1-11893 | 95-3679695 |
(Commission File Number) | (IRS Employer Identification No.) |
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: | |
o | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
o | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
o | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
o | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
99.1 | Press Release of Guess?, Inc. dated May 25, 2016 (financial results for the quarter ended April 30, 2016) |
Dated: May 25, 2016 | GUESS?, INC. | |
By: | /s/ Sandeep Reddy | |
Sandeep Reddy Chief Financial Officer |
Exhibit No. | Description | |
99.1 | Press Release of Guess?, Inc. dated May 25, 2016 (financial results for the quarter ended April 30, 2016) |
Exhibit 99.1 |
• | Americas Retail revenues decreased 5% in U.S. dollars and 3% in constant currency; retail comp sales including e-commerce decreased 4% in U.S. dollars and 3% in constant currency |
• | Europe revenues decreased 1% in U.S. dollars and 3% in constant currency |
• | Asia revenues decreased 15% in U.S. dollars and 11% in constant currency |
• | Americas Wholesale revenues decreased 12% in U.S. dollars and 7% in constant currency |
• | GAAP loss from operations of $29 million in Q1 fiscal 2017; compared to earnings from operations of $4 million in Q1 fiscal 2016; Adjusted loss from operations of $23 million in Q1 fiscal 2017 |
• | Announces quarterly cash dividend of $0.225 |
• | Operating margin for the Company’s Americas Retail segment decreased 280 basis points to negative 6.2% in the first quarter of fiscal 2017, from negative 3.4% in the prior-year period. The decrease in operating margin was driven primarily by lower gross margins and a higher SG&A rate due primarily to the negative impact on the fixed cost structure resulting from negative comparable store sales. |
• | Operating margin for the Company’s Europe segment decreased 770 basis points to negative 10.4% in the first quarter of fiscal 2017, from negative 2.7% in the prior-year period, due to lower gross margins and a higher SG&A rate. The lower gross margins were driven primarily by the unfavorable impact from lower wholesale shipments, currency exchange rate fluctuations and more promotions, partially offset by the favorable impact from business mix and positive comparable store sales. The higher SG&A rate was due primarily to overall deleveraging driven by lower wholesale shipments, partially offset by the favorable impact on the fixed cost structure resulting from positive comparable store sales. |
• | Operating margin for the Company’s Asia segment decreased 840 basis points to negative 1.2% in the first quarter of fiscal 2017, from 7.2% in the prior-year period. The decrease in operating margin was due to a higher SG&A rate and lower overall gross margins due primarily to the unfavorable impact from business mix and higher expenses driven by expansion in China. |
• | Operating margin for the Company’s Americas Wholesale segment decreased 100 basis points to 17.1% in the first quarter of fiscal 2017, from 18.1% in the prior-year period. The decrease in operating margin was due to lower product margins driven primarily by the unfavorable impact from currency exchange rate fluctuations on product costs. |
• | Operating margin for the Company’s Licensing segment increased 240 basis points to 91.4% in the first quarter of fiscal 2017, compared to 89.0% in the prior-year period. |
• | Consolidated net revenues are expected to increase between 0.5% and 2.5% in U.S. dollars and constant currency. |
• | Operating margin is expected to be between 1.5% and 2.5% and includes 60 basis points of currency headwind. |
• | Diluted earnings per share are expected to be in the range of $0.04 to $0.08. The estimated impact on earnings per share of the currency headwinds is approximately $0.06. |
• | Consolidated net revenues are expected to increase between 5.5% and 7.5% in U.S. dollars. Currency tailwinds are expected to positively impact consolidated revenue growth by approximately 0.5%. Excluding the impact of currency, consolidated net revenues are expected to increase between 5.0% and 7.0% in constant currency. |
• | GAAP operating margin is expected to be between 3.0% and 4.0% and includes 40 basis points of currency headwind; Adjusted operating margin is expected to be between 3.5% and 4.5%. |
• | GAAP diluted earnings per share are expected to be in the range of $0.48 to $0.68. The estimated impact on earnings per share of the currency headwinds is approximately $0.12. Adjusted diluted earnings per share are expected to be in the range of $0.55 to $0.75. |
Outlook by Segment1 | ||||||||||
Second Quarter of Fiscal 2017 | Fiscal Year 2017 | |||||||||
U.S. Dollars | Constant Currency2 | U.S. Dollars | Constant Currency2 | |||||||
Americas Retail: | ||||||||||
Comps | down MSD to LSD | down MSD to LSD | down LSD to up LSD | down LSD to up LSD | ||||||
Net Revenue | down MSD to LSD | down LSD | flat to up LSD | flat to up LSD | ||||||
Europe: | ||||||||||
Comps | __ | up HSD to LDD | __ | up HSD to LDD | ||||||
Net Revenue | up HSD to LDD | up MSD | up mid-teens | up LDD | ||||||
Asia: | ||||||||||
Net Revenue | down LSD to up LSD | flat to up MSD | up HSD to LDD | up LDD to low-teens | ||||||
Americas Wholesale: | ||||||||||
Net Revenue | flat | up LSD | up LSD | up MSD | ||||||
Licensing: | ||||||||||
Net Revenue | down HSD | __ | down HSD | __ | ||||||
Notes | ||||||||||
1 | As used in the table above, “LSD” is used to refer to the range of Low-Single-Digits, “MSD” is used to refer to the range of Mid-Single-Digits, “HSD” is used to refer to the range of High-Single-Digits, and “LDD” is used to refer to the range of Low-Double-Digits. | |||||||||
2 | Eliminates the impact of expected foreign currency translation to give investors a better understanding of the underlying trends within the business. |
Contact: | Guess?, Inc. | |
Fabrice Benarouche | ||
VP, Finance and Investor Relations | ||
(213) 765-5578 | ||
Source: | Guess?, Inc. |
Guess?, Inc. and Subsidiaries | ||||||||||||||||
Condensed Consolidated Statements of Income (Loss) | ||||||||||||||||
(amounts in thousands, except per share data) | ||||||||||||||||
Three Months Ended | ||||||||||||||||
April 30, 2016 | May 2, 2015 | |||||||||||||||
$ | % | $ | % | |||||||||||||
Product sales | $ | 426,468 | 95.0 | % | $ | 452,959 | 94.6 | % | ||||||||
Net royalties | 22,347 | 5.0 | % | 25,865 | 5.4 | % | ||||||||||
Net revenue | 448,815 | 100.0 | % | 478,824 | 100.0 | % | ||||||||||
Cost of product sales | 306,056 | 68.2 | % | 313,339 | 65.4 | % | ||||||||||
Gross profit | 142,759 | 31.8 | % | 165,485 | 34.6 | % | ||||||||||
Selling, general and administrative expenses | 165,654 | 36.9 | % | 161,132 | 33.7 | % | ||||||||||
Restructuring charges | 6,083 | 1.4 | % | — | 0.0 | % | ||||||||||
Earnings (loss) from operations | (28,978 | ) | (6.5 | %) | 4,353 | 0.9 | % | |||||||||
Other income (expense): | ||||||||||||||||
Interest expense | (520 | ) | (0.1 | %) | (435 | ) | (0.1 | %) | ||||||||
Interest income | 651 | 0.1 | % | 272 | 0.1 | % | ||||||||||
Other, net | (1,098 | ) | (0.2 | %) | 2,626 | 0.5 | % | |||||||||
Earnings (loss) before income tax expense (benefit) | (29,945 | ) | (6.7 | %) | 6,816 | 1.4 | % | |||||||||
Income tax expense (benefit) | (4,791 | ) | (1.1 | %) | 2,829 | 0.6 | % | |||||||||
Net earnings (loss) | (25,154 | ) | (5.6 | %) | 3,987 | 0.8 | % | |||||||||
Net earnings attributable to noncontrolling interests | 24 | 0.0 | % | 646 | 0.1 | % | ||||||||||
Net earnings (loss) attributable to Guess?, Inc. | $ | (25,178 | ) | (5.6 | %) | $ | 3,341 | 0.7 | % | |||||||
Net earnings (loss) per common share attributable to common stockholders: | ||||||||||||||||
Basic | $ | (0.30 | ) | $ | 0.04 | |||||||||||
Diluted | $ | (0.30 | ) | $ | 0.04 | |||||||||||
Weighted average common shares outstanding attributable to common stockholders: | ||||||||||||||||
Basic | 83,514 | 84,965 | ||||||||||||||
Diluted | 83,514 | 85,099 | ||||||||||||||
Effective tax rate | 16.0 | % | 41.5 | % | ||||||||||||
Adjusted loss from operations1: | $ | (22,895 | ) | (5.1 | %) | |||||||||||
Adjusted net loss attributable to Guess?, Inc.1: | $ | (19,371 | ) | (4.3 | %) | |||||||||||
Adjusted diluted loss per common share attributable to common stockholders1: | $ | (0.23 | ) | |||||||||||||
Adjusted effective tax rate1 | 18.9 | % | ||||||||||||||
Notes: | ||||||||||||||||
1 | The adjusted results reflect the exclusion of restructuring charges, related exit tax charge and tax impact where applicable, recorded during the first quarter of fiscal 2017. No adjustments have been made to the same prior-year period. A complete reconciliation of actual results to adjusted results is presented in the table entitled “Reconciliation of GAAP Results to Adjusted Results.” | |||||||||||||||
Guess?, Inc. and Subsidiaries | |||||||||||
Reconciliation of GAAP Results to Adjusted Results | |||||||||||
(dollars in thousands) | |||||||||||
The following table provides reconciliations of reported GAAP loss from operations to adjusted loss from operations, reported GAAP net loss attributable to Guess?, Inc. to adjusted net loss attributable to Guess?, Inc. and reported GAAP income tax benefit to adjusted income tax benefit for the three months ended April 30, 2016. | |||||||||||
Three Months Ended | |||||||||||
April 30, 2016 | |||||||||||
% of | |||||||||||
$ | Revenues | ||||||||||
Reported GAAP loss from operations | $ | (28,978 | ) | (6.5%) | |||||||
Restructuring charges1 | 6,083 | ||||||||||
Adjusted loss from operations | $ | (22,895 | ) | (5.1%) | |||||||
Reported GAAP net loss attributable to Guess?, Inc. | $ | (25,178 | ) | (5.6%) | |||||||
Restructuring charges1 | 6,083 | ||||||||||
Exit tax charge2 | 1,911 | ||||||||||
Income tax adjustments3 | (2,187 | ) | |||||||||
Total income tax effect | (276 | ) | |||||||||
Total adjustments affecting net loss attributable to Guess?, Inc. | 5,807 | ||||||||||
Adjusted net loss attributable to Guess?, Inc. | $ | (19,371 | ) | (4.3%) | |||||||
Reported GAAP income tax benefit | $ | (4,791 | ) | ||||||||
Exit tax charge2 | (1,911 | ) | |||||||||
Income tax adjustments3 | 2,187 | ||||||||||
Total income tax effect | 276 | ||||||||||
Adjusted income tax benefit | $ | (4,515 | ) | ||||||||
Adjusted effective tax rate | 18.9 | % | |||||||||
Notes: | |||||||||||
1 | During the first quarter of fiscal 2017, the Company initiated a global cost reduction and restructuring plan to streamline its operational structure and reduce expenses which resulted in restructuring charges, mainly related to cash-based severance costs, incurred during the three months ended April 30, 2016. No adjustments have been made to the same prior-year period. | ||||||||||
2 | As a result of the global cost reduction and restructuring plan, the Company incurred an estimated exit tax charge related to its reorganization in Europe during the three months ended April 30, 2016. | ||||||||||
3 | The income tax effect of the restructuring charges was based on the Company’s assessment of deductibility using the statutory tax rate of the tax jurisdiction in which the charges were incurred. | ||||||||||
Guess?, Inc. and Subsidiaries | ||||||||||||||
Consolidated Segment Data | ||||||||||||||
(dollars in thousands) | ||||||||||||||
Three Months Ended | ||||||||||||||
April 30, | May 2, | % | ||||||||||||
2016 | 2015 | change | ||||||||||||
Net revenue: | ||||||||||||||
Americas Retail | $ | 204,161 | $ | 214,249 | (5%) | |||||||||
Europe | 135,380 | 137,397 | (1%) | |||||||||||
Asia | 54,129 | 64,035 | (15%) | |||||||||||
Americas Wholesale | 32,798 | 37,278 | (12%) | |||||||||||
Licensing | 22,347 | 25,865 | (14%) | |||||||||||
$ | 448,815 | $ | 478,824 | (6%) | ||||||||||
Earnings (loss) from operations: | ||||||||||||||
Americas Retail | $ | (12,601 | ) | $ | (7,209 | ) | (75%) | |||||||
Europe | (14,085 | ) | (3,668 | ) | (284%) | |||||||||
Asia | (669 | ) | 4,613 | (115%) | ||||||||||
Americas Wholesale | 5,611 | 6,747 | (17%) | |||||||||||
Licensing | 20,415 | 23,025 | (11%) | |||||||||||
Corporate Overhead | (21,566 | ) | (19,155 | ) | 13% | |||||||||
Restructuring Charges | (6,083 | ) | — | |||||||||||
$ | (28,978 | ) | $ | 4,353 | (766%) | |||||||||
Operating margins: | ||||||||||||||
Americas Retail | (6.2 | %) | (3.4 | %) | ||||||||||
Europe | (10.4 | %) | (2.7 | %) | ||||||||||
Asia | (1.2 | %) | 7.2 | % | ||||||||||
Americas Wholesale | 17.1 | % | 18.1 | % | ||||||||||
Licensing | 91.4 | % | 89.0 | % | ||||||||||
Total Company including restructuring charges | (6.5 | %) | 0.9 | % | ||||||||||
Total Company before restructuring charges | (5.1 | %) | 0.9 | % |
Guess?, Inc. and Subsidiaries | ||||||||||||||||||||||||
Constant Currency Financial Measures | ||||||||||||||||||||||||
(dollars in thousands) | ||||||||||||||||||||||||
Three Months Ended | ||||||||||||||||||||||||
April 30, 2016 | May 2, 2015 | % change | ||||||||||||||||||||||
As Reported | Foreign Currency Impact | Constant Currency | As Reported | As Reported | Constant Currency | |||||||||||||||||||
Net revenue: | ||||||||||||||||||||||||
Americas Retail | $ | 204,161 | $ | 3,024 | $ | 207,185 | $ | 214,249 | (5%) | (3%) | ||||||||||||||
Europe | 135,380 | (1,810 | ) | 133,570 | 137,397 | (1%) | (3%) | |||||||||||||||||
Asia | 54,129 | 3,007 | 57,136 | 64,035 | (15%) | (11%) | ||||||||||||||||||
Americas Wholesale | 32,798 | 1,955 | 34,753 | 37,278 | (12%) | (7%) | ||||||||||||||||||
Licensing | 22,347 | — | 22,347 | 25,865 | (14%) | (14%) | ||||||||||||||||||
$ | 448,815 | $ | 6,176 | $ | 454,991 | $ | 478,824 | (6%) | (5%) |
Guess?, Inc. and Subsidiaries | |||||||||||||||||||
Selected Condensed Consolidated Balance Sheet Data | |||||||||||||||||||
(in thousands) | |||||||||||||||||||
April 30, | January 30, | May 2, | |||||||||||||||||
2016 | 2016 | 20151 | |||||||||||||||||
ASSETS | |||||||||||||||||||
Cash and cash equivalents | $ | 427,485 | $ | 445,480 | $ | 459,128 | |||||||||||||
Receivables, net | 177,669 | 222,359 | 195,741 | ||||||||||||||||
Inventories | 358,191 | 311,704 | 327,101 | ||||||||||||||||
Other current assets | 62,305 | 56,709 | 71,398 | ||||||||||||||||
Property and equipment, net | 265,818 | 255,344 | 249,784 | ||||||||||||||||
Other assets | 261,308 | 247,152 | 252,087 | ||||||||||||||||
Total Assets | $ | 1,552,776 | $ | 1,538,748 | $ | 1,555,239 | |||||||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||||||||||||
Current portion of capital lease obligations and borrowings | $ | 4,443 | $ | 4,024 | $ | 5,313 | |||||||||||||
Other current liabilities | 314,979 | 323,035 | 279,231 | ||||||||||||||||
Long-term debt | 23,539 | 2,318 | 2,335 | ||||||||||||||||
Other long-term liabilities | 179,498 | 172,826 | 193,705 | ||||||||||||||||
Redeemable and nonredeemable noncontrolling interests | 21,567 | 18,070 | 16,104 | ||||||||||||||||
Guess?, Inc. stockholders’ equity | 1,008,750 | 1,018,475 | 1,058,551 | ||||||||||||||||
Total Liabilities and Stockholders’ Equity | $ | 1,552,776 | $ | 1,538,748 | $ | 1,555,239 | |||||||||||||
Notes | |||||||||||||||||||
1 | As a result of the adoption of new authoritative guidance during fiscal 2016 which requires that all deferred tax liabilities and assets be classified as long-term on the balance sheet, other current assets and other assets at May 2, 2015 were adjusted to reflect the reclassification of deferred tax assets for $19.7 million from current to long-term. |
Guess?, Inc. and Subsidiaries | ||||||||||||||
Condensed Consolidated Cash Flow Data | ||||||||||||||
(in thousands) | ||||||||||||||
Three Months Ended | ||||||||||||||
April 30, | May 2, | |||||||||||||
2016 | 2015 | |||||||||||||
Net cash provided by (used in) operating activities | $ | (30,844 | ) | $ | 9,135 | |||||||||
Net cash used in investing activities | (10,086 | ) | (10,535 | ) | ||||||||||
Net cash provided by (used in) financing activities | 3,932 | (22,924 | ) | |||||||||||
Effect of exchange rates on cash and cash equivalents | 19,003 | (31 | ) | |||||||||||
Net change in cash and cash equivalents | (17,995 | ) | (24,355 | ) | ||||||||||
Cash and cash equivalents at the beginning of the year | 445,480 | 483,483 | ||||||||||||
Cash and cash equivalents at the end of the period | $ | 427,485 | $ | 459,128 | ||||||||||
Supplemental information: | ||||||||||||||
Depreciation and amortization | $ | 16,680 | $ | 18,330 | ||||||||||
Rent | $ | 63,256 | $ | 64,715 |
Guess?, Inc. and Subsidiaries | ||||||||||||||
Reconciliation of Net Cash Provided by (Used in) Operating Activities to Free Cash Flow | ||||||||||||||
(in thousands) | ||||||||||||||
Three Months Ended | ||||||||||||||
April 30, | May 2, | |||||||||||||
2016 | 2015 | |||||||||||||
Net cash provided by (used in) operating activities | $ | (30,844 | ) | $ | 9,135 | |||||||||
Less: Purchases of property and equipment | (17,841 | ) | (11,604 | ) | ||||||||||
Free cash flow | $ | (48,685 | ) | $ | (2,469 | ) | ||||||||
Guess?, Inc. and Subsidiaries | ||||||||||
Retail Store Data | ||||||||||
International Store Count | ||||||||||
As of April 30, 2016 | As of May 2, 2015 | |||||||||
Total | Directly Operated | Total | Directly Operated | |||||||
Region | Stores | Stores | Stores | Stores | ||||||
United States | 343 | 342 | 356 | 356 | ||||||
Canada | 112 | 112 | 114 | 114 | ||||||
Central and South America | 92 | 46 | 93 | 42 | ||||||
Total Americas | 547 | 500 | 563 | 512 | ||||||
Europe and the Middle East | 588 | 275 | 605 | 267 | ||||||
Asia | 497 | 65 | 499 | 52 | ||||||
1,632 | 840 | 1,667 | 831 | |||||||
Guess?, Inc. and Subsidiaries | ||||||||||
Directly Operated Retail Store Data | ||||||||||
U.S. and Canada | ||||||||||
Three Months Ended | ||||||||||
April 30, | May 2, | |||||||||
2016 | 2015 | |||||||||
Number of stores at the beginning of the year | 455 | 481 | ||||||||
Store openings | 2 | — | ||||||||
Store closures | (3) | (11) | ||||||||
Number of stores at the end of the period | 454 | 470 | ||||||||
Total store square footage at the end of the period | 2,206,000 | 2,251,000 |
Guess?, Inc. and Subsidiaries | ||||||||||
Americas Retail Net Revenue | ||||||||||
(dollars in thousands) | ||||||||||
Three Months Ended | ||||||||||
April 30, | May 2, | % | ||||||||
2016 | 2015 | change | ||||||||
Net revenue: | ||||||||||
Retail stores | $ | 183,950 | $ | 196,037 | (6.2 | %) | ||||
E-commerce sites | 20,211 | 18,212 | 11.0 | % | ||||||
Total | $ | 204,161 | $ | 214,249 | (4.7 | %) | ||||
Guess?, Inc. and Subsidiaries | |||
Retail Store Change in Comparable Store Sales | |||
U.S. and Canada | |||
Three Months Ended | |||
April 30, 2016 | |||
U.S. Dollars | Constant Currency | ||
Excluding e-commerce sales | (5.7%) | (4.5%) | |
Impact of e-commerce sales | 1.5% | 1.4% | |
Including e-commerce sales | (4.2%) | (3.1%) |