| Guess? Inc. (NYSE: GES) today reported financial results for its second quarter ended August 3, 2024. |
| Carlos Alberini, Chief Executive Officer, commented, “During the second quarter we delivered revenue growth of 10%, in line with our expectations. This performance was fueled by the rag-and-bone acquisition and strong wholesale performance in our European and American businesses. All our segments, except for Asia, delivered top-line growth. Our bottom-line results reflect our decision to significantly increase our marketing investments compared to last year’s spent to support the international expansion of our brands, including our core Guess brand as well as the new additions to our portfolio – Guess Jeans and Rag & bone.” |
| Paul Marciano, Co-Founder and Chief Creative Officer, commented, “I am very excited about the rag & bone acquisition. During the last few months, we met frequently with Andrew Rosen and the rag-and-bone team to develop our expansion strategy and put our plan into action. I am thrilled with the team and how we are working together, and I couldn’t be more excited about all the opportunities we see to grow the business. Under Andrew’s leadership, we are capitalizing on our capabilities and have already begun adding product categories to the portfolio and plan to accelerate store openings both domestically and abroad.” |
| Mr. Alberini concluded, “As we look into the second half of the year, we are adjusting our outlook for revenues and earnings to reflect the softer consumer environment. As always, we will manage our costs and inventories carefully, while we continue to support the growth of our business, including investments in marketing, new stores and infrastructure. For us, this is a year of transformation and investment – a year when our business is further diversifying with new brands in our portfolio that have significant opportunities for growth and value creation.” |
| Non-GAAP Information |
| This press release contains non-GAAP financial measures, including certain adjusted results of operations and outlook measures, constant currency information and free cash flow measures. See the heading “Presentation of Non-GAAP Information” for further information and the accompanying tables for a reconciliation to the comparable GAAP financial measure. |
| rag & bone Acquisition |
| On April 2, 2024, the Company and global brand management firm WHP Global completed the previously announced acquisition of New York-based fashion brand Rag & bone. Under the terms of the agreement, the Company acquired all the rag & bone operating assets and assumed the related operating liabilities of the business. In addition, a joint venture owned 50% each by the Company and WHP Global acquired Rag & bone’s intellectual property. As of April 2, 2024, the Company integrated Rag & bone into its existing segments. |
| Second Quarter Fiscal 2025 Results |
| For the second quarter of the fiscal year ending February 1, 2025 (“fiscal 2025”), the Company recorded a GAAP net loss of $10.6 million, compared to GAAP net earnings of $39.0 million for the same prior-year quarter. The results for the second quarter of fiscal 2025 included a net $40.5 million unrealized loss due to the change in fair value of the derivatives related to the Company’s convertible senior notes due 2028 and the related convertible note hedge. GAAP diluted net loss per share was $0.28 for the second quarter of fiscal 2025, compared to GAAP diluted net earnings per share (“EPS”) of $0.59 for the same prior-year quarter. The Company estimates a minimal impact from its share buybacks and a positive impact from currency of $0.01 on GAAP diluted net loss per share in the second quarter of fiscal 2025 when compared to the same prior-year quarter. |
| For the second quarter of fiscal 2025, the Company’s adjusted net earnings were $23.0 million, a 42% decrease from $39.7 million for the same prior-year quarter. Adjusted diluted EPS decreased 42% to $0.42, compared to $0.72 for the same prior-year quarter. The Company estimates a positive impact from its share buybacks of $0.01 and a positive impact from currency of $0.01 on adjusted diluted EPS in the second quarter of fiscal 2025 when compared to the same prior-year quarter. |
| Net Revenue. Total net revenue for the second quarter of fiscal 2025 increased 10% to $732.6 million from $664.5 million in the same prior-year quarter. In constant currency, net revenue increased by 13%. |
- Europe revenues increased 5% in U.S. dollars and 8% in constant currency. Retail comparable sales (including e-commerce) increased 1% in U.S. dollars and 4% in constant currency. The inclusion of our e-commerce sales positively impacted the retail comparable sales percentage by 1% in U.S. dollars and a minimal amount in constant currency.
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- American retail revenues increased by 8% in U.S. dollars and 9% in constant currency. Retail comparable sales (including e-commerce) decreased 10% in both U.S. dollars and constant currency. The inclusion of our e-commerce sales positively impacted the retail comparable sales percentage by 1% in both U.S. dollars and constant currency.
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- Americas Wholesale revenues increased 93% in U.S. dollars and 94% in constant currency.
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- Asia revenues decreased 8% in U.S. dollars and 4% in constant currency. Retail comparable sales (including e-commerce) decreased 14% in U.S. dollars and 10% in constant currency. The inclusion of our e-commerce sales negatively impacted the retail comparable sales percentage by 1% in both U.S. dollars and constant currency.
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- Licensing revenues increased 4% in both U.S. dollars and constant currency.
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| Earnings from Operations. GAAP earnings from operations for the second quarter of fiscal 2025 decreased 26.0% to $47.8 million (including a gain of $13.8 million on the sale of the U.S. distribution centre during the second quarter of fiscal 2025 and a $3.7 million unfavourable currency translation impact), from $64.6 million in the same prior-year quarter. GAAP operating margin in the second quarter of fiscal 2025 decreased from 3.2% to 6.5%, from 9.7% for the same prior-year quarter, driven primarily by higher expenses, the impact of newly acquired businesses and higher promotions, partially offset by a gain on the sale of assets, initial markups and the favourable impact of higher revenues. The negative impact of currency on operating margin for the quarter was approximately 30 basis points. |
| For the second quarter of fiscal 2025, adjusted earnings from operations decreased 41.6% to $37.9 million, from $65.0 million in the same prior-year quarter. Adjusted operating margin decreased from 4.6% to 5.2%, from 9.8% for the same prior-year quarter, driven primarily by higher expenses, the impact of newly acquired businesses and higher promotions, partially offset by initial markups and the favourable impact of higher revenues. |
- The operating margin for the Company’s Europe segment decreased from 3.1% to 9.8% in the second quarter of fiscal 2025, from 12.9% in the same prior-year quarter, driven primarily by higher expenses, higher promotions and the unfavourable impact of currency, partially offset by higher initial markups and the favourable impact of higher revenues.
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- The operating margin for the Company’s Americas Retail segment decreased from 7.6% to 1.5% in the second quarter of fiscal 2025, from 9.1% in the same prior-year quarter, driven primarily by the unfavourable impact from negative retail comparable sales, higher expenses and the impact of newly acquired businesses, partially offset by higher initial markups.
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- Operating margin for the Company’s Americas Wholesale segment decreased 6.4% to 18.9% in the second quarter of fiscal 2025, from 25.3% in the same prior-year quarter, driven primarily by the impact of newly acquired businesses.
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- Operating margin for the Company’s Asia segment decreased 1.4% to negative 2.3% in the second quarter of fiscal 2025, from negative 0.9% in the same prior-year quarter, driven primarily by higher expenses and lower revenues, partially offset by higher product margin and the impact of newly acquired business.
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- Operating margin for the Company’s Licensing segment decreased 0.8% to 93.3% in the second quarter of fiscal 2025, from 94.1% in the same prior-year quarter, mainly driven by higher expenses.
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| Other expense, net. Other expenses, net for the second quarter of fiscal 2025 was $39.9 million compared to $4.6 million for the same prior-year quarter. The change was primarily due to the fair value remeasurement of derivatives related to the Company’s convertible senior notes due 2028 and the related convertible note hedge resulting in a net unrealized loss of $40.5 million during the second quarter of fiscal 2025, partially offset by lower net unrealized losses from foreign currency exposures, compared to the same prior-year quarter. |
| Six-Month Period Results |
| For the six months ended August 3, 2024, the Company recorded GAAP net earnings of $2.4 million, a 91% decrease from $27.2 million for the same prior-year period. GAAP diluted EPS decreased 91% to $0.04 for the six months ended August 3, 2024, compared to $0.46 for the same prior-year period. The Company estimates a positive impact from its share buybacks of $0.01 and a negative impact from currency of $0.06 on GAAP diluted EPS for the six months ended August 3, 2024, when compared to the same prior-year period. |
| For the six months ended August 3, 2024, the Company recorded adjusted net earnings of $9.1 million, a 75% decrease from $36.2 million for the same prior-year period. Adjusted diluted EPS decreased 75% to $0.16, compared to $0.65 for the same prior-year period. The Company estimates its share buybacks had a positive impact of $0.01 and currency had a negative impact of $0.07 on adjusted diluted EPS during the six months ended August 3, 2024, when compared to the same prior-year period. |
| Net Revenue. Total net revenue for the six months ended August 3, 2024, increased 7% to $1.32 billion, from $1.23 billion in the same prior-year period. In constant currency, net revenue increased by 10%. |
- Europe revenues increased 3% in U.S. dollars and 8% in constant currency. Retail comparable sales (including e-commerce) increased 2% in U.S. dollars and 6% in constant currency. The inclusion of our e-commerce sales had a minimal impact on the retail comparable sales percentage in U.S. dollars and a negative impact of 1% in constant currency.
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- American retail revenues increased by 5% in both U.S. dollars and constant currency. Retail comparable sales (including e-commerce) decreased 9% in both U.S. dollars and constant currency. The inclusion of our e-commerce sales had a positive impact of 1% in both U.S. dollars and constant currency.
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- Americas Wholesale revenues increased 54% in U.S. dollars and 53% in constant currency.
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- Asia revenues decreased 2% in U.S. dollars and increased 2% in constant currency. Retail comparable sales (including e-commerce) decreased 12% in U.S. dollars and 8% in constant currency. The inclusion of our e-commerce sales had a minimal impact on the retail comparable sales percentage in both U.S. dollars and constant currency.
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- Licensing revenues increased 12% in both U.S. dollars and constant currency.
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| Guess? Inc |
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