GES
$16.34
Guess
$.08
.49%
Earnings Details
2nd Quarter July 2017
Wednesday, August 23, 2017 4:15:00 PM
Tweet Share Watch
Summary

Guess Beats

Guess (GES) reported 2nd Quarter July 2017 earnings of $0.19 per share on revenue of $573.7 million. The consensus earnings estimate was $0.10 per share on revenue of $559.1 million. The Earnings Whisper number was $0.13 per share. Revenue grew 5.3% on a year-over-year basis.

The company said it expects third quarter earnings of $0.08 to $0.11 per share on revenue of $557.8 million to $568.5 million. The current consensus earnings estimate is $0.14 per share on revenue of $561.1 million for the quarter ending October 31, 2017. The company also said it now expects fiscal year earnings of $0.52 to $0.60 per share on revenue of $2.34 billion to $2.38 billion. The company's previous guidance was earnings of $0.34 to $0.44 per share on revenue of $2.29 billion to $2.32 billion and the current consensus earnings estimate is $0.40 per share on revenue of $2.28 billion for the year ending January 31, 2018.

Guess? Inc., designs, markets, distributes and licenses a lifestyle collection of contemporary apparel and accessories for men, women and children that reflect the American lifestyle and European fashion sensibilities.

Results
Reported Earnings
$0.19
Earnings Whisper
$0.13
Consensus Estimate
$0.10
Reported Revenue
$573.7 Mil
Revenue Estimate
$559.1 Mil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

Guess?, Inc. Reports Second Quarter Results

Q2 Fiscal 2018 Revenues Increased 5% to $574 Million; Increased 5% in Constant Currency

Guess?, Inc. (GES) today reported financial results for its second quarter ended July 29, 2017.

Victor Herrero, Chief Executive Officer, commented, "We are pleased to report that our adjusted second quarter results finished above the high-end of our expectations for operating margin and earnings per share. Overall, the Company revenues increased 5%, operating margin expanded 120 basis points and operating profit grew 49% compared to last year’s second quarter. We continue to see the results of our efforts in Europe and Asia, where our revenues were up 20% and 17%, respectively, mainly driven by new store openings, wholesale growth and positive comp sales. We are also encouraged by the trends in operating margins for these two regions, as they expanded in the quarter relative to last year. In the Americas Retail, as our performance and the business environment remains soft, we continue to focus on shrinking our footprint and profitability improvements."

Mr. Herrero concluded, "This is truly an exciting time for Guess. We have now increased revenues for four consecutive quarters and we expect consolidated revenues to continue to increase despite store closures in North America. In Europe and Asia we have seen not only strong double digits growth for several consecutive quarters but also continuing margin expansion. We have achieved meaningful cost reductions, especially in our supply chain. We are accelerating the reduction of our footprint in the U.S., which currently represents less than 36% of our global sales. And finally we are significantly increasing the adjusted guidance for fiscal 2018 and are now expecting to grow top-line, adjusted operating margin and adjusted earnings per share compared to last year."

This press release contains certain non-GAAP, or adjusted, financial measures. References to "adjusted" actual results exclude the impact of (i) asset impairment charges, (ii) a gain from the sale of a minority interest investment, (iii) restructuring charges, (iv) a restructuring related exit tax charge and (v) the related tax effects of these adjustments, where applicable. In addition, "adjusted" guidance also excludes an estimated lease termination charge expected to be recorded in the third quarter of fiscal 2018. A reconciliation of actual reported GAAP results to comparable non-GAAP results is provided in the accompanying tables and discussed under the heading "Presentation of Non-GAAP Information" below.

Second Quarter Fiscal 2018 Results

For the second quarter of fiscal 2018, the Company recorded GAAP net earnings of $15.2 million, a 52.8% decrease from $32.3 million for the second quarter of fiscal 2017. The results for the second quarter of fiscal 2017 included a gain in other net income of approximately $22.3 million (or $20.3 million after considering the related tax impact of $2.0 million), or a favorable $0.24 per share impact, related to the sale of a minority interest investment. GAAP diluted earnings per share decreased 52.6% to $0.18 for the second quarter of fiscal 2018, from $0.38 for the prior-year quarter.

For the second quarter of fiscal 2018, the Company recorded adjusted net earnings of $16.1 million, a 30.4% increase compared to $12.3 million for the second quarter of fiscal 2017. Adjusted diluted earnings per share increased 26.7% to $0.19, compared to $0.15 for the prior-year quarter. The Company estimates the negative impact of currency on diluted earnings per share in the second quarter of fiscal 2018 was approximately $0.05 per share.

Net Revenue. Total net revenue for the second quarter of fiscal 2018 increased 5.3% to $573.7 million, compared to $545.0 million in the prior-year quarter. In constant currency, net revenue increased by 4.9%.

Americas Retail revenues decreased 11.2% in U.S. dollars and 10.8% in constant currency. Retail comp sales including e-commerce decreased 10% in U.S. dollars and constant currency.

Europe revenues increased 20.1% in U.S. dollars and 18.8% in constant currency. Retail comp sales including e-commerce increased 5% in U.S. dollars and constant currency.

Asia revenues increased 17.5% in U.S. dollars and 17.1% in constant currency. Retail comp sales including e-commerce increased 7% in U.S. dollars and 6% in constant currency.

Americas Wholesale revenues increased 6.6% in U.S. dollars and 6.8% in constant currency.

Licensing revenues decreased 0.2% in U.S. dollars and constant currency.

Operating Earnings. GAAP operating earnings for the second quarter of fiscal 2018 increased 49.2% to $23.2 million (including a $0.8 million favorable currency translation impact), compared to $15.6 million in the prior-year quarter. GAAP operating margin in the second quarter increased 120 basis points to 4.1%, compared to 2.9% in the prior-year quarter, driven primarily by higher initial mark-ups in Europe and overall leveraging of expenses, partially offset by the negative impact on the Company’s fixed cost structure resulting from negative comparable sales in Americas Retail. The negative impact of currency on operating margin for the quarter was roughly 20 basis points.

For the second quarter of fiscal 2018, adjusted operating earnings increased 52.3% to $24.5 million, compared to $16.1 million in the same prior-year quarter. Adjusted operating margin was 4.3%, an increase of 130 basis points compared to the same prior-year quarter.

Operating margin for the Company’s Americas Retail segment decreased 290 basis points to negative 3.6% in the second quarter of fiscal 2018, from negative 0.7% in the prior-year quarter. Excluding the impact of the asset impairment charges, operating margin for the Company’s Americas Retail segment decreased by 260 basis points from the same prior-year quarter. This decrease was driven primarily by the negative impact on the fixed cost structure resulting from negative comparable sales and more markdowns.

Operating margin for the Company’s Europe segment increased 160 basis points to 10.3% in the second quarter of fiscal 2018, compared to 8.7% in the prior-year quarter. Excluding the impact of the asset impairment charges, operating margin for the Company’s Europe segment improved by 150 basis points compared to the same prior-year quarter. This improvement was driven primarily by higher initial mark-ups and the favorable impact on the fixed cost structure resulting from overall leveraging of expenses.

Operating margin for the Company’s Asia segment increased 870 basis points to 2.4% in the second quarter of fiscal 2018, compared to negative 6.3% in the prior-year quarter. Excluding the impact of the asset impairment charges, operating margin for the Company’s Asia segment improved by 920 basis points compared to the same prior-year quarter. The improvement in operating margin was driven primarily by overall leveraging of expenses.

Operating margin for the Company’s Americas Wholesale segment increased 300 basis points to 14.9% in the second quarter of fiscal 2018, compared to 11.9% in the prior-year quarter, due to a lower SG&A rate driven primarily by overall leveraging of expenses and higher gross margins.

Operating margin for the Company’s Licensing segment decreased 120 basis points to 88.7% in the second quarter of fiscal 2018, from 89.9% in the prior-year quarter.

Other net expense was $1.6 million for the second quarter of fiscal 2018, which primarily includes net unrealized and realized mark-to-market revaluation losses on foreign exchange currency contracts, partially offset by net unrealized mark-to-market revaluation gains on foreign currency balances and unrealized gains on non-operating assets, compared to other net income of $27.4 million in the prior-year quarter. For the second quarter of fiscal 2017, other net income included a realized gain of $22.3 million from the sale of a minority interest investment. The gain from the sale of the minority interest investment has been excluded for purposes of calculating adjusted financial measures for the second quarter of fiscal 2017. A reconciliation of reported GAAP results to comparable non-GAAP results is provided in the accompanying tables and discussed under the heading "Presentation of Non-GAAP Information" below.

Six-Month Period Results

For the six months ended July 29, 2017, the Company recorded GAAP net loss of $6.1 million, compared to GAAP net earnings of $7.1 million for the six months ended July 30, 2016. GAAP diluted loss per share was $0.08 for the six months ended July 29, 2017, compared to GAAP diluted earnings per share of $0.08 for the prior-year period.

For the six months ended July 29, 2017, the Company recorded adjusted net loss of $3.3 million, a 52.5% improvement compared to $7.0 million for the six months ended July 30, 2016. Adjusted diluted loss per share improved 55.6% to $0.04, compared to $0.09 for the prior-year period. The Company estimates the negative impact of currency on diluted loss per share for the six months ended July 29, 2017 was approximately $0.02.

Net Revenue. Total net revenue for the first six months of fiscal 2018 increased 3.9% to $1.03 billion, compared to $993.8 million in the prior-year period. In constant currency, net revenue increased by 4.5%.

Americas Retail revenues decreased 13.0% in U.S. dollars and 12.7% in constant currency. Retail comp sales including e-commerce decreased 12% in U.S. dollars and constant currency.

Europe revenues increased 21.4% in U.S. dollars and 22.8% in constant currency. Retail comp sales including e-commerce increased 5% in U.S. dollars and 7% in constant currency.

Asia revenues increased 17.2% in U.S. dollars and 16.3% in constant currency. Retail comp sales including e-commerce increased 5% in U.S. dollars and 4% in constant currency.

Americas Wholesale revenues increased 6.1% in U.S. dollars and 7.3% in constant currency.

Licensing revenues decreased 4.8% in U.S. dollars and constant currency.

Operating Earnings (Loss). GAAP operating loss for the first six months of fiscal 2018 improved 83.1% to $2.3 million (including a $0.8 million favorable currency translation impact), compared to $13.4 million in the prior-year period. GAAP operating margin in the first six months of fiscal 2018 improved 110 basis points to negative 0.2%, compared to negative 1.3% in the prior-year period, driven primarily by overall leveraging of expenses and higher initial mark-ups in Europe, partially offset by the negative impact on the Company’s fixed cost structure resulting from negative comparable sales in Americas Retail. The negative impact of currency on operating margin for the first six months of fiscal 2018 was roughly 20 basis points.

For the first six months ended July 29, 2017, adjusted operating earnings were $1.7 million, compared to adjusted operating loss of $6.7 million for the six months ended July 30, 2016. Adjusted operating margin was 0.2% for the six months ended July 29, 2017, an increase of 90 basis points compared to the same prior-year period.

Operating margin for the Company’s Americas Retail segment decreased 570 basis points to negative 9.0% in the first six months of fiscal 2018, from negative 3.3% in the prior-year period. Excluding the impact of the asset impairment charges, operating margin for the Company’s Americas Retail segment decreased by 500 basis points from the same prior-year period. This decrease was driven primarily by the negative impact on the fixed cost structure resulting from negative comparable sales.

Operating margin for the Company’s Europe segment increased 430 basis points to 5.5% in the first six months of fiscal 2018, compared to 1.2% in the prior-year period. This improvement was driven primarily by higher initial mark-ups and the favorable impact on the fixed cost structure resulting from overall leveraging of expenses.

Operating margin for the Company’s Asia segment increased 410 basis points to 0.5% in the first six months of fiscal 2018, compared to negative 3.6% in the prior-year period. Excluding the impact of the asset impairment charges, operating margin for the Company’s Asia segment improved by 490 basis points compared to the same prior-year period. The improvement in operating margin was driven primarily by overall leveraging of expenses.

Operating margin for the Company’s Americas Wholesale segment increased 190 basis points to 16.8% in the first six months of fiscal 2018, compared to 14.9% in the prior-year period. The increase in operating margin was due to higher gross margins.

Operating margin for the Company’s Licensing segment decreased 340 basis points to 87.2% in the first six months of fiscal 2018, from 90.6% in the prior-year period.

Other net income was $0.8 million for the first six months of fiscal 2018, which primarily includes unrealized gains on non-operating assets and net unrealized mark-to-market revaluation gains on foreign currency balances, partially offset by net unrealized and realized mark-to-market revaluation losses on foreign exchange currency contracts, compared to $26.3 million in the prior-year period. For the six months ended July 30, 2016, other net income included a realized gain of $22.3 million from the sale of a minority interest investment. The gain from the sale of the minority interest investment has been excluded for purposes of calculating adjusted financial measures for the six months ended July 30, 2016. A reconciliation of reported GAAP results to comparable non-GAAP results is provided in the accompanying tables and discussed under the heading "Presentation of Non-GAAP Information" below.

Dividends

The Company’s Board of Directors has approved a quarterly cash dividend of $0.225 per share on the Company’s common stock. The dividend will be payable on September 22, 2017 to shareholders of record at the close of business on September 6, 2017.

Other Subsequent Events

Subsequent to quarter end, the Company modified certain of its leases held with a common landlord in North America. Under the terms of the agreements, 26 leases with original lease end dates from fiscal 2018 to fiscal 2026 will now end in fiscal 2018 through fiscal 2020. In connection with this agreement, in the third quarter of fiscal 2018, the Company will make up-front payments of roughly $22 million, of which $12 million will be recorded as a lease termination charge and $10 million will be recorded as advance rent payments.

Outlook

The Company’s expectations for the third quarter of fiscal 2018 ending October 28, 2017 and its updated outlook for the fiscal year ending February 3, 2018 are as follows:

Outlook for Total Company(1)
Third Quarter of Fiscal 2018
Fiscal Year 2018(2)
Consolidated net revenue in U.S. dollars
increase between 4.0% and 6.0%
increase between 6.0% and 7.5%
Consolidated net revenue in constant currency(3)
increase between 2.0% and 4.0%
increase between 4.0% and 5.5%
Estimated impact of 53rd week on consolidated net revenue
--
increase of 1.0%
GAAP operating margin(4)
0.1% to 0.9%
2.4% to 2.8%
Adjusted operating margin(5)
2.2% to 3.0%
3.1% to 3.5%
Currency impact included in operating margin(6)
0 basis points
20 basis points
GAAP EPS(4)
($0.07) to ($0.04)
$0.34 to $0.42
Adjusted EPS(5)
$0.08 to $0.11
$0.52 to $0.60
Currency impact included in EPS(6)
$0.00
$0.02
Estimated impact of 53rd week on EPS
--
$0.03
Notes:
1
The Company’s outlook for the third quarter ending October 28, 2017
and the fiscal year ending February 3, 2018 assumes that foreign
currency exchange rates remain at prevailing rates.
2
The Company’s fiscal year 2018 will include 53 weeks, while fiscal
year 2017 included 52 weeks.
3
Eliminates the impact of expected foreign currency translation to
give investors a better understanding of the underlying trends
within the business.
4
GAAP operating margin and EPS guidance for the third quarter and the
fiscal year 2018 include the impact of asset impairment charges and
the related tax impact incurred during the first six months of
fiscal 2018 as well as the estimated lease termination charge
expected to be recorded in the third quarter.
5
The adjusted operating margin and adjusted EPS guidance for the
third quarter and the fiscal year 2018 reflect the exclusion of
asset impairment charges and the related tax impact incurred
during the first six months of fiscal 2018 as well as the
estimated lease termination charge expected to be recorded in the
third quarter. The adjusted results do not assume any additional
asset impairment charges.
6
Represents the estimated translational and transactional gains
(losses) of foreign currency rate fluctuations within operating
margin and EPS measures presented.

On a segment basis, the Company expects the following ranges for percentage changes for comparable sales including e-commerce ("comps") and net revenue in U.S. dollars and constant currency compared to the same prior-year period:

Outlook by Segment(1)
Third Quarter of Fiscal 2018
Fiscal Year 2018
U.S. Dollars
Constant Currency(2)
U.S. Dollars
Constant Currency(2)
Americas Retail:
Comps
down LDD to HSD
down LDD to HSD
down LDD to HSD
down LDD
Net Revenue
down LDD to HSD
down low-teens to LDD
down LDD
down LDD
Europe:
Comps
--
up HSD to LDD
--
up MSD to HSD
Net Revenue
up mid-twenties
up high-teens
up mid-twenties
up low-twenties
Asia:
Comps
--
up MSD to HSD
--
up MSD
Net Revenue
up low-teens to mid-teens
up mid-teens to high-teens
up high-teens
up high-teens
Americas Wholesale:
Net Revenue
down LSD
down MSD
up LSD
flat
Licensing:
Net Revenue
down MSD
--
down MSD
--
Notes:
1
As used in the table above, "LSD" is used to refer to the range of
Low-Single-Digits, "MSD" is used to refer to the range of
Mid-Single-Digits, "HSD" is used to refer to the range of
High-Single-Digits, and "LDD" is used to refer to the range of
Low-Double-Digits.
2
Eliminates the impact of expected foreign currency translation to
give investors a better understanding of the underlying trends
within the business.

Presentation of Non-GAAP Information

The financial information presented in this release includes non-GAAP financial measures such as adjusted results, constant currency financial information and free cash flow measures. For the three and six months ended July 29, 2017, the adjusted results exclude the impact of asset impairment charges and the related tax impact. In addition, the adjusted guidance for the third quarter and the fiscal year 2018 also exclude the impact of the estimated lease termination charge expected to be recorded in the third quarter of fiscal 2018. For the three and six months ended July 30, 2016, the adjusted results exclude the impact of a gain on sale of a minority interest investment, restructuring charges, a restructuring related exit tax charge, asset impairment charges and the tax effects of these adjustments. These non-GAAP measures are provided in addition to, and not as alternatives for, the Company’s reported GAAP results.

The Company has excluded these items from its adjusted financial measures primarily because it believes that 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). A reconciliation of reported GAAP results to comparable non-GAAP results is provided in the accompanying tables.

This release also 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, comparable sales 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 that is different to the functional currency of that entity when exchange rates fluctuate. However, in calculating the estimated impact of currency on our earnings per share for our actual and 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 excludes 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 also includes information regarding its free cash flows in this release. The Company calculates free cash flows as cash flows from operating activities less purchases of property and equipment. Free cash flows is not intended to be an alternative to cash flows from operating activities as a measure of liquidity, but rather provides additional visibility to investors regarding how much cash is generated for discretionary and non-discretionary items after deducting purchases of property and equipment. Free cash flow information presented may not be comparable to similarly titled measures reported by other companies. A reconciliation of reported 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, 2017 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, 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, 2017, the Company directly operated 945 retail stores in the Americas, Europe and Asia. The Company’s licensees and distributors operated 699 additional retail stores worldwide. As of July 29, 2017, the Company and its licensees and distributors operated in roughly 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 Company’s expectations, future prospects, business strategies and strategic initiatives; statements expressing optimism or pessimism about future operating results or events and projected sales (including comparable sales), earnings, capital expenditures, cost savings and cash needs; and guidance for the third quarter and full year of fiscal 2018, are forward-looking statements that are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements, which are frequently indicated by terms such as "expect," "will," "goal," "strategy," "believe," "estimate," "continue," "outlook," "plan" 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 conditions, including economic and other events that could negatively impact consumer confidence and discretionary consumer spending; 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; risks related to the timing and costs of delivering merchandise to our stores and our 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 expand internationally and operate in regions where we have less experience, including through joint ventures; our ability to successfully or timely implement plans for cost and workforce reductions; our ability to relocate our European distribution center without incurring shipment delays and/or increased costs; our ability to attract and retain key personnel; changes to our short or long-term strategic initiatives; unexpected obligations arising from new or existing litigation, tax and other regulatory proceedings (including the European Commission proceeding initiated during the second quarter of fiscal 2018 to investigate whether the Company breached certain European Union competition rules); changes in U.S. tax or tariff policy regarding apparel and other accessory merchandise produced in other countries; accounting adjustments identified from subsequent events arising after issuance of this release; risk of future store asset and/or goodwill impairments or restructuring charges; our ability to adapt to new regulatory compliance and disclosure obligations; risks associated with our foreign operations, such as violations of laws prohibiting improper payments and the burdens of complying with a variety of foreign laws and regulations; risks associated with the acts or omissions of our third party vendors, including a failure to comply with our vendor code of conduct or other policies; risks associated with cyber attacks and other cyber security risks; and changes in economic, political, social and other conditions affecting our foreign operations and sourcing, including the impact of currency fluctuations, global tax rates and economic and market conditions in the various countries in which we operate. 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 and uncertainty surrounding potential changes in U.S. policies and regulations under the new administration 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 (Loss)
(amounts in thousands, except per share data)
Three Months Ended
Six Months Ended
July 29, 2017
July 30, 2016
July 29, 2017
July 30, 2016
$
%
$
%
$
%
$
%
Product sales
$ 551,794
96.2 %
$ 523,008
96.0 %
$ 990,114
95.9 %
$ 949,476
95.5 %
Net royalties
21,898
3.8 %
21,951
4.0 %
42,159
4.1 %
44,298
4.5 %
Net revenue
573,692
100.0 %
544,959
100.0 %
1,032,273
100.0 %
993,774
100.0 %
Cost of product sales
375,665
65.5 %
359,327
65.9 %
689,604
66.8 %
665,383
67.0 %
Gross profit
198,027
34.5 %
185,632
34.1 %
342,669
33.2 %
328,391
33.0 %
Selling, general and administrative expenses
173,546
30.2 %
169,553
31.1 %
340,945
33.0 %
335,054
33.7 %
Asset impairment charges
1,233
0.2 %
502
0.1 %
3,995
0.4 %
655
0.0 %
Restructuring charges
--
0.0 %
--
0.0 %
--
0.0 %
6,083
0.6 %
Earnings (loss) from operations
23,248
4.1 %
15,577
2.9 %
(2,271 )
(0.2 %)
(13,401 )
(1.3 %)
Other income (expense):
Interest expense
(544 )
(0.1 %)
(458 )
(0.1 %)
(958 )
(0.1 %)
(978 )
(0.1 %)
Interest income
1,260
0.2 %
251
0.0 %
2,131
0.2 %
902
0.1 %
Other income (expense), net
(1,630 )
(0.3 %)
27,390
5.0 %
802
0.1 %
26,292
2.6 %
Earnings (loss) before income tax expense
22,334
3.9 %
42,760
7.8 %
(296 )
(0.0 %)
12,815
1.3 %
Income tax expense
6,453
1.1 %
10,593
1.9 %
5,050
0.5 %
5,802
0.6 %
Net earnings (loss)
15,881
2.8 %
32,167
5.9 %
(5,346 )
(0.5 %)
7,013
0.7 %
Net earnings (loss) attributable to noncontrolling interests
662
0.1 %
(102 )
(0.0 %)
728
0.1 %
(78 )
(0.0 %)
Net earnings (loss) attributable to Guess?, Inc.
$
15,219
2.7 %
$
32,269
5.9 %
$
(6,074 )
(0.6 %)
$
7,091
0.7 %
Net earnings (loss) per common share attributable to common
stockholders:
Basic
$
0.18
$
0.38
$
(0.08 )
$
0.08
Diluted
$
0.18
$
0.38
$
(0.08 )
$
0.08
Weighted average common shares outstanding attributable to common
stockholders:
Basic
82,396
83,621
82,703
83,567
Diluted
82,763
83,863
82,703
83,809
Effective tax rate
28.9
%
24.8
%
(1,706.1 %)
45.3 %
Adjusted earnings (loss) from operations(1):
$
24,481
4.3 %
$
16,079
3.0 %
$
1,724
0.2 %
$
(6,663 )
(0.7 %)
Adjusted net earnings (loss) attributable to Guess?, Inc.(1):
$
16,051
2.8 %
$
12,313
2.3 %
$
(3,300 )
(0.3 %)
$
(6,950 )
(0.7 %)
Adjusted diluted earnings (loss) per common share attributable to
$
0.19
$
0.15
$
(0.04 )
$
(0.09 )
common stockholders(1):
Adjusted effective tax rate(1):
29.1
%
41.8 %
169.5 %
(157.8 %)
Notes:
1
The adjusted results for the three and six months ended July 29,
2017 reflect the exclusion of asset impairment charges and the
related tax impact that were recorded, where applicable. The
adjusted results for the three and six months ended July 30, 2016
reflect the exclusion of a gain on sale of a minority interest
investment, restructuring charges, a restructuring related exit tax
charge, asset impairment charges and the tax impacts of these
adjustments, where applicable. A complete reconciliation of actual
results to adjusted results is presented in the table entitled
"Reconciliation of GAAP Results to Adjusted Results."
Guess?, Inc. and Subsidiaries
Reconciliation of GAAP Results to Adjusted Results
(dollars in thousands)
The following table provides reconciliations of reported GAAP
earnings (loss) from operations to adjusted earnings (loss) from
operations, reported GAAP net earnings (loss) attributable to
Guess?, Inc. to adjusted net earnings (loss) attributable to Guess?,
Inc. and reported GAAP income tax expense to adjusted income tax
expense for the three and six months ended July 29, 2017 and July
30, 2016.
Three Months Ended
Six Months Ended
July 29,
July 30,
July 29,
July 30,
2017
2016
2017
2016
Reported GAAP earnings (loss) from operations
$
23,248
$
15,577
$
(2,271 )
$ (13,401 )
Asset impairment charges(1)
1,233
502
3,995
655
Restructuring charges(2)
--
--
--
6,083
Adjusted earnings (loss) from operations
$
24,481
$
16,079
$
1,724
$
(6,663 )
Reported GAAP net earnings (loss) attributable to Guess?, Inc.
$
15,219
$
32,269
$
(6,074 )
$
7,091
Asset impairment charges(1)
1,233
502
3,995
655
Restructuring charges(2)
--
--
--
6,083
Gain on sale of a minority interest investment(3)
--
(22,279 )
--
(22,279 )
Income tax adjustments(4)
(401 )
1,821
(1,221 )
(411 )
Exit tax charge(5)
--
--
--
1,911
Total adjustments affecting net earnings (loss) attributable to
832
(19,956 )
2,774
(14,041 )
Guess?, Inc.
Adjusted net earnings (loss) attributable to Guess?, Inc.
$
16,051
$
12,313
$
(3,300 )
$
(6,950 )
Reported GAAP income tax expense
$
6,453
$
10,593
$
5,050
$
5,802
Income tax adjustments(4)
401
(1,821 )
1,221
411
Exit tax charge(5)
--
--
--
(1,911 )
Total income tax effect
401
(1,821 )
1,221
(1,500 )
Adjusted income tax expense
$
6,854
$
8,772
$
6,271
$
4,302
Adjusted effective tax rate
29.1 %
41.8 %
169.5 %
(157.8 %)
Notes:
1
During the three and six months ended July 29, 2017 and July 30,
2016, the Company recognized asset impairment charges for certain
retail locations resulting from under-performance and expected store
closures. The results for the three and six months ended July 30,
2016 have been adjusted to show the impact of the asset impairment
charges for comparative purposes to same current-year period results.
2
During the first quarter of fiscal 2017, the Company implemented a
global cost reduction and restructuring plan to better align its
global cost and organizational structure with its current strategic
initiatives which resulted in restructuring charges, mainly related
to cash-based severance costs, incurred during the six months ended
July 30, 2016. The restructuring charges were recorded during the
three months ended April 30, 2016.
3
The Company recognized a gain related to the sale of its minority
interest equity holding in a privately-held boutique apparel company
during the three and six months ended July 30, 2016.
4
The income tax effect of the asset impairment charges and
restructuring charges was based on the Company’s assessment of
deductibility using the statutory tax rate of the tax jurisdiction
in which the charges were incurred. The income tax effect on the
gain on sale of the minority interest investment was based on the
impact of the transaction on the effective tax rate.
5
As a result of the global cost reduction and restructuring plan, the
Company incurred an estimated exit tax charge related to its
reorganization in Europe during the six months ended July 30, 2016.
The estimated exit tax charge was recorded during the three months
ended April 30, 2016.
Guess?, Inc. and Subsidiaries
Consolidated Segment Data
(dollars in thousands)
Three Months Ended
Six Months Ended
July 29,
July 30,
%
July 29,
July 30,
%
2017
2016
change
2017
2016
change
Net revenue:
Americas Retail
$ 201,188
$ 226,550
(11 %)
$
374,882
$ 430,711
(13 %)
Europe(1)
255,215
212,416
20 %
420,603
346,558
21 %
Asia(1)
62,733
53,410
17 %
126,114
107,638
17 %
Americas Wholesale(1)
32,658
30,632
7 %
68,515
64,569
6 %
Licensing
21,898
21,951
(0 %)
42,159
44,298
(5 %)
$ 573,692
$ 544,959
5 %
$ 1,032,273
$ 993,774
4 %
Earnings (loss) from operations:
Americas Retail before impairments
$
(6,242 )
$
(1,209 )
(416 %)
$
(30,895 )
$ (13,810 )
(124 %)
Asset impairment charges(2)
(918 )
(405 )
(3,031 )
(405 )
Americas Retail including impairments
(7,160 )
(1,614 )
(344 %)
(33,926 )
(14,215 )
(139 %)
Europe before impairments(1)
26,196
18,648
40 %
23,110
4,210
449 %
Asset impairment charges(2)
(8 )
(77 )
(17 )
(194 )
Europe including impairments(1)
26,188
18,571
41 %
23,093
4,016
475 %
Asia before impairments(1)
1,837
(3,358 )
155 %
1,639
(3,871 )
142 %
Asset impairment charges(2)
(307 )
(20 )
(947 )
(56 )
Asia including impairments(1)
1,530
(3,378 )
145 %
692
(3,927 )
118 %
Americas Wholesale(1)
4,859
3,633
34 %
11,504
9,594
20 %
Licensing
19,422
19,733
(2 %)
36,753
40,148
(8 %)
44,839
36,945
21 %
38,116
35,616
7 %
Corporate Overhead
(21,591 )
(21,368 )
1 %
(40,387 )
(42,934 )
(6 %)
Restructuring Charges
--
--
--
(6,083 )
$
23,248
$
15,577
49 %
$
(2,271 )
$ (13,401 )
83 %
Operating margins:
Americas Retail including impairments
(3.6 %)
(0.7 %)
(9.0 %)
(3.3 %)
Americas Retail before impairments
(3.1 %)
(0.5 %)
(8.2 %)
(3.2 %)
Europe including impairments(1)
10.3 %
8.7 %
5.5 %
1.2 %
Europe before impairments(1)
10.3 %
8.8 %
5.5 %
1.2 %
Asia including impairments(1)
2.4 %
(6.3 %)
0.5 %
(3.6 %)
Asia before impairments(1)
2.9 %
(6.3 %)
1.3 %
(3.6 %)
Americas Wholesale(1)
14.9 %
11.9 %
16.8 %
14.9 %
Licensing
88.7 %
89.9 %
87.2 %
90.6 %
Total Company including impairment and restructuring charges
4.1 %
2.9 %
(0.2 %)
(1.3 %)
Total Company before impairment and restructuring charges
4.3 %
3.0 %
0.2 %
(0.7 %)
Notes:
1
During the first quarter of fiscal 2018, net revenue and related
costs and expenses for certain globally serviced customers were
reclassified into the segment primarily responsible for the
relationship. Accordingly, segment results for Europe, Asia and
Americas Wholesale have been adjusted for the three and six months
ended July 30, 2016 to conform to the current year presentation.
2
During the three and six months ended July 29, 2017 and July 30,
2016, the Company recognized asset impairment charges for certain
retail locations resulting from under-performance and expected store
closures. The results for the three and six months ended July 30,
2016 have been adjusted to show the impact of the asset impairment
charges for comparative purposes to same current-year period results.
Guess?, Inc. and Subsidiaries
Constant Currency Financial Measures
(dollars in thousands)
Three Months Ended
July 29, 2017
July 30, 2016
% change
As Reported
Foreign
Constant
As Reported
As Reported
Constant
Currency
Currency
Currency
Impact
Net revenue:
Americas Retail
$
201,188
$
806
$
201,994
$ 226,550
(11 %)
(11 %)
Europe(1)
255,215
(2,768 )
252,447
212,416
20 %
19 %
Asia(1)
62,733
(175 )
62,558
53,410
17 %
17 %
Americas Wholesale(1)
32,658
54
32,712
30,632
7 %
7 %
Licensing
21,898
--
21,898
21,951
(0 %)
(0 %)
$
573,692
$
(2,083 )
$
571,609
$ 544,959
5 %
5 %
Six Months Ended
July 29, 2017
July 30, 2016
% change
As Reported
Foreign
Constant
As Reported
As Reported
Constant
Currency
Currency
Currency
Impact
Net revenue:
Americas Retail
$
374,882
$
1,248
$
376,130
$ 430,711
(13 %)
(13 %)
Europe(1)
420,603
4,961
425,564
346,558
21 %
23 %
Asia(1)
126,114
(916 )
125,198
107,638
17 %
16 %
Americas Wholesale(1)
68,515
755
69,270
64,569
6 %
7 %
Licensing
42,159
--
42,159
44,298
(5 %)
(5 %)
$ 1,032,273
$
6,048
$ 1,038,321
$ 993,774
4 %
4 %
Notes:
1
During the first quarter of fiscal 2018, net revenue for certain
globally serviced customers was reclassified into the segment
primarily responsible for the relationship. Accordingly, segment
results for Europe, Asia and Americas Wholesale have been adjusted
for the three and six months ended July 30, 2016 to conform to the
current year presentation.
Guess?, Inc. and Subsidiaries
Selected Condensed Consolidated Balance Sheet Data
(in thousands)
July 29,
January 28,
July 30,
2017
2017
2016
ASSETS
Cash and cash equivalents
$
316,543
$
396,129
$
415,499
Receivables, net
233,635
225,537
201,260
Inventories
436,044
367,381
379,748
Other current assets
61,208
54,965
55,831
Property and equipment, net
275,417
243,005
271,512
Restricted cash
1,258
1,521
535
Other assets
253,102
245,947
250,631
Total Assets
$ 1,577,207
$ 1,534,485
$
1,575,016
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current portion of capital lease obligations and borrowings
$
2,033
$
566
$
555
Other current liabilities
374,628
344,887
337,921
Long-term debt and capital lease obligations
39,214
23,482
23,639
Other long-term liabilities
185,253
180,104
181,159
Redeemable and nonredeemable noncontrolling interests
20,264
16,224
17,110
Guess?, Inc. stockholders’ equity
955,815
969,222
1,014,632
Total Liabilities and Stockholders’ Equity
$ 1,577,207
$ 1,534,485
$
1,575,016
Guess?, Inc. and Subsidiaries
Condensed Consolidated Cash Flow Data
(in thousands)
Six Months Ended
July 29,
July 30,
2017
2016
Net cash used in operating activities(1)
$
(9,665 )
$
(17,406 )
Net cash used in investing activities
(39,537 )
(839 )
Net cash used in financing activities(1)
(55,091 )
(23,404 )
Effect of exchange rates on cash, cash equivalents and restricted
24,444
11,684
cash(1)
Net change in cash, cash equivalents and restricted cash(1)
(79,849 )
(29,965 )
Cash, cash equivalents and restricted cash at the beginning of the
397,650
445,999
year(1)
Cash, cash equivalents and restricted cash at the end of the period(1)
$
317,801
$
416,034
Supplemental information:
Depreciation and amortization
$
30,585
$
34,049
Rent
$
132,816
$
128,485
Non-cash investing and financing activity:
Assets acquired under capital lease obligations(2)
$
17,522
$ --
Notes:
1
As a result of the adoption of new authoritative guidance during the
first quarter of fiscal 2018 which impacted the classification of
certain cash receipts and cash payments in the statement of cash
flows, the amounts related to cash flows from operating and
financing activities as well as the effect of exchange rates on
cash, cash equivalents and restricted cash have been updated for the
six months ended July 30, 2016 to conform to the current year
presentation.
2
During the second quarter of fiscal 2018, the Company began the
relocation of its European distribution center to the Netherlands.
As a result, the Company entered into a capital lease of $16.0
million for equipment used in the new facility. During the second
quarter of fiscal 2018, the Company also entered into a capital
lease for $1.5 million related primarily to computer hardware and
software.
Guess?, Inc. and Subsidiaries
Reconciliation of Net Cash Used in Operating Activities to Free
Cash Flow
(in thousands)
Six Months Ended
July 29,
July 30,
2017
2016
Net cash used in operating activities(1)
$
(9,665 )
$ (17,406 )
Less: Purchases of property and equipment
(39,591 )
(44,223 )
Free cash flow(1)
$ (49,256 )
$ (61,629 )
Notes:
1
As a result of the adoption of new authoritative guidance during the
first quarter of fiscal 2018 which impacted the classification of
certain cash receipts and cash payments in the statement of cash
flows, net cash used in operating activities and free cash flow have
been updated for the six months ended July 30, 2016 to conform to
the current year presentation.
Guess?, Inc. and Subsidiaries
Retail Store Data
International Store Count
As of July 29, 2017
As of July 30, 2016
Total
Directly Operated
Total
Directly Operated
Region
Stores
Stores
Stores
Stores
United States
320
318
342
341
Canada
104
104
109
109
Central and South America
94
51
94
47
Total Americas
518
473
545
497
Europe and the Middle East
646
363
598
295
Asia
480
109
495
81
1,644
945
1,638
873
Guess?, Inc. and Subsidiaries
Directly Operated Retail Store Data
U.S. and Canada
Six Months Ended
July 29,
July 30,
2017
2016
Number of stores at the beginning of the year
450
455
Store openings
4
5
Store closures
(32)
(10)
Number of stores at the end of the period
422
450
Total store square footage at the end of the period
2,089,000
2,193,000

http://cts.businesswire.com/ct/CT?id=bwnews&sty=20170823005923r1&sid=cmtx6&distro=nx&

View source version on businesswire.com: http://www.businesswire.com/news/home/20170823005923/en/

SOURCE: Guess?, Inc.

Guess?, Inc.
Fabrice Benarouche
VP, Finance and Investor Relations
(213) 765-5578