Guess Inc. said the coronavirus pandemic has had and is continuing to have a material impact on the company’s financial performance.
In a Nutshell: During the fourth quarter of fiscal 2021, Guess Inc. continued to experience lower net revenue compared to the same prior-year period, as business remained challenged by lower demand, temporary store closures and capacity restrictions. The company said it partially offset these revenue declines by reducing its SG&A expenses for the quarter through expense savings.
Toward the end of the third quarter of fiscal 2021, Guess said a new round of government-mandated temporary store closures, mostly in Europe, affected its retail operations. While the number of temporarily closed stores ebbed and flowed during the period, the overall impact resulted in stores being closed for over 15 percent of the total days during the fourth quarter of fiscal 2021, primarily in Europe and Canada. As of Jan. 30, 70 percent of its stores were open, with the majority of closed stores located in Europe and Canada. As of March 27, around 77 percent of its stores were open.
Guess said given the current circumstances regarding the Covid-19 crisis and its uncertain impact on operations, it was not providing detailed guidance for the first quarter or the full fiscal year ending Jan. 29, 2022.
“We expect revenues in the first quarter of fiscal 2022 to be down in the high-single digits versus the first quarter of fiscal 2020, as pandemic-related shutdowns and traffic declines are partially offset by continued momentum in our global e-commerce business and the favorable timing shift of European wholesale shipments from the fourth quarter of fiscal 2021 into the first quarter of fiscal 2022,” the company said. “For the full fiscal year 2022, assuming no COVID-related shutdowns past the first quarter, we expect revenues to be down in the high single digits versus fiscal 2020.”
Guess said the expectation for the full year also assumes a return to a normal cadence of product development and shipments for the European wholesale business.
Sales: Net revenue for the fourth quarter ended Jan. 30 decreased 23 percent to $648.5 million, from $842.3 million in the prior-year quarter.
Americas retail revenue fell 24.2 percent, while retail comp sales, including e-commerce, declined 15 percent. Americas wholesale revenue decreased 15.3 percent.
Europe revenue was off 26.8 percent, as retail comp sales increased 2 percent. Asia revenue decreased 16.2 percent and retail comp sales were down 18 percent. Licensing revenue was up 12.2 percent.
For the year, net revenue decreased 29.9 percent to $1.88 billion from $2.68 billion in the prior year. Americas retail revenue fell 37.1 percent and Americas wholesale revenue declined 36.9 percent.
Europe revenue dropped 24.6 percent, Asia revenue decreased 32.8 percent and licensing revenue dipped 13.8 percent.
Earnings: For the fourth quarter, net earnings fell 11.5 percent compared to $70.4 million in the year-earlier period. Diluted earnings per share (EPS) decreased 9.3 percent to $1.07.
Adjusted net earnings in the period were down 5.7 percent to $77.7 million, while adjusted diluted EPS decreased 3.3 percent to $1.18.
For the year, the company recorded a net loss of $81.2 million compared to net earnings of $96 million for the fiscal year ended Feb. 1, 2020. The adjusted net loss for the year was $4.5 million compared to adjusted net earnings of $105 million for the prior year.
CEO’s Take: Carlos Alberini, CEO, said: “I am very pleased with our fourth quarter earnings performance, which significantly exceeded our expectations in spite of the difficult circumstances we continued to face due to the pandemic…During the period, we expanded gross margin and managed expenses tightly, which helped us to mitigate the anticipated revenue decrease…During the year, we made great progress executing our strategic plan and were able to accelerate the implementation of several key initiatives, including those related to customer centricity, elevating our brand, improving the quality of our product and developing one global product line.
“Today, we are updating our strategic plan and confirming our strong belief that our opportunities for market share gains, operating margin expansion and value creation remain intact,” Alberini continued. “Furthermore, we are committed to delivering net revenues of $2.9 billion by fiscal year 2025 and an operating margin of 10 percent by that year. I am confident that we have an opportunity to more than double our earnings per share by fiscal year 2025 to $3.00 from $1.33 in fiscal 2020 and improve our return on invested capital to 26 percent in fiscal 2025 from 12 percent in fiscal 2020. Our product line looks the best I have seen in all my years with Guess. The customer is responding very well to our assortments in our stores and in our digital business, which has accelerated quite nicely in the fourth quarter and further into this year.”