Guess Inc. sees huge opportunities ahead for its Rag & Bone business, but its Guess Americas retail component failed to meet company expectations due to softer consumer spending in the second quarter.
Walmart Banks on Generative AI to Improve Customer, Seller Experiences
“We are extremely pleased with how the business performed and how the assimilation of the business onto our platform is progressing,” Guess CEO Carlos Alberini said during an investor conference call following the posting of second-quarter results. He said the brand contributed solid growth for the company and that results were “driven by a great performance of the wholesale business, which experienced strong demand of new product in key categories from multiple customers.” In contrast, Alberini said the direct-to-consumer business came in “slightly below” company expectations.
Paul Marciano, co-founder and chief creative officer, said in a statement that the company has already started adding product categories to the Rag & Bone portfolio and has plans to “accelerate store openings both domestically and abroad.”
Alberini said the company is also increasing its marketing investments to support the international expansion of its brands, including the new additions to its portfolio, Guess Jeans and Rag & Bone.
The investments for Rag & Bone include new markets across Europe outside of the U.K. where the brand isn’t as well known. One other development as the company hunts for retail locations is the signing of a lease for a store in Amsterdam, Alberini said. “In addition to Europe, we are in discussions with potential partners to represent the Rag & Bone brand in other new markets, including Mexico, Latin America, Middle East and Australia,” the CEO said, adding that it is working with WHP to explore other licenses for products and territories. Guess disclosed in February that it would acquire the operating assets of the New York-based jeans brand, and that the brand’s intellectual property assets would be placed in a 50-50 joint venture controlled by Guess and WHP Global, the brand management firm headed up by Yehuda Shmidman. Rag & Bone chairman Andrew Rosen and his team joined Guess following the closing of the transaction.
In other growth news, Alberini said the wholesale business for its new Guess Jeans brand , headed by Nicolai Marciano, “is off to a strong start.” The new lifestyle brand targeting Gen Z men and women, with its casual offering and “compelling price points,” saw the opening of two stores in the quarter, one in Amsterdam and the other in Berlin. According to Alberini, Guess Jeans hosted a weekend event at Coachella that garnered “billions of impressions and millions of views,” adding also that the first Guess Jeans sales campaign delivered orders well ahead of company expectations.
The Guess business, except for Asia, saw revenue growth in all segments. The core Guess business performed well in European wholesale, and the company was able to drive growth in its Americas wholesale operations that also delivered top-line increases in the U.S. and Mexico. While the European retail business saw a positive comp sales increase, traffic in stores was slower in the quarter. Traffic was aldo tough in Guess Americas retail business, where comp sales posted a decline. Also, sales in the Asia business also fell.
Shuffle Board: Former CFO Returns to Guess, Oeko-Tex Names CEO
By category, Alberini said footwear and accessories were the leading categories across Europe, with strong momentum in sneakers and handbags. In apparel, knit tops for men and women, and women’s denim, delivered positive comps. In contrast, dresses and outerwear saw a decline in sales. In the Americas, the company posted declines in both its men’s and women’s businesses, although activewear remained the best-performing category across both genders. Accessories outperformed apparel, while revenue in licensing increased mostly due to footwear as the best-performing category for the period.
For the second quarter ended Aug. 3, the company posted a net loss of $10.6 million, or 28 cents a diluted share, against net income of $39 million, or 59 cents, a year ago. Net revenue rose 10.2 percent to $732.6 million from $664.5 million. Revenue included a 10.5 percent rise in product sales to $703.5 million and a 3.9 percent gain in royalty income to $29.1 million.
On an adjusted basis, earnings per share (EPS) were 42 cents. Analysts were expecting diluted EPS of 43 cents on revenues of nearly $730 million.
For the six months, net income was $2.4 million, or 4 cents, down from net income of $27.2 million, or 46 cents, in the same year-ago period. Net revenue was up 7.3 percent to $1.32 billion from $1.23 billion, which included a 7.1 percent increase in product sales to $1.27 billion and an 11.9 percent rise in royalty income to $58.1 million.
“We are clearly operating in a dynamic environment, where the customer is very selective and more sensitive to price and promotions,” Alberini said of the consumer mindset. He also noted that the slower customer traffic patterns that started in the U.S. first has now extended into Canada.
Reflecting the softer consumer backdrop, and factoring in higher costs due to inflationary factors, the company guided third-quarter adjusted diluted EPS to a range between 33 cents to 45 cents, on a consolidated net revenue increase of between 14.5 percent and 16.5 percent. For full year Fiscal 2025, adjusted diluted EPS was projected at between $2.42 to $2.70, on a consolidated net revenue increase of between 9.5 percent and 11.0 percent. Net revenue for the third quarter ended Oct. 28, 2023, was $651.2 million, and for the fiscal year ended Feb. 3, 2024, was $2.78 billion.
Lenzing Reports Increased Profit as Cost Cutting Pays Off
Local News
Comments / 0