Guess earnings decline 13.4 percent, announces weak outlook

For the fourth quarter of fiscal 2016, Guess recorded net earnings of 47.8 million dollars, an 11.4 percent decrease. Diluted earnings per share decreased 9.5 percent to 0.57 dollar with negative impact of currency of around 0.19 dollar per share. Net earnings for the fiscal year ended January 30, 2016 were 81.9 million dollars, a decrease of 13.4 percent. Diluted earnings per share decreased 13.5 percent to 0.96 dollar with negative impact of currency of around 0.43 dollar per share.

Commenting on the results, Victor Herrero, Chief Executive Officer, said, "I am pleased to report that fourth quarter earnings per share were within the range of our guidance. Turning to the outlook for the next three years, based on the Strategic Initiatives that I have mentioned in the last two earnings calls, we are planning for our annual revenues to reach three billion dollars in three years at prevailing currency rates. Again, assuming currencies remain at prevailing levels, we are planning for operating margin to reach 7.5 percent in three years.”

Fourth quarter highlights

Total net revenue for the fourth quarter decreased 5.5 percent to 658.3 million dollars. In constant currency, total net revenue increased 0.6 percent. Operating earnings decreased 4.4 percent to 70 million dollars including a 4.5 million dollars unfavorable currency translation impact, from 73.2 million dollars in the prior-year period. Operating margin in the fourth quarter was relatively flat at 10.6 percent.

Operating margin for the company's Americas Retail segment increased 350 basis points to 6.6 percent. For the company's Europe segment, it decreased 180 basis points to 15.1 percent, due to lower gross margins, partially offset by a lower SG&A rate. Operating margin for the company's Asia segment increased 310 basis points to 3.5 percent, due to higher gross margins driven by our South Korea business as the company completed the phase out of its G by Guess product line in the region.

Operating margin for the company's Americas Wholesale segment decreased 100 basis points to 19 percent and for the licensing segment, it decreased 740 basis points to 87.9 percent.

Fiscal 2016 results in detail

Total net revenue for fiscal year 2016 decreased 8.8 percent to 2.20 billion dollars. In constant currency, total net revenue decreased 0.9 percent. Operating earnings decreased 3.6 percent to 121.4 million dollars including a 10.3 million dollars unfavourable currency translation impact. Operating margin increased 30 basis points to 5.5 percent driven by lower store impairment charges and higher initial mark-ups, partially offset by the unfavorable impact from currency exchange rate fluctuations.

Operating margin for the company's Americas Retail segment increased 300 basis points to 1.7 percent and for the Europe segment; it decreased 40 basis points to 7.6 percent. Operating margin for the company's Asia segment increased 140 basis points to 4.3 percent. Operating margin for the company's Americas wholesale segment decreased 200 basis points to 18.4 percent and operating margin for the company's licensing segment decreased 240 basis points to 88.7 percent.

Dividends and outlook

The company's Board of Directors has approved a quarterly cash dividend of 0.225 dollar per share on the company's common stock.

The Company's expectations for the first quarter of fiscal 2017 ending April 30, 2016, include decline in consolidated net revenues between 1.5 percent and 0.5 percent in constant currency. Currency headwinds are expected to negatively impact consolidated revenue growth by approximately 2 percent, for a net decline between 3.5 percent and 2.5 percent. Operating margin is expected to be between minus 5 percent and minus 4 percent and includes 130 basis points of currency headwind.

Diluted net loss per share is expected to be in the range of 0.20 dollar to 0.17 dollars. The estimated impact on earnings per share of the currency headwinds is approximately 0.04 dollar.

For the fiscal year ending January 28, 2017, the company expects consolidated net revenues to increase between 7 percent and 9 percent in constant currency. Currency headwinds are expected to negatively impact consolidated revenue growth by approximately 1 percent, for a net increase between 6 percent and 8 percent. Diluted earnings per share are expected to be in the range of 0.65 dollar to 0.85 dollar. The estimated impact on earnings per share of the currency headwinds is approximately 0.11 dollar.