Guess Shares Lose 10% on Restated Results
Guess Inc. shares fell 10% after the clothing designer and retailer said it lost money in the fourth quarter and restated its earnings for the first three quarters of last year.
Shares in Guess stock fell 80 cents to close at $6.89 in trading of 1.90 million shares on the New York Stock Exchange, almost nine times the three-month daily average. The day’s low was $5.01.
In a Monday conference call, Guess executives expanded on a news release issued late last week. Maurice Marciano, co-chairman and chief executive, blamed the company’s problems on an inventory glut during a soft retail period as well as on accounting errors.
Because of a failure to properly account for some merchandise when the company moved its distribution facilities from Los Angeles to Kentucky, among other reasons, the company has restated its performance for the first three quarters of last year.
Heading into 2001, the company said it expects flat revenue for the year, with lower wholesale revenue and higher retail sales because of new stores.
The company’s stock has lost about 65% of its value since Sept. 25, after Guess lowered its third-quarter profit forecast and said fourth-quarter results may also miss estimates.
Guess’ new president and chief operating officer, Carlos Alberini, said the company was overly optimistic heading into 2000 after record sales in 1999. Slower consumer spending in the second half of 2000 forced the company to slash prices to clear the excess inventory, analysts said.
“They didn’t have good financial control of the inventory the whole year,” said John Zolidis, an analyst at Sidoti & Co., which has a “neutral” rating on the stock.
The company said Friday it had a fourth-quarter loss of 27 to 31 cents a share, including charges of about $14 million to write off aged and damaged inventory. Los Angeles-based Guess had been expected to earn 7 cents a share for the fourth quarter, the average estimate of five analysts polled by First Call/Thomson Financial.
Because of the restatement, Guess said it was “technically in violation” of one of the financial terms of a bank revolving credit line.
“We are confident that [the banks] will waive or amend the current agreement for the company going forward,” Alberini said. “We are doing a lot of things to run the business more effectively and efficiently.”
Alberini is continuing the search for a chief financial officer to replace Brian Fleming, who resigned from the position in November.
Guess restated first-quarter earnings to 33 cents a share from 35 cents. Second-quarter profit was revised to 15 cents from 28 cents, and third-quarter earnings were changed to 19 cents from 13 cents.
The company said it expects to earn 68 cents to 72 cents a share this year and will take pretax charges of about $3 million in the first quarter as it reorganizes to cut costs. A First Call poll of five analysts had an average estimate of 94 cents for the year.
Including the charge, first-quarter earnings are forecast to be 3 to 4 cents a share, Guess said.
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Bloomberg News contributed to this report.
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Sales Figures
Apparel maker Guess has had inventory problems in part because it ordered too much merchandise last year after record sales in 1999. Quarterly sales, in millions:
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Third quarter 2000: $216.40 million
Source: Bloomberg News
