GES Fuels Growth With Strategic Plan, Faces Hurdles From Rising Costs

Core Insights - Guess?, Inc. is experiencing growth driven by strong global brand momentum and customer demand, particularly in its Guess, Marciano, and rag & bone brands, despite facing challenges from a weaker consumer environment and elevated costs [1] Group 1: Growth and Performance - The company reported a year-over-year revenue increase of 10% in the second quarter of fiscal 2025, with net revenues reaching 732.6 million, largely attributed to the acquisition of rag & bone and strong wholesale results in Europe and the Americas [2] - Guess?'s wholesale business is a significant growth driver, particularly in European and Americas markets, positioning the company for sustained future success [3] Group 2: Strategic Initiatives - Guess? is implementing a multi-faceted strategy for long-term growth, including the successful integration of rag & bone, expanded marketing efforts, and new store openings in Europe [4] - The company has launched Guess Jeans targeting Gen-Z customers, which has exceeded sales expectations, and doubled its marketing investments to enhance customer engagement [4] - Guess? is optimizing its logistics network through a partnership with GXO Logistics to drive cost efficiencies in the U.S. and Europe, while strengthening its capital structure with expanded credit facilities [4] Group 3: Financial Challenges - Rising operating costs are impacting financial performance, with SG&A expenses increasing to 38.7% of sales from 34.6% a year earlier, primarily due to higher investments in rag & bone and increased marketing spend [5] - The gross margin declined to 43.7% from 44.3%, and adjusted operating margin fell to 5.2% from 9.8%, driven by increased expenses and promotional activity [5] - The company anticipates rising freight costs in the second half of the year due to the ongoing Red Sea crisis, which is expected to impact margins and operating profit [5] Group 4: Outlook Adjustments - Management revised its fiscal 2025 revenue growth projection to between 9.5% and 11%, down from the previous range of 10.7% to 12.7%, and adjusted earnings per share (EPS) forecast to between 2.42 and $2.70, compared to$3.14 reported in fiscal 2024 [6] Group 5: Competitive Landscape - Guess? faces challenges from unfavorable currency fluctuations and stiff competition from other textile-apparel players [7]