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)) |
Emerging growth company o | |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o |
Dated: | March 20, 2019 | GUESS?, INC. | |
By: | /s/ Sandeep Reddy | ||
Sandeep Reddy Chief Financial Officer |
Exhibit 99.1 |
• | Americas Retail revenues decreased 0.7% in U.S. dollars and increased 0.4% in constant currency. Retail comp sales including e-commerce increased 6% in U.S. dollars and 7% in constant currency. |
• | Americas Wholesale revenues increased 19.2% in U.S. dollars and 21.9% in constant currency. |
• | Europe revenues increased 4.1% in U.S. dollars and 10.0% in constant currency. Retail comp sales including e-commerce were flat in U.S. dollars and increased 6% in constant currency. |
• | Asia revenues increased 21.7% in U.S. dollars and 25.8% in constant currency. Retail comp sales including e-commerce increased 13% in U.S. dollars and 17% in constant currency. |
• | Licensing revenues increased 9.9% in U.S. dollars and constant currency. |
• | Operating margin for the Company’s Americas Retail segment improved 270 basis points to 8.8% in the fourth quarter of fiscal 2019, compared to 6.1% in the prior-year quarter, driven primarily by the favorable impact from lower markdowns and positive sales comps, partially offset by higher store selling expenses. |
• | Operating margin for the Company’s Americas Wholesale segment improved 500 basis points to 19.0% in the fourth quarter of fiscal 2019, from 14.0% in the prior-year quarter, due primarily to higher initial mark-ups in the U.S. and leveraging of expenses, partially offset by the liquidation of aged inventory in Mexico. |
• | Operating margin for the Company’s Europe segment decreased 480 basis points to 11.0% in the fourth quarter of fiscal 2019, from 15.8% in the prior-year quarter, driven primarily by higher retail and wholesale distribution costs and the liquidation of aged inventory, partially offset by higher initial mark-ups and lower markdowns in wholesale. |
• | Operating margin for the Company’s Asia segment decreased 480 basis points to 3.6% in the fourth quarter of fiscal 2019, from 8.4% in the prior-year quarter, driven primarily by the liquidation of aged inventory and higher markdowns, partially offset by the positive impact from leveraging occupancy and selling expenses across the region. |
• | Operating margin for the Company’s Licensing segment decreased 220 basis points to 86.8% in the fourth quarter of fiscal 2019, compared to 89.0% in the prior-year quarter. |
• | Americas Retail revenues decreased 1.0% in U.S. dollars and decreased 0.5% in constant currency. Retail comp sales including e-commerce increased 4% in U.S. dollars and constant currency. |
• | Americas Wholesale revenues increased 13.6% in U.S. dollars and 15.0% in constant currency. |
• | Europe revenues increased 14.4% in U.S. dollars and constant currency. Retail comp sales including e-commerce increased 5% in U.S. dollars and constant currency. |
• | Asia revenues increased 25.7% in U.S. dollars and 25.4% in constant currency. Retail comp sales including e-commerce increased 15% in U.S. dollars and 14% in constant currency. |
• | Licensing revenues increased 14.3% in U.S. dollars and constant currency. |
• | Operating margin for the Company’s Americas Retail segment improved 460 basis points to 3.3% in fiscal 2019, compared to negative 1.3% in the prior year, driven primarily by the favorable impact from lower markdowns and negotiated rent reductions. |
• | Operating margin for the Company’s Americas Wholesale segment improved 30 basis points to 17.5% in fiscal 2019, from 17.2% in the prior year. The increase in operating margin was due primarily to leveraging of expenses resulting from higher wholesale shipments, partially offset by lower gross margins. |
• | Operating margin for the Company’s Europe segment decreased 440 basis points to 5.1% in fiscal 2019, from 9.5% in the prior year. This decrease was driven primarily by higher distribution costs, partially offset by higher initial mark-ups and leverage from higher wholesale sales. |
• | Operating margin for the Company’s Asia segment decreased 160 basis points to 3.2% in fiscal 2019, compared to 4.8% in the prior year. The decrease in operating margin was driven primarily by an unfavorable business mix and liquidation of aged inventory, partially offset by the overall leveraging of occupancy costs. |
• | Operating margin for the Company’s Licensing segment improved 40 basis points to 87.7% in fiscal 2019, compared to 87.3% in the prior year. |
Outlook for Total Company1 | ||||||
First Quarter of Fiscal 2020 | Fiscal Year 2020 | |||||
Consolidated net revenue in U.S. dollars | increase between 2.5% and 3.5% | increase between 4.0% and 5.0% | ||||
Consolidated net revenue in constant currency2 | increase between 7.0% and 8.0% | increase between 5.5% and 6.5% | ||||
GAAP operating margin | (4.5)% to (4.0)% | 4.8% to 5.3% | ||||
Currency impact included in operating margin3 | (10) basis points | 10 basis points | ||||
GAAP EPS | $(0.29) to $(0.25) | $1.09 to $1.21 | ||||
Currency impact included in EPS3 | $0.01 | $0.02 | ||||
Notes: | ||||||
1 | The Company’s outlook for the first quarter ending May 4, 2019 and the fiscal year ending February 1, 2020 assumes that foreign currency exchange rates remain at prevailing rates. | |||||
2 | Eliminates the impact of expected foreign currency translation to give investors a better understanding of the underlying trends within the business. | |||||
3 | Represents the estimated translational and transactional gains (losses) of foreign currency rate fluctuations within operating margin and EPS measures presented. |
Outlook by Segment1 | ||||||||||
First Quarter of Fiscal 2020 | Fiscal Year 2020 | |||||||||
U.S. Dollars | Constant Currency2 | U.S. Dollars | Constant Currency2 | |||||||
Americas Retail: | ||||||||||
Comps | __ | up LSD | __ | up LSD | ||||||
Net Revenue | up LSD | up LSD | up LSD | up LSD | ||||||
Americas Wholesale: | ||||||||||
Net Revenue | up MSD | up HSD | Flat | up LSD | ||||||
Europe: | ||||||||||
Comps | __ | up LSD to MSD | __ | up LSD to MSD | ||||||
Net Revenue | up LSD | up HSD | up MSD | up HSD | ||||||
Asia: | ||||||||||
Comps | __ | down MSD to LSD | __ | up LSD | ||||||
Net Revenue | up LDD | up mid-teens | up low-teens | up low-teens | ||||||
Licensing: | ||||||||||
Net Revenue | down LSD | __ | down LSD | __ | ||||||
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 Earnings (Loss) | |||||||||||||||||||||||||||
(amounts in thousands, except per share data) | |||||||||||||||||||||||||||
Three Months Ended1 | Twelve Months Ended1 | ||||||||||||||||||||||||||
February 2, 2019 | February 3, 2018 | February 2, 2019 | February 3, 2018 | ||||||||||||||||||||||||
$ | % | $ | % | $ | % | $ | % | ||||||||||||||||||||
Product sales | $ | 815,712 | 97.4 | % | $ | 772,676 | 97.5 | % | $ | 2,526,500 | 96.8 | % | $ | 2,290,999 | 96.9 | % | |||||||||||
Net royalties | 21,415 | 2.6 | % | 19,488 | 2.5 | % | 83,194 | 3.2 | % | 72,755 | 3.1 | % | |||||||||||||||
Net revenue | 837,127 | 100.0 | % | 792,164 | 100.0 | % | 2,609,694 | 100.0 | % | 2,363,754 | 100.0 | % | |||||||||||||||
Cost of product sales | 531,035 | 63.4 | % | 497,094 | 62.8 | % | 1,670,090 | 64.0 | % | 1,534,906 | 64.9 | % | |||||||||||||||
Gross profit | 306,092 | 36.6 | % | 295,070 | 37.2 | % | 939,604 | 36.0 | % | 828,848 | 35.1 | % | |||||||||||||||
Selling, general and administrative expenses2 | 234,562 | 28.0 | % | 223,771 | 28.2 | % | 835,293 | 32.0 | % | 741,641 | 31.5 | % | |||||||||||||||
European Commission fine | 3,209 | 0.4 | % | — | — | % | 45,637 | 1.7 | % | — | — | % | |||||||||||||||
Asset impairment charges | 1,922 | 0.2 | % | 2,466 | 0.3 | % | 6,939 | 0.3 | % | 8,479 | 0.3 | % | |||||||||||||||
Net (gains) losses on lease terminations | (325 | ) | (0.0 | %) | (121 | ) | (0.0 | %) | (477 | ) | (0.0 | %) | 11,373 | 0.5 | % | ||||||||||||
Earnings from operations2 | 66,724 | 8.0 | % | 68,954 | 8.7 | % | 52,212 | 2.0 | % | 67,355 | 2.8 | % | |||||||||||||||
Other income (expense): | |||||||||||||||||||||||||||
Interest expense | (1,021 | ) | (0.1 | %) | (789 | ) | (0.1 | %) | (3,407 | ) | (0.1 | %) | (2,431 | ) | (0.1 | %) | |||||||||||
Interest income | 1,602 | 0.2 | % | 1,084 | 0.1 | % | 4,494 | 0.2 | % | 4,106 | 0.2 | % | |||||||||||||||
Other income (expense), net2 | 473 | 0.0 | % | (693 | ) | (0.0 | %) | (6,591 | ) | (0.3 | %) | 1,241 | 0.1 | % | |||||||||||||
Earnings before income tax expense | 67,778 | 8.1 | % | 68,556 | 8.7 | % | 46,708 | 1.8 | % | 70,271 | 3.0 | % | |||||||||||||||
Income tax expense | 42,543 | 5.1 | % | 65,449 | 8.3 | % | 29,542 | 1.1 | % | 74,172 | 3.2 | % | |||||||||||||||
Net earnings (loss) | 25,235 | 3.0 | % | 3,107 | 0.4 | % | 17,166 | 0.7 | % | (3,901 | ) | (0.2 | %) | ||||||||||||||
Net earnings attributable to noncontrolling interests | 2,003 | 0.2 | % | 2,067 | 0.3 | % | 3,067 | 0.2 | % | 3,993 | 0.1 | % | |||||||||||||||
Net earnings (loss) attributable to Guess?, Inc. | $ | 23,232 | 2.8 | % | $ | 1,040 | 0.1 | % | $ | 14,099 | 0.5 | % | $ | (7,894 | ) | (0.3 | %) | ||||||||||
Net earnings (loss) per common share attributable to common stockholders: | |||||||||||||||||||||||||||
Basic | $ | 0.29 | $ | 0.01 | $ | 0.17 | $ | (0.11 | ) | ||||||||||||||||||
Diluted | $ | 0.28 | $ | 0.01 | $ | 0.16 | $ | (0.11 | ) | ||||||||||||||||||
Weighted average common shares outstanding attributable to common stockholders: | |||||||||||||||||||||||||||
Basic | 80,382 | 81,046 | 80,146 | 82,189 | |||||||||||||||||||||||
Diluted | 81,959 | 82,377 | 81,589 | 82,189 | |||||||||||||||||||||||
Effective tax rate | 62.8 | % | 95.5 | % | 63.2 | % | 105.6 | % | |||||||||||||||||||
Adjusted selling, general and administrative expenses2,3: | $ | 229,171 | 27.4 | % | $ | 223,319 | 28.2 | % | $ | 823,988 | 31.6 | % | $ | 741,189 | 31.4 | % | |||||||||||
Adjusted earnings from operations2,3: | $ | 76,921 | 9.2 | % | $ | 71,751 | 9.1 | % | $ | 115,616 | 4.4 | % | $ | 87,659 | 3.7 | % | |||||||||||
Adjusted net earnings attributable to Guess?, Inc.3: | $ | 58,236 | 7.0 | % | $ | 51,622 | 6.5 | % | $ | 80,411 | 3.1 | % | $ | 58,712 | 2.5 | % | |||||||||||
Adjusted diluted earnings per common share attributable to common stockholders3: | $ | 0.70 | $ | 0.62 | $ | 0.98 | $ | 0.70 | |||||||||||||||||||
Adjusted effective tax rate3: | 22.7 | % | 24.8 | % | 24.2 | % | 30.8 | % | |||||||||||||||||||
Notes: | |||||||||||||||||||||||||||
1 | The three and twelve months ended February 2, 2019 contain 13 and 52 weeks, respectively. The three and twelve months ended February 3, 2018 contain 14 and 53 weeks, respectively. | ||||||||||||||||||||||||||
2 | During the first quarter of fiscal 2019, the Company adopted new authoritative guidance which requires that the non-service components of net periodic defined benefit pension cost be presented outside of earnings from operations. Accordingly, the Company reclassified approximately $0.6 million and $2.2 million, respectively, from selling, general and administrative expenses to other income (expense), net, for the three and twelve months ended February 3, 2018 to conform to the current period presentation. This reclassification had no impact on previously reported net loss or net loss per share. | ||||||||||||||||||||||||||
3 | The adjusted results for the three and twelve months ended February 2, 2019 reflect the exclusion of net gains (losses) on lease terminations, asset impairment charges, certain professional service and legal fees and related costs, charges related to the European Commission fine, severance charges related to the departure of our former CEO, and the related tax impacts of these adjustments, where applicable, as well as amounts recorded related to the enactment of the Tax Reform. The adjusted results for the three and twelve months ended February 3, 2018 reflect the exclusion of net (gains) losses on lease terminations, asset impairment charges, certain professional service and legal fees and related costs and the tax impacts of these adjustments, as well as the tax impacts resulting from the enactment of the Tax Reform, where applicable. 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 selling, general and administrative expenses to adjusted selling, general and administrative expenses, reported GAAP earnings from operations to adjusted earnings from operations, reported GAAP net earnings (loss) attributable to Guess?, Inc. to adjusted net earnings attributable to Guess?, Inc. and reported GAAP income tax expense to adjusted income tax expense for the three and twelve months ended February 2, 2019 and February 3, 2018. | ||||||||||||||||||||
Three Months Ended 1 | Twelve Months Ended1 | |||||||||||||||||||
February 2, 2019 | February 3, 2018 | February 2, 2019 | February 3, 2018 | |||||||||||||||||
Reported GAAP selling, general and administrative expenses | $ | 234,562 | $ | 223,771 | $ | 835,293 | $ | 741,641 | ||||||||||||
Certain professional service and legal fees and related costs2 | (165 | ) | (452 | ) | (6,079 | ) | (452 | ) | ||||||||||||
CEO severance charges3 | (5,226 | ) | — | (5,226 | ) | — | ||||||||||||||
Adjusted selling, general and administrative expenses | $ | 229,171 | $ | 223,319 | $ | 823,988 | $ | 741,189 | ||||||||||||
Reported GAAP earnings from operations | $ | 66,724 | $ | 68,954 | $ | 52,212 | 67,355 | |||||||||||||
European Commission fine4 | 3,209 | — | 45,637 | — | ||||||||||||||||
Asset impairment charges6 | 1,922 | 2,466 | 6,939 | 8,479 | ||||||||||||||||
Net (gains) losses on lease terminations5 | (325 | ) | (121 | ) | (477 | ) | 11,373 | |||||||||||||
Certain professional service and legal fees and related costs2 | 165 | 452 | 6,079 | 452 | ||||||||||||||||
CEO severance charges3 | 5,226 | — | 5,226 | — | ||||||||||||||||
Adjusted earnings from operations | $ | 76,921 | $ | 71,751 | $ | 115,616 | $ | 87,659 | ||||||||||||
Reported GAAP net earnings (loss) attributable to Guess?, Inc. | $ | 23,232 | $ | 1,040 | $ | 14,099 | $ | (7,894 | ) | |||||||||||
Certain professional service and legal fees and related costs2 | 165 | 452 | 6,079 | 452 | ||||||||||||||||
European Commission fine4 | 3,209 | — | 45,637 | — | ||||||||||||||||
Net (gains) losses on lease terminations5 | (325 | ) | (121 | ) | (477 | ) | 11,373 | |||||||||||||
Asset impairment charges6 | 1,922 | 2,466 | 6,939 | 8,479 | ||||||||||||||||
CEO severance charges3 | 5,226 | — | 5,226 | — | ||||||||||||||||
Income tax adjustments7 | (1,030 | ) | (105 | ) | (3,378 | ) | (1,588 | ) | ||||||||||||
Amounts recorded related to Tax Reform8 | 25,837 | 47,890 | 6,286 | 47,890 | ||||||||||||||||
Total adjustments affecting net earnings (loss) attributable to Guess?, Inc. | 35,004 | 50,582 | 66,312 | 66,606 | ||||||||||||||||
Adjusted net earnings attributable to Guess?, Inc. | $ | 58,236 | $ | 51,622 | $ | 80,411 | $ | 58,712 | ||||||||||||
Reported GAAP income tax expense | $ | 42,543 | $ | 65,449 | $ | 29,542 | $ | 74,172 | ||||||||||||
Income tax adjustments7 | 1,030 | 105 | 3,378 | 1,588 | ||||||||||||||||
Amounts recorded related to Tax Reform8 | (25,837 | ) | (47,890 | ) | (6,286 | ) | (47,890 | ) | ||||||||||||
Adjusted income tax expense | $ | 17,736 | $ | 17,664 | $ | 26,634 | $ | 27,870 | ||||||||||||
Adjusted effective tax rate | 22.7 | % | 24.8 | % | 24.2 | % | 30.8 | % | ||||||||||||
Notes: | ||||||||||||||||||||
1 | The three and twelve months ended February 2, 2019 contain 13 and 52 weeks, respectively. The three and twelve months ended February 3, 2018 contain 14 and 53 weeks, respectively. | |||||||||||||||||||
2 | During the three and twelve months ended February 2, 2019, the Company recorded certain professional service and legal fees and related costs, which it otherwise would not have incurred as part of its business operations. Accordingly, the results for the three and twelve months ended February 3, 2018 have been adjusted to show the impact of these charges for comparative purposes. | |||||||||||||||||||
3 | On January 28, 2019, the Company announced the departure of its Chief Executive Officer and the terms of his separation. As a result, the Company recorded $5.2 million in severance-related charges. These charges are comprised of $2.4 million in future cash severance payments and $2.8 million in non-cash stock-based compensation expenses resulting from the vesting terms of certain previously granted stock awards. | |||||||||||||||||||
4 | During the three months ended November 3, 2018, the Company recognized a charge of €37.0 million ($42.4 million) related to a fine expected to be imposed on the Company by the European Commission related to its inquiry concerning potential violations of European Union competition rules by the Company. In December of fiscal 2019, the European Commission concluded its investigation and imposed a fine of €39.8 million ($45.6 million), which the Company has paid in the first quarter of fiscal 2020. As a result, the Company recorded additional charges of €2.8 million ($3.2 million) during the three months ended February 2, 2019. The Company has already made certain changes to its business practices and agreements in response to these proceedings, and the Company believes that such changes and any related modifications have not had, and will not have, a material impact on its ongoing business operations within the European Union. | |||||||||||||||||||
5 | During the three and twelve months ended February 2, 2019, the Company recorded net (gains) losses on lease terminations related primarily to the modification of certain lease agreements held in North America. During the three and twelve months ended February 3, 2018, the Company recorded net (gains) losses on lease terminations related primarily to the modification of certain lease agreements held with a common landlord in North America. | |||||||||||||||||||
6 | During the three and twelve months ended February 2, 2019 and February 3, 2018, the Company recognized asset impairment charges for certain retail locations resulting from under-performance and expected store closures. | |||||||||||||||||||
7 | The income tax effect of the net gains (losses) on lease terminations, asset impairment charges, certain professional service and legal fees and related costs, European Commission fine and severance charges related to our former CEO’s departure was based on the Company’s assessment of deductibility using the statutory tax rate (inclusive of the impact of valuation allowances) of the tax jurisdiction in which the charges were incurred. | |||||||||||||||||||
8 | During the fourth quarter of fiscal 2018, the Company recognized additional tax expense of $47.9 million resulting from the enactment of the Tax Reform. Of these charges $24.9 million related to reduction in deferred tax assets due to lower future U.S. corporate tax rates and $23.0 million related to the deemed repatriation of foreign earnings. During the quarter ended November 3, 2018, the Company revised the provisional amounts previously recorded related to the estimated amounts due related to deemed repatriation of foreign earnings, and recorded income tax benefits of $19.6 million. During the fourth quarter of fiscal 2019, the Company concluded, based on additional information related to the Tax Reform, that the Company would owe transition taxes if proposed legislation that clarifies existing tax regulation with respect of the dividends received deduction calculation is passed into law. As a result, during the three months ended February 2, 2019, the Company recorded additional charges due to the Tax Reform of $25.8 million, or a total of $6.3 million for fiscal 2019. |
Guess?, Inc. and Subsidiaries | ||||||||||||||||||||||||
Consolidated Segment Data | ||||||||||||||||||||||||
(dollars in thousands) | ||||||||||||||||||||||||
Three Months Ended1 | Twelve Months Ended1 | |||||||||||||||||||||||
February 2, 2019 | February 3, 2018 | % change | February 2, 2019 | February 3, 2018 | % change | |||||||||||||||||||
Net revenue: | ||||||||||||||||||||||||
Americas Retail | $ | 269,284 | $ | 271,174 | (1%) | $ | 824,674 | $ | 833,077 | (1%) | ||||||||||||||
Americas Wholesale | 43,182 | 36,215 | 19% | 170,812 | 150,366 | 14% | ||||||||||||||||||
Europe | 371,298 | 356,824 | 4% | 1,142,768 | 998,657 | 14% | ||||||||||||||||||
Asia | 131,948 | 108,463 | 22% | 388,246 | 308,899 | 26% | ||||||||||||||||||
Licensing | 21,415 | 19,488 | 10% | 83,194 | 72,755 | 14% | ||||||||||||||||||
Total net revenue | $ | 837,127 | $ | 792,164 | 6% | $ | 2,609,694 | $ | 2,363,754 | 10% | ||||||||||||||
Earnings (loss) from operations: | ||||||||||||||||||||||||
Americas Retail2 | $ | 23,831 | $ | 16,455 | 45% | $ | 27,532 | $ | (11,096 | ) | 348% | |||||||||||||
Americas Wholesale2 | 8,192 | 5,062 | 62% | 29,935 | 25,845 | 16% | ||||||||||||||||||
Europe2,3 | 40,690 | 56,397 | (28%) | 58,298 | 94,545 | (38%) | ||||||||||||||||||
Asia2 | 4,728 | 9,076 | (48%) | 12,365 | 14,809 | (17%) | ||||||||||||||||||
Licensing2 | 18,577 | 17,340 | 7% | 72,986 | 63,538 | 15% | ||||||||||||||||||
Total segment earnings from operations3 | 96,018 | 104,330 | (8%) | 201,116 | 187,641 | 7% | ||||||||||||||||||
Corporate overhead3, 5, 6 | (24,488 | ) | (33,031 | ) | (26%) | (96,805 | ) | (100,434 | ) | (4%) | ||||||||||||||
European Commission fine4 | (3,209 | ) | — | (45,637 | ) | — | ||||||||||||||||||
Net gains (losses) on terminations | 325 | 121 | 477 | (11,373 | ) | |||||||||||||||||||
Asset impairment charges | (1,922 | ) | (2,466 | ) | (6,939 | ) | (8,479 | ) | ||||||||||||||||
Total earnings from operations3,5,6 | $ | 66,724 | $ | 68,954 | (3%) | $ | 52,212 | $ | 67,355 | (22%) | ||||||||||||||
Operating margins: | ||||||||||||||||||||||||
Americas Retail2 | 8.8 | % | 6.1 | % | 3.3 | % | (1.3 | %) | ||||||||||||||||
Americas Wholesale2 | 19.0 | % | 14.0 | % | 17.5 | % | 17.2 | % | ||||||||||||||||
Europe2,3 | 11.0 | % | 15.8 | % | 5.1 | % | 9.5 | % | ||||||||||||||||
Asia2 | 3.6 | % | 8.4 | % | 3.2 | % | 4.8 | % | ||||||||||||||||
Licensing2 | 86.8 | % | 89.0 | % | 87.7 | % | 87.3 | % | ||||||||||||||||
GAAP operating margin for total Company3 | 8.0 | % | 8.7 | % | 2.0 | % | 2.8 | % | ||||||||||||||||
Net (gains) losses on terminations | (0.0 | %) | (0.0 | %) | (0.0 | %) | 0.5 | % | ||||||||||||||||
Asset impairment charges | 0.2 | % | 0.3 | % | 0.3 | % | 0.3 | % | ||||||||||||||||
European Commission fine4 | 0.4 | % | — | % | 1.7 | % | — | % | ||||||||||||||||
Certain professional service and legal fees and related costs5 | 0.0 | % | 0.1 | % | 0.2 | % | 0.1 | % | ||||||||||||||||
CEO severance charges6 | 0.6 | % | — | % | 0.2 | % | — | % | ||||||||||||||||
Adjusted operating margin for total Company3,4,5 | 9.2 | % | 9.1 | % | 4.4 | % | 3.7 | % | ||||||||||||||||
Notes: | ||||||||||||||||||||||||
1 | The three and twelve months ended February 2, 2019 contain 13 and 52 weeks, respectively. The three and twelve months ended February 3, 2018 contain 14 and 53 weeks, respectively. | |||||||||||||||||||||||
2 | During the first quarter of fiscal 2019, the Company changed the segment accountability for funds received from licensees on the Company’s purchases of its licensed products. These amounts were treated as a reduction of cost of product sales within the Licensing segment but now are considered in the results of the segments that control the respective purchases for purposes of segment performance evaluation. Accordingly, segment results for the three and twelve months ended February 3, 2018 have been adjusted to conform to the current period presentation. | |||||||||||||||||||||||
3 | During the first quarter of fiscal 2019, the Company adopted new authoritative guidance which requires that the non-service components of net periodic defined benefit pension cost be presented outside of earnings (loss) from operations. Accordingly, earnings from operations and segment results for the three and twelve months ended February 3, 2018 have been adjusted to conform to the current period presentation. | |||||||||||||||||||||||
4 | During the three months ended November 3, 2018, the Company recognized a charge of €37.0 million ($42.4 million) related to a fine expected to be imposed on the Company by the European Commission related to its inquiry concerning potential violations of European Union competition rules by the Company. In December of fiscal 2019, the European Commission concluded its investigation and imposed a fine of €39.8 million ($45.6 million), which the Company has paid in the first quarter of fiscal 2020. As a result, the Company recorded additional charges of €2.8 million ($3.2 million) during the three months ended February 2, 2019. The Company has already made certain changes to its business practices and agreements in response to these proceedings, and the Company believes that such changes and any related modifications have not had, and will not have, a material impact on its ongoing business operations within the European Union. | |||||||||||||||||||||||
5 | During the three and twelve months ended February 2, 2019 and February 3, 2018, the Company recorded certain professional service and legal fees and related costs, which it otherwise would not have incurred as part of its business operations. | |||||||||||||||||||||||
6 | On January 28, 2019, the Company announced the departure of its Chief Executive Officer and the terms of his separation. As a result, the Company recorded $5.2 million in severance-related charges. These charges are comprised of $2.4 million in future cash severance payments and $2.8 million in non-cash stock-based compensation expenses resulting from the vesting terms of certain previously granted stock awards. |
Guess?, Inc. and Subsidiaries | |||||||||||||||||||||||||
Constant Currency Financial Measures | |||||||||||||||||||||||||
(dollars in thousands) | |||||||||||||||||||||||||
Three Months Ended1 | |||||||||||||||||||||||||
February 2, 2019 | February 3, 2018 | % change | |||||||||||||||||||||||
As Reported | Foreign Currency Impact | Constant Currency | As Reported | As Reported | Constant Currency | ||||||||||||||||||||
Net revenue: | |||||||||||||||||||||||||
Americas Retail | $ | 269,284 | $ | 3,069 | $ | 272,353 | $ | 271,174 | (1%) | 0% | |||||||||||||||
Americas Wholesale | 43,182 | 980 | 44,162 | 36,215 | 19% | 22% | |||||||||||||||||||
Europe | 371,298 | 21,315 | 392,613 | 356,824 | 4% | 10% | |||||||||||||||||||
Asia | 131,948 | 4,548 | 136,496 | 108,463 | 22% | 26% | |||||||||||||||||||
Licensing | 21,415 | — | 21,415 | 19,488 | 10% | 10% | |||||||||||||||||||
Total net revenue | $ | 837,127 | $ | 29,912 | $ | 867,039 | $ | 792,164 | 6% | 9% | |||||||||||||||
Twelve Months Ended1 | |||||||||||||||||||||||||
February 2, 2019 | February 3, 2018 | % change | |||||||||||||||||||||||
As Reported | Foreign Currency Impact | Constant Currency | As Reported | As Reported | Constant Currency | ||||||||||||||||||||
Net revenue: | |||||||||||||||||||||||||
Americas Retail | $ | 824,674 | $ | 3,869 | $ | 828,543 | $ | 833,077 | (1%) | (1%) | |||||||||||||||
Americas Wholesale | 170,812 | 2,068 | 172,880 | 150,366 | 14% | 15% | |||||||||||||||||||
Europe | 1,142,768 | 159 | 1,142,927 | 998,657 | 14% | 14% | |||||||||||||||||||
Asia | 388,246 | (971 | ) | 387,275 | 308,899 | 26% | 25% | ||||||||||||||||||
Licensing | 83,194 | — | 83,194 | 72,755 | 14% | 14% | |||||||||||||||||||
Total net revenue | $ | 2,609,694 | $ | 5,125 | $ | 2,614,819 | $ | 2,363,754 | 10% | 11% | |||||||||||||||
Notes: | |||||||||||||||||||||||||
1 | The three and twelve months ended February 2, 2019 contain 13 and 52 weeks, respectively. The three and twelve months ended February 3, 2018 contain 14 and 53 weeks, respectively. |
Guess?, Inc. and Subsidiaries | ||||||||||||||
Selected Condensed Consolidated Balance Sheet Data | ||||||||||||||
(in thousands) | ||||||||||||||
February 2, 2019 | February 3, 2018 | |||||||||||||
ASSETS | ||||||||||||||
Cash and cash equivalents | $ | 210,460 | $ | 367,441 | ||||||||||
Receivables, net | 321,995 | 259,996 | ||||||||||||
Inventories | 468,897 | 428,304 | ||||||||||||
Other current assets | 87,343 | 52,964 | ||||||||||||
Property and equipment, net | 315,558 | 294,254 | ||||||||||||
Restricted cash | 535 | 241 | ||||||||||||
Other assets | 244,417 | 252,434 | ||||||||||||
Total assets | $ | 1,649,205 | $ | 1,655,634 | ||||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||||||
Current portion of capital lease obligations and borrowings | $ | 4,315 | $ | 2,845 | ||||||||||
Other current liabilities | 539,049 | 465,000 | ||||||||||||
Long-term debt and capital lease obligations | 35,012 | 39,196 | ||||||||||||
Other long-term liabilities | 212,331 | 209,528 | ||||||||||||
Redeemable and nonredeemable noncontrolling interests | 21,271 | 22,246 | ||||||||||||
Guess?, Inc. stockholders’ equity | 837,227 | 916,819 | ||||||||||||
Total liabilities and stockholders’ equity | $ | 1,649,205 | $ | 1,655,634 |
Guess?, Inc. and Subsidiaries | ||||||||||||||
Condensed Consolidated Cash Flow Data | ||||||||||||||
(in thousands) | ||||||||||||||
Twelve Months Ended1 | ||||||||||||||
February 2, 2019 | February 3, 2018 | |||||||||||||
Net cash provided by operating activities2 | $ | 81,679 | $ | 148,370 | ||||||||||
Net cash used in investing activities | (123,528 | ) | (90,347 | ) | ||||||||||
Net cash used in financing activities | (96,818 | ) | (128,737 | ) | ||||||||||
Effect of exchange rates on cash, cash equivalents and restricted cash | (18,020 | ) | 40,746 | |||||||||||
Net change in cash, cash equivalents and restricted cash | (156,687 | ) | (29,968 | ) | ||||||||||
Cash, cash equivalents and restricted cash at the beginning of the year | 367,682 | 397,650 | ||||||||||||
Cash, cash equivalents and restricted cash at the end of the period | $ | 210,995 | $ | 367,682 | ||||||||||
Supplemental information: | ||||||||||||||
Depreciation and amortization | $ | 68,357 | $ | 63,588 | ||||||||||
Rent | $ | 292,067 | $ | 272,332 | ||||||||||
Non-cash investing and financing activity: | ||||||||||||||
Assets acquired under capital lease obligations3 | $ | 1,172 | $ | 18,502 | ||||||||||
Notes: | ||||||||||||||
1 | The three and twelve months ended February 2, 2019 contain 13 and 52 weeks, respectively. The three and twelve months ended February 3, 2018 contain 14 and 53 weeks, respectively. | |||||||||||||
2 | During fiscal 2018, the Company recorded net losses on lease terminations related primarily to the modification of certain lease agreements held with a common landlord in North America. In connection with this modification, the Company made up-front payments of approximately $22 million, of which $12 million was recognized as net losses on lease terminations and $10 million was recorded as advance rent payments. | |||||||||||||
3 | During the second quarter of fiscal 2019, the Company entered into capital leases for $1.2 million related primarily to computer hardware and software. During the second quarter of fiscal 2018, the Company began the relocation of its European distribution center to the Netherlands. As a result, the Company entered into a capital lease of $16.0 million for equipment used in the new facility. During the second quarter of fiscal 2018, the Company also entered into a capital lease for $1.5 million related primarily to computer hardware and software. |
Guess?, Inc. and Subsidiaries | ||||||||||||||
Reconciliation of Net Cash Used in Operating Activities to Free Cash Flow | ||||||||||||||
(in thousands) | ||||||||||||||
Twelve Months Ended1 | ||||||||||||||
February 2, 2019 | February 3, 2018 | |||||||||||||
Net cash provided by operating activities2 | $ | 81,679 | $ | 148,370 | ||||||||||
Less: Purchases of property and equipment | (108,117 | ) | (84,655 | ) | ||||||||||
Less: Payments for property and equipment under capital leases | (1,387 | ) | (937 | ) | ||||||||||
Free cash flow | $ | (27,825 | ) | $ | 62,778 | |||||||||
Notes: | ||||||||||||||
1 | The three and twelve months ended February 2, 2019 contain 13 and 52 weeks, respectively. The three and twelve months ended February 3, 2018 contain 14 and 53 weeks, respectively. | |||||||||||||
2 | During fiscal 2018, the Company recorded net losses on lease terminations related primarily to the modification of certain lease agreements held with a common landlord in North America. In connection with this modification, the Company made up-front payments of approximately $22 million, of which $12 million was recognized as net losses on lease terminations and $10 million was recorded as advance rent payments. |
Guess?, Inc. and Subsidiaries | ||||||||||||||
Retail Store Data | ||||||||||||||
Global Store and Concession Count | ||||||||||||||
As of February 2, 2019 | ||||||||||||||
Stores | Concessions | |||||||||||||
Region | Total | Directly Operated | Partner Operated | Total | Directly Operated | Partner Operated | ||||||||
United States | 290 | 288 | 2 | 1 | — | 1 | ||||||||
Canada | 89 | 89 | — | — | — | — | ||||||||
Central and South America | 104 | 67 | 37 | 27 | 27 | — | ||||||||
Total Americas | 483 | 444 | 39 | 28 | 27 | 1 | ||||||||
Europe and the Middle East | 700 | 490 | 210 | 37 | 37 | — | ||||||||
Asia and the Pacific | 536 | 227 | 309 | 358 | 174 | 184 | ||||||||
Total | 1,719 | 1,161 | 558 | 423 | 238 | 185 | ||||||||
As of February 3, 2018 | ||||||||||||||
Stores | Concessions | |||||||||||||
Region | Total | Directly Operated | Partner Operated | Total | Directly Operated | Partner Operated | ||||||||
United States | 308 | 306 | 2 | 1 | — | 1 | ||||||||
Canada | 89 | 89 | — | — | — | — | ||||||||
Central and South America | 103 | 59 | 44 | 27 | 27 | — | ||||||||
Total Americas | 500 | 454 | 46 | 28 | 27 | 1 | ||||||||
Europe and the Middle East | 669 | 400 | 269 | 33 | 33 | — | ||||||||
Asia and the Pacific | 494 | 157 | 337 | 368 | 177 | 191 | ||||||||
Total | 1,663 | 1,011 | 652 | 429 | 237 | 192 |