Reaffirms Plan to
Deliver 10% Operating Margin by Fiscal 2025
Q4 Fiscal 2021
Revenues Decreased 23% to $648 Million; Decreased 26% in Constant
Currency
Q4 Fiscal 2021 GAAP
Earnings Per Share (“EPS”) of $1.07, Compared to GAAP EPS of $1.18
in Q4 Fiscal 2020; Q4 Fiscal 2021 Adjusted EPS of $1.18, Compared
to $1.22 in Q4 Fiscal 2020
Fiscal Year 2021
Revenues Decreased 30% to $1.88 Billion; Decreased 31% in Constant
Currency
Fiscal Year 2021 GAAP
Loss Per Share of $1.27, Compared to GAAP EPS of $1.33 in Fiscal
Year 2020; Fiscal Year 2021 Adjusted Loss Per Share of $0.07,
Compared to Adjusted EPS of $1.45 in Fiscal Year
2020
Guess?, Inc. (NYSE: GES) today reported financial results for
its fourth quarter and fiscal year ended January 30, 2021.
Carlos Alberini, Chief Executive Officer, commented, “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. Our
earnings per share reached $1.07 versus $1.18 last year. During the
period, we expanded gross margin and managed expenses tightly,
which helped us to mitigate the anticipated revenue decrease. With
this performance, we conclude a challenging but rewarding year for
our Company. I could not be more grateful and proud of our teams
all over the world for their great work leading our Company through
these unprecedented times, controlling very well what was
controllable, finding opportunities to transform our business and
positioning Guess for an even brighter future.”
Mr. Alberini continued, “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. Furthermore, we are
committed to delivering net revenues of $2.9 billion by fiscal year
2025 and an operating margin of 10% 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% in fiscal 2025 from
12% in fiscal 2020.”
Mr. Alberini concluded, “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. We have a great team, a strong business
model and an amazing brand with remarkable momentum to gain share
and grow profitably for many years to come.”
Adjusted Amounts
This press release contains certain non-GAAP, or adjusted,
financial measures. References to “adjusted” results exclude the
impact of (i) asset impairment charges, (ii) net gains on lease
modifications, (iii) certain professional service, legal fees and
related net credits, (iv) certain separation charges, (v) non-cash
debt discount amortization on our convertible senior notes, (vi)
the related tax effects of the foregoing items as well as the
impact from changes in the tax law on deferred taxes in certain tax
jurisdictions, net tax settlements and adjustments to specific
uncertain income tax positions and (vii) certain discrete income
tax adjustments, in each case 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.
COVID-19 Fourth Quarter Business
Update
The coronavirus (or “COVID-19”) pandemic has had and is
continuing to have a material impact on the Company’s financial
performance. During the fourth quarter of fiscal 2021, the Company
continued to experience lower net revenue compared to the same
prior-year period as it remained challenged by lower demand,
temporary store closures and capacity restrictions. The Company
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, the Company started to incur a
new round of government-mandated temporary store closures, mostly
in Europe. While the number of temporarily closed stores ebbed and
flowed during the quarter based on local conditions, the overall
impact resulted in stores being closed for over 15% of the total
days during the fourth quarter of fiscal 2021, primarily in Europe
and Canada. As of January 30, 2021 over 70% of our stores were
open, with the majority of closed stores located primarily in
Europe and Canada. As of March 27, 2021 approximately 77% of our
stores were open.
Fourth Quarter Fiscal 2021
Results
For the fourth quarter of fiscal 2021, the Company recorded GAAP
net earnings of $70.4 million, an 11.5% decrease from $79.6 million
for the fourth quarter of fiscal 2020. GAAP diluted earnings per
share decreased 9.3% to $1.07 for the fourth quarter of fiscal
2021, compared to $1.18 for the same prior-year quarter. The
Company estimates a positive impact from its share buybacks and
currency of $0.06 and $0.13, respectively, on GAAP diluted earnings
per share in the fourth quarter of fiscal 2021.
For the fourth quarter of fiscal 2021, the Company’s adjusted
net earnings were $77.7 million, a 5.7% decrease from $82.3 million
for the fourth quarter of fiscal 2020. Adjusted diluted earnings
per share decreased 3.3% to $1.18, compared to $1.22 for the same
prior-year quarter. The Company estimates that its share buybacks
had a positive impact of $0.07 on adjusted diluted earnings per
share in the fourth quarter of fiscal 2021.
Net Revenue. Total net revenue for the fourth quarter of
fiscal 2021 decreased 23.0% to $648.5 million, from $842.3 million
in the same prior-year quarter. In constant currency, net revenue
decreased by 25.9%.
- Americas Retail revenues decreased 24.2% in U.S. dollars and
24.0% in constant currency. Retail comp sales including e-commerce
decreased 15% in U.S. dollars and constant currency.
- Americas Wholesale revenues decreased 15.3% in U.S. dollars and
14.1% in constant currency.
- Europe revenues decreased 26.8% in U.S. dollars and 31.8% in
constant currency. Retail comp sales including e-commerce increased
2% in U.S. dollars and decreased 5% in constant currency.
- Asia revenues decreased 16.2% in U.S. dollars and 20.7% in
constant currency. Retail comp sales including e-commerce decreased
18% in U.S. dollars and 22% in constant currency.
- Licensing revenues increased 12.2% in U.S. dollars.
Earnings from Operations. GAAP earnings from operations
for the fourth quarter of fiscal 2021 decreased 25.5% to $71.9
million (including $5.2 million in non-cash impairment charges
taken on certain long-lived store related assets and a $2.6 million
favorable currency translation impact), from $96.5 million in the
same prior-year quarter. GAAP operating margin in the fourth
quarter decreased 40 basis points to 11.1%, from 11.5% in the same
prior-year quarter, driven primarily by overall deleveraging of
expenses due to the negative impact from the COVID-19 pandemic on
our revenues and global operations, partially offset by lower
expenses. The negative impact of currency on operating margin for
the quarter was approximately 30 basis points.
For the fourth quarter of fiscal 2021, adjusted earnings from
operations decreased 27.0% to $74.2 million, from $101.7 million in
the same prior-year quarter. Adjusted operating margin decreased 70
basis points to 11.4%, from 12.1% in the same prior-year quarter,
driven primarily by overall deleveraging of expenses due to the
negative impact from the COVID-19 pandemic on our revenues and
global operations, partially offset by lower expenses.
- Operating margin for the Company’s Americas Retail segment
increased 640 basis points to 12.8% in the fourth quarter of fiscal
2021, compared to 6.4% in the same prior-year quarter, driven
primarily by lower store occupancy costs and store selling expenses
and, to a lesser extent, lower markdowns, partially offset by the
deleveraging impact of negative comp sales resulting from lower
traffic as a result of the COVID-19 pandemic.
- Operating margin for the Company’s Americas Wholesale segment
increased 390 basis points to 23.5% in the fourth quarter of fiscal
2021, compared to 19.6% in the same prior-year quarter, due mainly
to higher selling prices and reduced sales discounts and
allowances.
- Operating margin for the Company’s Europe segment decreased 620
basis points to 12.7% in the fourth quarter of fiscal 2021, from
18.9% in the same prior-year quarter, driven primarily by overall
deleveraging of expenses due to lower revenue as a result of the
COVID-19 pandemic as well as the timing shift of wholesale
shipments into the first quarter of fiscal 2022, partially offset
by the favorable impact of higher initial markups, government
subsidies and rent concessions.
- Operating margin for the Company’s Asia segment increased 340
basis points to 5.0% in the fourth quarter of fiscal 2021, compared
to 1.6% in the same prior-year quarter, due mainly to lower
expenses, partially offset by the unfavorable impact of
deleverage.
- Operating margin for the Company’s Licensing segment increased
820 basis points to 95.3% in the fourth quarter of fiscal 2021,
compared to 87.1% in the same prior-year quarter, due to lower
expenses.
Other income, net, was $14.6 million for the fourth quarter of
fiscal 2021, compared to $1.8 million in the same prior-year
quarter. The change was driven primarily by market volatility which
resulted in net unrealized gains on the translation of foreign
currency balances, compared to net unrealized losses in the same
prior-year quarter.
Full Fiscal Year Results
For the fiscal year ended January 30, 2021, the Company recorded
GAAP net loss of $81.2 million, compared to GAAP net earnings of
$96.0 million for the fiscal year ended February 1, 2020. GAAP
diluted loss per share was $1.27 for the fiscal year ended January
30, 2021, compared to GAAP earnings per share of $1.33 during the
prior year. The Company estimates a net negative impact from its
share buybacks and its prior year convertible notes transaction and
currency of $0.19 and $0.04, respectively, on GAAP diluted loss per
share for the fiscal year ended January 30, 2021.
For the fiscal year ended January 30, 2021, the Company recorded
adjusted net loss of $4.5 million, compared to adjusted net
earnings of $105.0 million for the fiscal year ended February 1,
2020. Adjusted diluted loss per share was $0.07, compared to
adjusted earnings per share of $1.45 during the prior year. The
Company estimates that its share buybacks and its prior year
convertible notes transaction had a net negative impact of $0.02 on
adjusted diluted loss per share during the fiscal year ended
January 30, 2021.
Net Revenue. Total net revenue for fiscal 2021 decreased
29.9% to $1.88 billion, from $2.68 billion in the prior year. In
constant currency, net revenue decreased by 31.0%.
- Americas Retail revenues decreased 37.1% in U.S. dollars and
36.7% in constant currency.
- Americas Wholesale revenues decreased 36.9% in U.S. dollars and
34.8% in constant currency.
- Europe revenues decreased 24.6% in U.S. dollars and 27.2% in
constant currency.
- Asia revenues decreased 32.8% in U.S. dollars and 33.8% in
constant currency.
- Licensing revenues decreased 13.8% in U.S. dollars.
Earnings (Loss) from Operations. GAAP loss from
operations for fiscal 2021 was $60.5 million (including $80.4
million in non-cash impairment charges taken on certain long-lived
store related assets and a $9.3 million favorable currency
translation impact), compared to GAAP earnings from operations of
$140.7 million in the prior year. GAAP operating margin in fiscal
2021 decreased 850 basis points to negative 3.2%, from 5.3% in the
prior year, driven primarily by overall deleveraging of expenses
and higher asset impairment charges due to the negative impact from
the COVID-19 pandemic on our revenues and global operations. The
positive impact of currency on operating margin for fiscal 2021 was
approximately 20 basis points.
For the fiscal year ended January 30, 2021, adjusted earnings
from operations was $20.0 million, compared to $150.2 million for
the fiscal year ended February 1, 2020. Adjusted operating margin
decreased 460 basis points to 1.0% for the fiscal year ended
January 30, 2021, from 5.6% in the prior year, driven primarily by
overall deleveraging of expenses due to the negative impact from
the COVID-19 pandemic on our revenues and global operations.
- Operating margin for the Company’s Americas Retail segment
decreased 580 basis points to negative 3.1% in fiscal 2021, from
2.7% in the prior year, driven primarily by the deleveraging impact
of temporary store closures and lower traffic as a result of the
COVID-19 pandemic, partially offset by lower store selling expenses
and lower occupancy costs.
- Operating margin for the Company’s Americas Wholesale segment
decreased 220 basis points to 16.9% in fiscal 2021, from 19.1% in
the prior year, due mainly to the negative impact from the COVID-19
pandemic on our revenues which resulted in overall deleveraging of
expenses.
- Operating margin for the Company’s Europe segment decreased 360
basis points to 7.1% in fiscal 2021, from 10.7% in the prior year,
driven primarily by overall deleveraging of expenses due to lower
revenue as a result of the COVID-19 pandemic, partially offset by
the favorable impact of higher initial markups, rent concessions
and government subsidies.
- Operating margin for the Company’s Asia segment decreased 6.3%
to negative 8.9% in fiscal 2021, from negative 2.6% in the prior
year, due mainly to the negative impact from the COVID-19 pandemic
which resulted in significantly higher inventory reserves and
overall deleveraging of expenses.
- Operating margin for the Company’s Licensing segment increased
510 basis points to 91.8% in fiscal 2021, from 86.7% in the prior
year, due to lower expenses.
Other expense, net, was $6.0 million for fiscal 2021, compared
to $2.5 million in the prior year. The change was due primarily to
net mark-to-market losses on revaluation of foreign exchange
currency contracts, compared to gains in the prior year.
Outlook
Given the current circumstances regarding the COVID-19 crisis
and its uncertain impact on our operations, we are not providing
detailed guidance for the first quarter or the full fiscal year
ending January 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. 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. The expectation for the full year also assumes a return to a
normal cadence of product development and shipments for our
European wholesale business. These comparisons are both versus the
pre-pandemic periods from two fiscal years prior, in order to
provide a more normalized comparison.
Fiscal 2025 Strategic Plan
Update
The five-year strategic plan that the Company presented in
December 2019 continues to be a solid roadmap for revenue growth,
increased profitability and value creation. The six key strategic
pillars the Company identified remain at the core of its strategy,
and the Company has made solid progress on initiatives across each
of them amid the pandemic in fiscal 2021. The key strategic pillars
include organization and culture, brand relevancy, product
excellence, customer centricity, global footprint and functional
capabilities. The Company’s financial plan is to achieve an
operating margin of 10% by fiscal 2025, with net revenues of $2.9
billion, a 2% CAGR from fiscal 2020.
Please refer to the Company’s presentation materials (to be
posted concurrently with the issuance of this earnings release)
available at www.guess.com via the “Investor Relations” link. Those
listening to today’s investor conference call are encouraged to
refer to the presentation materials during the call.
Dividend
The Company’s Board of Directors has approved a quarterly cash
dividend of $0.1125 per share on the Company’s common stock. The
dividend will be payable on April 30, 2021 to shareholders of
record as of the close of business on April 14, 2021.
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, free cash flows and return on
invested capital. For the three months and fiscal year ended
January 30, 2021, the adjusted results exclude the impact of
certain professional service, legal fees and related (credits)
costs, certain separation charges, asset impairment charges, net
gains on lease modifications, non-cash amortization of debt
discount on the Company’s convertible senior notes, the related
income tax impacts of these adjustments as well as certain discrete
income tax adjustments, where applicable. For the three months and
fiscal year ended February 1, 2020, the adjusted results exclude
the impact of certain professional service, legal fees and related
(credits) costs, separation charges related to the departure of our
former CEO, asset impairment charges, non-cash amortization of debt
discount on the Company’s convertible senior notes, and the related
income tax impacts of these adjustments as well as the impact from
changes in the tax law on deferred taxes in certain tax
jurisdictions, net tax settlements and adjustments to specific
uncertain tax positions, 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 these items are not
indicative of the underlying performance of its business and 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 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 from 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 or 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 (i) purchases of property
and equipment and (ii) payments for property and equipment under
finance leases. Free cash flows are not intended to be an
alternative to cash flows from operating activities as a measure of
liquidity, but rather to provide additional visibility to investors
regarding how much cash is generated for discretionary and
non-discretionary items after deducting purchases of property and
equipment and payments for property and equipment under finance
leases. 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.
The Company also includes information regarding its return on
invested capital (or “ROIC”) in this release. The Company defines
ROIC as adjusted net operating profit after taxes divided by
two-year average invested capital. The Company believes that ROIC
is a useful financial measure for investors in evaluating how
efficiently the Company deploys its capital. The Company’s method
of calculating ROIC may differ from other companies’ methods and
therefore might not be comparable.
Investor Conference Call
The Company will hold a conference call at 4:45 pm (ET) on March
31, 2021 to discuss the news announced in this press release and to
provide an update to its strategic plan. A live webcast of the
conference call and related presentation materials (to be posted
concurrently with the issuance of this earnings release) will be
accessible at www.guess.com via the “Investor Relations” link. The
webcast and related presentation materials will also be archived on
the website.
About Guess?
Guess?, Inc. designs, markets, distributes and licenses a
lifestyle collection of contemporary apparel, denim, handbags,
watches, eyewear, 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 January 30, 2021, the Company directly operated 1,046 retail
stores in the Americas, Europe and Asia. The Company’s partners and
distributors operated 524 additional retail stores worldwide. As of
January 30, 2021, the Company and its partners and distributors
operated in approximately 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 potential
actions and impacts related to the COVID-19 pandemic; statements
concerning the Company’s future outlook, including with respect to
the first quarter and full year of fiscal 2022 and the Company’s
fiscal 2025 strategic plan; statements concerning the Company’s
expectations, goals, future prospects, global cost reduction
opportunities and profitability efforts, capital allocation plans,
cash needs and current business strategies and strategic
initiatives; and statements expressing optimism or pessimism about
future operating results, growth opportunities, earnings, and
operating margins 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,” “could,”
“will,” “should,” “goal,” “strategy,” “believe,” “estimate,”
“continue,” “outlook,” “plan,” “create,” “see,” 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 or political conditions, including economic and other
events that could negatively impact consumer confidence and
discretionary consumer spending; the continuation or worsening of
impacts related to the COVID-19 pandemic, including business,
financial, human capital, litigation and other impacts to the
Company and its partners; our ability to successfully negotiate
rent relief or other lease-related terms with our landlords; our
ability to successfully negotiate or defer our vendor obligations;
our ability to maintain adequate levels of liquidity; changes to
estimates related to impairments, inventory and other reserves,
including the impact of the CARES Act, which were made using the
best information available at the time; 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 successfully implement
or update information technology systems, including enhancing our
global omni-channel capabilities; our ability to expand
internationally and operate in regions where we have less
experience, including through joint ventures; risks related to our
convertible senior notes issued in April 2019, including our
ability to settle the liability in cash; our ability to
successfully or timely implement plans for cost reductions; our
ability to effectively and efficiently manage the volume and costs
associated with our European distribution centers without incurring
shipment delays; our ability to attract and retain key personnel;
obligations or changes in estimates arising from new or existing
litigation, income tax and other regulatory proceedings; risks
related to the complexity of the Tax Reform, future clarifications
and legislative amendments thereto, as well as our ability to
accurately interpret and predict its impact on our cash flows and
financial condition; the risk of economic uncertainty associated
with the United Kingdom’s departure from the European Union
(“Brexit”) or any other similar referendums that may be held; the
occurrence of unforeseen epidemics, such as the COVID-19 pandemic;
other catastrophic events; changes in U.S. or foreign income tax or
tariff policy, including changes to tariffs on imports into the
U.S.; accounting adjustments to our unaudited financial statements
identified during the completion of our annual independent audit of
financial statements and financial controls or from subsequent
events arising after issuance of this release; risk of future
non-cash asset impairments, including goodwill, right-of-use lease
assets and/or other store asset impairments; 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; risks associated
with our ability to properly collect, use, manage and secure
consumer and employee data; risks associated with our vendors’
ability to maintain the strength and security of information
technology systems; and changes in economic, political, social and
other conditions affecting our foreign operations and sourcing,
including the impact of currency fluctuations, global income 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, length and severity of the COVID-19
pandemic, and uncertainty surrounding potential changes in U.S.
policies and regulations may amplify many of these risks.
Additional information with respect to known and unknown risks will
also be set forth in the Company’s annual report on Form 10-K for
the fiscal year ended January 30, 2021, which is expected to be
filed with the Securities and Exchange Commission in the first
quarter of fiscal 2022. 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
Fiscal Year Ended
January 30, 2021
February 1, 2020
January 30, 2021
February 1, 2020
$
%
$
%
$
%
$
%
Product sales
$
618,973
95.5
%
$
815,975
96.9
%
$
1,802,533
96.1
%
$
2,592,262
96.8
%
Net royalties
29,482
4.5
%
26,279
3.1
%
73,996
3.9
%
85,847
3.2
%
Net revenue
648,455
100.0
%
842,254
100.0
%
1,876,529
100.0
%
2,678,109
100.0
%
Cost of product sales
372,130
57.4
%
503,660
59.8
%
1,179,427
62.9
%
1,662,401
62.1
%
Gross profit
276,325
42.6
%
338,594
40.2
%
697,102
37.1
%
1,015,708
37.9
%
Selling, general and administrative
expenses
201,638
31.1
%
237,237
28.1
%
679,958
36.1
%
865,060
32.2
%
Asset impairment charges
5,166
0.8
%
4,851
0.6
%
80,442
4.3
%
9,977
0.4
%
Net gains on lease modifications
(2,351
)
(0.4
%)
—
—
%
(2,801
)
(0.1
%)
—
—
%
Earnings (loss) from operations
71,872
11.1
%
96,506
11.5
%
(60,497
)
(3.2
%)
140,671
5.3
%
Other income (expense):
Interest expense
(5,657
)
(0.9
%)
(4,973
)
(0.6
%)
(22,869
)
(1.2
%)
(16,129
)
(0.6
%)
Interest income
629
0.1
%
563
0.1
%
2,237
0.1
%
1,729
0.1
%
Other income (expense), net
14,603
2.3
%
1,817
0.2
%
(5,950
)
(0.3
%)
(2,529
)
(0.2
%)
Earnings (loss) before Income tax expense
(benefit)
81,447
12.6
%
93,913
11.2
%
(87,079
)
(4.6
%)
123,742
4.6
%
Income tax expense (benefit)
8,512
1.4
%
11,864
1.5
%
(6,338
)
(0.3
%)
22,513
0.8
%
Net earnings (loss)
72,935
11.2
%
82,049
9.7
%
(80,741
)
(4.3
%)
101,229
3.8
%
Net earnings attributable to
noncontrolling interests
2,516
0.3
%
2,445
0.2
%
488
0.0
%
5,254
0.2
%
Net earnings (loss) attributable to
Guess?, Inc.
$
70,419
10.9
%
$
79,604
9.5
%
$
(81,229
)
(4.3
%)
$
95,975
3.6
%
Net earnings (loss) per common share
attributable to common stockholders:
Basic
$
1.10
$
1.21
$
(1.27
)
$
1.35
Diluted
$
1.07
$
1.18
$
(1.27
)
$
1.33
Weighted average common shares outstanding
attributable to common stockholders:
Basic
63,033
65,019
64,179
70,461
Diluted
65,003
66,653
64,179
71,669
Effective income tax rate
10.5
%
12.6
%
7.3
%
18.2
%
Adjusted selling, general and
administrative expenses1:
$
202,117
31.2
%
$
236,919
28.1
%
$
677,110
36.0
%
$
865,479
32.3
%
Adjusted earnings from operations1:
$
74,208
11.4
%
$
101,675
12.1
%
$
19,992
1.1
%
$
150,229
5.6
%
Adjusted net earnings (loss) attributable
to Guess?, Inc.1:
$
77,668
12.0
%
$
82,336
9.8
%
$
(4,521
)
(0.2
%)
$
105,036
3.9
%
Adjusted diluted earnings (loss) per
common share attributable to common stockholders1:
$
1.18
$
1.22
$
(0.07
)
$
1.45
Adjusted effective income tax rate1:
7.2
%
16.5
%
206.0
%
21.7
%
______________________________________________________________________
1
The adjusted results for the three months
and fiscal year ended January 30, 2021 reflect the exclusion of
certain professional service, legal fees and related (credits)
costs, certain separation charges, asset impairment charges, net
gains on lease modifications, non-cash amortization of debt
discount on the Company’s convertible senior notes, the related
income tax impacts of these adjustments as well as certain discrete
income tax adjustments, where applicable. The adjusted results for
the three months and fiscal year ended February 1, 2020 reflect the
exclusion of certain professional service, legal fees and related
(credits) costs, separation charges related to the departure of our
former CEO, asset impairment charges, non-cash amortization of debt
discount on the Company’s convertible senior notes, and the related
income tax impacts of these adjustments as well as the impact from
changes in the tax law on deferred taxes in certain tax
jurisdictions, net tax settlements and adjustments to specific
uncertain tax positions, 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
selling, general and administrative expenses to adjusted selling,
general and administrative expenses, reported GAAP earnings (loss)
from operations to adjusted earnings from operations, reported GAAP
net earnings (loss) attributable to Guess?, Inc. to adjusted net
earnings (loss) attributable to Guess?, Inc. and reported GAAP
income tax expense (benefit) to adjusted income tax expense for the
three months and fiscal year ended January 30, 2021 and February 1,
2020.
Three Months Ended
Fiscal Year Ended
January 30, 2021
February 1, 2020
January 30, 2021
February 1, 2020
Reported GAAP selling, general and
administrative expenses
$
201,638
$
237,237
$
679,958
$
865,060
Certain professional service, legal fees
and related net credits1
509
120
565
857
Separation charges2
(30
)
(438
)
(3,413
)
(438
)
Adjusted selling, general and
administrative expenses
$
202,117
$
236,919
$
677,110
$
865,479
Reported GAAP earnings (loss) from
operations
$
71,872
$
96,506
$
(60,497
)
$
140,671
Certain professional service, legal fees
and related net credits1
(509
)
(120
)
(565
)
(857
)
Separation charges2
30
438
3,413
438
Asset impairment charges3
5,166
4,851
80,442
9,977
Net gains on lease modifications4
(2,351
)
—
(2,801
)
—
Adjusted earnings from
operations
$
74,208
$
101,675
$
19,992
$
150,229
Reported GAAP net earnings (loss)
attributable to Guess?, Inc.
$
70,419
$
79,604
$
(81,229
)
$
95,975
Certain professional service, legal fees
and related net credits1
(509
)
(120
)
(565
)
(857
)
Separation charges2
30
438
3,413
438
Asset impairment charges3
5,166
4,851
80,442
9,977
Net gains on lease modifications4
(2,351
)
—
(2,801
)
—
Amortization of debt discount5
2,598
2,449
10,394
7,558
Discrete tax adjustments6
3,248
—
4,053
—
Income tax impact from adjustments7
(933
)
(4,886
)
(18,228
)
(8,055
)
Total adjustments affecting net earnings
(loss) attributable to Guess?, Inc.
7,249
2,732
76,708
9,061
Adjusted net earnings (loss)
attributable to Guess?, Inc.
$
77,668
$
82,336
$
(4,521
)
$
105,036
Reported GAAP income tax expense
(benefit)
$
8,512
$
11,864
$
(6,338
)
$
22,513
Discrete tax adjustments6
(3,248
)
—
(4,053
)
—
Income tax impact from adjustments7
933
4,886
18,228
8,055
Adjusted income tax expense
$
6,197
$
16,750
$
7,837
$
30,568
Adjusted effective income tax
rate
7.2
%
16.5
%
206.0
%
21.7
%
______________________________________________________________________
1
During the three months and fiscal year
ended January 30, 2021 and February 1, 2020, the Company recorded
certain professional service, legal fees and related net credits,
which it otherwise would not have incurred as part of its business
operations.
2
During the fiscal year ended January 30,
2021, the Company recorded $0.2 million in separation-related
charges mainly related to certain cash severance payments,
partially offset by adjustments to non-cash stock-based
compensation expense related to our former Chief Executive Officer
resulting from changes in expected performance conditions of
certain previously granted stock awards that were no longer subject
to service vesting requirements after his departure. Additionally,
during the fiscal year ended January 30, 2021, the Company recorded
$3.2 million in separation-related charges mainly related to
headcount reduction in response to the COVID-19 pandemic. During
the three months and fiscal year ended February 1, 2020, the
Company recorded $0.4 million mainly related to non-cash
stock-based compensation expense resulting from changes in expected
performance conditions of certain previously granted stock awards
that were no longer subject to service vesting requirements after
the former CEO’s departure.
3
During the three months and fiscal year
ended January 30, 2021, the Company recognized asset impairment
charges related primarily to impairment of operating lease
right-of-use assets and impairment of property and equipment
related to certain retail locations resulting from lower revenue
and future cash flow projections from the ongoing effects of the
COVID-19 pandemic. During the three months and fiscal year ended
February 1, 2020, the Company’s asset impairment charges related
primarily to impairment of property and equipment and impairment of
operating lease right-of-use assets related to certain retail
locations resulting from under-performance and expected store
closures as well as impairment charges related to the Company’s
China retail reporting unit.
4
During the three months and fiscal year
ended January 30, 2021, the Company recorded net gains on lease
modifications related primarily to the early termination of certain
lease agreements.
5
In April 2019, the Company issued $300
million principal amount of 2.00% convertible senior notes due 2024
(the “Notes”) in a private offering. The Company has separated the
Notes into liability (debt) and equity (conversion option)
components. The debt discount, which represents an amount equal to
the fair value of the equity component, is amortized as non-cash
interest expense over the term of the Notes.
6
During the three months and fiscal year
ended January 30, 2021, the discrete tax adjustments related
primarily to the negative impact from cumulative valuation
allowances, partially offset by tax benefits from a tax rate change
due to net operating loss carryback. During the three months and
fiscal year ended January 30, 2021, the Company recognized an
increase (decrease) in valuation allowances of $(0.7) million and
$4.2 million, respectively, resulting from jurisdictions where
there have been cumulative net operating losses, limiting the
Company’s ability to consider other subjective evidence to continue
to recognize the existing deferred tax assets. This was partially
offset by tax expenses of approximately $3.8 million due to better
performance than initially expected during the three months ended
January 30, 2021 and tax benefits of approximately $0.7 million
during the year ended January 30, 2021 resulting from a tax rate
change related to the ability to carryback net operating losses to
tax years with a higher federal corporate tax rate as allowed under
the CARES Act enacted in March 2020.
7
The income tax effect of certain
professional service, legal fees and related net credits,
separation charges, asset impairment charges, net gains on lease
modifications and the amortization of debt discount 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
adjustment for the fiscal year ended February 1, 2020 also included
the impact from changes in the tax law on deferred taxes in certain
tax jurisdictions, net tax settlements and adjustments to specific
uncertain tax positions.
Guess?, Inc. and
Subsidiaries
Consolidated Segment
Data
(dollars in thousands)
Three Months Ended
Fiscal Year Ended
January 30, 2021
February 1, 2020
% change
January 30, 2021
February 1, 2020
% change
Net revenue:
Americas Retail
$
195,829
$
258,334
(24
%)
$
510,806
$
811,547
(37
%)
Americas Wholesale
35,476
41,884
(15
%)
117,607
186,389
(37
%)
Europe
307,648
420,297
(27
%)
941,546
1,248,114
(25
%)
Asia
80,020
95,460
(16
%)
232,574
346,212
(33
%)
Licensing
29,482
26,279
12
%
73,996
85,847
(14
%)
Total net revenue
$
648,455
$
842,254
(23
%)
$
1,876,529
$
2,678,109
(30
%)
Earnings (loss) from operations:
Americas Retail
$
25,128
$
16,533
52
%
$
(15,776
)
$
22,279
(171
%)
Americas Wholesale
8,353
8,222
2
%
19,912
35,674
(44
%)
Europe
38,925
79,336
(51
%)
66,790
134,078
(50
%)
Asia
3,971
1,541
158
%
(20,758
)
(8,894
)
(133
%)
Licensing
28,105
22,896
23
%
67,938
74,459
(9
%)
Total segment earnings from operations
104,482
128,528
(19
%)
118,106
257,596
(54
%)
Corporate overhead
(29,795
)
(27,171
)
10
%
(100,962
)
(106,948
)
(6
%)
Asset impairment charges
(5,166
)
(4,851
)
6
%
(80,442
)
(9,977
)
706
%
Net gains on lease modifications
2,351
—
2,801
—
Total earnings (loss) from operations
$
71,872
$
96,506
(26
%)
$
(60,497
)
$
140,671
(143
%)
Operating margins:
Americas Retail
12.8
%
6.4
%
(3.1
%)
2.7
%
Americas Wholesale
23.5
%
19.6
%
16.9
%
19.1
%
Europe
12.7
%
18.9
%
7.1
%
10.7
%
Asia
5.0
%
1.6
%
(8.9
%)
(2.6
%)
Licensing
95.3
%
87.1
%
91.8
%
86.7
%
GAAP operating margin for total
Company
11.1
%
11.5
%
(3.2
%)
5.3
%
Certain professional service, legal fees
and related net credits
(0.1
%)
(0.0
%)
(0.0
%)
(0.1
%)
Separation charges
0.0
%
0.0
%
0.1
%
0.0
%
Asset impairment charges
0.8
%
0.6
%
4.3
%
0.4
%
Net gains on lease modifications
(0.4
%)
—
%
(0.1
%)
—
%
Adjusted operating margin for total
Company
11.4
%
12.1
%
1.1
%
5.6
%
Guess?, Inc. and
Subsidiaries
Constant Currency Financial
Measures
(dollars in thousands)
Three Months Ended
January 30, 2021
February 1, 2020
% change
As Reported
Foreign Currency
Impact
Constant Currency
As Reported
As Reported
Constant Currency
Net revenue:
Americas Retail
$
195,829
$
463
$
196,292
$
258,334
(24
%)
(24
%)
Americas Wholesale
35,476
508
35,984
41,884
(15
%)
(14
%)
Europe
307,648
(21,164
)
286,484
420,297
(27
%)
(32
%)
Asia
80,020
(4,365
)
75,655
95,460
(16
%)
(21
%)
Licensing
29,482
—
29,482
26,279
12
%
12
%
Total net revenue
$
648,455
$
(24,558
)
$
623,897
$
842,254
(23
%)
(26
%)
Fiscal Year Ended
January 30, 2021
February 1, 2020
% change
As Reported
Foreign Currency
Impact
Constant Currency
As Reported
As Reported
Constant Currency
Net revenue:
Americas Retail
$
510,806
$
3,132
$
513,938
$
811,547
(37
%)
(37
%)
Americas Wholesale
117,607
3,910
121,517
186,389
(37
%)
(35
%)
Europe
941,546
(33,144
)
908,402
1,248,114
(25
%)
(27
%)
Asia
232,574
(3,428
)
229,146
346,212
(33
%)
(34
%)
Licensing
73,996
—
73,996
85,847
(14
%)
(14
%)
Total net revenue
$
1,876,529
$
(29,530
)
$
1,846,999
$
2,678,109
(30
%)
(31
%)
Guess?, Inc. and
Subsidiaries
Selected Condensed
Consolidated Balance Sheet Data
(in thousands)
January 30,
2021
February 1,
2020
ASSETS
Cash and cash equivalents
$
469,110
$
284,613
Receivables, net
314,147
327,281
Inventories
389,144
393,129
Other current assets
60,123
59,212
Property and equipment, net
216,196
288,112
Restricted cash
235
215
Operating lease right-of-use assets
764,804
851,990
Other assets
252,109
224,410
Total assets
$
2,465,868
$
2,428,962
LIABILITIES AND STOCKHOLDERS’
EQUITY
Current portion of borrowings and finance
lease obligations
$
38,710
$
9,490
Current operating lease liabilities
222,800
192,066
Other current liabilities
501,029
436,857
Long-term debt and finance lease
obligations
68,554
32,770
Convertible senior notes, net
258,614
247,363
Long-term operating lease liabilities
662,657
714,079
Other long-term liabilities
144,004
130,259
Redeemable and nonredeemable
noncontrolling interests
25,837
26,364
Guess?, Inc. stockholders’ equity
543,663
639,714
Total liabilities and stockholders’
equity
$
2,465,868
$
2,428,962
Guess?, Inc. and
Subsidiaries
Condensed Consolidated Cash
Flow Data
(in thousands)
Fiscal Year Ended
January 30, 2021
February 1, 2020
Net cash provided by operating
activities
$
209,050
$
197,913
Net cash used in investing activities
(22,161
)
(56,471
)
Net cash used in financing activities
(9,907
)
(64,165
)
Effect of exchange rates on cash, cash
equivalents and restricted cash
7,535
(3,444
)
Net change in cash, cash equivalents and
restricted cash
184,517
73,833
Cash, cash equivalents and restricted cash
at the beginning of the year
284,828
210,995
Cash, cash equivalents and restricted cash
at the end of the year
$
469,345
$
284,828
Supplemental information:
Depreciation and amortization
$
63,501
$
72,188
Total lease costs (excluding finance lease
cost)
$
283,806
$
368,435
Guess?, Inc. and
Subsidiaries
Reconciliation of Net Cash
Provided By Operating Activities to Free Cash Flow
(in thousands)
Fiscal Year Ended
January 30, 2021
February 1, 2020
Net cash provided by operating
activities
$
209,050
$
197,913
Less: Purchases of property and
equipment
(18,876
)
(61,868
)
Less: Payments for property and equipment
under finance leases
(7,131
)
(2,733
)
Free cash flow
$
183,043
$
133,312
Guess?, Inc. and
Subsidiaries
Retail Store Data
Global Store and Concession
Count
As of January 30, 2021
Stores
Concessions
Region
Total
Directly Operated
Partner Operated
Total
Directly Operated
Partner Operated
United States
251
249
2
1
—
1
Canada
76
76
—
—
—
—
Central and South America
105
70
35
27
27
—
Total Americas
432
395
37
28
27
1
Europe and the Middle East
725
507
218
44
44
—
Asia and the Pacific
413
144
269
304
101
203
Total
1,570
1,046
524
376
172
204
As of February 1, 2020
Stores
Concessions
Region
Total
Directly Operated
Partner Operated
Total
Directly Operated
Partner Operated
United States
282
280
2
1
—
1
Canada
80
80
—
—
—
—
Central and South America
113
73
40
27
27
—
Total Americas
475
433
42
28
27
1
Europe and the Middle East
745
517
228
39
39
—
Asia and the Pacific
509
219
290
327
117
210
Total
1,729
1,169
560
394
183
211
Guess?, Inc. and
Subsidiaries
Return on Invested
Capital
(in thousands)
FY2019
FY2020
FY2020 2-Year Average
FY2024E
FY2025E
FY2025E 2-Year Average
Total assets1
$
1,649,205
$
2,428,962
$
2,039,084
$
2,918,000
$
2,829,000
$
2,873,500
Less: cash and cash equivalents
(210,460
)
(284,613
)
(247,537
)
(786,000
)
(675,000
)
(730,500
)
Less: Operating right-of-use assets1
—
(851,990
)
(425,995
)
(764,000
)
(768,000
)
(766,000
)
Less: Accounts payable
(286,657
)
(232,761
)
(259,709
)
(346,000
)
(354,000
)
(350,000
)
Less: Accrued expenses
(252,392
)
(204,096
)
(228,244
)
(209,000
)
(210,000
)
(209,500
)
Add: Accrual for European Commission
fine2
45,619
—
22,809
—
—
—
Average invested capital
$
945,315
$
855,502
$
900,408
$
813,000
$
822,000
$
817,500
FY2020
FY2025E
Adjusted earnings from operations3
$
150,229
$
290,000
Less: Asset impairments
(9,977
)
—
Less: Other income (expense), net
(2,529
)
(1,400
)
Less: Income tax expense4
(29,886
)
(72,150
)
Adjusted net operating profit after
taxes
$
107,837
$
216,450
Non-GAAP return on invested
capital5
12%
26%
______________________________________________________________________
1
During fiscal year 2020, the Company
adopted a comprehensive new lease standard which superseded
previous lease guidance. The standard requires a lessee to
recognize an asset related to the right to use the underlying asset
and a liability that approximates the present value of the lease
payments over the term of contracts that qualify as leases under
the new guidance. The adoption of the standard resulted in the
recording of operating lease right-of-use assets and operating
lease liabilities.
2
During fiscal year 2019, the Company
recognized a charge of €39.8 million ($45.6 million) related to a
fine by the European Commission related to its inquiry concerning
potential violations of European Union competition rules by the
Company.
3
The adjusted earnings from operations for
fiscal year 2020 reflect the exclusion of certain items which the
Company believes are not indicative of the underlying performance
of its business. Refer to the “Reconciliation of GAAP Results to
Adjusted Results” table above.
4
Income taxes are calculated using the
adjusted effective income tax rate for fiscal year 2020 of 21.7%
and a projection of 25% for the fiscal 2025 effective income tax
rate.
5
The Company defines return on invested
capital (or "ROIC") as adjusted net operating profit after taxes
divided by two-year average invested capital.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210331005847/en/
Guess?, Inc. Fabrice Benarouche VP, Finance and Investor
Relations (213) 765-5578
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