(Reuters) - Apparel retailer Guess Inc (GES.N) forecast current-quarter sales above Wall Street’s estimates after reporting a higher-than-expected quarterly profit, sending its shares up 10 percent in trading after the bell.
The retailer forecast total second-quarter sales of $620 million to $635 million, which beat analysts’ average estimate of $618.4 million.
“So far in the second quarter, comparable-store sales have improved (in North America) and are roughly flat for the quarter to date,” Russell Bowers, Chief Financial Officer of North American Retail said on a post earnings call with analysts.
Piper Jaffray & Co analyst Erinn Murphy said the signs of improving trends in North American retail as new product initiatives unfold are encouraging for potential margin recovery. She has the stock as a ‘top pick’ with an “overweight” rating.
The company, however, cautioned cold weather conditions in Europe were a cause for concern.
“What we have not expected has been ... the drastic weather conditions that continue to beat Europe like we have not seen for some time in a half century. The weather has been a big factor,” Chief Executive Paul Marciano said. France and Italy were the most affected, he added.
The company said it expects sales in Europe to decline in the low-single-digit percentage range in the second quarter, assuming the Euro remained at its current rate. It expects Europe sales to improve in the third quarter, which begins in August.
First-quarter net income fell to $9.9 million, or 12 cents per share in the period ended May 4, from $26.6 million, or 30 cents per share, a year earlier.
Excluding restructuring charges, the company earned 14 cents per share. Analysts had expected earnings of 8 cents per share.
Sales fell 5 percent to $549 million, but were in line with Wall Street’s expectations.
Sales in Europe, which contributes about a third to the total revenue, fell 13 percent in the first quarter, hurt by cooler weather conditions.
“The (decline in Europe) was driven by lower wholesale shipments as well as negative comp-store sales that were down in the high single digits,” interim Chief Financial Officer Nigel Kershaw said on the call.
North American retail revenue fell 5 percent.
Sales in Asia, however, offset some of the slowdown and rose 10 percent to $71.1 million.
Guess shares closed at $29.35 on the New York Stock Exchange on Thursday.
Reporting by Siddharth Cavale in Bangalore; Editing by Sreejiraj Eluvangal