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Guess happy with Q2 figures despite mixed bag, points to improving trend


Guess said it had a lot to be pleased about on Wednesday as it delivered Q2 results. Although there are still pockets of its business that aren’t performing as well as it would like and the earnings picture didn’t look good, its CEO said the effects of its transformation are already starting to be seen in the current period.

Profit excluding one-offs actually fell but the company managed to report a Q2 outcome that CEO Victor Herrero said “exceeded our expectations both in earnings per share and operating margin.”

That was at least good news, especially on a day when sector peer Express was reporting such bad news.

So just what were the figures? Well, there were both rises and falls in some of its key metrics. Net earnings rose 76.4% to $32.2m while EPS rose 81% to $0.38 from $18.3m/$0.21. But the company had a one-off gain from the sale of a minority interest investment of around $22.3m/$0.24 a share and with that factored-out, adjusted net earnings would have been down to $12m/$0.14 per share.

Total net revenue fell 0.2% to $545m, but it rose on a currency-neutral basis by a slim 0.5%. Operating earnings fell 40.5% to $15.6m and the operating margin fell 2.9% from 4.8% in Q2 2015.

By region, Americas retail revenue fell 3% in US dollars and 1% currency-neutral with comps fell 2%. Europe revenues rose 7% in dollars, or 6% currency-neutral, while Asia fell 6% in dollars, 4% currency-neutral.

US and Canadian stores were “in line with our expectations,” Guess said, even though tourist destination stores were still under-performing the chain.

In Asia, the retailer also delivered positive comps in South Korea, Mainland China and Japan, although Greater China was below its expectations as its continues to “build out our infrastructure there and transition the business to a direct model.”

So what else did Herrero have to say about all that? “I had highlighted on our prior earnings calls that the first six months of the year would be a transition period,” he explained. “This transition is now behind us and the investments we have made so far are expected to start generating revenue growth for the company in the third quarter, accelerating into the fourth quarter.”

#Guess

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