GES - Earnings call transcript Q4 2021

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Operator

Good day, everyone and welcome to the Guess?, Fourth Quarter and Fiscal 2021 Earnings Conference Call and Five-Year Strategic Plan Update.

On the call are Carlos Alberini, Chief Executive Officer; Katie Anderson, Chief Financial Officer; Fabrice Benarouche, VP of Finance and Investor Relations.

During today's call, the company will be making forward-looking statements, including comments regarding future plans, strategic initiatives, capital allocation and short and long-term outlook, including with respect to the Company's fiscal 2025 strategic plan. 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. Comments will also reference certain non-GAAP or adjusted measures. of of and can earlier accompanying the Relations descriptions today's found today and Investor release earning presentation section reconciliations these be measures in on GAAP guess.com. materials posted

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

Carlos Alberini

you Good us. thank for joining Thank you, and all Operator. afternoon

Our agenda the after plan, regarding which will open general include for our fiscal your and strategic quarter today to results financial our will call questions. year and comments fourth an update we

posted to a the at the strategic We the our presentation press remarks. our addition encourage we view strategic have onto we In our prepared update five-year release, to discuss commentary, during when with plan Investor guess.com. plan materials section along you

significantly adjusted our we ahead the period, We last per to earnings In of quarter very are with was our expectations. delivered pleased of year. fourth $X.XX $X.XX share compared which earnings performance,

close but year the last With which XXX company. points delivered versus increased were revenues a America the challenging digital in our anticipated line basis our QX. year. and Europe in into XX operating also Europe adjusted year outperformance these an margin expectations, and margin, and we While last anticipated, managed rewarding retail for lower we and our In performance, what were mostly period, accelerated below of main with in North XX% than additional outperformed. well revenue and basis and only due driver increase Europe spite had business in business has was in of to quarter businesses our Canada we the year. last decline, our more XX.X% an and improvements XX% revenues gross our store of shipments the in for this The Offsetting wholesale closures our posting points a revenue licensing below restrictions, shift

led quarter the close proactive an loss We first we of we revenue inventory our the reverse were in to $XX adjusted year experienced to to in year $XXX and contraction with able expenses year the million the good managing tightly. and of operating inventories a ended significant were XX% position. well business considered, due pandemic, adjusted operating million. controlling While we profit a the carefully very of All

have in ownership appropriate product right We the is year. service and to business new our our fiscal the well

caused our with industry, disruption we deliveries experienced sourcing our the in globally. product to in both of has rest supply some have As and transportation, chain delays which

were the operating supply, These the the resulted given across we we product fact appropriately which we to in activity regions, are service that benefiting. However, our to allocate promotional to some less in able were from demand. contributing with limited restrictions industry have conditions

this time, transportation delays an costs. caused to addition increase In in

minimize that possible options and Suez will have Of receipt to course, shipments transportation further the alternative recent provisions been be we delays cost. the congestion of choosing to by We believe anticipate the made and in to we including the Canal summer mitigate have normalized the goods port wherever delays. prioritizing this event

digital our and initiatives structure. global footprint expense year, store omni-channel and prioritized in we rationalized the investments and During our our

million We our they the balance is We entering New well shares. trends also shareholders by via solid returned value digital are are dividends our channels the customer year assortments, It we and accelerating, purchased with with and a to are responding to performing open, our and share well $XX wholesale gaining our million closed sheet we our our is clear business with when our stores $XXX are Year. sell-throughs. that product encouraged products shows of cash. the strong I'm in market

considerable the below our while same meaningfully our experiencing since pre-COVID time, the conversion improvement, sequential acceleration levels. pre-COVID showing In a is traffic continues exceed announced. levels. direct-to-consumer to stimulus were we checks the customer still Our in businesses significantly At are U.S.,

confident business pandemic. we our We from in this emerge as are

in across the as out levels clothes. be different have and we increase will vaccination to upcoming buy As U.S., seen months new inspired venture countries the in consumer the

lifestyle. assortment I been believe industry. line for is am begin ideal again. multiple casualization to lifestyles to include and have essentials locations accessories by as expanded for apparel which categories business post-pandemic we rich in customers pandemic here assortments altered product also athleisure to forever is will Our like and to this that support socialize our But have pleased dressier stay. of the resonate I and we that our our

performance more present opportunity to for to a in say times this. of our a Guess? that just Katie At of courage all that me the we let year of believe Before character review I of other strongly was us. test in of in like flourish is character, I call Guess? detail, and is strength There the DNA. proof financial turn this

for Our and team our we team vision running company, the in his demonstrates build company to the something business a view, with and same our the with strength next single generation, commitment courage founders not today, day decision just the next brand quarter. brand long-term Guess? make, the and of The had every day clear every that with with this evident for value is a always since leading our our Guess? our work. and he of Paul one proof has

mortar Katie? plan. our to will domestic change to call that from believe and to licensed I the every endured to I one, XX has return businesses last year company's business adapt now review to to ability a a brand the the over of five successfully a lifestyle I and to value in retail, model the adapt success will a an update to to strongly assortment offering our retail Katie each the pass from denim bricks omni-channel is foundation our global and and from business change business creation. and model. to business our from strategic multiple capacity company years from ones, industry wholesale own validated the Our to and been changes category has and image, by

Katie Anderson

Good our we COVID quarter margin We exceeding operating except increases which Europe, expected, globe. significantly expectations, closures you, a this government saw operating that with in line happy across able adjusted in in afternoon, million higher for the I'm Thank segments to shift Carlos. to profit. significantly significantly prior strong higher than our profit by but of impacted were our shipments. and finished business With with outlook, earnings despite in year we everyone. deliver report fiscal year revenue fourth to mandated store $XX all our wholesale resurgences was

XX% Europe North to U.S. momentum the European the X% during and revenue which resurgences. We an were also the increase of about X% by XX% business, impact continued in offset $XXX in shift quarter the sales prior XX% e-commerce sales XX%, digital impact quarter closures also up in shipments European prior the America Stronger of XX% QX store and year in anticipated mostly QX versus expected The our me in take Fourth constant details. total was total nice in of and for temporary company which had Canada. business about in wholesale We licensing and in our but you worth and was million was momentum some company than COVID versus on for year. Europe, let in our were dollars currency. quarter saw in in revenues down through

XX% decline been about the sales Excluding these have X. of QX factors, decline a two would

and down due offset let performance store constant as constant were currency, pandemic. result showed revenues to the In slightly growth sales Now were traffic and segment. declines were softening comps into XX% U.S. a underlying in comps by Americas XX%, in of was in down sequential by the Canada detail better closures in than me negative where down continued e-commerce QX get permanent Store even on store improvement sales partially by greater Canada XX% The business. U.S. trend in our Retail, the as temporary recovery. currency, in the offset was U.S. in which and

avoiding However, by busiest capacity of the consumers are the on year. on typically hurt what days shopping was the crowds business and restrictions

QX better In the revenues sales down sales U.S. in calculation, what currency. five would our about reported. in In XX% if than super days high-volume Europe, we and remove comp were QX been fact constant the store in X% have we from Canada the

As place COVID significantly today. in and which at the restrictions operating end for through of are and the that comps quarter impacted regions the in continued QX, region. were lockdowns remain know, constant fourth Store the experiencing down currency, increased levels in increase end you in Europe of the XX% by

to in nicely fourth the helped and headwinds. some quarter Our of however these mitigate e-commerce accelerated sales

in constant those Europe year. the spring-summer store to was Korea. mentioned, QX driven of as virus resurgence collection shift Asia, by in wholesale year in like some Carlos next planned As of down a business prior markets were comps XX% the in In result shipments for the in the into of currency down

QX, to quarter but timing year. strong basis sales. vast currency in Wholesale the Our also business in Americas continuing compared from QX, improvement but in than XXX down by higher demand, constant prior in points in was was the XX% year XX% for driven recovery to down up Licensing prior and deceleration quarter-to-quarter. last under were margin XX% showing the some still pressure business revenues XX% Gross in quarter XX.X%,

business basis a of XXX rate primarily of this result promotions. as sales. mix, offset partially as Occupancy and well rent margin result product as quarter increased IMU, higher Our by a as basis in deleverage XXX relief lower points decreased points

or of second landlords $XXX a This the deals are our Asia. with the we quarter expectations. with still our SG&A North closures. and $XXX rent booked quarter to we negotiated for million conversations million XX% are some decrease the better America rent expanding million fully Adjusted landlords year, roughly was across relief There are $XX prior in address in Europe, our million outstanding to credits of and for than negotiations also round and $XX that compared

last decrease our benefit lower advertising store from and versus year. in permanent related We to expenses continue to spend closures changes a expense to structure,

by In addition, versus our one-time fourth expenses quarter partially profit subsidies the the to in Adjusted $XXX last there variable of mainly were were which growth from of $XX offset million year. higher million business. for operating in related some government was Europe, QX e-commerce benefits

X% year. quarter adjusted million $XXX tax of fourth earnings. X% last from U.S. down constant Our the down and dollars currency driven mix X% versus were by XX% statutory Inventories last down rate in in was year,

This the with in high to Carlos due we inventory in down transit the year year $XXX the for we $XX capacity. cash flow payment lower Europe vendors year due million, Free that and had to receipts year. million with in-transit were the in extended in expenditures increase Our rent. the were $XXX in and $XXX cash year prior ended earlier. of from inventory terms million and borrowing from was million $XX mentioned million increase year Capital We $XX expenditures, of incremental the benefited delays million for million prior $XXX levels our an capital year. $XXX inventory versus million the timing artificially last an versus unpaid

In tough year. fine. a addition, a the included of $XX last outflow non-recurring the payment strong This million was European to Commission finish year's

lost For the of as fiscal a prior of year, versus sales our million pandemic. year we or almost $XXX the XX% result

a maintain still relief, we over as than and to brand, adjusted profit the that super shareholders line. million, the our to pandemic. of of returned executed emerge this our value allowing reinstating environment. bottom capital we and we is in of there lower our on our very near-term We $XXX company hopeful million have year, completing while able positioning All control tightly. a from our over of year a to rollout. through prior we This a the However, our we and over XX% share had operating $XX eye to COVID demonstrate we revenues to control margins, win rent future managed to And at dividend average will an be by in reason positive $XX the repurchases This as only can cut $XX. vaccines price remain million XX% QX headwind, what those while lost flow million product global were abatement in of for expanded SG&A dynamic tremendous $XX

Now let's near-term talk about our future.

in are continued to we the environment, the guidance. formal uncertainty going current provide of level Given not

anchor this walk However, fiscal through is ended year's our comparison. the May to going QX pre-COVID I Xth quarter how of clearly XXXX, the about you XXXX, normalized are comparisons as we which thinking first past fiscal a year to will first not quarter. I'm

locations of to momentum have XX% we in down of digits We XX% as expect comps in at down e-commerce our to traffic fiscal the and Quarter-to-date, X% are in single Europe. our down quarter Europe revenues shipments U.S. first down global high Asia. in favorable Canada, seen be business pandemic declines shutdowns timing wholesale retail and sales and XXXX, in in offset our year the the and by partially related continued

to stores Our continues year closures. and Currently, accelerate reduced stores and business additional by in closed operating North up to quarter-to-date have store with impacted is prior growth approximately Europe e-commerce with government hours. we mandated Europe. be the XXX have in for over XXX America XX% to continued

from the of summer will store the this in of the timing spring the the We wholesale impact offset as negative shift that the the from wholesale Europe Lastly, of QX shipments QX for benefit positive past discussed roughly quarter. temporary collection year. estimate impact closures will of for

an We as business in XXX that better adjusted the be basis gross fiscal as margin from rolled anticipate will XXXX, SG&A points improved lost primarily offset profit, by expansion mix, IMUs. by quarter by of in sales, quarter savings offset around a terms expenses year. as margin be be than deleverage last In to revenue the first the as initiatives expected well out adjusted of over increase will this cost partially is driven percent

fiscal high digit European the year in wholesale. single for cadence of full year includes This shutdowns and the revenues development shipments XXXX, normal past QX. resumption we fiscal COVID the barring a product down for For expect XXXX, to

that, to and hand fiscal season decision five-year pre-spring-summer not talk last strategic year, shipping the made it development the business With I'll in As response the to XXXX. we the the of and back fall-winter you cancel recall, Carlos strategic line, pandemic this the to plan. window to planning may are repeating about in we elongate

Carlos Alberini

truly crisis, the to share but year our I'm said, let Thank to excited go Winston was you, a we view future. crisis very like my today Katie. with you didn't past of Churchill of This waste. year

progress and our by implementation value increase Today, great and year, we and operating more share an our strategic the that able XXXX XX% $X made delivering that opportunities by revenues to for billion to I have are of to we we're belief key than confident XXXX. fiscal intact by remain fiscal our margin Furthermore, several am the opportunity for us. our confirming strong During plan earnings of an flow accelerate initiatives. we free executing year respect per to of $X.X to XXXX. our XX% committed fiscal we double remain creation net cash

than double return fiscal result, a capital XXXX XXXX. XX% As on by we from plan invested to fiscal more in our XX% to

the results fully Canada Let us very accelerate the availability are of control, dividend of key the liquidity. now managed platform on We our of return reinstatement initial me begin is effectively able value the implementation is sales complete. beginning with This new our the a the focused when milestone and visibility capital to quick the our including force in through U.S., repurchases our review our for improved. able and major Europe, were and a capital of which and We we our strong. to to share we could accomplishments last shareholders areas our year. From pandemic, we're and

have rate with the For XX% lower Europe, a we from previous and conversion in mobile platform XX% example over homepage increase a download X.X times in rate an faster our faster, site. bounce

also assortment North We America expanded Europe our in and out to rolled addition product globally. omni-channel online capabilities we in

underperforming XXX XXX stores to at the closing terms. rationalize leases favorable portfolio and During store able over we were our year, renegotiating

local which by in our were product line Last we XX our and Guess? team and introduction rationalization, focus ways and transform capital almost GUESS China, least, of market integrated of have the essentials. athleisure the our our business GUESS store part very consumer for our we represent of This not to U.S., shown factory in results. with like four model. the global expansion. As includes country new business encouraging stores identified new global product our And but already converting and first of our development repositioning to direct for partnering of to also of G our business, our categories into in business brand omni-channel reorganization the expertise regions we separate the successful franchisees in with

We also year we Day, operations. and dare about eliminate dream. style their to at organization worked inspire our Investor and and same shared foundation for for across our future we our purpose streamline to passionate timeless processes vision their these hard company. our Guess? commitment, during to our and That we Last to day, team our and constitute our a feel customers redundancies our our confident shared

price As extraordinary over I all and operate. I believe an Furthermore, concentrate market our four a businesses Capacity create in to is gain quality, styling wholesale we substantial of the in the said result our offering are and been years has eliminated fewer beyond. many we This by certainly for our marketplace. opportunity with to in the customers today's our our thereby of one them. see share that and significant space, with to we stronger our primarily starts opportunity of products as brands chosen represented the have next unmatched of value and closures. markets store value of stakeholders

to this an outerwear our that and in give related have new marketplace in and for handbags as opportunity our the product for us growth. and believe essentials category amazing Somewhat to we is I opportunity like Denim, presence product our category expand lines assortment key such product additional athleisure growth.

have in good and are Russia, currently countries, markets wide XXX in this. Germany of space China, examples we where are under-developed While Poland just we multiple approximately we are

invested future of capital the documented environment over creating model ability the This operating that plan constitutes return are still the in double we more will in last our the the also to for margin opportunity Our changes contribute six we right expansion in years. to well been our the next strategic at asset-light our Guess? Last has plan. our and year. objectives roadmap for the shared despite few five-year year than

culture. Our six organization pillars and are one,

We works place best-in-class we Generation we we at make functional develop distribute of And together. product effectively and have our be capabilities, and lifestyles. is efficiently Z for relevant we product the ecosystem. always with to will always Millennials infrastructure strive Five we'll long-term. Four, Heritage, team that three support global relevancy, consumer we'll amazing our invest and footprint, distribution do. brand customers. a and key groups centricity, target strive excellence, our design, the brands support an to to effective Two, to well global always customers business will everything center profitable will customer our six customer in Three,

organization and are culture our capitalizing and our functional For market organizing accountability. emphasizing we on responsibilities expertise objective, teams local and global

We strive develop with conscious a our consider approach in each of all driving priorities unit. Guess? approach to market business to also we'll an the is force plan the one using by to we traditional At on accountability be and ESG change. separate omnichannel instead and with team develop market placed where for channels capitalist organization channel a accountability a

goals deliver know XXXX. are business strong by brand and in of recycled equal not. we our synthetic environmental and The and know Guess? always big are been point with XXX% consistent we packaging have to a we materials to a Today agenda We and who Denim improve view. be we XXX% and who has at We are XX%.

in over reduce must key including least, key elevate We stores, not focus across selling, last brand, the and are are consistency well is our this Quality item the value we experience wholesale the Guess? increased to to partners product a but and categories. in have in our on brand brand for to use starts lifetime world. environment. is win for we focus with our protected perceived area. And reason to new brand we customer each the customer certain elevate price quality and a of to key elevate this order full all sustainability Our plan promotional plan licensees and and that relevancy activity websites, our materials quality product, are increase ecosystem asset it strengthening the

especially collaborations, addition, fuel new the unique drive younger are consumers. and for In and key to customer strategies partnerships acquisition, awareness go-to-market brand

In strategic pillar our product next business, Our excellence. is everything. about is product

four four to in initiatives this We fulfill next key the have objective years.

quality, product is First and styling assortment.

including our on women's and and products, athleisure focus essential men's and kids. categories. is Second consist key handbags, of apparel denim, product footwear They

is initiative product third line. our global one Our

in in markets, all quality our the initiative As chain. efficiencies we will in of consistency past, throughout result the to products our said have enables this drives us significant supply and elevate

pillar fourth initiative centricity. product of the omnichannel regarding customer Our our to support assortment our is is next expansion about The business.

We and creation our our to and of have and preferences, of four a optimize big journeys optimization brand their segments, tools analysis, experience strategy, data their and using seamless programs. customer customer customer collection of customer loyalty the understanding goals engagement world-class the

fully suite our enable implementing the sales heels activity rollout, engagement. marketing dissect engagement, integrated optimize results point will capability by contact customer to the and This capture, solution personalized sales of of omnichannel XXX, are of us On every force force. data and and the developed we Customer a journey's analyze

in and almost and have opportunities rich work million XXX CRM base Customer to in put three the big few next we and to on years. the X all loyalty Regarding our program this customers global program, grow we see a this regions with

global customer and a acquisition our vehicle. to our network, our brand footprint, lifestyle number our are in component key represent great one stores a I environment Regarding believe omnichannel

years. where we and XXXX have later I opportunistic fiscal fiscal XXXX. made in few of points some We more operating leases significant have the flexibility as flagship our rationalizing by We of been contribute closed XX have will fleet And margin in to XXX estimate this those our we to underrepresented. exit over year to close portfolio, store been decision planned XX% while are Altogether, very basis which the mentioned, plan the global year. years next store to versus as continue improvement others our successful we our unprofitable that are three in year will openings new markets already pursue of to last optimize expiring still than worldwide locations, are

touch our functional capabilities. on will Next I

our This leveraging and to focus technology There we development, end business data few few management, driven to Over to end. distributional our means think across optimizing product optimization global the become product management to true components years, a creating efficiencies a about We and key on are management. sourcing production this organization. inventory next to logistics product meaningful from will plan.

places to to consolidating operational our achieve and are vendors We most both the cost efficient suppliers and efficiencies. migrating

In two are we over fact, number over than the important last years, our by Faster XX%. times suppliers market of ever. have lead to more reduced now

processes, distribution times and We efficient which sales are react demand. planning quickly both to are well capitalizes product up to in digitalizing to Inventory our automation. by could reduce key is regions development conducting on lever global as we low an lead vendors In developing maximizing key our and to management logistics, network two that months, margin. and capacity as changes with cost

We must us. allocation, is evolution are I This compete data-driven the enabler to organization planning, focusing a that and to optimization. process becoming assortment future. for on is an in markdown a focus and believe fulfillment remain effectively us allowing key constant a

supports plan data and Our our analysis. innovation and technology is plan strategic anchored in

Some initiatives and the work cloud. centricity migration addition to and the a integrated enhancing in include to ensure our customer and reliable, on global that infrastructure modernizing doing we're technology to a secure systems

process eliminating Lastly, global practices a have infrastructure. are as simplifying across we globe. In and focused redundancies a we organization, a global business true place. the system and means multi-channel, Europe, multi-country infrastructure on our in This

streamline This to organization a us. and model this for is opportunity drive the savings. big will cost We leverage

want and to in mean brand I and great This great giving express how have chapter it incredible I dynamic much me and last to plan our have a this the am I my and extraordinary. Katie I over Before is in make everything excited to how future. Paul, an a Fabrice, am partner journey about it company professional to a and I team, business. turn I

the staying great this business meaningfully in and plan position team's pass it I am our and this market is allow profitably. execute ability of on confident grow very company. to the will very me With to grow Katie. our that, Our in roadmap us focused to value strong let our

Katie Anderson

Thanks, Carlos.

that color on fall give me Let some plan. you the of strategic financials more the out

are XX% our that over sales mentioned, double the growth particularly control. get December fiscal in year XXXX mean the we while of excited And execute few operating EPS deliver margins that control. to we the P&L we of brand to Carlos in As we presented fiscal our in still have from by the XXXX next And the lies commitment to where most confirming middle for can that year's we year what past year of XXXX years, believe I this we fiscal in the path can $X proof XXXX.

QX, more comparison. As to February conversation we ended we going fiscal which did comparisons with are our XXXX, anchor Xst, year for the in pre-COVID this to XXXX normalized

business, growth with offset in retail. decline will versus revenue, fueled our reach is In terms growth by billion fiscal this of that in we wholesale being in in e-commerce anticipate $X.X we of XXXX by $X.X billion fiscal a being Most XXXX.

we XX% was a that in of pandemic XXXX store this that year, inflated our bit fiscal As penetration year to but past a direct sales induced penetration mention was e-commerce growing XX% the see XX% in fiscal from result, with year I'll closures. consumer to XXXX. e-com

Store adjusted the margin, modeled portion next margin had the than over XX a points. points years. we of see is from few In sales. majority basis leverage expansion coming from we portfolio of the efficiencies This XXX higher pre-pandemic. terms basis growth operating XXX of with represents The remaining on operational optimization XXX higher about is coming basis vast points large

XXXX as IMUs. of from expansion streamlining anticipate primarily longer-term in points very efficiencies fiscal XX expense successful on and better working margin We XX well. been basis chain basis this from expect We points supply are We've opportunities year this of area. and

to growth. is e-commerce which the will logistics, offset margin equally of margin sales of contribute will efficiencies it the expected see some flowing initiatives years rest that the that at with With operational will by cost points the though impact say basis points operating operating the in variable improvement. I financials. associated XXXX, on be Carlos to The Fabrice roughly lead walk present some We I'll five-year savings. Lastly operational leverage underlying through to of require will from these while the be year XXX that partially fiscal pass efficiency XX expansion slightly offset the of basis mentioned four as savings to you over time. fiscal next

Fabrice Benarouche

Thank same strong as for can everyone. and At operating We over This of remain should shareholders XX%. free fiscal free next cash support and balance annual $XX Protecting the a we believe was above our we XXXX. you, afternoon cash returning to XXXX, to we years working levels $XXX flows higher million. and remains capital good margin strategic the driving by our XXXX continue our believe to X.X that priority can four Katie generate in capital managing key sheet disciplined us. result times investment flat plan time, of the flow to million with and we fiscal on

order allocation, forward picking remain consistent. Turning capital our will going to

is of first Our execution our priority strategic that make the investments will enable to the plan.

is priority dividend second Our share through to to repurchases. return and capital shareholders

stores markets. support across technology remodeling infrastructure that driven some would capital into our continue our We company. truly opening a globe of will will allocations penetrated key the the store to customer transformation locations We data and new throughout in and under centric in prioritize invest

our is our return to invested capital. of key One objective in improve

increase of to portfolio a plan smaller, efficient but provides path Our the from profitability more assets.

model our where we underperforming As to working capital stores, optimize appropriate. a migrate and exit capital-light

XXXX to is that by more invested XX% in to fiscal on XXXX. fiscal return XX% is goal than double Our capital

we is in QX. payment second which a resumed Our priority dividend

past. significant able Finally, have value repurchases, in deliver the been we shareholder to share here

$XX.XX. an As over the believe five-year roadmap a repurchased we shares that value With average value. stock our of We intrinsic creation and our company's of opportunistically when to to trading solid we provides plan reminder, share our for I over years that is call questions. strategic a will last XX% at let's conclude remarks its approach two slightly below the we and up repurchases continue believe your that the will open price

Operator

Securities. Our Susan Instructions] comes first question B. Anderson [Operator from from Riley

now is Your open. line

Alec Legg

Hi, Legg it's Alec on Susan. for

quarter job congratulations momentum But question. nice up. reopening the on keep the first First and off, continues and economies the hopefully

Carlos Alberini

Thank afternoon. you, good

Alec Legg

Carlos. Thank you. Thanks,

year, pandemic that aren't the you're but to set you of in can it How this break gross the leverage unfortunately know a high down direction So back and margins, SG&A but I much margin for year get pre-COVID kind you for if level giving at you guidance in think you and already to? this right were able was to operating headed the back. due do

Carlos Alberini

at put you business to year. past operating model. how the more those to Yes, you you kick transform operating pieces off just how then to had just the know and after probably pieces excited year plan. as and somewhat Investor margin to significant includes this talk at the are shared let back this now. we the XX% But remember very than know really were differently when numbers When back then in were think Day Katie a the different. We that able plan will we we really and several looking a me had about the that we you were more are opportunities plan and try and will the Katie of at explain affect are reach configured we very I thing that same what looking ago way that altogether, found plan XX% set the change we of talk and confidence effective about back. margin operating time last this expansion and But obviously that we we with crisis it us lot to a that bit margin accelerate great the able we in year a the had you we we little use is is

Katie Anderson

Yes, hi.

we're said, still fiscal XX% committed in the Carlos as XXXX. So, to

margin So them efficiencies. XXX the points coming of from operational XXX are expansion, basis of

that optimization. store is portfolio half about So

us rent. higher than stores lot modeled and of close and underperforming pandemic to is course had opportunity this gave renegotiate we the a pre-pandemic of So

we of is chain, e-com. optimizing know past network, we post still shift and is expense points, more went had in basis you pandemic line points. at point. modeled have we're have second streamlining, zero our piece business we than some logistics This And into a but underlying to what which know basis last this is efficiencies we The you because model know XX year, savings the more to you supply good we able we through budgeting basis identified were base logistics We a we're cetera And then then pre-pandemic. pretty and more had as that XX modeled we as pre-pandemic. going the have process again find et before found during is had have piece much with we XX this leaning

So savings variable we see offset more bit. originally that cost penetration the e-com XX the our now to of we comes to and with going a had logistics and direct-to-consumer business going it that XX

the - leverage then So revenues. efficiencies. And that's points see basis those of from XX higher coming obviously we are operational

it bit in points geography of costs talk than the So business SG&A. growth SG&A of SG&A, - now our come I P&L, comes basis about that XX in a And well, in is with and gross those why is come the the the e-commerce expansion is more XXX the on going and costs margin so sales. gross reasons higher the weighted the margin to about XXX of of and I'll variable as in in is to margin percent going one talked a of live

the what coming achieve four by flow that and 'XX, see the to evenly basis going 'XX in over going back 'XX. So to are to we're we includes years operating next of points think fiscal that fiscal efficiency fiscal we XXX

So 'XX. the will be savings underlying fiscal present expense

will of to revenue going the that levels going saw we're of some sale. offset because deleverage by However, up some to to take we get to is the time get that back pre-pandemic, be

Carlos Alberini

we or we there line to our about will period. plan, is just And at thing don't that very this gain line but if that cost opportunity very And depending doesn't four-year growth is of top on excited opportunities little exciting see that efficiencies we most top share that mean the the is big value is the over growth, that about that for achieve created are look here. reductions you depending here on market

the We incredible. product have a brand, great is

been marketplace that online as we seeing response when And is they top value are our us to assortment grow. in making we just unmatched. the when wholesale whether have we we even meaningful line. a that open, in it's business, have customers see pretty shop a the new to the of we opportunity have tremendous will stores customers as an our with on are seeing that ultimate But and or retail an are to that represent we brand believe our today think that a significant I we with the investments that the customers in only that opportunity not wholesale us give

stores leases. streamline a have in even of we we are the we more flexibility some and frankly further portfolio, lot portfolio of also on to because opportunities the course, capacity of we happy the Now of that have terms terms but our very closed where we reduced with are of in have we

Alec Legg

That's follow-up, it's impacted this extremely or just in-transit the possession helpful a I down at just and Canal year. right you inventory Are of inventory? then on port, Katie. X% Carlos hopefully hopefully And stuck that still then guess and in quick is considered inventory, now just that Suez not the

Carlos Alberini

Yes, it's question. a great

of we composition that's wanted those do the have where is inventory accounting, know inventory true ownership inventory feel in that but we we that You in-transit the have numbers some be. you right to and it's ownership we yes, that know, that an

obviously know we traditionally driver clear about the shipments quarter weeks. obviously this experience would We a but wholesale when in X% And the you relative the you some the in we we these lower inventory to in have know year. significant of quarter that that to by did ship think occurred talking in to of the last numbers, receipts, minus the significantly the closed move down expecting talked that all the - that I two we quarter, Europe. inventory, versus we shipments the impacting are, we three for is the we're inventory for order have we reported. in lot fourth know going made that some and that of had related way did we're time into the were first And to is shift this and delays we And you we had that is historically is in which to between before the X% big we third year the when

that of So and and brings thing materialized. year we had here identical ship with those we already great it's the is that already almost are to sitting this just shipments number that everything the XX%

during the have the running pieces composition was look going continue be of has accumulating we really pandemic to that as you inventory have year's of days. to those been we margins. expectation, the so with allowed of that. significantly the been ahead And the us at great just about are also in leaner well. happy America, inventories rest to out So and very that of trying two good have anticipate And pretty very numbers because look on lean our the with down is been the to timing we of course, you the we and last North good happy we like know because run what inventories, experience inventory, Asia exceeding just now getting in demand is that When thing with are based of significantly And shift is the shipment. Europe, XX% our of down are

we and sell-throughs our full inventory we up now well. as position a applies remember may up seeing with a running to really. China you clean and gross across significant that much Asia are improvements a again took the position nicely by last in more We are charge this margins seeing also we to this just the there margin seeing China year time where are are and And lot leaner are in price board first within very we quarter

very So the position. happy I'm with inventory

Operator

from Stichter question Our Jefferies. Janine next comes from

now open. is line Your

Janine Stichter

ask the all I thanks more everyone little Hi, for and about… wanted to detail.

Carlos Alberini

you, Thank you. Janine? How are

Janine Stichter

Good, how are you? good

Carlos Alberini

Good.

Janine Stichter

to want the about I more XX% margin target. about ask

easiest market from you bit rational. given the for just assume basis and position being some helpful. points of years. margin promotional environment the assumption, you lower what the I there I XXX wins a talk there or think can now, It of assumption anything in Maybe the gross the where from and color will you you expansion, about mentioned that you outlook Do fairly do a don't give lot next evenly about X take the kind of on over of you the are then you. any flowing kind just and longer? benefited so the the assume be benefits is then there you markdowns seems in industry that you like roughly back that see markdowns? is And of some Thank build inventory see where where would

Carlos Alberini

thank Janine, Yes, great you, questions.

year reorganization we not of kind this in think start, this was everything a we the whole closed But our that with And weren't much to past not like are I for the we where meaning me have we portfolio, pleased we had we to that. and planned right original did. heavy are profitable really I after that have go were work a I planning what is XXX a bate, locations And renegotiated of it not pretty the with or very, we very quick plan. and are XXX as many - we lot opportunities the very stores leases, lot brand. think store the did more just well, saw happen going of we frankly. So, wins that let did mean than

obligations about that very because a Polish think a So, and able or like did this where to on going are people we the logistics masked us kind lot have our they major very we tenant are do we case is to now, through are quicker. be impact year Europe provider we And we especially to that, another more the our to did Netherlands. that And network rates with distribution reorganize leverage. in we to year for attractive one is We with in partners in no and a our profitability were we good Venlo big now had pandemic, win now when helped ago logistics. rid Then We a a our want like it's a and and and somewhat last we it it we think of had and labor much new passed and very the facilities was at a because it's we talked appealing. occupancy place were cost. did deal this - onto to in I cut then work big opportunity looking and very, of I probably a just really did entire big which get plan at of facility it

and the So we we faster that savings somewhat that planned, are faster, offsetting expecting to said, is at Katie are think are that that fact have like but that get. to carries going those have issues we our business what masked growing savings we e-commerce by just we the that this variable capture somewhat this than savings rate cost a and

So overall are I IMU. would big say those two

four go a efficiencies of also the And and global one have that before other years that that going increasing just as course result are was to last had for and lot as consistently but more that. we in and the costs product volume great leverage that is IMU we well. think of help us and that put bucket or there cost just been We of good are this and we of line having and place into IMU we a

we that in are continue But good to very Of forth. headwinds accordance cotton plan. prices to we some our feel with a and with we our place so course, have increasing grow IMU in

so and we know, of this big that the frankly, beauties plan there, you we plan it. I So the that and - but on say would are ones, we those I are one of acting is a have have this everything

basis are XXX, those So a very I very, all tangible think points XXX number.

of where do here, that we I seeing go ask think line of go to even you increase from way me, a there. you what think the can here growth well, long or a couple very can upside that you top the if points So numbers are is

why excited. that's so So we're

Katie Anderson

basis have we points of question on focus plan, planned IMU. in improvements in but And the terms really your XX markdown Janine, in about markdowns, some slight that

Operator

from next comes Our from ISI. Omar Evercore Saad question

line is open. Your now

Omar Saad

lot all my I the questions. absorb. thanks also for have to a Thanks question a of was for there taking couple information, and

Carlos Alberini

you. Thank

Omar Saad

the I'd that's margin profitability Sure. of guess in couple I start on business. of I the a questions. have with kind gross going the profitability,

environment, I least promotional my margin environment of maybe guess margin then the Do wide less strong expect it be promotionality at first level about the component promotional normalize of is industry that a growth on supply a industry think constraints that of sustainable result, of talked up, component, more inventory inventory dynamic? You or going that time. to possible would given how and you some is question, gross is this should I frees as we as have kind the gross a follow-up. leaner significantly to operate less over

Carlos Alberini

it's you, what is to thank to say hard going Yes, Omar. happen. Yes,

And that to aspect, full expecting brand. we going pricing, product now. everything help just continue that be this and but us our road effectively Obviously, buy we far this chosen then and we're quantities, so same, if brand. a well really value the you by know excess, to elevate and the you we sufficient for should But to others you of hoping have that initiative. right cannot we each And every do each judges price. it exactly think you buy that. the then we quality that do to product, full what if amazing very sure have that we more has We starts environment in others know have product not to of sell. garment, with going be price. end be most know want we that at day think going well. you to in and to the goes able brand in I our and the fourth is better do is it receptive going lot have sell to We can a sell priced you successful two putting you at want worked the it That We is are where match that are should at to but of that have with

direction big promoting how either aggressively ones very, as malls, doing going are I models think closing stores or many I we the think industry. for and we're of to companies looking that operating, they that that all just over or what's entire other lot have looking share. very I that the time their way And gaining are by before that that just at happening looking And people a we adjust online, at a we one other be feel the said the of in at I in healthy winner this things. feel it's capacity, just can reduce think

do are if this So just are to sales okay, are what environment always our they accordingly, is and our know and margins I the But and that our can exactly balance don't restored. look what like else's at after if or there at expectations, are going play looking where is to but are we fulfill going to we buying then a we is going stay looking margin more saying, demand way the normalized control so we comes then we we is, not somebody game. more can

we're game are We like playing. - we the

Omar Saad

- there's a China to I fashion, small repositioning, little for through been why know on then And the different give it's mentioned that helpful. more you gone maybe That's detail, bit Carlos. stake little mean I new works. this Can but is it's still you a think at you, you bit more business, detail a could going such really market the you iterations, there. be a China Thank one okay. talk it, Got it's big partners a

Carlos Alberini

going the well, had market are and what it is that we a and with And the has both elevating and with we and wanted to just some the distribution customers again, do. product showing the product were we back Yes, way was parts, to brand, line in year the up our necessarily our run our took plan now. over we market us that - China first what to so we ownership four product clean and think going not

product like We help we going. great took a a are inventory move had, assortment. and we put significant just much position we but the I we hit we - to where team in we said, healthier So some merchants of are today to the like with that

and to And augment - see have global about and to also that case with the effectively. together wants customer are do and be local we to leveraging that putting able We the line thinking what we more design. team trying a to are local our

I is frankly store portfolio second that the are we what what think done this the approach is partners and The I not are our was when occasions. alluded and the company, physical is earlier, with and big this Omar to nothing how part you we our And network. I for with they base, new now, with doing store company multiple were is mean Guess? we franchisee do new structuring this has

very We I of dealing because partnerships that somewhat have the many world other and with is unique. it think market successful in of franchisee when with is region and China is such I of different I and parts model. and love you're huge the size is a a think that the country each capital-light

can to time the gives very have that having they within areas particular reasonable a and and you that and flexibility talent consistently it would and represent are where in So very open and a capital expertise gives landlords across, brand you speed, otherwise experienced with period. to you those be belong the people difficult access do relationships gives have of it lot and stores it

is for. a doing we the piece that with and were DNA that localized a The not think we third brand by promotional stand exactly what deceleration We be think we things marketing that marketing were would were is also And of too being we brand help initiative. us. big again aligned more and and impacted

that is stand couple towards about We in are confidence artists up place big goes, of we for the and And how that strives making to partners that. of T-mall quality innovation this is e-commerce, see have and reinvent to that collaborations have and thing consumer go. want of and local we'll doing right model with celebrities big we again are but we the to last we front and lot the and a a

So you for still us. market priority very a is big know high

you're is a be our vibrant were important there. think Paul priority fact, we brand today right, on you're that now, is talking how is trillion, We a business but of can with the big talking our is are and we talking this In with young small base list. it huge. we And Yes, a world, the $XX love very deal. the and economy class biggest consumer I is middle mean energetic huge very about very, in about

good So we win to able going want be to with we everything give and win are have we partners. to to

Operator

Associates. Janet from JJK Research comes from question next Kloppenburg Our Instructions] [Operator

now line open. Your is

Janet Kloppenburg

product in I exciting, want I'm the just to looked hasn't really was… I that this news, not sure you good it's know just, quite that

Carlos Alberini

Sorry, you, can I - repeat? you couldn't hear what

Janet Kloppenburg

you Can now? hear Can me Oh, me? hear can't hear you me? you

Carlos Alberini

yes, can, go Yes, I ahead.

Sorry, Janet.

Janet Kloppenburg

know I the ever you seen. strongest strong, I just assortments have said I that that were to want very, very

Carlos Alberini

Paul the thank that an team have job the with done incredible you, very Thank you very product. and I proud, We're much. think

Janet Kloppenburg

Really well done, yes.

store 'XX. the big those was the like when fiscal presentation, So I at though in look the first on chunk portion least it done a closings, question at is the large of you looks are behind or

business still shrinkage forward. And more you the what negotiations And from how ramp that improve lower wondering of And if margins, about I in more that grow the profitability talk there the and think the you are And the to the see could from about wondering be big about is some coming base there. then should basis and business secondly, points it's to improvement, there how So Licensing XXX was lastly, and exciting see channel. wins getting or going was when that we I store store about come. that direct we getting base? they how again in 'XX

are Thank So there room is that segment? think more growth lot I'm that? you. for business if in just And you a wondering product driving categories what

Carlos Alberini

Okay.

chime a and Fabrice with will things Katie sure start that to then of going I'm So I'm in. couple and

the we this you right, So with you respect year, our we a renegotiating lot grants store successful became we currently come. have based next what we when past many there years think closings, done we can network, over more have they but on considering have are been are that new see in four that and improve when command locations the do. the those is look at to we are within may locations there what And even environment to

in that of see some So the numbers that expectations. is you embedded or our in

that? on touch to want you do Katie, So

Katie Anderson

it's closed from to at just five fiscal isn't changing 'XX, XXX year a Yes, add, stores over you year so, we I'll this total going look Janet, base when the this year lot, plan our and not store lot. a

have closures of North until in more - and now or China U.S., North lot see sorry some we but additions the in some some America, now from a and 'XX. Europe don't movement fiscal in We in additions

up XXXX XXX top losses over the that of mentioned about that that of already On lot it's rent Carlos remarks the points relief. said closures, made we in think baked big in prepared impact So $XX Carlos margin, more that. than here basis the but of also environment to, a even flagships, is this stores this million I a and has XX operating those now of had it's closed of

as included well. So that's

Carlos Alberini

in to testing conservative to we we plan, a fleet, to know it said, I have market. that comes really are market. in of openings brand like relatively opportunities we And say I under-developed few want that you have but do we the to expect several and things, appropriately new our lot looking are represent when at is plan Yes

percentage the we be business, we see direct-to-consumer Katie of of there, this. the more a retail With that direct business, penetration you adding so with our we year aggressive that significantly this about, think penetration. look e-com on do our can at business respect about if to talked year we as better, So if XX% the probably we'll - closed a I are

Janet Kloppenburg

Right.

Carlos Alberini

year are this. of business XX% acceleration to of closed operating time, somewhat plan we accretive But assumes XXXX a do the that at it targeting to very business right our be periods the because that's retail for extended Obviously because the obviously that with to are of retail diminishes very even had are e-commerce that And number our it fiscal accelerating by pleased honest, that's feel margin the that rest are of that we and to many mean could just we for so is stores business, there. than we of respect we we with growth it. and artificial the our company. we the happy better so I way be this with

to is our happy direct the opportunities are business. frankly we So making make more talking about and we're business see that teens about good or we and e-commerce with the business money, money is

that are implemented sales and licensing, are think last productive business we the And we thing that optimized excited. once a force, have super and Customer mentioned we excited and the more we So even fully think there. are XXX you we we with can

and business yes, I just there unusual couple this happened during were know is we were quarter things think up a but still the that still tough obviously down that the quarter. of you

you trend business. low with your think expectations change an consider because are not important planning a you were So cannot this organic that seeing it's in I and way respect we to the the keep this we

performance. interesting we you So, and there which even category doing categories better watches, few excited an very better that are are seeing know that are are is we

alone Our and we line marketplace an don't you think selection better keeps better. that if of have think in are it's them, handbags getting keeps we coming, incredible have know I completely but just and the seen handbags, I

we a but is So nice just lot amazing our everybody the business you some the distorted the have challenges going strong, last through know of board, obviously spot has job well. bright mean that pandemic. it's footwear I our been is they're doing doing there. areas with eyewear is very that have year we across wholesale of And bravely business

Operator

time at Thank comments. call you. closing no the And now have will questions I back we turn to queue. further Carlos for in this

Carlos Alberini

a you very just your we generous want attending lot very All had I a on you and you lot this. today's you and for on were time was long you thank patience details much. to thank opportunity we a to call that of about say for to good right, was, know give thank we but really all I your felt attention. much well appreciate and how that it somewhat concerned - how agenda and this of it we

wait about so time to and We progress. time. you happy holidays on do. to about plan Please a are all Thank we're this week to you. just cannot wonderful to very we have so of report our our much excited and your you excited for about I'm what

Operator

concludes Ladies gentlemen, you today's you. your for this and Thank conference. Thank participation.

You may now disconnect.

Guess' (GES) 1 Apr 212021 Q4 Earnings call transcript