Weakness in southern Europe outweighed strength in new markets and its North American retail operations as Guess Inc. reported lower third-quarter profits that fell short of analysts’ expectations.
In the three months ended Oct. 29, the Los Angeles-based apparel marketer registered a 4 percent decline in net income, to $66.3 million, 71 cents a diluted share, from $69.1 million, or 75 cents, in the year-ago period. Analysts on average had expected earnings per share of 73 cents.
Revenues advanced 4.7 percent, to $642.8 million from $613.9 million. At the North American retail unit, the firm’s largest, sales also rose 4.7 percent, to $265.6 million, while same-store sales dropped 4.1 percent in local currencies as Guess elected to ratchet down its promotional activity. Indicative of its strength in newer markets, Asia registered the largest percentage increase in sales growth, bounding 18.3 percent to $64.8 million. Overall gross margin ticked down to 43.2 percent of sales from 43.4 percent a year ago.
European sales grew 2.3 percent, to $221 million, but fell 3.7 percent in local currencies, while operating income in the company’s second largest unit dropped 19.8 percent to $34.2 million.
Calling Europe “the biggest challenge in the next 12 months,” Paul Marciano, vice chairman and chief executive officer, told analysts on a Wednesday conference call that the company has performed well in newer markets such as Germany, Russia, the Netherlands and Spain.
“The growth we’re achieving in these new markets was not enough to offset the impact of the weakening economy in southern Europe,” he said. “In Italy and France, our largest business in Europe, we posted negative comps for the quarter in our owned retail stores.”
Noting that the company already has annual revenues of more than $1 billion in Europe, he reaffirmed Guess’s strategy for the continent: “To develop and accelerate our penetration in north and eastern Europe where we are barely present.”
Marciano was emphatic that the company’s priority for its North American retail operations was “elevating our brand and increasing profitability. We concentrated on full-price selling, lowered our stock level and reduced our markdowns significantly from a year ago. In fact, year-over-year markdown improvement was even greater than what it was in the second quarter in the face of a heavily promotional environment.”
The combination of less promotion and increased prices allowed Guess to boost average unit retail sales “over 15 percent in our U.S. full-price stores,” he said. Even with the drop in its comps, operating income for the unit rose 42.5 percent to $27.5 million, the only one of Guess’ five business units to register an increase.
@fearofgod and @maxfieldla have teamed up on a pop-up installation. The store, located in the gallery space across from Maxfield’s Melrose Ave location, is the site of the brand’s House of God pop-up in which Fear of God founder @jerrylorenzo has created a church-inspired installation. A dozen vintage church pews sit in front of an LED screen playing 90s gospel singers in an effort to re-create an environment akin to a Southern Baptist Church, Lorenzo explained. Read more about the pop-up on WWD.com #wwdfashion (📷: Jennifer Johnson)
Known for his sleek, sophisticated American glamour, Norman Norell is the subject of an upcoming exhibition at @fitnyc. “Norell: Dean of American Fashion,” which runs from February 9 through April 14, will feature approximately 100 ensembles and accessories. His best work is exemplified by the designer’s glittering “mermaid” gowns frosted with thousands of hand-sewn sequins – like the one pictured. (📷: William Helburn) #wwdfashion
For pre-fall 2018, @balmain didn’t let go of the glitz. A crystal embroidered baseball jacket priced at around $40,000 hangs in the “couture” section of the brand’s first men’s pre-collection. Sporting the words “Balmain Army” across the back, the item took around two months to make. “When it was completed, it was like Christmas, it was like, ‘It’s done, it’s exactly what I wanted,’” said Balmain’s creative director @olivier_rousteing during a tour of the collection in a Paris showroom on Monday. #wwdfashion
Eighty degree temperatures and outdoor installations at the annual Art Basel Miami Beach called for bright, elevated beachwear. See more street style pictures on WWD.com. #theyarewearing #ABMB (📷: @lifeinreverie)
Following September’s emotional tribute to her brother Gianni, Donatella Versace wanted to bring the spring show’s deep sense of intimacy to her @versace_official pre-fall collection. Donatella found inspiration in Versace Palazzo in Milan and from Gianni’s opulent apartment. Archival patterns and new motifs were splashed on silk shirtdresses and fitted jersey frocks. See the rest of the photos on WWD.com. #wwdfashion
Demna Gvasalia continues to shake up the Paris fashion calendar — and experiment with new runway timetables for his @vetements_official brand. WWD has learned that Vetements plans to stage its next coed show for the fall 2018 season on January 19 during Men’s Fashion Week in the French capital. Details about the timing and venue have not been confirmed — stay tuned on WWD.com to catch the latest. #wwdnews (📷: @giovanni_giannoni_photo)
@zacposen's go-to holiday gift? Cookies! "I'll usually bake cookies and send them as a gift," said the designer, who recently released his cookbook "Cooking With Zac: Recipes from Rustic to Refined." Get the recipe for his Brown Butter-Chocolate Chip Cookies via link in bio 🍪🍪🍪 #wwdeye #cookingwithzac
For @monsemaison’s pre-fall 2018 collection, Fernando Garcia and Laura Kim honed in on the brand’s many signatures — men’s wear, which was tweaked and feminized through deconstruction, proportion play and lots of bare shoulders. See the rest of the photos on WWD.com #wwdfashion (📷: George Chinese)
On Friday night, @yohjiyamamotoofficial received the Design for Asia Lifetime Achievement Award in Hong Kong. The 75-year-old designer has been celebrated for many years and is best known for his dark and avant-garde tailoring. “In my long career, in design, architecture, [I’ve been to] so many parties, this is the very first time that I have such a warm feeling, I really appreciate this,” Yamamoto said. #wwdfashion (📷: @dominiquemaitre)