Guess profits bolstered by improved margins

Los Angeles-based fashion retailer Guess?, Inc. (Guess) reported net earnings of $12.0 million, or $0.18 per diluted share, for the first quarter ended May 1, 2021, on Thursday, figures representing solid progress compared to the Q1 losses posted by the company in the last two years.

In the same period in the previous year, which was strongly affected by the impact of pandemic-related store closures, Guess reported a net loss of $157.7 million, or $2.40 per diluted share. In the first quarter ended May 4, 2019, the company’s net loss was $21.4 million, or $0.27 per diluted share.

When compared to last year’s first quarter, the growth in the retailer’s profits is hardly surprising, considering the year-over-year increase of 99.8% in its Q1 net revenues, which totaled $520.0 million this year, up from $260.3 million in the prior-year period, when sales were decimated by the health crisis. In constant currencies the rise was 90.3%.

The company’s European revenues saw the strongest growth, posting a 127.1% year-over-year increase in revenue, followed by a 108.5% rise in retail revenues in the Americas and a 75.6% increase in wholesale revenues in the same region. Asian revenues increased 37.8%, while licensing revenues climbed 66.4%.

However, when compared to the same period two years ago, Guess’ latest first-quarter revenues registered a decline of 3%, or 5% in constant currencies.

Bottom-line growth was therefore achieved thanks to the company’s 5.1% operating margin in the quarter, which represented an expansion of more than 900 basis points compared to the same period two years ago. Furthermore, Guess’ gross margin expanded by almost 700 basis points over the two-year period, while its SG&A rate improved by over 200 basis points.

“We firmly believe that this strong performance is a direct result of the transformational work we have done at the company,” explained Guess co-founder and chief creative officer Paul Marciano in a release. “This transformation touched every area of our business, including initiatives to elevate our brand and our product, the acceleration of our e-commerce business, the optimization of our global footprint and brand portfolio, the reorganization of our team globally and the execution of significant cost reductions throughout our operation.”

Due to the ongoing certainty surrounding the Covid-19 pandemic, Guess did not provide detailed financial guidance. The company did, however, report that it currently expects both its second quarter and full-year revenues to be down in the mid-single digits compared to the equivalent periods two years ago.

“We remain focused on executing our strategic business plan and now believe that in the current year we will […] reach an operating margin of about 8.6%,” added Guess CEO Carlos Alberini. “Furthermore, we are well on track to achieve our long-term 10% operating margin target but now a year earlier than we anticipated. We believe that we are at an inflection point for our company.”

Guess profits bolstered by improved margins

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