• Q2 earnings down 50.5%
  • Operating margin down 560 bps
  • Total sales fall 4.8%

US apparel retailer Guess has said it will continue to rationalise its North America store portfolio after revealing a drop in second-quarter earnings and sales declines in all regions.

The company recorded net earnings of US$22m in the three months ended 2 August, a 50.5% decrease on earnings of $44.3m in the prior year.

Guess blamed a soft environment in North America, where traffic and promotional activity has continued to put its brick and mortar stores under pressure. The company was also hit with restructuring charges of $6.1m and an unfavourable $0.05 after-tax impact from this.

Operating margin dropped 560 basis points to 4.9% from 10.5% in last year's quarter, primarily reflecting the negative impact on the company's fixed cost structure from negative same store sales in North America and lower wholesale shipments in Europe, and more markdowns in those regions.

Total sales dropped 4.8% to $608.6m, while in North America revenues were down 4%. European revenues decreased 6%, and Asia revenues decreased 2%.

The company said it will continue to rationalise its North America store portfolio and also has the flexibility to further optimise its retail footprint in the coming years.

"Overall second quarter earnings were consistent with our expectations but were short of our operational goals due to a soft environment in North America, where traffic and promotional activity have continued to put our brick and mortar stores under pressure," said CEO Paul Marciano.

"However, we are encouraged by our North American e-commerce business which grew by almost 50% in the second quarter. So far in the third quarter, our fall collection in North American retail has not seen the traction with the consumer that we were expecting and we have adjusted our expectations for the back-half of the year accordingly."