On August 28, 2024, Guess? Inc (GES, Financial) released its 8-K filing reporting financial results for the second quarter of fiscal year 2025, ending August 3, 2024. Guess? Inc designs, markets, distributes, and licenses contemporary apparel and accessories under brands including Guess, Marciano, and G by Guess. The company operates in five segments: Americas Retail, Americas Wholesale, Europe, Asia, and Licensing, with the United States being its largest revenue source.
Performance Overview
Guess? Inc reported a 10% increase in revenues to $733 million, surpassing the analyst estimate of $729.96 million. However, the company posted a GAAP loss per share of $0.28, missing the estimated earnings per share (EPS) of $0.46. Adjusted EPS came in at $0.42, also below expectations.
Key Financial Achievements
The revenue growth was primarily driven by the acquisition of rag & bone and robust wholesale performance in Europe and the Americas. The company reported an operating margin of 6.5%, with an adjusted operating margin of 5.2%. Despite the revenue increase, the bottom-line results were impacted by higher marketing investments aimed at supporting international expansion.
Income Statement Highlights
| Metric | Q2 FY2025 | Q2 FY2024 |
|---|---|---|
| Net Revenue | $732.6 million | $664.5 million |
| Gross Profit | $319.9 million | $294.4 million |
| GAAP Net Earnings (Loss) | $(10.6) million | $39.0 million |
| Adjusted Net Earnings | $23.0 million | $39.7 million |
| GAAP EPS | $(0.28) | $0.59 |
| Adjusted EPS | $0.42 | $0.72 |
Segment Performance
Europe and Americas Wholesale segments showed significant growth, with Americas Wholesale revenues increasing by 93% in U.S. dollars. However, the Asia segment faced challenges, with revenues decreasing by 8% in U.S. dollars. The company's licensing revenues also saw a modest increase of 4%.
Challenges and Outlook
The company faced a GAAP net loss of $10.6 million, primarily due to a $40.5 million unrealized loss from the fair value change of derivatives related to convertible senior notes. The adjusted net earnings decreased by 42% to $23.0 million. The company has lowered its full fiscal year 2025 outlook, expecting revenue growth between 9.5% and 11.0% and adjusted EPS between $2.42 and $2.70.
Carlos Alberini, Chief Executive Officer, commented, “During the second quarter we delivered revenue growth of 10%, in line with our expectations. This performance was fueled by the rag & bone acquisition and strong wholesale performance in our Europe and Americas businesses. All our segments, except for Asia, delivered top-line growth.”
Financial Metrics and Analysis
Key financial metrics such as operating margin, net earnings, and EPS are crucial for evaluating the company's performance. The operating margin decreased to 6.5% from 9.7% in the same prior-year quarter, driven by higher expenses and increased marketing investments. The adjusted operating margin also saw a decline to 5.2% from 9.8%.
Despite the challenges, the company's strategic acquisitions and strong wholesale performance indicate potential for future growth. However, the lowered outlook reflects a cautious approach given the current consumer environment.
For more detailed insights and the complete earnings report, visit the 8-K filing.
Explore the complete 8-K earnings release (here) from Guess? Inc for further details.
