GES - Earnings call transcript Q3 2020

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Operator

Good day everyone and welcome to the Guess, Third Quarter Fiscal 2020 Earnings Conference Call.

On the call are Carlos Alberini, Chief Executive Officer; and Sandeep Reddy, Chief Financial Officer.

During today's call, the company will be making forward-looking statements, including comments regarding future plans, business and financial opportunities, strategic initiatives, capital allocation, and short and long-term financial outlook. The company's actual results may differ materially from current expectations based on risk factors included in today's press release and the company's quarterly and annual reports filed with the SEC.

Now, I would like to turn the call over to Carlos.

Carlos Alberini

operator. you Thank thank and for us joining Good you today. afternoon all above third We earnings and share our quarter we period. our for and high-end the guidance were per operating today deliver results reported of to very earnings the pleased corporate versus increased of to margin X% an gross year, driven of adjusted during offset XX by XX due basis investments SG&A Adjusted revenue X% by from and increase increase basis quarter. operating points pressure last earnings was rate a increase a the points, which

Our mixed a reflected all strong results performance businesses. across Europe terrific performance our had channels. very regional quarter with across

the in in our While below our deceleration with business we comp sales experienced strength showed retail our wholesale Americas expectations. business,

better that we I inventory traffic, tourism, factors impacting Asia factors the quarter. including business in our at the performance primarily and than product collection was and was a had also weaker influenced believe expected customer and weather position. North our related Fall/Winter in America licensing level, by to our internal macro a and business

volumes. breadth on comp we from with believe we more inventories, have product retail depth classifications ownership our and inventory and As leaner our for year's benefited business last certain operating focused would to

We will are confident New the as much and stronger in that speak be are correcting this we we position a in Year.

the totally are development, our trade markets levels, to improve about a assortment specific our lot styling, to can our there three promotional Regarding are protest Similarly impacting South regional in inventory situation issues Asia, Japan Kong is our the control, such trends. we and These but forward the not impact some macro-driven issues retail in our and persist that our of our in going the of on and and in cadence believe Greater product current China that business today. and as major war China, factors the Hong we our faced include earlier business, and the still year here control. we Korea, Americas

brands and challenges. we consumer, All considered, in current continue very are offering intact and to the to and this Asian long-term region compelling product relevant our of spite the in opportunity that the Guess’ that is very remains believe the

We are our adjusted on region investment and current situation for our very closely trends the monitoring have based plans and medium-term expectations. the the

different an our Regarding sub-region improve fit, have our specifically, and regarding our and Asia more believe or by also customer taste and very sizing, assortment we opportunity specific developing offering product market strongly lines. that caters that styling, in by we different local to from a needs are which to existing

product are this. our We address create mobilizing teams to to capabilities

addition, with. newness levels we high the year have that we of were floor came by that into should on more the impacted older had the inventory online season and In

incorporate on-hand, inventory the buys brand. future through work are we newness As ensuring the expect we the consumer would that our from

marketing, with effectively. social of believe more terms job to market do platforms and we that media can better and capabilities we consumers while leveraging local to In livestreaming celebrities influencers, a partnering

an opportunity have Lastly, capture adjust been products local have we to Chinese where to sharp fast competitive and with brands promotional share. regarding aggressive the for is cadence, very prices development market our pricing and certain very

action quarter. this the taking on also in are We fourth

doubled quarter a pleased are period. the with earnings X% we margin and very region. for the Europe business performance Our Operating our channels all all across markets in had strong in in up operating [ph] with very than XXX% revenues and the quarter and up more

end year, with the inventory on overall and to our manage the inventory continue range. in track of are and X% a we of year period the global ended company's quarter, to we inventories reduction a the last double-digit with During effectively, in versus decrease we

tariffs our the risks, dependency make while to progress quality our continue improving cost mitigating of reducing potential in without performance. China compromising and We good on products, sourcing

their are have Our and capabilities teams and job doing in regarding optimization. with that believe and I development this, our and cost sourcing quality, a phenomenal will speed, our significant product infrastructure work a in product long-term impact

vendors productive We're willing very but increases. remain committed of spite reaching prices are costing that also negotiations to sourcing, potential with compelling offer China tariff in to

As costs increase a increase on expected sourced have if new to China from will result, the impact year. XX% next percentage apparel XX% get our negative our of tariffs product may for no enacted. This

guidance updated our on comment now for year. me Let the

we fact able low Americas to in our QX Europe in strength been am of where speaks Retail our management of improved EPS the coupled continue Americas our the maintaining of model, Asia, this two have $X.XX pull of light by diversified several expense momentum beat, end wholesale our business year seeing revenue this that with as The levers in guidance confident we profitability regions. I raised have and drive to very to business that positive due offset have do the helped in We have weakness we to in to and other end effective guidance. the while model. high that we're the softness

our almost few been about feel have I been progress now the in planned that in to great we sharing look InterContinental forward finalized Hotel making team New in you months plans strategic I coming event at have our the believe Day for this and X the fronts. for back with December our months during strongly ten plan. Tuesday, Guess that critical with that as last We York. Investor our we I multiple for organization and are our business particular is

and will of participate meeting. our the will we have in also our Katie Anderson, For CFO new the few present executives event, a

Pizza to key event, from strategy. you, a been of finance level brings I be come interest she the profitability. background Kitchen, attending, growth strategic that love we our years us Guess and to CFO, California and strong and is from accommodate in share next invited and can the would joins and where haven't currently event, for will next you Katie we you priorities if hope will and so to hear five webcast in This can you. take to a have we our

will you think what will you hear. I like

As we worked to during Guess following articulated developing continue first I our business back and strategy, in we my March. principles our on with the operate key call model, long-term the

to of first capital principles those one The relates allocation.

you reducing we know, through made XX%. the As shareholders to decision capital dividend redeploy incremental to value while return by share our repurchases, and significant our

accelerated accretion The this $X.XX With for total repurchase forecasted is of share guidance. beginning million outstanding the we our we shares, of million. which third amounted at $XXX per representing a in quarter is the to the our of During shares at share over now year this, have repurchased XX% slightly completed program, expected and the year. XX.X included

we as million flows, cash continue transaction expect impact and cash next of to our dividend to million the this of generation Regarding reduction, a year. flow year of $XX approximately positive a result this $XX

$XX expect cash plan more not in a year, through coupled than in a last to working meaningful better we capital improvement this with addition, spend versus flow results, improved last generation In over management. free we million year, million $XXX CapEx and also year operating

with extending our we our from capital, suppliers of we to align our cycle, cash subject in which them the flows cash targeted should of have working management, the benefits payment to conversion the the next see inventory year. free apart terms on better And starting

to and operation strength review, partner of in to leveraging will expertise transition has that licensee local Korea of capital on this our our our of have part lines, as to the category. reduce core enable decided Underwear business the in South we the the This licensee us in capital investment a allocation Also, established business. while our focus

for Asia quarter executed expect this for it Our fourth reflects as we fourth guidance during to the the be transition quarter.

optimization. product principle on discussed have calls The distribution and relates second I to previous development

with stores We presentation and improved expanded and in all development denim good online, which our progress is product results. contributing made have of to both

both the in strengthened with we merchandising our Europe, and America efforts. design also North as with our We're have progress our and pleased refocused brand, teams Marciano

We also business. expect improvement and this profitability continuing sales in with

efforts the benefit next to continuing, segment Regarding the efforts us that specific year. each more of we these will products to are accessories, our fiscal men's results in expect customer develop are and and

As both and line in factory a that lines the and to as and model, product improved today. we assortments and opportunity is opportunity for America search for and more development single offer This starting the reduce the we have develop Europe continue big of consolidation. efficiencies instead regions, separate of savings serve outlet consistent device we brand a global will clear scale that identified yield our even an between significant costs. It two we both to are lines cost we leverage North both very have across to quality consistency leverage and

service can customers will our it become an if we that in of find be equip customers. teams Additionally, a products our also our to assortment support This of the they brand, choice store the largest cannot for and side, plan to representation to This so our e-commerce with our assortment their important our vision. biggest on initiative our omni-channel find is store. a broader offering

logistics strategies Day areas for a inventory to The our sourcing the we the main our to focused development, more IT, strategic functional real meeting. will will distribution, capabilities. product estate critical functional you past drive omni-channel key of I tell in part management, and The principal pursue vision have capabilities to are are and relates business alluded and These during and across plan, third opportunity what have global on that areas. our Investor about them we

fourth to past overall optimization. and our cost in have structure relates I The principle for the mentioned opportunities

optimize align with and and these, to to model we have store our Regarding process replenishment the scheduling traffic labor allocation better plans patterns. inventory refine

to and our and structure In simplifying cost opportunities processes. rationalization addition rent see this, of reduction by streamlining for we

principle in Centricity. fifth past is I Customer the have The mentioned

approach segmentation experience, next data develop model, goal marketing roadmap. to a during analysis more that's and our data Investor will and our significantly intense but Day customer You our improve is personalized customer strong our hear about capture, our week, strengthen

level that We this increased and opportunity big sales global rates. should a conversion better a here and in initiative result we believe productivity have at

platform on for this business North critical America sales of main in Europe. of implementation of will to enabler initiative, force growth. part both continue service experience This be the a our future our we improved As sales and driver our as a and plan work customer e-commerce to

performers model line our believe new result the capabilities best-in-class sales in to more industry. of are e-commerce that in with increased and continue should penetration that We in

attract due that to Guess I is so want expand globally the I the our continue significant future. company's our three level to brand, profiles: highly customers is engaging Cs, opportunity to believe differentiated and Millennials a and unique Heritage, continue to power at opportunity our attractive with very our strongly our and distinct say approach. to are deeper with brand closing, to to In These very primarily of and Generation due customers are to

not sales last operating company over large but model XX% profitability good representation potential, not in annually growing this XX% the and adjusted is grow our this projected profit profit least, two operating year. has our however, Last our a margin a of and is our guidance to years our for above business base; adjusted and despite

is margin leave more lot there it here our of is understanding control. more attack topics believe to these a a our plan opportunity depth you We will next with our to plan week, and operating it. in I opportunity the in event discuss clear expansion and hope and

leads years not to areas I in company in a your during with to with for during Sandeep future during call want nine his here very together to the responsibility, all also the Sandeep working earnings who his last the wish I I now us. we Sandeep. Sandeep, contributions the great will is last you want last I Guess. our to pass miss and It strong in his know very team want that all few thank a transition. months. call beat of been best has his to

ahead. Thank you please go and

Sandeep Reddy

Good Carlos; you, afternoon appreciated. Thank much everyone. that is

this conference Please non-GAAP GAAP-reconciliations descriptions reference or of comments our for adjusted earnings certain refer call such measures. or today's release to During measures.

XXth consecutive X% the dollars growth. I highlight Third-quarter prior that like revenues was versus up and in U.S. quarter constant year. of X% would currency revenue in million, our this $XXX were to

driven This IMUs. on quarter. higher in improvement Total points gross XX of top company gross basis-point to margin third by XX.X% in increased margins basis last a was XXX year's

sales at quarter versus $XX X% the profit with of basis percentage operating of a of driven primarily increase pressure better third and last than flat operating an as SG&A from operating profit Corporate the our last year. adjusted Adjusted XX points, by high-end guidance. finished by Investments. Adjusted margin was the for increased million, year Adjusted X.X%,

were shipments due on year basis The like benefited net to that out a points timing expense on year. I million in expense unrealized reported third to last operating non-operating on would to compared margin a a XX minimum shift quarter guidance as in that on negative losses re-evaluation point of exposures. net foreign unrealized non-operating included by the we of assets impact quarter gains This quarter. the the quarter, the this of currency non-operating basis $X.X second third in offset

was adjusted by diluted lower-than at repurchases. Also from the tax adjusted mix year, better finished was our earnings-per-share earnings Our rate $X.XX driven driven in adjusted third-quarter share per Adjusted operating by last of XX% $X.XX expected This last convert profit compared $X.XX. year accretion diluted XX% of included transaction and year's a down above adjusted share rate. and the EPS of earnings. tax $X.XX guidance the of high in to this statutory share primarily end per from

color finished sales more quarter some and below in expectations. down finishing and constant-currency. U.S. for in for were X% dollars dollars Retail Americas in the segment: including revenues the constant-currency, X% down in for our U.S. Comp quarter by X% e-commerce Now

Labor The breaking weekend. the quarter. on by negative consecutive comp IMUs. from comps by with driven deteriorated The in a partially the operating contracted margins the Retail trends contraction the impact margins driven E-commerce starting operating Day the quarter immaterial lower markdowns sales, deleverage of our as negative Americas points, had in was and quarter of expansion. for by for and basis XXX an margin traffic comps sequence offset quarter in AURs quarters better eight were

XX U.S. and grew in revenues strong a X% business. U.S. off-price our store were continuing wholesale, The operating constant quarter in and in margins currency, dollars X% expanded in by Americas specialty basis driven wholesale department to Americas and performance points. Moving the

improved grew revenue at including openings, by quarter comps Comps for wholesale the X% in U.S. store new comps. U.S. European comps the e-commerce driven points. of in the and for in the increase finished in comp last and in X% and were year constant for revenues XX% dollars by up positive quarter currency. dollars percentage European currency marked versus constant X% quarter consecutive currency by growth positive The and E-commerce XXth three the constant region.

the We the and strong. to very We business Our lower consecutive IMUs, in improved order XXXX contribute basis spring-summer basis expect to leverage by European region. during least recorded continues European of wholesale margin to in the logistics lower expansion European season the points the costs, growth also be due segment and XXX our for sixth higher XXX at closed quarter season book cost distribution points lower markdowns. margin year. retail now to Europe for double-digit

Moving to in in in XX% down down and currency. were Comps were U.S. dollars e-commerce X% dollars revenues U.S. XX% in down Asia, including down and constant-currency. X% third-quarter constant

E-commerce points. by decreased comps percentage two

segment traffic of was across significantly the in deteriorated Our major as performance the primarily below as trends weakness XXX during Asia margin the result China markets deleverage negative second in for basis contracted consistent was Korea, our all and to a in higher quarter, half into markdowns Asia; the region due Operating expectations expense of is that quarter. Japan. The our the comps. stores and the points

another the in quarter Moving in million, versus sheet. balance year. X% million, U.S. and X% constant last improvement. on Accounts currency. U.S. X% This was Inventories was and up receivable to in constant down X% sequential in were dollars down $XXX currency dollars $XXX of

it significantly end selling than inventory we outlet carrying inventory year the channels, stock this While as some inventory healthier retail we've this can liquidation year stores, of to position through a made using the last progress combination so our end of in as year. to own still dispose year, of well lot from excess continue expect of and on a we last are

paid EU year, earlier of first by cash Free negative nine capital. free the year $XX $XX working last Commission million $XX versus last negative months driven improved million $XXX our the for million, we flows million flow fine was by versus expenditures exclude capital $XX improvement million million of the lower improvement of in impact this cash year. year, of and If $XX the $XX an million

the shares during to of mentioned, were total ASR. September in us out the the quarter we of we year. this A quarter during the close delivered Carlos to million ASR first million entered into that As completed $XXX X.X

million were cost reminder, the As during Including against ASR year, the million of per a of this the share already shares $XXX $XX.XX. of first delivered additional of average $XXX repurchased X.X shares a price us million million this we total year. purchases resulting ASR, and to in an XX.X quarter a have at open-market

million. the compared last with last negative to quarter of cash was year. $XXX $XX Cash the $XXX the ended to cash at quarter of and compared less million equivalents year's $XXX debt million end We million

should fourth fiscal impairment supplemental attached full-year comp guidance of in by guidance, our that Moving assume asset earnings onto quarter sales any segment for the outlook and the the Also, a to point does I not release. is table total included and XXXX and company out our revenues charges. for for

we revenues be in fourth roughly fiscal the be for a point currency X.X% prevailing exchange will up For the quarter. consolidated quarter expect At the quarter to on rates, revenue we of X.X growth XXXX, estimate headwind to X.X% constant-currency. for percentage that

Our expense initiatives, up to from expected rate as year. last improvement due position our chain year. due compared to to cleaner be margin inventory and IMU as is is down expected SG&A supply slightly gross obsolescence up last to lower to be well The than to a slightly markdowns

including and repurchases. $X.XX share due accretion the to per an of per The earnings basis guidance the point is includes of earnings quarter range $X.XX the convert adjusted from share impact to $X.XX share planned currency. share impact with in unfavorable of a in planning XX% XX transaction between currency. operating a and per The for are share due the a margin We $X.XX per and headwind XX.X%

Our related debt of the of guidance fees $X.X transaction. convertible assumption interest amortization adjusted EPS of to cash includes and million an loan expense

Our XX%. rate to tax is for estimated be the quarter

expect estimate consolidated in currency prevailing to consolidated be X% for year At have year. X% We constant between revenues growth currency. the negative up and we the X.X% revenue for exchange rates, on a to impact

to year year, Europe in up distribution margins Americas Europe. to performance-based as expect both increase adjusted well is gross in as logistics and lower be full improved due in costs rate be for The to the an compensation. the and the up For expected we SG&A due to IMUs

is to XX%. be Our for adjusted year the estimated rate tax

We are point an negative a operating with and assumes and margin our that impact adjusted X.XX% planning roughly margin guidance operating XX at between rates. prevailing basis on X.X% will foreign remain currencies currency

is in per $X.XX and from Adjusted range share of $X.XX earnings the with planned currency. a $X.XX headwind

a the of low end. year our we the our to have so $X.XX raised guidance guidance $X.XX, As by for maintained prior reminder, the end and $X.XX high was

share the The includes transaction, last guidance high-end expense. estimated $X.X includes XX% to represents guidance and assumption accretion million adjusted cash of new year's $X.XX and convert a of increase repurchases our The in interest EPS. and due amortization over an of loan

million down year. expected long-term $XX in year infrastructure range $XX prior is million store CapEx is note the store remodels from in to technology $XXX that to million support this our growth. the for key Please from to openings, investments and support to

working year-to-date has $XX earlier the of in to Commission on was This improved inventory I lower addition million driven capital free As the management, million. capital in fine, by cash the flow excluding by last our $XX call, mentioned over and expenditures. impact EU improvements

$XX million cash with for which from continued improvement benefits to EU and free and million the $XXX the the see capital flow the management of in of capital in the due quarter cash impact working expect excluding in Commission fine to improvement free final year a to We expenditures. is lower finish year, further flow

In share per quarter, December directors board business improved shareholders record dividend payable a XXXX. the of has to quarterly XX, of the current the close of of $X.XXXX at on

over that past the like take to opportunity been would evolved prepared an them way a the and been close It to journey work of say I for the to remarks, it's I has finance years I'm for for Before they've thank at Guess personally incredible the proud nine me, team I privilege function. professionally. and so would my like their the the for both to years. support

continued the Finally, partnership I Maurice I’ve future. the associates success thank Paul would the and and like in their worked The Board all Marciano, and to for with Carlos, wish company

company's that, the open questions. the remarks for call will I conclude and up your With

Operator

[Operator Instructions] open. first Susan comes you. Our Thank FBR, from now B. your Riley Anderson question is from line

Susan Anderson

good Hi, little I quarter. the maybe I like would on job to a … get evening. guess Nice

Carlos Alberini

Hi Susan.

Susan Anderson

and fourth well A that bit color comp the of retail Hi, step seeing margin. as quarter a on back it the kind then more operating we're how going? taken as the is and little into Americas

and also thoughts, and now your are what store get positive? then think front, the deleverage Thanks. comp you operating can margin on know around slower given do You I the you guess the that base, the comp back

Carlos Alberini

Susan. first and primarily the traffic Thank able saw conversion is and know first in quarter; traffic was for Carlos, the second negative we offset saw to third quarter than the This you, part more was were and of we good what UPT quarter the however, year, AUR. – second afternoon. quarter improvements. just with Traffic declines the we been you has I and early driven during what by

our quarter, as in year third as it than be was compensate ago, and the to year UPT a better was traffic able and positive well. the declines during not to the So more than AUR conversion as earlier declines was the

prepared very and light the also depth. categories – like we're remarks, breadth we in We key where mentioned as specific we in

I certain indicated, think when extent as was even it it as conversion as strong a not has to that tailwind, might been. was have I impacted and conversion

making changes really are to we position our that to fast do when QX, We to this we can would expect those strengthen as into even what like. categories trend as continue inventory we were

quarter quarter against see going the to we comps were up in comps and in pressure even know healthy fourth the healthier the the from fourth last quarter, respect year. third up against forward, we we that while in With you comps are

that we into very New see the think time next be going going to impacting course, to adjust. with, we definitely inventory we have are go pressure Year that we year are we things of different position the be us, to able correcting that while and into So

coming I portfolio deleveraging. to also that Obviously, think what is have. and we always just and base that. try about the opportunity own. expiration, deal. look Every we we we the stores lease single was reasonable are exit we has don't many to the stores have with improve the a to its continue numbers cannot are take if the at we I on And to if to pleased that question that which structure, improve every do store we to on on as look compelling, cost we achieve the location your and opportunities have store we stand – occupancy done,

Sandeep Reddy

cadence pressure bit to think digits, is we the as low- actions to to asked year. going and said for single and into be about QX margins remediate into as down taking mentioned, so well. a digits operating think as Carlos of the mid-single as Susan, you going into that down of which on year lot QX, I into I the the a operating is actually there against comp we're go end a And quarter next a But fourth the of also QX margin obviously with deceleration guidance

we recovering think fully take to start expecting as those hold. I initiatives So, are

Carlos Alberini

global impacted shopping. and react tourist saw thing tourists are locations. underperforming non-tourist you is quarter locations more would by how a this we how just Obviously, One and I say the they the brand know are we during is,

weather products, quarter. it quarter Also ideal warmer. It in and a inside the cold too wasn't impacting not third because and for was key this also was weather conducive fourth classification is both

product We business and also be quarter weather level think, of obviously permanent that fourth move really the I terrific for have, to AUR. the and a major both weather the conducive could of cold in is assortment a factor

Susan Anderson

of of it. at a follow given are know on on marketing, all fit for you the And any seeing with the could It I you then of working and and add else there geography macro doing also. back tough a worse issues. up about bit stability Asia. could you talk kind you're people track? that's and the Got adjusting just to looks terms little product a some lot if been if initiatives a Are get on maybe that in what of try and I

Carlos Alberini

and definitely very know with for a Yes, a the thank know sudden you. been us Well, trends softness We at few change you saw year of in beginning Asia has New the about in and just quarters. trends we those as our it markets. I'm softness Japan, was the softer in you during Year, even experienced Korea, got Chinese QX as you China, after three and Greater talking major now the indicated.

know China-U.S. our control, quarter. accelerated. the like There war, happened these that why impacting trade also were the this that is region a if outside changes; is the weather. that you look happened and Japan situation, there know during a Korea lot happened, trade reason at the Kong we lead that completely lot is The softness you is of to is there and that things us are Hong don't what when those something playing know the how a that believe it changes out war; at and unusual macro level I

significant traffic the is many things But referred we that internally, challenging that do our retail not across see that what start we environment opportunities know those product but we on is you markets. There and can of that. improve is do and much to to that, with customer all is down and

China Korea specific. that for in and requirements the we the been developing are not are a In Japan, we and we very at the product region We that moment. have do do for specific product believe several but years,

terms in better the needs customer do opportunity fit. and address sizing, we So, have an to product of styling,

with in study especially believe And of that insufficient of are older current product by also, we that we product how very inventory, China. that into been we exits, as the and incorporate newness. know season future with, position, offering newness our work of you been careful through we the in the inventory all high we flow ensuring inventory we think impacted we have we and we Greater that composition impacted the and by has came inventory The buy do our as that we the level are

is think opportunity prices. We on also that an there

been think aggressive by and are points relevant sharp market, very analyzing products in also to our we brands to pricing, We so have have that have with fast development that brands that. price and been become some and we compared adjusting the these other

respect take product to as that then know specific some going think asked, And with the we you you time. is to

can purpose but to that and analyze specific, trying that's doing. we is a what think whether strategy, are need existing market product We that to are localized still really a Japan there serve and our for we very from great lines more Korea a degree,

building are the to do We able team that. be to

about the didn't partnerships know think local too. with music effective. proven with very now marketing we think an with there that here relevancy celebrities have We You but is is opportunity factor that and big groups to bands, and is that influencers high – we you enhance that we ask a have marketing, collaborate how working the

groups and the don't we as that Japan the of did example is great super Generations level we about that and success. We same was a used collaboration we go of relevant to big a when local in not markets, with this ago. see are successful, A year it

are we about that. that collaboration this Generations for excited QX reason coming So with Japan we're redoing and another in

great long-term here region, I potential this look that at the You convinced for Guess key very know we the I of what a represents thing when am in it’s is the call and risk. and end asymmetrical remains compelling potential very example Asia of the at the day,

compared the business to our What does small is It that mean? that means business. overall relatively

and and a the growth for relatively flexible clauses, Asian especially structure, have We when consumer. about brand. especially it think is you well-known; with that there short or know stores leases the rents kick-out incredible, and opportunity expense brand you with we resonates have the our is variable The

We we’ll it have done and I before it again. that do think

Greater you a world. the you about, the China. we're look that to of The know biggest through talking we're the about slowness, at it’s market So you when trillion somewhat the this class is disappointing when talking about That to middle-class the current $XX middle in in I size go have roughly huge. a obviously, is think know economy but

and we is the the size downside a we compared really can considering we times, the business that big lot company. total not a model protecting think that navigate the that have of to the especially So opportunity are through see business of that and we challenging

are one going the opportunity So that powerful when we we a you great about very, to this for remains and Guess. but on very talk think more Tuesday, I see

Susan Anderson

and Good very That's Sandeep, wish all luck the Great! best. holiday I you helpful. this

Sandeep Reddy

you Thank you, Susan. thank

Carlos Alberini

you. Thank

Operator

from Our next Janine Co. Jefferies question comes from & Stichter

open. Your line now is

Janine Stichter

to want and little I a afternoon. Europe. gears good about bit switch talk Hi,

and headwind how on transition? driving the of what's about you're saw last that looks bit costs your you DC from timeline that recapturing saw little a like there; of the nice It talk logistics the beating improvement margin some of you you on own there. your then that like going European, that to some do You what seems what side can the business. improve internal improvement ultimately year forecast some Can for

Carlos Alberini

you. Sure Janine, thank

the are in obviously excited we Europe. about know super, You super business

We strength so pleased. couldn't seen across the we be countries, board, across more across channels, have

about mentioned think I Sandeep too. When our strong know how think wholesale is you – business you

easy do and now know We very that's business; growth wholesale how have business good of you years in our improvement seen are, the our our there. the and to brand well perceived it is on speaks think relationships excited how strength the so product about several and not and I of significant

parts it the world to to major With starts other retail traffic. there what of in and are respect differences some business, see the we with

similar in traffic stores the positive type is also retail momentum online. a of see we Our and

momentum positive. very is the overall So

that just that wanted know us to enabled make. move inventory, changes quickly think really I we you through to also very the that

more we remember, been ability as our may – with in invest some good really ended also we outlet Europe newness navigated able already. to year inventory very which to position the off-price a in and also move as have know we and excess and really a contributed have you of last giving us using to quicker that channels channel inventory just parts, really like we and you had through both internal As plan stores to inventory those dispose

this operating doing margin. to obviously I growth respect Europe we for overall, is the it feel definitely continued but well. the and is lot still expecting of in we're a year, margin happening, that operating a and think that to expansion leaves something business operating side, that With is are major guiding very So we that of opportunity

the happening going logistics logistics that that to do on and continue we are businesses and look and big we the to to We're But week. there plan we distribution. to next know of as businesses for us do have other that kind mentioned opportunity You is distribution at talk about that similar a costs more and with that better consume. so. ours, to have what's plan do improve a We a those to

Sandeep Reddy

something I Janine. just to that And to add want

the margin recapture about, the think first for improvement months the that for over for I Europe. talked nine points margin already you in for XXX think we're I basis

year we see to very actually margins. to get that, because close in trend, operating and margins continuing expect we We to we if this last double-digit get were X.X%

powerful about I as extremely this thing terms model the in And total so is it's of think business company well. the

as the as strength Asia critical the the this that Carlos business European spoke offset in retail improvement to in that diversified able week basis-point to and business weakness Americas business, contributed New it, the next the the model we it’s is and XXX been actually operating And we in about really a for has go of because a that the in have saw lot year, talking there's but actually we're despite more can softness, year this talk we'll also efficiencies and current to more that much York. forward, about current

to with really able drive softness, expansion. margin see we've even think of this so So to I it's that much exciting been

Janine Stichter

And color. a helpful just Wholesale on one Americas then also had really That’s the quick business. I

growth You are seeing guiding nice partners? with fourth terms sell-throughs anything you're and seeing have wholesale your there the Is this a you to like with of been in saw it timing quarter. there in quarter, you nice changing or decline anything a growth and looks

Carlos Alberini

that number anything in this healthy the actually think the more still quarter it's is an timing mean know quarter and both about negative fourth we I very think fourth than and You business issues We we at – consider is have a I the second third on other better annualized obviously quarter some and to quarter. now a way issue. that to represent basis. timing shouldn't did impacted look

we We the what's are markets think very that our partners and considering we Obviously are – really unique well very out that have to there. is happening relationship. see strong very in a growth and continue we doing

about the So the and strength I the product. think of speaks brand it

Janine Stichter

Okay, you so much. thank

Carlos Alberini

you, Thank Janine.

Operator

from Our next question Kernan comes from & John Company. Cowen

Your is open. now line

John Kernan

Hey, good afternoon, questions. and my thanks for taking

Carlos Alberini

Hi Talk] John. [Cross

John Kernan

fair operating a Europe. Hey comps to America have just you wanted seems in guiding Sandeep, like North while outlook, on guidance. It last are fourth-quarter we grill of expansion the on in call a embedded in the little time you bit to on slower amount the and comps margin negative there's

I think up constant a currency. they guided low-singles are on

to SG&A trying areas. lot just So being quarter? EPS on dynamic implied expansion. about in Europe against seems to margin right the in talk balance that margin of guidance. the region assumption leverage and that down fourth the Can you a other strong between wanted drill there's very just be SG&A I’m a Obviously to the now, gross

Sandeep Reddy

John. Sure

fourth of three happened gross expansion we look was year having quarter. margins reserves margin the the markdowns reason into in well, take quarter of decline into first I and cadence gross last quarters in year terms think during fourth as and the inventory to we quarter because fourth the quarter we take fourth had inventory the had of an when to quarter, last end at had by is all the it during position, where only went declined quarter. margin you year the performance, last the in our in gross the what the And actually quarter fourth

guidance, quarter position to where a we saying the the flat so significantly you cleaner good with contrast relative very last embedded the that from the be margin were perspective are by year. gross and assumption year, a in at be and is if we we even to fourth year, better. the last This that's of end basically And is definitely year in are SG&A roughly expect look to entering we

talking are that company almost improvement nine and very the in So coming margin the it's of been the operating first the for all year. consistent gross about of of the from gross, is months the margin,

pretty IMU it's by And especially in that on been we talked a a lot fact have have the all about, the business. Europe that improvement, initiatives significant driven promotional the less

in we've talked a of because also business, size margin and some very Asia that's line. way material All in of are costs those and in European to and able the the about are things weakness Americas offset that of contributing the gross of the big logistics the

So, the margin really we you but provided, the put operating all it margin to guidance that pretty gross comfortable together, cadence. that's ties we're that why with back

John Kernan

just Got it, on that Europe. follow-up maybe Thanks. makes sense. then a And

us can at have talk obviously You lot together any into beyond backlog dynamic and too. we Thank as about you. the quarter channels year to tandem you but feel a have how this and – Investor year. worked head well in in both are going and can helpful update But into the this, about you think would you the wholesale on next retail, of on I'm on those you know the viewing just, Europe, on you detail between Day you whitespace the when - how fourth be

Carlos Alberini

retail is company to and John. very in obviously you regions. and I'm let have that me the platform but thank continue last those to we the I of Well feel know an continue sales have opportunity Europe think start to you opportunity about, base to I Many stores. and that Yes, in stores that few are productivity those same-store also in new feel now we a them build build and expand considerably invested talking business the during we But store that through years the great other here an growth. there to – right

different more doing been countries are doing with have business well have we extremely distribution that wholesale accounts, necessarily what A the done, is accounts, more think the in had with more expanding productivity looking great not do job with. different but by and accounts we done the we distribution of the to respect a country. business, lot though have I With that has at we company also

that I many expanding and years. have think kind so product categories we doing fueled different this the all growth really has And in experienced of

the think brand. think I and So I is for synergistic is the pretty balance significant that

piece even better at talk we very big week e-com growing sales significantly and that faster. has also additional as a with force and fast can that more equipped during we third been capabilities, and e-com, next do we we'll about believe the see and we business clip the And is

So, we that are initiative. very excited about

week. it approaching We will about are how share we next more

XX done that our But it about the nine, and north all and you when think presence limited I Europe southern see Europe. so When has much now has to in was in had really to put together limited we company whitespace you was very how some countries, ago, the here east the and it years you expand, it was and it successfully. done to and of the

the region. it think have we that very, to I speaks about to very more grow in strongly opportunities the continue

Sandeep Reddy

that mentioned wholesale the which seeing the that's business. worth backlog three-years’ double-digit of we asked in up we're ‘XX on the consecutive season about prepared you remarks, think the is backlog, John about is And Spring-Summer sixth I as and the the double-digits growth in

‘XX more a ‘XX update March this as the ships cadence, that the year quarter Fall/Winter first of that on next so we'll year. and at during product that of call typically just and And We're in coming we season have next which and collecting fourth for of on the in year, quarter reminder is Spring-Summer process the point. orders that

John Kernan

you. Excellent! Thank

week. Looking forward next to

Carlos Alberini

Thank you, then. see John. We'll

Operator

Dana Instructions] from [Operator comes Advisory question Group. Our next from Telsey Telsey

Your open. now line is

Dana Telsey

everyone. Hi afternoon Good Carlos!

Carlos Alberini

Dana? How Hi! are you

Dana Telsey

Hi! how are Good, you?

Carlos Alberini

Good.

Dana Telsey

working about you the are think and there what you and there seeing terms Thank both Europe, promotion terms the in wholesale are you you and in channel? of in patterns? of What are how you distribution As pricing business Excellent! with in order seeing America wholesale

Carlos Alberini

Well.

are we have that business a and represents have sorry. So know like to business as In is with That in have for definitely consumer different. us have the Pacific in a somewhat a distribution we at chains with very for wholesale and caters big, I’m and that accounts very Americas such within which concentrated Macy's few us, – on some other you our some represents Sunwear, is Americas deal big to product you retail and company partner Urban a Europe that we opportunity then younger. is a and that, business different significant

We the here. about Generation opportunity C have talked

are that I business, is just in. and located on you think just in they you have Europe a countries fragmented obviously region, is more there at and when we depending X,XXX businesses where accounts of I very, look Europe, these think excess of accounts participating what much are throughout base the diversified kind know of

in-line with what has flow seen order we been The have in very the past.

patterns and is that that the a a Sandeep – terms have different there and I think order about we the we – is are and that know have pretty those is of campaign to the flow, the the growth see six-month we into much the past that's exciting this and you talked And seasons in each been Europe consistent how times seen. that season extended is weeks relatively just what just see see with season takes. in what rigorous

been in And placed. been have the of the also terms has I in how orders the business traditional Americas think

very are We're opportunities that distribution pleased we very the with and pleased with partners to we model that see think I have. continue together. grow our to we

Dana Telsey

year? go different the And it'll be into we last environment how promotional as fourth you. quarter, the Thank you think do than

Carlos Alberini

say. to hard very it's know You

know what obviously. and is will You hear we we the inventory what see probably we about situation The that what know is only foremost. thing more

We We Thanksgiving, unusual even significantly a more just compressed, promotional but here in impacting that which past, considering saw sense. the of calendars makes more before activity is of in the change behaving. and kind big is level some how business obviously the is calendar is have that

down like we we think inventories we we will the in inventory and are So happy are a about year us. are end be significant in I with targeting which to position, for accomplishment of – double-digits, terms where we are said, with

Dana Telsey

a holiday! Have you. Thank great

Carlos Alberini

Holiday! Dana. Happy you, Thank

Operator

questions queue, this I over now for call Carlos at no like Presenters, the to in to show and further I would Instructions] turn [Operator time closing remarks.

Carlos Alberini

quarter to I and and fourth a today. strong for strong improvement. have a want well-positioned and all with participation had close quarter top-line year you In thank significant a profit growth We good are third to your closing, terrific we

We reporting Investor our on look week really forward at hope see to are we forward to event; you next to looking we and our progress Day that. certainly

to thanks Sandeep, you for future your good all you and luck again and have done.

Happy and with enjoy Thanksgiving family. you time Thank everyone your to your again.

Operator

This for Thank your ladies you today's gentlemen. call. you Thank and concludes conference participation.

disconnect. now may You

Guess' (GES) 26 Nov 192020 Q3 Earnings call transcript