Guess? Inc. Reports Solid Earnings for Fiscal 2019

Guess? Inc. has been undergoing a lot of executive changes this year, but that didn’t hamper its bottom line.

The lifestyle-clothing company founded in Los Angeles 38 years ago reported that fourth-quarter net income was $23.2 million, a drastic improvement over the same period last year, when net income was only $1 million.

Revenues for the latest fourth-quarter period were up 5.7 percent to $837.1 million compared to $792.2 million the previous fourth quarter.

For fiscal 2019, net income was $14.1 million compared to a net loss of $7.9 million in fiscal 2018. Revenues in fiscal 2019 totaled $2.61 billion compared to $2.36 billion the previous year.

Softness was seen in the Americas market, where retail revenues for the year declined 1 percent but retail comp sales including e-commerce increased 4 percent. On the wholesale side of the Americas business, revenues shot up 13.6 percent.

The strongest performance was seen in Asia, where revenues rose 25.4 percent and retail comp sales including e-commerce saw a 15 percent improvement.

The March 20 earnings results were reported just as Carlos Alberini returned to the company to take over as chief executive officer, replacing Victor Herrero, who after four years stepped down on Feb. 2.

Previously Alberini was at Guess between 2000 and 2010 as the company’s president and chief operating officer. He left to work for Restoration Hardware and later Lucky Brand Inc., where most recently he was the chairman and chief executive.

On an earnings conference call with analysts, Alberini said that he was glad to be back at the lifestyle-apparel company. “This was and is my dream job,” he said. “While nine years may seem like a long time [to be away], it took me no time to feel I was back home.”

He noted that during his absence Guess had expanded its international sales and global reach to now be distributed in more than 95 countries. But he said there was a “big white space” to expand the company’s international presence, particularly in areas including China, Japan, and Eastern and Northern Europe.

He said that in his first 100 days he would work on a number of initiatives and develop a strategy for making the company more profitable. He noted that in the past year logistics and distribution costs had been higher than usual and he would work to reduce those.

He also pointed out that he wanted to work on product development and expand areas such as accessories, menswear, denim and the Marciano brand, which he thought had room to grow.

“Denim has always been at our core and has always been a dominant product category for Guess, one that brings the customer into the store,” he noted. “Today, our denim penetration is much lower than our historic levels, and I believe that we can grow it back with a great product assortment, strong store presentation and effective marketing. Other product opportunities include Marciano, our men’s business, and accessories across channels and territories, just to name a few.”

Keeping a fashion-forward clothing company relevant after nearly 38 years is not easy, Alberini said, but he was proud that the brand was favored by some of the label’s heritage customers as well as younger customers.

“Through very innovative initiatives and highly meaningful collaborations with key celebrities, the Guess brand is engaging new customer profiles that are representative of millennials and Generation Zs, which now represent more than half of the online customers doing business with Guess in the U.S.,” Alberini said. “Great examples of brand partnerships, driven by Nicolai Marciano and his team, have been ASAP Rocky, J Balvin, 88rising, Places + Faces and Sean Wotherspoon. Through our authentic positioning on our product capsule, Guess? has been able to attract a younger consumer, who has developed into a community of brand ambassadors.”

Despite a profitable year, Alberini noted that the company by the end of the fiscal year had more inventory in stock than it would like. “We exited the year with higher inventory than we planned,” he noted. “We will move out our inventory through our own retail stores and stock-liquidation channels, which will ease inventory more in the back half of the fiscal year.”