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Guess four-point plan to drive profit in Americas

US fashion retailer Guess Inc has narrowed it outlook for the full year, and devised a four point plan to "drive value" for the business in the Americas that will see it continue to implement supply chain initiatives and potentially close unprofitable stores.

For the three months ended 29 October, earnings fell 26.8% to US$9.1m, compared to $12.4m in the year ago period. Operating margin decreased 120 basis points to 2.8%, driven primarily by the negative impact on the company's fixed cost structure resulting from negative comparable store sales in Americas retail and segment mix, partially offset by lower performance-based compensation costs.

Net sales, meanwhile, increased 2.9% to $536.3m from $521m in the comparable period last year. Europe revenues were up 16.4% in US dollars and 16.8% in constant currency, while sales in Asia also increased, by 9.8% in US dollars and 6.4% in constant currency. In the Americas, retail sales were down 4.7% in US dollars and 4.6% in constant currency. Meanwhile, retail comp sales, including e-commerce, decreased 4.9% in US dollars and 4.8% in constant currency.

"While I recognise the challenges we are facing in the Americas, I am thrilled that, due to our various revenue enhancement initiatives, our third quarter revenues increased by 3%," says Herrero. "We enjoyed strong double digit growth in Europe and in Asia, and we remain focused on improving our profitability in North America. As we reach the end of our transition year, I look forward to fiscal year 2018 with tremendous anticipation and excitement."

Herrero adds that Guess is now "more than ever" focused on improving the profitability of its retail business in the Americas. As part of its new four-point plan, the company will:

  • Continue to negotiate rent reductions whenever possible

  • Close unprofitable stores upon lease kick-out or expiration unless new rent terms make them profitable

  • Continue to implement supply chain initiatives including vendor consolidation, fabric platforming and source country diversification

  • Enhance digital capabilities to help set Guess apart from other retailers

For the full year, Guess is forecasting consolidated net revenues to increase between 0.5% and 1.5% in US dollars, GAAP operating margin between 2.5% and 3%, including roughly 60 basis points of currency headwind, and GAAP diluted earnings per share in the range of $0.59 to $0.69.

"Our previous full-year guidance assumed better comps and gross margins in the Americas etail segment for the fourth quarter than we are now expecting based on our third quarter results and trends so far in the fourth quarter. This is the main driver of the change in company guidance," Herrero added.


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