Q3 Fiscal 2018 GAAP
Net Loss Per Share of $0.04, Compared to EPS of $0.11 in Q3 Fiscal
2017; Q3 Fiscal 2018 Adjusted EPS of $0.12, Compared to $0.11 in Q3
Fiscal 2017
Q3 Fiscal 2018
Revenues Increased 3% to $554 Million; Increased 1% in Constant
Currency
Guess?, Inc. (NYSE: GES) today reported financial results for
its third quarter ended October 28, 2017.
Victor Herrero, Chief Executive Officer, commented, “Overall,
our third quarter adjusted operating profit finished within our
expectations, and adjusted earnings per share ended above the
high-end of our guidance. We continue to see good momentum in
Europe and Asia, where our revenues were up 19% and 17%,
respectively, mainly driven by new store openings, wholesale growth
and positive comp sales. We were also thrilled with the operating
margin expansion in the Americas Retail despite a sales decline.
This is the result of our profit improvement plan which included
tight markdown management, higher IMUs, negotiated rent reductions
and unprofitable store closures.”
Mr. Herrero concluded, “Overall, as I peek into the future of
our Company, I believe that Europe and Asia still offer a lot of
opportunity and should continue to grow double-digits next year. I
expect the profitability in the Americas to continue to benefit
from our cost reduction and margin improvement initiatives.
Finally, we remain committed to our long-term goal of 7.5%
operating margin that we expect to achieve through revenue growth
and disciplined cost control.”
This press release contains certain non-GAAP, or adjusted,
financial measures. References to “adjusted” results exclude the
impact of (i) net (gains) losses on lease terminations, (ii) asset
impairment charges, (iii) restructuring charges, (iv) a
restructuring related exit tax charge, (v) a gain from the sale of
a minority interest investment and (vi) the related tax effects of
these adjustments, where applicable. A reconciliation of reported
GAAP results to comparable non-GAAP results is provided in the
accompanying tables and discussed under the heading “Presentation
of Non-GAAP Information” below.
Third Quarter Fiscal 2018
Results
For the third quarter of fiscal 2018, the Company recorded GAAP
net loss of $2.9 million, compared to GAAP net earnings of $9.1
million for the third quarter of fiscal 2017. GAAP diluted loss per
share was $0.04 for the third quarter of fiscal 2018, compared to
GAAP diluted earnings per share of $0.11 for the prior-year
quarter. The Company estimates that currency had a minimal impact
on diluted loss per share in the third quarter of fiscal 2018.
For the third quarter of fiscal 2018, the Company recorded
adjusted net earnings of $10.4 million, an 8.1% increase compared
to $9.6 million for the third quarter of fiscal 2017. Adjusted
diluted earnings per share increased 9.1% to $0.12, compared to
$0.11 for the prior-year quarter.
Net Revenue. Total net revenue for the third quarter of
fiscal 2018 increased 3.3% to $554.1 million, compared to $536.3
million in the prior-year quarter. In constant currency, net
revenue increased by 0.6%.
- Americas Retail revenues decreased
13.4% in U.S. dollars and 14.3% in constant currency. Retail comp
sales including e-commerce decreased 10% in U.S. dollars and 11% in
constant currency.
- Europe revenues increased 18.8% in U.S.
dollars and 11.9% in constant currency. Retail comp sales including
e-commerce increased 10% in U.S. dollars and 4% in constant
currency.
- Asia revenues increased 16.8% in U.S.
dollars and 18.5% in constant currency. Retail comp sales including
e-commerce increased 3% in U.S. dollars and 5% in constant
currency.
- Americas Wholesale revenues decreased
2.5% in U.S. dollars and 4.5% in constant currency.
- Licensing revenues increased 9.1% in
U.S. dollars and constant currency.
Operating Earnings (Loss). GAAP operating loss for the
third quarter of fiscal 2018 was $1.0 million (including a $0.2
million favorable currency translation impact), compared to GAAP
operating earnings of $15.1 million in the prior-year quarter. GAAP
operating margin in the third quarter decreased 300 basis points to
negative 0.2%, from 2.8% in the prior-year quarter, driven
primarily by net losses on lease terminations incurred during the
current year-quarter and higher performance-based compensation
costs. The negative impact of currency on operating margin for the
quarter was roughly 10 basis points.
For the third quarter of fiscal 2018, adjusted operating
earnings decreased 21.1% to $12.6 million, from $15.9 million in
the same prior-year quarter. Adjusted operating margin was 2.3%, a
decrease of 70 basis points compared to the same prior-year quarter
driven primarily by higher performance-based compensation
costs.
- Operating margin for the Company’s
Americas Retail segment improved 240 basis points to negative 2.5%
in the third quarter of fiscal 2018, compared to negative 4.9% in
the prior-year quarter, driven primarily by the favorable impact
from lower markdowns, negotiated rent reductions, higher initial
markups and store closures, partially offset by the negative impact
on the fixed cost structure resulting from negative comparable
sales.
- Operating margin for the Company’s
Europe segment decreased 320 basis points to 3.0% in the third
quarter of fiscal 2018, from 6.2% in the prior-year quarter, driven
primarily by higher distribution costs resulting from the
relocation of the Company’s European distribution center, partially
offset by higher initial markups.
- Operating margin for the Company’s Asia
segment increased 680 basis points to 3.7% in the third quarter of
fiscal 2018, compared to negative 3.1% in the prior-year quarter,
driven primarily by overall leveraging of expenses.
- Operating margin for the Company’s
Americas Wholesale segment increased 70 basis points to 18.1% in
the third quarter of fiscal 2018, compared to 17.4% in the
prior-year quarter, due to a lower SG&A rate driven primarily
by slightly lower expenses and higher gross margins.
- Operating margin for the Company’s
Licensing segment increased 620 basis points to 90.8% in the third
quarter of fiscal 2018, compared to 84.6% in the prior-year
quarter.
Other net income was $2.8 million for the third quarter of
fiscal 2018, which primarily includes unrealized gains on
non-operating assets and net unrealized and realized mark-to-market
revaluation gains on foreign exchange currency contracts, compared
to $0.1 million in the prior-year quarter.
Nine-Month Period
Results
For the nine months ended October 28, 2017, the Company recorded
GAAP net loss of $8.9 million, compared to GAAP net earnings of
$16.2 million for the nine months ended October 29, 2016. GAAP
diluted loss per share was $0.12 for the nine months ended October
28, 2017, compared to GAAP diluted earnings per share of $0.19 for
the prior-year period. The Company estimates the negative impact of
currency on diluted loss per share for the nine months ended
October 28, 2017 was approximately $0.02 per share.
For the nine months ended October 28, 2017, the Company recorded
adjusted net earnings of $7.1 million, a 223.3% increase compared
to $2.2 million for the nine months ended October 29, 2016.
Adjusted diluted earnings per share increased 300.0% to $0.08,
compared to $0.02 for the prior-year period.
Net Revenue. Total net revenue for the first nine months
of fiscal 2018 increased 3.7% to $1.59 billion, compared to $1.53
billion in the prior-year period. In constant currency, net revenue
increased by 3.1%.
- Americas Retail revenues decreased
13.1% in U.S. dollars and 13.2% in constant currency. Retail comp
sales including e-commerce decreased 12% in U.S. dollars and
constant currency.
- Europe revenues increased 20.5% in U.S.
dollars and 19.0% in constant currency. Retail comp sales including
e-commerce increased 7% in U.S. dollars and 6% in constant
currency.
- Asia revenues increased 17.0% in U.S.
dollars and 17.1% in constant currency. Retail comp sales including
e-commerce increased 4% in U.S. dollars and constant currency.
- Americas Wholesale revenues increased
2.5% in U.S. dollars and 2.3% in constant currency.
- Licensing revenues were relatively flat
in U.S. dollars and constant currency.
Operating Earnings (Loss). GAAP operating loss for the
first nine months of fiscal 2018 was $3.2 million (including a $0.9
million favorable currency translation impact), compared to GAAP
operating earnings of $1.7 million in the prior-year period. GAAP
operating margin in the first nine months of fiscal 2018 decreased
30 basis points to negative 0.2%, from 0.1% in the prior-year
period, driven primarily by net losses on lease terminations
incurred during the current year-period and higher
performance-based compensation costs. The negative impact of
currency on operating margin for the first nine months of fiscal
2018 was roughly 10 basis points.
For the nine months ended October 28, 2017, adjusted operating
earnings increased 66.7% to $14.3 million, compared to $8.6 million
for the nine months ended October 29, 2016. Adjusted operating
margin was 0.9% for the nine months ended October 28, 2017, an
increase of 30 basis points compared to the same prior-year
period.
- Operating margin for the Company’s
Americas Retail segment deteriorated 260 basis points to negative
6.0% in the first nine months of fiscal 2018, from negative 3.4% in
the prior-year period, driven primarily by the negative impact on
the fixed cost structure resulting from negative comparable
sales.
- Operating margin for the Company’s
Europe segment increased 180 basis points to 4.8% in the first nine
months of fiscal 2018, compared to 3.0% in the prior-year period.
This increase was driven primarily by higher initial mark-ups and
the favorable impact on the fixed cost structure resulting from
overall leveraging of expenses, partially offset by higher
distribution costs resulting from the relocation of the Company’s
European distribution center.
- Operating margin for the Company’s Asia
segment increased 560 basis points to 2.5% in the first nine months
of fiscal 2018, compared to negative 3.1% in the prior-year period.
The improvement in operating margin was driven primarily by overall
leveraging of expenses.
- Operating margin for the Company’s
Americas Wholesale segment increased 110 basis points to 17.5% in
the first nine months of fiscal 2018, compared to 16.4% in the
prior-year period. The increase in operating margin was due to
higher gross margins.
- Operating margin for the Company’s
Licensing segment increased 100 basis points to 89.6% in the first
nine months of fiscal 2018, compared to 88.6% in the prior-year
period.
Other net income was $3.6 million for the first nine months of
fiscal 2018, which primarily includes unrealized gains on
non-operating assets and net unrealized mark-to-market revaluation
gains on foreign currency balances, partially offset by net
realized and unrealized mark-to-market revaluation losses on
foreign exchange currency contracts, compared to $26.4 million in
the prior-year period. For the nine months ended October 29, 2016,
other net income included a realized gain of $22.3 million from the
sale of a minority interest investment. The gain from the sale of
the minority interest investment has been excluded for purposes of
calculating adjusted financial measures for the nine months ended
October 29, 2016. A reconciliation of reported GAAP results to
comparable non-GAAP results is provided in the accompanying tables
and discussed under the heading “Presentation of Non-GAAP
Information” below.
Dividends
The Company’s Board of Directors has approved a quarterly cash
dividend of $0.225 per share on the Company’s common stock. The
dividend will be payable on January 3, 2018 to shareholders of
record at the close of business on December 13, 2017.
Outlook
The Company’s expectations and updated outlook for the fourth
quarter and fiscal year ending February 3, 2018 are as
follows:
Outlook for Total Company1
Fourth Quarter of Fiscal 20182 Fiscal Year
20182 Consolidated net revenue in U.S. dollars
increase between 10.0% and 12.0% increase between 6.0% and 6.5%
Consolidated net revenue in constant currency3 increase
between 5.0% and 7.0% increase between 4.0% and 4.5%
Estimated impact of extra week on consolidated net revenue increase
of 3.0% increase of 1.0% GAAP operating margin4 8.0% to 9.0%
2.5% to 2.8% Adjusted operating margin5 8.0% to 9.0% 3.2% to
3.5% Currency impact included in operating margin6 80 basis
points 20 basis points GAAP EPS4 $0.48 to $0.55 $0.36 to
$0.43 Adjusted EPS5 $0.48 to $0.55 $0.56 to $0.63
Currency impact included in EPS6 $0.05 $0.02 Estimated
impact of extra week on EPS $0.03 $0.03 Notes:
1 The Company’s outlook for the fourth quarter and fiscal
year ending February 3, 2018 assumes that foreign currency exchange
rates remain at prevailing rates. 2 The Company’s fourth
quarter of fiscal 2018 will include 14 weeks, while the fourth
quarter of fiscal 2017 included 13 weeks. The Company’s fiscal year
2018 will include 53 weeks, while fiscal year 2017 included 52
weeks. 3 Eliminates the impact of expected foreign currency
translation to give investors a better understanding of the
underlying trends within the business. 4 GAAP operating
margin and EPS guidance for the fiscal year 2018 include the impact
of net losses on lease terminations, asset impairment charges and
the related tax impacts incurred during the first nine months of
fiscal 2018. 5 The adjusted operating margin and adjusted
EPS guidance for the fiscal year 2018 reflect the exclusion of net
losses on lease terminations, asset impairment charges and the
related tax impacts incurred during the first nine months of fiscal
2018. The adjusted results do not assume any additional asset
impairment charges. 6 Represents the estimated translational
and transactional gains (losses) of foreign currency rate
fluctuations within operating margin and EPS measures presented.
A reconciliation of the Company’s outlook for GAAP operating
margin to adjusted operating margin and GAAP earnings per share to
adjusted earnings per share for the fourth quarter and fiscal year
ending February 3, 2018 is as follows:
Reconciliation of GAAP Outlook to Adjusted Outlook
Fourth Quarter of Fiscal 2018 Fiscal Year
2018 GAAP operating margin 8.0% to 9.0% 2.5% to 2.8% Net
losses on lease terminations1 — 0.5% Asset impairment charges2 —
0.2%
Adjusted operating margin 8.0% to 9.0% 3.2% to 3.5%
GAAP earnings per share
$0.48 to $0.55 $0.36 to $0.43 Net losses on lease terminations1 —
$0.15 Asset impairment charges2 — $0.05 Adjusted earnings
per share $0.48 to $0.55 $0.56 to $0.63 Notes:
1 During the nine months ended October 28, 2017, the Company
recorded net losses on lease terminations related primarily to the
modification of certain lease agreements held with a common
landlord in North America. 2 During the nine months ended
October 28, 2017, the Company recognized asset impairment charges
for certain retail locations resulting from under-performance and
expected store closures. The adjusted results do not assume any
additional asset impairment charges.
On a segment basis, the Company expects the following ranges for
percentage changes for comparable sales including e-commerce
(“comps”) and net revenue in U.S. dollars and constant currency
compared to the same prior-year period:
Outlook by Segment1
Fourth Quarter of Fiscal 2018 Fiscal Year 2018
U.S. Dollars Constant Currency2 U.S. Dollars Constant
Currency2 Americas Retail: Comps down MSD to LSD down HSD to
MSD down LDD to HSD down LDD to HSD Net Revenue down HSD to MSD
down HSD to MSD down LDD down LDD Europe: Comps
__
up MSD __ up MSD Net Revenue up high-twenties to low-thirties up
high-teens to low-twenties up low-twenties up high-teens
Asia: Comps __ up LSD __ up LSD Net Revenue up mid-twenties up
low-twenties up high-teens up high-teens Americas Wholesale:
Net Revenue up LSD down LSD up LSD up LSD Licensing: Net
Revenue down HSD __ down LSD __ Notes:
1 As used in the table above, “LSD” is used to refer
to the range of Low-Single-Digits, “MSD” is used to refer to the
range of Mid-Single-Digits, “HSD” is used to refer to the range of
High-Single-Digits, and “LDD” is used to refer to the range of
Low-Double-Digits. 2 Eliminates the impact of expected
foreign currency translation to give investors a better
understanding of the underlying trends within the business.
Presentation of Non-GAAP
Information
The financial information presented in this release includes
non-GAAP financial measures such as adjusted results, constant
currency financial information and free cash flow measures. For the
three and nine months ended October 28, 2017, the adjusted results
exclude the impact of net losses on lease terminations, asset
impairment charges and the related tax impacts. For the three and
nine months ended October 29, 2016, the adjusted results exclude
the impact of a gain on sale of a minority interest investment, net
gains on lease terminations, restructuring charges, a restructuring
related exit tax charge, asset impairment charges and the tax
effects of these adjustments, where applicable. These non-GAAP
measures are provided in addition to, and not as alternatives for,
the Company’s reported GAAP results.
The Company has excluded these items from its adjusted financial
measures primarily because it believes that the adjusted financial
information provided is useful for investors to evaluate the
comparability of the Company’s operating results and its future
outlook (when reviewed in conjunction with the Company’s GAAP
financial statements). A reconciliation of reported GAAP results to
comparable non-GAAP results is provided in the accompanying
tables.
This release also includes certain constant currency financial
information. Foreign currency exchange rate fluctuations affect the
amount reported from translating the Company’s foreign revenue,
expenses and balance sheet amounts into U.S. dollars. These rate
fluctuations can have a significant effect on reported operating
results under GAAP. The Company provides constant currency
information to enhance the visibility of underlying business
trends, excluding the effects of changes in foreign currency
translation rates. To calculate net revenue, comparable sales and
earnings (loss) from operations on a constant currency basis,
actual or forecasted results for the current-year period are
translated into U.S. dollars at the average exchange rates in
effect during the comparable period of the prior year. The constant
currency calculations do not adjust for the impact of revaluing
specific transactions denominated in a currency that is different
to the functional currency of that entity when exchange rates
fluctuate. However, in calculating the estimated impact of currency
on our earnings (loss) per share for our actual and forecasted
results, the Company estimates gross margin (including the impact
of merchandise-related hedges) and expenses using the appropriate
prior-year rates, translates the estimated foreign earnings at the
comparable prior-year rates, and excludes the year-over-year
earnings impact of gains or losses arising from balance sheet
remeasurement and foreign currency contracts not designated as
merchandise hedges. The constant currency information presented may
not be comparable to similarly titled measures reported by other
companies.
The Company also includes information regarding its free cash
flows in this release. The Company calculates free cash flows as
cash flows from operating activities less purchases of property and
equipment. Free cash flows is not intended to be an alternative to
cash flows from operating activities as a measure of liquidity, but
rather provides additional visibility to investors regarding how
much cash is generated for discretionary and non-discretionary
items after deducting purchases of property and equipment. Free
cash flow information presented may not be comparable to similarly
titled measures reported by other companies. A reconciliation of
reported GAAP cash flows from operating activities to the
comparable non-GAAP free cash flow measure is provided in the
accompanying tables.
Investor Conference Call
The Company will hold a conference call at 4:45 pm (ET) on
November 21, 2017 to discuss the news announced in this press
release. A live webcast of the conference call will be accessible
at www.guess.com via the “Investor
Relations” link. The webcast will be archived on the website for 30
days.
About Guess?
Guess?, Inc. designs, markets, distributes and licenses a
lifestyle collection of contemporary apparel, denim, handbags,
watches, footwear and other related consumer products. Guess?
products are distributed through branded Guess? stores as well as
better department and specialty stores around the world. As of
October 28, 2017, the Company directly operated 982 retail
stores in the Americas, Europe and Asia. The Company’s licensees
and distributors operated 671 additional retail stores worldwide.
As of October 28, 2017, the Company and its licensees and
distributors operated in roughly 100 countries worldwide. For more
information about the Company, please visit www.guess.com.
Forward-Looking
Statements
Except for historical information contained herein, certain
matters discussed in this press release or the related conference
call and webcast, including statements concerning the Company’s
expectations, future prospects, business strategies and strategic
initiatives; statements expressing optimism or pessimism about
future operating results or events and projected sales (including
comparable sales), earnings, capital expenditures, operating
margins, cost savings and cash needs; and guidance for the fourth
quarter and full year of fiscal 2018, are forward-looking
statements that are made pursuant to the safe harbor provisions of
the Private Securities Litigation Reform Act of 1995.
Forward-looking statements, which are frequently indicated by terms
such as “expect,” “will,” “should,” “goal,” “strategy,” “believe,”
“estimate,” “continue,” “outlook,” “plan” and similar terms, are
only expectations, and involve known and unknown risks and
uncertainties, which may cause actual results in future periods to
differ materially from what is currently anticipated. Factors which
may cause actual results in future periods to differ materially
from current expectations include, among others: our ability to
maintain our brand image and reputation; domestic and international
economic conditions, including economic and other events that could
negatively impact consumer confidence and discretionary consumer
spending; changes in the competitive marketplace and in our
commercial relationships; our ability to anticipate and adapt to
changing consumer preferences and trends; our ability to manage our
inventory commensurate with customer demand; risks related to the
timing and costs of delivering merchandise to our stores and our
wholesale customers; unexpected or unseasonable weather conditions;
our ability to effectively operate our various retail concepts,
including securing, renewing, modifying or terminating leases for
store locations; our ability to successfully and/or timely
implement our growth strategies and other strategic initiatives;
our ability to expand internationally and operate in regions where
we have less experience, including through joint ventures; our
ability to successfully or timely implement plans for cost and
workforce reductions; our ability to complete the transfer of our
European distribution center without incurring additional shipment
delays and/or increased costs; our ability to attract and retain
key personnel; changes to our short or long-term strategic
initiatives; obligations arising from new or existing litigation,
tax and other regulatory proceedings (including the European
Commission proceeding initiated during the second quarter of fiscal
2018 to investigate whether the Company breached certain European
Union competition rules); changes in U.S. tax or tariff policy
including with respect to apparel and other accessory merchandise
produced in other countries; accounting adjustments identified
after issuance of this release; risk of future store asset and/or
goodwill impairments or restructuring charges; our ability to adapt
to new regulatory compliance and disclosure obligations; risks
associated with our foreign operations, such as violations of laws
prohibiting improper payments and the burdens of complying with a
variety of foreign laws and regulations (including global data
privacy regulations); risks associated with the acts or omissions
of our third party vendors, including a failure to comply with our
vendor code of conduct or other policies; risks associated with
cyber attacks and other cyber security risks; and changes in
economic, political, social and other conditions affecting our
foreign operations and sourcing, including the impact of currency
fluctuations, global tax rates and economic and market conditions
in the various countries in which we operate. In addition to these
factors, the economic, technological, managerial, and other risks
identified in the Company’s most recent annual report on Form 10-K
and other filings with the Securities and Exchange Commission,
including but not limited to the risk factors discussed therein,
could cause actual results to differ materially from current
expectations. The current global economic climate and uncertainty
surrounding potential changes in U.S. policies and regulations
under the new administration may amplify many of these risks. The
Company undertakes no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information,
future events or otherwise.
Guess?, Inc. and Subsidiaries Condensed
Consolidated Statements of Income (Loss) (amounts in thousands,
except per share data)
Three Months Ended Nine Months Ended October 28,
2017 October 29, 2016 October 28, 2017 October
29, 2016 $ % $ % $ %
$ % Product sales $ 528,209 95.3 % $ 512,553
95.6 % $ 1,518,323 95.7 % $ 1,462,029 95.6 % Net royalties 25,929
4.7 % 23,768 4.4 % 68,088 4.3 % 68,066
4.4 % Net revenue 554,138 100.0 % 536,321 100.0 % 1,586,411 100.0 %
1,530,095 100.0 % Cost of product sales 363,029 65.5
% 356,079 66.4 % 1,052,633 66.4 % 1,021,462
66.8 % Gross profit 191,109 34.5 % 180,242 33.6 % 533,778
33.6 % 508,633 33.2 % Selling, general and administrative
expenses 178,552 32.2 % 164,317 30.6 % 519,497 32.7 % 500,066 32.6
% Net (gains) losses on lease terminations 11,494 2.1 % — 0.0 %
11,494 0.7 % (695 ) (0.0 %) Asset impairment charges 2,018 0.4 %
802 0.2 % 6,013 0.4 % 1,457 0.1 % Restructuring charges —
0.0 % — 0.0 % — 0.0 % 6,083 0.4 %
Earnings (loss) from operations (955 ) (0.2 %) 15,123 2.8 % (3,226
) (0.2 %) 1,722 0.1 % Other income (expense): Interest
expense (684 ) (0.1 %) (500 ) (0.1 %) (1,642 ) (0.1 %) (1,478 )
(0.0 %) Interest income 891 0.2 % 861 0.2 % 3,022 0.2 % 1,763 0.1 %
Other income, net 2,759 0.5 % 125 0.0 % 3,561
0.2 % 26,417 1.7 % Earnings before income tax expense
2,011 0.4 % 15,609 2.9 % 1,715 0.1 % 28,424 1.9 % Income tax
expense 3,673 0.7 % 5,880 1.1 % 8,723 0.5 %
11,682 0.8 % Net earnings (loss) (1,662 ) (0.3 %)
9,729 1.8 % (7,008 ) (0.4 %) 16,742 1.1 % Net earnings
attributable to noncontrolling interests 1,198 0.2 % 626
0.1 % 1,926 0.2 % 548 0.0 % Net
earnings (loss) attributable to Guess?, Inc. $ (2,860 ) (0.5 %) $
9,103 1.7 % $ (8,934 ) (0.6 %) $ 16,194 1.1 %
Net earnings (loss) per common share attributable to common
stockholders: Basic $ (0.04 ) $ 0.11 $ (0.12 ) $ 0.19
Diluted $ (0.04 ) $ 0.11 $ (0.12 ) $ 0.19 Weighted average
common shares outstanding attributable to common stockholders:
Basic 82,390 83,758 82,599 83,631 Diluted 82,390 83,917
82,599 83,813 Effective tax rate 182.6 % 37.7 % 508.6 % 41.1
% Adjusted earnings from operations1: $ 12,557 2.3 % $
15,925 3.0 % $ 14,281 0.9 % $ 8,567 0.6 % Adjusted net
earnings attributable to Guess?, Inc.1: $ 10,390 1.9 % $ 9,608 1.8
% $ 7,090 0.4 % $ 2,193 0.1 % Adjusted diluted earnings per
common share attributable to common stockholders1: $ 0.12 $ 0.11 $
0.08 $ 0.02 Adjusted effective tax rate1: 25.3 % 37.6 % 53.1
% 78.9 % Notes: 1 The adjusted
results for the three and nine months ended October 28, 2017
reflect the exclusion of net losses on lease terminations, asset
impairment charges and the related tax impact, where applicable.
The adjusted results for the three and nine months ended October
29, 2016 reflect the exclusion of a gain on sale of a minority
interest investment, net gains on lease terminations, restructuring
charges, a restructuring related exit tax charge, asset impairment
charges and the tax impacts of these adjustments, where applicable.
A complete reconciliation of actual results to adjusted results is
presented in the table entitled “Reconciliation of GAAP Results to
Adjusted Results.”
Guess?, Inc. and Subsidiaries
Reconciliation of GAAP Results to Adjusted Results (dollars
in thousands)
The following table provides reconciliations of reported
GAAP earnings (loss) from operations to adjusted earnings from
operations, reported GAAP net earnings (loss) attributable to
Guess?, Inc. to adjusted net earnings attributable to Guess?, Inc.
and reported GAAP income tax expense to adjusted income tax expense
for the three and nine months ended October 28, 2017 and October
29, 2016.
Three Months Ended Nine Months Ended
October 28, 2017 October 29, 2016 October 28,
2017 October 29, 2016 Reported GAAP earnings
(loss) from operations $ (955 ) $ 15,123 $ (3,226 ) $ 1,722 Net
(gains) losses on lease terminations1 11,494 — 11,494 (695 ) Asset
impairment charges2 2,018 802 6,013 1,457 Restructuring charges3 —
— — 6,083
Adjusted earnings
from operations $ 12,557 $
15,925 $ 14,281 $
8,567 Reported GAAP net earnings (loss)
attributable to Guess?, Inc. $ (2,860 ) $ 9,103 $ (8,934 ) $ 16,194
Net (gains) losses on lease terminations1 11,494 — 11,494 (695 )
Asset impairment charges2 2,018 802 6,013 1,457 Restructuring
charges3 — — — 6,083 Gain on sale of a minority interest
investment4 — — — (22,279 ) Income tax adjustments5 (262 ) (297 )
(1,483 ) (478 ) Exit tax charge6 — — — 1,911
Total adjustments affecting net earnings
(loss) attributable to Guess?, Inc.
13,250 505 16,024 (14,001 )
Adjusted
net earnings attributable to Guess?, Inc. $
10,390 $ 9,608 $
7,090 $ 2,193 Reported
GAAP income tax expense $ 3,673 $ 5,880 $ 8,723 $ 11,682 Income tax
adjustments5 262 297 1,483 478 Exit tax charge6 — — —
(1,911 ) Total income tax effect 262 297
1,483 (1,433 )
Adjusted income tax
expense $ 3,935 $ 6,177
$ 10,206 $ 10,249
Adjusted effective tax rate 25.3 %
37.6 % 53.1 % 78.9 %
Notes: 1 During the three
and nine months ended October 28, 2017, the Company recorded net
losses on lease terminations related primarily to the modification
of certain lease agreements held with a common landlord in North
America. During the nine months ended October 29, 2016, the Company
recorded net gains on lease terminations related primarily to the
early termination of certain lease agreements. The net gains on
lease terminations were recorded during the first and second
quarters of fiscal 2017. The results for the nine months ended
October 29, 2016 have been adjusted to show the impact of the net
gains on lease terminations for comparative purposes to same
current-year period results. 2 During the three and nine
months ended October 28, 2017 and October 29, 2016, the Company
recognized asset impairment charges for certain retail locations
resulting from under-performance and expected store closures. The
results for the three and nine months ended October 29, 2016 have
been adjusted to show the impact of the asset impairment charges
for comparative purposes to same current-year period results.
3 During the first quarter of fiscal 2017, the Company
implemented a global cost reduction and restructuring plan to
better align its global cost and organizational structure with its
current strategic initiatives which resulted in restructuring
charges, mainly related to cash-based severance costs, incurred
during the nine months ended October 29, 2016. The restructuring
charges were recorded during the three months ended April 30, 2016.
4 The Company recognized a gain related to the sale of its
minority interest equity holding in a privately-held boutique
apparel company during the nine months ended October 29, 2016. The
gain related to the sale was recorded during the three months ended
July 30, 2016. 5 The income tax effect of the net (gains)
losses on lease terminations, asset impairment charges and
restructuring charges was based on the Company’s assessment of
deductibility using the statutory tax rate (inclusive of the impact
of valuation allowances) of the tax jurisdiction in which the
charges were incurred. The income tax effect of the gain on sale of
the minority interest investment was based on the impact of the
transaction on the effective tax rate. 6 As a result of the
global cost reduction and restructuring plan, the Company incurred
an estimated exit tax charge related to its reorganization in
Europe during the nine months ended October 29, 2016. The estimated
exit tax charge was recorded during the three months ended April
30, 2016.
Guess?, Inc. and Subsidiaries
Consolidated Segment Data (dollars in thousands)
Three Months Ended Nine Months Ended
October 28, October 29, % October 28,
October 29, % 2017 2016 change
2017 2016 change Net revenue: Americas
Retail $ 187,021 $ 215,862 (13%) $ 561,903 $ 646,573 (13%) Europe1
221,230 186,289 19% 641,833 532,847 20% Asia1 74,322 63,617 17%
200,436 171,255 17% Americas Wholesale1 45,636 46,785 (2%) 114,151
111,354 3% Licensing 25,929 23,768 9% 68,088
68,066 0% Total net revenue $ 554,138 $ 536,321
3% $ 1,586,411 $ 1,530,095 4% Earnings
(loss) from operations: Americas Retail1 (4,670 ) (10,505 ) 56%
(33,654 ) (22,279 ) (51%) Europe1 6,678 11,597 (42%) 30,749 16,221
90% Asia1 2,718 (1,962 ) 239% 5,055 (5,251 ) 196% Americas
Wholesale1 8,241 8,142 1% 20,011 18,211 10% Licensing1 23,532
20,119 17% 61,019 60,325 1% Total
segment earnings from operations 36,499 27,391 33% 83,180 67,227
24% Corporate overhead1 (23,942 ) (11,466 ) 109% (68,899 )
(58,660 ) 17%
Net gains (losses) on lease
terminations1
(11,494 ) — (11,494 ) 695
Asset impairment charges1
(2,018 ) (802 ) (6,013 ) (1,457 ) Restructuring charges — —
— (6,083 ) Total earnings (loss) from operations $
(955 ) $ 15,123 (106%) $ (3,226 ) $ 1,722 (287%)
Operating margins: Americas Retail1 (2.5 %) (4.9 %) (6.0 %)
(3.4 %) Europe1 3.0 % 6.2 % 4.8 % 3.0 % Asia1 3.7 % (3.1 %) 2.5 %
(3.1 %) Americas Wholesale1 18.1 % 17.4 % 17.5 % 16.4 % Licensing1
90.8 % 84.6 % 89.6 % 88.6 % GAAP operating margin for total
Company (0.2 %) 2.8 % (0.2 %) 0.1 %
Net gains (losses) on lease
terminations1
2.1 % 0.0 % 0.7 % (0.0 %)
Asset impairment charges1
0.4 % 0.2 % 0.4 % 0.1 % Restructuring charges 0.0 % 0.0 % 0.0 % 0.4
% Adjusted operating margin for total Company 2.3 % 3.0 % 0.9 % 0.6
% Notes: 1
During the first quarter of fiscal 2018, net revenue and related
costs and expenses for certain globally serviced customers were
reclassified into the segment primarily responsible for the
relationship. During the third quarter of fiscal 2018, segment
results were also adjusted to exclude corporate performance-based
compensation costs, net gains (losses) on lease terminations and
asset impairment charges due the fact that these items are no
longer included in the segment results provided to the Company’s
chief operating decision maker in order to allocate resources and
assess performance. Accordingly, segment results have been adjusted
for the nine months ended October 28, 2017 as well as the three and
nine months ended October 29, 2016 to conform to the current period
presentation.
Guess?, Inc. and Subsidiaries
Constant Currency Financial Measures (dollars in thousands)
Three Months Ended October 28, 2017 October
29, 2016 % change As Reported Foreign Currency
Impact Constant Currency As Reported As
Reported Constant Currency Net revenue: Americas Retail
$ 187,021 $ (2,074 ) $ 184,947 $ 215,862 (13%) (14%) Europe1
221,230 (12,687 ) 208,543 186,289 19% 12% Asia1 74,322 1,035 75,357
63,617 17% 18% Americas Wholesale1 45,636 (941 ) 44,695 46,785 (2%)
(4%) Licensing 25,929 — 25,929 23,768
9% 9% $ 554,138 $ (14,667 ) $ 539,471 $ 536,321
3% 1%
Nine Months Ended October 28,
2017 October 29, 2016 % change As Reported
Foreign Currency Impact Constant Currency As
Reported As Reported Constant Currency Net
revenue: Americas Retail $ 561,903 $ (826 ) $ 561,077 $ 646,573
(13%) (13%) Europe1 641,833 (7,726 ) 634,107 532,847 20% 19% Asia1
200,436 119 200,555 171,255 17% 17% Americas Wholesale1 114,151
(186 ) 113,965 111,354 3% 2% Licensing 68,088 —
68,088 68,066 0% 0% $ 1,586,411 $ (8,619 ) $
1,577,792 $ 1,530,095 4% 3%
Notes:
1 During the first quarter of fiscal 2018, net
revenue for certain globally serviced customers was reclassified
into the segment primarily responsible for the relationship.
Accordingly, segment results for Europe, Asia and Americas
Wholesale have been adjusted for the three and nine months ended
October 29, 2016 to conform to the current year presentation.
Guess?, Inc. and Subsidiaries Selected Condensed
Consolidated Balance Sheet Data (in thousands)
October 28, January 28, October 29,
2017 2017 2016 ASSETS
Cash and cash equivalents $ 233,089 $ 396,129 $ 349,104
Receivables, net 236,659 225,537 218,205 Inventories 477,177
367,381 428,139 Other current assets 59,658 54,965 59,479
Property and equipment, net 283,197 243,005 272,918
Restricted cash 225 1,521 821 Other assets 263,507 245,947
251,097 Total Assets $ 1,553,512 $
1,534,485 $ 1,579,763
LIABILITIES AND
STOCKHOLDERS’ EQUITY Current portion of capital lease
obligations and borrowings $ 2,121 $ 566 $ 560 Other current
liabilities 387,821 344,887 363,416 Long-term debt and
capital lease obligations 38,781 23,482 23,540 Other
long-term liabilities 179,220 180,104 179,372 Redeemable and
nonredeemable noncontrolling interests 19,228 16,224 14,659
Guess?, Inc. stockholders’ equity 926,341 969,222 998,216
Total Liabilities and Stockholders’ Equity $
1,553,512 $ 1,534,485 $ 1,579,763
Guess?, Inc. and Subsidiaries Condensed Consolidated Cash
Flow Data (in thousands)
Nine Months Ended October 28,
October 29, 2017 2016 Net cash used in
operating activities1, 2 $ (34,202 ) $ (30,233 ) Net cash
used in investing activities (68,626 ) (25,383 ) Net cash
used in financing activities1 (82,316 ) (45,224 ) Effect of
exchange rates on cash, cash equivalents and restricted cash1
20,808 4,766 Net change in cash, cash
equivalents and restricted cash1 (164,336 ) (96,074 ) Cash,
cash equivalents and restricted cash at the beginning of the year1
397,650 445,999 Cash, cash equivalents and restricted
cash at the end of the period1 $ 233,314 $ 349,925
Supplemental information: Depreciation
and amortization $ 46,769 $ 51,194 Rent $ 198,844 $ 193,671
Non-cash investing and financing activity:
Assets acquired under capital lease obligations3 $ 18,042 $
— Notes: 1
As a result of the adoption of new authoritative guidance during
the first quarter of fiscal 2018 which impacted the classification
of certain cash receipts and cash payments in the statement of cash
flows, the amounts related to cash flows from operating and
financing activities as well as the effect of exchange rates on
cash, cash equivalents and restricted cash have been updated for
the nine months ended October 29, 2016 to conform to the current
year presentation. 2 During the third quarter of fiscal
2018, the Company recorded net losses on lease terminations related
primarily to the modification of certain lease agreements held with
a common landlord in North America. In connection with this
modification, the Company made up-front payments of approximately
$22 million, of which $12 million was recognized as net losses on
lease terminations and $10 million was recorded as advance rent
payments. 3 During the nine months ended October 28, 2017,
the Company began the relocation of its European distribution
center to the Netherlands. As a result, the Company entered into a
capital lease of $16.5 million for equipment used in the new
facility. During the nine months ended October 28, 2017, the
Company also entered into a capital lease for $1.5 million related
primarily to computer hardware and software.
Guess?, Inc.
and Subsidiaries Reconciliation of Net Cash Used in
Operating Activities to Free Cash Flow (in thousands)
Nine
Months Ended October 28, October 29, 2017
2016 Net cash used in operating activities1, 2 $
(34,202 ) $ (30,233 ) Less: Purchases of property and
equipment (65,345 ) (66,849 ) Free cash flow1, 2 $
(99,547 ) $ (97,082 )
Notes: 1 As a result of the adoption of new
authoritative guidance during the first quarter of fiscal 2018
which impacted the classification of certain cash receipts and cash
payments in the statement of cash flows, net cash used in operating
activities and free cash flow have been updated for the nine months
ended October 29, 2016 to conform to the current year presentation.
2 During the third quarter of fiscal 2018, the Company
recorded net losses on lease terminations related primarily to the
modification of certain lease agreements held with a common
landlord in North America. In connection with this modification,
the Company made up-front payments of approximately $22 million, of
which $12 million was recognized as net losses on lease
terminations and $10 million was recorded as advance rent payments.
Guess?, Inc. and Subsidiaries Retail Store
Data International Store Count
As of October 28, 2017 As of October
29, 2016 Total Directly Operated Total
Directly Operated Region Stores Stores
Stores Stores United States 317 315 342 341
Canada 96 96 111 111 Central and South America 97 54
91 48
Total Americas 510 465 544
500 Europe and the Middle East 661 385 614 321
Asia and the Pacific 482 132 493 95
1,653 982 1,651 916 Guess?,
Inc. and Subsidiaries Directly Operated Retail Store
Data U.S. and Canada
Nine Months Ended October
28, October 29, 2017 2016 Number of
stores at the beginning of the year 450 455 Store openings 6
11 Store closures (45) (14) Number of stores
at the end of the period 411 452 Total store square
footage at the end of the period 2,037,000 2,216,000
View source
version on businesswire.com: http://www.businesswire.com/news/home/20171121006011/en/
Guess?, Inc.Fabrice BenaroucheVP, Finance and Investor
Relations(213) 765-5578
Guess (NYSE:GES)
Historical Stock Chart
From Aug 2024 to Sep 2024
Guess (NYSE:GES)
Historical Stock Chart
From Sep 2023 to Sep 2024