Guess Inc.’s European business is the Los Angeles denim company’s biggest story.
Although, the firm is saying little with the clock ticking on its deal to sell a 51 percent stake in its intellectual property to Authentic Brands Group. The pending deal had Guess axe its quarterly conference call on Wednesday, leaving followers to parse through its financial records for a picture of the business.
In short, things continue to look good out of Europe.
The market is the largest for Guess by revenue, accounting for $436.9 million in the quarter ended Aug. 2. That was up 14 percent from a year ago.
That’s more than half of companywide revenue in the quarter and the first six months of Guess’ fiscal year, which ends Jan. 31. It’s expected to reach nearly $1.7 billion in the current fiscal year.
Europe is also a profitable business for Guess Inc., with earnings swelling to $46.4 million in the August quarter, compared to $37.4 million a year ago.
Operationally, Europe and the Middle East have the largest store footprint, with 783 locations. That’s in comparison to 423 in the Americas.
Italy and Poland were the first to see Guess’ new loyalty program and the plan when the company last updated investors in June was to push that into Germany, Austria and Spain.
“In those markets, among our loyalty customers, we saw increases in revenues from those customers of roughly 36 percent,” CEO Carlos Alberini told analysts during a June earnings update. “We also saw that those customers returned to the stores with greater frequency and they spend more per visitor.”
Rag & Bone, Guess Jeans Another Boon
Europe’s successes haven’t just been confined to Guess Inc.’s namesake.
Its youngest divisions in Guess Jeans and Rag & Bone are also laying claim to their own growth stories in the region.
In fact, for Rag & Bone, there’s nothing but runway to expand in Europe. Alberini said as much in the June update.
“We are trying to expand the presence of the brand into the European market,” he told analysts. “We opened one store, and we have two more to open in the next few months in Germany…. And we are also trying to develop other markets worldwide.”
There’s also the aggressive expansion into licensing deals for Rag & Bone, which should help further fuel its growth in Europe and beyond.
Rag & Bone as a division is expected to help drive Guess Inc.’s overall growth in the current year, generating about $320 million in annual revenue.
Meanwhile, the Guess Jeans label which is being overseen by Guess Inc. co-founder Paul Marciano’s son, Nicolai Marciano, is also benefitting from European tailwinds.
That explains why the new brand opened its first-ever store in Amsterdam last year and was seeing robust orders out of Europe when it came to the wholesale business, which is the majority of its revenue currently.
Guess Inc. and the Americas
Meanwhile, the company’s Americas business was more challenged in the quarter on the retail and wholesale side. It generated revenue of $254 million, with wholesale being the largest drag slumping 11 percent in the August quarter.
Alberini mentioned challenges with store traffic, particularly in the Americas. However, it was a trend the company was also seeing the beginning signs of in Europe. With no conference call, it’s difficult to discern whether the headwinds were addressed with the additional marketing mentioned in June, or if they worsened.
By the looks of it, the Americas retail business continued to slide. Same-store sales were off 5 percent in the August quarter. Its retail business swung to a loss of $6.6 million, compared to the year-ago period’s profit of $2.7 million.
Wholesale was profitable with $14.7 million in net earnings in the recently ended quarter, but that was down 8 percent from the year-ago period’s nearly $16 million.
Overall for the company, Europe’s successes and the gains made in the smaller Asia market, helped offset challenges in the Americas.
Companywide revenue in the August quarter rose 3 percent in constant currency to $772.9 million. Net earnings, adjusted to include fees related to the evaluation of the purchase offers made by WHP global and Authentic Brands Group among other things, fell 40 percent to $13.8 million.
Be First to Comment