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Guess Tops Analyst Expectations in Q2

Guess released its second quarter results for fiscal year 2018 Thursday, reporting a positive second quarter and beating analyst predictions.

The second quarter revenue for the company grew to $573.7 million, up from analyst predictions of $559.1 million. The increase in revenue marks Guess’ fourth consecutive quarter of net revenue increases, and the company expects consolidated revenues to continue to grow despite store closures in North America.

“We are pleased to report that our adjusted second quarter results finished above the high-end of our expectations for operating margin and earnings per share,” said Guess CEO Victor Herrero. “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.

Herrero highlighted the positive results in Europe and Asia where revenues saw double-digit increases, attributing the success to new store openings, wholesale growth and positive comp sales. “We are also encouraged by the trends in operating margins for these two regions, as they expanded in the quarter relative to last year,” he said. “In the Americas Retail, as our performance and the business environment remains soft, we continue to focus on shrinking our footprint and profitability improvements.”

Net Earnings
For the second quarter of fiscal year 2018, Guess reported GAAP net earnings of $15.2 million, a 52.8% decrease from the $32.3 million reported during the same period last year. GAAP diluted earnings per share (EPS) decreased 52.6% to $0.18 during the second quarter of FY2018, down from $0.38 during the same period last year.

During the second quarter, Guess adjusted its net earnings of $16.1 million, a 30.4% increase compared to $12.3 million during the same period last year. Adjusted diluted earnings per share grew 26.7% to $0.19, compared to $0.15 for last year. Guess estimates that the negative impact of currency on diluted EPS in the second quarter of this year was around $0.05 per share.

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Net Revenue
The second quarter net revenue grew 5.3% to $573.7 million, compared to $545 million during the same period last year. Constant currency net revenue grew 4.9%.

Americas retail revenue dropped 11.2%. Even e-commerce sales and retail comp sales fell 10 percent. However, Americas wholesale revenue grew 6.6%.

European revenue grew 20.1%. Retail comp sales, including e-commerce, grew 5 percent. Meanwhile, Asia revenues grew 17.5%. Retail comp sales including e-commerce grew 7 percent.

FY2018 Outlook
Guess updates its outlook for FY 2018, and expects a consolidated net revenue increase between 6 percent and 7.5%, and a GAAP EPS of $0.34 to $0.42. The company still expects Americas net revenue to be down during FY2018, while it expects double-digit growth for Europe and Asia net revenues for the year.

“We have achieved meaningful cost reductions, especially in our supply chain. We are accelerating the reduction of our footprint in the U.S., which currently represents less than 36 percent of our global sales,” Herrero said. “And finally we are 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.”