Guess(US:GES)2024-12-06 21:55Acquisition and Integration - The acquisition of rag & bone was completed on April 2, 2024, integrating it into existing segments for financial reporting purposes[212]. - Inventory increased by $113.4 million, or 20.2%, to $675.8 million, primarily due to the rag & bone acquisition and higher in-transit inventory[258]. - Accounts receivable increased by $42.6 million, or 12.5%, to $383.4 million, driven by the rag & bone acquisition[259]. - Net revenue from the Americas Wholesale segment increased by $44 million, or 79%, driven mainly by the newly acquired rag & bone business[284]. - Gross profit increased by $31 million, driven by the impact of newly acquired businesses, including rag & bone[267]. Financial Performance - Net loss attributable to Guess?, Inc. was $23.4 million, or diluted net loss per share of $0.47, for the quarter ended November 2, 2024, compared to net earnings of $55.7 million, or diluted net earnings per share of $0.82, for the quarter ended October 28, 2023[247]. - Total net revenue increased 13.4% to $738.5 million for the quarter ended November 2, 2024, compared to $651.2 million in the same prior-year quarter[249]. - Gross margin decreased 110 basis points to 43.6% for the quarter ended November 2, 2024, compared to 44.7% in the same prior-year quarter[249]. - SG&A expenses increased 19.3% to $279.4 million for the quarter ended November 2, 2024, compared to $234.1 million in the same prior-year quarter[250]. - Operating margin decreased 270 basis points to 5.7% for the quarter ended November 2, 2024, compared to 8.4% in the same prior-year quarter[253]. Economic and Market Conditions - The ongoing wars in Ukraine and Gaza, along with macroeconomic conditions, are negatively impacting business operations[207]. - Inflationary pressures have impacted overall cost structure, including transportation, employee compensation, and raw materials, negatively affecting margins and expenses[218]. - Continued inflationary conditions could adversely impact consumer discretionary spending, negatively affecting sales and results[222]. - The average U.S. dollar rate was stronger against several currencies, negatively impacting the translation of international revenues and earnings for the nine months ended November 2, 2024[216]. - Currency fluctuations can significantly impact the translation of international revenues and earnings into U.S. dollars, affecting operating margins[214]. Operational Challenges - The company has experienced increased costs and transit times associated with deliveries related to operations in Russia due to sanctions and new procedures[227]. - The company continues to strategically manage expenses to protect profitability amid supply chain disruptions, including the Red Sea crisis[208]. - The company continues to assess operations in Russia to ensure compliance with applicable sanctions, with no material impact on operations to date[228]. Shareholder Returns and Capital Management - The company plans to prioritize capital allocation toward investments that support growth and infrastructure while managing product buys and inventory ownership rigorously[237]. - A special cash dividend of $2.25 per share was announced on March 20, 2024, in addition to a regular quarterly cash dividend of $0.30 per share[348]. - The company repurchased 2.6 million shares at an aggregate cost of $60.8 million during the nine months ended November 2, 2024, under the 2024 Share Repurchase Program[353]. - The company plans to return value to shareholders through dividends and share repurchases while considering strategic acquisitions that leverage its global infrastructure[237]. Tax and Compliance - The effective income tax rate was an expense of 128.9% for the quarter ended November 2, 2024, compared to a benefit of 44.5% in the same prior-year quarter[254]. - The effective income tax rate was 355.1%, compared to a benefit of 6.3% in the prior year, primarily due to a net unrealized loss on derivatives[305]. - The company is monitoring the OECD Pillar 2 guidelines, which may affect its future tax rate starting in 2024[306]. Cash Flow and Liquidity - As of November 2, 2024, cash and cash equivalents decreased to $140.9 million from $244.1 million as of October 28, 2023[255]. - Net cash used in operating activities was $61.6 million for the nine months ended November 2, 2024, compared to net cash provided of $40.9 million for the same prior-year period, indicating a deterioration of $102.4 million[338]. - The company anticipates satisfying ongoing cash requirements for at least the next 12 months primarily through cash flow from operations and existing cash balances[333]. Strategic Focus and Future Plans - The company plans to focus on increasing productivity in existing markets and pursuing brand extensions and category expansions for revenue growth[233]. - The company aims to enhance customer experience through a seamless omni-channel strategy and expand its digital business[234]. - The company intends to operate with high efficiency and effectiveness, leveraging technology and data analytics to improve operations and decision-making[236]. - The company aims to design and extend its product offerings to better address local product needs and support various lifestyle occasions[235].