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Guess Asia sales improve, but store closures loom

Guess Asia sales are recovering post Covid-19, but the company will be exiting some stores in the region when leases come up for renewal, as part of a worldwide network trim of 100 outlets.

The store closures represent about 9 per cent of the global fleet and will take place over the next 18 months. 

CEO Carlos Alberini said last week that about 75 per cent of the fashion retailer’s leases come up for renewal within the next three years, representing an opportunity to cut back unprofitable stores. Guess has 1169 company-operated shops along with 560 operated by partners. 

In the quarter to May 2, Guess sales globally fell by 51.5 per cent to US$260.3 million, compared with $536.7 million in the same prior-year quarter. The company recorded an adjusted net loss of $118.9 million, compared to $19.6 million for the first quarter a year ago. 

In Asia, sales fell by 52.6 per cent in US dollars and by 50.6 per cent in constant currency terms.

The Guess Asia regional operating margin decreased by 52.6 per cent to negative 56.4 per cent in the first quarter, due mainly to the negative impact of the Covid-19 pandemic which resulted in significantly higher inventory reserves.

Since the end of the quarter, all Guess-run stores have now reopened, however they continue to experience significant reductions in traffic and therefore, sales. The company said its e-commerce sites have experienced lower traffic, but this has been partially offset by a strengthening in conversion.

Alberini said the Covid-19 crisis had a material impact on the company, including operations and financial results. 

“To minimise our loss and protect our liquidity, we challenged every aspect of our business which was being significantly impacted by extensive store closures and lower customer demand.”

With all stores open in Asia, more than 400 in Europe and 180 stores in the US and Canada, Alberini says he is encouraged by initial trading results, which have been better than anticipated. “Our sales productivity for re-opened stores for the second quarter to date has reached roughly 75 per cent in the US and Canada and 70 per cent in Europe as compared to last year’s level.”

He said the company was continuing to focus on improving its omni-channel platform centred around the consumer, and improving efficiencies in its global operations. 

“I fully expect to be on the other side of this crisis with a more efficient business model, a more focused and consistent global brand strategy and a more nimble and agile organisation.”

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