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Guess posts weak Q1 results, net revenues decline 6.3 percent

By Prachi Singh

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Management |REPORT

Guess, for its first quarter ended April 30, 2016 reported that net revenue decreased 6.3 percent to 448.8 million dollars, from 478.8 million dollars in the prior-year quarter. In constant currency, total net revenue decreased 5 percent. Americas retail revenues decreased 5 percent in US dollars and 3 percent in constant currency. Retail comp sales including e-commerce decreased 4 percent in US dollars and 3 percent in constant currency. Europe revenues decreased 1percent in US dollars and 3 percent in constant currency, while Asia revenues decreased 15 percent in US dollars and 11 percent in constant currency.

Commenting on the results, Victor Herrero, Chief Executive Officer, commented, "Our first quarter adjusted operating loss finished at the low-end of our guidance as sales finished below our expectations. I had highlighted on our last earnings call that the first six months of the year would be a transition period. The start to the year has been a bit more challenging than we anticipated especially in the Americas and to a lesser extent in Greater China. We are still confident that we will be able to achieve the three year plan goals we provided in March this year, but with a different cadence than initially planned.”

Detailed financial review of the first quarter

For the first quarter, the company recorded GAAP net loss of 25.2 million dollars, compared to net earnings of 3.3 million dollars for the first quarter of fiscal 2016. GAAP diluted loss per share was 0.30 dollar, compared to diluted earnings per share of 0.04 dollar for the prior-year quarter, a decrease of 0.34 dollar per share.

GAAP operating loss was 29 million dollars including a 0.9 million dollars unfavourable currency translation impact, compared to operating earnings of 4.4 million dollars in the prior-year period, a decrease of 33.3 million dollars. Operating margin for the company's Americas Retail segment decreased 280 basis points to negative 6.2 percent from negative 3.4% in the prior-year period. Operating margin for the company's Europe segment decreased 770 basis points to negative 10.4 percent from negative 2.7 percent in the prior-year period. Operating margin for the company's Asia segment decreased 840 basis points to negative 1.2 percent from 7.2 percent in the prior-year period. Operating margin for the licensing segment increased 240 basis points to 91.4 percent in the first quarter compared to 89 percent in the prior-year period.

Dividends and outlook

The company's Board of Directors has approved a quarterly cash dividend of 0.225 dollar per share on the company's common stock.

The company's expectations for the second quarter of fiscal 2017 ending July 30, 2016, include consolidated net revenues to increase between 0.5 percent and 2.5 percent in US dollars and constant currency, operating margin is expected to be between 1.5 percent and 2.5 percent and includes 60 basis points of currency headwind. Diluted earnings per share are expected to be in the range of 0.04 dollar to 0.08 dollar and the estimated impact on earnings per share of the currency headwinds is expected to be approximately 0.06 dollar.

For the fiscal year ending January 28, 2017, the company expects consolidated net revenues to increase between 5.5 percent and 7.5 percent in US dollars. Currency tailwinds are expected to positively impact consolidated revenue growth by approximately 0.5 percent. Excluding the impact of currency, consolidated net revenues are expected to increase between 5 percent and 7 percent in constant currency. GAAP diluted earnings per share are expected to be in the range of 0.48 dollar to 0.68 dollar.

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