Third Quarter Fiscal
2024 Results: Revenues Increased to $651 Million, Up 3% in
U.S. Dollars and 1% in Constant Currency Delivered Operating Margin
of 8.4%; Adjusted Operating Margin of 8.9% GAAP EPS of $0.82 and
Adjusted EPS of $0.49
Lowers Full Year
Fiscal 2024 Outlook: Expects Revenue Growth between 1.8% and
2.4% in U.S. Dollars GAAP and Adjusted Operating Margins between
8.7% and 8.9% and 8.9% and 9.1%, Respectively Expects GAAP EPS
between $2.49 and $2.55 and Adjusted EPS between $2.67 and
$2.74
Guess?, Inc. (NYSE: GES) today reported financial results for
its third quarter ended October 28, 2023.
Carlos Alberini, Chief Executive Officer, commented, “We are
pleased with our third quarter financial results, which were in
line with our guidance for revenue growth and at the high end of
our expectations for operating profit performance. During the
period, we managed the business well and delivered strong gross
margin and effective cost performance, which resulted in GAAP and
adjusted operating margins of 8.4% and 8.9%, respectively, ahead of
our expectations for the quarter. Overall, a strong licensing
business combined with a disciplined approach to cost management
offset softness in some of our direct-to-consumer businesses and
drove earnings from operations for the Company that were flat to
last year’s performance.”
Paul Marciano, Co-Founder and Chief Creative Officer, commented,
“Our brand momentum is strong and we continue to benefit from our
highly diversified business model. We have a strong global
infrastructure that supports 25 different product categories, many
markets across all regions of the world and multiple consumer
channels. We have great teams driving these businesses that are
performing well in a challenging environment and remain well
positioned to grow our business. We want to thank our people for
their hard work and valuable contributions.”
Mr. Alberini concluded, “We are confident in our plans for the
holiday season and have a strong inventory position to respond well
to customer demand. We are navigating through an uncertain shopping
environment in many parts of the world impacted by geopolitical
issues and lower consumer confidence. Based on these factors and
our recent sales trends, we are taking a more cautious view for our
fourth quarter outlook and now expect to deliver net revenue growth
of 2% and an operating margin of roughly 9% for the fiscal year. We
have identified many opportunities to grow our business and are
working on our strategy to capture these opportunities and deliver
strong value to 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.
Third Quarter Fiscal 2024
Results
For the third quarter of the fiscal year ending February 3, 2024
(“fiscal 2024”), the Company recorded GAAP net earnings of $55.7
million, a 155% increase from $21.8 million for the same prior-year
quarter. The results for the third quarter of fiscal 2024 included
a net positive impact of $31.2 million from discrete tax
adjustments related primarily to the consolidation of certain
business functions into Switzerland. GAAP diluted net earnings per
share (“EPS”) increased 141% to $0.82 for the third quarter of
fiscal 2024, compared to $0.34 for the same prior-year quarter. The
Company estimates a positive impact from its share buybacks of
$0.02 and a negative impact from currency of $0.03 on GAAP diluted
EPS in the third quarter of fiscal 2024 when compared to the same
prior-year quarter.
For the third quarter of fiscal 2024, the Company’s adjusted net
earnings were $27.0 million, a 9% increase from $24.7 million for
the same prior-year quarter. Adjusted diluted EPS increased 11% to
$0.49, compared to $0.44 for the same prior-year quarter. The
Company estimates a positive impact from its share buybacks of
$0.02 and a negative impact from currency of $0.02 on adjusted
diluted EPS in the third quarter of fiscal 2024 when compared to
the same prior-year quarter.
Net Revenue. Total net revenue for the third quarter of
fiscal 2024 increased 3% to $651.2 million from $633.4 million in
the same prior-year quarter. In constant currency, net revenue
increased by 1%.
- Europe revenues increased 6% in U.S. dollars and 5% in constant
currency. Retail comparable sales (including e-commerce) increased
8% in U.S. dollars and 7% in constant currency. The inclusion of
our e-commerce sales had a minimal impact on the retail comparable
sales percentage in U.S. dollars and a negative impact of 1% in
constant currency.
- Americas Retail revenues decreased 7% in U.S. dollars and 8% in
constant currency. Retail comparable sales (including e-commerce)
decreased 5% in both U.S. dollars and constant currency. The
inclusion of our e-commerce sales had a minimal impact on the
retail comparable sales percentage in U.S. dollars and a positive
impact of 1% in constant currency.
- Americas Wholesale revenues increased 4% in U.S. dollars and
decreased 1% in constant currency.
- Asia revenues increased 2% in U.S. dollars and remained flat in
constant currency. Retail comparable sales (including e-commerce)
decreased 8% in U.S. dollars and 9% in constant currency. The
inclusion of our e-commerce sales negatively impacted the retail
comparable sales percentage by 1% in both U.S. dollars and constant
currency.
- Licensing revenues increased 19% in U.S. dollars and constant
currency.
Earnings from Operations. GAAP earnings from operations
for the third quarter of fiscal 2024 remained consistent at $54.8
million (including $1.7 million in non-cash impairment charges
taken on certain long-lived store related assets, $0.5 million net
losses on lease modifications and a $1.3 million unfavorable
currency translation impact), from $54.8 million (including $1.8
million in non-cash impairment charges taken on certain long-lived
store related assets and $0.1 million net gains on lease
modifications) in the same prior-year quarter. GAAP operating
margin in the third quarter of fiscal 2024 decreased 0.2% to 8.4%,
from 8.6% for the same prior-year quarter, driven primarily by
higher expenses, including higher performance-based compensation,
and the unfavorable impact of currency, partially offset by higher
initial markups and the favorable impact of business mix. The
negative impact of currency on operating margin for the quarter was
approximately 120 basis points.
For the third quarter of fiscal 2024, adjusted earnings from
operations decreased slightly to $57.9 million, from $58.0 million
in the same prior-year quarter. Adjusted operating margin decreased
0.2% to 8.9%, from 9.1% for the same prior-year quarter, driven
primarily by higher expenses, including higher performance-based
compensation, and the unfavorable impact of currency, partially
offset by higher initial markups and the favorable impact of
business mix.
- Operating margin for the Company’s Europe segment decreased
0.9% to 10.3% in the third quarter of fiscal 2024, from 11.2% in
the same prior-year quarter, driven primarily by the unfavorable
impact of currency and higher expenses, partially offset by higher
initial markups and higher revenues.
- Operating margin for the Company’s Americas Retail segment
decreased 1.6% to 5.3% in the third quarter of fiscal 2024, from
6.9% in the same prior-year quarter, driven primarily by the
unfavorable impact from lower revenues and higher expenses,
partially offset by higher initial markups.
- Operating margin for the Company’s Americas Wholesale segment
increased 9.9% to 29.1% in the third quarter of fiscal 2024, from
19.2% in the same prior-year quarter, driven primarily by higher
product margin.
- Operating margin for the Company’s Asia segment increased 1.0%
to 1.0% in the third quarter of fiscal 2024, from a relative
breakeven point in the same prior-year quarter, driven primarily by
the favorable impact of business mix, partially offset by higher
expenses.
- Operating margin for the Company’s Licensing segment increased
3.5% to 93.1% in the third quarter of fiscal 2024, from 89.6% in
the same prior-year quarter, mainly driven by the favorable impact
of higher royalties and lower expenses.
Other expense, net. Other expense, net for the third
quarter of fiscal 2024 decreased 28% to $11.0 million from $15.2
million for the same prior-year quarter. The change was primarily
due to lower net realized and unrealized losses from foreign
currency exposures, as well as higher net unrealized and realized
gains from foreign exchange currency contracts, compared to the
same prior-year quarter.
Nine-Month Period
Results
For the nine months ended October 28, 2023, the Company recorded
GAAP net earnings of $82.9 million, a 54% increase from $53.8
million for the same prior-year period. The results for the nine
months ended October 28, 2023 included a net positive impact of
$30.7 million from discrete tax adjustments related primarily to
the consolidation of certain business functions into Switzerland.
GAAP diluted EPS increased 63% to $1.30 for the nine months ended
October 28, 2023, compared to $0.80 for the same prior-year period.
The Company estimates a positive impact from its share buybacks of
$0.09 and a negative impact from currency of $0.01 on GAAP diluted
EPS for the nine months ended October 28, 2023 when compared to the
same prior-year period.
For the nine months ended October 28, 2023, the Company recorded
adjusted net earnings of $63.2 million, a 1% increase from $62.9
million for the same prior-year period. Adjusted diluted EPS
increased 8% to $1.14, compared to $1.06 for the same prior-year
period. The Company estimates its share buybacks had a positive
impact of $0.10 and currency had a negative impact of $0.03 on
adjusted diluted EPS during the nine months ended October 28, 2023
when compared to the same prior-year period.
Net Revenue. Total net revenue for the nine months ended
October 28, 2023 increased 1% to $1.89 billion, from $1.87 billion
in the same prior-year period. In constant currency, net revenue
also increased by 1%.
- Europe revenues increased 6% in both U.S. dollars and constant
currency. Retail comparable sales (including e-commerce) increased
10% in both U.S. dollars and constant currency. The inclusion of
our e-commerce sales negatively impacted the retail comparable
sales percentage by 1% in U.S. dollars and 2% in constant
currency.
- Americas Retail revenues decreased 9% in U.S. dollars and 10%
in constant currency. Retail comparable sales (including
e-commerce) decreased 8% in both U.S. dollars and constant
currency. The inclusion of our e-commerce sales had a minimal
impact on the retail comparable sales percentage in U.S. dollars
and a positive impact of 1% in constant currency.
- Americas Wholesale revenues decreased 12% in U.S. dollars and
15% in constant currency.
- Asia revenues increased 15% in U.S. dollars and 18% in constant
currency. Retail comparable sales (including e-commerce) decreased
1% in U.S. dollars and increased 1% in constant currency. The
inclusion of our e-commerce sales positively impacted the retail
comparable sales percentage by 1% in both U.S. dollars and constant
currency.
- Licensing revenues increased 8% in both U.S. dollars and
constant currency.
Earnings from Operations. GAAP earnings from operations
for the nine months ended October 28, 2023 decreased by 18% to
$118.5 million (including $6.3 million in non-cash impairment
charges taken on certain long-lived store related assets, $1.9
million net gains on lease modifications and a $2.3 million
unfavorable currency translation impact), from $144.6 million
(including $5.3 million in non-cash impairment charges taken on
certain long-lived store related assets and $1.7 million net gains
on lease modifications) in the same prior-year period. GAAP
operating margin in the nine months ended October 28, 2023
decreased 1.4% to 6.3%, from 7.7% in the same prior-year period,
driven primarily by higher expenses, including higher
performance-based compensation, 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 nine months ended October 28, 2023 was approximately
120 basis points.
For nine months ended October 28, 2023, adjusted earnings from
operations decreased 20% to $124.8 million, from $155.4 million in
the same prior-year period. Adjusted operating margin decreased
1.7% to 6.6% for the nine months ended October 28, 2023, from 8.3%
in the same prior-year period, driven primarily by higher expenses,
including higher store costs and performance-based compensation,
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
1.0% to 8.5% in the nine months ended October 28, 2023, from 9.5%
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 5.3% to 4.3% in the nine months ended October 28, 2023,
from 9.6% 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 4.1% to 26.8% in the nine months ended October 28, 2023,
from 22.7% in the same prior-year period, driven primarily by
higher product margin.
- Operating margin for the Company’s Asia segment increased 6.0%
to 2.0% in the nine months ended October 28, 2023, from negative
4.0% 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
4.2% to 93.5% in the nine months ended October 28, 2023, from 89.3%
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 together with the 2028 Notes, the “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 nine months ended October 28,
2023.
Other expense, net. Other expense, net for the nine
months ended October 28, 2023 decreased 55% to $18.2 million from
$40.7 million in the same prior-year period. The change was
primarily due to lower net realized and unrealized losses from
foreign currency exposures and, to a lesser extent, lower net
unrealized losses on the Company’s SERP-related assets compared to
the same prior-year period.
Outlook
The Company’s expectations for the fourth quarter and full
fiscal year 2024 are as follows:
Outlook for Total
Company1
Fourth Quarter of Fiscal
2024
Fiscal 2024
Consolidated net revenue in U.S.
dollars
increase between 4.0% and
6.0%
increase between 1.8% and
2.4%
GAAP operating margin
14.1% to 14.4%
8.7% to 8.9%
Adjusted operating margin
14.1% to 14.4%
8.9% to 9.1%
GAAP diluted EPS
$1.22 to $1.28
$2.49 to $2.55
Adjusted diluted EPS
$1.53 to $1.60
$2.67 to $2.74
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 fourth quarter and full fiscal 2024 is
as follows:
Reconciliation of GAAP Outlook
to Adjusted Outlook1
Fourth Quarter of Fiscal
2024
Fiscal 2024
GAAP operating margin
14.1% to 14.4%
8.7% to 8.9%
Certain professional service and legal
fees and related (credits) costs2
—%
0.1%
Asset impairment charges2
—%
0.2%
Net (gains) losses on lease
modifications2
—%
(0.1)%
Adjusted operating margin
14.1% to 14.4%
8.9% to 9.1%
GAAP diluted EPS
$1.22 to $1.28
$2.49 to $2.55
Certain professional service and legal
fees and related (credits) costs2
—
0.02
Asset impairment charges2
—
0.07
Net (gains) losses on lease
modifications2
—
(0.02)
Loss on extinguishment of debt2
—
0.08
Amortization of debt discount3
0.00
0.01
Discrete income tax adjustments2
—
(0.44)
Impact of convertible share dilution3
0.31 to 0.32
0.46 to 0.47
Adjusted diluted EPS
$1.53 to $1.60
$2.67 to $2.74
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 December 22, 2023 to shareholders of
record as of the close of business on December 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 nine months ended October 28, 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 and the impact from certain discrete
income tax adjustments related primarily to the consolidation of
certain business functions into Switzerland and, to a lesser
extent, the impact from changes in the income tax law in certain
tax jurisdictions, in each case where applicable. The weighted
average diluted shares outstanding used for adjusted diluted EPS
excludes the dilutive impact of the Notes, based on the bond hedge
contracts in place. 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
November 21, 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 October 28, 2023, the Company directly operated 1,015 retail
stores in Europe, the Americas and Asia. The Company’s partners and
distributors operated 544 additional retail stores worldwide. As of
October 28, 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 conflicts in Ukraine and Gaza and other events
impacting the markets in which we operate; statements concerning
the Company’s future outlook, including with respect to the fourth
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 Israel-Hamas war; 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 conflicts in Ukraine and Gaza, possible
instability in the banking system, the possibility of a government
shutdown in the U.S., 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
Nine Months Ended
October 28, 2023
October 29, 2022
October 28, 2023
October 29, 2022
Product sales
$
618,130
94.9
%
$
605,656
95.6
%
$
1,800,536
95.5
%
$
1,790,651
95.8
%
Net royalties
33,040
5.1
%
27,747
4.4
%
84,944
4.5
%
78,915
4.2
%
Net revenue
651,170
100.0
%
633,403
100.0
%
1,885,480
100.0
%
1,869,566
100.0
%
Cost of product sales
360,000
55.3
%
364,032
57.5
%
1,067,882
56.6
%
1,082,545
57.9
%
Gross profit
291,170
44.7
%
269,371
42.5
%
817,598
43.4
%
787,021
42.1
%
Selling, general and administrative
expenses
234,123
36.0
%
212,927
33.6
%
694,748
36.8
%
638,801
34.2
%
Asset impairment charges
1,737
0.3
%
1,789
0.3
%
6,293
0.4
%
5,252
0.3
%
Net (gains) losses on lease
modifications
537
0.0
%
(146
)
(0.0
%)
(1,894
)
(0.1
%)
(1,654
)
(0.1
%)
Earnings from operations
54,773
8.4
%
54,801
8.6
%
118,451
6.3
%
144,622
7.7
%
Other income (expense):
Interest expense
(5,923
)
(0.9
%)
(3,453
)
(0.5
%)
(15,883
)
(0.9
%)
(9,741
)
(0.5
%)
Interest income
3,181
0.5
%
636
0.1
%
8,557
0.5
%
1,629
0.1
%
Loss on extinguishment of debt
—
—
%
—
—
%
(7,696
)
(0.4
%)
—
—
%
Other, net
(11,004
)
(1.7
%)
(15,211
)
(2.4
%)
(18,227
)
(1.0
%)
(40,716
)
(2.2
%)
Earnings before income tax expense
(benefit)
41,027
6.3
%
36,773
5.8
%
85,202
4.5
%
95,794
5.1
%
Income tax expense (benefit)
(18,277
)
(2.8
%)
11,616
1.8
%
(5,370
)
(0.3
%)
32,743
1.7
%
Net earnings
59,304
9.1
%
25,157
4.0
%
90,572
4.8
%
63,051
3.4
%
Net earnings attributable to
noncontrolling interests
3,603
0.5
%
3,322
0.6
%
7,643
0.4
%
9,284
0.5
%
Net earnings attributable to Guess?.
Inc.
$
55,701
8.6
%
$
21,835
3.4
%
$
82,929
4.4
%
$
53,767
2.9
%
Net earnings per common share attributable
to common stockholders:
Basic
$
1.04
$
0.40
$
1.53
$
0.93
Diluted
$
0.82
$
0.34
$
1.30
$
0.80
Weighted average common shares outstanding
attributable to common stockholders:
Basic
53,052
53,894
53,450
57,300
Diluted
70,331
67,102
68,098
70,705
Effective income tax rate
(44.5
%)
31.6
%
(6.3
%)
34.2
%
Adjusted selling, general and
administrative expenses4:
$
233,274
35.8
%
$
211,419
33.4
%
$
692,787
36.7
%
$
631,616
33.8
%
Adjusted earnings from operations4:
$
57,896
8.9
%
$
57,952
9.1
%
$
124,811
6.6
%
$
155,405
8.3
%
Adjusted net earnings attributable to
Guess?, Inc.4:
$
27,006
4.1
%
$
24,746
3.9
%
$
63,231
3.4
%
$
62,856
3.4
%
Adjusted weighted average common shares
outstanding attributable to common stockholders:
Adjusted Diluted4,5
54,418
55,204
54,726
58,807
Adjusted net earnings per common share
attributable to common stockholders:
Adjusted Diluted4,5
$
0.49
$
0.44
$
1.14
$
1.06
Adjusted effective income tax rate4:
30.9
%
29.7
%
28.8
%
32.3
%
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 (benefit) to adjusted income tax expense, and
(v) reported GAAP diluted EPS to adjusted diluted EPS are as
follows:
Three Months Ended
Nine Months Ended
October 28,
2023
October 29,
2022
October 28,
2023
October 29,
2022
Reported GAAP selling, general and
administrative expenses
$
234,123
$
212,927
$
694,748
$
638,801
Certain professional service and legal
fees and related credits (costs)6
(849
)
(1,508
)
(1,961
)
(7,185
)
Adjusted selling, general and
administrative expenses4
$
233,274
$
211,419
$
692,787
$
631,616
Reported GAAP earnings from operations
$
54,773
$
54,801
$
118,451
$
144,622
Certain professional service and legal
fees and related (credits) costs6
849
1,508
1,961
7,185
Asset impairment charges7
1,737
1,789
6,293
5,252
Net (gains) losses on lease
modifications8
537
(146
)
(1,894
)
(1,654
)
Adjusted earnings from
operations4
$
57,896
$
57,952
$
124,811
$
155,405
Reported GAAP net earnings attributable to
Guess?, Inc.
$
55,701
$
21,835
$
82,929
$
53,767
Certain professional service and legal
fees and related (credits) costs6
849
1,508
1,961
7,185
Asset impairment charges7
1,737
1,789
6,293
5,252
Net (gains) losses on lease
modifications8
537
(146
)
(1,894
)
(1,654
)
Loss on extinguishment of debt9
—
—
7,696
—
Amortization of debt discount10
163
—
351
—
Discrete income tax adjustments11
(31,166
)
208
(30,669
)
624
Income tax impact from adjustments12
(815
)
(448
)
(3,436
)
(2,318
)
Total adjustments affecting net earnings
attributable to Guess?, Inc.
(28,695
)
2,911
(19,698
)
9,089
Adjusted net earnings attributable to
Guess?, Inc.4
$
27,006
$
24,746
$
63,231
$
62,856
Reported GAAP income tax expense
(benefit)
$
(18,277
)
$
11,616
$
(5,370
)
$
32,743
Discrete income tax adjustments11
31,166
(208
)
30,669
(624
)
Income tax impact from adjustments12
815
448
3,436
2,318
Adjusted income tax expense4
$
13,704
$
11,856
$
28,735
$
34,437
Adjusted effective income tax
rate4
30.9
%
29.7
%
28.8
%
32.3
%
Reported GAAP diluted EPS
$
0.82
$
0.34
$
1.30
$
0.80
Convertible notes if-converted method5
0.07
0.05
0.13
0.13
Certain professional service and legal
fees and related (credits) costs6,13
0.01
0.02
0.02
0.08
Asset impairment charges7,13
0.02
0.02
0.07
0.06
Net (gains) losses on lease
modifications8,13
0.01
(0.00
)
(0.02
)
(0.02
)
Loss on extinguishment of debt9,13
—
—
0.09
—
Amortization of debt discount10,13
0.00
—
0.00
—
Discrete income tax adjustments11
(0.44
)
0.01
(0.45
)
0.01
Adjusted diluted EPS
$
0.49
$
0.44
$
1.14
$
1.06
See end of release for footnotes.
Guess?, Inc. and
Subsidiaries
Consolidated Segment
Data
(dollars in thousands)
Three Months Ended
Nine Months Ended
October 28,
2023
October 29,
2022
% change
October 28,
2023
October 29,
2022
% change
Net revenue:
Europe
$
344,472
$
323,754
6%
$
990,981
$
936,470
6%
Americas Retail
153,872
165,603
(7%)
464,984
513,743
(9%)
Americas Wholesale
55,288
53,181
4%
150,361
171,733
(12%)
Asia
64,498
63,118
2%
194,210
168,705
15%
Licensing
33,040
27,747
19%
84,944
78,915
8%
Total net revenue
$
651,170
$
633,403
3%
$
1,885,480
$
1,869,566
1%
Earnings (loss) from operations:
Europe
$
35,555
$
36,222
(2%)
$
84,344
$
88,650
(5%)
Americas Retail
8,086
11,365
(29%)
20,060
49,552
(60%)
Americas Wholesale
16,106
10,229
57%
40,264
39,068
3%
Asia
636
(5
)
(12,820%)
3,927
(6,792
)
(158%)
Licensing
30,770
24,849
24%
79,419
70,499
13%
Total segment earnings from operations
91,153
82,660
10%
228,014
240,977
(5%)
Corporate overhead
(34,106
)
(26,216
)
30%
(105,164
)
(92,757
)
13%
Asset impairment charges
(1,737
)
(1,789
)
(3%)
(6,293
)
(5,252
)
20%
Net gains (losses) on lease
modifications
(537
)
146
(468%)
1,894
1,654
15%
Total earnings from operations
$
54,773
$
54,801
(0%)
$
118,451
$
144,622
(18%)
Operating margins:
Europe
10.3
%
11.2
%
8.5
%
9.5
%
Americas Retail
5.3
%
6.9
%
4.3
%
9.6
%
Americas Wholesale
29.1
%
19.2
%
26.8
%
22.7
%
Asia
1.0
%
(0.0
%)
2.0
%
(4.0
%)
Licensing
93.1
%
89.6
%
93.5
%
89.3
%
GAAP operating margin for total
Company
8.4
%
8.6
%
6.3
%
7.7
%
Certain professional service and legal
fees and related (credits) costs4,6
0.2
%
0.2
%
0.0
%
0.4
%
Asset impairment charges4,7
0.3
%
0.3
%
0.4
%
0.3
%
Net (gains) losses on lease
modifications4,8
0.0
%
(0.0
%)
(0.1
%)
(0.1
%)
Adjusted operating margin for total
Company4
8.9
%
9.1
%
6.6
%
8.3
%
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
October 28, 2023
October 29, 2022
Three Months Ended
% change
Net revenue:
Europe
$
344,472
$
(5,469
)
$
339,003
$
323,754
6%
5%
Americas Retail
153,872
(940
)
152,932
165,603
(7%)
(8%)
Americas Wholesale
55,288
(2,621
)
52,667
53,181
4%
(1%)
Asia
64,498
(1,230
)
63,268
63,118
2%
0%
Licensing
33,040
—
33,040
27,747
19%
19%
Total net revenue
$
651,170
$
(10,260
)
$
640,910
$
633,403
3%
1%
Nine Months Ended
Net revenue:
Europe
$
990,981
$
711
$
991,692
$
936,470
6%
6%
Americas Retail
464,984
(921
)
464,063
513,743
(9%)
(10%)
Americas Wholesale
150,361
(4,754
)
145,607
171,733
(12%)
(15%)
Asia
194,210
4,526
198,736
168,705
15%
18%
Licensing
84,944
—
84,944
78,915
8%
8%
Total net revenue
$
1,885,480
$
(438
)
$
1,885,042
$
1,869,566
1%
1%
Guess?, Inc. and
Subsidiaries
Selected Condensed
Consolidated Balance Sheet Data
(in thousands)
October 28,
2023
January 28,
2023
October 29,
2022
ASSETS
Cash and cash equivalents
$
244,103
$
275,765
$
174,065
Receivables, net
340,784
341,939
319,342
Inventories
562,386
510,899
574,574
Other current assets
81,220
83,102
82,553
Property and equipment, net
234,572
240,355
231,024
Operating lease right-of-use assets
657,363
636,148
614,705
Other assets
358,349
337,240
320,361
Total assets
$
2,478,777
$
2,425,448
$
2,316,624
LIABILITIES AND STOCKHOLDERS’
EQUITY
Current portion of borrowings and finance
lease obligations
$
41,695
$
40,380
$
39,626
Current operating lease liabilities
165,420
170,192
159,152
Current portion of convertible senior
notes due 2024, net
114,985
—
—
Other current liabilities
514,294
552,480
533,949
Long-term debt and finance lease
obligations
131,821
95,921
153,717
Convertible senior notes due 2024, net
—
298,931
298,731
Convertible senior notes due 2028, net
266,551
—
—
Long-term operating lease liabilities
538,731
528,236
519,594
Other long-term liabilities
147,637
157,403
150,733
Redeemable and nonredeemable
noncontrolling interests
43,583
47,792
42,294
Guess?, Inc. stockholders’ equity
514,060
534,113
418,828
Total liabilities and stockholders’
equity
$
2,478,777
$
2,425,448
$
2,316,624
Guess?, Inc. and
Subsidiaries
Condensed Consolidated Cash
Flow Data
(in thousands)
Nine Months Ended
October 28,
2023
October 29,
2022
Net cash provided by (used in) operating
activities
$
40,881
$
(21,418
)
Net cash used in investing activities
(56,624
)
(71,969
)
Net cash used in financing activities
(9,793
)
(131,779
)
Effect of exchange rates on cash and cash
equivalents
(6,126
)
(16,334
)
Net change in cash and cash
equivalents
(31,662
)
(241,500
)
Cash and cash equivalents at the beginning
of the year
275,765
415,565
Cash and cash equivalents at the end of
the period
$
244,103
$
174,065
Supplemental information:
Depreciation and amortization
$
46,059
$
45,490
Total lease costs (excluding finance lease
cost)
$
233,063
$
220,151
Guess?, Inc. and
Subsidiaries
Reconciliation of Net Cash
Provided By (Used In) Operating Activities to Free Cash
Flow
(in thousands)
Nine Months Ended
October 28,
2023
October 29,
2022
Net cash provided by (used in) operating
activities
$
40,881
$
(21,418
)
Less: Purchases of property and
equipment
(52,469
)
(71,729
)
Less: Payments for property and equipment
under finance leases
(4,898
)
(5,261
)
Free cash flow
$
(16,486
)
$
(98,408
)
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 October 28, 2023
United States
234
234
—
—
—
—
Canada
57
57
—
—
—
—
Central and South America
104
73
31
29
29
—
Total Americas
395
364
31
29
29
—
Europe and the Middle East
767
545
222
58
58
—
Asia and the Pacific
397
106
291
241
133
108
Total
1,559
1,015
544
328
220
108
As of October 29, 2022
United States
242
242
—
—
—
—
Canada
72
72
—
—
—
—
Central and South America
103
69
34
29
29
—
Total Americas
417
383
34
29
29
—
Europe and the Middle East
799
561
238
54
54
—
Asia and the Pacific
414
120
294
251
127
124
Total
1,630
1,064
566
334
210
124
Guess?, Inc. and
Subsidiaries
Footnotes to Condensed
Consolidated Financial Data
Footnote:
1
The Company’s outlook for the fourth
quarter and full fiscal 2024 assumes that foreign currency exchange
rates remain at recently prevailing rates.
2
Amounts for the full fiscal year outlook
exclude the following items recognized during the nine months ended
October 28, 2023: (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) losses 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 consolidation of
certain business functions into Switzerland and the impact from
changes in the income tax law in certain tax jurisdictions. 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 fourth quarter and full
fiscal 2024 outlook exclude (i) the amortization of the debt
discount related to the 2028 Notes and (ii) the dilutive impact of
the 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 exclude certain
professional service and legal fees and related (credits) costs,
asset impairment charges, net (gains) losses 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.
The weighted average diluted shares outstanding used for adjusted
diluted EPS excludes the dilutive impact of the Notes, based on the
bond hedge contracts in place. 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 Notes at stock prices below $44.53 for the 2024 Notes and
below $41.51 for the 2028 Notes, based on the bond hedge contracts
in place that will deliver shares to offset dilution. At stock
prices in excess of $44.53 for the 2024 Notes and $41.51 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. During the third quarter of fiscal 2024, the Company
announced the pending settlement, subject to court approval, of a
previously-disclosed stockholder derivative lawsuit brought by the
Employees Retirement System of Rhode Island. Consistent with its
historical practice, the Company intends to exclude any settlement
amounts recorded in the future related to this matter (including
any amounts to be received by the Company and any court approved
attorney’s fee award to be paid by the Company) from its non-GAAP
adjusted operating results.
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) losses
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 tax
items related primarily to a benefit recognized as a result of the
consolidation of certain business functions into Switzerland during
the third quarter of fiscal 2024 and, to a lesser extent, the
impact from changes in the income tax law in certain tax
jurisdictions.
12
The income tax effect 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 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/20231119638480/en/
Guess?, Inc. Fabrice Benarouche Senior Vice President Finance,
Investor Relations and Chief Accounting Officer (213) 765-5578
Grafico Azioni Guess (NYSE:GES)
Storico
Da Ago 2024 a Set 2024
Grafico Azioni Guess (NYSE:GES)
Storico
Da Set 2023 a Set 2024