Image source: Guess?, Inc.

What: Shares of Guess? Inc. (NYSE:GES) were up 23.8% as of 12:30 p.m. EDT Thursday after the clothing retailer announced stronger-than-expected fiscal second-quarter 2017 earnings.

So what: Quarterly revenue fell slightly from last year's fiscal Q2, to $545 million, including a 3% decline in Americas Retail revenue, to $226.6 million, an 8% decline in Americas Wholesale revenue, to $29.7 million, a 7% increase in European revenue, to $213.5 million, and a 6% decline in Asian revenue, to $53.2 million. Licensing revenue also declined 13% year over year, to $22 million. On the bottom line, that translated to adjusted net income of $12 million, or $0.14 per diluted share.

By contrast, Guess?'s guidance (provided three months ago) called for revenue to increase between 0.5% and 2.5%, and translate to diluted earnings per share in the range of $0.04 to $0.08. And analysts, on average, were only anticipating adjusted net income of $0.07 per share.

Guess? CEO Victor Herrero elaborated,

We are pleased to deliver second quarter earnings that exceeded our expectations both in earnings per share and operating margin. In Europe, our retail business delivered another strong quarter with comp store sales up in the low-double digits. In the Americas, our retail business in the US and Canada performed in line with our expectations with tourist doors still under-performing the chain. In Asia, we delivered positive comps in Korea, Mainland China and Japan, although Greater China was below our expectations as we continue to build out our infrastructure there and transition the business to a direct model.

Now what: Going forward, Herrero added that the company anticipates returning to revenue growth in the third quarter, with that growth accelerating in the fourth quarter. As such, for the current quarter, Guess? expects revenue to increase between 5% and 8% in U.S. dollars, including a 0.5% positive impact from currency exchange. On the bottom line, fiscal Q3 earnings per share should be in the range of $0.11 to $0.16. 

Finally, for fiscal year 2017, Guess? expects revenue to increase between 3% and 5% (including a 0.5% positive impact from foreign exchange), with adjusted earnings per share of $0.62 to $0.75. For perspective, Guess?'s previous guidance called for fiscal year 2017 revenue to increase between 5.5% and 7.5%, and for adjusted earnings per share of $0.55 to $0.75.

It's tempting to be disappointed by Guess?'s relative under-performance on the top line. But I also think investors are rightly pleased by the company's bottom-line out-performance, its increased full-year earnings outlook, and the fact its transition in the first half of the year is now behind it. So while I'm not eager to dive in today, it's no surprise to see the market bidding up shares of Guess? right now.

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