Guess(US:GES)2025-06-05 20:19Q1 FY2026 Performance and Outlook This section covers the company's first-quarter financial results, management's strategic commentary, and details of the recent rag & bone acquisition First Quarter Fiscal 2026 Highlights Guess?, Inc. reported a 9% revenue increase to $648 million for the first quarter of fiscal 2026, but experienced a GAAP loss per share of $0.65, a significant downturn from the previous year's earnings, with an updated full-year outlook projecting revenue growth between 5.5% and 7.4% and an adjusted EPS of $1.32 to $1.64 Q1 FY2026 Key Metrics | Metric | Value | | :--- | :--- | | Revenues | $648 Million (+9% in USD, +12% in constant currency) | | GAAP Operating Margin | (5.1)% | | Adjusted Operating Margin | (4.0)% | | GAAP Loss per Share | $0.65 | | Adjusted Loss per Share | $0.44 | Updated Full Fiscal Year 2026 Outlook | Metric | Outlook Range | | :--- | :--- | | Revenue Increase (USD) | 5.5% to 7.4% | | GAAP Operating Margin | 3.9% to 4.6% | | Adjusted Operating Margin | 4.4% to 5.1% | | GAAP EPS | $0.87 to $1.11 | | Adjusted EPS | $1.32 to $1.64 | Management Commentary Management expressed encouragement over the first quarter's performance, which surpassed expectations, driven by the successful integration of rag & bone and strong wholesale business in Europe and the Americas, with plans to leverage its diversified business model for future growth and proactive steps taken to mitigate tariff impacts to under $10 million - The better-than-expected performance was attributed to the successful integration of rag & bone and continued momentum in wholesale businesses across Europe and the Americas4 - Future growth initiatives include expanding rag & bone into new markets, increasing distribution of the Guess Athleisure line, and launching the Guess Jeans brand to target young consumers4 - The company has proactively managed tariff exposure to protect margins, limiting the fiscal year's net impact to less than $10 million, which is incorporated into the outlook4 rag & bone Acquisition On April 2, 2024, Guess? and WHP Global finalized the acquisition of the fashion brand rag & bone, with Guess? acquiring all operating assets and liabilities, and a 50/50 joint venture acquiring the intellectual property, integrating the business into existing segments from the acquisition date - The company acquired all operating assets and assumed related liabilities of rag & bone6 - A 50/50 joint venture with WHP Global was formed to acquire rag & bone's intellectual property6 - As of April 2, 2024, rag & bone has been integrated into the company's existing operational segments6 First Quarter Fiscal 2026 Financial Results Analysis This section provides a detailed analysis of the company's overall financial performance and segment-specific results for the first quarter of fiscal year 2026 Overall Financial Performance In Q1 FY2026, the company shifted to a GAAP net loss of $32.9 million from a $13.0 million net profit in the prior year, largely due to a $4.3 million unrealized loss on derivatives compared to a $38.5 million gain previously, with net revenue increasing by 9% to $647.8 million, but the GAAP operating loss widened by 67.5% to $33.3 million, and the operating margin declined from -3.4% to -5.1% YoY, influenced by unfavorable business mix and higher impairment charges Q1 FY2026 vs. Q1 FY2025 Performance | Metric | Q1 FY2026 | Q1 FY2025 | Change | | :--- | :--- | :--- | :--- | | Net Revenue | $647.8M | $591.9M | +9.0% | | GAAP Net Earnings (Loss) | ($32.9M) | $13.0M | -353% | | GAAP Diluted EPS (Loss) | ($0.65) | $0.23 | -383% | | Adjusted Net Loss | ($22.3M) | ($13.8M) | +61% | | Adjusted Diluted EPS (Loss) | ($0.44) | ($0.27) | +63% | | GAAP Loss from Operations | ($33.3M) | ($19.9M) | +67.5% | | GAAP Operating Margin | (5.1)% | (3.4)% | -1.7 p.p. | - The significant swing from net earnings to net loss was primarily driven by a net $4.3 million unrealized loss on derivatives, compared to a net $38.5 million unrealized gain in the prior-year quarter713 Segment Performance Revenue growth was led by Americas Wholesale (+63%), Americas Retail (+9%), and Europe (+8%), while Asia revenues fell by 20% and Licensing by 14%, with operating margins declining across most segments, Americas Retail dropping to -10.5% and Asia turning to a negative margin of -3.1% from a positive 5.1% last year, and only the Licensing segment seeing a slight margin improvement Segment Revenue Performance (YoY) | Segment | Revenue Change (USD) | Revenue Change (Constant Currency) | | :--- | :--- | :--- | | Americas Wholesale | +63% | +70% | | Americas Retail | +9% | +12% | | Europe | +8% | +9% | | Licensing | -14% | -14% | | Asia | -20% | -16% | Segment Operating Margin Performance | Segment | Q1 FY2026 Operating Margin | Q1 FY2025 Operating Margin | | :--- | :--- | :--- | | Americas Wholesale | 19.9% | 22.7% | | Americas Retail | (10.5)% | (7.2)% | | Europe | (2.9)% | (0.2)% | | Asia | (3.1)% | 5.1% | | Licensing | 92.1% | 92.0% | - Retail comparable sales (including e-commerce) decreased across all regions: Americas Retail (-11%), Asia (-24%), and Europe (-4%) in U.S. dollars10 Fiscal Year 2026 Outlook This section outlines the company's financial projections for the full fiscal year 2026 and the second quarter, including revenue, operating margin, EPS, and free cash flow forecasts Company Outlook For the full fiscal year 2026, Guess? anticipates a revenue increase between 5.5% and 7.4%, with an adjusted operating margin of 4.4% to 5.1% and adjusted EPS between $1.32 and $1.64, while the outlook for the second quarter projects revenue growth of 2.9% to 4.7% and an adjusted EPS of $0.11 to $0.21 Fiscal 2026 Full Year and Q2 Outlook | Metric | Second Quarter of Fiscal 2026 | Full Fiscal 2026 | | :--- | :--- | :--- | | Net Revenue Increase (USD) | 2.9% to 4.7% | 5.5% to 7.4% | | GAAP Operating Margin | 2.5% to 3.3% | 3.9% to 4.6% | | Adjusted Operating Margin | 2.5% to 3.3% | 4.4% to 5.1% | | GAAP Diluted EPS | $0.11 to $0.18 | $0.87 to $1.11 | | Adjusted Diluted EPS | $0.11 to $0.21 | $1.32 to $1.64 | - The full-year adjusted operating margin outlook of 4.4% to 5.1% is derived from a GAAP outlook of 3.9% to 4.6% after accounting for restructuring charges, asset impairments, and other costs18 Free Cash Flow Outlook The company projects a free cash flow of approximately $55 million for the full fiscal year 2026, based on an expected $125 million in net cash from operating activities, offset by $65 million in property and equipment purchases and $5 million in payments for finance leases Fiscal 2026 Free Cash Flow Outlook (in millions) | Item | Amount | | :--- | :--- | | Net cash provided by operating activities | $125 | | Less: Purchases of property and equipment | ($65) | | Less: Payments for property and equipment under finance leases | ($5) | | Free cash flow | $55 | Shareholder Returns and Other Information This section details the company's dividend policy and provides an overview of its global retail store and concession data Dividends The Board of Directors has approved a quarterly cash dividend of $0.30 per share on the company's common stock, payable on July 3, 2025, to shareholders of record as of June 18, 2025 - A quarterly cash dividend of $0.30 per share has been approved22 - The dividend is payable on July 3, 2025, to shareholders of record on June 18, 202522 Store and Concession Data As of May 3, 2025, Guess? and its partners operated 1,601 retail stores globally, an increase of 20 stores from the previous year, with the total number of directly operated stores growing to 1,074 from 1,048, while partner-operated stores slightly decreased Global Store Count Comparison | Store Type | As of May 3, 2025 | As of May 4, 2024 | | :--- | :--- | :--- | | Total Stores | 1,601 | 1,581 | | Directly Operated | 1,074 | 1,048 | | Partner Operated | 527 | 533 | Condensed Consolidated Financial Statements This section presents the company's condensed consolidated income statements, balance sheet data, cash flow information, and reconciliation of GAAP to adjusted results Condensed Consolidated Statements of Income (Loss) For the first quarter of FY2026, the company reported net revenue of $647.8 million, up from $591.9 million in the prior year, but increased cost of product sales and higher SG&A expenses led to a loss from operations of $33.3 million, a significant increase from the $19.9 million loss in the same period last year, resulting in a final net loss attributable to Guess?, Inc. of $32.9 million, a reversal from a $13.0 million net earning in Q1 FY2025 Q1 Income Statement Highlights (in thousands) | Line Item | Three Months Ended May 3, 2025 | Three Months Ended May 4, 2024 | | :--- | :--- | :--- | | Net revenue | $647,801 | $591,943 | | Gross profit | $258,457 | $248,101 | | Loss from operations | $(33,308) | $(19,888) | | Net earnings (loss) attributable to Guess?, Inc. | $(32,928) | $13,022 | Reconciliation of GAAP Results to Adjusted Results The company's GAAP net loss of $32.9 million was adjusted to a non-GAAP net loss of $22.3 million for the quarter, with key adjustments including adding back $6.1 million in asset impairment charges and a $4.3 million loss from the fair value remeasurement of derivatives, aiming to provide a clearer view of underlying business performance by excluding non-recurring or non-operational items Reconciliation of GAAP to Adjusted Net Loss (in thousands) | Description | Amount | | :--- | :--- | | Reported GAAP net loss attributable to Guess?, Inc. | $(32,928) | | Asset impairment charges | $6,089 | | Fair value remeasurement of derivatives | $4,253 | | Proposed transaction costs | $1,834 | | Other adjustments (net) | $(1,468) | | Adjusted net loss attributable to Guess?, Inc. | $(22,260) | Selected Condensed Consolidated Balance Sheet Data As of May 3, 2025, the company's balance sheet showed total assets of $2.86 billion, with cash and cash equivalents at $151.2 million, a decrease from $241.7 million a year prior, inventories increasing to $638.2 million from $554.9 million YoY, and total stockholders' equity declining to $483.6 million from $565.5 million in the previous year Key Balance Sheet Items (in thousands) | Account | May 3, 2025 | May 4, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $151,192 | $241,654 | | Inventories | $638,188 | $554,903 | | Total assets | $2,863,425 | $2,748,641 | | Total liabilities | $2,329,838 | $2,140,808 | | Guess?, Inc. stockholders' equity | $483,566 | $565,473 | Condensed Consolidated Cash Flow Data In the first quarter, net cash used in operating activities was $73.4 million, a significant increase from the $22.9 million used in the prior-year period, with net cash used in investing activities at $22.5 million, resulting in a negative free cash flow of $96.4 million, deteriorating from a negative $45.6 million in the same quarter last year Cash Flow Summary (in thousands) | Cash Flow Activity | Three Months Ended May 3, 2025 | Three Months Ended May 4, 2024 | | :--- | :--- | :--- | | Net cash used in operating activities | $(73,412) | $(22,921) | | Net cash used in investing activities | $(22,479) | $(77,923) | | Net cash provided by (used in) financing activities | $52,551 | $(15,720) | Free Cash Flow Reconciliation (in thousands) | Line Item | Three Months Ended May 3, 2025 | Three Months Ended May 4, 2024 | | :--- | :--- | :--- | | Net cash used in operating activities | $(73,412) | $(22,921) | | Less: Purchases of property and equipment | $(21,907) | $(21,100) | | Less: Payments for property and equipment under finance leases | $(1,103) | $(1,533) | | Free cash flow | $(96,422) | $(45,554) |