Guess Inc. Sees Net Loss Despite Growth in Europe and Asia

Guess? Inc. is an apparel brand synonymous with the cool California lifestyle, but most of its sales are now done in Europe and Asia.

In the Los Angeles company’s first-quarter earnings call on May 27, Guess Chief Executive Victor Herrero noted that the label has been chalking up major sales gains in Europe, where they rose 24 percent in U.S. dollars during the first quarter for fiscal 2019, ending May 5, compared to the same period last year.

“The growth was driven by new store openings, by an increase in wholesale revenues and by positive comps, including e-commerce, which was up 15 percent in U.S. dollars,” he noted.

The company’s European wholesale business is strong, he said, with Guess opening seven new directly operated stores in the first quarter in areas including Italy, France, Spain, Turkey, Finland, Russia and Poland.

Healthy sales were also seen in Asia, with China and Japan providing the most growth and South Korea being stable. Revenues in Asia grew 33 percent over the same period last year.

Guess has been on an aggressive expansion path in China. During the first quarter, Guess opened 12 stores in Asia, including eight directly operated stores in China. Those stores included Chinese locations in Hangzhou, Harbin, Wenzhou, Shenzhen and Haikou.

The Hangzhou store is in the first shopping mall opened by Alibaba, located next to the online e-commerce site’s headquarters.

However, sales in the Americas—which include Latin America, Canada and the United States—dipped 1 percent in U.S. dollars, with the company trying to save money by shuttering unprofitable stores, renegotiating leases and asking for rent reductions when possible. Comp sales for the quarter, including e-commerce, were only up 2 percent, Herrero said, over last year.

“While the positive comps [in the Americas] were exciting, what was satisfying is that we achieved these comps while being less promotional than last year,” Herrero said.

Overall, the company’s revenues increased 15 percent in the first quarter to $521.3 million compared with $454.3 million during the same period last year. However, the company had a net loss of $21.2 million, compared to a net loss of $21.3 million for the same period last year.

Sandeep Reddy, the chief financial officer for Guess, said that the company, founded by the Marciano brothers in 1981, was investing significantly in Europe and Asia, with about $85 million to $95 million expected to be spent this year on retail growth.

Executives at the apparel company were asked about the investigation surrounding allegations lodged by model Kate Upton earlier this year against Guess cofounder Paul Marciano, who has the titles of executive chairman and chief creative officer.

Two weeks after the allegations were made, Marciano stepped down from being involved in the company.

Herrero said the investigation was ongoing and that the company had no further comment about the issue.