Downtown L.A. fashion retailer Guess Inc. is winning the expectations game – offering up unexpected good news alongside more predictable bad.
Guess, which designs, sells and licenses clothing and accessories, last week reported net income of $3.3 million (4 cents a share) for the quarter ended May 2. That surprised analysts, who had predicted the company would see a loss of 5 cents a share, and topped results from the same quarter a year ago, when the company reported a net loss of $2.1 million (-3 cents a share).
What’s more, Chief Executive Paul Marciano said on the company’s June 2 conference call that he was pleased with the company performance and, because of the fairly positive results, upped its earnings guidance for the year.
“I’m encouraged by the performance of our business so far this year,” he said. “I strongly believe this is a result of the product change we have made in the last few months, as well as a clear focus by the management team to execute our strategy.”
The company now said that it expects earnings of between 86 cents and $1.02 a share for the year, up from its previous guidance of 75 cents to 95 cents, another surprise for Wall Street.
Those unexpected positive notes were enough to send Guess shares up 8 percent for the week ended June 3, closing at $19.08 and making the company one of the biggest gainers on the LABJ Stock Index. (See page 52.)
That’s despite an earnings report that also had a fair amount of bad news for the company. Revenue for the quarter was $479 million, down 8 percent from a year earlier. Comparable-store sales fell and a strong dollar hurt the company’s overseas operations. But, unlike the earnings beat and updated guidance, analysts expected all of that.
That’s especially the case for the currency impacts, which have affected many companies and which Guess knew would take a toll, said Dorothy Lakner, who follows the company as a managing director at New York’s Topeka Capital Markets.
“They’re not the only ones, but they did a good job of spelling out what the currency impact would be,” she said.
