14%, though earnings for North American wholesale fell 13%.

Overall, Guess swung to a first-quarter profit of $3.3 million, or four cents a share, compared with a loss of $2.1 million, or three cents a share, a year earlier.

Revenue fell 8.4% to $479 million. Excluding foreign-exchange rates, sales would have been roughly flat from the year before.

Chief Executive Paul Marciano said results were better than expected due to "tight expense management." He added that there was improvement in the women's category, e-commerce and European retail. These trends are continuing into the current quarter, he added.

Analysts polled by Thomson Reuters had expected a per-share loss of five cents on revenue of $484 million.

Write to Angela Chen at [e-mail]

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