Certain parts of Guess Inc.’s business may have stumbled through the recently ended quarter. Still, that didn’t make a difference for the Los Angeles denim firm’s overall results.
While rugged patches in Asia and the Americas retail business were laggards, the strength of Guess’ European and Americas wholesale divisions were more than enough to notch gains in the quarter ended Nov. 1.
CEO Carlos Alberini said in a statement that management was “pleased” with the overall performance, but stopped short of more specifics.
Guess shareholders earlier this month approved a sale of 51 percent of the company’s intellectual property to Authentic Brands Group, while management—including Alberini—will own the operating business.
With the pending go-private deal, which is slated to close next year in Guess’ fiscal fourth quarter, the company did not offer a conference call to go over its results in more detail.
The Good
Still, based on the financials reported, there were few deviations from previous quarters.
Much of the potential for the business resides in Europe, where revenue bumped up 6 percent, excluding the impact of exchange rates, to $404.1 million.
Same-store sales in Europe, for brick-and-mortar and e-commerce, rose 2 percent in constant currency.
That’s consistent with moves made in the past to bring the company’s newer, Gen Z-focused label, Guess Jeans, to Europe first. The new brand opened its first store in Amsterdam in a move underscoring the market’s significance when it comes to growth potential.
The other major bright spot for Guess in the November quarter was the performance at third-party retailers, with Americas wholesale spiking 26 percent in constant currency to $126.1 million.
The Not so Good
Despite the solid performance in wholesale, Americas retail revenue fell 2 percent to $170 million in the recently ended quarter, with same-store sales off 3 percent. The latter’s decline was driven by lackluster performance in e-commerce.
Asia continued to struggle.
The division saw its revenue drop 6 percent in constant currency to $60.1 million.
The challenges appeared to be in both physical retail and e-commerce.
One other aspect of the business to note: licensing.
That business fell 6 percent to $31.1 million in the quarter.
In the absence of a quarterly earnings call with management, it’s hard to pinpoint the reasons for the licensing decline and whether executives are seeing the trend continue in the current quarter.
It’s something of note with the pending deal to Authentic Brands, although that is tempered with the reality that licensing is not a sizable business compared to some of Guess’ other divisions.
Still, Authentic Brands’ successes have been in growing labels largely through the licensing model. Authentic Brands has seen success in holding the IPs of legacy brands in the apparel industry and then tapping outside firms to make any number of goods under a licensing agreement in which Authentic gets paid a royalty fee.
Even with the more challenging aspects of its business, Guess Inc. total revenue for the November quarter was $791.4 million, which was up 7 percent from the year-ago period.
The company swung to a profit of $29.4 million, compared to a loss of $20.8 million in the prior year period, largely driven by a change in the value of senior notes.
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