Guess Inc.’s profit doubles in 3rd quarter; its shares soar
Jeans and accessory retailer Guess Inc. continued its ascent as a brand for the chic and fashionable, reporting strong sales at home and abroad Wednesday and third-quarter profit that doubled from a year earlier.
It was a record quarter for the Los Angeles-based company.
“Basically, every aspect of their business is doing well,” said Christine Chen, an analyst at Pacific Growth Equities who owns shares of the company.
Investors responded to the big news, driving the stock up to a record $61.50 in after-hours trading. The shares had closed down 32 cents at $56.63 ahead of the earnings report. The stock is up 59% this year.
Guess operates 706 Guess, Guess Accessories and Marciano stores worldwide.
Chen said the company had succeeded in part because trends such as skinny jeans and long tops are the company’s “sweet spot.”
Sales in stores that have been open at least a year, a key industry indicator, rose 11.8% in October alone, and have grown in the last 14 quarters.
“They are right on with fashion trends right now,” said Erin Moloney, an analyst at Merriman Curhan Ford & Co.
The company reported earnings of $48.4 million for the quarter that ended Sept. 30, up from $20.7 million a year earlier.
Earnings per share rose from 46 cents to $1.05, beating the 72 cents a share that analysts polled by Thomson Financial had expected. Guess’ revenue rose to $348.7 million, up 31% from $265.6 million in the same period last year.
International customers were particularly interested in the Guess brand, with major growth coming from Europe. Revenue from the company’s European operations grew 73.1% over the last year. Guess said it planned to continue expanding outside the U.S., opening 117 stores this year and 102 the next.
“We fill a market niche that not too many other companies can support,” President Carlos Alberini said.
Guess has been able to profit from this strong niche position and customer willingness to pay ever-higher prices for denim. The company has increased the price of jeans by 63% in the last three years, said co-Chief Executive Paul Marciano.
As its prices increase, Guess is also positioning itself to sell to customers edged out of its Guess brand.
The company Wednesday introduced G by Guess, a less-pricey brand that straddles retail and factory stores. Marciano said the brand would be “aspirational, timeless and smart,” but not cutting-edge fashion.
The company plans to convert 10 Guess retail stores and 11 factory stores into G by Guess stores and open nine new stores before the end of the year.
Based on its strong results, the company projected earnings per share in 2007 of $2.75 to $2.85.
