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Turnarounds are always difficult, because no investor wants to wait forever for a recovery. Guess? (NYSE: GES) has dealt with the normal ups and downs of its market as well as some unusual situations affecting its reputation, and that's made some people think twice about counting on the jeans maker's attempts to mount a full turnaround.
Coming into Wednesday's fiscal first-quarter financial report, Guess? investors didn't have much hope that the company would be able to come close to turning a profit, but they still wanted to see good gains in sales. The jeans retailer largely delivered on those expectations, but some shareholders look like they're getting tired of having to endure quarter after quarter of red ink.
Image source: Guess?
How the jeans maker did
Guess?'s fiscal first-quarter results gave optimists further hope about the company's future. Revenue was higher by 15% from year-earlier figures to $521.3 million, which was far better than the 11% growth that most investors were looking for. Guess? still suffered an adjusted net loss of $17.8 million, but that was 8% less than the loss it had in the first quarter of fiscal 2018 a year ago, and the per-share adjusted loss of $0.23 matched the amount of red ink that those following the stock were expecting.
One thing to keep in mind was that Guess? benefited greatly from currency impacts during the quarter. On a constant currency basis, the growth rate that the jeans maker posted was seven percentage points less than its dollar-denominated performance.
The weakest area for Guess? was its Americas retail unit, where revenue was actually down 1.4% from year-ago levels. Comparable sales including e-commerce were up just 2%. Yet elsewhere, Guess? did better. Wholesale revenue in the Americas jumped 13%, and top-line gains in Europe of 24% and Asia of 33% included double-digit comps -- driven largely by the weakness of the U.S. dollar in comparison to the euro and various Asian currencies. Guess? brought in almost 24% more revenue from licensing arrangements during the quarter as well.
Margin figures were mixed. Retail in the Americas segment saw a dramatic narrowing of negative operating margin figures, with fewer markdowns and higher initial pricing practices. Operating margin also jumped in Asia, but substantial reductions in Europe and the wholesale business in the Americas offset gains elsewhere. In general, though, profit levels improved sequentially nearly everywhere, with only the wholesale business in the Americas getting left out.