Guess Inc.’s financials seem to be looking up despite harassment accusations against its cofounder and chief creative Paul Marciano.
For the year ended Feb. 1 — roughly the same time model Kate Upton publicly accused Marciano of harassment, including groping her on the set of a photo shoot — Guess said sales grew 7 percent to $2.36 billion. The company’s net loss totaled $7.9 million, equal to a loss of 11 cents per diluted share, and compared with net earnings of $22.7 million for 2016.
Things looked better during the fourth quarter, when net revenue rose 15 percent to $792.16 million and net earnings came in at $1.04 million, or 1 cent per diluted share, although still less than earnings of $6.6 million a year ago.
The company has been carrying out a plan to reduce its store footprint, mainly in the U.S., where retail sales fell 11 percent last year and total comparable sales including e-commerce fell 10 percent. Costs related to lease terminations and impairment charges took a toll on profits, as they did in the third quarter, and they’re set to continue.
Victor Herrero, Guess chief executive officer, said during a call with analysts that another 25 U.S. stores could close this year “if we do not get sufficient rent reductions.” But he noted that the fourth quarter marked the start of a “turnaround” for the brand in its home market, as costs stabilize.
Guess is expanding rapidly in Europe and Asia, where it saw sales increase 27 percent and 24 percent, respectively. Hererro said another 60 stores are planned to open in Europe over the next year, along with another 60 stores in Asia focused on mainland China. Comp sales in Europe also increased 11 percent during the year, and increased 8 percent in Asia.
“I see a lot of opportunity in Europe and Asia where we will continue to allocate capital for superior returns and where we plan to continue growing sales in double digits while also expanding margins,” Hererro said. “I also expect that the profitability of the Americas will continue to benefit from our cost reduction and margin improvement initiatives.”
Looking forward to the next fiscal year, Europe and Asia are expected to lead a boost in consolidated revenue around 7 percent and get earnings per share back in positive territory, between 86 cents and 98 cents.
As for the allegations against Marciano, Hererro only brought it up during the call to make clear that he would not be taking questions on the subject, citing an “ongoing” investigation, which he stressed was being conducted by “independent” parties on behalf of an “independent board,” of which Marciano is chairman. Guess previously said, more than a week after it launched the investigation, that Marciano stepped away from his day-to-day duties while the investigation is carried out.
Upton earlier this month called the investigation was a “stunt,” alleging it was being conducted by Marciano’s personal lawyers. The firm O’Melveny & Myers subsequently left its role in the investigation.
Marciano has consistently denied Upton’s allegations.
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