TIMES HARD TO GUESS FASHION RETAILER'S PROFITS FALL.

Byline: Brent Hopkins Staff Writer

A tough retail sector is looking like a sure thing to Guess Inc., as the clothing designer announced Thursday that its second-quarter earnings would fall below expectations.

When Los Angeles-based Guess posts earnings per share July 30, it expects them to be in the 2 cents to 4 cents range, down from the First Call/Thomson Financial analyst prediction of 7 cents. Retail sales for the quarter dropped from $84.8 million in 2000 to $83.3 million.

Following the release, shares of the firm dropped 13 cents, closing at $7.50 on the New York Stock Exchange.

President and Chief Operating Officer Carlos Alberini blamed the retail climate for the losses, which he said showed little sign of abatement.

``We think that traffic is down across the board,'' he said. ``We think there's an overall weakness in the retail business, and if you look at other companies, it confirms our feelings. We also have a very well- established wholesale business, and we hear that the department store market is very weak.''

This squares with Federated Department Stores Inc.'s Tuesday announcement that weak sales will drag its quarterly earnings down at least 40 cents per share. Alberini said that while the sales in both retail and wholesale operations are currently poor, cost cutting measures have been implemented to minimize the impact.

``We reduced our overall discretionary spending, including reducing marketing and other fees across the board, as well as distribution costs,'' he said. ``We reduced staffing, both in corporate and in retail to adjust to the lowered revenue base.''

Such cuts should serve Guess well once the retail sector revives, according to John Rouleau, a senior retail analyst in the Chicago office of Gruntal & Co.

``You're talking about a company that has a good base of stores and a high degree of brand equity,'' he said. ``They're one of the most highly recognized companies in the marketplace. I think they'll rebound and are in an excellent position once sales rebound. It's a much stronger company now.''

According to Shana Yao, marketing director for Sherman Oaks Fashion Square, basics retailers such as Guess, a tenant at the mall, are hit harder than trend-driven stores in tough times. While whatever's hot for the week will still attract interest, staples like jeans and polo shirts are less desirable to light-walleted consumers.

``People are spending more wisely,'' she said. ``They come to the mall, I don't see a dip in traffic, but they're selecting what they want. If they want the sweater of the season, they'll get it, but they may not get more basics, like T-shirts, that they might have picked up before.''

She said sales in trendy shops such as Bisou Bisou and Abercrombie & Fitch were up, and that overall traffic in the mall had not declined. Stores such as this have a relative degree of immunity from economic downturns, according to Richard Giss, a retail expert for Deloitte & Touche's Los Angeles office.

``If you look at youth-oriented apparel chains, there are some segments that have been very good,'' he said. ``It may well be that the teen market is not as concerned with saving as their parents are.''

Alberini acknowledged that Guess has been unsuccessful in keeping its products consistently hot.

``We also have a mix issue, in that some of the high-ticket offers that sold well last year aren't selling as well this year,'' he said. ``There are some changes in what the customer's interested in.''

With this in mind, the company has shifted its focus somewhat, which Roleau pointed to as key to its future prospects.

``This isn't a case of the brand being out of favor, with problems with the quality or the image,'' he said. ``They're focusing more on fashion and less on the basic side, which will help.''

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Photo:

(color) Shoppers at the Sherman Oaks Fashion Square stroll past the Guess store, which has been having trouble lately.

John Lazar/Staff Photographer