FINANCE

Guess reports Q3 loss, pays European Commission fine

BY Deena M. Amato-McCoy

Guess is inching closer to resolving a dispute with the European Commission, however fines have taken a toll on the retailer’s third quarter earnings.

The fashion retailer said that, as it has previously disclosed, it has been cooperating with a European Commission investigation into whether the company violated European competition rules. Guess reported it is “likely to reach an agreement” that is expected to result in a fine ranging from $42.4 million to $46.6 million (U.S. dollars).

While the company has already changed some of its business practices, those remediations have not had “a material impact on its ongoing business operations within the European Union,” according to Guess.

During the third quarter ended Nov. 3, the company also recorded an estimated charge related to this matter of $42.4 million, a negative impact of 52 cents per share.

In addition, the fashion retailer had a net loss of $13.4 million compared to $2.9 million for the third quarter. GAAP per-share earnings were 17 cents, compared to 4 cents for the prior year. Analysts expected 16 cents per share. The company estimates that currency had a negative impact on diluted earnings per share of 2 cents for the quarter.

Revenue was $605 million, beating analyst estimates of $603 million. Same-store sales in the Americas rose 3%, beating analyst estimates of 2.1%.

“I am very encouraged by the overall sales momentum we are experiencing with positive comps in all regions in the third quarter, which speaks to the global strength and relevancy of the Guess brand,” said Victor Herrero, Guess CEO.

For the remainder of the fiscal year, which ends Feb. 2, 2019, Guess is expects positive comps in all regions, and profitability across all business segments, according to Herrero.

“Beyond the current year, we still have a lot of growth opportunities in Europe and Asia. The results in the Americas retail business have continued to show improvement, and we see more opportunities to reduce costs, particularly in logistics,” he added. “More than ever, we remain focused on executing our strategic initiatives which are the pillars of our revenue and profit growth and our 7.5% operating margin goal.”

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