Document
GUESS?, INC. REPORTS FISCAL YEAR 2024 THIRD QUARTER RESULTS
Third Quarter Fiscal 2024 Results:
Revenues Increased to $651 Million, Up 3% in U.S. Dollars and 1% in Constant Currency
Delivered Operating Margin of 8.4%; Adjusted Operating Margin of 8.9%
GAAP EPS of $0.82 and Adjusted EPS of $0.49
Lowers Full Year Fiscal 2024 Outlook:
Expects Revenue Growth between 1.8% and 2.4% in U.S. Dollars
GAAP and Adjusted Operating Margins between 8.7% and 8.9% and 8.9% and 9.1%, Respectively
Expects GAAP EPS between $2.49 and $2.55 and Adjusted EPS between $2.67 and $2.74
LOS ANGELES, November 21, 2023 - Guess?, Inc. (NYSE: GES) today reported financial results for its third quarter ended October 28, 2023.
Carlos Alberini, Chief Executive Officer, commented, “We are pleased with our third quarter financial results, which were in line with our guidance for revenue growth and at the high end of our expectations for operating profit performance. During the period, we managed the business well and delivered strong gross margin and effective cost performance, which resulted in GAAP and adjusted operating margins of 8.4% and 8.9%, respectively, ahead of our expectations for the quarter. Overall, a strong licensing business combined with a disciplined approach to cost management offset softness in some of our direct-to-consumer businesses and drove earnings from operations for the Company that were flat to last year’s performance.”
Paul Marciano, Co-Founder and Chief Creative Officer, commented, “Our brand momentum is strong and we continue to benefit from our highly diversified business model. We have a strong global infrastructure that supports 25 different product categories, many markets across all regions of the world and multiple consumer channels. We have great teams driving these businesses that are performing well in a challenging environment and remain well positioned to grow our business. We want to thank our people for their hard work and valuable contributions.”
Mr. Alberini concluded, “We are confident in our plans for the holiday season and have a strong inventory position to respond well to customer demand. We are navigating through an uncertain shopping environment in many parts of the world impacted by geopolitical issues and lower consumer confidence. Based on these factors and our recent sales trends, we are taking a more cautious view for our fourth quarter outlook and now expect to deliver net revenue growth of 2% and an operating margin of roughly 9% for the fiscal year. We have identified many opportunities to grow our business and are working on our strategy to capture these opportunities and deliver strong value to our shareholders.”
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.
Third Quarter Fiscal 2024 Results
For the third quarter of the fiscal year ending February 3, 2024 (“fiscal 2024”), the Company recorded GAAP net earnings of $55.7 million, a 155% increase from $21.8 million for the same prior-year quarter. The results for the third quarter of fiscal 2024 included a net positive impact of $31.2 million from discrete tax adjustments related primarily to the consolidation of certain business functions into Switzerland. GAAP diluted net earnings per share (“EPS”) increased 141% to $0.82 for the third quarter of fiscal 2024, compared to $0.34 for the same prior-year quarter. The Company estimates a positive impact from its share buybacks of $0.02 and a negative impact from currency of $0.03 on GAAP diluted EPS in the third quarter of fiscal 2024 when compared to the same prior-year quarter.
For the third quarter of fiscal 2024, the Company’s adjusted net earnings were $27.0 million, a 9% increase from $24.7 million for the same prior-year quarter. Adjusted diluted EPS increased 11% to $0.49, compared to $0.44 for the same prior-year quarter. The Company estimates a positive impact from its share buybacks of $0.02 and a negative impact from currency of $0.02 on adjusted diluted EPS in the third quarter of fiscal 2024 when compared to the same prior-year quarter.
Net Revenue. Total net revenue for the third quarter of fiscal 2024 increased 3% to $651.2 million from $633.4 million in the same prior-year quarter. In constant currency, net revenue increased by 1%.
•Europe revenues increased 6% in U.S. dollars and 5% in constant currency. Retail comparable sales (including e-commerce) increased 8% in U.S. dollars and 7% in constant currency. The inclusion of our e-commerce sales had a minimal impact on the retail comparable sales percentage in U.S. dollars and a negative impact of 1% in constant currency.
•Americas Retail revenues decreased 7% in U.S. dollars and 8% in constant currency. Retail comparable sales (including e-commerce) decreased 5% in both U.S. dollars and constant currency. The inclusion of our e-commerce sales had a minimal impact on the retail comparable sales percentage in U.S. dollars and a positive impact of 1% in constant currency.
•Americas Wholesale revenues increased 4% in U.S. dollars and decreased 1% in constant currency.
•Asia revenues increased 2% in U.S. dollars and remained flat in constant currency. Retail comparable sales (including e-commerce) decreased 8% in U.S. dollars and 9% in constant currency. The inclusion of our e-commerce sales negatively impacted the retail comparable sales percentage by 1% in both U.S. dollars and constant currency.
•Licensing revenues increased 19% in U.S. dollars and constant currency.
Earnings from Operations. GAAP earnings from operations for the third quarter of fiscal 2024 remained consistent at $54.8 million (including $1.7 million in non-cash impairment charges taken on certain long-lived store related assets, $0.5 million net losses on lease modifications and a $1.3 million unfavorable currency translation impact), from $54.8 million (including $1.8 million in non-cash impairment charges taken on certain long-lived store related assets and $0.1 million net gains on lease modifications) in the same prior-year quarter. GAAP operating margin in the third quarter of fiscal 2024 decreased 0.2% to 8.4%, from 8.6% for the same prior-year quarter, driven primarily
by higher expenses, including higher performance-based compensation, and the unfavorable impact of currency, partially offset by higher initial markups and the favorable impact of business mix. The negative impact of currency on operating margin for the quarter was approximately 120 basis points.
For the third quarter of fiscal 2024, adjusted earnings from operations decreased slightly to $57.9 million, from $58.0 million in the same prior-year quarter. Adjusted operating margin decreased 0.2% to 8.9%, from 9.1% for the same prior-year quarter, driven primarily by higher expenses, including higher performance-based compensation, and the unfavorable impact of currency, partially offset by higher initial markups and the favorable impact of business mix.
•Operating margin for the Company’s Europe segment decreased 0.9% to 10.3% in the third quarter of fiscal 2024, from 11.2% in the same prior-year quarter, driven primarily by the unfavorable impact of currency and higher expenses, partially offset by higher initial markups and higher revenues.
•Operating margin for the Company’s Americas Retail segment decreased 1.6% to 5.3% in the third quarter of fiscal 2024, from 6.9% in the same prior-year quarter, driven primarily by the unfavorable impact from lower revenues and higher expenses, partially offset by higher initial markups.
•Operating margin for the Company’s Americas Wholesale segment increased 9.9% to 29.1% in the third quarter of fiscal 2024, from 19.2% in the same prior-year quarter, driven primarily by higher product margin.
•Operating margin for the Company’s Asia segment increased 1.0% to 1.0% in the third quarter of fiscal 2024, from a relative breakeven point in the same prior-year quarter, driven primarily by the favorable impact of business mix, partially offset by higher expenses.
•Operating margin for the Company’s Licensing segment increased 3.5% to 93.1% in the third quarter of fiscal 2024, from 89.6% in the same prior-year quarter, mainly driven by the favorable impact of higher royalties and lower expenses.
Other expense, net. Other expense, net for the third quarter of fiscal 2024 decreased 28% to $11.0 million from $15.2 million for the same prior-year quarter. The change was primarily due to lower net realized and unrealized losses from foreign currency exposures, as well as higher net unrealized and realized gains from foreign exchange currency contracts, compared to the same prior-year quarter.
Nine-Month Period Results
For the nine months ended October 28, 2023, the Company recorded GAAP net earnings of $82.9 million, a 54% increase from $53.8 million for the same prior-year period. The results for the nine months ended October 28, 2023 included a net positive impact of $30.7 million from discrete tax adjustments related primarily to the consolidation of certain business functions into Switzerland. GAAP diluted EPS increased 63% to $1.30 for the nine months ended October 28, 2023, compared to $0.80 for the same prior-year period. The Company estimates a positive impact from its share buybacks of $0.09 and a negative impact from currency of $0.01 on GAAP diluted EPS for the nine months ended October 28, 2023 when compared to the same prior-year period.
For the nine months ended October 28, 2023, the Company recorded adjusted net earnings of $63.2 million, a 1% increase from $62.9 million for the same prior-year period. Adjusted diluted EPS increased 8% to $1.14, compared to $1.06 for the same prior-year period. The Company estimates its share buybacks had a positive impact of $0.10 and currency had a negative impact of $0.03 on adjusted diluted EPS during the nine months ended October 28, 2023 when compared to the same prior-year period.
Net Revenue. Total net revenue for the nine months ended October 28, 2023 increased 1% to $1.89 billion, from $1.87 billion in the same prior-year period. In constant currency, net revenue also increased by 1%.
•Europe revenues increased 6% in both U.S. dollars and constant currency. Retail comparable sales (including e-commerce) increased 10% in both U.S. dollars and constant currency. The inclusion of our e-commerce sales negatively impacted the retail comparable sales percentage by 1% in U.S. dollars and 2% in constant currency.
•Americas Retail revenues decreased 9% in U.S. dollars and 10% in constant currency. Retail comparable sales (including e-commerce) decreased 8% in both U.S. dollars and constant currency. The inclusion of our e-commerce sales had a minimal impact on the retail comparable sales percentage in U.S. dollars and a positive impact of 1% in constant currency.
•Americas Wholesale revenues decreased 12% in U.S. dollars and 15% in constant currency.
•Asia revenues increased 15% in U.S. dollars and 18% in constant currency. Retail comparable sales (including e-commerce) decreased 1% in U.S. dollars and increased 1% in constant currency. The inclusion of our e-commerce sales positively impacted the retail comparable sales percentage by 1% in both U.S. dollars and constant currency.
•Licensing revenues increased 8% in both U.S. dollars and constant currency.
Earnings from Operations. GAAP earnings from operations for the nine months ended October 28, 2023 decreased by 18% to $118.5 million (including $6.3 million in non-cash impairment charges taken on certain long-lived store related assets, $1.9 million net gains on lease modifications and a $2.3 million unfavorable currency translation impact), from $144.6 million (including $5.3 million in non-cash impairment charges taken on certain long-lived store related assets and $1.7 million net gains on lease modifications) in the same prior-year period. GAAP operating margin in the nine months ended October 28, 2023 decreased 1.4% to 6.3%, from 7.7% in the same prior-year period, driven primarily by higher expenses, including higher performance-based compensation, the unfavorable currency impact and lower government subsidies compared to the same prior-year period, partially offset by higher initial markups and the favorable impact of business mix. The negative impact of currency on operating margin for the nine months ended October 28, 2023 was approximately 120 basis points.
For nine months ended October 28, 2023, adjusted earnings from operations decreased 20% to $124.8 million, from $155.4 million in the same prior-year period. Adjusted operating margin decreased 1.7% to 6.6% for the nine months ended October 28, 2023, from 8.3% in the same prior-year period, driven primarily by higher expenses, including higher store costs and performance-based compensation, the unfavorable currency impact and lower government subsidies compared to the same prior-year period, partially offset by higher initial markups and the favorable impact of business mix.
•Operating margin for the Company’s Europe segment decreased 1.0% to 8.5% in the nine months ended October 28, 2023, from 9.5% in the same prior-year period, driven primarily by the unfavorable currency impact, higher expenses and lower government subsidies compared to the prior year, partially offset by higher initial markups and the favorable impact of higher revenues.
•Operating margin for the Company’s Americas Retail segment decreased 5.3% to 4.3% in the nine months ended October 28, 2023, from 9.6% in the same prior-year period, driven primarily by the unfavorable impact from lower revenues, higher expenses and higher markdowns.
•Operating margin for the Company’s Americas Wholesale segment increased 4.1% to 26.8% in the nine months ended October 28, 2023, from 22.7% in the same prior-year period, driven primarily by higher product margin.
•Operating margin for the Company’s Asia segment increased 6.0% to 2.0% in the nine months ended October 28, 2023, from negative 4.0% in the same prior-year period, driven primarily by the favorable impact of higher revenues, partially offset by higher expenses.
•Operating margin for the Company’s Licensing segment increased 4.2% to 93.5% in the nine months ended October 28, 2023, from 89.3% in the same prior-year period, mainly due to lower expenses.
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 together with the 2028 Notes, the “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 for the nine months ended October 28, 2023.
Other expense, net. Other expense, net for the nine months ended October 28, 2023 decreased 55% to $18.2 million from $40.7 million in the same prior-year period. The change was primarily due to lower net realized and unrealized losses from foreign currency exposures and, to a lesser extent, lower net unrealized losses on the Company’s SERP-related assets compared to the same prior-year period.
Outlook
The Company’s expectations for the fourth quarter and full fiscal year 2024 are as follows:
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Outlook for Total Company1 |
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| | | Fourth Quarter of Fiscal 2024 | | Fiscal 2024 |
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| Consolidated net revenue in U.S. dollars | | increase between 4.0% and 6.0% | | increase between 1.8% and 2.4% |
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| GAAP operating margin | | 14.1% to 14.4% | | 8.7% to 8.9% |
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| Adjusted operating margin | | 14.1% to 14.4% | | 8.9% to 9.1% |
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| GAAP diluted EPS | | $1.22 to $1.28 | | $2.49 to $2.55 |
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| Adjusted diluted EPS | | $1.53 to $1.60 | | $2.67 to $2.74 |
| ______________________________________________________________________ |
See page 17 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 fourth quarter and full fiscal 2024 is as follows:
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Reconciliation of GAAP Outlook to Adjusted Outlook1 |
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| | | Fourth Quarter of Fiscal 2024 | | Fiscal 2024 |
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| GAAP operating margin | | 14.1% to 14.4% | | 8.7% to 8.9% |
| Certain professional service and legal fees and related (credits) costs2 | | —% | | 0.1% |
| Asset impairment charges2 | | —% | | 0.2% |
| Net (gains) losses on lease modifications2 | | —% | | (0.1)% |
| Adjusted operating margin | | 14.1% to 14.4% | | 8.9% to 9.1% |
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| GAAP diluted EPS | | $1.22 to $1.28 | | $2.49 to $2.55 |
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| Certain professional service and legal fees and related (credits) costs2 | | — | | 0.02 |
| Asset impairment charges2 | | — | | 0.07 |
| Net (gains) losses on lease modifications2 | | — | | (0.02) |
| Loss on extinguishment of debt2 | | — | | 0.08 |
| Amortization of debt discount3 | | 0.00 | | 0.01 |
| Discrete income tax adjustments2 | | — | | (0.44) |
| Impact of convertible share dilution3 | | 0.31 to 0.32 | | 0.46 to 0.47 |
| Adjusted diluted EPS | | $1.53 to $1.60 | | $2.67 to $2.74 |
| ______________________________________________________________________________ | | |
See page 17 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):
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Free Cash Flow Outlook for Total Company1 |
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| | | | | Fiscal 2024 |
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| Net cash provided by operating activities | | | | $240 |
| Less: Purchases of property and equipment | | | | (74) |
| Less: Payments for property and equipment under finance leases | | (6) |
| Free cash flow | | | | $160 |
| ______________________________________________________________________ |
See page 17 for footnotes.
Dividend
The Company’s Board of Directors approved a quarterly cash dividend of $0.30 per share on the Company’s common stock. The dividend will be payable on December 22, 2023 to shareholders of record as of the close of business on December 6, 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 nine months ended October 28, 2023, the Company did not make any share repurchases other than the aforementioned transactions.
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 and the impact from certain discrete income tax adjustments related primarily to the consolidation of certain business functions into Switzerland and, to a lesser extent, the impact from changes in the income tax law in certain tax jurisdictions, in each case where applicable. The weighted average diluted shares outstanding used for adjusted diluted EPS excludes the dilutive impact of the Notes, based on the bond hedge contracts in place. 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 November 21, 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 October 28, 2023, the Company directly operated 1,015 retail stores in Europe, the Americas and Asia. The Company’s partners and distributors operated 544 additional retail stores worldwide. As of October 28, 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 conflicts in Ukraine and Gaza and other events impacting the markets in which we operate; statements concerning the Company’s future outlook, including with respect to the fourth 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 Israel-Hamas war; 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 liabilities 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 conflicts in Ukraine and Gaza, possible instability in the banking system, the possibility of a government shutdown in the U.S., 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.
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| Contact: | Guess?, Inc. |
| | Fabrice Benarouche |
| | Senior Vice President Finance, Investor Relations and Chief Accounting Officer |
| | (213) 765-5578 |
| | |
| Source: | Guess?, Inc. |
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| Guess?, Inc. and Subsidiaries |
| Condensed Consolidated Statements of Income |
| (amounts in thousands, except per share data) |
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| | | | Three Months Ended | | | | | Nine Months Ended |
| | | | October 28, 2023 | | October 29, 2022 | | | | | October 28, 2023 | | October 29, 2022 |
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| Product sales | $ | 618,130 | | 94.9 | % | | $ | 605,656 | | 95.6 | % | | | | | $ | 1,800,536 | | 95.5 | % | | $ | 1,790,651 | | 95.8 | % |
| Net royalties | 33,040 | | 5.1 | % | | 27,747 | | 4.4 | % | | | | | 84,944 | | 4.5 | % | | 78,915 | | 4.2 | % |
| Net revenue | 651,170 | | 100.0 | % | | 633,403 | | 100.0 | % | | | | | 1,885,480 | | 100.0 | % | | 1,869,566 | | 100.0 | % |
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| Cost of product sales | 360,000 | | 55.3 | % | | 364,032 | | 57.5 | % | | | | | 1,067,882 | | 56.6 | % | | 1,082,545 | | 57.9 | % |
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| Gross profit | 291,170 | | 44.7 | % | | 269,371 | | 42.5 | % | | | | | 817,598 | | 43.4 | % | | 787,021 | | 42.1 | % |
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| Selling, general and administrative expenses | 234,123 | | 36.0 | % | | 212,927 | | 33.6 | % | | | | | 694,748 | | 36.8 | % | | 638,801 | | 34.2 | % |
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| Asset impairment charges | 1,737 | | 0.3 | % | | 1,789 | | 0.3 | % | | | | | 6,293 | | 0.4 | % | | 5,252 | | 0.3 | % |
| Net (gains) losses on lease modifications | 537 | | 0.0 | % | | (146) | | (0.0 | %) | | | | | (1,894) | | (0.1 | %) | | (1,654) | | (0.1 | %) |
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| Earnings from operations | 54,773 | | 8.4 | % | | 54,801 | | 8.6 | % | | | | | 118,451 | | 6.3 | % | | 144,622 | | 7.7 | % |
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| Other income (expense): | | | | | | | | | | | | | | |
| | Interest expense | (5,923) | | (0.9 | %) | | (3,453) | | (0.5 | %) | | | | | (15,883) | | (0.9 | %) | | (9,741) | | (0.5 | %) |
| | Interest income | 3,181 | | 0.5 | % | | 636 | | 0.1 | % | | | | | 8,557 | | 0.5 | % | | 1,629 | | 0.1 | % |
| | Loss on extinguishment of debt | — | | — | % | | — | | — | % | | | | | (7,696) | | (0.4 | %) | | — | | — | % |
| | Other, net | (11,004) | | (1.7 | %) | | (15,211) | | (2.4 | %) | | | | | (18,227) | | (1.0 | %) | | (40,716) | | (2.2 | %) |
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| Earnings before income tax expense (benefit) | 41,027 | | 6.3 | % | | 36,773 | | 5.8 | % | | | | | 85,202 | | 4.5 | % | | 95,794 | | 5.1 | % |
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| Income tax expense (benefit) | (18,277) | | (2.8 | %) | | 11,616 | | 1.8 | % | | | | | (5,370) | | (0.3 | %) | | 32,743 | | 1.7 | % |
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| Net earnings | 59,304 | | 9.1 | % | | 25,157 | | 4.0 | % | | | | | 90,572 | | 4.8 | % | | 63,051 | | 3.4 | % |
| | | | | | | | | | | | | | | | | |
| Net earnings attributable to noncontrolling interests | 3,603 | | 0.5 | % | | 3,322 | | 0.6 | % | | | | | 7,643 | | 0.4 | % | | 9,284 | | 0.5 | % |
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| Net earnings attributable to Guess?. Inc. | $ | 55,701 | | 8.6 | % | | $ | 21,835 | | 3.4 | % | | | | | $ | 82,929 | | 4.4 | % | | $ | 53,767 | | 2.9 | % |
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| Net earnings per common share attributable to common stockholders: |
| | Basic | $ | 1.04 | | | | $ | 0.40 | | | | | | | $ | 1.53 | | | | $ | 0.93 | | |
| | Diluted | $ | 0.82 | | | | $ | 0.34 | | | | | | | $ | 1.30 | | | | $ | 0.80 | | |
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| Weighted average common shares outstanding attributable to common stockholders: |
| | Basic | 53,052 | | | | 53,894 | | | | | | | 53,450 | | | | 57,300 | | |
| | Diluted | 70,331 | | | | 67,102 | | | | | | | 68,098 | | | | 70,705 | | |
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| Effective income tax rate | (44.5 | %) | | | 31.6 | % | | | | | | (6.3 | %) | | | 34.2 | % | |
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Adjusted selling, general and administrative expenses4: | $ | 233,274 | | 35.8 | % | | $ | 211,419 | | 33.4 | % | | | | | $ | 692,787 | | 36.7 | % | | $ | 631,616 | | 33.8 | % |
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Adjusted earnings from operations4: | $ | 57,896 | | 8.9 | % | | $ | 57,952 | | 9.1 | % | | | | | $ | 124,811 | | 6.6 | % | | $ | 155,405 | | 8.3 | % |
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Adjusted net earnings attributable to Guess?, Inc.4: | $ | 27,006 | | 4.1 | % | | $ | 24,746 | | 3.9 | % | | | | | $ | 63,231 | | 3.4 | % | | $ | 62,856 | | 3.4 | % |
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| Adjusted weighted average common shares outstanding attributable to common stockholders: |
| | Adjusted Diluted4,5 | 54,418 | | | | 55,204 | | | | | | | 54,726 | | | | 58,807 | | |
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| Adjusted net earnings per common share attributable to common stockholders: |
| | Adjusted Diluted4,5 | $ | 0.49 | | | | $ | 0.44 | | | | | | | $ | 1.14 | | | | $ | 1.06 | | |
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Adjusted effective income tax rate4: | 30.9 | % | | | 29.7 | % | | | | | | 28.8 | % | | | 32.3 | % | |
| __________________________________________________________________ |
See page 17 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 from operations to adjusted earnings from operations, (iii) reported GAAP net earnings attributable to Guess?, Inc. to adjusted net earnings attributable to Guess?, Inc., (iv) reported GAAP income tax expense (benefit) to adjusted income tax expense, and (v) reported GAAP diluted EPS to adjusted diluted EPS are as follows:
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| | | | | Three Months Ended | | | | Nine Months Ended | | | | |
| | | | | October 28, 2023 | | October 29, 2022 | | | | October 28, 2023 | | October 29, 2022 | | | | |
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| Reported GAAP selling, general and administrative expenses | $ | 234,123 | | | $ | 212,927 | | | | | $ | 694,748 | | | $ | 638,801 | | | | | |
Certain professional service and legal fees and related credits (costs)6 | (849) | | | (1,508) | | | | | (1,961) | | | (7,185) | | | | | |
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Adjusted selling, general and administrative expenses4 | $ | 233,274 | | | $ | 211,419 | | | | | $ | 692,787 | | | $ | 631,616 | | | | | |
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| Reported GAAP earnings from operations | $ | 54,773 | | | $ | 54,801 | | | | | $ | 118,451 | | | $ | 144,622 | | | | | |
Certain professional service and legal fees and related (credits) costs6 | 849 | | | 1,508 | | | | | 1,961 | | | 7,185 | | | | | |
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Asset impairment charges7 | 1,737 | | | 1,789 | | | | | 6,293 | | | 5,252 | | | | | |
Net (gains) losses on lease modifications8 | 537 | | | (146) | | | | | (1,894) | | | (1,654) | | | | | |
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Adjusted earnings from operations4 | $ | 57,896 | | | $ | 57,952 | | | | | $ | 124,811 | | | $ | 155,405 | | | | | |
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| Reported GAAP net earnings attributable to Guess?, Inc. | $ | 55,701 | | | $ | 21,835 | | | | | $ | 82,929 | | | $ | 53,767 | | | | | |
Certain professional service and legal fees and related (credits) costs6 | 849 | | | 1,508 | | | | | 1,961 | | | 7,185 | | | | | |
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Asset impairment charges7 | 1,737 | | | 1,789 | | | | | 6,293 | | | 5,252 | | | | | |
Net (gains) losses on lease modifications8 | 537 | | | (146) | | | | | (1,894) | | | (1,654) | | | | | |
Loss on extinguishment of debt9 | — | | | — | | | | | 7,696 | | | — | | | | | |
Amortization of debt discount10 | 163 | | | — | | | | | 351 | | | — | | | | | |
Discrete income tax adjustments11 | (31,166) | | | 208 | | | | | (30,669) | | | 624 | | | | | |
Income tax impact from adjustments12 | (815) | | | (448) | | | | | (3,436) | | | (2,318) | | | | | |
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| Total adjustments affecting net earnings attributable to Guess?, Inc. | (28,695) | | | 2,911 | | | | | (19,698) | | | 9,089 | | | | | |
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Adjusted net earnings attributable to Guess?, Inc.4 | $ | 27,006 | | | $ | 24,746 | | | | | $ | 63,231 | | | $ | 62,856 | | | | | |
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| Reported GAAP income tax expense (benefit) | $ | (18,277) | | | $ | 11,616 | | | | | $ | (5,370) | | | $ | 32,743 | | | | | |
Discrete income tax adjustments11 | 31,166 | | | (208) | | | | | 30,669 | | | (624) | | | | | |
Income tax impact from adjustments12 | 815 | | | 448 | | | | | 3,436 | | | 2,318 | | | | | |
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Adjusted income tax expense4 | $ | 13,704 | | | $ | 11,856 | | | | | $ | 28,735 | | | $ | 34,437 | | | | | |
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Adjusted effective income tax rate4 | 30.9 | % | | 29.7 | % | | | | 28.8 | % | | 32.3 | % | | | | |
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Reported GAAP diluted EPS | $ | 0.82 | | | $ | 0.34 | | | | | $ | 1.30 | | | $ | 0.80 | | | | | |
Convertible notes if-converted method5 | 0.07 | | | 0.05 | | | | | 0.13 | | | 0.13 | | | | | |
Certain professional service and legal fees and related (credits) costs6,13 | 0.01 | | | 0.02 | | | | | 0.02 | | | 0.08 | | | | | |
Asset impairment charges7,13 | 0.02 | | | 0.02 | | | | | 0.07 | | | 0.06 | | | | | |
Net (gains) losses on lease modifications8,13 | 0.01 | | | (0.00) | | | | | (0.02) | | | (0.02) | | | | | |
Loss on extinguishment of debt9,13 | — | | | — | | | | | 0.09 | | | — | | | | | |
Amortization of debt discount10,13 | 0.00 | | | — | | | | | 0.00 | | | — | | | | | |
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Discrete income tax adjustments11 | (0.44) | | | 0.01 | | | | | (0.45) | | | 0.01 | | | | | |
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Adjusted diluted EPS | $ | 0.49 | | | $ | 0.44 | | | | | $ | 1.14 | | | $ | 1.06 | | | | | |
| __________________________________________________________________ | | | | |
See page 17 for footnotes.
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| Guess?, Inc. and Subsidiaries |
| Consolidated Segment Data |
| (dollars in thousands) |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | Three Months Ended | | | | | Nine Months Ended |
| | | | | | October 28, 2023 | | October 29, 2022 | | | | % change | | | October 28, 2023 | | October 29, 2022 | | % change |
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| Net revenue: | | | | | | | | | | | | | | | | |
| Europe | $ | 344,472 | | | $ | 323,754 | | | | | 6% | | | | | $ | 990,981 | | | $ | 936,470 | | | 6% |
| Americas Retail | 153,872 | | | 165,603 | | | | | (7%) | | | | | 464,984 | | | 513,743 | | | (9%) |
| Americas Wholesale | 55,288 | | | 53,181 | | | | | 4% | | | | | 150,361 | | | 171,733 | | | (12%) |
| Asia | 64,498 | | | 63,118 | | | | | 2% | | | | | 194,210 | | | 168,705 | | | 15% |
| Licensing | 33,040 | | | 27,747 | | | | | 19% | | | | | 84,944 | | | 78,915 | | | 8% |
| Total net revenue | $ | 651,170 | | | $ | 633,403 | | | | | 3% | | | | | $ | 1,885,480 | | | $ | 1,869,566 | | | 1% |
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| Earnings (loss) from operations: | | | | | | | | | | | | | | | | |
| Europe | $ | 35,555 | | | $ | 36,222 | | | | | (2%) | | | | | $ | 84,344 | | | $ | 88,650 | | | (5%) |
| Americas Retail | 8,086 | | | 11,365 | | | | | (29%) | | | | | 20,060 | | | 49,552 | | | (60%) |
| Americas Wholesale | 16,106 | | | 10,229 | | | | | 57% | | | | | 40,264 | | | 39,068 | | | 3% |
| Asia | 636 | | | (5) | | | | | (12,820%) | | | | | 3,927 | | | (6,792) | | | (158%) |
| Licensing | 30,770 | | | 24,849 | | | | | 24% | | | | | 79,419 | | | 70,499 | | | 13% |
| Total segment earnings from operations | 91,153 | | | 82,660 | | | | | 10% | | | | | 228,014 | | | 240,977 | | | (5%) |
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| Corporate overhead | (34,106) | | | (26,216) | | | | | 30% | | | | | (105,164) | | | (92,757) | | | 13% |
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| Asset impairment charges | (1,737) | | | (1,789) | | | | | (3%) | | | | | (6,293) | | | (5,252) | | | 20% |
| Net gains (losses) on lease modifications | (537) | | | 146 | | | | | (468%) | | | | | 1,894 | | | 1,654 | | | 15% |
| Total earnings from operations | $ | 54,773 | | | $ | 54,801 | | | | | (0%) | | | | | $ | 118,451 | | | $ | 144,622 | | | (18%) |
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| Operating margins: | | | | | | | | | | | | | | | | |
| Europe | 10.3 | % | | 11.2 | % | | | | | | | | | 8.5 | % | | 9.5 | % | | |
| Americas Retail | 5.3 | % | | 6.9 | % | | | | | | | | | 4.3 | % | | 9.6 | % | | |
| Americas Wholesale | 29.1 | % | | 19.2 | % | | | | | | | | | 26.8 | % | | 22.7 | % | | |
| Asia | 1.0 | % | | (0.0 | %) | | | | | | | | | 2.0 | % | | (4.0 | %) | | |
| Licensing | 93.1 | % | | 89.6 | % | | | | | | | | | 93.5 | % | | 89.3 | % | | |
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| GAAP operating margin for total Company | 8.4 | % | | 8.6 | % | | | | | | | | | 6.3 | % | | 7.7 | % | | |
| Certain professional service and legal fees and related (credits) costs4,6 | 0.2 | % | | 0.2 | % | | | | | | | | | 0.0 | % | | 0.4 | % | | |
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| Asset impairment charges4,7 | 0.3 | % | | 0.3 | % | | | | | | | | | 0.4 | % | | 0.3 | % | | |
| Net (gains) losses on lease modifications4,8 | 0.0 | % | | (0.0 | %) | | | | | | | | | (0.1 | %) | | (0.1 | %) | | |
| Adjusted operating margin for total Company4 | 8.9 | % | | 9.1 | % | | | | | | | | | 6.6 | % | | 8.3 | % | | |
| ______________________________________________________________________ |
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See page 17 for footnotes.
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| Guess?, Inc. and Subsidiaries |
| Constant Currency Financial Measures |
| (dollars in thousands) |
| | | | | | | | | | | | |
| As Reported | | Foreign Currency Impact | | Constant Currency | | As Reported | | As Reported | | Constant Currency |
| | October 28, 2023 | | October 29, 2022 | | | | |
| | | | | | | | | | | | |
| | Three Months Ended | | % change |
| | | | | | | | |
| Net revenue: | | | | | | | | | | | |
| Europe | $ | 344,472 | | | $ | (5,469) | | | $ | 339,003 | | | $ | 323,754 | | | 6% | | 5% |
| Americas Retail | 153,872 | | | (940) | | | 152,932 | | | 165,603 | | | (7%) | | (8%) |
| Americas Wholesale | 55,288 | | | (2,621) | | | 52,667 | | | 53,181 | | | 4% | | (1%) |
| Asia | 64,498 | | | (1,230) | | | 63,268 | | | 63,118 | | | 2% | | 0% |
| Licensing | 33,040 | | | — | | | 33,040 | | | 27,747 | | | 19% | | 19% |
| Total net revenue | $ | 651,170 | | | $ | (10,260) | | | $ | 640,910 | | | $ | 633,403 | | | 3% | | 1% |
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| | Nine Months Ended | | | | |
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| Net revenue: | | | | | | | | | | | |
| Europe | $ | 990,981 | | | $ | 711 | | | $ | 991,692 | | | $ | 936,470 | | | 6% | | 6% |
| Americas Retail | 464,984 | | | (921) | | | 464,063 | | | 513,743 | | | (9%) | | (10%) |
| Americas Wholesale | 150,361 | | | (4,754) | | | 145,607 | | | 171,733 | | | (12%) | | (15%) |
| Asia | 194,210 | | | 4,526 | | | 198,736 | | | 168,705 | | | 15% | | 18% |
| Licensing | 84,944 | | | — | | | 84,944 | | | 78,915 | | | 8% | | 8% |
| Total net revenue | $ | 1,885,480 | | | $ | (438) | | | $ | 1,885,042 | | | $ | 1,869,566 | | | 1% | | 1% |
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| Guess?, Inc. and Subsidiaries | | | | | | | | | |
| Selected Condensed Consolidated Balance Sheet Data | | | | | | | | | |
| (in thousands) | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | October 28,
2023 | | January 28,
2023 | | October 29,
2022 | | | | | | | | | |
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| ASSETS | | | | | | | | | |
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| Cash and cash equivalents | $ | 244,103 | | | $ | 275,765 | | | $ | 174,065 | | | | | | | | | | |
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| Receivables, net | 340,784 | | | 341,939 | | | 319,342 | | | | | | | | | | |
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| Inventories | 562,386 | | | 510,899 | | | 574,574 | | | | | | | | | | |
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| Other current assets | 81,220 | | | 83,102 | | | 82,553 | | | | | | | | | | |
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| Property and equipment, net | 234,572 | | | 240,355 | | | 231,024 | | | | | | | | | | |
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| Operating lease right-of-use assets | 657,363 | | | 636,148 | | | 614,705 | | | | | | | | | | |
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| Other assets | 358,349 | | | 337,240 | | | 320,361 | | | | | | | | | | |
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| Total assets | $ | 2,478,777 | | | $ | 2,425,448 | | | $ | 2,316,624 | | | | | | | | | | |
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| LIABILITIES AND STOCKHOLDERS’ EQUITY | | | | | | | | | |
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| Current portion of borrowings and finance lease obligations | $ | 41,695 | | | $ | 40,380 | | | $ | 39,626 | | | | | | | | | | |
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| Current operating lease liabilities | 165,420 | | | 170,192 | | | 159,152 | | | | | | | | | | |
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Current portion of convertible senior notes due 2024, net | 114,985 | | | — | | | — | | | | | | | | | | |
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| Other current liabilities | 514,294 | | | 552,480 | | | 533,949 | | | | | | | | | | |
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| Long-term debt and finance lease obligations | 131,821 | | | 95,921 | | | 153,717 | | | | | | | | | | |
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Convertible senior notes due 2024, net | — | | | 298,931 | | | 298,731 | | | | | | | | | | |
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Convertible senior notes due 2028, net | 266,551 | | | — | | | — | | | | | | | | | | |
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| Long-term operating lease liabilities | 538,731 | | | 528,236 | | | 519,594 | | | | | | | | | | |
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| Other long-term liabilities | 147,637 | | | 157,403 | | | 150,733 | | | | | | | | | | |
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| Redeemable and nonredeemable noncontrolling interests | 43,583 | | | 47,792 | | | 42,294 | | | | | | | | | | |
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| Guess?, Inc. stockholders’ equity | 514,060 | | | 534,113 | | | 418,828 | | | | | | | | | | |
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| Total liabilities and stockholders’ equity | $ | 2,478,777 | | | $ | 2,425,448 | | | $ | 2,316,624 | | | | | | | | | | |
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| Guess?, Inc. and Subsidiaries |
| Condensed Consolidated Cash Flow Data |
| (in thousands) |
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| | | | | | | | Nine Months Ended |
| | | | | | | | October 28, 2023 | | October 29, 2022 | | |
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| Net cash provided by (used in) operating activities | | | $ | 40,881 | | | $ | (21,418) | | | |
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| Net cash used in investing activities | | | (56,624) | | | (71,969) | | | |
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| Net cash used in financing activities | | | (9,793) | | | (131,779) | | | |
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| Effect of exchange rates on cash and cash equivalents | | (6,126) | | | (16,334) | | | |
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| Net change in cash and cash equivalents | | | (31,662) | | | (241,500) | | | |
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| Cash and cash equivalents at the beginning of the year | | 275,765 | | | 415,565 | | | |
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| Cash and cash equivalents at the end of the period | | $ | 244,103 | | | $ | 174,065 | | | |
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| Supplemental information: | | | | | | | |
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| Depreciation and amortization | | | $ | 46,059 | | | $ | 45,490 | | | |
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| Total lease costs (excluding finance lease cost) | | | $ | 233,063 | | | $ | 220,151 | | | |
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| Guess?, Inc. and Subsidiaries |
| Reconciliation of Net Cash Provided By (Used In) Operating Activities to Free Cash Flow |
| (in thousands) |
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| | | | | | | | Nine Months Ended |
| | | | | | | | October 28, 2023 | | October 29, 2022 | | |
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| Net cash provided by (used in) operating activities | | | $ | 40,881 | | | $ | (21,418) | | | |
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| Less: Purchases of property and equipment | | | (52,469) | | | (71,729) | | | |
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| Less: Payments for property and equipment under finance leases | | | (4,898) | | | (5,261) | | | |
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| Free cash flow | | | $ | (16,486) | | | $ | (98,408) | | | |
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| Guess?, Inc. and Subsidiaries |
| Retail Store Data |
| Global Store and Concession Count |
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| | | | Stores | | Concessions |
| Region | Total | | Directly Operated | | Partner Operated | | Total | | Directly Operated | | Partner Operated |
| | | | As of October 28, 2023 |
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| United States | 234 | | 234 | | — | | — | | — | | — |
| Canada | 57 | | 57 | | — | | — | | — | | — |
| Central and South America | 104 | | 73 | | 31 | | 29 | | 29 | | — |
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| | Total Americas | 395 | | 364 | | 31 | | 29 | | 29 | | — |
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| Europe and the Middle East | 767 | | 545 | | 222 | | 58 | | 58 | | — |
| Asia and the Pacific | 397 | | 106 | | 291 | | 241 | | 133 | | 108 |
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| | Total | 1,559 | | 1,015 | | 544 | | 328 | | 220 | | 108 |
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| | | | As of October 29, 2022 |
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| United States | 242 | | 242 | | — | | — | | — | | — |
| Canada | 72 | | 72 | | — | | — | | — | | — |
| Central and South America | 103 | | 69 | | 34 | | 29 | | 29 | | — |
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| | Total Americas | 417 | | 383 | | 34 | | 29 | | 29 | | — |
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| Europe and the Middle East | 799 | | 561 | | 238 | | 54 | | 54 | | — |
| Asia and the Pacific | 414 | | 120 | | 294 | | 251 | | 127 | | 124 |
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| | Total | 1,630 | | 1,064 | | 566 | | 334 | | 210 | | 124 |
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| Guess?, Inc. and Subsidiaries |
| Footnotes to Condensed Consolidated Financial Data |
Footnote:
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1 | The Company’s outlook for the fourth quarter and full fiscal 2024 assumes that foreign currency exchange rates remain at recently prevailing rates. |
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2 | Amounts for the full fiscal year outlook exclude the following items recognized during the nine months ended October 28, 2023: (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) net (gains) losses on lease modifications related primarily to the early termination of certain lease agreements, (iv) loss on extinguishment of debt related to the 2024 Notes and (v) discrete income tax adjustments related to the consolidation of certain business functions into Switzerland and the impact from changes in the income tax law in certain tax jurisdictions. 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. |
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3 | Amounts for the fourth quarter and full fiscal 2024 outlook exclude (i) the amortization of the debt discount related to the 2028 Notes and (ii) the dilutive impact of the 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. |
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4 | The adjusted results exclude certain professional service and legal fees and related (credits) costs, asset impairment charges, net (gains) losses on lease modifications, loss on extinguishment of debt, amortization of debt discount, the related income tax impacts of these adjustments, as well as certain discrete income tax adjustments, where applicable. The weighted average diluted shares outstanding used for adjusted diluted EPS excludes the dilutive impact of the Notes, based on the bond hedge contracts in place. A reconciliation of actual results to adjusted results is presented in the “Reconciliation of GAAP Results to Adjusted Results.” |
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5 | The Company excludes the dilutive impact of the Notes at stock prices below $44.53 for the 2024 Notes and below $41.51 for the 2028 Notes, based on the bond hedge contracts in place that will deliver shares to offset dilution. At stock prices in excess of $44.53 for the 2024 Notes and $41.51 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. |
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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. During the third quarter of fiscal 2024, the Company announced the pending settlement, subject to court approval, of a previously-disclosed stockholder derivative lawsuit brought by the Employees Retirement System of Rhode Island. Consistent with its historical practice, the Company intends to exclude any settlement amounts recorded in the future related to this matter (including any amounts to be received by the Company and any court approved attorney’s fee award to be paid by the Company) from its non-GAAP adjusted operating results. |
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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. |
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8 | Adjustments represent net (gains) losses on lease modifications related primarily to the early termination of certain lease agreements. |
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9 | Adjustments represent loss on extinguishment of debt from a portion of the exchanged 2024 Notes in April 2023. |
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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. |
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11 | Adjustments represent discrete income tax items related primarily to a benefit recognized as a result of the consolidation of certain business functions into Switzerland during the third quarter of fiscal 2024 and, to a lesser extent, the impact from changes in the income tax law in certain tax jurisdictions. |
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12 | The income tax effect 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 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. |
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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. |
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