Guess?, Inc. Issues Special Dividend

Sterne Agee has published a research report on Guess?, Inc. GES after the company reported strong 3Q results and has issued a special $2.00 dividend. In the report, Sterne Agee writes "GES reported Q3 EPS of $0.75 (vs. $0.69 LY), higher than our $0.58 estimate and the $0.59 FC consensus. Results also came in much better than management's guidance of $0.55-$0.58 that was provided on the Q2 call in late August. Total revenues rose 17.4% to $613.9 million with broad-based strength across segments but particular strength in Europe and Asia (comprising 2/3 of the revenue increase vs. LY). The upside to our estimates primarily stemmed from strong top-line performance, with revenues up 17.4% vs. our expectation of 10.9%, as well as other income ($5.9 million compared to our estimate of $2.0 million of expense) and a lower tax rate (29.1% vs. our estimate of 30.1%). Consolidated gross margins deleveraged 190 bp to 43.4%, primarily due to currency headwinds and higher markdown levels in Europe and North American retail. SG&A deleveraged 140 bp to 28.3% with higher selling expense due to a larger retail store base and infrastructure investments to support that store base. Performance-based comp and marketing expenses also increased during the quarter although not as much as anticipated. Overall, operating margins deleveraged 380 bp to 15.1%. Other income totaled $5.9 million ($0.06 benefit) compared to an expense of $1.3 million last year, reflecting unrealized mark-to-market gains on non-operating assets and currency contracts." Sterne Agee maintains its Buy rating and $58 price target. Guess?, Inc. closed yesterday at $45.34.