Guess loss widens, hurt by European Commission anti-trust fine

By

Jennifer Braun

Published
Nov 29, 2018

Guess Inc. reported on Wednesday third quarter results that missed expectations, despite a beat on revenue, as the American fashion brand said it expects to pay out a hefty fine for anti-trust charges issued by the European Commission.

 
The Los Angeles-based company said it recorded a net loss of $13.4 million, a 370% dive compared to $2.9 million for the third quarter of fiscal 2018. 

For the three months, earnings per share increased 8.3 percent to $0.13, below analysts’ expectations, compared to $0.12 for the prior-year quarter.

Guess said its profit calculations were hit hard in the quarter by estimated anti-trust charges issued by the European Commission (EC). The company announced that it expects to reach an agreement with the EC that will likely result in a fine ranging from $42.4 million to $46.6 million. The ongoing investigation concerns violations of certain European competition rules.
 
Still, total net revenue for the third quarter of fiscal 2019 was up at $605.4 million, compared to $549 million in the prior-year quarter.
 
“I am very pleased to report another quarter of strong operating performance with revenue growth of 10% in U.S. dollars and 13% in constant currency, significant growth in adjusted earnings from operations and adjusted operating margin finishing higher than our expectations despite unexpected currency headwinds,” said CEO, Victor Herrero. 
 
“I am very encouraged by the overall sales momentum we are experiencing with positive comps in all regions in the third quarter, which speaks to the global strength and relevancy of the Guess brand.”
 
By region, the Americas retail revenues increased 1.1 percent in constant currency, while comp sales including e-commerce increased 4 percent. 
 
European revenues increased 19.8 percent in constant currency. Comp sales jumped 12 percent. Asian revenues rose 21.8 percent in constant currency, while retail comp sales were up 9 percent in constant currency.
 
Looking ahead, for the fourth quarter ending February 2, 2019, the company expects revenue to increase between 7.5 and 9.5 percent in constant currency. 
 
Meanwhile, for fiscal 2019, the company forecasted adjusted EPS at between 96 cents to $1.03. Revenue is expected to be up 10 to 10.5 percent.