Guess to Close North America Stores as Q2 Profit Slides

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GUESS Ad: "Denim is never out of season"

GUESS Ad: “Denim is never out of season”

Los Angeles–Guess has said it will continue to rationalize its North America store portfolio after revealing a drop in second-quarter earnings and sales declines in all regions.

The company recorded today net earnings of $22 million in the three months ended August 2, a 50.5% decrease on earnings of $44.3 million 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 $6.1 million and an unfavorable 5 cents 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 $608.6 million, while in North America revenues were down 4%. European revenues decreased 6%, and Asia revenues decreased 2%.

The company said it will continue to rationalize its North America store portfolio and also has the flexibility to further optimize 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.”

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