European sales were the silver lining this year for Guess Inc., which on Tuesday reported its fourth-quarter and year-end financial results for fiscal 2023, when it encountered several headwinds led by fluctuating currency rates.
Carlos Alberini, Guess’s chief executive since 2019, said in an earnings report that currency fluctuations for the fiscal year ending Jan. 28 consumed $62 million in operating profit and 140 basis points of operating margin.
Despite currency fluctuations, the fourth quarter ended on a relatively positive note with net revenue up 2 percent to $817.8 million compared to nearly $800 million for the same period in fiscal 2022. Quarterly net income totaled $95.8 million, up from $68.4 million in the same period in fiscal 2022.
“Our strongest product categories in the fourth quarter were accessories, led by handbags, leather goods, travel products, fragrances, jewelry and eyewear,” Alberini explained. “We also saw strong results in the Marciano brand of activewear dresses.”
Alberini said the fourth quarter results exceeded the company’s expectations. “The [fourth quarter] revenue increase was driven primarily by our business in Europe, which delivered strong top line growth and solid profit performance despite currency headwinds,” the Guess CEO said. “Our European results were driven by a better-than-expected performance in our retail stores, including new stores, and solid results in our wholesale business due to increased shipments during the quarter.”
For the fourth quarter, European revenues climbed 10 percent in U.S. dollars, and retail comp sales, including e-commerce, inched up 1 percent in U.S. dollars.
It was a different story for the Americas and Asia. Americas retail revenues dipped 1 percent over the previous fourth quarter, and retail comp sales, including e-commerce, were relatively flat. For the Americas wholesale division, revenues nosedived 27 percent. “Our Americas wholesale segment decreased meaningfully in the quarter as we experienced lower orders and cancellations from our customers as they tightly managed their overall inventory levels,” Alberini explained.
In Asia, with China being shut down for such a long time, revenues and retail comp sales both slipped 8 percent. But Alberini said the company is still committed to its Asian market as conditions and the economy there are expected to improve.
For fiscal 2023, the Los Angeles company saw net revenue climb 4 percent to $2.69 billion from $2.59 billion in fiscal 2022. But annual net earnings for 2023 slid 12.7 percent to $149.6 million from $171.4 million during the same prior-year period.
“Although the pandemic became less of an issue for our business this year, there were significant changes in the environment and challenges that impacted our results, which were beyond our control. Severe supply chain disruptions, creative product shortages and skyrocketing costs further aggravated the situation,” the Guess CEO said. “Additionally, the ongoing war in Ukraine disrupted energy flows, resulting in a significant increase in costs. These and other factors contributed to global inflation, which undermine consumer confidence and put pressure on all aspects of our cost structure, including labor costs and rents.”
For fiscal 2024, Guess predicts revenues will grow 1 percent to 3 percent in U.S. dollars. “For fiscal year 2024, we are taking a prudent approach to our outlook,” Alberini said.
Interim Chief Financial Officer Dennis Secor said the company expects consumers to remain cautious about spending their money, focusing on price. “We expect retailers will prioritize maintaining tighter inventories, which should tighten the competitive environment and help lessen the use of markdowns, especially in the U.S.,” the CFO said.
Since its founding in 1981, Guess has turned itself into a global company, operating in 100 countries. As of Oct. 29, 2022, the company operated 1,064 retail stores in the Americas, Europe and Asia. With partners and distributors, it operated 566 additional retail stores worldwide.