Guess? Lags on Q2 Earnings, Cuts FY25 View on Consumer Slowdown

Core Viewpoint - Guess? Inc. (GES) reported mixed results for the second quarter of fiscal 2025, with revenue growth year over year but a decline in earnings that missed consensus estimates [1][3]. Financial Performance - Adjusted earnings were 42 cents per share, missing the Zacks Consensus Estimate of 44 cents, and down 42% from 72 cents in the same quarter last year [3][4]. - Net revenues reached $732.6 million, a 10% increase year over year, and a 13% increase on a constant-currency basis, driven by the acquisition of Rag & Bone and strong wholesale results in Europe and the Americas [4][6]. - Gross margin decreased to 43.7% from 44.3% in the prior year, while SG&A expenses rose to 38.7% from 34.6% [5][6]. Segment Performance - Americas Retail segment revenues increased by 8% in U.S. dollars, but comparable sales declined by 10% [7]. - Americas Wholesale revenues surged by 93% on a reported basis, although the operating margin fell to 18.9% due to newly-acquired businesses [7]. - Europe segment revenues grew by 5% reported and 8% at constant currency, with retail comparable sales up 1% [8]. - Asia revenues declined by 8% reported and 4% at constant currency, with retail comparable sales down 14% [9]. - Licensing revenues rose by 4% reported and at constant currency, with an operating margin of 93.3% [10]. Financial Health - The company ended the quarter with cash and cash equivalents of $218.9 million and long-term debt of approximately $187.8 million [11]. - Net cash from operating activities for the six months ended August 3, 2024, was $21.7 million, while free cash flow was negative almost $23 million [12]. Future Outlook - For fiscal 2025, GES projects revenue growth between 9.5% and 11%, down from a previous range of 10.7% to 12.7% [14]. - Adjusted EPS is expected to be between $2.42 and $2.70, revised down from $2.62 to $3.00 [15]. - For the third quarter of fiscal 2025, revenue growth is anticipated in the range of 14.5% to 16.5%, with adjusted EPS forecasted between 33 and 45 cents [16].