Yesterday was a big day for the reborn '80s denim phenom, Guess?
Net revenues were up 40.6% to $215.6 million, but these figures were juiced by the inclusion of results from a European acquisition.
You would be correct in guessing that the results do look a bit too good to be true, and in fact, management admitted that timing and booking issues were responsible for about $4.5 million of the increase in operating earnings. That means it won't appear in Q2, where it was originally expected.
Still, there's a lot here to like beyond the seasonally supercharged earnings growth. Gross margins increased to 38.1%, a nearly 4 percentage-point gain. At the same time, selling, general, and administrative expenses came to only 31.1% of revenue, a 1.5% improvement. Inventory was up 18%, which is only half the increase in revenues, and 15% of that gain came from the recent acquisition.
One skid mark on these clean sheets was news of a 1.2% same-store sales drop for April. I'm only partly satisfied with the "Easter shift" excuse and recommend that other shareholders keep an eye on the numbers going forward to make sure that management is meeting targets. Another blemish is the major increase in receivables, which more than doubled. Management explained this as a function of growth in the European business and noted that over half the $72 million increase was insured or subject to guarantees. Until I know more about this, I continue to look on it with a frown.
No doubt, there is plenty of competition in the teen jeans category, with American Eagle Outfitters
Leave the guesswork to us with these related Foolish takes:
At the time of publication, Seth Jayson had shares of Guess? and Aeropostale, but no position in any other company mentioned. View his stock holdings and Fool profile here. The Fool has a disclosure policy.