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01/10 20:10
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call summary reveals mixed results: while Q4 revenue grew by 5%, adjusted EPS and operating profit fell short of expectations, with declining gross margins. The US dollar's strength and tariff issues pose risks, and the Greater China business is losing money. Despite positive developments like rag & bone's growth and share repurchases, the financial outlook is weak, with lower EPS guidance. The Q&A session highlighted concerns about the Americas business strategy and unclear management responses, further dampening sentiment. Given the company's small market cap, a negative stock price reaction of -2% to -8% is anticipated.
Q4 Revenue $932 million, up 5% year-over-year; adjusted for currencies and last year's extra week, growth would have been 14%.
Adjusted Operating Profit $107 million, down from previous expectations; adjusted operating margin of 11.4%, down 320 basis points year-over-year due to lower gross margin.
Adjusted Earnings Per Share (EPS) $1.48, down from $2.01 in the previous year.
Gross Margin 44.1%, down 130 basis points year-over-year, mainly due to higher markdown pressure and unfavorable currency impact.
Adjusted SG&A Expenses $305 million, up 11% year-over-year, driven by the addition of rag & bone infrastructure and increased marketing investments.
Full Year Revenue $3 billion, up 8% in US dollars; 10% growth in constant currency.
Full Year Adjusted Operating Profit $180 million, with an adjusted operating margin of 6%.
Full Year Adjusted EPS $1.96, reflecting a shortfall from initial earnings goals.
Inventory $563 million, up 21% year-over-year, primarily due to the acquisition of rag & bone.
Receivables $391 million, a 24% increase year-over-year, driven by the acquisition of rag & bone and growth in Guess wholesale businesses.
Capital Expenditures $86 million, up from $74 million last year, mainly for store remodels and technology investments.
Cash Position $188 million, down from $360 million year-over-year, impacted by dividends, acquisition costs, and share repurchases.
New Brand Launch: Launched Guess Jeans globally to attract a younger customer, offering an affordable yet sustainable denim collection.
Acquisition: Completed acquisition of rag & bone with WHP Global, marking the first brand acquisition in Guess's history.
Product Performance: Women's active wear performed well, driven by woven pants and skirts.
Market Expansion: Signed a partnership agreement with Tata Group to represent Guess Jeans in India, closing the year with 22 new stores in the market.
Joint Venture: Entered into a joint-venture agreement with Chalhoub Group to manage business in the Middle East.
Operational Efficiency: Partnered with GXO Global in the US to manage distribution, driving operational efficiencies.
Store Closures: Plan to reduce North American store fleet by roughly 20 stores by year-end.
Strategic Shift: Internalized development and distribution of outerwear and dresses businesses, previously licensed to G3.
Marketing Initiatives: Investing in marketing to improve brand awareness and customer engagement, including a new CRM system in Europe.
Supply Chain Challenges: The Red Sea crisis disrupted the flow of goods and increased shipping costs and transit times.
Economic Factors: Globally, consumers have faced significant inflationary pressures, tempering demand for discretionary products.
Retail Traffic Declines: Traffic declines into retail stores have persisted, particularly in the US and Canadian markets, resulting in a 14% constant-currency comp decline.
Currency Impact: The strength of the US dollar has negatively impacted revenues and margins.
Market Conditions in Asia: The Guess Asia business experienced revenue declines in the upper teens, particularly in South Korea and China, where retail traffic remained challenging.
Tariff Issues: The company anticipates potential impacts from new US tariffs, particularly affecting the 25% of business conducted in the US.
Greater China Business Losses: The business in Greater China is expected to lose approximately $20 million this year, prompting plans to transition it to a third party.
Store Closures: The company plans to reduce its North American store fleet by roughly 20 stores by the end of the year.
Acquisition of rag & bone: Completed acquisition of rag & bone with WHP Global, marking the first brand acquisition in Guess's history.
Expansion in India: Signed a partnership agreement with Tata Group to represent Guess Jeans in India, closing the year with 22 new stores.
Renewed Handbag License: Renewed Guess handbag license with Signal until 2039, representing a large license under favorable terms.
Joint-Venture Agreement: Entered into a joint-venture agreement with Chalhoub Group in the Middle East.
Infrastructure Optimization: Internalized development and distribution of outerwear and dresses previously licensed to G3.
Distribution Management: Partnered with GXO Global in the US to manage distribution and sold US warehousing facility to free up capital.
Marketing Investments: Increased marketing and advertising spending to build brand awareness and enhance customer engagement.
New Store Concept: Developing a new store concept to optimize assortments and improve customer experience.
CRM Implementation: Implementing a new CRM system in Europe with encouraging early results.
Revenue Growth: Expecting revenue growth in the range of 3.9% to 6.2% for fiscal year 2026.
Adjusted Operating Margin: Expecting adjusted operating margin between 4.5% and 5.4% for fiscal year 2026.
Adjusted EPS: Expecting adjusted earnings per share in the range of $1.32 to $1.76 for fiscal year 2026.
First Quarter Revenue Growth: Expecting first quarter revenue growth in the range of 5.8% to 7.5%.
Free Cash Flow: Expecting free cash flow of about $55 million for the fiscal year.
Impact of Tariffs: Guidance does not include the impact of new US tariffs announced.
Operating Profit: Expecting adjusted operating profit in the range of $140 million to $170 million for fiscal year 2026.
Quarterly Cash Dividend: The Board has approved a regular quarterly cash dividend of $0.30 per share.
Share Repurchases: $61 million in share repurchases were executed during the year.
The earnings call presents a mixed picture with challenges outweighing positives. Financial performance shows revenue growth but also significant losses and declining margins. Product development and market strategy are promising with new partnerships and expansions, but competitive pressures and supply chain risks are concerning. The market strategy faces headwinds in Asia and declining store traffic. Financial health is strained by increased expenses and reduced cash position. Shareholder returns are stable with dividends and buybacks, but uncertainty in guidance and weak Q&A responses suggest a negative sentiment, likely leading to a -2% to -8% stock price decline.
The earnings call summary and Q&A reveal mixed results. While there are positive aspects like revenue growth and strategic initiatives, there are significant concerns: declining gross margins, profitability issues in Asia, and a weak outlook for the Americas. Despite share repurchases and dividends, the unclear management responses and potential impacts from tariffs and currency challenges weigh negatively. The company's market cap suggests moderate sensitivity to these factors, leading to an expected stock price decline of -2% to -8%.
The earnings call summary reveals mixed results: while Q4 revenue grew by 5%, adjusted EPS and operating profit fell short of expectations, with declining gross margins. The US dollar's strength and tariff issues pose risks, and the Greater China business is losing money. Despite positive developments like rag & bone's growth and share repurchases, the financial outlook is weak, with lower EPS guidance. The Q&A session highlighted concerns about the Americas business strategy and unclear management responses, further dampening sentiment. Given the company's small market cap, a negative stock price reaction of -2% to -8% is anticipated.
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