European economies are taking heavy hits as the global crisis dips and slips, with governments everywhere tightening belts and workers lining up for the dole. Nevertheless, fashion retailer Guess? (GES) is posting sales growth in Europe that is keeping the American brand afloat.
Most retailers, especially in Europe, take advantage of the summer sale season to offload as much as they can at bottom of the barrel prices. Guess? took a different path, opting for lower volume, higher-priced sales, which seems to have paid off.
During its second fiscal quarter earnings report on Aug. 24, the company’s CEO said the result of the strategy was to further elevate the brand’s prestige in its growing markets. The company has been opening stores across France, Spain, Holland, and the U.K., in part contributing to its 30 percent revenue increase in Europe for the quarter. Add to that a weak dollar and it’s a winning combination.
Sales remained even or slipped throughout its U.S. markets, forcing the company to keep its focus international. In South Korea and China, its main Asian markets, the goal is to open an additional 36 stores and 40 stores, respectively, by the end of the year.
That’s just in time for CEO Paul Marciano to retire and take his place as non-executive chairman of the board, but he won’t rest until there are 500 stores in China, far more than the 113 stores there currently.
Home to more than a dozen brands, Guess? expects its new “G by Guess” brand to be the main draw for South Korean markets. In total, European and Asian sales made up 80 percent of sales growth for the quarter.
Third quarter, like for most retail, is expected to be weaker as the economy trickles down to consumer habits. Excluding a 19-cent impact from a settlement charge, adjusted earnings were 84 cents.
Wedbush analysts recently downgraded GES to hold while Brean Murray has a buy rating. Guess? is scheduled to report earnings on or about Nov. 23.
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