Guess Inc. Reports Quarterly Profit of $ 63 Million

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Guess Inc. continues to make gains. But Wall Street keeps asking for more.

The clothes, accessories and a shoe retailer revealed earnings Wednesday after the market closed, improved results compared to the same period last year. But a prospect predicting more downward trends to come – and quarterly earnings below pre-pandemic levels – caused the company’s shares to fall more than 6% in after-hours trading.

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Still, Carlos Alberini, CEO, said he was satisfied with the progress of the company, which has exceeded expectations.

“Compared to the second quarter of fiscal 2020, the [like-for-like pre-pandemic] period, we increased the operating margin by over 700 basis points to 13.9%, ”Alberini said in a statement. “Our revenues for the quarter ended down 8%, compared to [like-for-like pre-pandemic period in 2019.] The entire decrease was due to a delay in wholesale shipments to Europe in the third quarter and the impact of permanent store closings. We achieved this result despite the pandemic and by being significantly less promotional in all of our direct-to-consumer sales activities. Our operating profit growth was strong, up 90% from the [like-for-like pre-pandemic period.] This resulted in earnings per share of $ 0.91, compared to $ 0.35 in the [like-for-like pre-pandemic] period.

“Based on our progress, we now expect to meet our 10% operating margin target for the current year and we are raising our expectations to 12% by fiscal 2024, which would generate a return on invested capital of more than 30% and an adjusted profit. per share of approximately $ 3.50, ”continued the CEO. “The Guess brand has significant white space for revenue growth and we are confident in our ability to meet our revenue target of $ 2.8 billion by fiscal 2024. We continue to prioritize returning value to our shareholders and announced today that our board of directors has approved an increase in our existing share buyback program to $ 200 million.

For the three-month period ending July 31, total revenue was $ 628 million, up from $ 398 million a year ago, but down from $ 683 million in second pre-pandemic quarter of 2019.

Alberini said the increase in revenue in the last quarter was due to fewer promotional sales and more full-price sales.

“We have reduced promotional activity everywhere,” he told analysts on Wednesday night’s conference call. “This company will never return to the level of promotions it had before the pandemic.”

As a result, Guess posted a profit of $ 63.1 million, down from losses of $ 20.6 million a year earlier.

Meanwhile, in-store traffic remains difficult in all regions, with the steepest declines. retail in Asia (down 43 percent for the quarter, year-over-year.) Executives said nearly half of the declines in the region were caused by store closings.

“It has been difficult with the traffic,” Alberini said on the call, adding that Guess is currently in the process of changing direction in its Asian business, which is concentrated in China, Japan and South Korea.

China was a challenge for us, ”he said. “Were [working on] improving the product mix; much less promotional. Also, the store portfolio. We have closed nearly 70 stores in China in the past 18 months. The franchise model works for us. In marketing, influencers are very difficult and expensive to do. But we are working on it. E-commerce was a challenge for us too, as we decided to be much less promotional.

But he added: “We are confident that we are on the right track.”

Higher AURs, or average selling prices, as well as e-commerce across the company, helped offset losses. Other favorable winds include US wholesale trade, which grew 19% from pre-2019 pandemic levels. By Category, Sportswear, Jeans and knits have been the engines of growth.

The company expects revenue for the current quarter to be slightly negative to stable, compared to the same period a year earlier. For the full fiscal year, assuming there are no further COVID-19-related closures, Guess expects revenue to be down by the average number, by a year over year, with an operating margin of around 10%.

The retailer ended the quarter with 1,597 stores, nearly $ 459 million in cash and cash equivalents, and nearly $ 80 million in long-term debt.

Guess shares, which closed down 1.23% on Wednesday at $ 24.15 apiece, are up about 114% year-on-year.


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