Guess?, Inc. (NYSE:GES) is hoping to continue whittling down costs by shutting 50 more stores through the end of 2017. But the apparel retailer hinted some of the stores earmarked for closing next year could be spared if landlords agree to reduce rent.
The company has closed 52 stores since 2015 as it struggles with mounting costs amid shrinking physical store sales as shoppers move online.
The stores Guess is targeting for closing next year fall in its Americas business segment, which includes operations in the U.S., Canada, Brazil and Mexico. Operations in this segment have been strained in recent years amid intense competition from fellow brick-and-mortar retailers and disruptive e-commerce providers like Amazon.com, Inc. (NASDAQ:AMZN).
Macy’s Inc (NYSE:M) and Gap Inc (NYSE:GPS) are other traditional retailers that have been shrinking their physical store footprint to cut costs and boost faltering earnings.
F3Q17 earnings
Guess failed to live up to expectations in its F3Q17. Instead of strong top line growth that CEO Victor Herrero promised, the company only posted a 2.9% increase in revenue to $536 million in the quarter. That was below the internal top line guidance of $554 million and also below the consensus estimate of $549.0 million.
Disappointing performance in the Americas business rattled the top line. The company said Americas revenue decreased 4.7% and same-store sales for the region fell 4.9%. However, Europe and Asia bucked the trend, both posting double-digit growth. European sales rose 16% and Asian sales increased 10%. Guess opened 14 stores in Asia and 26 stores in Europe during the quarter.
“When we see our performance in North America […] the reduction in revenue is not due to selling less product, rather it is due to lower average unit prices,” said CEO Herrero.
As for the bottom line, Guess posted EPS of $0.11, down from $0.15 a year ago and below internal guidance for EPS in the band of $0.11 to $0.16.
F4Q17 outlook
Guess is expecting sales in the current quarter to be in the range of 3.5% to 7.5%, with EPS expected in the range of $0.40 to $0.50. But the consensus estimate is calling for EPS of at least $0.60 for the quarter.
Guess shares have tumbled 34% over the last one year and shrank further 10% to close at $13.76 in the last session.
