Guess' Inc. (NYSE:GES) Q3 2019 Earnings Conference Call - Final Transcript

Nov 26, 2019 • 04:45 pm ET


Guess' Inc. (NYSE:GES) Q3 2019 Earnings Conference Call - Final Transcript


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Good day, everyone, and welcome to the Guess? Third Quarter Fiscal 2020 Earnings Conference Call. On the call are Carlos Alberini, Chief Executive Officer; and Sandeep Reddy, Chief Financial Officer.

During today's call, the Company will be making forward-looking statements including comments regarding future plans, business and financial opportunities, strategic initiatives, capital allocation, and short and long-term financial outlook. The Company's actual results may differ materially from current expectations based on risk factors included in today's press release and the Company's quarterly and annual reports filed with the SEC.

Now I would like to turn the call over to Carlos.

Carlos E. Alberini

Thank you, operator. Good afternoon, and thank you all for joining us today. We reported our third quarter results today, and we are very pleased to deliver operating earnings and earnings per share above the high end of our guidance for the period. Adjusted operating earnings increased 4% versus last year, driven by a 2% revenue increase and a gross margin increase of 90 basis points, which was offset by an adjusted SG&A rate increase of 90 basis points, due to pressure from corporate investments during the quarter.

Our performance reflected mixed results across our regional businesses. Europe had a terrific quarter with very strong performance across all channels. While the Americas showed strength in our wholesale business, we experienced deceleration in our retail business, with comp sales below our expectations. Asia was also weaker, and our licensing business had a better performance than we expected in the quarter. I believe that our business in North America was influenced by factors at a macro level, primarily impacting customer traffic, including weather and tourism, and internal factors related to our Fall/Winter product collection and the inventory position.

As we focused on operating our retail business with leaner inventories, we believe our ownership and product for certain classifications would have benefited from more inventory depth and breadth to comp last year's volumes. We are correcting this as we speak, and are confident that we will be in a much stronger position in the New Year.

Regarding Asia, the issues we faced earlier in the year in our three major markets of Greater China, South Korea and Japan, still persist today. Similarly to the Americas Retail business, we believe that some of the factors impacting our business here are macro-driven and not in our control. These include specific regional issues, such as the Hong Kong protests situation and the China trade war development, but there is a lot about our product assortment and styling, our inventory levels and our promotional cadence that are totally in our control, and we can impact going forward to improve on our current trends.

All considered, we continue to believe that the GUESS? brand and our product offering, are very relevant to the Asian consumer and that the long-term opportunity in this region is very compelling and remains intact, in spite of the current challenges. We are monitoring the situation very closely and have adjusted our investment plans for