Guess, Inc will close more than 100 stores globally over the next 18 months amid news the group’s first-quarter sales fell 50%, owing to temporary shutdowns during the coronavirus outbreak.
Speaking on the firm’s first-quarter earnings call with analysts, Guess CEO Carlos Alberini said the closures will primarily be in North America and China, adding many of the stores’ leases are set to expire, giving management an opportunity to renegotiate terms.
He added, of China, the group would continue to have a presence in 37 “Tier 1 to Tier 3 cities”. Closures would be of stores that were not “desirable locations” or were not making a “significant contribution in terms of the presence of the brand in that territory or in terms of profitability.”
“The recent stock performance and expected demand under our new normal model made very clear that our stock portfolios around the world could be optimised to increase profitability. This is particularly true in North America and China and we have plans to close over 100 stores in those territories within the next 18 months. Fortunately, we have significant flexibility with lease terms in every region, with about 70% of all our leases globally expiring within a three-year timeframe, which also gives us significant negotiation power for future renewals,” he said.
“Between February and May, we have closed 42 stores in China. So, there is a significant opportunity for us to really optimise our portfolio there and we have a few more to go between now and the next few months. And in the case of North America, we have a lot of lease expirations too that gives us a lot of flexibility. In fact, about one-third of the fleet is coming up just in a very short horizon here. So, it doesn’t mean that we are going to close all those stores. There are a lot of stores very, very healthy and even with the new normal numbers here, we think that we can continue to maintain a very strong presence on the store side.
“In terms of Europe, we have over 15% of our stores are also coming up for renewal within the next year and we feel very strongly about our business here and how important stores are and we feel that in that particular case, we are not going to go through many closures.
US Tariffs are shifting - will you react or anticipate?
Don’t let policy changes catch you off guard. Stay proactive with real-time data and expert analysis.
By GlobalData“Overall, we think that having all these exploration opportunities, we think that is not just an opportunity to close stores, but also to renegotiate lease terms.
“I want to make sure I make this point very strongly because we believe in stores and we think that that is an important piece of our success. We think that there is no better way to represent the brand than with a great, well-positioned and well-merchandised store and this has always been part of our big representation of the brand.”
The news comes as Guess reported a wider GAAP net loss in the first quarter to U$157.7m from $21.4m a year ago. Total net revenue for the three months to 2 May, meanwhile, tumbled 51.5% to $260.3m from $536.7m in the same prior-year quarter.
