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Guess CEO: ‘Strategic Initiatives Helped Deliver Higher Profitability’

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Guess Inc. turned red to black in fiscal 2022, posting net earnings of $171.4 million compared to a net loss of $81.2 million the prior year.

In a Nutshell: Guess Inc. said it expect revenues in the first quarter through April, assuming no meaningful Covid-related shutdowns, to be up in the low-teens versus the prior-year period, mainly driven by last year’s temporary store closures, wholesale growth and positive store comps.

For the full fiscal year through January 2023, Guess forecast revenues to be up in the low-single digits versus the previous year and operating margin to reach approximately 10.5 percent. The outlook for the first quarter and the year reflects significant disruptions in Russia, the company noted.

“This has been an incredible year for our company, where we completely transformed our business,” Paul Marciano, co-founder and chief creative officer, said. “Our brand elevation strategy is at the center of that transformation. Today, the Guess brand enjoys strong momentum all over the world and the consistency of our assortments and brand images globally, the quality of our products and the perceived value of our offerings are among the best they have been in the history of Guess.”

Guess said as of Jan. 29, it directly operated 1,068 retail stores in the Americas, Europe and Asia. The company’s partners and distributors operated 563 additional retail stores worldwide.

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Sales: Net revenue for the fourth quarter ended Jan. 29 increased 23.4 percent to $799.9 million from $648.5 million in the same prior-year quarter.

For the year, net revenue rose 38.1 percent to $2.59 billion from $1.88 billion in fiscal 2021.

Earnings: Net earnings for the fourth quarter declined 2.8 percent to $68.4 million from $70.4 million for same period in the prior year.

Diluted earnings per share (EPS) decreased 2.8 percent to $1.04 for the quarter compared to $1.07 for the same prior-year quarter. Operating margin increased 4.6 percent to 15.7 percent from 11.1 percent in the prior-year quarter, driven primarily by overall leveraging of expenses, lower markdowns and higher initial markups, partially offset by the prior year rent relief and government subsidies.

For the year, Guess recorded net earnings of $171.4 million compared to a net loss of $81.2 million for the prior year. Diluted EPS was $2.57 for fiscal 2022 compared to a diluted loss per share of $1.27 for fiscal 2021.

CEO’s Take: CEO Carlos Alberini said: “We are very pleased with our fourth quarter results. We delivered revenues in line with our expectations and exceeded our profit targets through strong gross margin performance and effective expense management. Our results this quarter cap an outstanding year for our company, where the execution of our strategic initiatives helped to deliver much higher profitability, well in advance of our original plan. We closed the year with over $300 million in earnings from operations and reached an operating margin of 11.8 percent, more than double our pre-pandemic levels by both measures. We delivered a return on invested capital of 26 percent for the year, the highest it has been in 10 years. Our balance sheet is strong, and we plan to use our capital opportunistically to return value to our shareholders through dividends and increased share repurchases.”

“Our business model transformation provides us with a strong foundation for sustainable and profitable growth,” Alberini added. “Last year was a baseline year for our company as demand was suppressed due to lower promotions, price increases, store closures and limited product availability. We started the new year with a strong position to drive growth and leverage our global network to build a bigger business through increased comparable store sales and category expansion, digital growth and continued expansion of our wholesale business and store base.”