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Guess Narrows Loss; Raises Guidance for 2019

Guess reported Wednesday a $21.2 million loss in its first quarter of fiscal 2019, while revenues beat expectations. Investors were not expecting the brand to turn a profit, but were hopeful after seeing some gains in sales.

In a nutshell: Revenues increased in Europe and Asia, encouraging the brand to raise its guidance for 2019. Guess now estimates sales growth of 8.5% to 9.5%, a 1.5% increase from what it expected three months ago.

However, the Americas continue to be a question mark for Guess. Revenue was down from one year prior, despite an improved operating margin for the Americas retail segment, which improved 910 basis points to negative 3.3% in the quarter, compared to a negative 12.4% the year prior. This was driven primarily by the favorable impact from lower markdowns, negotiated rent reductions and higher initial markups, Guess reported.

Sales: For the first quarter of fiscal 2019, Guess recorded GAAP net loss of $21.2 million, a 0.3% improvement compared to $21.3 million for the first quarter of fiscal 2018. GAAP diluted loss per share deteriorated 3.8% to $0.27 for the first quarter of fiscal 2019, from $0.26 for the prior-year quarter, the company reported. Guess estimates that currency had a negative impact on diluted loss per share of $0.03 in the first quarter of fiscal 2019.

For the first quarter of fiscal 2019, Guess recorded adjusted net loss of $17.8 million, a 7.9% improvement compared to $19.4 million for the first quarter of fiscal 2018. Adjusted diluted loss per share improved 4.2% to $0.23, compared to $0.24 for the prior-year quarter. Thomson Reuters reported that analyst estimated a loss of $0.23 per share.

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Earnings: Total net revenue for the first quarter of fiscal 2019 increased 14.7% to $521.3 million, compared to $454.3 million in the prior-year quarter. In constant currency, net revenue increased by 7.7%.

Retail revenue in the Americas decreased 1.4% during the quarter. However, retail comp sales including e-commerce increased 15 percent. Europe revenues increased 24.2% and Asia revenues increased 32.6%.

CEO’s Take: “I am pleased to report that our first quarter results finished above the high-end of our expectations for revenues, adjusted operating margin and adjusted earnings per share. Overall, the company revenues increased 15 percent in U.S. dollars and 8 percent in constant currency, driven by continued momentum in Europe and Asia. We were also able to expand the company’s operating margin, despite cost pressures related to our transition to our new distribution center in Europe,” Victor Herrero, Guess Inc. CEO, said.

He continued, “Overall, I am very excited by the continued momentum, as the first quarter marks the seventh consecutive quarter of revenue growth for the company. For me, it speaks to the global strength and potential of the Guess brand. More than ever, we remain focused on executing our strategic initiatives that have been the pillars of our revenue and profit growth.”