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Guess' (GES) Q2 FY25 Earnings call transcript Aug 28, 2024

AInvestThursday, Aug 29, 2024 11:56 am ET
2min read

The second quarter fiscal 2025 earnings call for Guess? Inc. saw a strong performance despite some challenges, with the company reporting a 10% increase in U.S. dollars and 13% in constant currency, reaching $733 million. The call, led by Carlos Alberini, Senior Vice President of Finance, Investor Relations, and Chief Accounting Officer, highlighted several key themes and trends.

Operating Results and Segments

Guess? performed well in European wholesale and Americas wholesale, with revenue growth in both regions. However, Asia and the Americas retail sector experienced declines, with sales not meeting expectations. The European retail business showed a positive comp sales increase but faced lower traffic, while the Americas retail segment struggled with traffic and declining comp sales.

Product Performance

Footwear and accessories, particularly sneakers and handbags, drove positive comps in Europe. In apparel, knit tops for both genders and women's denim showed growth, while dresses and outerwear faced declines. The Americas market saw declines in both women's and men's businesses, but activewear was a bright spot with strong sales across both genders. The licensing business, including footwear, also performed well with a 4% revenue increase.

Rag & Bone Acquisition

The acquisition of Rag & Bone was a significant focus of the call, with the brand performing well and contributing to the company's growth. The transition to the Guess? platform has been smooth, with strong demand for new product in key categories from multiple customers. The direct-to-consumer business is also progressing, although it underperformed slightly in the quarter.

Investments and Marketing

Guess? made significant investments to support long-term growth, increasing adjusted SG&A spending by 70%. This included marketing and advertising investments for both Guess? and Guess? Jeans, which are expected to build stronger brand awareness. The company also opened new stores in Amsterdam and Berlin for Guess? Jeans, and is exploring opportunities to expand the brand's reach into new markets.

Outlook and Challenges

Despite the strong performance, Guess? faced challenges, including a softer consumer environment and increased operating costs due to inflationary factors. The company revised its revenue growth expectations for the year to be between 9.5% and 11%, with adjusted earnings per share between $2.42 and $2.70.

Strategic Initiatives

The call also highlighted several strategic initiatives, including the company's efforts to transform from a single brand to a platform with a diverse brand portfolio. The acquisition of Rag & Bone and the launch of Guess? Jeans are part of this strategy, as is the expansion of the company's logistics network and capital structure to support growth.

Conclusion

The second quarter fiscal 2025 earnings call for Guess? Inc. showcased a company facing both challenges and opportunities. With a strong performance in some segments and strategic initiatives aimed at long-term growth, Guess? is well-positioned to navigate the dynamic retail environment. The acquisition of Rag & Bone and the launch of Guess? Jeans are key parts of this strategy, and the company's investments in marketing and brand awareness are expected to drive growth in the coming quarters. Despite the challenges, Guess? remains optimistic about its future and is focused on delivering shareholder value.

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