Second Quarter Fiscal
2025 Results: Revenues Increased to $733 Million, Up 10% in
U.S. Dollars and 13% in Constant Currency Delivered Operating
Margin of 6.5%; Adjusted Operating Margin of 5.2% GAAP Loss per
Share of $0.28 and Adjusted EPS of $0.42
Lowers Full Fiscal
Year 2025 Outlook: Expects Revenue Increase between 9.5% and
11.0% in U.S. Dollars Expects GAAP and Adjusted Operating Margins
between 7.2% and 7.7% and 7.3% and 7.8%, Respectively Expects GAAP
EPS between $1.92 and $2.14 and Adjusted EPS between $2.42 and
$2.70
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 & bone
acquisition and strong wholesale performance in our Europe and
Americas 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 spend 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
& 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.
- Americas Retail revenues increased 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.
- Americas Wholesale revenues increased 93% in U.S. dollars and
94% in constant currency.
- 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.
- Licensing revenues increased 4% in both U.S. dollars and
constant currency.
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 center during the second quarter of fiscal 2025 and a
$3.7 million unfavorable currency translation impact), from $64.6
million in the same prior-year quarter. GAAP operating margin in
the second quarter of fiscal 2025 decreased 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 favorable 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
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 favorable impact of higher revenues.
- Operating margin for the Company’s Europe segment decreased
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 unfavorable impact of currency, partially
offset by higher initial markups and the favorable impact of higher
revenues.
- Operating margin for the Company’s Americas Retail segment
decreased 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
unfavorable impact from negative retail comparable sales, higher
expenses and the impact of newly acquired businesses, partially
offset by higher initial markups.
- 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.
- 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.
- 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.
Other expense, net. Other expense, 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.
- Americas Retail revenues increased 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.
- Americas Wholesale revenues increased 54% in U.S. dollars and
53% in constant currency.
- 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.
- Licensing revenues increased 12% in both U.S. dollars and
constant currency.
Earnings from Operations. GAAP earnings from operations
for the six months ended August 3, 2024 decreased 56.2% to $27.9
million (including a gain of $13.8 million on the sale of the U.S.
distribution center during the second quarter of fiscal 2025 and a
$6.8 million unfavorable currency translation impact), from $63.7
million in the same prior-year period. GAAP operating margin in the
six months ended August 3, 2024 decreased 3.1% to 2.1%, from 5.2%
in the same prior-year period, driven primarily by higher expenses,
including separation charges, transaction costs and higher store
costs, and unfavorable currency impact, partially offset by a gain
on the sale of assets, the favorable impact of higher revenues and
higher initial markups. The negative impact of currency on
operating margin for the six months ended August 3, 2024 was
approximately 50 basis points.
For the six months ended August 3, 2024, adjusted earnings from
operations decreased 54.8% to $30.3 million, from $66.9 million in
the same prior-year period. Adjusted operating margin decreased
3.1% to 2.3% for the six months ended August 3, 2024, from 5.4% in
the same prior-year period, driven primarily by higher expenses,
including higher store costs, and unfavorable currency impact,
partially offset by the favorable impact of higher revenues and
higher initial markups.
- Operating margin for the Company’s Europe segment decreased
2.0% to 5.5% in the six months ended August 3, 2024, from 7.5% in
the same prior-year period, 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 6.2% to negative 2.4% in the six months ended August 3,
2024, from 3.8% in the same prior-year period, driven primarily by
the unfavorable impact from lower revenues and higher expenses
partially offset by higher initial markups.
- Operating margin for the Company’s Americas Wholesale segment
decreased 4.9% to 20.5% in the six months ended August 3, 2024,
from 25.4% in the same prior-year period, driven primarily by the
impact of newly acquired businesses.
- Operating margin for the Company’s Asia segment decreased 0.5%
to 2.0% in the six months ended August 3, 2024, from 2.5% in the
same prior-year period, driven primarily by higher expenses.
- Operating margin for the Company’s Licensing segment decreased
1.1% to 92.6% in the six months ended August 3, 2024, from 93.7% in
the same prior-year period, mainly due to the unfavorable impact of
higher expenses.
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, net. Other expense, net for the six months
ended August 3, 2024 was $4.1 million compared to $7.2 million in
the same prior-year period. The change was primarily due to lower
net unrealized and realized losses from foreign currency exposures
compared to the same prior-year period.
Outlook
The Company’s expectations for the third quarter and full fiscal
year 2025 are as follows:
Outlook for Total
Company1
Third Quarter of Fiscal
2025
Fiscal 2025
Consolidated net revenue in U.S.
dollars
increase between 14.5% and
16.5%
increase between 9.5% and
11.0%
GAAP operating margin
4.7% to 5.8%
7.2% to 7.7%
Adjusted operating margin
4.7% to 5.8%
7.3% to 7.8%
GAAP diluted EPS
$0.28 to $0.38
$1.92 to $2.14
Adjusted diluted EPS
$0.33 to $0.45
$2.42 to $2.70
______________________________________________________________________
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 third quarter and full fiscal year
2025 is as follows:
Reconciliation of GAAP Outlook
to Adjusted Outlook1
Third Quarter of Fiscal
2025
Fiscal 2025
GAAP operating margin
4.7% to 5.8%
7.2% to 7.7%
Certain professional service and legal
fees and related (credits) costs2
—%
(0.0)%
Transaction costs2
—%
0.2%
Separation charges2
—%
0.2%
Asset impairment charges2
—%
0.1%
Gain on disposal of assets2
—%
(0.4)%
Adjusted operating margin
4.7% to 5.8%
7.3% to 7.8%
GAAP diluted EPS
$0.28 to $0.38
$1.92 to $2.14
Certain professional service and legal
fees and related (credits) costs2
—
(0.00)
Transaction costs2
—
0.07
Separation charges2
—
0.08
Asset impairment charges2
—
0.04
Loss on extinguishment of debt2
—
0.02
Amortization of debt discount3
0.01
0.03
Fair value remeasurement of
derivatives2
—
0.03
Gain on disposal of assets2
—
(0.16)
Discrete income tax adjustments2
—
0.01
Convertible notes if-converted method3
0.04 to 0.06
0.38 to 0.44
Adjusted diluted EPS
$0.33 to $0.45
$2.42 to $2.70
______________________________________________________________________________
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
$200
Less: Purchases of property and
equipment
(90)
Less: Payments for property and equipment
under finance leases
(10)
Free cash flow
$100
______________________________________________________________________
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 September 27, 2024 to shareholders of
record as of the close of business on September 11, 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.
During the second quarter of fiscal 2025, the Company repurchased
approximately 2.3 million shares of its common stock in open market
transactions totaling $50.0 million, leaving a capacity of $139.8
million under the share repurchase program. Combined, these
transactions resulted in the repurchase of approximately 2.6
million shares for $60.3 million during the six months ended August
3, 2024.
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, gain on the
sale of the U.S. distribution center and settlement of the related
interest rate swap, asset impairment charges, net (gains) losses on
lease modifications, 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
August 28, 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 August 3, 2024, the Company directly
operated 1,054 retail stores in Europe, the Americas and Asia. The
Company’s partners and distributors operated 537 additional retail
stores worldwide. As of August 3, 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 our expectations
regarding the consumer spending environment; statements concerning
the Company’s future outlook, including with respect to the third
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
Six Months Ended
Aug 3, 2024
Jul 29, 2023
Aug 3, 2024
Jul 29, 2023
Product sales
$
703,460
96.0
%
$
636,496
95.8
%
$
1,266,413
95.6
%
$
1,182,406
95.8
%
Net royalties
29,100
4.0
%
28,016
4.2
%
58,090
4.4
%
51,904
4.2
%
Net revenue
732,560
100.0
%
664,512
100.0
%
1,324,503
100.0
%
1,234,310
100.0
%
Cost of product sales
412,617
56.3
%
370,069
55.7
%
756,459
57.1
%
707,882
57.4
%
Gross profit
319,943
43.7
%
294,443
44.3
%
568,044
42.9
%
526,428
42.6
%
Selling, general and administrative
expenses
282,951
38.7
%
229,652
34.6
%
549,799
41.4
%
460,625
37.3
%
Asset impairment charges
2,277
0.3
%
2,622
0.4
%
3,418
0.3
%
4,556
0.3
%
Net gains on lease modifications
—
—
%
(2,431
)
(0.4
%)
—
—
%
(2,431
)
(0.2
%)
Gain on sale of assets
(13,781
)
(1.9
%)
—
—
%
(13,781
)
(1.0
%)
—
—
%
Loss on equity method investment
720
0.1
%
—
—
%
720
0.1
%
—
—
%
Earnings from operations
47,776
6.5
%
64,600
9.7
%
27,888
2.1
%
63,678
5.2
%
Other income (expense):
Interest expense
(7,707
)
(1.1
%)
(5,742
)
(0.8
%)
(14,081
)
(1.1
%)
(9,960
)
(0.8
%)
Interest income
2,957
0.4
%
2,861
0.4
%
6,605
0.5
%
5,376
0.4
%
Loss on extinguishment of debt
—
—
%
—
—
%
(1,952
)
(0.1
%)
(7,696
)
(0.6
%)
Other, net
(39,873
)
(5.4
%)
(4,592
)
(0.7
%)
(4,106
)
(0.3
%)
(7,223
)
(0.6
%)
Earnings before income tax expense
3,153
0.4
%
57,127
8.6
%
14,354
1.1
%
44,175
3.6
%
Income tax expense
11,789
1.6
%
15,165
2.3
%
7,084
0.6
%
12,907
1.1
%
Net earnings (loss)
(8,636
)
(1.2
%)
41,962
6.3
%
7,270
0.5
%
31,268
2.5
%
Net earnings attributable to
noncontrolling interests
1,967
0.2
%
2,929
0.4
%
4,851
0.3
%
4,040
0.3
%
Net earnings (loss) attributable to
Guess?, Inc.
$
(10,603
)
(1.4
%)
$
39,033
5.9
%
$
2,419
0.2
%
$
27,228
2.2
%
Net earnings (loss) per common share
attributable to common stockholders:
Basic
$
(0.21
)
$
0.73
$
0.04
$
0.50
Diluted
$
(0.28
)
$
0.59
$
0.04
$
0.46
Weighted average common shares outstanding
attributable to common stockholders:
Basic
52,436
52,951
52,672
53,649
Diluted
67,092
69,869
54,118
65,608
Effective income tax rate
373.9
%
26.5
%
49.4
%
29.2
%
Adjusted selling, general and
administrative expenses4:
$
281,280
38.4
%
$
229,451
34.5
%
$
537,065
40.5
%
$
459,513
37.2
%
Adjusted earnings from operations4:
$
37,943
5.2
%
$
64,992
9.8
%
$
30,259
2.3
%
$
66,915
5.4
%
Adjusted net earnings attributable to
Guess?, Inc.4:
$
22,950
3.1
%
$
39,712
6.0
%
$
9,140
0.7
%
$
36,225
2.9
%
Adjusted weighted average common shares
outstanding attributable to common stockholders:
Adjusted Diluted4,5
53,835
54,026
54,118
54,871
Adjusted net earnings per common share
attributable to common stockholders:
Adjusted Diluted4,5
$
0.42
$
0.72
$
0.16
$
0.65
Adjusted effective income tax rate4:
26.3
%
26.1
%
34.5
%
27.2
%
__________________________________________________________________
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 earnings from
operations to adjusted earnings from operations, (iii) reported
GAAP net earnings (loss) attributable to Guess?, Inc. to adjusted
net earnings attributable to Guess?, Inc., and (iv) reported GAAP
income tax expense to adjusted income tax expense are as
follows:
Three Months Ended
Six Months Ended
Aug 3, 2024
Jul 29, 2023
Aug 3, 2024
Jul 29, 2023
Reported GAAP selling, general and
administrative expenses
$
282,951
$
229,652
$
549,799
$
460,625
Certain professional service and legal
fees and related credits (costs)6
127
(201
)
67
(1,112
)
Transaction costs7
(142
)
—
(5,726
)
—
Separation charges8
(1,656
)
—
(7,075
)
—
Adjusted selling, general and
administrative expenses4
$
281,280
$
229,451
$
537,065
$
459,513
Reported GAAP earnings from operations
$
47,776
$
64,600
$
27,888
$
63,678
Certain professional service and legal
fees and related (credits) costs6
(127
)
201
(67
)
1,112
Transaction costs7
142
—
5,726
—
Separation charges8
1,656
—
7,075
—
Asset impairment charges9
2,277
2,622
3,418
4,556
Net gains on lease modifications10
—
(2,431
)
—
(2,431
)
Gain on disposal of assets11
(13,781
)
—
(13,781
)
—
Adjusted earnings from
operations4
$
37,943
$
64,992
$
30,259
$
66,915
Reported GAAP net earnings (loss)
attributable to Guess?, Inc.
$
(10,603
)
$
39,033
$
2,419
$
27,228
Certain professional service and legal
fees and related (credits) costs6
(127
)
201
(67
)
1,112
Transaction costs7
142
—
5,726
—
Separation charges8
1,656
—
7,075
—
Asset impairment charges9
2,277
2,622
3,418
4,556
Net gains on lease modifications10
—
(2,431
)
—
(2,431
)
Loss on extinguishment of debt12
—
—
1,952
7,696
Amortization of debt discount13
775
163
1,475
188
Fair value remeasurement of
derivatives14
40,492
—
1,982
—
Gain on disposal of assets11
(14,569
)
—
(14,569
)
—
Discrete income tax adjustments15
280
249
561
497
Income tax impact from adjustments16
2,627
(125
)
(832
)
(2,621
)
Total adjustments affecting net earnings
(loss) attributable to Guess?, Inc.
33,553
679
6,721
8,997
Adjusted net earnings attributable to
Guess?, Inc.4
$
22,950
$
39,712
$
9,140
$
36,225
Reported GAAP income tax expense
$
11,789
$
15,165
$
7,084
$
12,907
Discrete income tax adjustments15
(280
)
(249
)
(561
)
(497
)
Income tax impact from adjustments16
(2,627
)
125
832
2,621
Adjusted income tax expense4
$
8,882
$
15,041
$
7,355
$
15,031
Adjusted effective income tax
rate4
26.3
%
26.1
%
34.5
%
27.2
%
__________________________________________________________________
See end of release for footnotes.
Guess?, Inc. and
Subsidiaries
Reconciliation of GAAP Results
to Adjusted Results
(dollars in thousands)
The reconciliation of reported GAAP diluted earnings (loss) per
share to adjusted diluted earnings per share is as follows:
Three Months Ended
Six Months Ended
Aug 3, 2024
Jul 29, 2023
Aug 3, 2024
Jul 29, 2023
Reported GAAP diluted earnings (loss) per
share
$
(0.28
)
$
0.59
$
0.04
$
0.46
Certain professional service and legal
fees and related (credits) costs6,17
(0.00
)
0.00
(0.00
)
0.01
Transaction costs7,17
0.01
—
0.08
—
Separation charges8,17
0.02
—
0.10
—
Asset impairment charges9,17
0.03
0.04
0.05
0.06
Net gains on lease modifications10,17
—
(0.03
)
—
(0.03
)
Loss on extinguishment of debt12,17
—
—
0.03
0.11
Amortization of debt discount13,17
0.01
0.00
0.02
0.00
Fair value remeasurement of
derivatives14
0.60
—
0.04
—
Gain on disposal of assets11,17
(0.17
)
—
(0.21
)
—
Discrete income tax adjustments15
0.00
0.00
0.01
0.01
Convertible notes if-converted method5
0.21
0.12
0.00
0.03
Effect of dilutive stock options and
restricted stock units18
(0.01
)
—
0.00
—
Adjusted diluted earnings per
share4,5
$
0.42
$
0.72
$
0.16
$
0.65
__________________________________________________________________
See end of release for footnotes.
Guess?, Inc. and
Subsidiaries
Consolidated Segment
Data
(dollars in thousands)
Three Months Ended
Six Months Ended
Aug 3, 2024
Jul 29, 2023
% change
Aug 3, 2024
Jul 29, 2023
% change
Net revenue:
Europe
$
383,230
$
366,311
5%
$
667,103
$
646,509
3%
Americas Retail
181,494
167,568
8%
325,690
311,112
5%
Americas Wholesale
84,404
43,680
93%
146,532
95,073
54%
Asia
54,332
58,937
(8%)
127,088
129,712
(2%)
Licensing
29,100
28,016
4%
58,090
51,904
12%
Total net revenue
$
732,560
$
664,512
10%
$
1,324,503
$
1,234,310
7%
Earnings (loss) from operations:
Europe
$
37,394
$
47,196
(21%)
$
36,955
$
48,789
(24%)
Americas Retail
2,693
15,261
(82%)
(7,698
)
11,974
(164%)
Americas Wholesale
15,980
11,065
44%
30,107
24,158
25%
Asia
(1,224
)
(539
)
127%
2,517
3,291
(24%)
Licensing
27,136
26,354
3%
53,814
48,649
11%
Total segment earnings from operations
81,979
99,337
(17%)
115,695
136,861
(15%)
Corporate overhead
(45,707
)
(34,546
)
32%
(98,170
)
(71,058
)
38%
Asset impairment charges
(2,277
)
(2,622
)
(13%)
(3,418
)
(4,556
)
(25%)
Net gains on lease modifications
—
2,431
(100%)
—
2,431
(100%)
Gain on sale of assets
13,781
—
13,781
—
Total earnings from operations
$
47,776
$
64,600
(26%)
$
27,888
$
63,678
(56%)
Operating margins:
Europe
9.8
%
12.9
%
5.5
%
7.5
%
Americas Retail
1.5
%
9.1
%
(2.4
%)
3.8
%
Americas Wholesale
18.9
%
25.3
%
20.5
%
25.4
%
Asia
(2.3
%)
(0.9
%)
2.0
%
2.5
%
Licensing
93.3
%
94.1
%
92.6
%
93.7
%
GAAP operating margin for total
Company
6.5
%
9.7
%
2.1
%
5.2
%
Certain professional service and legal
fees and related (credits) costs4,6
(0.0
%)
0.1
%
(0.0
%)
0.1
%
Transaction costs4,7
0.0
%
—
%
0.4
%
—
%
Separation charges4,8
0.3
%
—
%
0.5
%
—
%
Asset impairment charges4,9
0.3
%
0.4
%
0.3
%
0.3
%
Net gains on lease modifications4,10
—
%
(0.4
%)
—
%
(0.2
%)
Gain on disposal of assets4,11
(1.9
%)
—
%
(1.0
%)
—
%
Adjusted operating margin for total
Company4
5.2
%
9.8
%
2.3
%
5.4
%
______________________________________________________________________
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
Aug 3, 2024
Jul 29, 2023
Three Months Ended
% change
Net revenue:
Europe
$
383,230
$
12,239
$
395,469
$
366,311
5%
8%
Americas Retail
181,494
1,068
182,562
167,568
8%
9%
Americas Wholesale
84,404
482
84,886
43,680
93%
94%
Asia
54,332
2,174
56,506
58,937
(8%)
(4%)
Licensing
29,100
—
29,100
28,016
4%
4%
Total net revenue
$
732,560
$
15,963
$
748,523
$
664,512
10%
13%
Six Months Ended
Net revenue:
Europe
$
667,103
$
28,675
$
695,778
$
646,509
3%
8%
Americas Retail
325,690
20
325,710
311,112
5%
5%
Americas Wholesale
146,532
(896
)
145,636
95,073
54%
53%
Asia
127,088
4,833
131,921
129,712
(2%)
2%
Licensing
58,090
—
58,090
51,904
12%
12%
Total net revenue
$
1,324,503
$
32,632
$
1,357,135
$
1,234,310
7%
10%
Guess?, Inc. and
Subsidiaries
Selected Condensed
Consolidated Balance Sheet Data
(in thousands)
Aug 3, 2024
Feb 3, 2024
Jul 29, 2023
ASSETS
Cash and cash equivalents
$
218,856
$
360,285
$
302,626
Receivables, net
332,037
314,769
318,364
Inventories
603,263
466,297
554,425
Other current assets
101,701
84,122
84,654
Property and equipment, net
238,088
246,648
237,928
Restricted cash
1,394
—
—
Operating lease right-of-use assets
767,463
667,031
651,722
Other assets
513,843
450,869
339,440
Total assets
$
2,776,645
$
2,590,021
$
2,489,159
LIABILITIES AND STOCKHOLDERS’
EQUITY
Current portion of borrowings and finance
lease obligations
$
41,348
$
40,781
$
37,507
Current operating lease liabilities
187,568
166,451
170,020
Current portion of convertible senior
notes due 2024, net
—
48,048
114,899
Other current liabilities
626,598
536,277
534,879
Long-term debt and finance lease
obligations
187,838
28,210
146,043
Convertible senior notes due 2028, net
350,546
336,717
266,110
Long-term operating lease liabilities
638,228
542,392
532,495
Other long-term liabilities
212,491
155,829
152,812
Redeemable and nonredeemable
noncontrolling interests
40,818
50,376
45,497
Guess?, Inc. stockholders’ equity
491,210
684,940
488,897
Total liabilities and stockholders’
equity
$
2,776,645
$
2,590,021
$
2,489,159
Guess?, Inc. and
Subsidiaries
Condensed Consolidated Cash
Flow Data
(in thousands)
Six Months Ended
Aug 3, 2024
Jul 29, 2023
Net cash provided by operating
activities
$
21,734
$
47,273
Net cash used in investing activities
(60,894
)
(35,836
)
Net cash provided by (used in) financing
activities
(95,441
)
13,253
Effect of exchange rates on cash, cash
equivalents and restricted cash
(5,434
)
2,171
Net change in cash, cash equivalents and
restricted cash
(140,035
)
26,861
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
$
220,250
$
302,626
Supplemental information:
Depreciation and amortization
$
33,581
$
30,833
Total lease costs (excluding finance lease
cost)
$
171,730
$
154,507
Guess?, Inc. and
Subsidiaries
Reconciliation of Net Cash
Provided By Operating Activities to Free Cash Flow
(in thousands)
Six Months Ended
Aug 3, 2024
Jul 29, 2023
Net cash provided by operating
activities
$
21,734
$
47,273
Less: Purchases of property and
equipment
(41,478
)
(34,793
)
Less: Payments for property and equipment
under finance leases
(3,216
)
(3,405
)
Free cash flow
$
(22,960
)
$
9,075
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 Aug 3, 2024
United States
264
264
—
—
—
—
Canada
54
54
—
—
—
—
Central and South America
100
88
12
29
29
—
Total Americas
418
406
12
29
29
—
Europe and the Middle East
780
555
225
58
58
—
Asia and the Pacific
393
93
300
222
131
91
Total
1,591
1,054
537
309
218
91
As of Jul 29, 2023
United States
234
234
—
—
—
—
Canada
61
61
—
—
—
—
Central and South America
103
69
34
29
29
—
Total Americas
398
364
34
29
29
—
Europe and the Middle East
769
546
223
58
58
—
Asia and the Pacific
402
113
289
241
132
109
Total
1,569
1,023
546
328
219
109
Guess?, Inc. and
Subsidiaries
Footnotes to Condensed
Consolidated Financial Data
Footnote:
1
The Company’s outlook for the third
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 (vii)
gain on the sale of assets related to the U.S. distribution center
and the settlement of the related interest rate swap and (viii)
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 third 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, net gains on lease modifications, loss on extinguishment
of debt, amortization of debt discount, fair value remeasurement of
derivatives associated with the 2028 Notes, gain on the sale of
assets related to the U.S. distribution center and the settlement
of the related interest rate swap, 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 $41.08 for the 2024 Notes and
below $37.76 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 $41.08 for the 2024 Notes and $37.76 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
Adjustments represent 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 net gains on lease
modifications related primarily to the early termination of certain
lease agreements.
11
Adjustments represent the gain on the sale
of assets related to the U.S. distribution center within earnings
from operations and the settlement of the related interest rate
swap within other income (expense).
12
Adjustments represent loss on
extinguishment of debt from a portion of the exchanged 2024 Notes
in April 2023 and March 2024.
13
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.
14
Adjustments represent changes in fair
value of the equity-linked derivatives associated with the 2028
Notes.
15
Adjustments represent discrete income tax
items related primarily to the impact from changes in the income
tax law in certain tax jurisdictions.
16
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, net gains on lease modifications, loss on extinguishment
of debt, amortization of debt discount and gain on the sale of
assets related to the U.S. distribution center and the settlement
of the related interest rate swap 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.
17
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.
18
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.
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version on businesswire.com: https://www.businesswire.com/news/home/20240826428126/en/
Guess?, Inc. Fabrice Benarouche Senior Vice President Finance,
Investor Relations and Chief Accounting Officer (213) 765-5578
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