First Quarter Fiscal
2025 Results: Revenues Increased to $592 Million, Up
4% in U.S. Dollars and 7% in Constant Currency Delivered
Operating Margin of (3.4%); Adjusted Operating Margin of (1.3%)
GAAP EPS of $0.23 and Adjusted Loss per Share of $0.27
Updates Full Fiscal
Year 2025 Outlook: Expects Revenue Increase between
10.7% and 12.7% in U.S. Dollars GAAP and Adjusted Operating
Margins between 7.3% and 8.1% and 7.7% and 8.5%, Respectively
Expects GAAP EPS between $2.59 and $2.89 and Adjusted EPS
between $2.62 and $3.00
Guess?, Inc. (NYSE: GES) today reported financial results for
its first quarter ended May 4, 2024.
Carlos Alberini, Chief Executive Officer, commented, “We are
very pleased with our first quarter results, which exceeded our
expectations for revenues and earnings per share. We delivered
revenue growth of 4% in US dollars and 7% in constant currency,
driven by a remarkable performance of our Licensing and Americas
wholesale businesses and strong results in Europe and Asia.
Revenues in our Americas retail business finished flat for the
quarter, as we continued to experience softness in certain of our
businesses in the region due to slower customer traffic. I believe
our strong results this quarter once again highlight the power of
our diversified business model and the strength of our brand and
our global distribution.”
Paul Marciano, Co-Founder and Chief Creative Officer, commented,
“During this quarter, we completed the acquisition of rag &
bone, welcoming the team into our Guess family and we just
announced the appointment of Andrew Rosen as Chair of rag &
bone. I couldn’t be more excited about this opportunity to work
together to expand the business globally. Over the years, we built
Guess into a true lifestyle brand with a very diversified product
assortment and global distribution. I believe our experience and
the platform we built can benefit rag & bone greatly to fulfill
our vision to grow the business with new product categories and in
new markets.”
Mr. Alberini concluded, “As we look into the rest of the year,
we continue to expect strong revenue growth and solid margin
performance. Today we are providing an outlook that is consistent
with our previous guidance for the year to exceed $3 billion in
revenues for the first time in our Company’s history. We have an
ambitious agenda this year that includes working with the rag &
bone team and the launch of Guess Jeans. We are excited about our
momentum. As I said in the past, we believe our Company is at an
inflection point and we are well positioned to capitalize on the
opportunities with a solid capital structure, strong brands,
amazing products and very capable teams that are ready to take this
Company to a new level of growth and profitability.”
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.
First Quarter Fiscal 2025
Results
For the first quarter of the fiscal year ended February 1, 2025
(“fiscal 2025”), the Company recorded GAAP net earnings of $13.0
million, compared to a GAAP net loss of $11.8 million for the same
prior-year quarter. The results for the first quarter of fiscal
2025 included a net $38.5 million unrealized gain 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 earnings per share (“EPS”) was $0.23 for
the first quarter of fiscal 2025, compared to GAAP diluted net loss
per share of $0.22 for the same prior-year quarter. The Company
estimates a positive impact from its share buybacks of $0.01 and a
negative impact from currency of $0.12 on GAAP diluted EPS in the
first quarter of fiscal 2025 when compared to the same prior-year
quarter.
For the first quarter of fiscal 2025, the Company’s adjusted net
loss was $13.8 million, compared to $3.5 million for the same
prior-year quarter. Adjusted diluted net loss per share was $0.27,
compared to $0.07 for the same prior-year quarter. The Company
estimates a negative impact from its share buybacks of $0.02 and a
negative impact from currency of $0.08 on adjusted diluted net loss
per share in the first quarter of fiscal 2025 when compared to the
same prior-year quarter.
Net Revenue. Total net revenue for the first quarter of
fiscal 2025 increased 4% to $591.9 million from $569.8 million in
the same prior-year quarter. In constant currency, net revenue
increased by 7%.
- Europe revenues increased 1% in U.S. dollars and 7% in constant
currency. Retail comparable sales (including e-commerce) increased
4% in U.S. dollars and 9% in constant currency. The inclusion of
our e-commerce sales negatively impacted the retail comparable
sales percentage by 2% in U.S. dollars and 3% in constant
currency.
- Americas Retail revenues remained flat in both U.S. dollars and
constant currency. Retail comparable sales (including e-commerce)
decreased 7% in U.S. dollars and 8% in constant currency. The
inclusion of our e-commerce sales positively impacted the retail
comparable sales percentage by 1% in U.S. dollars and 2% in
constant currency.
- Americas Wholesale revenues increased 21% in U.S. dollars and
18% in constant currency.
- Asia revenues increased 3% in U.S. dollars and 7% in constant
currency. Retail comparable sales (including e-commerce) decreased
9% in U.S. dollars and 5% in constant currency. The inclusion of
our e-commerce sales positively impacted the retail comparable
sales percentage by 1% in U.S. dollars and 2% in constant
currency.
- Licensing revenues increased 21% in both U.S. dollars and
constant currency.
Loss from Operations. GAAP loss from operations for the
first quarter of fiscal 2025 was $19.9 million (including $1.1
million in non-cash impairment charges taken on certain long-lived
store related assets and a $3.1 million unfavorable currency
translation impact), compared to $0.9 million (including $1.9
million in non-cash impairment charges taken on certain long-lived
store related assets) in the same prior-year quarter. GAAP
operating margin in the first quarter of fiscal 2025 decreased 3.2%
to negative 3.4%, from negative 0.2% for the same prior-year
quarter, driven primarily by higher expenses, including transaction
costs and separation charges, and the unfavorable impact of
currency, partially offset by the favorable impact of higher
revenues and initial markups. The negative impact of currency on
operating margin for the quarter was approximately 90 basis
points.
For the first quarter of fiscal 2025, adjusted loss from
operations was $7.7 million, compared to adjusted operating
earnings of $1.9 million in the same prior-year quarter. Adjusted
operating margin decreased 1.6% to negative 1.3%, from 0.3% for the
same prior-year quarter, driven primarily by higher expenses and
the unfavorable impact of currency, partially offset by the
favorable impact of higher revenues and initial markups.
- Operating margin for the Company’s Europe segment decreased
0.8% to negative 0.2% in the first quarter of fiscal 2025, from
0.6% in the same prior-year quarter, driven primarily by higher
expenses and the unfavorable impact of currency, partially offset
by the favorable impact of higher revenues and higher initial
markups.
- Operating margin for the Company’s Americas Retail segment
decreased 4.9% to negative 7.2% in the first quarter of fiscal
2025, from negative 2.3% in the same prior-year quarter, driven
primarily by the unfavorable impact from negative retail comparable
sales and higher expenses, partially offset by lower markdowns and
higher initial markups.
- Operating margin for the Company’s Americas Wholesale segment
decreased 2.8% to 22.7% in the first quarter of fiscal 2025, from
25.5% in the same prior-year quarter, driven primarily by the
impact of new acquired businesses.
- Operating margin for the Company’s Asia segment decreased 0.3%
to 5.1% in the first quarter of fiscal 2025, from 5.4% in the same
prior-year quarter, driven primarily by lower product margins and
higher expenses, partially offset by higher revenues.
- Operating margin for the Company’s Licensing segment decreased
1.3% to 92.0% in the first quarter of fiscal 2025, from 93.3% in
the same prior-year quarter, mainly driven by higher expenses,
partially offset by the favorable impact of higher royalties.
Loss on Extinguishment of Debt. In March 2024, the
Company issued approximately $12.1 million principal amount of
additional convertible senior notes due April 2028 (together with
the additional convertible senior notes issued in January 2024, the
“Additional 2028 Notes”) in exchange for approximately $14.6
million of its outstanding convertible senior notes due April 2024
(the “2024 Notes”). The Additional 2028 Notes have the same terms,
constitute a single series with, and have the same CUSIP number as
the other outstanding convertible senior notes due April 2028
(together with the Additional 2028 Notes, the “2028 Notes”;
collectively with the 2024 Notes, the “Notes”). Immediately
following the closing of this transaction, approximately $33.5
million of the 2024 Notes remained outstanding, all of which were
settled upon maturity during April 2024. As a result of the
transaction, the Company recognized a $2.0 million loss on
extinguishment of debt during the first quarter of fiscal 2025.
Other expense (income), net. Other income, net for the
first quarter of fiscal 2025 was $35.8 million compared to other
expense, net of $2.6 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 gain of $38.5 million during the first quarter of fiscal
2025.
Outlook
The Company’s expectations for the second quarter and full
fiscal year 2025 are as follows:
Outlook for Total
Company1
Second Quarter of Fiscal
2025
Fiscal 2025
Consolidated net revenue in U.S.
dollars
increase between 9.0% and
11.0%
increase between 10.7% and
12.7%
GAAP operating margin
5.3% to 6.1%
7.3% to 8.1%
Adjusted operating margin
5.3% to 6.1%
7.7% to 8.5%
GAAP diluted EPS
$0.33 to $0.40
$2.59 to $2.89
Adjusted diluted EPS
$0.38 to $0.47
$2.62 to $3.00
________________________________________________________
See end of release for footnotes
A reconciliation of the Company’s outlook for GAAP operating
margin to adjusted operating margin and GAAP diluted EPS to
adjusted diluted EPS for the second quarter and full fiscal year
2025 is as follows:
Reconciliation of GAAP Outlook
to Adjusted Outlook1
Second Quarter of Fiscal
2025
Fiscal 2025
GAAP operating margin
5.3% to 6.1%
7.3% to 8.1%
Certain professional service and legal
fees and related (credits) costs2
—%
—%
Transaction costs2
—%
0.2%
Separation charges2
—%
0.2%
Asset impairment charges2
—%
—%
Adjusted operating margin
5.3% to 6.1%
7.7% to 8.5%
GAAP diluted EPS
$0.33 to $0.40
$2.59 to $2.89
Certain professional service and legal
fees and related (credits) costs2
—
—
Transaction costs2
—
0.06
Separation charges2
—
0.06
Asset impairment charges2
—
0.01
Loss on extinguishment of debt2
—
0.02
Amortization of debt discount3
0.01
0.03
Fair value remeasurement of
derivatives2
—
(0.55)
Discrete income tax adjustments2
—
—
Convertible notes if-converted method3
$0.04 to $0.06
$0.40 to $0.48
Adjusted diluted EPS
$0.38 to $0.47
$2.62 to $3.00
________________________________________________________
See end of release for footnotes
The Company’s expectations of the high-end for the free cash
flow outlook for the full fiscal year 2025 are as follows (in
millions):
Free Cash Flow Outlook for
Total Company1
Fiscal 2025
Net cash provided by operating
activities
$260
Less: Purchases of property and
equipment
(90)
Less: Payments for property and equipment
under finance leases
(10)
Free cash flow
$160
________________________________________________________
See end of release for footnotes
Dividends
The Company’s Board of Directors approved a quarterly cash
dividend of $0.30 per share on the Company’s common stock. The
dividend will be payable on June 28, 2024 to shareholders of record
as of the close of business on June 12, 2024.
Share Repurchases
On March 25, 2024, the Board of Directors authorized a new
$200.0 million share repurchase program. On March 28, 2024, in
connection with the additional exchange and subscription offering
related to the 2024 Notes and the 2028 Notes, the Company
repurchased approximately 0.3 million shares of its common stock
for $10.3 million through broker-assisted market transactions,
leaving a capacity of $189.7 million under the share repurchase
program. During the first quarter of fiscal 2025, the Company did
not make any share repurchases other than the aforementioned
transaction.
Presentation of Non-GAAP
Information
The financial information presented in this release includes
non-GAAP financial measures, such as adjusted results and outlook,
constant currency financial information and free cash flows. The
adjusted measures exclude the impact of certain professional
service and legal fees and related (credits) costs, transaction
costs in connection with the Company’s acquisition of rag &
bone, separation charges related to the transition of the
operations of the Company’s U.S. distribution center, asset
impairment charges, loss on extinguishment of debt, non-cash
amortization of debt discount of the Company’s convertible senior
notes, fair value remeasurement of derivatives related to the 2028
Notes and the related convertible note hedge, the related income
tax effects of the foregoing items and the impact from certain
discrete income tax adjustments related primarily to the impact
from changes in the income tax law in certain tax jurisdictions, in
each case where applicable. The weighted average diluted shares
outstanding used for adjusted diluted EPS excludes the dilutive
impact of the Notes, based on the bond hedge contracts in place.
These non-GAAP measures are provided in addition to, and not as
alternatives for, the Company’s reported GAAP results and
outlook.
The Company has excluded these items from its adjusted financial
measures primarily because it believes these items are not
indicative of the underlying performance of its business and the
adjusted financial information provided is useful for investors to
evaluate the comparability of the Company’s operating results and
its future outlook (when reviewed in conjunction with the Company’s
GAAP financial statements and GAAP future outlook). A
reconciliation of reported GAAP results and outlook to comparable
non-GAAP results and outlook is provided in the accompanying
tables.
This release includes certain constant currency financial
information. Foreign currency exchange rate fluctuations affect the
amount reported from translating the Company’s foreign revenue,
expenses and balance sheet amounts into U.S. dollars. These rate
fluctuations can have a significant effect on reported operating
results under GAAP. The Company provides constant currency
information to enhance the visibility of underlying business
trends, excluding the effects of changes in foreign currency
translation rates. To calculate net revenue and earnings (loss)
from operations on a constant currency basis, actual or forecasted
results for the current-year period are translated into U.S.
dollars at the average exchange rates in effect during the
comparable period of the prior year. The constant currency
calculations do not adjust for the impact of revaluing specific
transactions denominated in a currency different from the
functional currency of that entity when exchange rates fluctuate.
However, in calculating the estimated impact of currency on our
earnings (loss) per share for our actual or forecasted results, the
Company estimates gross margin (including the impact of
merchandise-related hedges) and expenses using the appropriate
prior-year rates, translates the estimated foreign earnings at the
comparable prior-year rates, and considers the year-over-year
earnings impact of gains or losses arising from balance sheet
remeasurement and foreign currency contracts not designated as
merchandise hedges. The constant currency information presented may
not be comparable to similarly titled measures reported by other
companies.
The Company includes information regarding its free cash flows
in this release. The Company calculates free cash flows as cash
flows from operating activities less (i) purchases of property and
equipment and (ii) payments for property and equipment under
finance leases. Free cash flows are not intended to be an
alternative to cash flows from operating activities as a measure of
liquidity, but rather to provide additional visibility to investors
regarding how much cash is generated for discretionary and
non-discretionary items after deducting purchases of property and
equipment and payments for property and equipment under finance
leases. Free cash flow information presented may not be comparable
to similarly titled measures reported by other companies. A
reconciliation of reported and expected GAAP cash flows from
operating activities to the comparable non-GAAP free cash flow
measure is provided in the accompanying tables.
Investor Conference Call
The Company will hold a conference call at 4:45 pm (ET) on May
30, 2024 to discuss the news announced in this press release. A
live webcast of the conference call will be accessible at
www.guess.com via the “Investor Relations” link. The webcast will
be archived on the website for 30 days.
About Guess?
Guess?, Inc. designs, markets, distributes and licenses a
lifestyle collection of contemporary apparel, denim, handbags,
watches, eyewear, footwear and other related consumer products.
Guess? products are distributed through branded Guess? stores as
well as better department and specialty stores around the world. On
April 2, 2024, the Company acquired all the operating assets and a
50% interest in the intellectual property assets of New York-based
fashion brand rag & bone, a leader in the American fashion
scene, directly operating stores in the U.S. and in the U.K., and
also available in high-end boutiques, department stores and through
e-commerce globally. As of May 4, 2024, the Company directly
operated 1,048 retail stores in Europe, the Americas and Asia. The
Company’s partners and distributors operated 533 additional retail
stores worldwide. As of May 4, 2024, the Company and its partners
and distributors operated in approximately 100 countries worldwide.
For more information about the Company, please visit
www.guess.com.
Forward-Looking
Statements
Except for historical information contained herein, certain
matters discussed in this press release or the related conference
call and webcast, including statements concerning the Company’s
expectations, goals, future prospects, and current business
strategies and strategic initiatives; statements concerning the
Company’s plans and expectations for its recently-acquired rag
& bone business; statements concerning the impacts of the
ongoing conflicts in Ukraine and Gaza and other events impacting
the markets in which we operate; statements concerning the
Company’s future outlook, including with respect to the second
quarter and full year of fiscal 2025; and statements expressing
optimism or pessimism about future operating results and growth
opportunities are forward-looking statements that are made pursuant
to the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995. All statements other than statements of
historical fact are forward-looking statements. Forward-looking
statements, which are frequently indicated by terms such as
“expect,” “could,” “will,” “should,” “goal,” “strategy,” “believe,”
“estimate,” “continue,” “outlook,” “plan,” “create,” “see,” and
similar terms, are only expectations, and involve known and unknown
risks and uncertainties, which may cause actual results in future
periods to differ materially from what is currently
anticipated.
Factors which may cause actual results in future periods to
differ materially from current expectations include, among others:
our ability to maintain our brand image and reputation; changes in
consumer confidence or discretionary consumer spending; sanctions
and export controls targeting Russia and other impacts related to
the war in Ukraine; impacts related to the Israel-Hamas war;
impacts related to public health crises; risks relating to our
indebtedness; changes to estimates related to impairments,
inventory and other reserves; changes in the competitive
marketplace and in our commercial relationships; our ability to
anticipate and adapt to changing consumer preferences and trends;
our ability to manage our inventory commensurate with customer
demand; the high concentration of our Americas Wholesale business;
risks related to the costs and timely delivery of merchandise to
our distribution facilities, stores and wholesale customers,
including risks related to the current Red Sea supply chain crisis;
unexpected or unseasonable weather conditions, catastrophic events
or natural disasters; our ability to effectively operate our
various retail concepts; our ability to successfully and/or timely
implement our growth strategies and other strategic initiatives;
our ability to complete or integrate acquisitions or alliances;
uncertainties regarding our ability to realize operational
efficiencies and other anticipated synergies, expansion plans and
other benefits from the rag & bone acquisition in the timeframe
expected or at all; our ability to successfully enhance our global
omni-channel capabilities; our ability to expand internationally
and operate in regions where we have less experience; risks
relating to our convertible senior notes, including our ability to
settle the liabilities in cash; disruptions at our distribution
facilities, including potential challenges related to the
conversion of our self-operated U.S. distribution center to a
third-party provider; our ability to attract and retain management
and other key personnel; obligations or changes in estimates
arising from new or existing litigation, income tax and other
regulatory proceedings; errors in our assumptions, estimates and
judgments related to tax matters; changes in U.S. or foreign income
tax or tariff policy, including changes to tariffs on imports into
the U.S.; accounting adjustments to our unaudited financial
statements; future non-cash asset impairments, including goodwill,
right-of-use lease assets and/or other store asset impairments;
violations of, or changes to, domestic or international laws and
regulations; risks associated with the acts or omissions of our
licensees and third party vendors, including a failure to comply
with our vendor code of conduct or other policies; risks associated
with cyber-security incidents and other cyber-security risks; risks
associated with our ability to properly collect, use, manage and
secure consumer and employee data; risks associated with our
vendors’ ability to maintain the strength and security of
information systems; changes in economic, political, social and
other conditions affecting our foreign operations and sourcing,
including the impact of currency fluctuations, global income tax
rates and economic and market conditions in the various countries
in which we operate; impacts of inflation and further inflationary
pressures; fluctuations in quarterly performance; slowing in-person
customer traffic; increases in labor costs; increases in wages;
risks relating to activist investor activity; and the significant
voting power of our founders.
In addition to these factors, the economic, technological,
managerial, and other risks identified in the Company’s most recent
annual report on Form 10-K and other filings with the Securities
and Exchange Commission, including but not limited to the risk
factors discussed therein, could cause actual results to differ
materially from current expectations. The Company undertakes no
obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events
or otherwise.
Guess?, Inc. and
Subsidiaries
Condensed Consolidated
Statements of Income (Loss)
(amounts in thousands, except per
share data)
Three Months Ended
May 4, 2024
April 29, 2023
Product sales
$
562,953
95.1
%
$
545,910
95.8
%
Net royalties
28,990
4.9
%
23,888
4.2
%
Net revenue
591,943
100.0
%
569,798
100.0
%
Cost of product sales
343,842
58.1
%
337,813
59.3
%
Gross profit
248,101
41.9
%
231,985
40.7
%
Selling, general and administrative
expenses
266,848
45.1
%
230,973
40.6
%
Asset impairment charges
1,141
0.2
%
1,934
0.3
%
Loss from operations
(19,888
)
(3.4
%)
(922
)
(0.2
%)
Other income (expense):
Interest expense
(6,374
)
(1.1
%)
(4,218
)
(0.7
%)
Interest income
3,648
0.6
%
2,515
0.4
%
Loss on extinguishment of debt
(1,952
)
(0.3
%)
(7,696
)
(1.4
%)
Other, net
35,767
6.1
%
(2,631
)
(0.4
%)
Earnings (loss) before income tax
benefit
11,201
1.9
%
(12,952
)
(2.3
%)
Income tax benefit
(4,705
)
(0.8
%)
(2,258
)
(0.4
%)
Net earnings (loss)
15,906
2.7
%
(10,694
)
(1.9
%)
Net earnings attributable to
noncontrolling interests
2,884
0.5
%
1,111
0.2
%
Net earnings (loss) attributable to
Guess?, Inc.
$
13,022
2.2
%
$
(11,805
)
(2.1
%)
Net earnings (loss) per common share
attributable to common stockholders:
Basic
$
0.24
$
(0.22
)
Diluted
$
0.23
$
(0.22
)
Weighted average common shares outstanding
attributable to common stockholders:
Basic
52,908
54,348
Diluted
55,538
54,348
Effective income tax rate
(42.0
%)
17.4
%
Adjusted selling, general and
administrative expenses4:
$
255,785
43.2
%
$
230,062
40.4
%
Adjusted earnings (loss) from
operations4:
$
(7,684
)
(1.3
%)
$
1,923
0.3
%
Adjusted net loss attributable to Guess?,
Inc.4:
$
(13,810
)
(2.3
%)
$
(3,487
)
(0.6
%)
Adjusted weighted average common shares
outstanding attributable to common stockholders:
Adjusted Diluted4,5
52,908
54,348
Adjusted net loss per common share
attributable to common stockholders:
Adjusted Diluted4,5
$
(0.27
)
$
(0.07
)
Adjusted effective income tax rate4:
12.3
%
0.4
%
________________________________________________________
See end of release for footnotes
Guess?, Inc. and
Subsidiaries
Reconciliation of GAAP Results
to Adjusted Results
(dollars in thousands)
The reconciliations of (i) reported GAAP selling, general and
administrative expenses to adjusted selling, general and
administrative expenses, (ii) reported GAAP loss from operations to
adjusted earnings (loss) from operations, (iii) reported GAAP net
earnings (loss) attributable to Guess?, Inc. to adjusted net loss
attributable to Guess?, Inc., (iv) reported GAAP income tax benefit
to adjusted income tax benefit, and (v) reported GAAP diluted
earnings (loss) per share to adjusted diluted loss per share are as
follows:
Three Months Ended
May 4, 2024
April 29, 2023
Reported GAAP selling, general and
administrative expenses
$
266,848
$
230,973
Certain professional service and legal
fees and related credits (costs)6
(60
)
(911
)
Transaction costs7
(5,584
)
—
Separation charges8
(5,419
)
—
Adjusted selling, general and
administrative expenses4
$
255,785
$
230,062
Reported GAAP loss from operations
$
(19,888
)
$
(922
)
Certain professional service and legal
fees and related (credits) costs6
60
911
Transaction costs7
5,584
—
Separation charges8
5,419
—
Asset impairment charges9
1,141
1,934
Adjusted earnings (loss) from
operations4
$
(7,684
)
$
1,923
Reported GAAP net earnings (loss)
attributable to Guess?, Inc.
$
13,022
$
(11,805
)
Certain professional service and legal
fees and related (credits) costs6
60
911
Transaction costs7
5,584
—
Separation charges8
5,419
—
Asset impairment charges9
1,141
1,934
Loss on extinguishment of debt10
1,952
7,696
Amortization of debt discount11
700
25
Fair value remeasurement of
derivatives12
(38,510
)
—
Discrete income tax adjustments13
281
248
Income tax impact from adjustments14
(3,459
)
(2,496
)
Total adjustments affecting net earnings
(loss) attributable to Guess?, Inc.
(26,832
)
8,318
Adjusted net loss attributable to
Guess?, Inc.4
$
(13,810
)
$
(3,487
)
Reported GAAP income tax benefit
$
(4,705
)
$
(2,258
)
Discrete income tax adjustments13
(281
)
(248
)
Income tax impact from adjustments14
3,459
2,496
Adjusted income tax benefit4
$
(1,527
)
$
(10
)
Adjusted effective income tax
rate4
12.3
%
0.4
%
Reported GAAP diluted earnings (loss) per
share
$
0.23
$
(0.22
)
Certain professional service and legal
fees and related (credits) costs6,15
0.00
0.01
Transaction costs7,15
0.08
—
Separation charges8,15
0.07
—
Asset impairment charges9,15
0.02
0.03
Loss on extinguishment of debt10,15
0.03
0.11
Amortization of debt discount11,15
0.01
0.00
Fair value remeasurement of
derivatives12
(0.69
)
—
Discrete income tax adjustments13
0.01
0.00
Convertible notes if-converted method5
0.00
—
Effect of dilutive stock options and
restricted stock units16
(0.03
)
—
Adjusted diluted loss per
share4,5
$
(0.27
)
$
(0.07
)
________________________________________________________
See end of release for footnotes
Guess?, Inc. and
Subsidiaries
Consolidated Segment
Data
(dollars in thousands)
Three Months Ended
May 4, 2024
April 29, 2023
% change
Net revenue:
Europe
$
283,873
$
280,198
1
%
Americas Retail
144,196
143,544
0
%
Americas Wholesale
62,128
51,393
21
%
Asia
72,756
70,775
3
%
Licensing
28,990
23,888
21
%
Total net revenue
$
591,943
$
569,798
4
%
Earnings (loss) from operations:
Europe
$
(439
)
$
1,593
(128
%)
Americas Retail
(10,391
)
(3,287
)
216
%
Americas Wholesale
14,127
13,093
8
%
Asia
3,741
3,830
(2
%)
Licensing
26,678
22,295
20
%
Total segment earnings from operations
33,716
37,524
(10
%)
Corporate overhead
(52,463
)
(36,512
)
44
%
Asset impairment charges
(1,141
)
(1,934
)
(41
%)
Total loss from operations
$
(19,888
)
$
(922
)
2,057
%
Operating margins:
Europe
(0.2
%)
0.6
%
Americas Retail
(7.2
%)
(2.3
%)
Americas Wholesale
22.7
%
25.5
%
Asia
5.1
%
5.4
%
Licensing
92.0
%
93.3
%
GAAP operating margin for total
Company
(3.4
%)
(0.2
%)
Certain professional service and legal
fees and related (credits) costs4,6
0.0
%
0.2
%
Transaction costs4,7
1.0
%
—
%
Separation charges4,8
0.9
%
—
%
Asset impairment charges4,9
0.2
%
0.3
%
Adjusted operating margin for total
Company4
(1.3
%)
0.3
%
________________________________________________________
See end of release for footnotes
Guess?, Inc. and
Subsidiaries
Constant Currency Financial
Measures
(dollars in thousands)
As Reported
Foreign Currency
Impact
Constant Currency
As Reported
As Reported
Constant Currency
May 4, 2024
April 29, 2023
Three Months Ended
% change
Net revenue:
Europe
$
283,873
$
16,435
$
300,308
$
280,198
1
%
7
%
Americas Retail
144,196
(1,047
)
143,149
143,544
0
%
(0
%)
Americas Wholesale
62,128
(1,378
)
60,750
51,393
21
%
18
%
Asia
72,756
2,659
75,415
70,775
3
%
7
%
Licensing
28,990
—
28,990
23,888
21
%
21
%
Total net revenue
$
591,943
$
16,669
$
608,612
$
569,798
4
%
7
%
Guess?, Inc. and
Subsidiaries
Selected Condensed
Consolidated Balance Sheet Data
(in thousands)
May 4, 2024
February 3,
2024
April 29, 2023
ASSETS
Cash and cash equivalents
$
241,654
$
360,285
$
298,642
Receivables, net
297,422
314,769
286,314
Inventories
554,903
466,297
528,903
Other current assets
113,548
84,122
98,820
Property and equipment, net
259,386
246,648
239,747
Restricted cash
1,377
—
—
Operating lease right-of-use assets
720,924
667,031
645,713
Other assets
559,427
450,869
342,583
Total assets
$
2,748,641
$
2,590,021
$
2,440,722
LIABILITIES AND STOCKHOLDERS’
EQUITY
Current portion of borrowings and finance
lease obligations
$
41,504
$
40,781
$
39,092
Current operating lease liabilities
181,702
166,451
172,628
Current portion of convertible senior
notes due 2024, net
—
48,048
114,812
Other current liabilities
544,912
536,277
502,501
Long-term debt and finance lease
obligations
196,919
28,210
159,372
Convertible senior notes due 2028, net
360,666
336,717
265,594
Long-term operating lease liabilities
600,286
542,392
530,939
Other long-term liabilities
214,819
155,829
153,392
Redeemable and nonredeemable
noncontrolling interests
42,360
50,376
50,392
Guess?, Inc. stockholders’ equity
565,473
684,940
452,000
Total liabilities and stockholders’
equity
$
2,748,641
$
2,590,021
$
2,440,722
Guess?, Inc. and
Subsidiaries
Condensed Consolidated Cash
Flow Data
(in thousands)
Three Months Ended
May 4, 2024
April 29, 2023
Net cash used in operating activities
$
(22,921
)
$
(12,658
)
Net cash used in investing activities
(77,923
)
(17,384
)
Net cash provided by (used in) financing
activities
(15,720
)
53,305
Effect of exchange rates on cash, cash
equivalents and restricted cash
(690
)
(386
)
Net change in cash, cash equivalents and
restricted cash
(117,254
)
22,877
Cash and cash equivalents at the beginning
of the year
360,285
275,765
Cash, cash equivalents and restricted cash
at the end of the period
$
243,031
$
298,642
Supplemental information:
Depreciation and amortization
$
16,379
$
15,449
Total lease costs (excluding finance lease
cost)
$
84,135
$
79,510
Guess?, Inc. and
Subsidiaries
Reconciliation of Net Cash
Used In Operating Activities to Free Cash Flow
(in thousands)
Three Months Ended
May 4, 2024
April 29, 2023
Net cash used in operating activities
$
(22,921
)
$
(12,658
)
Less: Purchases of property and
equipment
(21,100
)
(17,347
)
Less: Payments for property and equipment
under finance leases
(1,533
)
(1,490
)
Free cash flow
$
(45,554
)
$
(31,495
)
Guess?, Inc. and
Subsidiaries
Retail Store Data
Global Store and Concession
Count
Stores
Concessions
Region
Total
Directly Operated
Partner Operated
Total
Directly Operated
Partner Operated
As of May 4, 2024
United States
261
261
—
—
—
—
Canada
53
53
—
—
—
—
Central and South America
99
87
12
29
29
—
Total Americas
413
401
12
29
29
—
Europe and the Middle East
775
549
226
60
60
—
Asia and the Pacific
393
98
295
240
134
106
Total
1,581
1,048
533
329
223
106
As of April 29, 2023
United States
238
238
—
—
—
—
Canada
61
61
—
—
—
—
Central and South America
103
69
34
29
29
—
Total Americas
402
368
34
29
29
—
Europe and the Middle East
782
558
224
53
53
—
Asia and the Pacific
404
117
287
244
135
109
Total
1,588
1,043
545
326
217
109
Guess?, Inc. and
Subsidiaries
Footnotes to Condensed
Consolidated Financial Data
Footnote:
1
The Company’s outlook for the second
quarter and full fiscal year 2025 assumes that foreign currency
exchange rates remain at recently prevailing rates.
2
Amounts for the full fiscal 2025 outlook
exclude the following items: (i) certain professional service and
legal fees and related (credits) costs which the Company otherwise
would not have incurred as part of its business operations, (ii)
transaction costs in connection with the rag & bone
acquisition, (iii) separation charges related to the transition of
the operation of the Company’s U.S. distribution center, (iv) asset
impairment charges related primarily to impairment of property and
equipment related to certain retail locations resulting from
underperformance and expected store closures, (v) loss on
extinguishment of debt related to the 2024 Notes, (vi) fair value
remeasurement of derivatives associated with the 2028 Notes and
(vii) discrete income tax adjustments. See the heading
“Presentation of Non-GAAP Information” for further information. The
Company is unable to predict future amounts with respect to these
items, as such amounts are inconsistent in magnitude and frequency
and certain elements used to estimate such items have not yet
occurred or are out of the Company’s control. As such, the Company
has not considered any future charges or credits with respect to
these items in the accompanying GAAP outlook.
3
Amounts for the second quarter and full
fiscal 2025 outlook exclude (i) the amortization of the debt
discount related to the 2028 Notes and (ii) the dilutive impact of
the Notes for adjusted diluted shares and corresponding interest
expenses at initial stock prices below $46.88 for the 2024 Notes
and $41.80 for the 2028 Notes, based on the bond hedge contracts in
place that will deliver shares to offset dilution. The Company
excludes the impact anticipated to be recorded and the diluted
impact anticipated in those periods as such amounts are reasonably
estimated. The Company has not assumed any potential share dilution
due to the related warrants.
4
The adjusted results exclude certain
professional service and legal fees and related (credits) costs,
transaction costs in connection with the acquisition of rag &
bone, separation charges related to the transition of the operation
of the Company’s U.S. distribution center, asset impairment
charges, loss on extinguishment of debt, amortization of debt
discount, fair value remeasurement of derivatives associated with
the 2028 Notes, the related income tax impacts of these
adjustments, as well as certain discrete income tax adjustments,
where applicable. The weighted average diluted shares outstanding
used for adjusted diluted loss per share excludes the dilutive
impact of the Notes, based on the bond hedge contracts in place. A
reconciliation of actual results to adjusted results is presented
in the “Reconciliation of GAAP Results to Adjusted Results.”
5
The Company excludes the dilutive impact
of the Notes at stock prices below $41.45 for the 2024 Notes and
below $37.89 for the 2028 Notes, based on the bond hedge contracts
in place that will deliver shares to offset dilution. At stock
prices in excess of $41.45 for the 2024 Notes and $37.89 for the
2028 Notes, the Company would have an obligation to deliver
additional shares in excess of the dilution protection provided by
the bond hedges.
6
Adjustments represent certain professional
service and legal fees and related (credits) costs which the
Company otherwise would not have incurred as part of its business
operations.
7
Adjustments represent transaction costs in
connection with the rag & bone acquisition which the Company
otherwise would not have incurred as part of its business
operations.
8
During the first quarter of fiscal 2025,
the Company recorded separation charges related to the transition
of the operation of the Company’s U.S. distribution center, which
was formerly owner-operated, to a third-party logistics
provider.
9
Adjustments represent asset impairment
charges related primarily to impairment of property and equipment
related to certain retail locations resulting from
under-performance and expected store closures.
10
Adjustments represent loss on
extinguishment of debt from a portion of the exchanged 2024 Notes
in April 2023 and March 2024.
11
In April 2023, January 2024 and March
2024, the Company issued $275 million, $65 million and $12 million
principal amount of 3.75% convertible senior notes due 2028 in
private offerings, respectively. The debt discount resulted from:
(1) the modification accounting for a portion of the exchanged 2024
Notes in April 2023, and (2) recognized embedded derivative
liability for the issuances of the Additional 2028 Notes. The debt
discount will be amortized as non-cash interest expense over the
term of the 2028 Notes.
12
Adjustments represent changes in fair
value of the equity-linked derivatives associated with the 2028
Notes.
13
Adjustments represent discrete income tax
items related primarily to the impact from changes in the income
tax law in certain tax jurisdictions.
14
The income tax effect of certain
professional service and legal fees and related (credits) costs,
transaction costs in connection with the acquisition of rag &
bone, separation charges related to the transition of the operation
of the Company’s U.S. distribution center, asset impairment
charges, loss on extinguishment of debt and amortization of debt
discount was based on the Company’s assessment of deductibility
using the statutory income tax rate (inclusive of the impact of
valuation allowances) of the tax jurisdiction in which the charges
were incurred.
15
Adjustments include the related income tax
effect based on the Company’s assessment of deductibility using the
statutory income tax rate (inclusive of the impact of valuation
allowances) of the tax jurisdiction in which the charges were
incurred.
16
Adjustments represent the potentially
dilutive impact of outstanding stock options and restricted stock
units which are not included in the computation of diluted net loss
per share as the impact would be antidilutive.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240528879638/en/
Guess?, Inc. Fabrice Benarouche Senior Vice President Finance,
Investor Relations and Chief Accounting Officer (213) 765-5578
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