EX-99.1 2 gu7693ex991.txt EXHIBIT 99.1 Exhibit 99.1 GUESS?, INC. REPORTS RECORD THIRD QUARTER 2006 REVENUES AND EARNINGS THIRD QUARTER EPS INCREASED BY 128%, TO $1.05 VERSUS $0.46 LAST YEAR OCTOBER 2006 COMP SALES UP 11.8% COMPANY ISSUED EPS GUIDANCE RANGE FOR 2007 OF $2.75 TO $2.85 Third Quarter Highlights - Revenues increased by 31% to $348.7 million - Gross margin increased by 390 basis points and SG&A expense rate decreased by 390 basis points - Operating margin improved 780 basis points to 21.2% - Net earnings grew 134% to $48.4 million Nine-Month Highlights - Revenues grew 27% to $838.8 million - Gross margin increased by 300 basis points and SG&A expense rate decreased by 260 basis points - Operating margin improved 560 basis points to 14.5% - Net earnings increased 135% to $77.5 million LOS ANGELES, Nov. 1 /PRNewswire-FirstCall/ -- Guess?, Inc. (NYSE: GES) today reported financial results for the third quarter ended September 30, 2006. Third Quarter Results For the third quarter of 2006, the Company reported record net earnings of $48.4 million, an increase of 133.8% compared to net earnings of $20.7 million for the quarter ended October 1, 2005. Diluted earnings per share increased 128.3% to $1.05 per share in the current quarter versus $0.46 per share in the third quarter of last year. Paul Marciano, Co-Chairman and Co-CEO, commented, "We are very pleased with our outstanding financial performance in the third quarter. Our results represent record-setting levels of revenues, operating margin, net earnings and earnings per share, compared to any quarter in the Company's history. Our revenues and earnings came in stronger than our expectations across all businesses and geographic regions of the world. Our operating results show the power and the potential of our business model with each of our businesses achieving significant growth and margin expansion in the quarter. As a result, the Company's operating margin expanded by 780 basis points -- a great achievement." Mr. Marciano stated, "Starting with North America, we had a very strong quarter. Our retail business delivered top line growth of 14% and increased operating earnings by 38%. The wholesale segment increased revenues by 38% and increased operating earnings nearly fivefold." Mr. Marciano concluded, "Our results demonstrate that our business model today is a unique one, more balanced and diversified. Europe had a remarkable third quarter and was the largest contributor to our results, generating nearly a third of our revenues and more than half of our operating profit. We see even greater opportunity in that region as we expand into northern and eastern Europe. As our European business continues to gain traction and momentum, we are now focusing on new opportunities, such as Asia." Total net revenue for the third quarter of 2006 increased 31.3% to $348.7 million from $265.6 million in the third quarter of 2005. The Company's retail stores in the U.S. and Canada generated revenue of $178.1 million in the third quarter of 2006, a 13.9% increase from $156.3 million, as reported in the prior-year period. Comparable store sales increased 8.6% during the third quarter of 2006 versus the prior-year period. Net revenue from the Company's wholesale segment increased 37.8% to $42.7 million in the third quarter of 2006, from $31.0 million in the prior-year period. Net revenue from the Company's European operations segment increased 73.1% to $111.5 million in the third quarter of 2006, compared to $64.4 million in the prior-year period. Licensing segment net revenue increased 18.3% to $16.4 million in the third quarter of 2006, from $13.9 million in the prior-year period. The Company operated 330 retail stores in the U.S. and Canada at the end of the third quarter 2006 versus 305 stores a year earlier. Operating earnings for the third quarter of 2006 increased 108.7% to $74.0 million from $35.5 million in the third quarter of 2005. Operating margin in the third quarter improved 780 basis points to 21.2%, compared to the prior year's quarter. This margin expansion was driven by a gross margin increase of 390 basis points to 47.0%, and an SG&A expense rate reduction of 390 basis points to 25.8% in the period. Nine-Month Results For the nine months ended September 30, 2006, the Company reported net earnings of $77.5 million, an increase of 134.7% compared to net earnings of $33.0 million for the nine months ended October 1, 2005. Diluted earnings per share increased 128.4% to $1.69 per share in the first nine months of 2006 versus $0.74 per share in the comparable period last year. The nine months ended September 30, 2006 had 273 days compared to 274 days in the nine months ended October 1, 2005. Total net revenue increased 27.2% to $838.8 million in the 2006 nine-month period from $659.4 million in the prior-year period. The Company's retail stores in the U.S. and Canada generated revenue of $481.0 million for the first nine months of 2006, an increase of 18.6% from $405.7 million in the prior-year period. Comparable store sales increased 13.0% during the first nine months of 2006. Net revenue from the Company's wholesale segment in the first nine months of 2006 increased 18.4% to $104.3 million from $88.1 million in the first nine months of 2005. Net revenue from the Company's European operations segment increased 60.0% to $209.5 million in the first nine months of 2006, compared to $131.0 million in the prior-year period. Licensing segment net revenue was $43.9 million in the first nine months of 2006, a 26.8% increase from $34.6 million for the prior-year period. Operating earnings for the first nine months of 2006 increased 108.8% to $121.9 million from $58.4 million in the first nine months of 2005. Operating margin for the first nine months of 2006 improved by 560 basis points to 14.5%. This margin expansion was driven by a gross margin increase of 300 basis points to 42.9% and a decrease in SG&A of 260 basis points to 28.4% in the period. October 2006 Retail Sales The Company also reported retail sales for its stores in the U.S. and Canada for fiscal October 2006. Total October retail sales for the month ended October 28, 2006 were $53.5 million, an increase of 17.6% from sales of $45.5 million for the month ended October 29, 2005. Comparable store sales for October 2006 increased 11.8%, which follows an increase of 12.3% for the October 2005 period. Outlook for 2007 The Company has reinstated issuing earnings guidance. For the 2007 fiscal year, the Company's expectations are as follows: - Consolidated net revenues are expected to range from $1.30 billion to $1.35 billion. - Operating margin is expected to be in the mid-teens. - Diluted earnings per share are expected to be in the range of $2.75 to $2.85. The Company will hold a conference call at 4:30 pm (ET) on November 1, 2006 to discuss the news announced in this press release. A live webcast of the conference call will be accessible at www.guessinc.com via the "Investor's Info" link. The webcast will be archived on the website for 30 days. Guess?, Inc. designs, markets, distributes and licenses a lifestyle collection of contemporary apparel, accessories and related consumer products. At September 30, 2006 the Company operated 330 retail stores in the United States and Canada. The Company also distributes its products through better department and specialty stores around the world. For more information about the Company, please visit www.guessinc.com. Except for historical information contained herein, certain matters discussed in this press release, including statements concerning the Company's future prospects and guidance for 2007, are forward-looking statements that are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are only expectations, and involve known and unknown risks and uncertainties, which may cause actual results in future periods to differ materially from what is currently anticipated. Factors which may cause actual results in future periods to differ materially from current expectations include our ability to, among other things, anticipate consumer preferences, effectively operate our retail stores, effectively manage inventories, successfully execute our strategies, including our supply chain and international growth strategies, and domestic and international general economic conditions and consumer confidence. In addition to these factors, the economic and other factors identified in the Company's most recent annual report on Form 10-K and other filings with the Securities and Exchange Commission, including but not limited to the risk factors discussed therein, could cause actual results to differ materially from current expectations. Contacts: Carlos Alberini President & Chief Operating Officer (213) 765-3582 Dennis R. Secor SVP & Chief Financial Officer (213) 765-3289 Joseph Teklits Integrated Corporate Relations (203) 682-8258 GUESS?, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (dollars in thousands, except per share data)
THREE MONTHS ENDED NINE MONTHS ENDED --------------------------------------------- --------------------------------------------- September 30, October 1, September 30, October 1, 2006 2005 2006 2005 --------------------- --------------------- --------------------- --------------------- $ % $ % $ % $ % --------- --------- --------- --------- --------- --------- --------- --------- Net revenue Product sales $ 332,304 95.3% $ 251,695 94.8% $ 794,848 94.8% $ 624,802 94.7% Net royalties 16,444 4.7% 13,905 5.2% 43,915 5.2% 34,641 5.3% --------- --------- --------- --------- --------- --------- --------- --------- 348,748 100.0% 265,600 100.0% 838,763 100.0% 659,443 100.0% Cost of product sales 184,917 53.0% 151,162 56.9% 478,847 57.1% 396,304 60.1% --------- --------- --------- --------- --------- --------- --------- --------- Gross profit 163,831 47.0% 114,438 43.1% 359,916 42.9% 263,139 39.9% Selling, general and administrative expenses 89,785 25.8% 78,966 29.7% 238,003 28.4% 204,752 31.0% --------- --------- --------- --------- --------- --------- --------- --------- Earnings from operations 74,046 21.2% 35,472 13.4% 121,913 14.5% 58,387 8.9% Other (income) expense: Interest expense 1,498 0.4% 1,608 0.6% 4,769 0.6% 4,872 0.8% Interest income (1,686) (0.5)% (608) (0.2)% (4,307) (0.6)% (1,503) (0.2)% Other, net (1,415) (0.4)% --- --- (2,587) (0.3)% --- --- --------- --------- --------- --------- --------- --------- --------- --------- Earnings before income taxes and minority interest 75,649 21.7% 34,472 13.0% 124,038 14.8% 55,018 8.3% Income taxes 27,312 7.8% 13,788 5.2% 46,571 5.6% 22,007 3.3% Minority interest (18) (0.0)% --- --- (18) (0.0)% --- --- --------- --------- --------- --------- --------- --------- --------- --------- Net earnings $ 48,355 13.9% $ 20,684 7.8% $ 77,485 9.2% $ 33,011 5.0% ========= ========= ========= ========= ========= ========= ========= ========= Net earnings per share: Basic $ 1.07 $ 0.47 $ 1.71 $ 0.75 Diluted $ 1.05 $ 0.46 $ 1.69 $ 0.74 Weighted number of shares outstanding: Basic 45,394 44,409 45,201 44,282 Diluted 46,103 45,162 45,956 44,817
GUESS?, INC. AND SUBSIDIARIES CONSOLIDATED SEGMENT DATA (in thousands)
THREE MONTHS ENDED NINE MONTHS ENDED ----------------------------------------- ----------------------------------------- September 30, October 1, % September 30, October 1, % 2006 2005 chg 2006 2005 chg -------------- ---------- --------- -------------- ---------- --------- Net revenue: Retail operations $ 178,119 $ 156,332 14% $ 481,025 $ 405,735 19% Wholesale operations 42,666 30,955 38% 104,290 88,101 18% European operations 111,519 64,408 73% 209,533 130,966 60% Licensing operations 16,444 13,905 18% 43,915 34,641 27% -------------- ---------- -------------- ---------- $ 348,748 $ 265,600 31% $ 838,763 $ 659,443 27% ============== ========== ============== ========== Earnings (loss) from operations: Retail operations $ 26,003 $ 18,777 38% $ 49,112 $ 28,826 70% Wholesale operations 8,529 1,776 380% 14,459 4,182 246% European operations 40,381 16,911 139% 59,234 27,911 112% Licensing operations 13,116 7,861 67% 37,441 24,911 50% Corporate overhead (13,983) (9,853) 42% (38,333) (27,443) 40% -------------- ---------- -------------- ---------- $ 74,046 $ 35,472 109% $ 121,913 $ 58,387 109% ============== ========== ============== ========== Operating margins: Retail operations 14.6% 12.0% 10.2% 7.1% Wholesale operations 20.0% 5.7% 13.9% 4.7% European operations 36.2% 26.3% 28.3% 21.3% Licensing operations 79.8% 56.5% 85.3% 71.9% Total Company 21.2% 13.4% 14.5% 8.9%
Guess?, Inc. and Subsidiaries Selected Condensed Consolidated Balance Sheet Data (in thousands)
September 30, December 31, October 1, 2006 2005 2005 ------------- ------------- ------------- ASSETS Cash and cash equivalents $ 153,743 $ 171,549 $ 138,891 Restricted cash 35,280 -- -- Receivables, net 172,561 81,762 103,806 Inventories, net 139,690 122,037 126,387 Other current assets 39,578 32,670 28,446 Property and equipment, net 159,817 144,007 126,905 Other assets 108,148 81,349 61,576 Total Assets $ 808,817 $ 633,374 $ 586,011 LIABILITIES AND STOCKHOLDERS' EQUITY Current installments of notes payable, long-term debt and capital lease $ 44,873 $ 35,051 $ 38,164 Other current liabilities 245,929 182,175 172,566 Notes payable, long-term debt and capital lease, excluding current installments 41,736 53,199 45,027 Other long-term liabilities 88,045 74,656 75,807 Minority interest 472 -- -- Stockholders' equity 387,762 288,293 254,447 Total Liabilities and Stockholders' Equity $ 808,817 $ 633,374 $ 586,011
Guess?, Inc. and Subsidiaries Condensed Consolidated Cash Flow Data (in thousands) Nine Months Ended ------------------------------ September 30, October 1, 2006 2005 ------------- ------------- Net cash provided by operating activities $ 55,134 $ 92,390 Net cash used in investing activities (44,349) (54,902) Net cash used in financing activities (29,519) (4,518) Effect of exchange rates on cash 928 (82) Net increase in cash and cash equivalents (17,806) 32,888 Cash and cash equivalents at the beginning of the year 171,549 106,003 Cash and cash equivalents at the end of the period $ 153,743 $ 138,891 Supplemental information: Depreciation and amortization $ 27,408 $ 25,719 Rent 62,184 53,349 Guess?, Inc. and Subsidiaries Retail Store Data U.S. and Canada Nine Months Ended ------------------------------ September 30, October 1, 2006 2005 ------------- ------------- Number of stores at the beginning of the year 315 287 Store openings 25 27 Store closures (10) (9) Number of stores at the end of the period 330 305 Total store square footage at the end of the period 1,602,000 1,521,000 SOURCE Guess?, Inc. -0- 11/01/2006 /CONTACT: Carlos Alberini, President & Chief Operating Officer, +1-213-765-3582, or Dennis R. Secor, SVP & Chief Financial Officer, +1-213-765-3289, both of Guess?, Inc.; or Joseph Teklits of Integrated Corporate Relations, +1-203-682-8258, for Guess?, Inc./ /Web site: http://www.guessinc.com / (GES)