Guess?, Inc. (GES)
Q2 2011 Earnings Call Transcript
August 25, 2010 4:30 p.m. ET

Executives

Maili Bergman – Vice President, Investor Relations
Paul Marciano – Vice Chairman and Chief Executive Officer
Dennis Secor – Chief Financial Officer
Russell Bowers – Chief Financial Officer of Retail
Maurice Marciano – Chairman of the Board

Analysts

Jeffrey Klinefelter – Piper Jaffray
Omar Saad – Credit Suisse
Christine Chen – Needham & Company
Dana Telsey – Telsey Advisory Group
Betty Chen – Wedbush Securities
Eric Beder – Brean Murray, Carret & Co.
David Glick – Buckingham Research Group
Todd Slater – Lazard Capital Markets
Randy Konik – Jefferies & Company
Margaret Whitfield – Sterne, Agee & Leach, Inc.
Chi Lee – Morgan Stanley
John Kernan – Cowen and Company

Presentation

Operator

Good day, everyone and welcome to the Guess? Second Quarter Fiscal 2011 Earnings Conference Call. For opening remarks and introductions, I would like to turn the call over to Maili Bergman with Guess? Investor Relations. Please go ahead, Maili.

Maili Bergman

Good afternoon, everyone and thank you for joining us today. On the call are Paul Marciano, Vice Chairman and Chief Executive Officer, Maurice Marciano, Chairman of the Board and Dennis Secor, our Chief Financial Officer.

During today''s call, we will be making forward-looking statements, including comments regarding future plans and our financial outlook. The company''s actual results may differ materially from current expectations based on risk factors included in the company''s quarterly and annual report filed with the SEC.

Now, I would like to turn the call over to Paul Marciano. Paul?

Paul Marciano

Thank you, Maili. Good afternoon and thank you for joining us. Our second quarter financial results exceeded our expectation both in terms of revenues and earnings. We grew each one of our businesses, which combined to deliver double-digit revenue growth even as the strong U.S. dollar continues to represent a significant headwind for us.

We made excellent progress with several important strategic initiatives. We continued through extension of the North American retail business where we added 17 stores during the quarter.

Our effort to expand international business continues to deliver solid results. Europe and Asia together delivered 45% of the revenue growth. Our all seven Licensing business also performed well and exceed our expectation for the quarter.

We also managed our expenses tightly. We’ve an SG&A rate that was roughly flat to last year, even as we are making investments in store expansion and for our structure and in marketing to support the growth of our brand around the world.

With focused management on the cost structure and inventory, we generated solid earnings that exceed our expectation and set a new second quarter record for our company. The second quarter diluted earnings per share reached $0.72, a 13% increase over the same period last year.

During the quarter, international and Licensing businesses remain solid. At the same time, we began to experience a softening in our North American retail business as traffic continued to be down slightly and the mall became increasingly promotional.

Our ability to deliver record earnings for this quarter is a testament to the value of our diversified business model and our global teams. Our North American retail business same-store sales increased by 3.5%. Throughout this period, we were able to improve conversion to offset the impact of traffic.