Guess

Guess Inc. is back in fashion

The apparel, accessories and footwear retailer revealed quarterly earnings Wednesday evening, beating expectations and more than doubling its profits from the same period a year ago, thanks to tighter inventory and expense controls and more full-priced selling. Shares of Guess were up more than 5 percent in after-hours trading as a result. 

“We are very pleased with our third-quarter performance, which significantly exceeded our expectations, in spite of the challenging circumstances we faced due to the pandemic,” Carlos Alberini, chief executive officer, said in a statement. “We managed the business well, drove more full-price selling, increased product margins, reduced occupancy costs and leveraged expenses effectively. Our balance sheet is in great shape, with cash and equivalents of $365 million at quarter end and inventories 24 percent below last year’s levels.

“We continue to work on transforming our business model and elevating our brand,” Alberini continued. “During the period, we launched our first-ever global product line for all categories. This will enable us to represent the brand more consistently across the globe and benefit from significant efficiencies in developing our products. This is an incredible accomplishment that required vision, determination and tremendous teamwork. We also completed our Salesforce platform implementation and continue to work on other projects focused on customer centricity and organizational efficiencies.” 

That’s good news for a company that lost more than $180 million in the last two quarters combined. In the most recent quarter, however, Guess logged $27.5 million in profits, up from $13.5 million the same time last year. Total company revenues for the three-month period ending Oct. 31, were $596 million, compared with nearly $616 million the same time last year. 

Revenues declined in every region. But the 7.6 percent decline in net revenues was most pronounced in the Americas wholesale division, which was down more than 36 percent for the quarter, year-over-year. The Americas retail division was down 26.7 percent during the same timeframe, followed by the Asian region, which was down nearly 25 percent. 

One bright spot was the European wholesale business, which was able to increase revenues during the quarter by about $50 million by canceling inventory receipts. 

E-commerce was also up during the quarter, 19 percent in the most recent quarter, compared with the second quarter. 

Meanwhile, traffic in stores continues to be challenged during the quarter. But Alberini said shoppers who did enter stores were more likely to buy than in the past. 

By category, essentials, activewear, denim, accessories and footwear outperformed the business as a whole during the quarter. Last month, Guess re-released 68 vintage styles, across denim, T-shirts and jackets, from the Eighties and Nineties. 

“Product in our business continues to be king,” Alberini told analysts on Wednesday evening’s conference call, adding that the retailer’s new global product line has helped Guess reduce its style assortment by about 38 percent. 

“The most important thing is to present the brand on a consistent basis across the globe and that is a hard thing to do,” Alberini said on the call. “In many cases, we’re using similar fabrics, leveraging the vendor relationships that we have. We can go to those vendors and place a bigger order, which will result in reductions in cost. [And] if you think about what it takes to develop a line, the cost of development throughout the supply chain also comes down significantly. Everywhere we are looking there are significant savings opportunities. 

“And we see that a lot of our wholesale customers are buying more, even when you see the pandemic is creating significant pressure on demand,” he continued. “But they are buying more from us and as a result we are taking share. That’s going to help us when we’re on the other side of the pandemic. Those partnerships are going to continue to grow.” 

Guess ended the quarter with $70 million in long-term debt and 1,068 directly operated retail stores throughout the Americas, Europe and Asia. 

The company expects revenues in the current quarter to be down in the low to mid-twenties, impacted by lower customer traffic in stores, especially in Europe and Canada, as well as some permanent store closures. 

Shares of Guess, which closed up 3.49 percent to $16.89 a piece, are down about 8.6 percent year-over-year. 

“We are well positioned for the holiday period,” Alberini said. “While COVID-19-related restrictions are meaningfully impacting several markets, especially in Europe, we are confident in our brand, our product and our team’s ability to navigate the company through these challenges.

“We have a clear vision for our company and have a great team that is very excited about our future and is ready to take every challenge head on,” he continued. “I strongly believe we have a great model to continue to gain market share and grow profitably for many years to come.”

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