Guess to close 60 stores in fiscal 2018 to improve profitability

By

Obi Anyanwu

Published
Mar 16, 2017

Guess on Wednesday reported its fourth quarter and full year financial results. The European and Asia businesses continue to drive growth for the company and offset soft performances in the US. 

Revenues for the fourth quarter just missed expectations but increased 3.2% to $679.3 million. European revenues increased 11.4% and Asia revenues increased 26.6%. Both segments offset the 6.4% decrease in Americas retail revenue and the 7.0% decrease in retail comp sales including e-commerce. Fourth quarter adjusted net earnings fell to $34.6 million and full year adjusted earnings fell 55.3% to $37.2 million.

 
Victor Herrero, Chief Executive Officer, commented, "In Europe, our revenues were up 11% driven by new store openings and another good quarter of positive comp store sales. Turning to Asia, revenues finished up 27% driven by new store openings and positive comp store sales in China. We are encouraged by the progress we are making in these two regions and will continue to allocate the majority of our capital investment there."

Fourth quarter adjusted operational margin decreased 270 basis points to 7.9% and adjusted operational earnings were $53.9 million. In the Americas, retail segment operating margin decreased 17.7% to negative 11.1% and the wholesale segment decreased 200 basis points to 17.0%, while the Europe segment increased to 16.0% and the Asia segment was flat.

Net revenues for the year increased 0.2%, driven by the 8.9% increase in European revenues and 3.6% increase in Asia revenues, and the operating margin decreased in all segments in the fiscal year. The adjusted operating margin decreased 270 basis points to 2.9%.

The company posted fourth quarter adjusted earnings per share of $0.41, which is a decrease of 28.1% from the prior year, but met the bottom end of its diluted EPS range. In addition, full year adjusted diluted earnings per share of $0.44, which fell 55.1% from the previous year.
 
Herrero added, "As we head into fiscal year 2018, we will build on the good momentum we are experiencing in both Europe and Asia and will continue our retail expansion plan there. In the Americas Retail, where the retail environment remains challenging, we are focused on profitability improvements. We will continue to negotiate rent reductions whenever possible and plan to close 60 stores in fiscal 2018. And finally, we will remain focused on implementing supply chain initiatives that should drive profit improvement in fiscal 2018."
 
In the first quarter of 2017, Guess expects diluted net loss per share to range from $0.33 to $0.30 and consolidated net revenues to range from a decline of $0.5 to an increase of $1.5. In addition, full year consolidated net revenues are projected to increase between 2.0% and 4.0% and diluted earnings per share are expected to range from $0.28 to $0.40.