LOS ANGELES, May 25, 2016 /PRNewswire/ -- Guess?, Inc. (NYSE: GES) today reported financial results for its first quarter ended April 30, 2016.

First Quarter Fiscal 2017 Highlights

• Americas Retail revenues decreased 5% in U.S. dollars and 3% in constant currency; retail comp sales including e-commerce decreased 4% in U.S. dollars and 3% in constant currency
• Europe revenues decreased 1% in U.S. dollars and 3% in constant currency
• Asia revenues decreased 15% in U.S. dollars and 11% in constant currency
• Americas Wholesale revenues decreased 12% in U.S. dollars and 7% in constant currency
• GAAP loss from operations of $29 million in Q1 fiscal 2017; compared to earnings from operations of $4 million in Q1 fiscal 2016; Adjusted loss from operations of $23 million in Q1 fiscal 2017
• Announces quarterly cash dividend of $0.225

This press release contains certain non-GAAP, or adjusted, financial measures, which exclude the impact of restructuring charges and a related exit tax charge recorded during the first quarter of fiscal 2017. 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.

First Quarter Fiscal 2017 Results

Victor Herrero, Chief Executive Officer, commented, "Our first quarter adjusted operating loss finished at the low-end of our guidance as sales finished below our expectations. In the Americas, our retail business in the US and Canada was very challenging, especially in the month of April. In Europe, our retail business performed extremely well and delivered positive comp store sales in the mid-teens, a trend of strong comps that started in the second half of last year. In Asia, we delivered positive comps in Korea, although Greater China was below our expectations as we continue to build out our infrastructure there and transition the business to a direct model."

Mr. Herrero continued, "I had highlighted on our last earnings call that the first six months of the year would be a transition period. The start to the year has been a bit more challenging than we anticipated especially in the Americas and to a lesser extent in Greater China. These developments are reflected in our guidance for the second quarter as well as our updated guidance for the full year. We are still confident that we will be able to achieve the three year plan goals we provided in March this year, but with a different cadence than initially planned."

For the first quarter of fiscal 2017, the Company recorded GAAP net loss of $25.2 million, compared to net earnings of $3.3 million for the first quarter of fiscal 2016. GAAP diluted loss per share was $0.30, compared to diluted earnings per share of $0.04 for the prior-year quarter, a decrease of $0.34 per share. The negative impact of currency on diluted loss per share in the first quarter of fiscal 2017 was approximately $0.08 per share.

During the first quarter of fiscal 2017, the Company incurred restructuring charges and a related exit tax charge totaling approximately $5.8 million, including related tax impacts, or an unfavorable $0.07 per share impact. Excluding the impact of these charges, adjusted net loss was $19.4 million and adjusted diluted loss per share was $0.23 during the first quarter of fiscal 2017.

Total net revenue for the first quarter of fiscal 2017 decreased 6.3% to $448.8 million, from $478.8 million in the prior-year quarter. In constant currency, total net revenue decreased 5.0%. Refer to the accompanying tables for a summary of net revenue by segment as well as information regarding the impact of foreign currency exchange rate fluctuations on the Company's net revenue.

GAAP operating loss for the first quarter of fiscal 2017 was $29.0 million (including a $0.9 million unfavorable currency translation impact), compared to operating earnings of $4.4 million in the prior-year period, a decrease of $33.3 million. GAAP operating margin in the first quarter decreased 740 basis points to negative 6.5%, from 0.9% in the prior-year quarter, due primarily to lower shipments in our European wholesale business and the negative impact from currency exchange rate fluctuations and restructuring charges on the operating margin. The negative impact of currency on operating margin for the quarter was roughly 150 basis points.

Excluding the impact of the restructuring charges, adjusted operating loss was $22.9 million and adjusted operating margin was negative 5.1%, a decrease of 600 basis points compared to the same prior-year quarter.

• Operating margin for the Company's Americas Retail segment decreased 280 basis points to negative 6.2% in the first quarter of fiscal 2017, from negative 3.4% in the prior-year period. The decrease in operating margin was driven primarily by lower gross margins and a higher SG&A rate due primarily to the negative impact on the fixed cost structure resulting from negative comparable store sales.
• Operating margin for the Company's Europe segment decreased 770 basis points to negative 10.4% in the first quarter of fiscal 2017, from negative 2.7% in the prior-year period, due to lower gross margins and a higher SG&A rate. The lower gross margins were driven primarily by the unfavorable impact from lower wholesale shipments, currency exchange rate fluctuations and more promotions, partially offset by the favorable impact from business mix and positive comparable store sales. The higher SG&A rate was due primarily to overall deleveraging driven by lower wholesale shipments, partially offset by the favorable impact on the fixed cost structure resulting from positive comparable store sales.
• Operating margin for the Company's Asia segment decreased 840 basis points to negative 1.2% in the first quarter of fiscal 2017, from 7.2% in the prior-year period. The decrease in operating margin was due to a higher SG&A rate and lower overall gross margins due primarily to the unfavorable impact from business mix and higher expenses driven by expansion in China.
• Operating margin for the Company's Americas Wholesale segment decreased 100 basis points to 17.1% in the first quarter of fiscal 2017, from 18.1% in the prior-year period. The decrease in operating margin was due to lower product margins driven primarily by the unfavorable impact from currency exchange rate fluctuations on product costs.
• Operating margin for the Company's Licensing segment increased 240 basis points to 91.4% in the first quarter of fiscal 2017, compared to 89.0% in the prior-year period.

Other net expense, which primarily includes net unrealized and realized mark-to-market revaluation losses on foreign exchange currency contracts, partially offset by net unrealized and realized gains on non-operating assets, was $1.1 million for the first quarter of fiscal 2017, compared to other net income of $2.6 million in the prior-year quarter.

Dividends

The Company's Board of Directors has approved a quarterly cash dividend of $0.225 per share on the Company's common stock. The dividend will be payable on June 24, 2016 to shareholders of record at the close of business on June 8, 2016.

Outlook

The following guidance assumes that foreign currency exchange rates remain at prevailing rates:

The Company's expectations for the second quarter of fiscal 2017 ending July 30, 2016, are as follows:

• Consolidated net revenues are expected to increase between 0.5% and 2.5% in U.S. dollars and constant currency.
• Operating margin is expected to be between 1.5% and 2.5% and includes 60 basis points of currency headwind.
• Diluted earnings per share are expected to be in the range of $0.04 to $0.08. The estimated impact on earnings per share of the currency headwinds is approximately $0.06.

The Company updated its outlook for the fiscal year ending January 28, 2017, which is now as follows:

• Consolidated net revenues are expected to increase between 5.5% and 7.5% in U.S. dollars. Currency tailwinds are expected to positively impact consolidated revenue growth by approximately 0.5%. Excluding the impact of currency, consolidated net revenues are expected to increase between 5.0% and 7.0% in constant currency.
• GAAP operating margin is expected to be between 3.0% and 4.0% and includes 40 basis points of currency headwind; Adjusted operating margin is expected to be between 3.5% and 4.5%.
• GAAP diluted earnings per share are expected to be in the range of $0.48 to $0.68. The estimated impact on earnings per share of the currency headwinds is approximately $0.12. Adjusted diluted earnings per share are expected to be in the range of $0.55 to $0.75.

During the first quarter of fiscal 2017, the Company initiated a global cost reduction and restructuring plan to streamline its operational structure and reduce expenses. The Company's adjusted outlook for the full year excludes the impact of the restructuring charges, related exit tax charge and tax impact where applicable, recorded during the first quarter of fiscal 2017. The Company's expectations for the second quarter ending July 30, 2016, and the Company's adjusted and GAAP outlook for the fiscal year ending January 28, 2017, also exclude the impact of any restructuring charges that may be recorded in the remainder of fiscal 2017.

On a segment basis, the Company expects the following ranges for percentage changes for comparable store sales ("comps") and net revenue in U.S. dollars and constant currency compared to the same prior-year period:

 

Presentation of Non-GAAP Information

The financial information presented in this release includes non-GAAP financial measures such as "adjusted" results (to exclude the impact of restructuring charges, related exit tax charge and tax impact where applicable, incurred during the first quarter of fiscal 2017), constant currency financial information and free cash flow measures. The non-GAAP measures are provided in addition to, and not as alternatives for, the Company's reported GAAP results.

The Company has excluded restructuring charges, related exit tax charge and tax impact where applicable, incurred during the first quarter of fiscal 2017 from its adjusted financial measures primarily because it does not believe such charges reflect the Company's ongoing operating results or future outlook. The Company believes that these adjusted financial measures are useful as an additional means for investors to evaluate the comparability of the Company's operating results when reviewed in conjunction with the Company's GAAP financial statements. A reconciliation of reported GAAP results to comparable non-GAAP results is provided in the accompanying tables.

This release also includes certain constant currency financial information. Foreign currency exchange rate fluctuations affect the amount reported from translating the Company's foreign revenue, expenses and balance sheet amounts into U.S. dollars. These rate fluctuations can have a significant effect on reported operating results under GAAP. The Company provides constant currency information to enhance the visibility of underlying business trends, excluding the effects of changes in foreign currency translation rates. To calculate net revenue, comparable store sales and earnings (loss) from operations on a constant currency basis, actual or forecasted results for the current-year period are translated into U.S. dollars at the average exchange rates in effect during the comparable period of the prior year. The constant currency calculations do not adjust for the impact of revaluing specific transactions denominated in a currency that is different to the functional currency of that entity when exchange rates fluctuate. However, in calculating the estimated impact of currency on our earnings per share for our actual and forecasted results, the Company estimates gross margin (including the impact of merchandise-related hedges) and expenses using the appropriate prior-year rates, translates the estimated foreign earnings at the comparable prior-year rates, and excludes the year-over-year earnings impact of gains or losses arising from balance sheet remeasurement and foreign currency contracts not designated as merchandise hedges. The constant currency information presented may not be comparable to similarly titled measures reported by other companies.

The Company also includes information regarding its free cash flows in this release. The Company calculates free cash flows as cash flows from operating activities less purchases of property and equipment. Free cash flows is not intended to be an alternative to cash flows from operating activities as a measure of liquidity, but rather provides additional visibility to investors regarding how much cash is generated for discretionary and non-discretionary items after deducting purchases of property and equipment. Free cash flow information presented may not be comparable to similarly titled measures reported by other companies. A reconciliation of reported GAAP cash flows from operating activities to the comparable non-GAAP free cash flow measure is provided in the accompanying tables.

Investor Conference Call

The Company will hold a conference call at 4:45 pm (ET) on May 25, 2016 to discuss the news announced in this press release. A live webcast of the conference call will be accessible at www.guess.com via the "Investor Relations" link. The webcast will be archived on the website for 30 days.

About Guess?

Guess?, Inc. designs, markets, distributes and licenses a lifestyle collection of contemporary apparel, denim, handbags, watches, footwear and other related consumer products. Guess? products are distributed through branded Guess? stores as well as better department and specialty stores around the world. As of April 30, 2016, the Company directly operated 840 retail stores in the Americas, Europe and Asia. The Company's licensees and distributors operated 792 additional retail stores worldwide. As of April 30, 2016, the Company and its licensees and distributors operated in more than 95 countries worldwide. For more information about the Company, please visit www.guess.com.

Forward-Looking Statements

Except for historical information contained herein, certain matters discussed in this press release or the related conference call and webcast, including statements concerning the Company's expectations, future prospects and strategic initiatives (including those identified by our Chief Executive Officer, Victor Herrero), guidance for the second quarter and full year of fiscal 2017, as well as our three-year plans (including revenues, operating margin and earnings per share growth), are forward-looking statements that are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements, which are frequently indicated by terms such as "expect," "will," "goal," "strategy," "believe," "continue," "outlook," "plan" and similar terms, are only expectations, and involve known and unknown risks and uncertainties, which may cause actual results in future periods to differ materially from what is currently anticipated. Factors which may cause actual results in future periods to differ materially from current expectations include, among others: our ability to maintain our brand image and reputation; domestic and international economic conditions, including economic and other events that could negatively impact consumer confidence and discretionary consumer spending; changes in the competitive marketplace and in our commercial relationships; our ability to anticipate and respond to 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; our ability to effectively operate our various retail concepts, including securing, renewing, modifying or terminating leases for store locations; our ability to successfully implement our growth strategies and other strategic initiatives, including expansion in emerging markets and joint ventures; our ability to successfully or timely implement plans for cost and workforce reductions; changes to our short or long-term strategic initiatives; unexpected obligations arising from new or existing litigation, tax and other regulatory proceedings; accounting adjustments identified from subsequent events arising after issuance of this release; 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; risks associated with the acts or omissions of our third party vendors, including a failure to comply with our vendor code of conduct or other policies; risks associated with cyber attacks and other cyber security risks; and changes in economic, political, social and other conditions affecting our foreign operations and sourcing, including the impact of currency fluctuations, global tax rates and economic and market conditions in Eastern Europe, Southern Europe and Asia (particularly China and Korea). 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 Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

 

 

 

 

 

 

 

 

 

 

 

 

 

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/guess-inc-reports-first-quarter-results-300275025.html

SOURCE Guess?, Inc.