Guess store

Sales at Guess Inc. have been improving — at least for now. 

The apparel retailer reported quarterly earnings Wednesday after the bell, sending shares up by more than 25 percent in after-hours trading.  

For the three-month period ending Feb. 1, sales rose to $815.9 million, up from $815.7 million a year ago. Or, $2.59 billion for all of 2019, compared with $2.52 billion in 2018. 

Profits also increased: To more than $82 million for the quarter, compared with $25.2 million a year earlier. For the full year, profits were $101.2 million, compared with $17.1 million a year earlier, driven by a lower-than-expected tax rate. 

“I am very pleased to report that we had a strong-fourth quarter performance, exceeding our guidance for earnings per share and delivering operating profit at the high end of our expectations,” Carlos Alberini, chief executive officer of Guess, said in a statement. “We closed the year with strong liquidity and a solid balance sheet, which positions us well to navigate through the current coronavirus crisis. 

“In the near term, we are actively managing the global situation, prioritizing the health and well-being of our associates around the world,” Alberini continued. “While we hope that the crisis will be temporary, we do expect it will have a significant negative impact on our financial results for the first quarter and may impact future results, including potential disruptions in our supply chain. That said, we currently are unable to determine with any degree of accuracy the impact the crisis may have in the future on our financial results, or how long it may last. As a result, we are not in a position to issue guidance for the first quarter or fiscal year 2021.”

Executives on Wednesday evening’s conference call with analysts said the impact of the coronavirus didn’t affect fourth-quarter sales in Europe and North America. The strong performance was primarily driven by the European business, including sales in the wholesale channel and new store openings in the region. 

Sales in China, however, were noticeably down last quarter. Revenues in Asia fell 28 percent to $95.4 million, down from $131.9 million a year before. For the year, sales declined nearly 11 percent. Retail comps for the year — which includes the e-commerce business — fell 19 percent. 

Amid the coronavirus outbreak in China, Guess was forced to close 127 of its stores in the region. While Alberini said most of those stores have since reopened, sales are “only a fraction of what it was.” He said there’s been a similar impact in other parts of Asia, including Hong Kong, Macau, South Korea and Japan

That’s bad news for the company that counted its North American and European businesses as some of its strongest divisions.

“Overall, the strength of our businesses in Europe, Americas’ wholesale and licensing, combined with a disciplined and effective approach to manage our costs, enabled us to more than offset softness in our Americas retail and Asia businesses in the quarter,” Alberini said in November. 

In the last week, a swarm of retailers have closed stores in North America and Europe, including Guess. On Monday, the company said it was closing all North American stores, from March 17 to March 27. As of Feb. 1, Guess has 1,169 retail locations spread out across the Americas, Europe and Asia. 

To combat the potentially devastating effects the coronavirus might have on the business, Guess has reduced inventory, cut discretionary spending and postponed or canceled most capital expenditure projects. In addition, the company had organized a global crisis management team to deal with the COVID-19 outbreak, including limiting large in-person meetings and asking employees to work from home when possible. 

“Two weeks ago we were excited about our results,” Alberini said on the call. “But we are in the midst of an unprecedented crisis in our history.” 

However, the ceo said he remains optimistic about the future, based on China’s recovery. Most of the Guess stores in China have reopened in the last month, Alberini added. 

“That fear factor that affected how the business was hit is much more under control,” he said, and added that people in China are beginning to once again go out for discretionary activities, such as dining out and shopping. 

“How fast things can escalate so quickly, is pretty incredible,” Alberini said. “We are trying to control all of those things that we can control. This is a culture of never giving up. If we fall 10 times, we get up 10 times.” 

In regular trading before the results were released, shares of Guess closed down 38.07 percent to $3.92 a share. The same day, the Dow Jones Industrial Average closed down 1,338.46 points, or 6.3 percent, to 19,898.92.

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