Guess Posts Loss, Looks to Europe, Asia
The Los Angeles-based brand is saving costs close to home and looking for expansion opportunities in Asia and Europe.
Guess Inc. continues to look abroad for growth while focusing on cost cuts at home.
The Los Angeles-based company said net losses for the quarter tallied $2.9 million, or 4 cents a share, down from earnings of $9.1 million, or 11 cents, a year earlier. Adjusted earnings, which factor out losses on lease terminations and asset impairment charges, rose 8.1 percent to $10.4 million, or 12 cents a share, in line with analyst estimates.
Revenues for the three months ended Oct. 28 inched up 3.3 percent to $528.2 million.
Victor Herrero, chief executive officer, said, “We continue to see good momentum in Europe and Asia, where our revenues were up 19 percent and 17 percent, respectively, mainly driven by new store openings, wholesale growth and positive comp sales.”
In the Americas region, Guess’ retail sales fell 13.4 percent, but the business’ operating margins improved by 240 basis points — to a decline of 2.5 percent from a drop of 4.9 percent a year earlier. Herrero attributed this to the company’s efforts to manage markdowns, higher initial mark-ups, negotiated rent reductions and the closure of unprofitable stores.
“Overall, as I peek into the future of our company, I believe that Europe and Asia still offer a lot of opportunity and should continue to grow double-digits next year,” Herrero said. “I expect the profitability in the Americas to continue to benefit from our cost reduction and margin improvement initiatives.”
On a conference call with analysts, the ceo added that this is the first holiday season Guess will be sold through Amazon Prime, which will bring incremental traffic to the brand.
Abroad is where Guess is looking for its real growth.
“There is a lot of runway left in Europe and Asia, so I expect a double-digit revenue growth [there] to continue into next year,” Herrero said. “The profitability of the Americas will continue to benefit from our cost reductions and margin improvement initiative, And we aim to achieve our long-term goal of 7.5 percent overall company operating margin by a combination of revenue growth and disciplined control of cost.”
The company closed 45 stores this year so far, leaving it with a total of 411 doors, and plans to eventually trim the store base down to 300 in the U.S.
Sandeep Reddy, Guess’ chief financial and chief accounting officer, told analyst the company has been “very aggressively renegotiating rents” and that a number of landlords are offering better rates.
“Where we couldn’t get rents that made sense, we just closed the stores,” Reddy said.