Guess shuttering 60 underperforming US stores as it expands abroad

Dive Brief:

Fashion brand Guess will close 60 underperforming stores this fiscal year, with “more than 100 stores or 120” on the chopping block during the next year, CEO Victor Herrero told analysts this week, according to a transcript from Seeking Alpha. In the past two years, the retailer — which operates a fleet of about 400 U.S. locations — has closed 62 U.S. stores, including 10 stores in the past quarter, executives said.
Guess this week reported fourth quarter total net revenue increases of 3.2% to $679.3 million, compared to $658.3 million in the prior-year quarter. In constant currency, net revenue rose 4.3%, dragged down by retail profitability in the Americas: North American retail revenues decreased 6.4% in U.S. dollars and 6.3% in constant currency.
In the U.S. and Canada, Guess' same-store sales (including e-commerce) fell 7% in U.S. dollars and 7.4% in constant currency. But sales were more robust in Europe and Asia, with European revenues rising 11.4% in U.S. dollars and 13.5% in constant currency, and Asian revenues up 26.6% in U.S. dollars and 27.9% in constant currency.

Dive Insight:

Herrero and Guess CFO Sandeep Reddy outlined an aggressive strategy to jumpstart profits in the brand’s U.S. operations through a store rationalization approach involving rent re-negotiation and closures. The retailer isn’t being shy about its motives: Last year, Guess shuttered 19 stores even after obtaining more favorable rents on their leases.

It's all a response to sweeping changes impacting retailers across the industry. "[W]e are seeing in the U.S. market a significant drop on traffic, which is leading us on the fourth quarter to a more promotional environment,” Herrero told analysts. “And at the same time, this is basically, as a consequence, declining our margins.”

It’s quite a different story for the brand outside of North America, however. This year, Guess will open 60 stores in Europe, where nearly half of its sales come from wholesale, and another 35 locations in Asia.

“Basically what we are trying to do is to become very profitable in the U.S. and trying to grow anywhere else,” Herrero said. “For example... for the last six quarters, we’ve been seeing positive comps in Europe; for the last two quarters we’ve been seeing very positive comps in Asia. So, what we are trying to [do is] rebalance a little bit our business between the international and the domestic."