Guess Sees Profit in Adding Stores

Paul Marciano, chief executive officer of Guess, noted in Tuesday's conference call that, outside of North America, Guess has opened 66 new stores this year, primarily through international licensees and distributors, including 20 new stores in Europe, three in South America and 43 in Asia. The new locations include seven new footwear stores in Europe and Asia as part of the company's expansion into shoes.

The Guess store expansion plan includes locations in the US as well as internationally. During the third quarter the company opened 19 stores in North America, for example. One of the Guess emerging brands is its G by Guess format, which has opened 31 locations in the US and plans 10 more in US next year, Marciano said. Another new format, the Marciano concept, has 37 stores in North America and expects to expand to 52 locations by the end of next year, according to Marciano. The Marciano concept has 30 locations in Europe and will open 10 more by the end of next year, bringing the count to 109 worldwide, Marciano said.

The Guess international expansion strategy includes the recent appointment of Massimo Macchi as president of Guess Europe, where he will spearhead the company's growth in Europe and the Middle East. Macchi, who will report to Marciano, most recently was the group executive vice president and CEO of the luxury clothing company Gianfranco Ferre.

The Guess earnings report Tuesday credited the new stores and its aggressive expansion strategy for a significant role in record quarterly earnings of $58.3 million and 62 cents per share, compared with $44 million and 48 cents per share in the third quarter last year. The record earnings came on net revenue that increased 42.7% to $469.1 million from $328.8 million in the third quarter of last year. Comparable store sales increased 15.8% for the quarter, marking the 19th consecutive quarter of same store sales growth in North America. Guess operated 365 retail stores in the US and Canada at the end of the third quarter, versus 332 stores a year earlier.

Marciano attributed the financial results to a number of factors, including the expansions into North America, Europe and Asia. For example, net revenue from the company's European segment increased 78.8% to $159.4 million in the third quarter of fiscal 2008, compared to $89.1 million in the third quarter of the previous year.

Marciano pointed out that the $469.1 million in revenue for the quarter and the pre-tax earnings of $95.6 million represented all time records for any quarter in the company's history and that the results showed 17 consecutive quarters of earnings growth. "We are encouraged by these results, especially in light of today's challenging retail environment," the Guess CEO said. Guess operated 365 retail stores in the US and Canada and 560 retail stores outside of North America at the end of the quarter.