Guess Inc. has raised its store closure count by 10 this year for a projected total of 70 stores.
That was disclosed by chief executive officer Victor Herrero during a conference call to Wall Street analysts after the company posted second-quarter results.
Shares of Guess rose in after-market trading as the company posted second-quarter results that beat Wall Street’s estimates.
The company said net income fell 52.8 percent to $15.2 million for the three months ended July 29, or 18 cents a diluted share, from $32.3 million, or 38 cents, a year ago. The quarter included a gain connected to the sale of an investment. On an adjusted basis, earnings per share was 19 cents for the period, and the company estimated that the negative impact of currency on diluted EPS was 5 cents a share. Net revenues rose 5.3 percent to $573.7 million from $545 million, which included a 5.5 percent gain in net sales to $551.8 million from $523 million.
Wall Street was expecting 10 cents on revenues of $559.1 million.
Shares of Guess were up 0.9 percent to close at $12.48 on Wednesday, but then rose 12.2 percent to $14 in after-market trading. The company posted results after the equity markets closed.
Herrero said the adjusted second-quarter results were above the high-end of management’s expectations for operating margin and EPS.
“Overall, the company revenues increased 5 percent, operating margin expanded 120 basis points and operating profit grew 49 percent compared to last year’s second quarter. We continue to see the results of our efforts in Europe and Asia, where our revenues were up 20 percent and 17 percent, respectively,” Herrero said, adding that growth cam primarily from new store openings, wholesale growth and positive comp sales.
Revenues in the retail segment in the Americas fell 11.2 percent in U.S. dollars. Retail comp sales, including e-commerce, fell 10 percent in the quarter. In Europe and Asia, comps rose 5 percent and 7 percent, respectively. In the wholesale segment, revenues for the Americas rose 6.6 percent in U.S. dollars.
According to Herrero, the company increased revenues for four consecutive quarters. He said management expects consolidated revenues to “continue to increase despite store closures in North America.” He said that company is accelerating the reduction of its store footprint in the U.S., which is less than 36 percent of global sales.
The ceo said the company is “significantly increasing the adjusted guidance for fiscal 2018 and are now expecting to grow top-line, adjusted operating margin and adjusted earnings per share compared to last year.”
Herrero, who noted to Wall Street during the company conference call that this was his second anniversary as ceo, described the past two years as a “period of revealing, of reinvesting and of repositioning Guess worldwide. As a result, our operations are now at an inflection point and we are poised to reap the rewards of our strategic initiatives.”
He also said the company closed 18 locations in the quarter, and has raised the projection of closures for the year to 70 stores from the 60 stores originally planned. Herrero also said more than half of the leases will expire or have kick-out clauses in the next three years, giving the company a “lot of flexibility to continue with the closures past this year to further improve profitability.” The company also negotiated an agreement with one of its landlords to restructure the terms of 26 of its leases with expirations of all 26 leases to occur in less than 24 months.
The ceo also said the company remains “laser focused on improving the profitability of the Americas retail business. We are continuously focused on elevating our brand presence through our digital and social media initiatives…”
For the third quarter ending Oct. 28, the company forecasted adjusted EPS at between 8 cents and 11 cents. For the year, the company guided adjusted EPS to between 52 cents and 60 cents.