Guess?, Inc. Reports Fiscal Year 2024 Fourth Quarter Results

Fourth Quarter Fiscal 2024 Results:

Revenues Increased to $891 Million, Up 9% in Both U.S. Dollars and Constant Currency

Delivered Operating Margin of 16.3%; Adjusted Operating Margin of 14.6%

GAAP EPS of $1.71 and Adjusted EPS of $2.01

Full Fiscal Year 2024 Results:

Revenues Increased to $2.8 Billion, Up 3% in Both U.S. Dollars and Constant Currency

Delivered Operating Margin of 9.5%; Adjusted Operating Margin of 9.2%

GAAP EPS of $3.09 and Adjusted EPS of $3.14

Full Fiscal Year 2025 Outlook:

Expects Revenue Increase between 11.5% and 13.5% in U.S. Dollars

GAAP and Adjusted Operating Margins between 7.4% and 8.4% and 7.5% and 8.5%, Respectively

Expects GAAP EPS between $2.08 and $2.43 and Adjusted EPS between $2.56 and $3.00

Declares Special Dividend of $2.25 per Share and Quarterly Dividend of $0.30 per Share

LOS ANGELES–(BUSINESS WIRE)–Guess?, Inc. (NYSE: GES) today reported financial results for its fourth quarter and full fiscal year ended February 3, 2024.

Carlos Alberini, Chief Executive Officer, commented, “We are very pleased with our fourth quarter results, which exceeded our expectations for revenues, operating earnings and earnings per share, and capped an outstanding year for our Company. We grew revenues by 9% for the quarter and 3% for the year. We grew GAAP earnings per share by 40% to $3.09 and adjusted earnings per share by 15% to $3.14. Our disciplined approach in managing the business enabled us to deliver $330 million of operating cash flow and $248 million of free cash flow and end the year with a cash position of $360 million, well ahead of our expectations. As a result of this strong performance, we are pleased to share that our Board has declared a Special Dividend of $2.25 per share to be paid in May, in line with our commitment to return capital directly to shareholders.”

Paul Marciano, Co-Founder and Chief Creative Officer, commented, “We saw strong brand momentum all over the world and are very pleased with how our customers are responding to our collections across all our product categories. Our results this past year are a strong testament that our brand elevation strategy and the transformation of our business are taking hold and creating strong value. I want to take this opportunity to thank our teams for a job well done this year. Regarding the future, we are very excited. We have built a powerful global platform that will enable us to drive the development and expansion of our Guess and Marciano businesses, as well as rag & bone, which we are thrilled to be adding to our portfolio through our first acquisition since Guess was created 43 years ago.”

Mr. Alberini concluded, “Looking forward, we are excited about our plans for the new fiscal year. We believe we are at an inflection point, and we expect to exceed $3 billion in revenues for the first time in our Company’s history with a solid growth plan for our core business, the integration of rag & bone into our portfolio and the launch of Guess Jeans to capture the demand from Generation Z consumers. Our business model is strong and highly diversified, we have great products that are resonating well with our customers, we are well positioned with a strong capital structure and have a great team very capable and ready to execute on our ambitions.”

Non-GAAP Information

This press release contains non-GAAP financial measures, including certain adjusted results of operations and outlook measures, constant currency information and free cash flow measures. See the heading “Presentation of Non-GAAP Information” for further information and the accompanying tables for a reconciliation to the comparable GAAP financial measure.

Fourth Quarter Fiscal 2024 Results

For the fourth quarter of the fiscal year ended February 3, 2024 (“fiscal 2024”), the Company recorded GAAP net earnings of $115.3 million, a 20% increase from $95.8 million for the same prior-year quarter. GAAP diluted net earnings per share (“EPS”) increased 20% to $1.71 for the fourth quarter of fiscal 2024, compared to $1.42 for the same prior-year quarter. The Company estimates a positive impact from its share buybacks of $0.06 and a negative impact from currency of $0.01 on GAAP diluted EPS in the fourth quarter of fiscal 2024 when compared to the same prior-year quarter. The Company’s fourth quarter fiscal 2024 results included 14 weeks, while the fourth quarter of the fiscal year ended January 28, 2023 (“fiscal 2023”) results included 13 weeks.

For the fourth quarter of fiscal 2024, the Company’s adjusted net earnings were $110.8 million, a 13% increase from $98.2 million for the same prior-year quarter. Adjusted diluted EPS increased 16% to $2.01, compared to $1.74 for the same prior-year quarter. The Company estimates a positive impact from its share buybacks of $0.09 and a negative impact from currency of $0.01 on adjusted diluted EPS in the fourth quarter of fiscal 2024 when compared to the same prior-year quarter.

Net Revenue. Total net revenue for the fourth quarter of fiscal 2024 increased 9% to $891.1 million from $817.8 million in the same prior-year quarter. In constant currency, net revenue also increased by 9%, driven by the favorable impact on revenue from the additional week in the current quarter.

• Europe revenues increased 9% in U.S. dollars and 10% in constant currency. Retail comparable sales (including e-commerce) increased 6% in U.S. dollars and 7% in constant currency. The inclusion of our e-commerce sales negatively impacted the retail comparable sales percentage by 4% in U.S. dollars and 5% in constant currency.
• Americas Retail revenues increased 1% in U.S. dollars and remained flat in constant currency. Retail comparable sales (including e-commerce) decreased 1% in U.S. dollars and 2% in constant currency. The inclusion of our e-commerce sales had a minimal impact on the retail comparable sales percentage in both U.S. dollars and constant currency.
• Americas Wholesale revenues increased 44% in U.S. dollars and 39% in constant currency.
• Asia revenues increased 18% in U.S. dollars and 19% in constant currency. Retail comparable sales (including e-commerce) decreased 2% in U.S. dollars and 1% in constant currency. The inclusion of our e-commerce sales positively impacted the retail comparable sales percentage by 4% in both U.S. dollars and constant currency.
• Licensing revenues increased 15% in both U.S. dollars and constant currency.

Earnings from Operations. GAAP earnings from operations for the fourth quarter of fiscal 2024 increased 39.9% to $144.8 million (including $0.6 million in non-cash impairment charges taken on certain long-lived store related assets, $0.2 million net losses on lease modifications and a $0.2 million unfavorable currency translation impact), from $103.6 million (including $4.3 million in non-cash impairment charges taken on certain long-lived store related assets and $0.6 million net gains on lease modifications) in the same prior-year quarter. GAAP operating margin in the fourth quarter of fiscal 2024 increased 3.6% to 16.3%, from 12.7% for the same prior-year quarter, driven primarily by higher revenues and initial markups and lower expenses, including a net positive impact from the settlement of a previously-disclosed stockholder derivative lawsuit, partially offset by the unfavorable impact of currency and higher markdowns. The negative impact of currency on operating margin for the quarter was approximately 50 basis points.

For the fourth quarter of fiscal 2024, adjusted earnings from operations increased 21.1% to $130.2 million, from $107.5 million in the same prior-year quarter. Adjusted operating margin increased 1.5% to 14.6%, from 13.1% for the same prior-year quarter, driven primarily by higher revenues and initial markups, partially offset by the unfavorable impact of currency, higher expenses and higher markdowns.

• Operating margin for the Company’s Europe segment increased 2.0% to 18.0% in the fourth quarter of fiscal 2024, from 16.0% in the same prior-year quarter, driven primarily by higher initial markups and higher revenues, partially offset by the unfavorable impact of currency and higher markdowns.
• Operating margin for the Company’s Americas Retail segment decreased 0.4% to 15.0% in the fourth quarter of fiscal 2024, from 15.4% in the same prior-year quarter, driven primarily by the unfavorable impact from negative retail comparable sales, partially offset by the favorable impact of currency.
• Operating margin for the Company’s Americas Wholesale segment increased 7.6% to 28.5% in the fourth quarter of fiscal 2024, from 20.9% in the same prior-year quarter, driven primarily by higher product margin and revenues.
• Operating margin for the Company’s Asia segment increased 2.0% to 4.8% in the fourth quarter of fiscal 2024, from 2.8% in the same prior-year quarter, driven primarily by higher revenues, partially offset by lower product margins and higher expenses.
• Operating margin for the Company’s Licensing segment increased 4.5% to 92.7% in the fourth quarter of fiscal 2024, from 88.2% in the same prior-year quarter, mainly driven by the favorable impact of lower expenses and higher royalties.

Loss on Extinguishment of Debt. In January 2024, the Company issued approximately $64.8 million principal amount of additional convertible senior notes due April 2028 (the “Additional 2028 Notes”) in exchange for approximately $67.1 million of its outstanding convertible senior notes due April 2024 (the “2024 Notes”). The Additional 2028 Notes have the same terms, constitute a single series with, and have the same CUSIP number as the currently outstanding convertible senior notes due April 2028 (the “Initial 2028 Notes”, and together with the Additional 2028 Notes, the “2028 Notes”; collectively with the 2024 Notes, the “Notes”). Immediately following the closing of these transactions, approximately $48.1 million of the 2024 Notes remained outstanding and classified within current liabilities. As a result of these transactions, the Company recognized a $4.7 million loss on extinguishment of debt during the fourth quarter of fiscal 2024.

Other income, net. Other income, net for the fourth quarter of fiscal 2024 was $13.2 million compared to $0.9 million for the same prior-year quarter. The change was primarily due to lower net unrealized losses from foreign exchange currency contracts compared to the same prior-year quarter and a realized gain on sale of other assets.

Full Year Fiscal 2024 Results

For fiscal 2024, the Company recorded GAAP net earnings of $198.2 million, a 32% increase from $149.6 million for fiscal 2023. The results for fiscal 2024 included a net positive impact of $26.9 million from discrete tax adjustments related primarily to the consolidation of certain business functions into Switzerland. GAAP diluted EPS increased 42% to $3.09 for fiscal 2024, compared to $2.18 during fiscal 2023. The Company estimates a positive impact from its share buybacks of $0.19 and a negative impact from currency of $0.02 on GAAP diluted EPS for fiscal 2024 when compared to fiscal 2023. The Company’s fiscal 2024 results included 53 weeks, while fiscal 2023 results included 52 weeks.

For fiscal 2024, the Company recorded adjusted net earnings of $174.0 million, an 8% increase from $161.1 million for fiscal 2023. Adjusted diluted EPS increased 15% to $3.14, compared to $2.74 for fiscal 2023. The Company estimates its share buybacks had a positive impact of $0.23 and currency had a negative impact of $0.04 on adjusted diluted EPS during fiscal 2024 when compared to fiscal 2023.

Net Revenue. Total net revenue for fiscal 2024 increased 3% to $2.78 billion, from $2.69 billion in fiscal 2023. In constant currency, net revenue also increased by 3%, driven by the favorable impact on revenue from the additional week in the current year.

• Europe revenues increased 7% in both U.S. dollars and constant currency. Retail comparable sales (including e-commerce) increased 9% in both U.S. dollars and constant currency. The inclusion of our e-commerce sales negatively impacted the retail comparable sales percentage by 2% in U.S. dollars and 3% in constant currency.
• Americas Retail revenues decreased 6% in U.S. dollars and 7% in constant currency. Retail comparable sales (including e-commerce) decreased 5% in U.S. dollars and 6% constant currency. The inclusion of our e-commerce sales had a minimal impact on the retail comparable sales percentage in both U.S. dollars and constant currency.
• Americas Wholesale revenues decreased 3% in U.S. dollars and 6% in constant currency.
• Asia revenues increased 16% in U.S. dollars and 18% in constant currency. Retail comparable sales (including e-commerce) decreased 2% in U.S. dollars and increased 1% in constant currency. The inclusion of our e-commerce sales positively impacted the retail comparable sales percentage by 2% in both U.S. dollars and constant currency.
• Licensing revenues increased 9% in both U.S. dollars and constant currency.

Earnings from Operations. GAAP earnings from operations for fiscal 2024 increased by 6% to $263.3 million (including $6.9 million in non-cash impairment charges taken on certain long-lived store related assets, $1.7 million net gains on lease modifications and a $2.5 million unfavorable currency translation impact), from $248.2 million (including $9.5 million in non-cash impairment charges taken on certain long-lived store related assets and $2.3 million net gains on lease modifications) in fiscal 2023. GAAP operating margin in fiscal 2024 increased 0.3% to 9.5%, from 9.2% in fiscal 2023, driven primarily by higher initial markups and the favorable impact of business mix and higher revenues, partially offset by higher expenses, unfavorable currency impact and lower government subsidies. The negative impact of currency on operating margin for fiscal 2024 was approximately 100 basis points.

For fiscal 2024, adjusted earnings from operations decreased 3.0% to $255.0 million, from $262.9 million in fiscal 2023. Adjusted operating margin decreased 0.6% to 9.2% for fiscal 2024, from 9.8% in fiscal 2023, driven primarily by higher expenses, including higher store costs and performance-based compensation, unfavorable currency impact and lower government subsidies, partially offset by higher initial markups and the favorable impact of business mix and higher revenues.

• Operating margin for the Company’s Europe segment in fiscal 2024 remained relatively flat from fiscal 2023 at 11.6%, driven primarily by higher initial markups and the favorable impact of higher revenues, offset by the unfavorable impact of currency, higher expenses and lower government subsidies compared to the prior year.
• Operating margin for the Company’s Americas Retail segment decreased 3.5% to 8.0% in fiscal 2024, from 11.5% in fiscal 2023, driven primarily by the unfavorable impact from lower revenues, higher expenses and higher markdowns.
• Operating margin for the Company’s Americas Wholesale segment increased 4.8% to 27.2% in fiscal 2024, from 22.4% in fiscal 2023, driven primarily by higher product margin, partially offset by higher expenses.
• Operating margin for the Company’s Asia segment increased 4.9% to 2.9% in fiscal 2024, from negative 2.0% in fiscal 2023, driven primarily by the favorable impact of higher revenues, partially offset by higher expenses.
• Operating margin for the Company’s Licensing segment increased 4.2% to 93.3% in fiscal 2024, from 89.1% in fiscal 2023, mainly due to the favorable impact of lower expenses and higher royalties.

Loss on Extinguishment of Debt. In April 2023, the Company issued $275 million principal amount of Initial 2028 Notes in privately negotiated exchange and subscription agreements with a limited number of holders of its 2024 Notes and certain other investors. As part of these April transactions, the Company exchanged approximately $184.9 million of its 2024 Notes for approximately $163.0 million of Initial 2028 Notes and approximately $33.3 million in cash, and issued $112.0 million of Initial 2028 Notes. Immediately following the closing of these April transactions, approximately $115.0 million of the 2024 Notes remained outstanding and classified within current liabilities. As a result of these April transactions, the Company recognized a $7.7 million loss on extinguishment of debt during the first quarter of fiscal 2024.

In January 2024, the Company issued approximately $64.8 million principal amount of Additional 2028 Notes in exchange for approximately $67.1 million of its outstanding 2024 Notes. The Additional 2028 Notes have the same terms, constitute a single series with, and have the same CUSIP number as the Initial 2028 Notes. Immediately following the closing of these January transactions, approximately $48.1 million of the 2024 Notes remained outstanding and classified within current liabilities. As a result of these January transactions, the Company recognized a $4.7 million loss on extinguishment of debt during the fourth quarter of fiscal 2024.

Other expense, net. Other expense, net for fiscal 2024 was $5.1 million compared to $39.8 million in fiscal 2023. The change was primarily due to lower net realized and unrealized losses from foreign currency exposures and, to a lesser extent, net unrealized gains compared to net unrealized losses on the Company’s SERP-related assets and foreign exchange currency contracts compared to fiscal 2023.

Outlook

The Company’s expectations for the first quarter and full fiscal year 2025, which include projected rag & bone results subsequent to the expected closing of the transaction in the first quarter of fiscal 2025, are as follows:

A reconciliation of the Company’s outlook for GAAP operating margin to adjusted operating margin and GAAP diluted earnings (loss) per share to adjusted diluted earnings (loss) per share for the first quarter and full fiscal year 2025 is as follows:

The Company’s expectations of the high-end for the free cash flow outlook for the full fiscal year 2025 are as follows (in millions):

Dividends

The Company’s Board of Directors has approved a special cash dividend of $2.25 per share on the Company’s common stock and a quarterly cash dividend of $0.30 per share on the Company’s common stock. Both dividends will be payable on May 3, 2024 to shareholders of record as of the close of business on April 17, 2024.

Share Repurchases

During April 2023, in connection with the exchange and subscription offering related to the 2024 Notes and the 2028 Notes, the Company repurchased approximately 2.2 million shares of its common stock for $42.5 million through broker-assisted market transactions, pursuant to the Company’s 2021 Share Repurchase Program, leaving a capacity of $19.7 million under its previously announced share repurchase program. During January 2024, in connection with the additional exchange and subscription offering related to the 2024 Notes and the 2028 Notes, the Company repurchased approximately 0.9 million shares of its common stock for $21.1 million through broker-assisted market transactions under its 2021 Share Repurchase Program. The Board of Directors expanded its repurchase authorization by $1.4 million to cover the January 2024 repurchase transactions. As of February 3, 2024, the Company had no remaining authority under the 2021 Share Repurchase Program to purchase its common stock.

Presentation of Non-GAAP Information

The financial information presented in this release includes non-GAAP financial measures, such as adjusted results and outlook, constant currency financial information and free cash flows. The adjusted measures exclude the impact of certain professional service and legal fees and related (credits) costs, transaction costs in connection with the Company’s acquisition of rag & bone, asset impairment charges, net (gains) losses on lease modifications, loss on extinguishment of debt, non-cash amortization of debt discount of the Company’s convertible senior notes, fair value remeasurement of derivatives related to the Additional 2028 Notes and convertible note hedge transactions, the related income tax effects of the foregoing items and the impact from certain discrete income tax adjustments related primarily to the consolidation of certain business functions into Switzerland and, to a lesser extent, adjustments from an intra-entity transfer of intellectual property rights from certain U.S. entities to a wholly-owned Swiss subsidiary and the impact from changes in the income tax law in certain tax jurisdictions, in each case where applicable. The weighted average diluted shares outstanding used for adjusted diluted EPS excludes the dilutive impact of the Notes, based on the bond hedge contracts in place. These non-GAAP measures are provided in addition to, and not as alternatives for, the Company’s reported GAAP results and outlook.

The Company has excluded these items from its adjusted financial measures primarily because it believes these items are not indicative of the underlying performance of its business and the adjusted financial information provided is useful for investors to evaluate the comparability of the Company’s operating results and its future outlook (when reviewed in conjunction with the Company’s GAAP financial statements and GAAP future outlook). A reconciliation of reported GAAP results and outlook to comparable non-GAAP results and outlook is provided in the accompanying tables.

This release includes certain constant currency financial information. Foreign currency exchange rate fluctuations affect the amount reported from translating the Company’s foreign revenue, expenses and balance sheet amounts into U.S. dollars. These rate fluctuations can have a significant effect on reported operating results under GAAP. The Company provides constant currency information to enhance the visibility of underlying business trends, excluding the effects of changes in foreign currency translation rates.

Contacts

Guess?, Inc.

Fabrice Benarouche

Senior Vice President Finance, Investor Relations and Chief Accounting Officer

(213) 765-5578

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