Guess plans to close 60 stores in fiscal 2018

Guess plans to close 60 stores in fiscal 2018

US fashion retailer Guess is to close 60 stores over the upcoming financial year and continue to implement supply chain initiatives under a recently-announced plan to improve profits in the Americas after seeing its earnings tumble in its fourth quarter and over the year as a whole.

For the three months ended 28 January, earnings tumbled 86.3% to US$6.6m from $47.8m in the year-ago period. GAAP operating margin decreased 750 basis points to 3.1%, from 10.6% last year, driven primarily by higher asset impairment charges, more markdowns and the negative impact on the company's fixed cost structure resulting from negative comparable store sales from its retail business in the Americas.

Net revenue, meanwhile, increased 3.2% to $679.3m, compared to $658.3m in the prior-year quarter. Revenues in Europe were up 11.4% in US dollars and 13.5% in constant currency, while, in Asia, sales also increased, rising 26.6% in US dollars and 27.9% in constant currency.

However, in the Americas, retail sales were down 6.4% in US dollars and 6.3% constant currency. Retail comp sales, including e-commerce, decreased 7% in US dollars and 7.4% in constant currency.

CEO Victor Herrero said Guess is "encouraged" by the progress in Europe and Asia, adding the company will continue to allocate the majority of its capital investment there.

"As we head into fiscal year 2018 we will build on the good momentum we are experiencing in both Europe and Asia and will continue our retail expansion plan there," he said. "In the Americas Retail, where the retail environment remains challenging, we are focused on profitability improvements. We will continue to negotiate rent reductions whenever possible and plan to close 60 stores in fiscal 2018. And finally, we will remain focused on implementing supply chain initiatives that should drive profit improvement in fiscal 2018."

The closures were mentioned last year as part of a four-point plan outlined by Guess in December and designed to "drive value" for the business in the Americas.

Guess four-point plan to drive profit in Americas

For the full year, Guess saw earnings fall 72.2% to $22.8m from $81.9m. GAAP operating margin decreased 450 basis points to 1.0%, from 5.5% in the prior year, driven primarily by higher asset impairment charges, more markdowns and the negative impact on the Company's fixed cost structure resulting from negative comparable store sales in Americas retail.

Meanwhile, total net revenue for fiscal 2017 increased 0.2% to $2.21bn, compared to $2.20bn in the prior year.

For fiscal 2018, Guess is forecasting consolidated net revenues to increase between 2% and 4% in US dollars, operating margin between 2.2% and 3%, including roughly 40 basis points of currency headwind, and diluted earnings per share in the range of $0.28 to $0.40.

Looking ahead, Herrero said it is "critical" Guess remains focused on "flowing high-quality product, delivering best-in-class digital and in-store experiences, and maintaining its long-term brand building approach, anchored on investments in advertising and marketing, supply chain and its digital platform".