Good day, everyone, and welcome to the Guess? Third Quarter Fiscal 2012 Earnings Conference Call. On the call are Paul Marciano, Chief Executive Officer; Michael Prince, Chief Operating Officer; Dennis Secor, Chief Financial Officer; and Russell Bowers, Chief Financial Officer of North America Retail. During today’s call, the company will be making forward-looking statements, including comments regarding future plans and financial outlook. The company’s actual results may differ materially from current expectations based on the risk factors included in the company’s quarterly and annual reports filed with the SEC. Now, I would like to turn the call over to Paul Marciano.

Thank you. Good afternoon and thank you for joining us today. Overall, we are pleased with our performance in the third quarter. During the quarter, we made good progress on many of our strategic initiatives, while at the same time we continued to focus on execution and manage carefully things that we control. As we highlighted on our last call, some of the pressure that we saw emerging in global economy have now clearly intensified. The economic and fiscal crisis that are being played out in Europe affected that region more than what we expected. That impacted the top line performance and our third quarter revenue did not meet expectation, but we were able to achieve operating margin that exceeded our expectation for the quarter and delivered earning of $0.71 per share. In North America, our focus on brand elevation resulted in a significant improvement of North American retail profitability. We also continued to diversify our geographic distribution and expanded our presence in more underpenetrated markets. As a result, our international business drove more than half of this quarter top line growth. Managing our expenses and inventory level was one of the priorities and we performed well driving better product margin and a lower expense rate in the quarter. I want to start with Europe. Where we see the biggest challenge in the next 12 months, the economic turmoil and credit crisis are now having the clear impact in our consumer confidence and our business. Product offering within our stores have not been optimal given this environment. We did however make progress in several key initiatives designed to support our long-term strategies in that region. We completed the seamless transition to a new logistic partner and now have a strong relationship with a world class provider who can support our $1 billion business that Guess? has today in Europe. In the third quarter, we grew our business in key market like Germany, Russia, Netherlands, and Spain. The brand is resonating well with consumers in these new markets, giving us confidence on the long-term potential of our brand in underpenetrated markets in the region. The growth we’re achieving in these new markets was not enough to offset the impact of the weakening economy in Southern Europe. In Italy and France, our largest business in Europe, we posted negative comp for the quarter in our own retail stores. While we cannot control economic condition, our brand continued to be strong in Europe and getting stronger. Our strategy in the future remains straightforward, to develop and accelerate our penetration in North and Eastern Europe where we’re barely present. In North America Retail, we’re very happy with our Q3 results as we continue to focus on effort on elevating our brand and increasing profitability. We concentrated on full price selling, lower the stock level, and reduced our markdown significantly from a year ago. In fact, our year-over-year mark-down improvement was even greater than what it was in the second quarter in the face of a heavily promotional environment. Combined with the successful pricing strategy, we improved our AUR significantly. It was up over 15% in our U.S. full price stores. These enabled us to increase overall segment product margin by two full points, despite significant increase in our product cost. Our focus to manage our bottom line is paying off. In addition to product margin improvement, we also reduced operating expenses resulting in improved profitability of almost 3 full points and a 42% increase in operating profit. That’s a great accomplishment in this environment which also reaffirms our commitment to long-term strategy. In the third quarter we continued to expand our retail footprint, opening ten new stores across multiple concepts. We plan to open another 13 this quarter which will result in a year-end store count of 500 stores between U.S. and Canada. For the holiday season, we remain confident in the direction of our business. The stores look very strong with improvements in our product and merchandise presentation. We are gaining momentum in the women apparel business based on the strength of our most recent delivery. Our stores continue to be clean and we have reduced our promotion to level that is consistent with the long-term vision of the brand. G by GUESS and GUESS by Marciano continued to generate very positive momentum. In Asia, our business grew 18% in the quarter, with both our businesses in South Korea and Greater China posting strong double-digit top line increase. We continued our store expansion in the third quarter as well, opening 36 new stores and we now have 400 freestanding stores across Asia. We are very pleased with the response we received from our Chinese customers. During the quarter, we delivered positive comp increase as we continue expansion throughout the combination of our own stores opening as well as licensee stores. So far this year, we have opened 40 new locations in China and now operate with 135 total locations in Greater China. In South Korea, our momentum continued as we once again delivered positive comp. G by GUESS is off to a very good start, and so far we have opened 42 locations in that market. Now looking forward. Europe, as I said just now, is our greatest concern because no one can see what the outcome will be and who will do what to restore consumer confidence, which is quite different than U.S. where we have one voice, one government, one language during the crisis in fall 2008. That’s clearly not the case in Europe today. As we move towards the holiday season and into 2012, we will manage the short-term carefully but always with an eye on the future. We are committed to improving productivity and expanding our long-term profitability in all markets including the new ones, in India, Brazil, Japan, Vietnam and others. Where we’re positioned to pursue these opportunities with a strong balance sheet, strong cash flow and ample access to capital. Our objective is to deploy our capital to drive growth and deliver high returns as we have done in the last decade, but always with brand protection in mind. With that, I will pass now to Dennis who will give you an update on our performance.

Thank you, Paul, and good afternoon. Net earnings for the third quarter of fiscal 2012 declined 4% to $66 million and diluted earnings per share were $0.71, down 5% compared to last year’s third quarter’s $0.75 per share. While net earnings declined, operating profit increased 5%, totaling $97 million which includes a $3 million favorable currency translation impact. Operating margin was flat at 15.1%. Third quarter revenues increased 5% reaching $643 million. North American Retail expansion, Asia growth, and a relatively stronger euro were our biggest growth drivers. These more than offset the negative North American comps and a modest local currency decline in Europe, reflecting the narrowing of our accessories distribution and economic conditions in that region. Constant dollar revenue growth was 2%. Total company gross profit increased 4% to $277 million and gross margin declined 20 basis points to 43.2%. Product margins rose significantly as lower mark-downs in North America, higher retail prices, favorable currencies, and retail mix more than offset the impact of cost inflation. These were more than offset by a higher occupancy rate, given the global retail expansion and comp declines in both North America and Europe. SG&A increased 4% to $180 million, including an unfavorable currency translation impact and our SG&A rate improved 20 basis points to 28.1%. The increase supported our international store and sales growth and higher advertising spending, and was partially offset by lower performance based compensation. Third quarter, other net income was $2 million, which primarily relates to unrealized foreign currency revaluation gain. Our effective third quarter tax rate was 32.3% compared to 29.1% in the prior year third quarter. The increase reflects a higher anticipated full-year effective income tax rate due to the effective currencies on our projected tax liabilities and a different distribution of earnings among tax jurisdictions. Moving to segment performance. In North America retail, third quarter revenues increased 5% to $266 million. Same store sales declined 3.5% in U.S. dollars and 4.1% in local currency. Operating income increased 42% to $28 million and operating margin expanded 280 basis points to 10.4%. We expanded gross margins with lower mark-downs and selective price increases which more than offset the effective product cost inflation and a higher occupancy rate. We improved our SG&A rate by reducing expenses despite a larger store base. In Europe, revenues increased 2% reaching $221 million. In local currencies, revenues declined 4%. Revenues from our owned retail stores increased as new store growth more than offset the impact of significant traffic declines and the resulting negative same store sales. We ended the quarter with 171 owned retail stores. Wholesale revenues declined in the quarter primarily due to lower accessory shipments, mainly jewelry as we realign our distribution. Shipments of apparel products increased modestly in the period. Operating income decreased by 20% to $34 million, declining 26% in local currency. Operating margin declined 420 basis points to 15.5%, mainly due to lower jewelry shipments. Excluding that business, operating margins declined only 20 basis points. Gross margins declined overall, as product margin improvements resulting from a stronger euro and a higher retail mix were more than offset by a higher occupancy rate. SG&A expenses increased to support our retail expansion and higher variable selling expenses. The SG&A rate increased due to the lower jewelry shipment. In Asia, revenues increased by 18% to $65 million. In constant dollars, the increase was 15%. All businesses contributed to this growth, led by South Korea and China, as we continue to expand our distribution in those markets. Both these markets posted positive comps and double digit revenue increases. Operating profit was flat at $8 million and operating margin declined 240 basis points to 12.7%. Gross margins improved due primary to channel mix, so this is more than offset by higher relative operating expenses to support more stores and our planned infrastructure investments. In North America wholesale, revenues increased 2% to $57 million. Operating profit declined by 4% to $60 million, and operating margin declined 180 basis points to 27.9%, reflecting the impact of higher product cost. In our licensing segment, revenues increased 3% to $34 million and operating profit was flat at $31 million. We ended the quarter with cash and equivalents of $427 million. Operating cash flows for the first nine months of fiscal 2012 were $150 million, up 12% from the prior year period. Accounts receivable increased 1% over last year to $377 million and were flat in constant dollars. Overall, DSOs were slightly higher compared to last year. At the end of the quarter, about 51% of our receivables were supported by insurance coverage, bank guarantees and letters of credit. Quarter end inventory increased 11% to $385 million and finished good units increased 9%. Inventories in Europe are higher than planned given the change in demand. Inventory turns in U.S. and Canada have improved, and levels in Asia are generally aligned with our sales growth. During the quarter, we invested $30 million in net capital expenditures, mainly to support retail store expansion and remodel. We are now planning full-year CapEx to be around $130 million. So now, Michael will give an overview of our recent business trends and provide our outlook for the fourth quarter and an update for the full fiscal year. Michael?

Thank you, Dennis. Starting with North America retail, for the fourth quarter, our strategy remains consistent with how we’ve been operating for most of this year. Traffic continues to be soft, and we’re not anticipating significant improvements. Based on this, together with our current sales trend, we expect comps to be down in the low single-digits for the fourth quarter. That would result in a full year comp decline in the low single digits. Based on a larger store base, our comp assumptions would result in a fourth quarter revenue increase in the low to mid single-digits and a mid-single-digit increase for the full year. In Europe, we assume that macroeconomic conditions continue to remain uncertain and volatile. Based on this, we’re planning that fourth quarter traffic and comps will continue to trend negative. In our wholesale business, reorders for our fall/winter ‘11 collection were not as strong as we had anticipated and our final spring/summer ‘12 orders were in the low single digits. Based on this, we’re planning fourth quarter revenues in our European business to grow in the low single digits in local currency and increase slightly in U.S. dollars assuming a modestly weaker euro. This would result in full year local currency revenue growth in mid single-digits and U.S. dollar revenue growth of over 10%. In Asia, we expect our growth to continue to be fueled by new door expansion and positive comps in both South Korea and China. For the fourth quarter, we expect revenues to increase in the low to mid 20% range, which will result in full year revenue growth in the low to mid-20% range. In our North America Wholesale business, we’re expecting fourth quarter revenues will be roughly flat to slightly down. This will result in full year revenue growth in the low single digits. The backlog is currently down in the mid single digits. In licensing, we expect fourth quarter royalties to decrease in the mid single digits which will result in full year revenue growth in the mid single digits. Now turning to gross margins. For the fourth quarter, we expect improved product margins, even considering last year’s fourth quarter $7 million favorable royalty breakage adjustment. This results in lower anticipated markdowns and currency benefits. We expect this will be more than offset by a higher occupancy rate given our expectations for negative comps in the overall retail mix, resulting in a modest decline in gross margin. For the fourth quarter, we expect to operate with a higher SG&A rate compared to last year’s fourth quarter. With respect to taxes, we are now planning our full year adjusted effective tax rate at 31.3%, which excludes the impact of the second quarter settlement charge. Among other factors, this rate could be further impacted by currency fluctuations and distribution earnings among jurisdictions. With respect to currencies, given our currency assumptions, we’re expecting a net mark-to-market gain in the fourth quarter. Considering all these factors for the fourth quarter, we expect revenues in the range between $780 million to $795 million. We are planning an operating margin between 17.5% and 18.5%, and for EPS in the range of $1.03 and $1.09 per share. For the full year, we now expect revenues to range between $2.7 billion and $2.71 billion. Adjusted operating margin in the mid to high 15% range. We now expect full year adjusted EPS in the range between $3.04 and $3.10 per share. Including the second quarter settlement charge, full year GAAP operating margin would be around 15% and full year GAAP EPS would be in the range between $2.85 per share and $2.91 per share. Finally, we are not providing specific guidance for next year at this time, given economic conditions. We do not expect current earnings headwinds to subside into at least the second half of next year when we anniversary the product cost increases and the European weakness that are impacting our business. In addition, at its current rate the euro, which has benefited operating earnings for most of the current fiscal year, will become a headwind against operating earnings as we move into next year. With that, I will conclude the company’s remarks and open the call up for your questions. Before doing so, let me remind everyone to please limit themselves to one single part question. If time permits, we’ll allow people to ask a follow-up question. Operator?

(Operator Instructions) Your first question comes from the line of Jeff Klinefelter with Piper Jaffray. Please proceed.

Hi, yes. Thank you, everyone. First to clarify, Dennis, on the Asian operating margins. A lot of investment going in this quarter which de-levered what was I think a fairly strong gross margin. Could you just comment on where you see that investment cycle going, how long it’s going to last? When we’d start to see the leverage in the Asian model? And then just on Europe, since this is a topic of considerable discussion, could you provide a little bit more color on the trends. You said you comped negatively, at least in Italy and France during the quarter. How much negative? What was the sequential change? And then you also said wholesale I think was still slightly positive in the backlog. Could you just clarify that as well? Thank you.

Yeah. So, first with the Asian margins. We planned going into this year that we would be investing in infrastructure to build the muscle, if you will, to drive our growth. So this -- it’s been playing out, essentially exactly as we planned. The SG&A rate is up because we have been expanding that business. So, we have -- for this full year, we have expected that we will see some margin compression as we build that. As to when it turns, I mean, we’re finishing our plans now so it’s probably a little premature for us to share when we see the margin expansion opportunities, but I can certainly tell you on a long-term basis we see that the Asian business is one that can certainly be accretive to the operating margins from where we now are. The second question; the comp trends in Europe overall. The business trended down on a comp basis. It was, if you look at the southern parts of Europe, they were more negative. Italy was slightly weaker than the entire business, as was France. We did have some positive results in some of our newer markets. The Netherlands is an example where we delivered positive comps. And then lastly we talked about the backlog. The spring summer ‘12 order book, we had anticipated that that would be the mid single digits. It did grow. It didn’t quite grow to the level that we had anticipated. Overall spring/summer orders, when we closed the market, were up in the low single digits.

Thank you, Dennis. What was the sequential change in comp from Q2 to Q3 in Europe?

Well, we didn’t specifically disclose the numbers. It was in the low single digits negative in the second quarter, and it was in the very low double-digits in the third quarter.

Your next question comes from the line of Christine Chen with Needham & company. Please proceed.

Thank you. I was wondering if you could share some more detail about the North American business. Wondering how trends progressed throughout the quarter. Traffic, I know you mentioned, continued to be a challenge. I assume that conversion is probably up. And then, wondering about the difference in performance between the concepts and across geographies. Wondering, just strategically, I love that you have been less promotional, it’s a difficult environment, but do you worry about losing market share as a result? Thank you.

Yeah. Okay. First, the trend during the quarter was very consistent throughout each of the months and really that continued into November. The year-over-year markdown improvements, which is also a big focus for us, that was also consistent throughout the quarter. Regionally, the West and the Southeast of the U.S. were our best performing regions. Canada was the most difficult market, though we are encouraged we’ve got a little bit of an improvement there in November. Our traffic was soft and it was a little bit softer for us in the third quarter than it was in the second quarter. Our conversion rate was down a little bit as well, and we expected that, because the markdown customer is someone that is very easy to convert. So really, we made up with a very strong AUR results which was our big focus. Second, on how to compete with the promotional customer out there. We’re in Q4 right now and Q4 is always the most heavily promotional quarter and we have order markdowns in our stores and we’ll certainly run promotions. But for us, it’s going to be less than what it was last year and it’s going to be more brand appropriate for us. Our goal is to compete for the full price customer, and we feel that customer is much more loyal and that customer is much more profitable. And we think that our inventory position really helps give us the luxury to not be overly promotional.

And then, performance across concepts?

The G by GUESS on a comp basis, was the best performing concept. They were up in the high single-digits. So, we really got a lot of momentum there and we think we’re building the customer base there. And the most -- the softest concept was within GUESS, but that’s where we focused the biggest margin improvements.

And, Christine, if I can add, this is Paul. When you mention -- because we intentionally decide to really focus on a clean product and clean market, and all that, you raised some concern about losing market share. It is a possibility, maybe, but it’s a conscious decision that we made that we cannot and we will not continue to go on that direction. If you take the last week business for the Thanksgiving week, our regular price went up like over 80%. So, regular priced product sells in our stores. So clearly, we want the message out that we will not and we will discontinue completely these issues of marking down promotion, marking down promotion, which is an endless game. We can’t. And that’s what we did and if it’s painful in the short term, it is. But we do what we have to do for the brand, and we continue to do what we do for the brand. We never change our methods for many years. The crisis of ‘08 gave the wrong signal at that time, which was November, December 2008. And then almost that became a norm in 2009 and we said this is not right. And we have corrected that and this is -- visit any of the stores and you would see the result. It’s better than any speech, it’s just to see by yourself what it is.

Yes, your stores are much less promotional. Thank you and good luck for the holidays.

Your next question comes from the line of Randy Konik with Jefferies. Please proceed.

Hi, guys. This is Shreya Jawalkar filling in for Randy. I just wanted to ask about the product categories in North America. Are you seeing any price assistance within the different categories and also how is men’s doing versus women’s?

Okay. First to talk about the price increases. Everything that we’ve seen kind of indicates that that our sales sensitivity is coming from having less markdown product, it’s not coming from the initial price. We know this because, number one, we see that our regular price sales are up. Second, we haven’t been forced to run deeper markdowns because we came in with a higher price initially. And, third, really our higher ticket items in our stores such as the outerwear, such as the premium basic denim and the dresses, are really outperforming everything else. Men’s versus women’s, women’s really started to gain a lot of traction in the back half of the quarter beginning in October and that’s continued through November. So, right now, women’s apparel is the best performing department without our full price stores.

Your next question comes from the line of Helena Tse with Bank of America Merrill Lynch. Please proceed.

Hey, guys. Just wanted to follow-up a little bit more about Europe. Can you talk about the inventory levels in Europe. Like your own stores as well as any visibility you might have in terms of inventory levels in your franchise partners? And then, related to franchise partners in Europe, can you talk about the status or basically the health of those businesses? And lastly, just sort of given all the macro conditions in Europe, how, if any, would this sort of change the pace of new store openings, both in direct and non-direct stores, going forward? Thanks.

Okay. I’ll try to remember all of that. First of all, just with respect to the inventory position, overall as a company, we’re up 11%. Roughly half of that growth is in Europe, and that inventory is there to support new stores as well as the wholesale business. We have -- with some change in demand that we saw in the quarter, we have a little more inventory in wholesale than we had planned, but the model is designed for that. We’ve got outlets that when the season is over, we take the product that is left over and we put it into the outlets in the following year, and whatever gap we need we fill in with special production. So, we feel good about our inventory position in Europe. That’s ours. With respect to franchise partners, we don’t have visibility over that. Perhaps one of the best indicators we have of the health of what’s going on in the wholesale channel, including our partners, is our receivables. And our receivables, as you heard, were basically flat or up very slightly in terms of DSOs. So, that’s probably a reasonably good proxy for the health of our partners. And then, I’m sorry, the last question?

Whether the conditions in Europe may change through the pace of how you’re thinking about opening new stores for direct and non-direct stores going forward?

Yes, this is Paul. To complete what Dennis was saying about the health of partners, mainly involving that in Europe, if you take as a picture, for example Spain, it’s almost all our stores. U.K., it’s almost all our stores directly. Portugal, which is a joint venture that we’re going to have with a partner franchisee who want to become also a joint venture with us, we would do that. And then we have existing franchisees who are with us like for many, many years, and continue to plan expansion, especially being in France or being in Italy who had healthy and strong relation with us for at least like seven, eight, nine years now. So, Eastern Europe, this is where I mentioned at the beginning of the call that we have a lot of opportunities there. I’m going back again Sunday. This Sunday I will be back there, I was there three weeks ago. Is that Poland, Russia, Turkey, all that, at least so much work to do for us there. And definitely the demand is getting stronger and stronger of all that part of Europe. So, now you talk about the distinction between direct and franchisees. We will continue to open of course direct stores in Europe and the percentage might be -- I would assume it will be 30%, 35% direct and 60%, 65% on franchisee, on the freestanding stores.

Your next question comes from the line of Dana Telsey with Telsey Advisory Group. Please proceed.

Hi, good afternoon, everyone. As you think about the consumer in Europe, the consumer in the U.S., obviously they each have their different stresses, what are you seeing in terms of the differences in spend, both men versus women. And how you’re thinking about managing inventory and margins for each? Thank you.

I think that the distinction you have, which if you’re familiar with Europe, it’s one of the first time I ever see such turnaround of the consumer. The summer finished, and we had a different consumer in September who became so cautious of shopping. And I have never seen that for 20 years. I mean especially in Italy, where the shopping has been basically the best past time of everybody there. Because I think for the first time Italy is concerned of its own future. So, if you look with the U.S. consumer, somehow, somewhere, the confidence has been coming back slowly but steady. And we can see that at the level of the street, at the level of the mall, at the level of the price resistance. Just now Russ, was mentioning that whatever expensive product we have in the store, be it the outerwear or the dress or the denim, and price being like at 150, 200, 250 on outerwear, we have no price resistance. That is right now I think you can see that difference here. And if you look at the inventory level, of course, we’re adjusting now the inventory level in Europe. In Europe, what we’re seeing developing in France and Italy, that that would be, we hope, offset by the demand we have in North Europe, in Germany, where we are increasing very strongly our business in Germany. And we just got a new country manager starting this week, and we think that we will be fine with that, about the level of inventory and margin. I will let Dennis address to the margin.

Just on inventory, Dana, this is Michael. As, Russ, mentioned earlier, we’re lean on inventory in North America which puts us in a really good position going into holiday and post holiday. And then when you think about Europe, as Dennis mentioned, with the sales trends where they are, we’re going to have some excess inventory, but we’ve got the model setup so that our outlet channel can easily absorb any excess inventory, which is good for the brand and also is at a very profitable margin. So, we feel good about where our inventory position is, even though there could be some excess based on Europe?

Your next question comes from the line of Jeff Black with Citigroup. Please proceed.

Hey, thanks. Can you talk a little bit more about the accessory, the jewelry impact in the quarter? Whether we see that going forward and any plans to -- as you described last quarter, get a little bit smaller in various countries as this crisis kind of unfolds? Thanks.

Yeah, this is Paul again. About the jewelry, I think that I mentioned extensively that subject last quarter and this quarter the same is -- again, we go back to two countries which is Italy and France. And this is where we saw the most contraction, but also on intentional wish to reduce the numbers of those we had in these two countries. So, I think these past two quarters, Q2 and Q3, all that shock has been absorbed and I think now we are expanding. I was just in China last week with a group of jewelry in Beijing and presenting the line to all our partners in Southeast Asia and Korea and China, and which that territory has not been really exploited yet. So, we think that in the next 12 to 18 months, this business is turning around and continuing to expand. That’s the way we look at it. But we were over distribution in France and Italy and completely under distribution in Asia, which we did address again just last week in Asia.

Just to expand on Paul’s comment just in terms of modeling; the strong -- like we said the biggest quarter for sales is the third which is why we saw anticipated and did experience the largest impact. The first quarter is also fairly strong, so you’ll see headwinds on this but not as severe as the quarter we just completed until we anniversary that. But just the other thing to really think about the jewelry business is; it has been a great acquisition for us. If you look at the profitability of this business since we brought it into our model, we probably increased that about five-fold from a license business. So it’s a strong driver, has been a strong driver of margin expansion.

Your next question comes from the line of Diana Katz with Lazard Capital Markets. Please proceed.

Hi, not to talk too much on it, but for the European regions where you are seeing growth in your less penetrated markets, maybe you can quantify the growth rates there. Was it mid single-digit as last quarter? And then I believe you said Spain delivered growth in the quarter. Are those your own stores, was that surprising?

Spain as a market grew. The comps were roughly flat. I think the comps were slightly down, but certainly Spain as a market grew. But Germany has been a very strong growing market for us all year as has, well, Spain has been up, Germany, Belgium. I’m just looking for some numbers here. Germany was positive as well. So Poland has been a strong market, Czech Republic has been a strong market. Turkey as well.

Okay. Overall, were they like mid single-digit growers?

It really varies among all the markets. I mean some of them are very -- relatively small. So, the increase is much stronger than that.

Okay. And then for our model, what should we estimate for the net mark-to-market gain in 4Q?

We didn’t specifically quantify, but with our assumption of euro being relatively weaker and it opened much stronger, you would expect a gain, but we didn’t specifically quantify it.

Okay. And then, just Asia, it grew very nice at 18%. I think their initial guidance was for mid to high 20% growth rate. I guess -- did anything transpire there versus original guidance, maybe any sort of shift?

There wasn’t a shift. The one area I would call out is our outerwear sales were impacted by weather that was much warmer than we had anticipated. So, it is very difficult to sell outerwear when the climate is warm. So, that was the biggest driver, that’s in South Korea.

Okay. And then just my last question. Was your Black Friday and your Black Friday weekend results in your North American stores in line with what you were seeing for November?

Yeah, we were happy with Black Friday. It was consistent with November in the third quarter. The comps were down slightly, but number one, our promotional offering was cut back significantly from what it was a year ago, so we expected that. We had improved profitability. Our comp store gross profit was up. The product margin, in fact, it was better than any Black Friday we’ve had over the last six years. So, it was very strong. And again, our regular price selling was up, and our AUR, for example, and full-price was up over 25%.

(Operator Instructions) Your next question comes from the line of Margaret Whitfield with Sterne, Agee & Leach. Please proceed.

Good afternoon. Paul, you mentioned a number of new countries, India, Brazil, Vietnam. If you could discuss when you might be penetrating these countries and also I’d appreciate an update on the sourcing outlook for Q4 and next spring into fall?

Let's start with the outsource. Michael will address that.

Yeah, Margaret, I’ll start with the sourcing side. In our sourcing where we thought cost have been consistent throughout Q3 and Q4 and we’ll see some costing headwinds still in the first half of next year. But as cotton prices continue to drop, there could be some opportunities in the back half of the year. The one thing that could impact is obviously market volatility as well as the euro depending on how it goes. If it strengthens that could -- or if it weakens, that could work against us. But we could see some opportunity in the back half of the year but the first half we still think will have some challenges on the costing side. But the good thing with the cotton prices where they are at, we’re reworking the supply chain, negotiating where we can and trying to add value.

Yeah, Margaret, to mention the new territories, I will start from India. India, we have currently 18 freestanding stores. We should reach the 50 stores in maybe two years maximum. Then I just last week in Korea, I just last week signed an agreement to open Guess Kids and Baby Guess Kids franchisee partner. We have a group who is extensively present in Korea and Greater China and that’s for the kids. Brazil, we’re now on the last stage of the candidate that we’re looking at. We have been looking at that now over a year and it has been a little bit long for us, but because of the past bad experience as I mentioned on Q2 many, many years ago, we are much more cautious this time around to make sure that we go in a business with the right partner. And Japan, our strategy is very simple. We had a licensee for many years until 2007 and we intend to do what we did in South Korea which has been very successful for us. It means to have our own team in Japan establish first and to exactly duplicate what was done in South Korea. It means like operate directly at all level of retail operation and wholesale. So, we are putting in place now -- as we speak, we are putting in place the team in the next six to nine months in Japan only. Vietnam, we’re open already, small, but I think Vietnam is an important market. Will become an important market like any of the small country like that. Like being Portugal or Belgium or -- it’s a small country but there is a good potential there. And Mexico, we continue to grow. We have a joint venture after six years. Mexico has been doing very, very well. In fact, we are kind of surprised that they are not as affected as the rest of North America, comparing to Canada or things like that. I mean, Mexico has been continuing to grow. So, that’s that.

This is Michael. Just one thing on the cost increases. I just want to make sure that everyone understands that also through price increases and through improved markdowns, we are going to be able to mitigate most of those cost increases. Just like we’ve done throughout the back half of this year.

In terms of the environment, what are your thoughts on store expansion in Europe next year and any thoughts in taking G by GUESS into different markets?

Store expansion about Europe, I would say conservatively that we should open between 40 to 50 stores. And I want to be conservative on that between direct and franchisee. I mean like licensees. About G by GUESS, G by GUESS as I mentioned we opened now in few countries. One is South Africa, and we’re doing very well there. Two is South Korea, I was there. Three is Philippines. We opened few stores in Philippines. We are there with Guess over 20 years now. And we don’t plan to expand the G by GUESS store rapidly. We want to go to certain markets who are precisely ready for that. For example, if you tell me, are you going to do that in China, the answer is not now. Anything in Europe, the answer is no. And even in Canada I think we have not even started there because we continue to expand in U.S. and we plan to open between 15 and 18 stores next year, new G by GUESS stores just in U.S.

Your next question comes from the line of John Kernan with Cowen. Please proceed.

Hi guys. I wanted to quickly focus in on the Q4 licensing guidance for a decline there, that’s kind of a break in trend. Can you talk about what’s driving that and if that’s expected to continue into next year?

Well, it is a business that we have the least direct visibility over. We get forecast from all of our licensees and I guess, remember that they are also selling on a worldwide basis, and they’re selling into some markets that are being impacted by what’s going on particularly in Europe. So, it’s not a tremendous surprise that their businesses would be impacted and they might see some headwinds as well.

Okay. And then, if I heard you correctly, earlier in the call, there was that European operating margin was only down 20 basis points ex-jewelry.

That’s correct.

And we can still expect about 300 to 400 basis points margin effect probably until you lap it next year in Q3?

No, because it’s really impactful in the third quarter.

Okay.

And it’s just a very profitable business as I alluded to earlier. So, that’s why you see such a dramatic impact in this past quarter.

Okay. And then the capital structure. Even in a difficult environment this year, I’d still think, at least in my model, I see you guys doing about over $200 million in free cash flow. It’s almost a 10% yield on your market cap. How do you view share buybacks? You paid a special dividend last year. How do you think in terms of returning some of this free cash flow this year or as going forward?

Well, John, I think you can see that definitely it’s -- at that point it’s of course very, very attractive. But the Board has approved to buy up to $250 million of shares. And clearly, I mean, the market has been reacting the way it reacts. And if it’s a major opportunity, you will see normally some management decision on that. But we have clearance from the Board, we have the cash, and as you said, it looks to anybody, very attractive, so.

Yeah. And we’re going to also continue to invest in the business as we always do. And in the press release, we announced another quarterly dividend of $0.20. So, we’re going to continue returning of value back to the shareholders that way.

Okay. And then Dennis, is there a buffer in terms of how much cash you’d want on the balance sheet before you got aggressive in terms of share buyback or another special dividend, is there certain amount of cash you’d want?

Yeah, we certainly do look at a minimum level of cash that we would want to have, both here and in all markets. So, when we do our modeling in our cash flows, we certainly consider what level of cash we want to hold. We do have a $200 million credit facility that we put in place. So, we do have a good access to capital.

At this time, there are no more questions in queue. I’ll turn the call back over to Paul Marciano for closing remarks.

Thank you, everyone, and thank you again to participate. A week from tomorrow, Europe, we’ll make a decision about the Euro zone and we are all -- from every analyst and every writer, every news channel is talking about that, what will happen nobody knows. So, I think a week from now, we’ll have a better picture how to be prepared about what’s happened to this huge market for us but for everybody, and the consequence you will have. And then, besides that, again, I will not repeat enough that brand integrity has driven Guess? since day one when we started in December 15, 1981, which will be 30 years, two weeks from now. It still does and hope it will always, into the next decade. So, we try to keep the same discipline. Try to execute always the best with our team around the world, which I want to thank again before the holidays. And I want to wish a happy and healthy holiday to everyone and looking forward to speak to you in March 2012. Thank you very much. Thank you.

Ladies and gentlemen that concludes today’s presentation. All parties may now disconnect. Good day.