Guess Sees Net Loss With Revenues Increasing in the First Quarter

Carlos Alberini, the new chief executive of Guess?, Inc., was celebrating more than four months on the job with financial news from the Los Angeles company’s first quarter of 2020.

In a conference call with analysts on June 6, he said business in the Americas and Europe posted strong revenue growth but was offset by weakness in Asia during the quarter ending May 4.

“In Asia, it has become clear during the first quarter that there has been a softening in the business with lower traffic to our stores and with e-commerce,” said Alberini, who left Lucky Brand Inc. in late January to join Guess after former CEO Victor Herrera departed.

For the first quarter, the company’s revenues were up 3 percent to $536.7 million compared to $521.3 million in the prior-year quarter. Net loss for the first quarter of 2020 totaled $20.6 million versus $21 million in the same period last year.

Sales in the Americas were the strongest of the geographic areas, with retail revenues climbing 3 percent and retail comps including e-commerce up 4 percent during the quarter.

Revenues in Europe inched up 2.2 percent, but Asia only saw sales growth of 1.4 percent. Retail comp sales including e-commerce decreased 15 percent.

Alberini talked about how the company’s sourcing strategy was being affected by tariffs on $200 billion in Chinese goods and more threatened on apparel and footwear.

“We are taking action to mitigate potential tariffs, from cost sharing with our suppliers to shifting sourcing to other countries,” he said. “We are raising prices if the product can deliver and offsetting cost increases with other cost-saving initiatives. If tariffs go up [from 10 percent] to 25 percent, the impact will be meaningful, but the situation is still fluid.”

Alberini noted that the company’s e-commerce sales only made up 12 percent of revenues, which is below what many other retailers are experiencing. He said best-in-class e-commerce sales for many retailers range from 30 percent to 40 percent of revenues so the company needs to improve in that area.

To better serve the Marciano customer with style preferences, the company is creating two design teams to manage the company’s contemporary label. One is to be set up in Los Angeles for the Americas and a second team will be centered in Davos, Switzerland, for Europe.

Denim will be a focal point in this summer’s marketing campaign, and there will be more denim in the stores this summer and fall. “We have a number of key products including denim, accessories, Marciano and men’s,” Alberini said. “We believe if there is a better assortment and better representation in stores and online we can drive sales.”

In the long term, China is still considered a revenue growth area even though business has been slow there. “We have stores in only 34 of the top 60 cities in China, and 90 percent are directly operated,” he noted.