Guess' Inc. (NYSE:GES) Q1 2020 Earnings Conference Call Transcript

Jun 06, 2019 • 04:45 pm ET

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Guess' Inc. (NYSE:GES) Q1 2020 Earnings Conference Call Transcript

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Q & A
Operator
Operator

Thank you. We will now begin the question-and-answer session. (Operator Instructions) And our first question comes from Susan Anderson from B. Riley FBR. Your line is now open.

Analyst
Susan Anderson

Hi, good evening. Thanks so much for taking my question. I was wondering if you can maybe --

Executive
Carlos Alberini

Yes. Hi, Susan.

Analyst
Susan Anderson

Talk about the guidance -- hi -- given just the inflection in the back half with a lower guidance in the second quarter. Maybe if you could kind of talk about by region, where you're expecting kind of the acceleration to come from as we look out to the back half? Thanks.

Executive
Sandeep Reddy

Hi Susan, this is Sandeep. So I think you're right. I mean, I think with the performance that we've had in the first quarter and the guidance that we're providing for the second quarter clearly to see the margin expansion in the year, there's going to be some improvement in the back half. And what I would take you to is, I think from an underlying perspective, the Americas business and the European business is expected to continue being very strong all year. And the only business, where I think we've seen some softness really is the Asia business, where we've definitely taken the numbers down relative to what we talked about last time.

But I think if you think about the full year guidance, the most material impact that we would see is really in the fourth quarter. But last year, we had some pretty material inventory charges because of the level of excess inventory, we were carrying. So as we lapped that -- that should be a help to actually have margin expansion during the back half of the year and that's what's embedded in the guidance for the full year.

Analyst
Susan Anderson

Got it. That's helpful. And then maybe just a follow up on Asia. It seems like there's just really weakness across all of the countries there. I guess is it more -- is it -- is there anything more than just macro going on there, I guess, in terms of product acceptance? And then also it looks like that you're expecting some improvement in the back half. So maybe just talk about what's going to be driving that? Thanks.

Executive
Carlos Alberini

Yeah. Susan, this is Carlos. Hello. I -- Asia is definitely showing some softening, as I said in my prepared remarks and the softening, as you suggested has impacted those three big markets for us. We do not think that this is brand specific. Frankly, when we see the driver of that softening is primarily customer traffic both coming into our stores and visiting websites. So we believe that this is probably goes beyond what is specific to us. Obviously, it's very difficult to speculate what is that is driving that.

There are some comments from people saying well, just the trade war may be having an impact. Definitely the government has made some changes and significant moves in China specifically to motivate the consumer to continue to