1-11893 | 95-3679695 |
(Commission File Number) | (IRS Employer Identification No.) |
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: | |
o | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
o | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
o | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
o | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Title of each class | Trading symbol(s) | Name of each exchange on which registered | ||
Common Stock, par value $0.01 per share | GES | New York Stock Exchange |
Emerging growth company o | |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o |
Dated: | August 28, 2019 | GUESS?, INC. | |
By: | /s/ Sandeep Reddy | ||
Sandeep Reddy Chief Financial Officer |
Exhibit 99.1 |
• | Americas Retail revenues increased 0.9% in U.S. dollars and 1.2% in constant currency. Retail comp sales including e-commerce increased 2% in U.S. dollars and constant currency. |
• | Americas Wholesale revenues increased 22.3% in U.S. dollars and 22.4% in constant currency. |
• | Europe revenues increased 9.1% in U.S. dollars and 14.1% in constant currency. Retail comp sales including e-commerce decreased 3% in U.S. dollars and increased 1% in constant currency. |
• | Asia revenues increased 0.6% in U.S. dollars and 5.2% in constant currency. Retail comp sales including e-commerce decreased 13% in U.S. dollars and 8% in constant currency. |
• | Licensing revenues decreased 5.9% in U.S. dollars and constant currency. |
• | Operating margin for the Company’s Americas Retail segment increased 20 basis points to 3.0% in the second quarter of fiscal 2020, compared to 2.8% in the prior-year quarter, driven primarily by the favorable impact from higher initial markups and positive comparable sales, partially offset by wage pressures and higher markdowns. |
• | Operating margin for the Company’s Americas Wholesale segment increased 460 basis points to 20.1% in the second quarter of fiscal 2020, compared to 15.5% in the prior-year quarter, due primarily to higher initial markups and lower markdowns. |
• | Operating margin for the Company’s Europe segment increased 540 basis points to 15.2% in the second quarter of fiscal 2020, compared to 9.8% in the prior-year quarter, driven primarily by higher initial markups, lower logistics costs and leveraging of expenses. |
• | Operating margin for the Company’s Asia segment deteriorated 780 basis points to negative 5.8% in the second quarter of fiscal 2020, from 2.0% in the prior-year quarter, driven primarily by overall deleveraging of expenses and higher markdowns. |
• | Operating margin for the Company’s Licensing segment decreased 470 basis points to 83.8% in the second quarter of fiscal 2020, compared to 88.5% in the prior-year quarter. |
• | Americas Retail revenues increased 1.9% in U.S. dollars and 2.5% in constant currency. Retail comp sales including e-commerce increased 3% in U.S. dollars and constant currency. |
• | Americas Wholesale revenues increased 17.6% in U.S. dollars and 18.7% in constant currency. |
• | Europe revenues increased 6.4% in U.S. dollars and 13.3% in constant currency. Retail comp sales including e-commerce decreased 2% in U.S. dollars and increased 4% in constant currency. |
• | Asia revenues increased 1.0% in U.S. dollars and 5.9% in constant currency. Retail comp sales including e-commerce decreased 14% in U.S. dollars and 9% in constant currency. |
• | Licensing revenues decreased 5.4% in U.S. dollars and constant currency. |
• | Operating margin for the Company’s Americas Retail segment increased 110 basis points to 1.1% in the first six months of fiscal 2020, compared to relatively breakeven in the same prior-year period, driven primarily by the favorable impact from higher initial markups and positive comparable sales, partially offset by wage pressures and higher markdowns. |
• | Operating margin for the Company’s Americas Wholesale segment increased 330 basis points to 18.4% in the first six months of fiscal 2020, compared to 15.1% in the same prior-year period. The increase in operating margin was due primarily to higher initial markups, lower markdowns and overall leveraging of expenses. |
• | Operating margin for the Company’s Europe segment increased 440 basis points to 6.4% in the first six months of fiscal 2020, compared to 2.0% in the same prior-year period. This increase was driven primarily by higher initial markups and leveraging of expenses due primarily to higher sales. |
• | Operating margin for the Company’s Asia segment deteriorated 810 basis points to negative 4.7% in the first six months of fiscal 2020, from 3.4% in the same prior-year period, driven primarily by overall deleveraging of expenses and higher markdowns. |
• | Operating margin for the Company’s Licensing segment decreased 220 basis points to 86.2% in the first six months of fiscal 2020, from 88.4% in the same prior-year period. |
Outlook for Total Company1 | |||||
Third Quarter of Fiscal 2020 | Fiscal Year 2020 | ||||
Consolidated net revenue in U.S. dollars | increase between 2.0% and 3.0% | increase between 3.0% and 3.5% | |||
Consolidated net revenue in constant currency2 | increase between 4.5% and 5.5% | increase between 6.0% and 6.5% | |||
GAAP operating margin | 3.0% to 3.5% | 5.2% to 5.5% | |||
Adjusted operating margin3 | 3.0% to 3.5% | 5.3% to 5.6% | |||
Currency impact included in operating margin4 | (10) basis points | (10) basis points | |||
Cash interest expense, and amortization of debt issuance costs related to convertible senior notes | $1.7 million | $5.3 million | |||
Amortization of debt discount related to convertible senior notes | $2.4 million | $7.5 million | |||
Estimated diluted shares outstanding5 | 67.9 million | 71.6 million | |||
GAAP EPS5 | $0.12 to $0.15 | $1.18 to $1.26 | |||
Adjusted EPS3, 5 | $0.15 to $0.18 | $1.28 to $1.36 | |||
Currency impact included in EPS4 | $0.01 | $(0.08) | |||
Estimated impact of convertible senior notes and share repurchases included in GAAP EPS5, 6 | $(0.01) | $0.05 | |||
Estimated impact of convertible senior notes and share repurchases included in adjusted EPS5, 7 | $0.02 | $0.13 | |||
______________________________________________________________________ | |||||
Notes: | |||||
1 | The Company’s outlook for the third quarter ending November 2, 2019 and the fiscal year ending February 1, 2020 assumes that foreign currency exchange rates remain at prevailing rates and includes the estimated impact of known tariffs on imports into the U.S. | ||||
2 | Eliminates the impact of expected foreign currency translation to give investors a better understanding of the underlying trends within the business. | ||||
3 | The adjusted operating margin and adjusted EPS guidance for the 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 table below for a reconciliation of our GAAP and adjusted outlook. | ||||
4 | Represents the estimated translational and transactional gains (losses) of foreign currency rate fluctuations within operating margin and EPS measures presented. | ||||
5 | These amounts rely upon estimates of future weighted average share count including the impact from actual shares repurchased during the first six months of fiscal 2020 and the estimated impact of the remaining shares yet to be repurchased under the ASR. These estimates are subject to change and are dependent upon the stock price for the ultimate quantity of shares repurchased as well as timing of the repurchases. | ||||
6 | Represents the estimated net impact of share repurchases, cash interest expense, and amortization of debt discount and debt issuance costs (related to the $300 million convertible senior notes issued during the first quarter of fiscal 2020) on our GAAP EPS outlook. | ||||
7 | Represents the estimated net impact of share repurchases, cash interest expense and amortization of debt issuance costs (related to the $300 million convertible senior notes issued during the first quarter of fiscal 2020) on our adjusted EPS outlook. |
Reconciliation of GAAP Outlook to Adjusted Outlook | |||||
Third Quarter of Fiscal 2020 | Fiscal Year 2020 | ||||
GAAP operating margin | 3.0% to 3.5% | 5.2% to 5.5% | |||
Certain professional service and legal fees and related costs1 | —% | 0.0% | |||
Asset impairment charges2 | —% | 0.1% | |||
Adjusted operating margin | 3.0% to 3.5% | 5.3% to 5.6% | |||
GAAP earnings per share | $0.12 to $0.15 | $1.18 to $1.26 | |||
Certain professional service and legal fees and related costs1 | $— | $0.00 | |||
Asset impairment charges2 | $— | $0.04 | |||
Amortization of debt discount3 | $0.03 | $0.08 | |||
Adjustments to uncertain tax positions excluded in prior years4 | $— | $(0.02) | |||
Adjusted earnings per share | $0.15 to $0.18 | $1.28 to $1.36 | |||
______________________________________________________________________ | |||||
Notes: |
1 | Amounts for the full fiscal year include certain professional service and legal fees and related costs recognized during the six months ended August 3, 2019 which the Company otherwise would not have incurred as part of its business operations. The Company is unable to predict future amounts as these expenditures are inconsistent in amount 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 in the accompanying GAAP outlook. |
2 | Amounts for the full fiscal year include asset impairment charges for certain retail locations recognized during the six months ended August 3, 2019 that resulted from store under-performance and expected store closures. The adjusted results do not assume any additional asset impairment charges as the Company has recorded amounts currently anticipated under GAAP. |
3 | Amounts for the third quarter and full fiscal year represent amortization of the debt discount related to the $300 million convertible senior notes issued during the first quarter of fiscal 2020. |
4 | Amounts for the full fiscal year represent adjustments of uncertain tax positions during the six months ended August 3, 2019 which related to items excluded from adjusted results in prior years. The adjusted results do not assume any other changes to specified uncertain tax positions as the Company’s current accrual reflects its best estimate of amounts that will eventually be realized. |
Outlook by Segment1 | |||||||||
Third Quarter of Fiscal 2020 | Fiscal Year 2020 | ||||||||
U.S. Dollars | Constant Currency2 | U.S. Dollars | Constant Currency2 | ||||||
Americas Retail: | |||||||||
Comps | __ | flat to up LSD | __ | up LSD | |||||
Net Revenue | down LSD | down LSD to flat | flat to up LSD | up LSD | |||||
Americas Wholesale: | |||||||||
Net Revenue | up LSD | up MSD | up MSD | up MSD | |||||
Europe: | |||||||||
Comps | __ | up LSD | __ | up LSD | |||||
Net Revenue | up MSD | up LDD | up HSD | up LDD | |||||
Asia: | |||||||||
Comps | __ | down LDD to HSD | __ | down HSD | |||||
Net Revenue | flat to up LSD | up LSD to MSD | down LSD | flat to up LSD | |||||
Licensing: | |||||||||
Net Revenue | down MSD | __ | down MSD | __ | |||||
______________________________________________________________________ | |||||||||
Notes: | |||||||||
1 | As used in the table above, “LSD” is used to refer to the range of Low-Single-Digits, “MSD” is used to refer to the range of Mid-Single-Digits, “HSD” is used to refer to the range of High-Single-Digits, and “LDD” is used to refer to the range of Low-Double-Digits. | ||||||||
2 | Eliminates the impact of expected foreign currency translation to give investors a better understanding of the underlying trends within the business. |
Contact: | Guess?, Inc. | |
Fabrice Benarouche | ||
VP, Finance and Investor Relations | ||
(213) 765-5578 | ||
Source: | Guess?, Inc. |
Guess?, Inc. and Subsidiaries | ||||||||||||||||||||||||||
Condensed Consolidated Statements of Income | ||||||||||||||||||||||||||
(amounts in thousands, except per share data) | ||||||||||||||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||||||||||||
August 3, 2019 | August 4, 2018 | August 3, 2019 | August 4, 2018 | |||||||||||||||||||||||
$ | % | $ | % | $ | % | $ | % | |||||||||||||||||||
Product sales | $ | 664,678 | 97.3 | % | $ | 626,162 | 96.9 | % | $ | 1,182,551 | 96.9 | % | $ | 1,127,667 | 96.6 | % | ||||||||||
Net royalties | 18,542 | 2.7 | % | 19,709 | 3.1 | % | 37,360 | 3.1 | % | 39,493 | 3.4 | % | ||||||||||||||
Net revenue | 683,220 | 100.0 | % | 645,871 | 100.0 | % | 1,219,911 | 100.0 | % | 1,167,160 | 100.0 | % | ||||||||||||||
Cost of product sales | 417,554 | 61.1 | % | 406,440 | 62.9 | % | 772,296 | 63.3 | % | 753,791 | 64.6 | % | ||||||||||||||
Gross profit | 265,666 | 38.9 | % | 239,431 | 37.1 | % | 447,615 | 36.7 | % | 413,369 | 35.4 | % | ||||||||||||||
Selling, general and administrative expenses | 218,175 | 32.0 | % | 204,569 | 31.7 | % | 422,820 | 34.6 | % | 402,788 | 34.5 | % | ||||||||||||||
Asset impairment charges | 1,504 | 0.2 | % | 2,981 | 0.5 | % | 3,279 | 0.3 | % | 3,740 | 0.3 | % | ||||||||||||||
Net gains on lease terminations | — | — | % | — | — | % | — | — | % | (152 | ) | (0.0 | %) | |||||||||||||
Earnings from operations | 45,987 | 6.7 | % | 31,881 | 4.9 | % | 21,516 | 1.8 | % | 6,993 | 0.6 | % | ||||||||||||||
Other income (expense): | ||||||||||||||||||||||||||
Interest expense | (4,951 | ) | (0.7 | %) | (863 | ) | (0.1 | %) | (6,210 | ) | (0.5 | %) | (1,602 | ) | (0.1 | %) | ||||||||||
Interest income | 313 | 0.0 | % | 1,132 | 0.2 | % | 674 | 0.1 | % | 2,109 | 0.1 | % | ||||||||||||||
Other income (expense), net | (6,355 | ) | (0.9 | %) | 1,360 | 0.2 | % | (4,284 | ) | (0.4 | %) | (1,254 | ) | (0.1 | %) | |||||||||||
Earnings before income tax expense | 34,994 | 5.1 | % | 33,510 | 5.2 | % | 11,696 | 1.0 | % | 6,246 | 0.5 | % | ||||||||||||||
Income tax expense | 8,818 | 1.3 | % | 7,776 | 1.2 | % | 6,101 | 0.5 | % | 1,499 | 0.1 | % | ||||||||||||||
Net earnings | 26,176 | 3.8 | % | 25,734 | 4.0 | % | 5,595 | 0.5 | % | 4,747 | 0.4 | % | ||||||||||||||
Net earnings attributable to noncontrolling interests | 854 | 0.1 | % | 204 | 0.0 | % | 1,647 | 0.2 | % | 438 | 0.0 | % | ||||||||||||||
Net earnings attributable to Guess?, Inc. | $ | 25,322 | 3.7 | % | $ | 25,530 | 4.0 | % | $ | 3,948 | 0.3 | % | $ | 4,309 | 0.4 | % | ||||||||||
Net earnings per common share attributable to common stockholders: | ||||||||||||||||||||||||||
Basic | $ | 0.36 | $ | 0.32 | $ | 0.05 | $ | 0.05 | ||||||||||||||||||
Diluted | $ | 0.35 | $ | 0.31 | $ | 0.05 | $ | 0.05 | ||||||||||||||||||
Weighted average common shares outstanding attributable to common stockholders: | ||||||||||||||||||||||||||
Basic | 70,508 | 80,110 | 75,216 | 80,006 | ||||||||||||||||||||||
Diluted | 71,356 | 81,550 | 76,155 | 81,248 | ||||||||||||||||||||||
Effective tax rate | 25.2 | % | 23.2 | % | 52.2 | % | 24.0 | % | ||||||||||||||||||
Adjusted selling, general and administrative expenses1: | $ | 217,770 | 31.9 | % | $ | 202,543 | 31.4 | % | $ | 422,143 | 34.6 | % | $ | 396,953 | 34.0 | % | ||||||||||
Adjusted earnings from operations1: | $ | 47,896 | 7.0 | % | $ | 36,888 | 5.7 | % | $ | 25,472 | 2.1 | % | $ | 16,416 | 1.4 | % | ||||||||||
Adjusted net earnings attributable to Guess?, Inc.1: | $ | 27,414 | 4.0 | % | $ | 29,454 | 4.6 | % | $ | 7,798 | 0.6 | % | $ | 11,623 | 1.0 | % | ||||||||||
Adjusted diluted earnings per common share attributable to common stockholders1: | $ | 0.38 | $ | 0.36 | $ | 0.10 | $ | 0.14 | ||||||||||||||||||
Adjusted effective tax rate1: | 28.2 | % | 23.0 | % | 48.4 | % | 23.0 | % | ||||||||||||||||||
______________________________________________________________________ | ||||||||||||||||||||||||||
Notes: |
1 | The adjusted results for the three and six months ended August 3, 2019 reflect the exclusion of certain professional service and legal fees and related costs, asset impairment charges, amortization of debt discounts on the Company’s convertible senior notes, the related tax impacts of these adjustments as well as adjustments to uncertain tax positions excluded from results in prior years, where applicable. The adjusted results for the three and six months ended August 4, 2018 reflect the exclusion of certain professional service and legal fees and related costs, asset impairment charges, net gains on lease terminations and the related tax impacts of these adjustments, where applicable. A complete reconciliation of actual results to adjusted results is presented in the table entitled “Reconciliation of GAAP Results to Adjusted Results.” |
Guess?, Inc. and Subsidiaries |
Reconciliation of GAAP Results to Adjusted Results |
(dollars in thousands) |
Three Months Ended | Six Months Ended | ||||||||||||||||||
August 3, 2019 | August 4, 2018 | August 3, 2019 | August 4, 2018 | ||||||||||||||||
Reported GAAP selling, general and administrative expenses | $ | 218,175 | $ | 204,569 | $ | 422,820 | $ | 402,788 | |||||||||||
Certain professional service and legal fees and related costs1 | (405 | ) | (2,026 | ) | (677 | ) | (5,835 | ) | |||||||||||
Adjusted selling, general and administrative expenses | $ | 217,770 | $ | 202,543 | $ | 422,143 | $ | 396,953 | |||||||||||
Reported GAAP earnings from operations | $ | 45,987 | $ | 31,881 | $ | 21,516 | $ | 6,993 | |||||||||||
Certain professional service and legal fees and related costs1 | 405 | 2,026 | 677 | 5,835 | |||||||||||||||
Asset impairment charges2 | 1,504 | 2,981 | 3,279 | 3,740 | |||||||||||||||
Net gains on lease terminations3 | — | — | — | (152 | ) | ||||||||||||||
Adjusted earnings from operations | $ | 47,896 | $ | 36,888 | $ | 25,472 | $ | 16,416 | |||||||||||
Reported GAAP net earnings attributable to Guess?, Inc. | $ | 25,322 | $ | 25,530 | $ | 3,948 | $ | 4,309 | |||||||||||
Certain professional service and legal fees and related costs1 | 405 | 2,026 | 677 | 5,835 | |||||||||||||||
Asset impairment charges2 | 1,504 | 2,981 | 3,279 | 3,740 | |||||||||||||||
Net gains on lease terminations3 | — | — | — | (152 | ) | ||||||||||||||
Amortization of debt discount4 | 2,449 | — | 2,662 | — | |||||||||||||||
Income tax adjustments5 | (2,266 | ) | (1,083 | ) | (2,768 | ) | (2,109 | ) | |||||||||||
Total adjustment affecting net earnings attributable to Guess?, Inc. | 2,092 | 3,924 | 3,850 | 7,314 | |||||||||||||||
Adjusted net earnings attributable to Guess?, Inc. | $ | 27,414 | $ | 29,454 | $ | 7,798 | $ | 11,623 | |||||||||||
Reported GAAP income tax expense | $ | 8,818 | $ | 7,776 | $ | 6,101 | $ | 1,499 | |||||||||||
Income tax adjustments5 | 2,266 | 1,083 | 2,768 | 2,109 | |||||||||||||||
Adjusted income tax expense | $ | 11,084 | $ | 8,859 | $ | 8,869 | $ | 3,608 | |||||||||||
Adjusted effective tax rate | 28.2 | % | 23.0 | % | 48.4 | % | 23.0 | % | |||||||||||
______________________________________________________________________ | |||||||||||||||||||
Notes: |
1 | During the three and six months ended August 3, 2019 and August 4, 2018, the Company recorded certain professional service and legal fees and related costs, which it otherwise would not have incurred as part of its business operations. |
2 | During the three and six months ended August 3, 2019 and August 4, 2018, the Company recognized asset impairment charges for certain retail locations resulting from under-performance and expected store closures. |
3 | During the six months ended August 4, 2018, the Company recorded net gains on lease terminations related primarily to the early termination of certain lease agreements. The net gains on lease terminations were recorded during the three months ended May 5, 2018. |
4 | 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, will be amortized as non-cash interest expense over the term of the Notes. |
5 | The income tax effect of certain professional service and legal fees and related costs, asset impairment charges, net gains on lease terminations and 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 three and six months ended August 3, 2019 also includes adjustments to uncertain tax positions excluded from results in prior years. |
Guess?, Inc. and Subsidiaries | ||||||||||||||||||||||||||
Consolidated Segment Data | ||||||||||||||||||||||||||
(dollars in thousands) | ||||||||||||||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||||||||||||
August 3, 2019 | August 4, 2018 | % change | August 3, 2019 | August 4, 2018 | % change | |||||||||||||||||||||
Net revenue: | ||||||||||||||||||||||||||
Americas Retail | $ | 198,966 | $ | 197,125 | 1 | % | $ | 375,389 | $ | 368,465 | 2 | % | ||||||||||||||
Americas Wholesale | 41,902 | 34,253 | 22 | % | 88,107 | 74,932 | 18 | % | ||||||||||||||||||
Europe | 340,509 | 311,998 | 9 | % | 550,564 | 517,433 | 6 | % | ||||||||||||||||||
Asia | 83,301 | 82,786 | 1 | % | 168,491 | 166,837 | 1 | % | ||||||||||||||||||
Licensing | 18,542 | 19,709 | (6 | %) | 37,360 | 39,493 | (5 | %) | ||||||||||||||||||
Total net revenue | $ | 683,220 | $ | 645,871 | 6 | % | $ | 1,219,911 | $ | 1,167,160 | 5 | % | ||||||||||||||
Earnings (loss) from operations: | ||||||||||||||||||||||||||
Americas Retail | $ | 5,957 | $ | 5,582 | 7 | % | $ | 4,145 | $ | (98 | ) | 4,332 | % | |||||||||||||
Americas Wholesale | 8,422 | 5,325 | 58 | % | 16,236 | 11,351 | 43 | % | ||||||||||||||||||
Europe | 51,594 | 30,531 | 69 | % | 35,267 | 10,198 | 246 | % | ||||||||||||||||||
Asia | (4,800 | ) | 1,634 | (394 | %) | (8,003 | ) | 5,699 | (240 | %) | ||||||||||||||||
Licensing | 15,547 | 17,437 | (11 | %) | 32,191 | 34,923 | (8 | %) | ||||||||||||||||||
Total segment earnings from operations | 76,720 | 60,509 | 27 | % | 79,836 | 62,073 | 29 | % | ||||||||||||||||||
Corporate overhead | (29,229 | ) | (25,647 | ) | 14 | % | (55,041 | ) | (51,492 | ) | 7 | % | ||||||||||||||
Asset impairment charges | (1,504 | ) | (2,981 | ) | (50 | %) | (3,279 | ) | (3,740 | ) | (12 | %) | ||||||||||||||
Net gains on lease terminations | — | — | — | — | 152 | (100 | %) | |||||||||||||||||||
Total earnings from operations | $ | 45,987 | $ | 31,881 | 44 | % | $ | 21,516 | $ | 6,993 | 208 | % | ||||||||||||||
Operating margins: | ||||||||||||||||||||||||||
Americas Retail | 3.0 | % | 2.8 | % | 1.1 | % | (0.0 | %) | ||||||||||||||||||
Americas Wholesale | 20.1 | % | 15.5 | % | 18.4 | % | 15.1 | % | ||||||||||||||||||
Europe | 15.2 | % | 9.8 | % | 6.4 | % | 2.0 | % | ||||||||||||||||||
Asia | (5.8 | %) | 2.0 | % | (4.7 | %) | 3.4 | % | ||||||||||||||||||
Licensing | 83.8 | % | 88.5 | % | 86.2 | % | 88.4 | % | ||||||||||||||||||
GAAP operating margin for total Company | 6.7 | % | 4.9 | % | 1.8 | % | 0.6 | % | ||||||||||||||||||
Certain professional service and legal fees and related costs | 0.1 | % | 0.3 | % | 0.0 | % | 0.5 | % | ||||||||||||||||||
Asset impairment charges | 0.2 | % | 0.5 | % | 0.3 | % | 0.3 | % | ||||||||||||||||||
Net gains on lease terminations | — | % | — | % | — | % | 0.0 | % | ||||||||||||||||||
Adjusted operating margin for total Company | 7.0 | % | 5.7 | % | 2.1 | % | 1.4 | % |
Guess?, Inc. and Subsidiaries | ||||||||||||||||||||||||
Constant Currency Financial Measures | ||||||||||||||||||||||||
(dollars in thousands) | ||||||||||||||||||||||||
Three Months Ended | ||||||||||||||||||||||||
August 3, 2019 | August 4, 2018 | % change | ||||||||||||||||||||||
As Reported | Foreign Currency Impact | Constant Currency | As Reported | As Reported | Constant Currency | |||||||||||||||||||
Net revenue: | ||||||||||||||||||||||||
Americas Retail | $ | 198,966 | $ | 563 | $ | 199,529 | $ | 197,125 | 1% | 1% | ||||||||||||||
Americas Wholesale | 41,902 | 14 | 41,916 | 34,253 | 22% | 22% | ||||||||||||||||||
Europe | 340,509 | 15,343 | 355,852 | 311,998 | 9% | 14% | ||||||||||||||||||
Asia | 83,301 | 3,754 | 87,055 | 82,786 | 1% | 5% | ||||||||||||||||||
Licensing | 18,542 | — | 18,542 | 19,709 | (6%) | (6%) | ||||||||||||||||||
Total net revenue | $ | 683,220 | $ | 19,674 | $ | 702,894 | $ | 645,871 | 6% | 9% | ||||||||||||||
Six Months Ended | ||||||||||||||||||||||||
August 3, 2019 | August 4, 2018 | % change | ||||||||||||||||||||||
As Reported | Foreign Currency Impact | Constant Currency | As Reported | As Reported | Constant Currency | |||||||||||||||||||
Net revenue: | ||||||||||||||||||||||||
Americas Retail | $ | 375,389 | $ | 2,192 | $ | 377,581 | $ | 368,465 | 2% | 2% | ||||||||||||||
Americas Wholesale | 88,107 | 802 | 88,909 | 74,932 | 18% | 19% | ||||||||||||||||||
Europe | 550,564 | 35,945 | 586,509 | 517,433 | 6% | 13% | ||||||||||||||||||
Asia | 168,491 | 8,166 | 176,657 | 166,837 | 1% | 6% | ||||||||||||||||||
Licensing | 37,360 | — | 37,360 | 39,493 | (5%) | (5%) | ||||||||||||||||||
Total net revenue | $ | 1,219,911 | $ | 47,105 | $ | 1,267,016 | $ | 1,167,160 | 5% | 9% |
Guess?, Inc. and Subsidiaries | ||||||||||||||||||
Selected Condensed Consolidated Balance Sheet Data | ||||||||||||||||||
(in thousands) | ||||||||||||||||||
August 3, 2019 | February 2, 2019 | August 4, 2018 | ||||||||||||||||
ASSETS | ||||||||||||||||||
Cash and cash equivalents | $ | 131,060 | $ | 210,460 | $ | 219,062 | ||||||||||||
Receivables, net | 292,985 | 321,995 | 283,375 | |||||||||||||||
Inventories | 484,236 | 468,897 | 464,531 | |||||||||||||||
Other current assets | 59,226 | 87,343 | 86,030 | |||||||||||||||
Property and equipment, net | 302,906 | 315,558 | 288,740 | |||||||||||||||
Restricted cash | 519 | 535 | 372 | |||||||||||||||
Operating lease right-of-use assets1 | 900,062 | — | — | |||||||||||||||
Other assets | 231,210 | 244,417 | 247,788 | |||||||||||||||
Total assets | $ | 2,402,204 | $ | 1,649,205 | $ | 1,589,898 | ||||||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||||||||||
Current portion of borrowings and finance lease obligations | $ | 32,554 | $ | 4,315 | $ | 3,504 | ||||||||||||
Current operating lease liabilities1 | 213,912 | — | — | |||||||||||||||
Other current liabilities | 426,886 | 539,049 | 466,385 | |||||||||||||||
Long-term debt and finance lease obligations | 35,512 | 35,012 | 36,945 | |||||||||||||||
Convertible senior notes, net | 242,055 | — | — | |||||||||||||||
Long-term operating lease liabilities1 | 747,791 | — | — | |||||||||||||||
Other long-term liabilities1 | 125,915 | 212,331 | 212,032 | |||||||||||||||
Redeemable and nonredeemable noncontrolling interests | 22,707 | 21,271 | 19,163 | |||||||||||||||
Guess?, Inc. stockholders’ equity | 554,872 | 837,227 | 851,869 | |||||||||||||||
Total liabilities and stockholders’ equity | $ | 2,402,204 | $ | 1,649,205 | $ | 1,589,898 | ||||||||||||
______________________________________________________________________ | ||||||||||||||||||
Notes: |
1 | During the quarter ended May 4, 2019, 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. In addition, other long-term liabilities no longer includes deferred rent and lease incentives since these items are now included in operating lease right-of-use assets due to the adoption of the new standard. |
Guess?, Inc. and Subsidiaries | ||||||||||||||
Condensed Consolidated Cash Flow Data | ||||||||||||||
(in thousands) | ||||||||||||||
Six Months Ended | ||||||||||||||
August 3, 2019 | August 4, 2018 | |||||||||||||
Net cash used in operating activities | $ | (22,957 | ) | $ | (21,652 | ) | ||||||||
Net cash used in investing activities | (33,868 | ) | (53,223 | ) | ||||||||||
Net cash used in financing activities | (18,549 | ) | (56,792 | ) | ||||||||||
Effect of exchange rates on cash, cash equivalents and restricted cash | (4,042 | ) | (16,581 | ) | ||||||||||
Net change in cash, cash equivalents and restricted cash | (79,416 | ) | (148,248 | ) | ||||||||||
Cash, cash equivalents and restricted cash at the beginning of the year | 210,995 | 367,682 | ||||||||||||
Cash, cash equivalents and restricted cash at the end of the period | $ | 131,579 | $ | 219,434 | ||||||||||
Supplemental information: | ||||||||||||||
Depreciation and amortization | $ | 37,225 | $ | 33,045 | ||||||||||
Total lease costs1 | $ | 180,307 | $ | 174,118 | ||||||||||
Non-cash investing and financing activity: | ||||||||||||||
Assets acquired under finance leases2 | $ | 3,055 | $ | 1,164 | ||||||||||
______________________________________________________________________ | ||||||||||||||
Notes: |
1 | In connection with the adoption of new lease guidance during the first quarter of fiscal 2020, the Company has elected to include non-lease components, which is inclusive of common area maintenance charges, in the measurement of its lease liabilities for its directly operated real estate leases. Therefore, total lease costs includes lease and non-lease components related to the Company’s directly operated real estate leases for the six months ended August 3, 2019 and August 4, 2018. |
2 | During the six months ended August 3, 2019 and August 4, 2018 , the Company entered into finance leases related primarily to computer hardware and software. |
Guess?, Inc. and Subsidiaries | ||||||||||||||
Reconciliation of Net Cash Used in Operating Activities to Free Cash Flow | ||||||||||||||
(in thousands) | ||||||||||||||
Six Months Ended | ||||||||||||||
August 3, 2019 | August 4, 2018 | |||||||||||||
Net cash used in operating activities | $ | (22,957 | ) | $ | (21,652 | ) | ||||||||
Less: Purchases of property and equipment | (34,551 | ) | (46,006 | ) | ||||||||||
Less: Payments for property and equipment under finance leases | (1,202 | ) | (776 | ) | ||||||||||
Free cash flow | $ | (58,710 | ) | $ | (68,434 | ) |
Guess?, Inc. and Subsidiaries | ||||||||||||||
Retail Store Data | ||||||||||||||
Global Store and Concession Count | ||||||||||||||
As of August 3, 2019 | ||||||||||||||
Stores | Concessions | |||||||||||||
Region | Total | Directly Operated | Partner Operated | Total | Directly Operated | Partner Operated | ||||||||
United States | 287 | 285 | 2 | 1 | — | 1 | ||||||||
Canada | 80 | 80 | — | — | — | — | ||||||||
Central and South America | 111 | 71 | 40 | 27 | 27 | — | ||||||||
Total Americas | 478 | 436 | 42 | 28 | 27 | 1 | ||||||||
Europe and the Middle East | 726 | 510 | 216 | 37 | 37 | — | ||||||||
Asia and the Pacific | 520 | 216 | 304 | 337 | 162 | 175 | ||||||||
Total | 1,724 | 1,162 | 562 | 402 | 226 | 176 | ||||||||
As of August 4, 2018 | ||||||||||||||
Stores | Concessions | |||||||||||||
Region | Total | Directly Operated | Partner Operated | Total | Directly Operated | Partner Operated | ||||||||
United States | 295 | 293 | 2 | 1 | — | 1 | ||||||||
Canada | 86 | 86 | — | — | — | — | ||||||||
Central and South America | 104 | 61 | 43 | 27 | 27 | — | ||||||||
Total Americas | 485 | 440 | 45 | 28 | 27 | 1 | ||||||||
Europe and the Middle East | 674 | 440 | 234 | 36 | 36 | — | ||||||||
Asia and the Pacific | 503 | 181 | 322 | 365 | 174 | 191 | ||||||||
Total | 1,662 | 1,061 | 601 | 429 | 237 | 192 |