Guess? Q1 Loss Narrower Than Expected, Revenues Up 9% Y/Y

Guess?, Inc. GES reported first-quarter fiscal 2026 results, wherein the top line increased year over year and surpassed the Zacks Consensus Estimate. While the bottom line fared better than the Zacks Consensus Estimate, it declined from the prior-year reported figure. The sales growth was primarily driven by the acquisition of rag & bone (concluded in April 2024). The company also updated its full-year guidance.

GES’ Quarterly Performance: Key Metrics & Insights

Guess? reported adjusted loss of 44 cents per share, which was narrower than the Zacks Consensus Estimate of a loss of 70 cents. However, the bottom line deteriorated from an adjusted loss of 27 cents in the year-ago quarter. (Find the latest EPS estimates and surprises on Zacks Earnings Calendar.)

Guess?, Inc. Price, Consensus and EPS Surprise

Guess?, Inc. price-consensus-eps-surprise-chart | Guess?, Inc. Quote

Net revenues amounted to $647.8 million, up 9% year over year, surpassing the consensus mark of $631 million. On a constant-currency (cc) basis, net revenues rose 12%. The strong performance was driven by the rag & bone acquisition and positive momentum in the wholesale businesses across Europe and the Americas. 
 
Gross margin contracted to 39.9% from 41.9% reported in the year-ago quarter. As a percentage of sales, adjusted SG&A expenses increased to 44% from 43.2% in the prior-year quarter.

Adjusted loss from operations was $25.8 million compared with a loss of $7.7 million in the year-ago quarter. Adjusted operating margin declined to negative 4% from negative 1.3% in the same-period last year. This decline was primarily due to increased expenses, including higher advertising, store-related costs and performance-based compensation, as well as the unfavorable impact of business mix and currency. These pressures were partially offset by contributions from newly acquired businesses.

Decoding GES’ Segmental Performance

Revenues in the Americas Retail segment rose 9% in U.S. dollars and 12% at cc. However, retail comparable sales, including e-commerce, declined 11% in U.S. dollars and 9% at cc. The operating margin in the segment was negative 10.5%, down 3.3% year over year. This decline was caused by the adverse effects of negative retail comparable sales, increased markdowns and higher expenses, including increased store costs, partially offset by the impact of newly acquired businesses.

Americas Wholesale revenues soared 63% on a reported basis and 70% at cc. The segment’s operating margin fell to 19.9%, down 2.8% year over year, due to the impact of newly acquired businesses and increased expenses, partially offset by the favorable impact of elevated revenues.

The Europe segment’s revenues increased 8% on a reported basis and 9% at cc. Retail comp sales (including e-commerce) decreased 4% on a reported basis and 3% at cc. The segmental operating margin was negative 2.9%, down 2.7% year over year, due to higher expenses, including elevated advertising and store costs, and an unfavorable currency impact.

Asia revenues decreased 20% on a reported basis and 16% at cc. Retail comp sales (including e-commerce) dropped 24% and 20% on a reported basis and at cc, respectively. The operating margin in the segment was negative 3.1%, down 8.2% year over year. This downside was due to reduced revenues, partially offset by lower expenses.

Licensing revenues decreased 14% on a reported basis and at cc. Segmental operating margin was 92.1% compared with 92% in the year-ago quarter.

GES’ Financial Health Snapshot & Shareholder-Friendly Moves

The company exited the quarter with cash and cash equivalents of $151.2 million and long-term debt and finance lease obligations of nearly $241.7 million. Stockholders’ equity was around $483.6 million.

Net cash used in operating activities for the fiscal first quarter ended May 3, 2025, was negative $73.4 million. Free cash flow for the same period amounted to negative $96.4 million. For fiscal 2026, free cash flow is expected to be $55 million.

GES announced a quarterly dividend of 30 cents per share, payable on July 3, 2025, to its shareholders on record as of June 18.

What to Expect From GES in the Future?

For fiscal 2026, Guess? now expects revenues to grow between 5.5% and 7.4%, an increase from its prior outlook of 3.9% to 6.2%.

The adjusted operating margin is projected in the range of 4.4% to 5.1%, which is slightly down from the previous estimate of 4.5% to 5.4%. The GAAP operating margin is now forecasted between 3.9% and 4.6%, down from the earlier range of 4.3% to 5.2%.

Management anticipates adjusted earnings per share (EPS) of $1.32 to $1.64 compared with the prior projection of $1.32 to $1.76 and actual EPS of $1.96 in fiscal 2025. On a GAAP basis, EPS is now expected to be in the range of 87 cents to $1.11, down from the previous outlook of $1.03 to $1.37. The metric was 77 cents per share in fiscal 2025.

For the second quarter of fiscal 2026, Guess? expects revenue growth of 2.9% to 4.7%. Adjusted EPS is expected to range from 11-21 cents, while GAAP EPS is projected between 11 cents and 18 cents.

Shares of this Zacks Rank #4 (Sell) company have risen 3.7% in the past three months against the industry’s 2.1% decline.

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This article originally published on Zacks Investment Research (zacks.com).

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