LOS ANGELES
,
Aug. 27, 2014
/PRNewswire/ --
Guess?, Inc.
(NYSE: GES) today reported financial results for its second quarter ended
August 2, 2014
.
Second Quarter Fiscal 2015 Highlights
- North
American Retail
revenues decreased 4%; retail comp sales including e-commerce decreased 5%
in U.S. dollars and 4% in constant currency
- European revenues decreased 6% in U.S.
dollars and 9% in local currency
- Asian revenues decreased 2% in U.S.
dollars and 8% in constant currency
- North American Wholesale revenues
decreased 8% in U.S. dollars and 6% in constant currency
- Adjusted operating earnings decreased
55%; GAAP operating earnings decreased 51%
This press release contains certain non-GAAP,
or adjusted, financial measures, which exclude the impact of restructuring
charges (and related taxes where applicable) recorded during the prior-year
first and second quarters. A reconciliation of reported GAAP results to
comparable non-GAAP results is provided in the accompanying tables and
discussed under the heading "Presentation of Non-GAAP Information"
below.
Second Quarter Fiscal 2015 Results
For the second quarter of fiscal 2015, the
Company recorded net earnings of
$22.0 million
, a 50.5% decrease compared to adjusted net earnings of
$44.3 million
for the second quarter of fiscal 2014. Diluted earnings per share decreased
50.0% to
$0.26
, compared to adjusted diluted earnings per share of
$0.52
for the prior-year quarter. The prior-year adjusted net earnings excluded
restructuring charges of
$6.1 million
(
$4.4 million
net of taxes). On a GAAP basis, prior-year second quarter net earnings were
$39.9 million
and diluted earnings per share totaled
$0.47
, including an unfavorable
$0.05
after-tax impact from the restructuring charges.
Paul Marciano
, Chief Executive Officer, commented, "Overall second quarter earnings
were consistent with our expectations but were short of our operational goals
due to a soft environment in
North America
, where traffic and promotional activity have continued to put our brick and
mortar stores under pressure. However, we are encouraged by our North American
e-commerce business which grew by almost 50% in the second quarter. So far in
the third quarter, our Fall collection in North American Retail has not seen
the traction with the consumer that we were expecting and we have adjusted our
expectations for the back-half of the year accordingly."
Mr. Marciano continued, "As always, we go
back to our roots and to what we can control. We are consolidating our
organization in
North America
, making it more efficient and more focused on our long-term goals. In
addition, we are continuing to rationalize our
North America
store portfolio and also have the flexibility to further optimize our retail
footprint in the coming years. Finally, we will continue to protect our most
valuable asset, the Guess brand, and will remain focused on delivering great
products to our customers."
Total net revenue for the second quarter of
fiscal 2015 decreased 4.8% to
$608.6 million
, from
$639.0 million
in the prior-year quarter. In constant currency, total net revenue decreased
6.3%.
- The Company's retail stores and e-commerce
sites in
North America
generated revenue of
$244.0 million
in the second quarter of fiscal 2015, a 4.1% decrease from
$254.3 million
in the same period a year ago. Comparable store sales including the
results of our e-commerce sites for the second quarter of fiscal 2015
decreased 5.4% in U.S. dollars and 4.4% in constant currency compared to
the same period a year ago. The Company directly operated 488 retail
stores in
the United States
and
Canada
at the end of the second quarter of fiscal 2015 versus 507 retail stores a
year earlier.
- Net revenue from the Company's
Europe
segment decreased 6.0% to
$235.3 million
in the second quarter of fiscal 2015, from
$250.4 million
in the prior-year period. In local currency, net revenue decreased 9.5%.
- Net revenue from the Company's
Asia
segment decreased 2.4% to
$64.3 million
in the second quarter of fiscal 2015, from
$65.9 million
in the prior-year period. In constant currency, net revenue decreased
8.5%.
- Net revenue from the Company's North
American Wholesale segment decreased 7.5% to
$38.3 million
in the second quarter of fiscal 2015, from
$41.4 million
in the prior-year period. In constant currency, net revenue decreased
6.2%.
- Licensing segment net revenue decreased 1.2%
to
$26.8 million
in the second quarter of fiscal 2015, from
$27.1 million
in the prior-year period.
Operating earnings for the second quarter of
fiscal 2015 decreased 55.4% to
$29.9 million
(including a
$0.9 million
favorable currency translation impact), from adjusted operating earnings of
$66.9 million
in the prior-year period. Operating margin in the second quarter decreased 560
basis points to 4.9%, compared to adjusted operating margin of 10.5% in the
prior-year quarter. The lower operating margin primarily reflects the
negative impact on the Company's fixed cost structure from negative same store
sales in
North America
and lower wholesale shipments in
Europe
and more markdowns in
North America
and
Europe
. On a GAAP basis, operating earnings decreased 50.9% and operating margin
decreased 460 basis points.
Other net income, which primarily includes net
unrealized and realized mark-to-market gains on foreign currency contracts and
net unrealized gains on non-operating assets, was
$4.8 million
for the second quarter of fiscal 2015, compared to other net expense of
$0.1 million
in the prior-year quarter.
The Company's second quarter fiscal 2015
effective tax rate increased to 34.8%, compared to 33.0% for the second
quarter of the prior year.
Six-Month Period Results
Net earnings for the six months ended
August 2, 2014
were
$19.9 million
, a decrease of 64.6% compared to adjusted net earnings of
$56.0 million
for the six months ended
August 3, 2013
. Diluted earnings per share decreased 65.2% to
$0.23
, compared to adjusted diluted earnings per share of
$0.66
for the prior-year period. The prior-year adjusted net earnings excluded
restructuring charges of
$8.5 million
(
$6.2 million
net of taxes). On a GAAP basis, net earnings for the six months ended
August 3, 2013
were
$49.8 million
and diluted earnings per share totaled
$0.58
, including an unfavorable
$0.08
after-tax impact from the restructuring charges.
Total net revenue for the first six months of
fiscal 2015 decreased 4.8% to
$1.13 billion
, from
$1.19 billion
in the prior-year period. In constant currency, total net revenue decreased
5.9%.
- The Company's retail stores and e-commerce
sites in
North America
generated revenue of
$472.3 million
in the first six months of fiscal 2015, a 4.1% decrease from
$492.6 million
in the same period a year ago. Comparable store sales including the
results of our e-commerce sites for the six months ended
August 2, 2014
decreased 4.9% in U.S. dollars and 3.6% in constant currency compared to
the same period a year ago.
- Net revenue from the Company's
Europe
segment decreased 5.1% to
$394.4 million
in the first six months of fiscal 2015, from
$415.8 million
in the prior-year period. In local currency, net revenue decreased 8.9%.
- Net revenue from the Company's
Asia
segment decreased 1.9% to
$134.4 million
in the first six months of fiscal 2015, from
$137.0 million
in the prior-year period. In constant currency, net revenue decreased
6.3%.
- Net revenue from the Company's North
American Wholesale segment decreased 9.0% to
$77.6 million
in the first six months of fiscal 2015, from
$85.2 million
in the prior-year period. In constant currency, net revenue decreased
7.0%.
- Licensing segment net revenue decreased 8.7%
to
$52.4 million
in the first six months of fiscal 2015, from
$57.4 million
in the prior-year period.
Operating earnings for the first six months of
fiscal 2015 decreased 65.4% to
$27.9 million
(including a
$0.6 million
favorable currency translation impact), from adjusted operating earnings of
$80.6 million
in the prior-year period. Operating margin in the first six months of fiscal
2015 decreased 430 basis points to 2.5%, compared to adjusted operating margin
of 6.8% in the prior-year period. The lower operating margin primarily
reflects the negative impact on the Company's fixed cost structure from
negative same store sales in
North America
and lower wholesale shipments in
Europe
and more markdowns in
North America
and
Europe
. On a GAAP basis, operating earnings decreased 61.3% and operating margin
decreased 360 basis points.
Other net income, which primarily includes net
unrealized gains on non-operating assets and net unrealized mark-to-market
gains on foreign currency contracts, was
$3.6 million
for the first six months of fiscal 2015, compared to
$5.3 million
in the prior-year period.
The Company's effective tax rate was 35.1% for
the first six months of fiscal 2015, compared to 33.0% in the prior-year
period.
Outlook
The Company's expectations for the third
quarter of fiscal 2015 ending
November 1, 2014
, are as follows:
- Consolidated net revenues are expected to
range from
$590 million to $600 million
.
- Operating margin is expected to be between
3.5% and 4.5%.
- Diluted earnings per share are expected to
be in the range of
$0.15 to $0.20
.
The Company updated its outlook for the fiscal
year ending
January 31, 2015
, which is now as follows:
- Consolidated net revenues are expected to
range from
$2.44 billion to $2.48 billion
.
- Operating margin is expected to be between
5.5% and 6.0%.
- Diluted earnings per share are expected to
be in the range of
$1.05 to $1.20
.
Dividends
The Company also announced today that its Board
of Directors has approved a quarterly cash dividend of
$0.225
per share on the Company's common stock. The dividend will be payable on
September 26, 2014
to shareholders of record at the close of business on
September 10, 2014
.
Presentation of Non-GAAP Information
The financial information presented in this
release includes non-GAAP financial measures such as "adjusted"
results (to exclude the impact of restructuring charges incurred during the
prior-year first and second quarters), constant currency financial information
and free cash flow measures. The non-GAAP measures are provided in addition
to, and not as alternatives for, the Company's reported GAAP results.
The Company has excluded restructuring charges,
and related tax impact, incurred during the prior-year first and second
quarters from its adjusted financial measures primarily because it does not
believe such charges reflect the Company's ongoing operating results or future
outlook. The Company believes that these adjusted financial measures are
useful as an additional means for investors to evaluate the comparability of
the Company's operating results when reviewed in conjunction with the
Company's GAAP financial statements. A reconciliation of reported GAAP results
to comparable non-GAAP results is provided in the accompanying tables.
This release also includes certain constant
currency financial information. Foreign currency exchange rate fluctuations
affect the amount reported from translating the Company's foreign revenues and
expenses into U.S. dollars. These rate fluctuations can have a significant
effect on reported operating results under GAAP. The Company provides constant
currency information to enhance the visibility of underlying business trends,
excluding the effects of changes in foreign currency translation rates. To
calculate revenues and earnings from operations on a constant currency basis,
operating results for the current-year period are translated into U.S. dollars
at the average exchange rates in effect during the comparable period of the
prior year. The constant currency calculations do not adjust for the impact of
revaluing specific transactions denominated in a currency that is different to
the functional currency of that entity when exchange rates fluctuate. The
constant currency information presented may not be comparable to similarly
titled measures reported by other companies.
The Company also includes information regarding
its free cash flows in this release. The Company calculates free cash flows as
cash flows from operating activities less purchases of property and equipment.
Free cash flows is not intended to be an alternative to cash flows from
operating activities as a measure of liquidity, but rather provides additional
visibility to investors regarding how much cash is generated for discretionary
and non-discretionary items after deducting purchases of property and
equipment. Free cash flow information presented may not be comparable to
similarly titled measures reported by other companies. A reconciliation of
reported GAAP cash flows from operating activities to the comparable non-GAAP
free cash flow measure is provided in the accompanying tables.
Investor Conference Call
The Company will hold a conference call at
4:30 pm (ET)
on
August 27, 2014
to discuss the news announced in this press release. A live webcast of the
conference call will be accessible at www.guess.com via
the "Investor Relations" link. The webcast will be archived on the
website for 30 days.
About Guess?
Guess?, Inc.
designs, markets, distributes and licenses a lifestyle collection of
contemporary apparel, denim, handbags, watches, footwear and other related
consumer products. Guess? products are distributed through branded Guess?
stores as well as better department and specialty stores around the world. As
of
August 2, 2014
, the Company directly operated 488 retail stores in
the United States
and
Canada
and 349 retail stores in
Europe
,
Asia
and
Latin America
. The Company's licensees and distributors operated an additional 848 retail
stores outside of
the United States
and
Canada
. For more information about the Company, please visit www.guess.com.
See Source for Condensed
Consolidated Statements of Income.