Guess Earnings Fall for Fiscal 2018

Guess? Inc., the decades-old denim and lifestyle label, no longer counts on the United States for the bulk of its sales.

In reporting its fourth-quarter and fiscal 2018 revenues on March 21, the Los Angeles company noted that sales in the U.S. in fiscal 2018 are now behind those in Europe and Asia.

“The United States comprises 31 percent of our global business, down from 38 percent one year ago,” said Victor Herrero, the company’s chief executive officer, in a conference call with analysts.

Growth in Europe and Asia is part of an extensive strategy developed by Herrero, who stepped in as CEO in August 2015, replacing cofounder Paul Marciano. Herrero, who is Spanish, spent years working at Inditex, the Spanish parent company of Zara stores.

Herrero said the company has reduced its U.S. costs by closing 62 stores in North America this past year and negotiating rent reductions on 88 stores. Another 20 to 25 stores will be closed this year if rent reductions are not received, he added.

In total, Guess directly operates 1,011 stores in the Americas, Europe and Asia and has 652 additional stores run by licensees or distributors.

For fiscal 2018, ending Feb. 3, Guess had a $7.9 million net loss compared to a $22.8 million profit the previous year. However, net revenue for fiscal 2018 increased 7.9 percent to $2.36 billion compared to $2.19 billion in the prior year.

In the Americas, which include Mexico and other Latin American countries, revenues decreased 10.9 percent in U.S. dollars. Same-store sales and e-commerce were down 9 percent, but wholesale revenues in the Americas were up 2.8 percent in U.S. dollars.

Doing much better were Europe and Asia. Europe revenues jumped 26.7 percent in U.S. dollars during the fiscal year and same-store sales with e-commerce rose 11 percent.

“Our e-commerce business in Europe continued to grow rapidly,” Herrero said. “We had a strong performance over Black Friday weekend, now a big shopping weekend in Europe. That set us up for strong business during the holiday. E-commerce business in Europe is rapidly approaching the size of e-commerce in the Americas.”

Guess has plans to open 60 stores in Europe this year after launching 15 stores during the fourth quarter in countries including Italy, France, Spain, Portugal, Switzerland, Belgium, Russia and Poland.

In addition, the company is putting the finishing touches on its new distribution center in Venlo, Netherlands, which should be operational at the end of the second quarter, Herrero said.

Revenues in Asia were also moving upward during the fiscal year with a 24.3 percent bump. Same-store sales and e-commerce rose 8 percent.

This year, Guess plans to open 60 stores in Asia, primarily in China. “While we are very excited about our bricks-and-mortar footprint, which will cover 45 cities in China, what is more exciting is the progress we are making there with our digital presence,” the CEO said. “In Asia, a market that is growing in importance is Japan. After several years of investment, our brand has started to gain a lot of traction there.”

In Singapore, Guess is beginning to directly operate some of its stores instead of letting licensees or distributors run the operations. “For us, it creates value for our brand far beyond the marketplace itself,” Herrero said.

For the fourth quarter, Guess had net earnings of $1 million, down from $6.6 million during the fourth quarter of fiscal 2017. Net revenues, however, were up 17.5 percent to $792.2 million, compared to $674 million in the previous fourth quarter.

Herrero did briefly touch on Paul Marciano stepping down temporarily from his job as executive chairman and chief creative officer following sexual-harassment accusations by model Kate Upton.

“I am committed to a safe work environment in our company,” he said. “The independent investigation being conducted by an independent counsel is ongoing. As the investigation is still ongoing, we will not take any questions on this matter.”