Guess’ shares jump on earnings

Second-quarter profit beats forecasts, helped by sales in Europe and Asia. Stock rises 5.6%

Guess Inc.’s stock rose sharply Thursday after the Los Angeles apparel company, which is trying to reverse years of slumping earnings, reported secondquarter profit that topped expectations.

The stock climbed 5.6% to $24.23, putting it up 50% in the last 12 months. Earlier in the day, it was up more than 17%.

Guess said Wednesday that profit for its fiscal second quarter, which ended Aug. 4, jumped 68% from a year earlier to $25.5 million, while revenue climbed 14% to $645.9 million. The gains were led by strong results in Europe and Asia, the company said.

Guess’ per-share earnings, after adjusting for onetime gains and charges, amounted to 36 cents in the latest quarter, up from 19 cents in the year-earlier quarter and topping the 32 cents forecast by analysts polled by FactSet.

“I feel confident that the ‘turnaround’ has only just begun, as we are well-positioned to exit this fiscal year with every business segment profitable,” Guess Chief Executive Victor Herrero said in a statement.

Founded as a jeans company in 1981, Guess — with about 14,700 employees — now designs and sells a variety of apparel aimed primarily at shoppers ages 20 to 35. Its sales channels include 1,662 stores operated by Guess and its licensed partners worldwide.

Guess has struggled with drooping earnings and flat revenue in recent years, especially in the U.S. market.

In its fiscal year that ended Feb. 3, Guess posted a $7.9-million loss on revenue of $2.4 billion. Four years earlier, the company earned $153.4 million on revenue of $2.5 billion.

Herrero, who took over as CEO from co-founder Paul Marciano in 2015, has been trying to reverse the trend by building up Guess’ European and Asian operations, negotiating lower store leases, liquidating old inventory and elevating Guess’ brand among millennials and younger adults, among other steps.

For instance, Guess has heavily invested in videos that promote its apparel, which Herrero said is “the preferred method of communication for the millennial and the Gen Z demographics.”

“We are delivering that content through key social media platforms like YouTube and Instagram,” moves that “are gaining real traction,” Herrero told analysts on a conference call Wednesday.

Susan Anderson, an analyst with the investment firm B. Riley FBR, said that Herrero “has been getting new customers to come into the brand” and that the look and appeal of Guess’ clothing have gained traction with consumers.