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Guess?, Inc. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: September 5, 2012 06:08AM

Guess?, Inc. (GES) filed Quarterly Report for the period ended 2012-07-28. Guess?, Inc. has a market cap of $2.34 billion; its shares were traded at around $26.26 with a P/E ratio of 10.22 and P/S ratio of 0.87. The dividend yield of Guess?, Inc. stocks is 3.07%. Guess?, Inc. had an annual average earning growth of 30.4% over the past 10 years. GuruFocus rated Guess?, Inc. the business predictability rank of 4-star.



Highlight of Business Operations:

Net earnings attributable to Guess?, Inc. decreased 29.3% to $42.9 million, or diluted earnings of $0.49 per common share, for the quarter ended July 28, 2012, compared to net earnings attributable to Guess?, Inc. of $60.7 million, or diluted earnings of $0.65 per common share, for the quarter ended July 30, 2011. During the quarter ended July 30, 2011, the Company recorded a pre-tax settlement charge of $19.5 million (or $17.6 million after considering the $1.9 million reduction to income tax as a result of the charge), or $0.19 per share. The charge related to a settlement agreement with a former third party logistics service provider in Europe to facilitate the transition to a new service provider. Adjusted diluted earnings, excluding the settlement charge, were $0.84 per common share for the quarter ended July 30, 2011. References to financial results excluding the impact of the settlement charge are non-GAAP measures and are addressed below under “Non-GAAP Measures.”

Net revenue from our North American Retail operations decreased by $8.1 million, or 3.1%, to $253.0 million for the quarter ended July 28, 2012, from $261.1 million in the same prior-year period. The increase in revenue resulting from a larger store base was more than offset by negative comparable store sales of 8.5% for our combined U.S. and Canadian stores (negative 7.5% in local currency, which excludes the unfavorable translation impact of currency fluctuations relating to our Canadian retail stores). The store base increased by an average of 20 net additional stores during the quarter ended July 28, 2012 compared to the prior-year quarter, resulting in a net 5.6% increase in average square footage. Currency translation fluctuations relating to our non-U.S. retail stores unfavorably impacted net revenue in our North American Retail segment by $3.6 million.

NET EARNINGS ATTRIBUTABLE TO GUESS?, INC. Net earnings attributable to Guess?, Inc. decreased by $33.8 million, or 32.7%, to $69.5 million for the six months ended July 28, 2012, from $103.3 million in the same prior-year period. Diluted earnings per share decreased to $0.78 per share for the six months ended July 28, 2012, compared to $1.11 per share for the six months ended July 30, 2011. The six month period ended July 30, 2011 included the $0.19 per share settlement charge. Adjusted diluted earnings, excluding the settlement charge, were $1.30 per common share for the six months ended July 30, 2011. References to financial results excluding the impact of the settlement charge are non-GAAP measures and are addressed below under “Non-GAAP Measures.”

The adjusted measures exclude the impact of a settlement charge incurred during the quarter ended July 30, 2011. Near the end of the second quarter of fiscal 2012, the Company experienced a temporary disruption in service with a former third party logistics service provider in Europe. Following this disruption in service, the Company entered into a settlement agreement with this service provider to facilitate a transition to a new service provider, resulting in a pre-tax settlement charge of $19.5 million (or $17.6 million after considering the $1.9 million reduction to income tax as a result of the charge), or $0.19 per share, in the quarter and six month period ended July 30, 2011 related to amounts paid in connection with this agreement. On a GAAP basis, net earnings attributable to Guess?, Inc. for the quarter and six month period ended July 30, 2011 were $60.7 million and $103.3 million, respectively, and diluted earnings per common share for the quarter and six month period ended July 30, 2011 were $0.65 and $1.11, respectively. Excluding the impact of the settlement charge and the related tax impact, adjusted net earnings attributable to Guess?, Inc. for the quarter and six month period ended July 30, 2011 were $78.3 million and $121.0 million, respectively, and adjusted diluted earnings per common share for the quarter and six month period ended July 30, 2011 were $0.84 and $1.30, respectively.

At July 28, 2012, the Company had net working capital (including cash and cash equivalents) of $695.9 million compared to $841.4 million at January 28, 2012 and $808.4 million at July 30, 2011. The lower net working capital is primarily due to the repurchases of the Company’s shares in the fourth quarter of fiscal 2012 and in the second quarter of fiscal 2013. The Company’s primary working capital needs are for accounts receivable and inventory. Accounts receivable at July 28, 2012 amounted to $334.8 million, down $56.7 million, compared to $391.5 million at July 30, 2011. The accounts receivable balance relates primarily to the Company’s wholesale business in Europe, and to a lesser extent, to its wholesale businesses in North America and Asia and its international licensing business. On a constant dollar basis, accounts receivable decreased by $16.5 million, or 4.2%, compared to the prior year. Approximately $164.0 million of our receivables, or 49.0% of the $334.8 million in accounts receivable at July 28, 2012, were insured for collection purposes or subject to certain bank guarantees or letters of credit. In Europe, approximately two-thirds of our receivables were insured for collection purposes or subject to certain bank guarantees or letters of credit. Inventory at July 28, 2012 increased to $381.2 million, or 11.1%, compared to $343.1 million at July 30, 2011. The increase in inventory supports primarily the growth of our international retail businesses, expansion of our G by GUESS store concept in the U.S. and South Korea and early receipts of the current season inventory in Europe. The increase also reflects the recent impact of reduced customer demand in Europe and negative comparable store sales in North American Retail. When measured in terms of finished goods units, inventory volumes increased by 16.9% as of July 28, 2012, when compared to July 30, 2011.

Read the The complete Report



Stocks Discussed: GES,
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