Second Quarter Fiscal
2024 Results: Revenues Increased to $665 Million, Up
3% in Both U.S. Dollars and Constant Currency Delivered
Operating Margin of 9.7%; Adjusted Operating Margin of 9.8%
GAAP EPS of $0.59 and Adjusted EPS of $0.72
Raises Full Year
Fiscal 2024 Outlook: Expects Revenue Growth between
2.5% and 4.0% in U.S. Dollars GAAP and Adjusted Operating
Margins between 8.9% and 9.3% and 9.0% and 9.4%, Respectively
Expects GAAP EPS between $2.22 and $2.37 and Adjusted EPS
between $2.88 and $3.08
Guess?, Inc. (NYSE: GES) today reported financial results for
its second quarter ended July 29, 2023.
Carlos Alberini, Chief Executive Officer, commented, “We are
very pleased with our second quarter performance, which exceeded
our expectations for top line growth and delivered a significant
beat in operating earnings and earnings per share for the period.
Our international businesses continued to perform strongly with
robust revenue growth and our Americas Retail business achieved a
sequential improvement in performance compared to the first
quarter, as we drove better customer conversion in stores. Most of
our businesses delivered better than expected operating results,
driven by solid revenue performance, strong gross margin results
and effective cost management, which contributed to an operating
profit of $65 million and a 9.7% operating margin for the period,
well ahead of our expectations.”
Paul Marciano, Co-Founder and Chief Creative Officer, commented,
“Our teams’ efforts to elevate our brands have been powerful and
transformational for our Company. This initiative touched almost
every aspect of our business from the products we offer to the
marketing we employ and the customer experience we provide and
impacted all channels and markets around the world, including our
stores, our websites and all wholesale points of distribution. I
strongly believe that this work puts our Company and our brands in
an optimum position to capitalize on the multiple growth
opportunities that lie ahead of us.”
Mr. Alberini concluded, “Our strong performance this year gives
us confidence for the second half of the year to deliver on our
plans. We have a clear strategy and our teams are executing well
and achieving solid results. Today we are increasing our outlook
meaningfully for both operating margin and earnings per share for
the year while maintaining our revenue outlook. We remain committed
to managing our capital efficiently and expect to generate strong
cash flows this year. I believe that our highly diversified
business model, the strong momentum of our global brands and our
great teams represent a significant competitive advantage and
position us well to grow our business and deliver strong value for
our shareholders.”
Non-GAAP Information
This press release contains non-GAAP financial measures,
including certain adjusted results of operations and outlook
measures, constant currency information and free cash flow
measures. See the heading “Presentation of Non-GAAP Information”
for further information and the accompanying tables for a
reconciliation to the comparable GAAP financial measure.
Second Quarter Fiscal 2024
Results
For the second quarter of the fiscal year ending February 3,
2024 (“fiscal 2024”), the Company recorded GAAP net earnings of
$39.0 million, a 63% increase from $24.0 million for the same
prior-year quarter. GAAP diluted net earnings per share (“EPS”)
increased 69% to $0.59 for the second quarter of fiscal 2024,
compared to $0.35 for the same prior-year quarter. The Company
estimates a positive impact from its share buybacks of $0.04 and a
negative impact from currency of $0.05 on GAAP diluted EPS in the
second quarter of fiscal 2024 when compared to the same prior-year
quarter.
For the second quarter of fiscal 2024, the Company’s adjusted
net earnings were $39.7 million, a 74% increase from $22.9 million
for the same prior-year quarter. Adjusted diluted EPS increased 85%
to $0.72, compared to $0.39 for the same prior-year quarter. The
Company estimates a positive impact from its share buybacks of
$0.06 and a negative impact from currency of $0.07 on adjusted
diluted EPS in the second quarter of fiscal 2024 when compared to
the same prior-year quarter.
Net Revenue. Total net revenue for the second quarter of
fiscal 2024 increased 3% to $664.5 million from $642.7 million in
the same prior-year quarter. In constant currency, net revenue
increased by 3%.
- Europe revenues increased 9% in U.S. dollars and 8% in constant
currency. Retail comp sales, including e-commerce, increased 11% in
both U.S. dollars and constant currency.
- Americas Retail revenues decreased 8% in U.S. dollars and
constant currency. Retail comp sales, including e-commerce,
decreased 6% in both U.S. dollars and constant currency.
- Americas Wholesale revenues decreased 13% in U.S. dollars and
16% in constant currency.
- Asia revenues increased 19% in U.S. dollars and 22% in constant
currency. Retail comp sales, including e-commerce, increased 2% in
U.S. dollars and 5% in constant currency.
- Licensing revenues increased 13% in U.S. dollars and constant
currency.
Earnings from Operations. GAAP earnings from operations
for the second quarter of fiscal 2024 increased 21% to $64.6
million (including $2.6 million in non-cash impairment charges
taken on certain long-lived store related assets, $2.4 million net
gains on lease modifications and a $0.5 million unfavorable
currency translation impact), from $53.4 million (including $1.9
million in non-cash impairment charges taken on certain long-lived
store related assets and $0.9 million net gains on lease
modifications) in the same prior-year quarter. GAAP operating
margin in the second quarter of fiscal 2024 increased 1.4% to 9.7%,
from 8.3% for the same prior-year quarter, driven primarily by
higher initial markups and the favorable impact of business mix,
partially offset by the unfavorable impact of currency and higher
expenses. The negative impact of currency on operating margin for
the quarter was approximately 130 basis points.
For the second quarter of fiscal 2024, adjusted earnings from
operations increased 17% to $65.0 million, from $55.7 million in
the same prior-year quarter. Adjusted operating margin increased
1.1% to 9.8%, from 8.7% for the same prior-year quarter, driven
primarily by higher initial markups and the favorable impact of
business mix, partially offset by the unfavorable impact of
currency and higher expenses.
- Operating margin for the Company’s Europe segment increased
2.6% to 12.9% in the second quarter of fiscal 2024, from 10.3% in
the same prior-year quarter, driven primarily by initial markups,
the favorable impact of higher revenues and lower markdowns,
partially offset by the unfavorable impact of currency and higher
expenses.
- Operating margin for the Company’s Americas Retail segment
decreased 4.1% to 9.1% in the second quarter of fiscal 2024, from
13.2% in the same prior-year quarter, driven primarily by higher
expenses, the unfavorable impact from lower revenues and higher
markdowns, partially offset by higher initial markups.
- Operating margin for the Company’s Americas Wholesale segment
increased 2.5% to 25.3% in the second quarter of fiscal 2024, from
22.8% in the same prior-year quarter, driven primarily by higher
product margin due to lower markdowns, partially offset by higher
expenses.
- Operating margin for the Company’s Asia segment improved 5.8%
to negative 0.9% in the second quarter of fiscal 2024, from
negative 6.7% in the same prior-year quarter, driven primarily by
the favorable impact of higher revenues, partially offset by higher
expenses.
- Operating margin for the Company’s Licensing segment increased
8.5% to 94.1% in the second quarter of fiscal 2024, from 85.6% in
the same prior-year quarter, mainly driven by lower expenses.
Other expense, net. Other expense, net for the second
quarter of fiscal 2024 decreased 49% to $4.6 million from $9.1
million for the same prior-year quarter. The change was primarily
due to lower net unrealized and realized losses from foreign
currency exposures compared to the same prior-year quarter.
Six-Month Period Results
For the six months ended July 29, 2023, the Company recorded
GAAP net earnings of $27.2 million, a 15% decrease from $31.9
million for the same prior-year period. GAAP diluted EPS remained
consistent at $0.46 for the six months ended July 29, 2023,
compared to the same prior-year period. The Company estimates a
positive impact from its share buybacks of $0.04 and a positive
impact from currency of $0.02 on GAAP diluted EPS for the six
months ended July 29, 2023 when compared to the same prior-year
period.
For the six months ended July 29, 2023, the Company recorded
adjusted net earnings of $36.2 million, a 5% decrease from $38.1
million for the same prior-year period. Adjusted diluted EPS
increased 5% to $0.65, compared to $0.62 for the same prior-year
period. The Company estimates its share buybacks had a positive
impact of $0.07 and currency had a negative impact of $0.01 on
adjusted diluted EPS during the six months ended July 29, 2023 when
compared to the same prior-year period.
Net Revenue. Total net revenue for the six months ended
July 29, 2023 decreased slightly to $1.23 billion, from $1.24
billion in the same prior-year period. In constant currency, net
revenue increased by 1%.
- Europe revenues increased 6% in U.S. dollars and 7% in constant
currency. Retail comp sales, including e-commerce, increased 11% in
U.S. dollars and 12% in constant currency.
- Americas Retail revenues decreased 11% in both U.S. dollars and
constant currency. Retail comp sales, including e-commerce,
decreased 9% in both U.S. dollars and constant currency.
- Americas Wholesale revenues decreased 20% in U.S. dollars and
22% in constant currency.
- Asia revenues increased 23% in U.S. dollars and 28% in constant
currency. Retail comp sales, including e-commerce, increased 2% in
U.S. dollars and 7% in constant currency.
- Licensing revenues increased 1% in both U.S. dollars and
constant currency.
Earnings from Operations. GAAP earnings from operations
for the six months ended July 29, 2023 decreased by 29% to $63.7
million (including $4.6 million in non-cash impairment charges
taken on certain long-lived store related assets, $2.4 million net
gains on lease modifications and a $0.9 million unfavorable
currency translation impact), from $89.8 million (including $3.5
million in non-cash impairment charges taken on certain long-lived
store related assets and $1.5 million net gains on lease
modifications) in the same prior-year period. GAAP operating margin
in the six months ended July 29, 2023 decreased 2.1% to 5.2%, from
7.3% in the same prior-year period, driven primarily by higher
expenses, the unfavorable currency impact and lower government
subsidies compared to the same prior-year period, partially offset
by higher initial markups and the favorable impact of business mix.
The negative impact of currency on operating margin for the six
months ended July 29, 2023 was approximately 120 basis points.
For six months ended July 29, 2023, adjusted earnings from
operations decreased 31% to $66.9 million, from $97.5 million in
the same prior-year period. Adjusted operating margin decreased
2.5% to 5.4% for the six months ended July 29, 2023, from 7.9% in
the same prior-year period, driven primarily by higher expenses,
the unfavorable currency impact and lower government subsidies
compared to the same prior-year period, partially offset by higher
initial markups and the favorable impact of business mix.
- Operating margin for the Company’s Europe segment decreased
1.1% to 7.5% in the six months ended July 29, 2023, from 8.6% in
the same prior-year period, driven primarily by the unfavorable
currency impact, higher expenses and lower government subsidies
compared to the prior year, partially offset by higher initial
markups and the favorable impact of higher revenues.
- Operating margin for the Company’s Americas Retail segment
decreased 7.2% to 3.8% in the six months ended July 29, 2023, from
11.0% in the same prior-year period, driven primarily by the
unfavorable impact from lower revenues, higher expenses and higher
markdowns.
- Operating margin for the Company’s Americas Wholesale segment
increased 1.1% to 25.4% in the six months ended July 29, 2023, from
24.3% in the same prior-year period, driven primarily by higher
product margin due to lower markdowns, partially offset by higher
expenses.
- Operating margin for the Company’s Asia segment increased 8.9%
to 2.5% in the six months ended July 29, 2023, from negative 6.4%
in the same prior-year period, driven primarily by the favorable
impact of higher revenues, partially offset by higher
expenses.
- Operating margin for the Company’s Licensing segment increased
4.5% to 93.7% in the six months ended July 29, 2023, from 89.2% in
the same prior-year period, mainly due to lower expenses.
Loss on Extinguishment of Debt. In April 2023, the
Company issued $275 million principal amount of convertible senior
notes due April 2028 (the “2028 Notes”) in privately negotiated
exchange and subscription agreements with a limited number of
holders of its convertible senior notes due April 2024 (the “2024
Notes”) and certain other investors. As part of these transactions,
the Company exchanged approximately $184.9 million of its 2024
Notes for approximately $163.0 million of new 2028 Notes and
approximately $33.3 million in cash, and issued $112.0 million of
2028 Notes. Immediately following the closing of these
transactions, approximately $115.0 million of the 2024 Notes
remained outstanding and classified within current liabilities. As
a result of these transactions, the Company recognized a $7.7
million loss on extinguishment of debt for the six months ended
July 29, 2023.
Other expense, net. Other expense, net for the six months
ended July 29, 2023 decreased 72% to $7.2 million from $25.5
million in the same prior-year period. The change was primarily due
to lower unrealized and realized losses from foreign currency
exposures compared to the same prior-year period.
Outlook
The Company’s expectations for the third quarter and full fiscal
year 2024 are as follows:
Outlook for Total
Company1
Third Quarter of Fiscal
2024
Fiscal 2024
Consolidated net revenue in U.S.
dollars
increase between 2.5% and
4.5%
increase between 2.5% and
4.0%
GAAP operating margin
7.5% to 8.3%
8.9% to 9.3%
Adjusted operating margin
7.5% to 8.3%
9.0% to 9.4%
GAAP diluted EPS
$0.46 to $0.53
$2.22 to $2.37
Adjusted diluted EPS
$0.55 to $0.64
$2.88 to $3.08
_____________________________________________________
See end of release for footnotes.
A reconciliation of the Company’s outlook for GAAP operating
margin to adjusted operating margin and GAAP diluted EPS to
adjusted diluted EPS for the third quarter and full fiscal 2024 is
as follows:
Reconciliation of GAAP Outlook
to Adjusted Outlook1
Third Quarter of Fiscal
2024
Fiscal 2024
GAAP operating margin
7.5% to 8.3%
8.9% to 9.3%
Certain professional service and legal
fees and related (credits) costs2
—%
—%
Asset impairment charges2
—%
0.2%
Net gains on lease modifications2
—%
(0.1)%
Adjusted operating margin
7.5% to 8.3%
9.0% to 9.4%
GAAP diluted EPS
$0.46 to $0.53
$2.22 to $2.37
Certain professional service and legal
fees and related (credits) costs2
—
0.01
Asset impairment charges2
—
0.05
Net gains on lease modifications2
—
(0.03)
Loss on extinguishment of debt2
—
0.08
Amortization of debt discount3
0.00
0.01
Discrete income tax adjustments2
—
0.01
Impact of convertible share dilution3
0.09 to 0.11
0.53 to 0.58
Adjusted diluted EPS
$0.55 to $0.64
$2.88 to $3.08
_____________________________________________________
See end of release for footnotes.
The Company’s expectations of the high-end for the free cash
flow outlook for the full fiscal year 2024 are as follows (in
millions):
Free Cash Flow Outlook for
Total Company1
Fiscal 2024
Net cash provided by operating
activities
$240
Less: Purchases of property and
equipment
(74)
Less: Payments for property and equipment
under finance leases
(6)
Free cash flow
$160
_____________________________________________________
See end of release for footnotes.
Dividend
The Company’s Board of Directors approved a quarterly cash
dividend of $0.30 per share on the Company’s common stock. The
dividend will be payable on September 22, 2023 to shareholders of
record as of the close of business on September 6, 2023.
Share Repurchases
During April 2023, in connection with the exchange and
subscription offering related to the 2024 Notes and the 2028 Notes,
the Company repurchased approximately 2.2 million shares of its
common stock for $42.8 million through broker-assisted market
transactions, pursuant to the Company’s 2021 Share Repurchase
Program. During the six months ended July 29, 2023, the Company did
not make any share repurchases other than the aforementioned
transactions.
Presentation of Non-GAAP
Information
The financial information presented in this release includes
non-GAAP financial measures, such as adjusted results and outlook,
constant currency financial information and free cash flows. The
adjusted measures exclude the impact of certain professional
service and legal fees and related (credits) costs, asset
impairment charges, net (gains) losses on lease modifications, loss
on extinguishment of debt, non-cash amortization of debt discount
of the Company’s convertible senior notes, the related income tax
effects of the foregoing items, the impact from changes in the
income tax law on deferred income taxes in certain tax
jurisdictions, as well as certain discrete income tax adjustments
related primarily to an intra-entity transfer of intellectual
property rights from certain U.S. entities to a wholly-owned Swiss
subsidiary, in each case where applicable. These non-GAAP measures
are provided in addition to, and not as alternatives for, the
Company’s reported GAAP results and outlook.
The Company has excluded these items from its adjusted financial
measures primarily because it believes these items are not
indicative of the underlying performance of its business and 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 and GAAP future outlook). A
reconciliation of reported GAAP results and outlook to comparable
non-GAAP results and outlook is provided in the accompanying
tables.
This release 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 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 different from the
functional currency of that entity when exchange rates fluctuate.
However, in calculating the estimated impact of currency on our
earnings (loss) per share for our actual or 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 considers 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 includes information regarding its free cash flows
in this release. The Company calculates free cash flows as cash
flows from operating activities less (i) purchases of property and
equipment and (ii) payments for property and equipment under
finance leases. Free cash flows are not intended to be an
alternative to cash flows from operating activities as a measure of
liquidity, but rather to provide additional visibility to investors
regarding how much cash is generated for discretionary and
non-discretionary items after deducting purchases of property and
equipment and payments for property and equipment under finance
leases. Free cash flow information presented may not be comparable
to similarly titled measures reported by other companies. A
reconciliation of reported and expected 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
August 23, 2023 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, eyewear, 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 July 29, 2023, the Company directly operated 1,023 retail stores
in the Americas, Europe and Asia. The Company’s partners and
distributors operated 546 additional retail stores worldwide. As of
July 29, 2023, the Company and its partners and distributors
operated in approximately 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 impacts of
the ongoing conflict in Ukraine and other events impacting the
markets in which we operate; statements concerning the Company’s
future outlook, including with respect to the third quarter and
full year of fiscal 2024; statements concerning the Company’s
expectations, goals, future prospects, and current business
strategies and strategic initiatives; and statements expressing
optimism or pessimism about future operating results and growth
opportunities are forward-looking statements that are made pursuant
to the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995. All statements other than statements of
historical fact are forward-looking statements. Forward-looking
statements, which are frequently indicated by terms such as
“expect,” “could,” “will,” “should,” “goal,” “strategy,” “believe,”
“estimate,” “continue,” “outlook,” “plan,” “create,” “see,” 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 or political conditions, including
economic and other events that could negatively impact consumer
confidence and discretionary consumer spending; sanctions and
export controls targeting Russia and other impacts related to the
war in Ukraine; impacts related to the COVID-19 pandemic or other
public health crises; risks relating to our indebtedness; changes
to estimates related to impairments, inventory and other reserves;
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; the high concentration
of our Americas Wholesale business; risks related to the costs and
timely delivery of merchandise to our distribution facilities,
stores and 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 successfully enhance our global
omni-channel capabilities; our ability to expand internationally
and operate in regions where we have less experience, including
through joint ventures; risks relating to our convertible senior
notes, including our ability to settle the liabilities in cash;
disruptions at our distribution facilities; our ability to attract
and retain management and other key personnel; obligations or
changes in estimates arising from new or existing litigation,
income tax and other regulatory proceedings; risks related to the
income tax treatment of our third quarter fiscal 2022 intra-entity
transfer of intellectual property rights from certain U.S. entities
to a wholly-owned Swiss subsidiary; catastrophic events or natural
disasters; changes in U.S. or foreign income tax or tariff policy,
including changes to tariffs on imports into the U.S.; accounting
adjustments to our unaudited financial statements identified during
the completion of our annual independent audit of financial
statements and financial controls or from subsequent events arising
after issuance of this release; risk of future non-cash asset
impairments, including goodwill, right-of-use lease assets and/or
other store asset impairments; violations of, or changes to,
domestic or international laws and regulations; risks associated
with the acts or omissions of our licensees and third party
vendors, including a failure to comply with our vendor code of
conduct or other policies; risks associated with cyber security
incidents and other cyber security risks; risks associated with our
ability to properly collect, use, manage and secure consumer and
employee data; risks associated with our vendors’ ability to
maintain the strength and security of information technology
systems; changes in economic, political, social and other
conditions affecting our foreign operations and sourcing, including
the impact of currency fluctuations, global income tax rates and
economic and market conditions in the various countries in which we
operate; impacts of inflation and further inflationary pressures;
fluctuations in quarterly performance; slowing in-person customer
traffic; increases in labor costs; increases in wages; risks
relating to activist investor activity; and the significant voting
power of our family founders.
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, the ongoing conflict in Ukraine, possible instability in
the banking system, and uncertainty surrounding potential changes
in U.S. policies and regulations 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.
Guess?, Inc. and
Subsidiaries
Condensed Consolidated
Statements of Income
(amounts in thousands, except per
share data)
Three Months Ended
Six Months Ended
July 29, 2023
July 30, 2022
July 29, 2023
July 30, 2022
Product sales
$
636,496
95.8
%
$
617,922
96.1
%
$
1,182,406
95.8
%
$
1,184,995
95.9
%
Net royalties
28,016
4.2
%
24,768
3.9
%
51,904
4.2
%
51,168
4.1
%
Net revenue
664,512
100.0
%
642,690
100.0
%
1,234,310
100.0
%
1,236,163
100.0
%
Cost of product sales
370,069
55.7
%
372,189
57.9
%
707,882
57.4
%
718,513
58.1
%
Gross profit
294,443
44.3
%
270,501
42.1
%
526,428
42.6
%
517,650
41.9
%
Selling, general and administrative
expenses
229,652
34.6
%
216,043
33.6
%
460,625
37.3
%
425,874
34.4
%
Asset impairment charges
2,622
0.4
%
1,919
0.3
%
4,556
0.3
%
3,463
0.3
%
Net gains on lease modifications
(2,431
)
(0.4
%)
(907
)
(0.1
%)
(2,431
)
(0.2
%)
(1,508
)
(0.1
%)
Earnings from operations
64,600
9.7
%
53,446
8.3
%
63,678
5.2
%
89,821
7.3
%
Other income (expense):
Interest expense
(5,742
)
(0.8
%)
(3,195
)
(0.5
%)
(9,960
)
(0.8
%)
(6,288
)
(0.5
%)
Interest income
2,861
0.4
%
419
0.1
%
5,376
0.4
%
993
0.1
%
Loss on extinguishment of debt
—
—
%
—
—
%
(7,696
)
(0.6
%)
—
—
%
Other, net
(4,592
)
(0.7
%)
(9,053
)
(1.4
%)
(7,223
)
(0.6
%)
(25,505
)
(2.1
%)
Earnings before income tax expense
57,127
8.6
%
41,617
6.5
%
44,175
3.6
%
59,021
4.8
%
Income tax expense
15,165
2.3
%
14,177
2.2
%
12,907
1.1
%
21,127
1.7
%
Net earnings
41,962
6.3
%
27,440
4.3
%
31,268
2.5
%
37,894
3.1
%
Net earnings attributable to
noncontrolling interests
2,929
0.4
%
3,478
0.6
%
4,040
0.3
%
5,962
0.5
%
Net earnings attributable to Guess?,
Inc.
$
39,033
5.9
%
$
23,962
3.7
%
$
27,228
2.2
%
$
31,932
2.6
%
Net earnings per common share attributable
to common stockholders:
Basic
$
0.73
$
0.42
$
0.50
$
0.54
Diluted
$
0.59
$
0.35
$
0.46
$
0.46
Weighted average common shares outstanding
attributable to common stockholders:
Basic
52,951
56,954
53,649
59,003
Diluted
69,869
70,299
65,608
72,443
Effective income tax rate
26.5
%
34.1
%
29.2
%
35.8
%
Adjusted selling, general and
administrative expenses4:
$
229,451
34.5
%
$
214,783
33.4
%
$
459,513
37.2
%
$
420,197
34.0
%
Adjusted earnings from operations4:
$
64,992
9.8
%
$
55,718
8.7
%
$
66,915
5.4
%
$
97,453
7.9
%
Adjusted net earnings attributable to
Guess?, Inc.4:
$
39,712
6.0
%
$
22,873
3.6
%
$
36,225
2.9
%
$
38,110
3.1
%
Adjusted weighted average common shares
outstanding attributable to common stockholders:
Adjusted Diluted4,5
54,026
58,482
54,871
60,626
Adjusted net earnings per common share
attributable to common stockholders:
Adjusted Diluted4,5
$
0.72
$
0.39
$
0.65
$
0.62
Adjusted effective income tax rate4:
26.1
%
40.0
%
27.2
%
33.9
%
_____________________________________________________
See end of release for footnotes.
Guess?, Inc. and
Subsidiaries
Reconciliation of GAAP Results to
Adjusted Results
(dollars in thousands)
The reconciliations of (i) reported GAAP selling, general and
administrative expenses to adjusted selling, general and
administrative expenses, (ii) reported GAAP earnings from
operations to adjusted earnings from operations, (iii) reported
GAAP net earnings attributable to Guess?, Inc. to adjusted net
earnings attributable to Guess?, Inc., (iv) reported GAAP income
tax expense to adjusted income tax expense, and (v) reported GAAP
diluted EPS to adjusted diluted EPS are as follows:
Three Months Ended
Six Months Ended
July 29, 2023
July 30, 2022
July 29, 2023
July 30, 2022
Reported GAAP selling, general and
administrative expenses
$
229,652
$
216,043
$
460,625
$
425,874
Certain professional service and legal
fees and related credits (costs)6
(201
)
(1,260
)
(1,112
)
(5,677
)
Adjusted selling, general and
administrative expenses4
$
229,451
$
214,783
$
459,513
$
420,197
Reported GAAP earnings from operations
$
64,600
$
53,446
$
63,678
$
89,821
Certain professional service and legal
fees and related (credits) costs6
201
1,260
1,112
5,677
Asset impairment charges7
2,622
1,919
4,556
3,463
Net gains on lease modifications8
(2,431
)
(907
)
(2,431
)
(1,508
)
Adjusted earnings from
operations4
$
64,992
$
55,718
$
66,915
$
97,453
Reported GAAP net earnings attributable to
Guess?, Inc.
$
39,033
$
23,962
$
27,228
$
31,932
Certain professional service and legal
fees and related (credits) costs6
201
1,260
1,112
5,677
Asset impairment charges7
2,622
1,919
4,556
3,463
Net gains on lease modifications8
(2,431
)
(907
)
(2,431
)
(1,508
)
Loss on extinguishment of debt9
—
—
7,696
—
Amortization of debt discount10
163
—
188
—
Discrete income tax adjustments11
249
(2,772
)
497
416
Income tax impact from adjustments12
(125
)
(589
)
(2,621
)
(1,870
)
Total adjustments affecting net earnings
attributable to Guess?, Inc.
679
(1,089
)
8,997
6,178
Adjusted net earnings attributable to
Guess?, Inc.4
$
39,712
$
22,873
$
36,225
$
38,110
Reported GAAP income tax expense
$
15,165
$
14,177
$
12,907
$
21,127
Discrete income tax adjustments11
(249
)
2,772
(497
)
(416
)
Income tax impact from adjustments12
125
589
2,621
1,870
Adjusted income tax expense4
$
15,041
$
17,538
$
15,031
$
22,581
Adjusted effective income tax
rate4
26.1
%
40.0
%
27.2
%
33.9
%
Reported GAAP diluted EPS
$
0.59
$
0.35
$
0.46
$
0.46
Convertible notes if-converted method
0.12
0.06
0.03
0.06
Certain professional service and legal
fees and related (credits) costs6, 13
0.00
0.02
0.01
0.07
Asset impairment charges7, 13
0.04
0.02
0.06
0.04
Net gains on lease modifications8, 13
(0.03
)
(0.01
)
(0.03
)
(0.02
)
Loss on extinguishment of debt9, 13
—
—
0.11
—
Amortization of debt discount10, 13
0.00
—
0.00
—
Discrete income tax adjustments11
0.00
(0.05
)
0.01
0.01
Adjusted diluted EPS
$
0.72
$
0.39
$
0.65
$
0.62
_____________________________________________________
See end of release for footnotes.
Guess?, Inc. and
Subsidiaries
Consolidated Segment
Data
(dollars in thousands)
Three Months Ended
Six Months Ended
July 29, 2023
July 30, 2022
% change
July 29, 2023
July 30, 2022
% change
Net revenue:
Europe
$
366,311
$
336,707
9%
$
646,509
$
612,716
6%
Americas Retail
167,568
181,655
(8%)
311,112
348,140
(11%)
Americas Wholesale
43,680
50,195
(13%)
95,073
118,552
(20%)
Asia
58,937
49,365
19%
129,712
105,587
23%
Licensing
28,016
24,768
13%
51,904
51,168
1%
Total net revenue
$
664,512
$
642,690
3%
$
1,234,310
$
1,236,163
(0%)
Earnings (loss) from operations:
Europe
$
47,196
$
34,538
37%
$
48,789
$
52,428
(7%)
Americas Retail
15,261
23,921
(36%)
11,974
38,187
(69%)
Americas Wholesale
11,065
11,442
(3%)
24,158
28,839
(16%)
Asia
(539
)
(3,300
)
(84%)
3,291
(6,787
)
(148%)
Licensing
26,354
21,206
24%
48,649
45,650
7%
Total segment earnings from operations
99,337
87,807
13%
136,861
158,317
(14%)
Corporate overhead
(34,546
)
(33,349
)
4%
(71,058
)
(66,541
)
7%
Asset impairment charges
(2,622
)
(1,919
)
37%
(4,556
)
(3,463
)
32%
Net gains on lease modifications
2,431
907
168%
2,431
1,508
61%
Total earnings from operations
$
64,600
$
53,446
21%
$
63,678
$
89,821
(29%)
Operating margins:
Europe
12.9
%
10.3
%
7.5
%
8.6
%
Americas Retail
9.1
%
13.2
%
3.8
%
11.0
%
Americas Wholesale
25.3
%
22.8
%
25.4
%
24.3
%
Asia
(0.9
%)
(6.7
%)
2.5
%
(6.4
%)
Licensing
94.1
%
85.6
%
93.7
%
89.2
%
GAAP operating margin for total
Company
9.7
%
8.3
%
5.2
%
7.3
%
Certain professional service and legal
fees and related (credits) costs4,6
0.1
%
0.2
%
0.1
%
0.4
%
Asset impairment charges4,7
0.4
%
0.3
%
0.3
%
0.3
%
Net gains on lease modifications4,8
(0.4
%)
(0.1
%)
(0.2
%)
(0.1
%)
Adjusted operating margin for total
Company4
9.8
%
8.7
%
5.4
%
7.9
%
_____________________________________________________
See end of release for footnotes.
Guess?, Inc. and
Subsidiaries
Constant Currency Financial
Measures
(dollars in thousands)
As Reported
Foreign Currency
Impact
Constant Currency
As Reported
As
Reported
Constant Currency
July 29, 2023
July 30, 2022
Three Months Ended
% change
Net revenue:
Europe
$
366,311
$
(2,984
)
$
363,327
$
336,707
9%
8%
Americas Retail
167,568
(795
)
166,773
181,655
(8%)
(8%)
Americas Wholesale
43,680
(1,335
)
42,345
50,195
(13%)
(16%)
Asia
58,937
1,389
60,326
49,365
19%
22%
Licensing
28,016
—
28,016
24,768
13%
13%
Total net revenue
$
664,512
$
(3,725
)
$
660,787
$
642,690
3%
3%
Six Months Ended
Net revenue:
Europe
$
646,509
$
6,180
$
652,689
$
612,716
6%
7%
Americas Retail
311,112
19
311,131
348,140
(11%)
(11%)
Americas Wholesale
95,073
(2,133
)
92,940
118,552
(20%)
(22%)
Asia
129,712
5,756
135,468
105,587
23%
28%
Licensing
51,904
—
51,904
51,168
1%
1%
Total net revenue
$
1,234,310
$
9,822
$
1,244,132
$
1,236,163
(0%)
1%
Guess?, Inc. and
Subsidiaries
Selected Condensed
Consolidated Balance Sheet Data
(in thousands)
July 29, 2023
January 28,
2023
July 30, 2022
ASSETS
Cash and cash equivalents
$
302,626
$
275,765
$
174,372
Receivables, net
318,364
341,939
301,659
Inventories
554,425
510,899
535,530
Other current assets
84,654
83,102
87,434
Property and equipment, net
237,928
240,355
230,376
Operating lease right-of-use assets
651,722
636,148
651,925
Other assets
339,440
337,240
335,375
Total assets
$
2,489,159
$
2,425,448
$
2,316,671
LIABILITIES AND STOCKHOLDERS’
EQUITY
Current portion of borrowings and finance
lease obligations
$
37,507
$
40,380
$
37,996
Current operating lease liabilities
170,020
170,192
170,133
Current portion of convertible senior
notes due 2024, net
114,899
—
—
Other current liabilities
534,879
552,480
552,190
Long-term debt and finance lease
obligations
146,043
95,921
99,287
Convertible senior notes due 2024, net
—
298,931
298,521
Convertible senior notes due 2028, net
266,110
—
—
Long-term operating lease liabilities
532,495
528,236
552,190
Other long-term liabilities
152,812
157,403
153,904
Redeemable and nonredeemable
noncontrolling interests
45,497
47,792
41,607
Guess?, Inc. stockholders’ equity
488,897
534,113
410,843
Total liabilities and stockholders’
equity
$
2,489,159
$
2,425,448
$
2,316,671
Guess?, Inc. and
Subsidiaries
Condensed Consolidated Cash
Flow Data
(in thousands)
Six Months Ended
July 29, 2023
July 30, 2022
Net cash provided by operating
activities
$
47,273
$
1,502
Net cash used in investing activities
(35,836
)
(51,236
)
Net cash provided by (used in) financing
activities
13,253
(181,149
)
Effect of exchange rates on cash and cash
equivalents
2,171
(10,310
)
Net change in cash and cash
equivalents
26,861
(241,193
)
Cash and cash equivalents at the beginning
of the year
275,765
415,565
Cash and cash equivalents at the end of
the period
$
302,626
$
174,372
Supplemental information:
Depreciation and amortization
$
30,833
$
30,533
Total lease costs (excluding finance lease
cost)
$
154,507
$
146,775
Guess?, Inc. and
Subsidiaries
Reconciliation of Net Cash
Provided By Operating Activities to Free Cash Flow
(in thousands)
Six Months Ended
July 29, 2023
July 30, 2022
Net cash provided by operating
activities
$
47,273
$
1,502
Less: Purchases of property and
equipment
(34,793
)
(51,221
)
Less: Payments for property and equipment
under finance leases
(3,405
)
(3,874
)
Free cash flow
$
9,075
$
(53,593
)
Guess?, Inc. and
Subsidiaries
Retail Store Data
Global Store and Concession
Count
Stores
Concessions
Region
Total
Directly Operated
Partner Operated
Total
Directly Operated
Partner Operated
As of July 29, 2023
United States
234
234
—
—
—
—
Canada
61
61
—
—
—
—
Central and South America
103
69
34
29
29
—
Total Americas
398
364
34
29
29
—
Europe and the Middle East
769
546
223
58
58
—
Asia and the Pacific
402
113
289
241
132
109
Total
1,569
1,023
546
328
219
109
As of July 30, 2022
United States
243
243
—
—
—
—
Canada
73
73
—
—
—
—
Central and South America
102
68
34
29
29
—
Total Americas
418
384
34
29
29
—
Europe and the Middle East
795
560
235
51
51
—
Asia and the Pacific
418
120
298
254
113
141
Total
1,631
1,064
567
334
193
141
Guess?, Inc. and Subsidiaries
Footnotes to Condensed Consolidated Financial Data
Footnote:
1
The Company’s outlook for the third
quarter and full fiscal 2024 assumes that foreign currency exchange
rates remain at recently prevailing rates.
2
Amounts for the full fiscal year outlook
represent the exclusion of (i) certain professional service and
legal fees and related (credits) costs which the Company otherwise
would not have incurred as part of its business operations, (ii)
asset impairment charges related primarily to impairment of
property and equipment and operating lease right-of-use assets
related to certain retail locations resulting from lower revenue
and future cash flow projections from under-performance and
expected store closures, (iii) net gains on lease modifications
related primarily to the early termination of certain lease
agreements, (iv) loss on extinguishment of debt related to the 2024
Notes and (v) discrete income tax adjustments related to the impact
from changes in the income tax law on deferred income taxes in
certain tax jurisdictions, in each case as recognized during the
six months ended July 29, 2023. See the heading “Presentation of
Non-GAAP Information” for further information. The Company is
unable to predict future amounts with respect to these items, as
such amounts are inconsistent in magnitude and frequency and
certain elements used to estimate such items have not yet occurred
or are out of the Company’s control. As such, the Company has not
considered any future charges or credits with respect to these
items in the accompanying GAAP outlook.
3
Amounts for the third quarter and full
fiscal 2024 outlook represent the exclusion of (i) the amortization
of the debt discount related to the 2028 Notes and (ii) the
dilutive impact of the Company’s convertible notes for adjusted
diluted shares and corresponding interest expenses at initial stock
prices below $46.88 for the 2024 Notes and $41.80 for the 2028
Notes, based on the bond hedge contracts in place that will deliver
shares to offset dilution. The Company excludes the dilutive impact
anticipated to be recorded in those periods as such amounts are
reasonably estimated. The Company has not assumed any potential
share dilution due to the related warrants.
4
The adjusted results reflect the exclusion
of certain professional service and legal fees and related
(credits) costs, asset impairment charges, net gains on lease
modifications, loss on extinguishment of debt, amortization of debt
discount, the related income tax impacts of these adjustments, as
well as certain discrete income tax adjustments, where applicable.
A reconciliation of actual results to adjusted results is presented
in the “Reconciliation of GAAP Results to Adjusted Results.”
5
The Company excludes the dilutive impact
of the 2024 Notes at initial stock prices below $46.88 and the 2028
Notes at initial stock prices below $41.80, based on the bond hedge
contracts in place that will deliver shares to offset dilution. At
initial stock prices in excess of $46.88 for the 2024 Notes and
$41.80 for the 2028 Notes, the Company would have an obligation to
deliver additional shares in excess of the dilution protection
provided by the bond hedges.
6
Adjustments represent certain professional
service and legal fees and related (credits) costs which the
Company otherwise would not have incurred as part of its business
operations.
7
Adjustments represent asset impairment
charges related primarily to impairment of property and equipment
and operating lease right-of-use assets related to certain retail
locations resulting from under-performance and expected store
closures.
8
Adjustments represent net gains on lease
modifications related primarily to the early termination of certain
lease agreements.
9
Adjustments represent loss on
extinguishment of debt from a portion of the exchanged 2024 Notes
in April 2023.
10
In April 2023, the Company issued $275
million principal amount of 3.75% convertible senior notes due 2028
in a private offering. The debt discount, which resulted from the
modification accounting for a portion of the exchanged 2024 Notes,
will be amortized as non-cash interest expense over the term of the
2028 Notes.
11
Adjustments represent discrete income
taxes related primarily to the impact from changes in the income
tax law on deferred income taxes in certain tax jurisdictions and
adjustments from an intra-entity transfer of intellectual property
rights from certain U.S. entities to a wholly-owned Swiss
subsidiary.
12
The income tax effect of certain
professional service and legal fees and related (credits) costs,
asset impairment charges, net gains on lease modifications, loss on
extinguishment of debt and amortization of debt discount was based
on the Company’s assessment of deductibility using the statutory
income tax rate (inclusive of the impact of valuation allowances)
of the tax jurisdiction in which the charges were incurred.
13
Adjustments include the related income tax
effect based on the Company’s assessment of deductibility using the
statutory income tax rate (inclusive of the impact of valuation
allowances) of the tax jurisdiction in which the charges were
incurred.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230821338678/en/
Guess?, Inc. Fabrice Benarouche Senior Vice President Finance,
Investor Relations and Chief Accounting Officer (213) 765-5578
Guess (NYSE:GES)
Gráfica de Acción Histórica
De May 2024 a Jun 2024
Guess (NYSE:GES)
Gráfica de Acción Histórica
De Jun 2023 a Jun 2024