LOS ANGELES, May 24, 2017 /PRNewswire/ -- Guess?, Inc. (NYSE: GES) today reported financial results for its first quarter ended April 29, 2017.

Victor Herrero, Chief Executive Officer, commented, "We are pleased to report that our first quarter results finished above the high-end of our expectations for revenues, adjusted operating margin and earnings per share. We continued to see strong performance in our international businesses. In Europe and in Asia, our revenues were up 23% and 17% driven by new store openings and positive comp sales. We are also encouraged by the trends in adjusted operating margins for these two regions, as they expanded in the quarter relative to last year. In the Americas, as the performance of our business and the environment remain soft, we are more than ever focused on shrinking our footprint and profitability improvements."

Mr. Herrero concluded, "In today's world, it is crucial to stay connected with our customers and their aspirations. The Guess Brand has always been associated with Sexy, and Sexy is being more broadly interpreted where anyone can be sexy. Authenticity is "in," and being real is more important than being perfect. The millennial and Gen Z consumer is seeking purpose-driven brands whose values align with their own. As always, we are adapting to this changing environment."

This press release contains certain non-GAAP, or adjusted, financial measures. References to "adjusted" results exclude the impact of (i) asset impairment charges, (ii) restructuring charges, (iii) a restructuring related exit tax charge and (vi) the related tax effects of these adjustments, where applicable. A reconciliation of reported GAAP results to comparable non-GAAP results is provided in the accompanying tables and discussed under the heading "Presentation of Non-GAAP Information" below.

First Quarter Fiscal 2018 Results

For the first quarter of fiscal 2018, the Company recorded GAAP net loss of $21.3 million, a 15.4% improvement compared to $25.2 million for the first quarter of fiscal 2017. GAAP diluted loss per share improved 13.3% to $0.26 for the first quarter of fiscal 2018, compared to $0.30 for the prior-year quarter.

For the first quarter of fiscal 2018, the Company recorded adjusted net loss of $19.4 million, a 0.5% deterioration from $19.3 million for the first quarter of fiscal 2017. Adjusted diluted loss per share deteriorated 4.3% to $0.24, from $0.23 for the prior-year quarter. The positive impact of currency on diluted loss per share in the first quarter of fiscal 2018 was approximately $0.03 per share.

Net Revenue. Total net revenue for the first quarter of fiscal 2018 increased 2.2% to $458.6 million, compared to $448.8 million in the prior-year quarter. In constant currency, net revenue increased by 4.0%.

• Americas Retail revenues decreased 14.9% in U.S. dollars and 14.7% in constant currency. Retail comp sales including e-commerce decreased 15% in U.S. dollars and constant currency.
• Europe revenues increased 23.3% in U.S. dollars and 29.1% in constant currency. Retail comp sales including e-commerce increased 5% in U.S. dollars and 11% in constant currency.
• Asia revenues increased 16.9% in U.S. dollars and 15.5% in constant currency. Retail comp sales including e-commerce increased 4% in U.S. dollars and 2% in constant currency.
• Americas Wholesale revenues increased 5.7% in U.S. dollars and 7.7% in constant currency.
• Licensing revenues decreased 9.3% in U.S. dollars and constant currency.

Operating Loss. GAAP operating loss for the first quarter of fiscal 2018 improved 11.9% to $25.5 million (including a minimal currency translation impact), compared to $29.0 million in the prior-year quarter. GAAP operating margin in the first quarter improved 90 basis points to negative 5.6%, compared to negative 6.5% in the prior-year quarter, driven primarily by the anniversary of last year's restructuring charges, partially offset by higher asset impairment charges during the current-year period. The negative impact of currency on operating margin for the quarter was roughly 30 basis points.

For the first quarter of fiscal 2018, adjusted operating loss was relatively flat at $22.8 million and adjusted operating margin was negative 5.0%, an improvement of 10 basis points compared to the same prior-year quarter.

• Operating margin for the Company's Americas Retail segment decreased 920 basis points to negative 15.4% in the first quarter of fiscal 2018, from negative 6.2% in the prior-year quarter. Excluding the impact of the asset impairment charges, operating margin for the Company's Americas Retail segment decreased by 800 basis points compared to the same prior-year quarter. This decrease was driven primarily by the negative impact on the fixed cost structure resulting from negative comparable sales.
• Operating margin for the Company's Europe segment increased 900 basis points to negative 1.9% in the first quarter of fiscal 2018, compared to negative 10.9% in the prior-year quarter. Excluding the impact of the asset impairment charges, operating margin for the Company's Europe segment improved by 890 basis points compared to the same prior-year quarter. This improvement was driven primarily by the favorable impact on the fixed cost structure resulting from overall leveraging of expenses and higher initial mark-ups.
• Operating margin for the Company's Asia segment decreased 30 basis points to negative 1.3% in the first quarter of fiscal 2018, from negative 1.0% in the prior-year quarter. Excluding the impact of the asset impairment charges, operating margin for the Company's Asia segment improved by 60 basis points compared to the same prior-year quarter. The improvement in operating margin was driven primarily by overall leveraging of expenses.
• Operating margin for the Company's Americas Wholesale segment increased 90 basis points to 18.5% in the first quarter of fiscal 2018, compared to 17.6% in the prior-year quarter, due to higher gross margins. The higher gross margins were driven primarily by higher initial mark-ups.
• Operating margin for the Company's Licensing segment decreased 590 basis points to 85.5% in the first quarter of fiscal 2018, from 91.4% in the prior-year quarter.

Other net income was $2.4 million for the first quarter of fiscal 2018, which primarily includes unrealized gains on non-operating assets, compared to other net expense of $1.1 million in the prior-year quarter.

Dividends

The Company's Board of Directors has approved a quarterly cash dividend of $0.225 per share on the Company's common stock. The dividend will be payable on June 23, 2017 to shareholders of record at the close of business on June 7, 2017.

Outlook

The Company's expectations for the second quarter of fiscal 2018 ending July 29, 2017 and its updated outlook for the fiscal year ending February 3, 2018 are as follows:

On a segment basis, the Company expects the following ranges for percentage changes for comparable store sales including e-commerce ("comps") and net revenue in U.S. dollars and constant currency compared to the same prior-year period:

Presentation of Non-GAAP Information

The financial information presented in this release includes non-GAAP financial measures such as adjusted results, constant currency financial information and free cash flow measures. For the first quarter of fiscal 2018, the adjusted results exclude the impact of asset impairment charges and the related tax impact incurred during the first quarter of fiscal 2018. For the first quarter of fiscal 2017, the adjusted results exclude the impact of asset impairment charges, restructuring charges and a restructuring related exit tax charge and the tax effects of these adjustments. These non-GAAP measures are provided in addition to, and not as alternatives for, the Company's reported GAAP results.

The Company has excluded these items from its adjusted financial measures primarily because it believes that 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). A reconciliation of reported GAAP results to comparable non-GAAP results is provided in the accompanying tables.

This release also 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, comparable sales 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 that is different to the functional currency of that entity when exchange rates fluctuate. However, in calculating the estimated impact of currency on our earnings per share for our actual and 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 excludes 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 also includes information regarding its free cash flows in this release. The Company calculates free cash flows as cash flows from operating activities less purchases of property and equipment. Free cash flows is not intended to be an alternative to cash flows from operating activities as a measure of liquidity, but rather provides additional visibility to investors regarding how much cash is generated for discretionary and non-discretionary items after deducting purchases of property and equipment. Free cash flow information presented may not be comparable to similarly titled measures reported by other companies. A reconciliation of reported 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 24, 2017 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, 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. As of April 29, 2017, the Company directly operated 949 retail stores in the Americas, Europe and Asia. The Company's licensees and distributors operated 721 additional retail stores worldwide. As of April 29, 2017, the Company and its licensees and distributors operated in roughly 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, future prospects, business strategies and strategic initiatives; statements expressing optimism or pessimism about future operating results or events and projected sales (including comparable sales), earnings, capital expenditures, cost savings and cash needs; and guidance for the second quarter and full year of fiscal 2018, are forward-looking statements that are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements, which are frequently indicated by terms such as "expect," "will," "goal," "strategy," "believe," "estimate," "continue," "outlook," "plan" 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; domestic and international economic conditions, including economic and other events that could negatively impact consumer confidence and discretionary consumer spending; 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; risks related to the timing and costs of delivering merchandise to our stores and our wholesale customers; unexpected or unseasonable weather conditions; our ability to effectively operate our various retail concepts, including securing, renewing, modifying or terminating leases for store locations; our ability to successfully and/or timely implement our growth strategies and other strategic initiatives; our ability to expand internationally and operate in regions where we have less experience, including through joint ventures; our ability to successfully or timely implement plans for cost and workforce reductions; our ability to attract and retain key personnel; changes to our short or long-term strategic initiatives; unexpected obligations arising from new or existing litigation, tax and other regulatory proceedings; changes in U.S. tax or tariff policy regarding apparel and other accessory merchandise produced in other countries; accounting adjustments identified from subsequent events arising after issuance of this release; risk of future store asset and/or goodwill impairments or restructuring charges; our ability to adapt to new regulatory compliance and disclosure obligations; risks associated with our foreign operations, such as violations of laws prohibiting improper payments and the burdens of complying with a variety of foreign laws and regulations; risks associated with the acts or omissions of our third party vendors, including a failure to comply with our vendor code of conduct or other policies; risks associated with cyber attacks and other cyber security risks; and changes in economic, political, social and other conditions affecting our foreign operations and sourcing, including the impact of currency fluctuations, global tax rates and economic and market conditions in the various countries in which we operate. 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 current global economic climate and uncertainty surrounding potential changes in U.S. policies and regulations under the new administration may amplify many of these risks. 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.

 

 

 

 

 

 

 

 

 

 

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SOURCE Guess?, Inc.