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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 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.
Total Revenues $648 million, up 9% year-over-year; driven by the acquisition of rag & bone, which added 9 points of constant currency growth.
Core Guess Business Growth 3% in constant currency; driven by higher shipments in wholesale operations across Europe and the Americas.
European Wholesale Revenue Growth Mid-teen growth rate; largest contributor to overall growth.
Adjusted Operating Loss $26 million; improvement over expectations for the quarter.
Adjusted Operating Loss Margin -4%, a decline of 270 basis points year-over-year; due to lower gross margin and higher SG&A rate.
Adjusted Loss Per Share $0.44, compared to $0.27 in the prior year.
Gross Margin 39.9%, down 200 basis points year-over-year; primarily due to business mix and lower royalty income.
SG&A Expenses $285 million, up 11% year-over-year; driven by the integration of rag & bone.
Americas Retail Revenue Growth 9% in U.S. dollars, reaching $157 million; driven by rag & bone acquisition.
Americas Wholesale Revenue Growth 63% in U.S. dollars to $101 million; driven by rag & bone and higher guest shipments.
Asia Revenue Decline 20% in U.S. dollars to $58 million; driven by significant weakness in Greater China.
Licensing Revenue $25 million, down 14% year-over-year; decline in fragrances and footwear.
Inventory $638 million, up 15% year-over-year; primarily in Europe due to early product deliveries.
Receivables $331 million, an 11% increase year-over-year; supports growing wholesale business.
Capital Expenditures $22 million; mainly for store remodels and technology.
Cash Position $151 million, down from $242 million year-over-year; driven by dividends, share repurchases, and free cash flow consumption.
New Product Categories for rag & bone: New license deals at various stages of completion in watches, fragrances, and eyewear.
Market Expansion in Europe: European wholesale business posted mid-teen growth rate, driven by reliable product deliveries.
Market Contraction in Asia: Sales in Asia declined by over 20%, with significant weakness in Greater China.
Operational Efficiency in Supply Chain: Mitigating supply chain risk by bringing in products early, resulting in larger volumes shipped.
Retail Productivity Initiatives: Rolling out initiatives to reengage customers and drive higher traffic across physical and digital channels.
Strategic Shift in North America: Exiting non-strategic full-price stores and reducing North America store fleet by roughly 20 stores.
CFO Transition: Appointment of Alberto Toni as new CFO to enhance operational efficiency and long-term value creation.
Supply Chain Challenges: The company is facing supply chain risks due to the Red Sea crisis, which has prompted them to bring in products earlier to mitigate disruptions. This has resulted in increased working capital investment.
Competitive Pressures: The company is experiencing declining store traffic, particularly in the U.S. and Asia, which has been a key productivity challenge. They are implementing initiatives to reengage customers and drive higher traffic.
Regulatory Issues: Tariffs are impacting the business, with an estimated year-over-year cost impact of less than $10 million. The company is actively working to move production out of China to mitigate these costs.
Economic Factors: There are concerns about inflation and recession, which may affect consumer spending and appetite for discretionary purchases.
Market Performance in Asia: The company's business in Asia, particularly in Greater China, is underperforming, with revenues declining over 20%. They are looking for a partner to take over operations in this market.
Licensing Revenue Decline: The licensing segment has seen a decline in royalties, particularly in fragrances and footwear, which has created a modest headwind for the company.
Store Portfolio Optimization: The company is reducing its North America store fleet by roughly 20 stores, which may impact revenue generation in those markets.
Retail Productivity Initiatives: The company is rolling out initiatives to reengage customers and drive higher traffic across physical and digital channels, including increased marketing investment and a new social media strategy.
Customer Loyalty Program: Launched in Europe, the program has shown positive results with a 36% revenue increase from loyalty customers. Plans to expand to more countries are underway.
Supply Chain Improvements: Developing fast track capabilities to replenish best sellers quickly and maintain flexibility in product assortment.
Pricing Strategy: Rebalancing product assortment to increase opening price point products to cater to price-sensitive consumers.
Store Portfolio Optimization: Reducing North America store fleet by roughly 20 stores and examining unproductive businesses, particularly in Asia.
Infrastructure Optimization: Consolidating support structures and logistics capabilities to create a unified global platform.
Revenue Growth Outlook: Expecting full year revenue growth between 5.5% and 7.4% driven by rag & bone acquisition and European wholesale growth.
Adjusted Operating Margin: Forecasting adjusted operating margin between 4.4% and 5.1% for the full year.
Adjusted EPS: Expecting adjusted EPS in the range of $1.32 to $1.64.
Second Quarter Revenue Growth: Expecting U.S. dollar revenues to grow between 2.9% and 4.7%.
Free Cash Flow and CapEx: Expecting free cash flow of roughly $55 million, including $65 million of CapEx.
Quarterly Cash Dividend: The Board has approved a regular quarterly cash dividend of $0.30 per share.
Share Repurchase: $50 million in share repurchases from July of last 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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