First Quarter Fiscal
2024 Results: Revenues Decreased 4% in U.S. Dollars
to $570 Million and Decreased 2% in Constant Currency
Delivered Operating Margin of (0.2%); Adjusted Operating Margin
of 0.3% GAAP Loss per Share of $0.22 and Adjusted Loss per
Share of $0.07
Updates Full Year
Fiscal 2024 Outlook: Expects Revenue Growth between
2.0% and 4.0% in U.S. Dollars GAAP and Adjusted Operating
Margins between 8.1% and 8.7% and 8.2% and 8.8%, Respectively
Expects GAAP EPS between $2.01 and $2.25 and Adjusted EPS
between $2.60 and $2.90
Raises Quarterly Cash
Dividend from $0.225 to $0.30 per Share
Guess?, Inc. (NYSE: GES) today reported financial results for
its first quarter ended April 29, 2023.
Carlos Alberini, Chief Executive Officer, commented, “We are
pleased with our first quarter financial results which exceeded our
expectations for revenues, operating margin and earnings per share.
Our international businesses were particularly strong during the
quarter. This performance, coupled with strong cost controls and
solid product margin performance, helped to more than offset
softness in our Americas Retail business as a result of slower
customer traffic into our stores. I believe that our results this
quarter highlight the power of our highly diversified business
model and the strength of our brands and global distribution.”
Paul Marciano, Co-Founder and Chief Creative Officer, commented,
“We have been relentlessly focused on our brand elevation strategy.
This initiative has touched almost every aspect of our business,
from the products we offer to the customer experience we provide,
including all channels of distribution, all global markets and all
25 of our product categories. Through these efforts, we have
transformed our Company and positioned our brands to continue to
gain market share and deliver profitable growth. I am very proud of
our teams and couldn’t be more excited about our future.”
Mr. Alberini concluded, “We are confident in our prospects and
today are reaffirming our positive outlook for the year. For fiscal
2024, we continue to see topline growth in the low single digits,
solid profit performance and strong cash flow generation. We just
completed a successful refinancing of our convertible bonds,
gaining additional financial capacity and extending debt maturities
by more than four years. We have a strong capital structure and
remain committed to rewarding our shareholders with solid returns.
Consistent with this commitment, we recently repurchased 2.2
million shares of our stock and our Board just approved a 33%
increase to our quarterly dividend, from $0.225 to $0.30 per share.
We look forward to our future and are very confident in our teams
to execute our plans effectively and capitalize on our
opportunities for growth and value creation.”
Non-GAAP Information
This press release contains non-GAAP financial measures,
including certain adjusted results of operations and outlook
measures, constant currency information and free cash flow
measures. See the heading “Presentation of Non-GAAP Information”
for further information and the accompanying tables for a
reconciliation to the comparable GAAP financial measure.
First Quarter Fiscal 2024
Results
For the first quarter of the fiscal year ending February 3, 2024
(“fiscal 2024”), the Company recorded GAAP net loss of $11.8
million, compared to GAAP net earnings of $8.0 million for the same
prior-year quarter. GAAP diluted net loss per share was $0.22 for
the first quarter of fiscal 2024, compared to GAAP diluted net
earnings per share (“EPS”) of $0.12 for the same prior-year
quarter. The Company estimates a negative impact from its share
buybacks of $0.03 and a positive impact from currency of $0.07 on
GAAP diluted net loss per share in the first quarter of fiscal 2024
when compared to the same prior-year quarter.
For the first quarter of fiscal 2024, the Company’s adjusted net
loss was $3.5 million, compared to adjusted net earnings of $15.2
million for the same prior-year quarter. Adjusted diluted net loss
per share was $0.07, compared to adjusted diluted EPS of $0.24 for
the same prior-year quarter. The Company estimates a negative
impact from its share buybacks of $0.01 and a positive impact from
currency of $0.06 on adjusted diluted net loss per share in the
first quarter of fiscal 2024 when compared to the same prior-year
quarter.
Net Revenue. Total net revenue for the first quarter of
fiscal 2024 decreased 4% to $569.8 million from $593.5 million in
the same prior-year quarter. In constant currency, net revenue
decreased by 2%.
- Americas Retail revenues decreased 14% in U.S. dollars and 13%
in constant currency. Retail comp sales, including e-commerce,
decreased 12% in both U.S. dollars and constant currency.
- Americas Wholesale revenues decreased 25% in U.S. dollars and
26% in constant currency.
- Europe revenues increased 2% in U.S. dollars and 5% in constant
currency. Retail comp sales, including e-commerce, increased 10% in
U.S. dollars and 13% in constant currency.
- Asia revenues increased 26% in U.S. dollars and 34% in constant
currency. Retail comp sales, including e-commerce, increased 1% in
U.S. dollars and 8% in constant currency.
- Licensing revenues decreased 10% in U.S. dollars and constant
currency.
Earnings (Loss) from Operations. GAAP loss from
operations for the first quarter of fiscal 2024 was $0.9 million
(including $1.9 million in non-cash impairment charges taken on
certain long-lived store related assets and a $0.5 million
unfavorable currency translation impact), compared to GAAP earnings
from operations of $36.4 million (including $1.5 million in
non-cash impairment charges taken on certain long-lived store
related assets and $0.6 million net gains on lease modifications)
in the same prior-year quarter. GAAP operating margin in the first
quarter of fiscal 2024 decreased 6.3% to negative 0.2%, from 6.1%
for the same prior-year quarter, driven primarily by higher costs,
lower government subsidies compared to the same prior-year quarter,
higher markdowns and the unfavorable impact of currency, partially
offset by higher initial markups. The negative impact of currency
on operating margin for the quarter was approximately 120 basis
points.
For the first quarter of fiscal 2024, adjusted earnings from
operations decreased 95% to $1.9 million, from $41.7 million in the
same prior-year quarter. Adjusted operating margin decreased 6.7%
to 0.3%, from 7.0% for the same prior-year quarter, driven
primarily by higher costs, lower government subsidies compared to
the same prior-year quarter, higher markdowns and the unfavorable
impact of currency, partially offset by higher initial markups.
- Operating margin for the Company’s Americas Retail segment
decreased 10.9% to negative 2.3% in the first quarter of fiscal
2024, from 8.6% in the same prior-year quarter, driven primarily by
the unfavorable impact from lower revenues, higher expenses and
higher markdowns.
- Operating margin for the Company’s Americas Wholesale segment
in the first quarter of fiscal 2024 remained the same as in the
prior-year quarter at 25.5%, driven primarily by the unfavorable
impact of lower revenues, offset by higher product margin.
- Operating margin for the Company’s Europe segment decreased
5.9% to 0.6% in the first quarter of fiscal 2024, from 6.5% in the
same prior-year quarter, driven primarily by higher expenses, lower
government subsidies compared to the same prior-year quarter and
the unfavorable impact of currency, partially offset by higher
initial markups and the favorable impact of higher revenues.
- Operating margin for the Company’s Asia segment increased 11.6%
to 5.4% in the first quarter of fiscal 2024, from negative 6.2% in
the same prior-year quarter, driven primarily by the favorable
impact of higher revenues.
- Operating margin for the Company’s Licensing segment increased
0.7% to 93.3% in the first quarter of fiscal 2024, from 92.6% in
the same prior-year quarter.
Loss on Extinguishment of Debt. In April 2023, the
Company issued $275 million principal amount of convertible senior
notes due April 2028 (the “2028 Notes”) in privately negotiated
exchange and subscription agreements with a limited number of
holders of its convertible senior notes due April 2024 (the “2024
Notes”) and certain other investors. As part of these transactions,
the Company exchanged approximately $184.9 million of its 2024
Notes for approximately $163.0 million of new 2028 Notes and
approximately $33.3 million in cash, and issued $112.0 million of
2028 Notes. Immediately following the closing of these
transactions, approximately $115.0 million of the 2024 Notes
remained outstanding and classified within current liabilities. As
a result of these transactions, the Company recognized a $7.7
million loss on extinguishment of debt.
Other expense, net. Other expense, net for the first
quarter of fiscal 2024 decreased 84% to $2.6 million from $16.5
million for the same prior-year quarter. The change was primarily
due to lower net unrealized and realized losses from foreign
currency exposures and, to a lesser extent, net unrealized gains on
the Company’s SERP-related assets, compared to net losses in the
same prior-year quarter. This was partially offset by net
mark-to-market losses on revaluation of foreign exchange currency
contracts, compared to net gains in the same prior-year
quarter.
Outlook
The Company’s expectations for the second quarter and full
fiscal year 2024 are as follows:
Outlook for Total
Company1
Second Quarter of Fiscal
2024
Fiscal 2024
Consolidated net revenue in U.S.
dollars
decrease 1.5% to flat
increase between 2.0% and
4.0%
GAAP operating margin
5.2% to 6.0%
8.1% to 8.7%
Adjusted operating margin
5.2% to 6.0%
8.2% to 8.8%
GAAP diluted EPS
$0.30 to $0.36
$2.01 to $2.25
Adjusted diluted EPS
$0.35 to $0.42
$2.60 to $2.90
______________________________________________________________________
See end of release for footnotes.
A reconciliation of the Company’s outlook for GAAP operating
margin to adjusted operating margin and GAAP diluted EPS to
adjusted diluted EPS for the second quarter and full fiscal 2024 is
as follows:
Reconciliation of GAAP Outlook
to Adjusted Outlook1
Second Quarter of Fiscal
2024
Fiscal 2024
GAAP operating margin
5.2% to 6.0%
8.1% to 8.7%
Certain professional service and legal
fees and related (credits) costs2
—%
—%
Asset impairment charges2
—%
0.1%
Net gains on lease modifications2
—%
—%
Adjusted operating margin
5.2% to 6.0%
8.2% to 8.8%
GAAP diluted EPS
$0.30 to $0.36
$2.01 to $2.25
Certain professional service and legal
fees and related (credits) costs2
—
0.01
Asset impairment charges2
—
0.02
Loss on extinguishment of debt2
—
0.09
Amortization of debt discount2
—
0.00
Discrete income tax adjustments2
—
0.00
Impact of convertible share dilution3
0.05 to 0.06
0.47 to 0.53
Adjusted diluted EPS
$0.35 to $0.42
$2.60 to $2.90
______________________________________________________________________
See end of release for footnotes.
The Company’s expectations of the high-end for the free cash
flow outlook for the full fiscal year 2024 are as follows (in
millions):
Free Cash Flow Outlook for
Total Company1
Fiscal 2024
Net cash provided by operating
activities
$230
Less: Purchases of property and
equipment
(74)
Less: Payments for property and equipment
under finance leases
(6)
Free cash flow
$150
______________________________________________________________________
See end of release for footnotes.
Dividend
The Company’s Board of Directors approved an increase to the
quarterly cash dividend, from $0.225 to $0.30 per share on the
Company’s common stock. The dividend will be payable on June 23,
2023 to shareholders of record as of the close of business on June
7, 2023.
Share Repurchases
During April 2023, in connection with the exchange and
subscription offering related to the 2024 Notes and the 2028 Notes,
the Company repurchased approximately 2.2 million shares of its
common stock for $42.8 million through broker-assisted market
transactions, pursuant to the Company’s 2021 Share Repurchase
Program. During the three months ended April 29, 2023, the Company
did not make any share repurchases other than the aforementioned
transaction.
Presentation of Non-GAAP
Information
The financial information presented in this release includes
non-GAAP financial measures, such as adjusted results and outlook,
constant currency financial information and free cash flows. The
adjusted measures exclude the impact of certain professional
service and legal fees and related (credits) costs, asset
impairment charges, net (gains) losses on lease modifications, loss
on extinguishment of debt, non-cash amortization of debt discount
of the Company’s convertible senior notes, the related income tax
effects of the foregoing items, the impact from changes in the
income tax law on deferred income taxes in certain tax
jurisdictions, as well as certain discrete income tax adjustments
related primarily to an intra-entity transfer of intellectual
property rights from certain U.S. entities to a wholly-owned Swiss
subsidiary, in each case where applicable. These non-GAAP measures
are provided in addition to, and not as alternatives for, the
Company’s reported GAAP results and outlook.
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 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 and GAAP future outlook). A
reconciliation of reported GAAP results and outlook to comparable
non-GAAP results and outlook is provided in the accompanying
tables.
This release 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 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 considers 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 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 and expected 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 May
24, 2023 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, 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 April 29, 2023, the Company directly operated 1,043 retail
stores in the Americas, Europe and Asia. The Company’s partners and
distributors operated 545 additional retail stores worldwide. As of
April 29, 2023, 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 impacts of
the ongoing conflict in Ukraine and other events impacting the
markets in which we operate; statements concerning the Company’s
future outlook, including with respect to the second quarter and
full year of fiscal 2024; statements concerning the Company’s
expectations, goals, future prospects, and current business
strategies and strategic initiatives; and statements expressing
optimism or pessimism about future operating results and growth
opportunities are forward-looking statements that are made pursuant
to the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995. All statements other than statements of
historical fact are forward-looking statements. 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; sanctions and
export controls targeting Russia and other impacts related to the
war in Ukraine; impacts related to the COVID-19 pandemic or other
public health crises; risks relating to our indebtedness; changes
to estimates related to impairments, inventory and other reserves;
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; the high concentration
of our Americas Wholesale business; risks related to the costs and
timely delivery of merchandise to our distribution facilities,
stores and 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 enhance our global
omni-channel capabilities; our ability to expand internationally
and operate in regions where we have less experience, including
through joint ventures; risks relating to our convertible senior
notes, including our ability to settle the liability in cash;
disruptions at our distribution facilities; our ability to attract
and retain management and other key personnel; obligations or
changes in estimates arising from new or existing litigation,
income tax and other regulatory proceedings; risks related to the
income tax treatment of our third quarter fiscal 2022 intra-entity
transfer of intellectual property rights from certain U.S. entities
to a wholly-owned Swiss subsidiary; catastrophic events or natural
disasters; 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; violations of, or changes to,
domestic or international laws and regulations; risks associated
with the acts or omissions of our licensees and third party
vendors, including a failure to comply with our vendor code of
conduct or other policies; risks associated with cyber security
incidents 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; 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; impacts of inflation and further inflationary pressures;
fluctuations in quarterly performance; slowing in-person customer
traffic; increases in labor costs; increases in wages; risks
relating to activist investor activity; and the significant voting
power of our family founders.
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, the ongoing conflict in Ukraine, concerns related to the
current U.S. debt ceiling, possible instability in the banking
system, and uncertainty surrounding potential changes in U.S.
policies and regulations 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
April 29, 2023
April 30, 2022
Product sales
$
545,910
95.8
%
$
567,073
95.6
%
Net royalties
23,888
4.2
%
26,400
4.4
%
Net revenue
569,798
100.0
%
593,473
100.0
%
Cost of product sales
337,813
59.3
%
346,324
58.4
%
Gross profit
231,985
40.7
%
247,149
41.6
%
Selling, general and administrative
expenses
230,973
40.6
%
209,831
35.3
%
Asset impairment charges
1,934
0.3
%
1,544
0.3
%
Net gains on lease modifications
—
—
%
(601
)
(0.1
%)
Earnings (loss) from operations
(922
)
(0.2
%)
36,375
6.1
%
Other income (expense):
Interest expense
(4,218
)
(0.7
%)
(3,093
)
(0.5
%)
Interest income
2,515
0.4
%
574
0.1
%
Loss on extinguishment of debt
(7,696
)
(1.4
%)
—
—
%
Other, net
(2,631
)
(0.4
%)
(16,452
)
(2.8
%)
Earnings (loss) before income tax expense
(benefit)
(12,952
)
(2.3
%)
17,404
2.9
%
Income tax expense (benefit)
(2,258
)
(0.4
%)
6,950
1.1
%
Net earnings (loss)
(10,694
)
(1.9
%)
10,454
1.8
%
Net earnings attributable to
noncontrolling interests
1,111
0.2
%
2,484
0.5
%
Net earnings (loss) attributable to
Guess?, Inc.
$
(11,805
)
(2.1
%)
$
7,970
1.3
%
Net earnings (loss) per common share
attributable to common stockholders:
Basic
$
(0.22
)
$
0.13
Diluted
$
(0.22
)
$
0.12
Weighted average common shares outstanding
attributable to common stockholders:
Basic
54,348
61,052
Diluted
54,348
74,469
Effective income tax rate
17.4
%
39.9
%
Adjusted selling, general and
administrative expenses4:
$
230,062
40.4
%
$
205,414
34.6
%
Adjusted earnings from operations4:
$
1,923
0.3
%
$
41,735
7.0
%
Adjusted net earnings (loss) attributable
to Guess?, Inc.4:
$
(3,487
)
(0.6
%)
$
15,237
2.6
%
Adjusted weighted average common shares
outstanding attributable to common stockholders:
Adjusted Diluted4,5
54,348
62,718
Adjusted net earnings (loss) per common
share attributable to common stockholders:
Adjusted Diluted4,5
$
(0.07
)
$
0.24
Adjusted effective income tax rate4:
0.4
%
22.1
%
__________________________________________________________________
See end of release for footnotes.
Guess?, Inc. and
Subsidiaries
Reconciliation of GAAP Results
to Adjusted Results
(dollars in thousands)
The reconciliations of (i) reported GAAP selling, general and
administrative expenses to adjusted selling, general and
administrative expenses, (ii) reported GAAP earnings (loss) from
operations to adjusted earnings from operations, (iii) reported
GAAP net earnings (loss) attributable to Guess?, Inc. to adjusted
net earnings (loss) attributable to Guess?, Inc., (iv) reported
GAAP income tax expense (benefit) to adjusted income tax expense
(benefit), and (v) reported GAAP diluted net earnings (loss) per
share to adjusted diluted net earnings (loss) per share are as
follows:
Three Months Ended
April 29, 2023
April 30, 2022
Reported GAAP selling, general and
administrative expenses
$
230,973
$
209,831
Certain professional service and legal
fees and related credits (costs)6
(911
)
(4,417
)
Adjusted selling, general and
administrative expenses4
$
230,062
$
205,414
Reported GAAP earnings (loss) from
operations
$
(922
)
$
36,375
Certain professional service and legal
fees and related (credits) costs6
911
4,417
Asset impairment charges7
1,934
1,544
Net gains on lease modifications8
—
(601
)
Adjusted earnings from
operations4
$
1,923
$
41,735
Reported GAAP net earnings (loss)
attributable to Guess?, Inc.
$
(11,805
)
$
7,970
Certain professional service and legal
fees and related (credits) costs6
911
4,417
Asset impairment charges7
1,934
1,544
Net gains on lease modifications8
—
(601
)
Loss on extinguishment of debt9
7,696
—
Amortization of debt discount10
25
—
Discrete income tax adjustments11
248
3,188
Income tax impact from adjustments12
(2,496
)
(1,281
)
Total adjustments affecting net earnings
(loss) attributable to Guess?, Inc.
8,318
7,267
Adjusted net earnings (loss)
attributable to Guess?, Inc.4
$
(3,487
)
$
15,237
Reported GAAP income tax expense
(benefit)
$
(2,258
)
$
6,950
Discrete income tax adjustments11
(248
)
(3,188
)
Income tax impact from adjustments12
2,496
1,281
Adjusted income tax expense
(benefit)4
$
(10
)
$
5,043
Adjusted effective income tax
rate4
0.4
%
22.1
%
Reported GAAP diluted net earnings (loss)
per share
$
(0.22
)
$
0.12
Convertible notes if-converted method
—
0.02
Certain professional service and legal
fees and related (credits) costs6, 13
0.01
0.05
Asset impairment charges7, 13
0.03
0.02
Net gains on lease modifications8, 13
—
(0.01
)
Loss on extinguishment of debt9, 13
0.11
—
Amortization of debt discount10, 13
0.00
—
Discrete income tax adjustments11
0.00
0.04
Adjusted diluted net earnings (loss)
per share
$
(0.07
)
$
0.24
__________________________________________________________________
See end of release for footnotes.
Guess?, Inc. and
Subsidiaries
Consolidated Segment
Data
(dollars in thousands)
Three Months Ended
April 29, 2023
April 30, 2022
% change
Net revenue:
Americas Retail
$
143,544
$
166,485
(14%)
Americas Wholesale
51,393
68,357
(25%)
Europe
280,198
276,009
2%
Asia
70,775
56,222
26%
Licensing
23,888
26,400
(10%)
Total net revenue
$
569,798
$
593,473
(4%)
Earnings (loss) from operations:
Americas Retail
$
(3,287
)
$
14,266
(123%)
Americas Wholesale
13,093
17,397
(25%)
Europe
1,593
17,890
(91%)
Asia
3,830
(3,487
)
(210%)
Licensing
22,295
24,444
(9%)
Total segment earnings from operations
37,524
70,510
(47%)
Corporate overhead
(36,512
)
(33,192
)
10%
Asset impairment charges
(1,934
)
(1,544
)
25%
Net gains on lease modifications
—
601
(100%)
Total earnings (loss) from operations
$
(922
)
$
36,375
(103%)
Operating margins:
Americas Retail
(2.3
%)
8.6
%
Americas Wholesale
25.5
%
25.5
%
Europe
0.6
%
6.5
%
Asia
5.4
%
(6.2
%)
Licensing
93.3
%
92.6
%
GAAP operating margin for total
Company
(0.2
%)
6.1
%
Certain professional service and legal
fees and related (credits) costs4,6
0.2
%
0.7
%
Asset impairment charges4,7
0.3
%
0.3
%
Net gains on lease modifications4,8
—
%
(0.1
%)
Adjusted operating margin for total
Company4
0.3
%
7.0
%
______________________________________________________________________
See end of release for footnotes.
Guess?, Inc. and
Subsidiaries
Constant Currency Financial
Measures
(dollars in thousands)
As Reported
Foreign Currency
Impact
Constant Currency
As Reported
As Reported
Constant Currency
April 29, 2023
April 30, 2022
Three Months Ended
% change
Net revenue:
Americas Retail
$
143,544
$
814
$
144,358
$
166,485
(14%)
(13%)
Americas Wholesale
51,393
(798
)
50,595
68,357
(25%)
(26%)
Europe
280,198
9,164
289,362
276,009
2%
5%
Asia
70,775
4,367
75,142
56,222
26%
34%
Licensing
23,888
—
23,888
26,400
(10%)
(10%)
Total net revenue
$
569,798
$
13,547
$
583,345
$
593,473
(4%)
(2%)
Guess?, Inc. and
Subsidiaries
Selected Condensed
Consolidated Balance Sheet Data
(in thousands)
April 29, 2023
January 28,
2023
April 30, 2022
ASSETS
Cash and cash equivalents
$
298,642
$
275,765
$
147,897
Receivables, net
286,314
341,939
295,430
Inventories
528,903
510,899
483,927
Other current assets
98,820
83,102
96,128
Property and equipment, net
239,747
240,355
232,763
Operating lease right-of-use assets
645,713
636,148
653,611
Other assets
342,583
337,240
340,250
Total assets
$
2,440,722
$
2,425,448
$
2,250,006
LIABILITIES AND STOCKHOLDERS’
EQUITY
Current portion of borrowings and finance
lease obligations
$
39,092
$
40,380
$
77,929
Current operating lease liabilities
172,628
170,192
178,470
Current portion of convertible senior
notes due 2024, net
114,812
—
—
Other current liabilities
502,501
552,480
502,092
Long-term debt and finance lease
obligations
159,372
95,921
51,560
Convertible senior notes due 2024, net
—
298,931
298,307
Convertible senior notes due 2028, net
265,594
—
—
Long-term operating lease liabilities
530,939
528,236
549,293
Other long-term liabilities
153,392
157,403
151,262
Redeemable and nonredeemable
noncontrolling interests
50,392
47,792
38,030
Guess?, Inc. stockholders’ equity
452,000
534,113
403,063
Total liabilities and stockholders’
equity
$
2,440,722
$
2,425,448
$
2,250,006
Guess?, Inc. and
Subsidiaries
Condensed Consolidated Cash
Flow Data
(in thousands)
Three Months Ended
April 29, 2023
April 30, 2022
Net cash used in operating activities
$
(12,658
)
$
(54,570
)
Net cash used in investing activities
(17,384
)
(29,196
)
Net cash provided by (used in) financing
activities
53,305
(176,794
)
Effect of exchange rates on cash and cash
equivalents
(386
)
(7,108
)
Net change in cash and cash
equivalents
22,877
(267,668
)
Cash and cash equivalents at the beginning
of the year
275,765
415,565
Cash and cash equivalents at the end of
the period
$
298,642
$
147,897
Supplemental information:
Depreciation and amortization
$
15,449
$
15,304
Total lease costs (excluding finance lease
cost)
$
79,510
$
74,678
Guess?, Inc. and
Subsidiaries
Reconciliation of Net Cash
Used In Operating Activities to Free Cash Flow
(in thousands)
Three Months Ended
April 29, 2023
April 30, 2022
Net cash used in operating activities
$
(12,658
)
$
(54,570
)
Less: Purchases of property and
equipment
(17,347
)
(28,742
)
Less: Payments for property and equipment
under finance leases
(1,490
)
(1,724
)
Free cash flow
$
(31,495
)
$
(85,036
)
Guess?, Inc. and
Subsidiaries
Retail Store Data
Global Store and Concession
Count
Stores
Concessions
Region
Total
Directly Operated
Partner Operated
Total
Directly Operated
Partner Operated
As of April 29, 2023
United States
238
238
—
—
—
—
Canada
61
61
—
—
—
—
Central and South America
103
69
34
29
29
—
Total Americas
402
368
34
29
29
—
Europe and the Middle East
782
558
224
53
53
—
Asia and the Pacific
404
117
287
244
135
109
Total
1,588
1,043
545
326
217
109
As of April 30, 2022
United States
244
244
—
1
—
1
Canada
74
74
—
—
—
—
Central and South America
101
67
34
29
29
—
Total Americas
419
385
34
30
29
1
Europe and the Middle East
795
564
231
51
51
—
Asia and the Pacific
424
124
300
253
111
142
Total
1,638
1,073
565
334
191
143
Guess?, Inc. and
Subsidiaries
Footnotes to Condensed
Consolidated Financial Data
Footnote:
1
The Company’s outlook for the
second quarter and full fiscal 2024 assumes that foreign currency
exchange rates remain at recently prevailing rates.
2
Amounts for the full fiscal year represent
the exclusion of (i) certain professional service and legal fees
and related (credits) costs which the Company otherwise would not
have incurred as part of its business operations, (ii) asset
impairment charges related primarily to impairment of property and
equipment and operating lease right-of-use assets related to
certain retail locations resulting from lower revenue and future
cash flow projections from under-performance and expected store
closures, (iii) loss on extinguishment of debt related to the 2024
Notes, (iv) amortization of debt discount related to the 2028 Notes
and (v) discrete income tax adjustments related to the impact from
changes in the income tax law on deferred income taxes in certain
tax jurisdictions, in each case as recognized during the three
months ended April 29, 2023. See the heading “Presentation of
Non-GAAP Information” for further information. The Company is
unable to predict future amounts with respect to these items, as
such amounts are inconsistent in magnitude and frequency and
certain elements used to estimate such items have not yet occurred
or are out of the Company’s control. As such, the Company has not
considered any future charges or credits with respect to these
items in the accompanying GAAP outlook.
3
Amounts for the second quarter
and full fiscal 2024 represent the exclusion of the dilutive impact
of the Company’s convertible notes for adjusted diluted shares and
corresponding interest expenses at initial stock prices below
$46.88 for the 2024 Notes and $41.80 for the 2028 Notes, based on
the bond hedge contracts in place that will deliver shares to
offset dilution. The Company excludes the dilutive impact
anticipated to be recorded in those periods as such amounts are
reasonably estimated. The Company has not assumed any potential
share dilution due to the related warrants.
4
The adjusted results reflect the
exclusion of certain professional service and legal fees and
related (credits) costs, asset impairment charges, net gains on
lease modifications, the related income tax impacts of these
adjustments, as well as certain discrete income tax adjustments,
where applicable. A reconciliation of actual results to adjusted
results is presented in the “Reconciliation of GAAP Results to
Adjusted Results.”
5
The Company excludes the dilutive
impact of the 2024 Notes at initial stock prices below $46.88 and
the 2028 Notes at initial stock prices below $41.80, based on the
bond hedge contracts in place that will deliver shares to offset
dilution. At initial stock prices in excess of $46.88 for the 2024
Notes and $41.80 for the 2028 Notes, the Company would have an
obligation to deliver additional shares in excess of the dilution
protection provided by the bond hedges.
6
Adjustments represent certain
professional service and legal fees and related (credits) costs
which the Company otherwise would not have incurred as part of its
business operations.
7
Adjustments represent asset
impairment charges related primarily to impairment of property and
equipment and operating lease right-of-use assets related to
certain retail locations resulting from under-performance and
expected store closures.
8
Adjustments represent net gains
on lease modifications related primarily to the early termination
of certain lease agreements.
9
Adjustments represent loss on
extinguishment of debt from a portion of the exchanged 2024 Notes
in April 2023.
10
In April 2023, the Company issued
$275 million principal amount of 3.75% convertible senior notes due
2028 in a private offering. The debt discount, which resulted from
the modification accounting for a portion of the exchanged 2024
Notes, will be amortized as non-cash interest expense over the term
of the 2028 Notes.
11
Adjustments represent discrete
income taxes related primarily to the impact from changes in the
income tax law on deferred income taxes in certain tax
jurisdictions and adjustments from an intra-entity transfer of
intellectual property rights from certain U.S. entities to a
wholly-owned Swiss subsidiary.
12
The income tax effect of certain
professional service and legal fees and related (credits) costs,
asset impairment charges, net gains on lease modifications, loss on
extinguishment of debt and amortization of debt discount was based
on the Company’s assessment of deductibility using the statutory
income tax rate (inclusive of the impact of valuation allowances)
of the tax jurisdiction in which the charges were incurred.
13
Adjustments include the related
income tax effect based on the Company’s assessment of
deductibility using the statutory income tax rate (inclusive of the
impact of valuation allowances) of the tax jurisdiction in which
the charges were incurred.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230522005763/en/
Guess?, Inc. Fabrice Benarouche Senior Vice President Finance,
Investor Relations and Chief Accounting Officer (213) 765-5578
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