Next year Guess expects to reduce the estimated tariff risk from China production into the US to only 12% of its total apparel production.

Next year Guess expects to reduce the estimated tariff risk from China production into the US to only 12% of its total apparel production.

Fashion retailer Guess Inc is looking to reduce its dependency on China as it moves to limit the impact to its business of the newly imposed tariffs on Chinese imports into the US.

In a post-earnings analyst call, CEO Carlos Alberini said the company has so far "successfully mitigated the tariff risk in China through productive negotiations with vendors" and is expecting minimal impact to its current financial year from potential tariff increases.

Next year it expects to reduce the estimated tariff risk on China shipments to the US to only 12% of its total apparel production.

The rapidly-changing tariff situation saw the US impose new levies on another tranche of imports from China on 1 September, meaning around US$31bn in textile, apparel and home textile products from the country are now subject to an additional tariff of 15%. The new tariffs will hit 92% of all apparel products and 53% of all footwear items imported into the US from China.

The remaining US$160bn in US imports from China – including US$4.7bn in textile, apparel and home textile products – are set to be hit by an extra 15% tariff from 15 December.

Guess Inc has now updated its full-year outlook to account for any potential tariff increases. For fiscal 2020 it expects net revenue in US dollars to increase between 3-5% from a previous outlook of 3.5%-4.5%.  Adjusted operating margin outlook is up to 5.3-5.6% from previous guidance of 4.8%-5.2%. Adjusted earnings per share are expected to be between $1.28-1.36 up from $1.19-1.30.

The retailer also says it is focusing on shaking up its sourcing operations in order to limit the fallout of the trade spat.

"Regarding sourcing and product development, we have assigned global oversight to our European leadership team. This team is working with our team in North America focusing on integrating common development and key fabrics, consolidating vendors, and migrating sourcing into lower-cost countries of origin, particularly out of China. I couldn't be more proud of the progress made by this team in the last few months to migrate our production to lower-cost countries and preparing for vendor consolidation," Alberini said.

For the second-quarter, Guess Inc reported total net revenue increased 5.8% to US$683.2m, up from $645.9m a year earlier. In constant currency, net revenue increased by 8.8%. Sales in the Americas increased by 0.9% in US dollars and 1.2% in constant currency, while sales in Asia were up 0.6% in US dollars and 5.2% in constant currency. Meanwhile, in Europe, revenues increased 9.1% in US dollars and 14.1% in constant currency. GAAP net earnings, however, slipped 0.8% in the period to $25.3m from $25.5m last year. Adjusted net earnings totalled $27.4m, a drop of 6.9% compared to $29.5m for the second quarter of fiscal 2019.