Guess Tells of Cost-Cutting Moves as Sales Slow

Guess Inc. said Thursday that a tough retail environment is prompting the company to cut jobs and close some underperforming stores this year in hopes of stemming a projected full-year loss.

The news came as the Los Angeles-based maker of jeans and other casual clothes posted a quarterly profit in line with the company’s revised expectations.

Guess had said earlier this month that slower-than-anticipated September sales would mean lower quarterly earnings.

For the quarter ended Sept. 28, Guess reported net income of $3.4 million, or 8 cents a share, up from $1.3 million, or 3 cents a share, for the same period last year.

Those numbers include a one-time gain this year of $2.6 million after taxes from a legal settlement and last year’s charge of $2.6 million after taxes.

Sales during the quarter dipped 8.5% to $157.8 million, down from $172.4 million during the same period last year.

“There is no question that the economic environment, particularly in retail, continues to be uncertain and consumer confidence has been shaken by a series of developments, including job losses, budget deficits and stock market volatility,” Guess President Carlos Alberini told investors in a mid-morning conference call.

Guess shares rose 30 cents to $4.58 Thursday on the New York Stock Exchange.

October sales in stores open at least a year probably will be down slightly, the company said.

Same-store sales, which exclude new and closed stores, will be released by most major retail chain stores next week.

For the year, Guess executives projected a loss of 2 cents to 5 cents a share excluding charges, with revenue down by a high single-digit percentage.

For the fourth quarter, which includes the holiday shopping period, the company projected earnings of 10 cents to 13 cents a share.

Guess would not say how many stores it plans to close, but during the conference call Alberini said it would be “less than a handful.”

The company, which operates 242 stores in North America, also will close some corporate facilities and will cut an undisclosed number of jobs, mostly from the corporate and administrative ranks, the company said.

Even so, Guess said it remains on track to open 12 to 15 stores next year.

This year’s cost-cutting measures will mean a fourth-quarter charge of $6 million to $8 million after taxes, or 15 cents to 18 cents a share, the company said.

Starting next year, Guess expects those efforts to generate about $7 million in savings.