Guess Inc. Victor Herrero’s “transition” during the first half has been more challenging than expected. But the chief executive officer is keeping his eye on the prize and plans to hit $3 billion in annual revenues in three years, as laid out in March.
He also sought to distance Guess from the beleaguered department store sector to Wall Street analysts on Wednesday, stressing that the retailer was a global player and was also ready to shutter U.S. stores or renegotiate rents in coming years to help boost profitability.
The company’s first-quarter net losses totaled $25.2 million, or 30 cents a diluted share, which compared with year-ago earnings of $3.3 million, or 4 cents. Adjusting for restructuring and tax charges, Guess logged a net loss of $19.4 million, or 23 cents a share — greater than the 19 cent loss Wall Street analysts had penciled in.
Investors pushed shares of the company down 1.8 percent to $16.15 in after-hours trading.
Revenues for the three months fell 6.3 percent to $448.8 million from $478.8 million. Comparable retail sales, including e-commerce, fell 4 percent.
Herrero said Guess wasn’t the only retailer to struggle in the first quarter, singling out weakness at department stores.
“With respect to the department stores, two things are happening,” he said on a conference call with analysts. “Their footprint is mainly in the U.S. And business is shifting from bricks-and-mortar department stores to online, especially online only, multibrand retailers. It is very important to know that in the U.S. Guess is not a big supplier to department stores, whether brick-and-mortar or online. Wholesale revenues represent only about 10 percent of our total revenues in the U.S., so we are not impacted very much by the shifting landscape in U.S. department stores.”
He also characterized Guess as one of the “very few U.S.-based retailers that has the majority of its revenues from outside the U.S.”
Last year, nearly 60 percent of the company’s sales came from international markets. The company plans, for instance, to open 45 doors in Europe this year, including ten in Russia and stores in Turkey, Ireland, Finland, Sweden and Denmark.
At home, Herrero said he would “monitor the performance of the Americas fleet” as it adds 50 stores, particularly under the Factory and G by Guess banners.
“We have a lot of flexibility as roughly half our existing leases in the U.S. and Canada are either expiring or have kick-out clauses in the next three years,” he said. “Should we need to moderate our expansion plan or prune the store base based on productivity of existing stores. The timing of this lease expirations also provide us an opportunity to renegotiate lower rents to make profitable stores, which we will otherwise exit profitable again on a forward basis.”
Globally, the company operates 840 stores, with licensees and distributors running another 792. In the first quarter, 45.5 percent of the company’s sales came from its retail operations in the Americas.
The first half of this year was already billed as a “transition period” for the company.
The ceo acknowledged that it was more challenging than anticipated, especially in the Americas and also to a lesser extent in China. But he also expressed confidence that the company would achieve the goals laid out in its three-year plan in March, just with a different cadence.
For the second quarter, Guess is looking for earnings per share ranging from 4 cents to 8 cents with revenues rising between 0.5 percent and 2.5 percent.