Challenging Retail Environment Prompts GUESS?, Inc. to Lower Earnings Expectation for Third and Fourth Quarter.

Business Editors

LOS ANGELES--(BUSINESS WIRE)--Sept. 25, 2000

GUESS?, Inc. (NYSE:GES) today announced that, due to the generally difficult retail environment, the Company expects to report earnings per share in the range of $0.35 to $0.38 for the third quarter ending September 31st, versus the consensus expectation of $0.44 and the year-ago quarter's results of $0.33.

Maurice Marciano, Co-Chief Executive Officer said, "Our ability to clear inventory into the off-price channel at cost or better was impacted by wide and, in my memory, unprecedented quantities of apparel from competing brands. While we managed to improve our excess inventory position, we did so at lower than expected pricing, which impacted our gross profit dollars for the quarter. We also saw a higher level of clearance activity in the retail stores, which again impacted our gross margins as well as our comparable store sales." GUESS?, Inc. expects inventories at the end of the third quarter to be improved as a result of both the off-price sales and the retail clearance activities.

Mr. Marciano continued, "The retail environment, as well as a difficult comparison with last year's 53% increase, has affected our backlog trend for the Holiday/Spring season. We expect to report Holiday/Spring backlog growth of approximately 12%."

Paul Marciano, Co-Chief Executive Officer said, "We believe that September comp store sales will be slightly negative for the first time in 27 months due to a soft retail environment. Our fashion goods have remained strong but basics have slowed. We are in the process of updating much of our basics assortment and expect to have fresh goods in the stores by early November, in time for the Holiday selling season."

While the company believes that a reinvigorated assortment will generate improved sales trends for Holiday, based on current trends, management believes some caution is warranted for the next two quarters and specifically believes that the fourth quarter earnings consensus of $0.44 is at risk.

Maurice Marciano concluded, "While we are clearly facing some near-term challenges due to the tough retail environment, we remain enthusiastic about our retail expansion strategy. Our position as the leading contemporary fashion brand remains strong. We are reassured by the robust sell-through performance of our fashion-oriented products and believe we have developed the right brand identity for today's consumer."

Note: GUESS?, Inc. will be presenting tomorrow at the ICR Xchange conference at 10:10am. A live webcast of the event is available at www.streetevents.com