Guess cuts forecast as weak euro, discounts bite

Guess Inc slashed its full-year profit forecast as the U.S. clothing maker resorts to discounts to clear excess inventory and a weak euro hurts revenue from Europe, sending its shares plunging 17 percent in extended trade.

Morningstar Inc analyst Peter Wahlstrom said the effects of a weak euro were higher than what management had anticipated, which it now expects will weigh on results through the second half of the year.

Revenue from Europe — which contributes about 39 percent to total revenue — fell 14.5 percent to $246.9 million. In local currency terms, revenue fell 1.9 percent in the region.

Known for its namesake jeans, the company had been trying to shift away from a promotional, traffic-driven business in North America to a full price model, without much success.

“The company has been having mixed results since it is still a very promotional environment,” Wahlstrom said.

Guess, which primarily sells to shoppers aged between 18 and 32, lowered its full-year revenue forecast to between $2.62 billion and $2.65 billion, from $2.70 billion to $2.74 billion it expected earlier.

It now expects to earn between $2.15 and $2.30 per share in the period, down from the $2.50 to $2.65 per share it had forecast earlier.

Analysts on average expected the company to earn $2.59 per share on revenue of $2.71 billion, according to Thomson Reuters I/B/E/S.

Profit in the second quarter ended July 28 fell to $42.9 million, or 49 cents per share, from $60.7 million, or 65 cents per share, a year earlier.

The company, which designs, markets, distributes and licenses apparel and accessories, said sales fell 6 percent to $635.4 million.

Analysts on average were expecting earnings of 50 cents per share, on revenue of $630 million.

Shares of the company fell to $27.85 in after-hours trade. They closed at $33.54 on Wednesday on the New York Stock Exchange.


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