Guess Inc. has expanded its borrowing capacity under its existing European revolving credit facility by 100 million euros.
The facility has now been expanded to 350 million euros ($376.2 million) from 250 million euros ($268.7 million). Guess said the interest rate for the facility is subject to an annual adjustment based on the achievement of specific sustainability goals connected to the reduction of greenhouse gas emissions, as well as the increased use of both sustainably-sourced materials and the company’s Guess Eco products.
Guess Eco is a capsule collection that was introduced in Spring 2019. The line, produced in collaboration with Guess Europe, uses lower-impact materials and manufacturing processes for products for men and women. The Guess Eco collections include fibers from Tencel lyocell for denim pieces such as jeans, shirts and dresses, and Lenzing Ecovero viscose for dresses and tops that include T-shirts, sweatshirts and pullovers.
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“The expansion of our European credit facility reflects the confidence of our lenders in our strategy and the importance of the European region to our overall company,” Guess CEO Carlos Alberini said. “The expanded credit facility will provide incremental access to longer-term capital while continuing to align financial incentives with our sustainability goals.”
The facility is maintained through the firm’s wholly-owned Swiss subsidiary Guess Europe Sagl and has a remaining term of three years, Guess said.
The company’s newly launched Gen Z-focused brand Guess Jeans opened its first store in Amsterdam this May, with more locations planned for later this year in Tokyo and Los Angeles.
Guess said that first-quarter net income was in the black for the three months ended May 4 at $13 million versus the year-ago net loss of $11.08 million, while revenues rose 3.9 percent to $592 million from $570 million. The company said at the time that it expects annual revenues for Fiscal 2025 to exceed $3 billion for the first time, buoyed by the first-quarter acquisition of Rag & Bone, which last year posted annual revenues estimated at $250 million.
Alberini said during a first quarter conference call that while Guess saw declines in both its women’s and men’s businesses, women’s apparel in Europe was strong, while men’s posted solid increases as well.
Dana Telsey, chief investment officer at Telsey Advisory Group, noted that second-quarter guidance for a revenue increase in the range of 9 percent to 11 percent is below the prior market’s expectation for 14.6 percent growth to $762 million. She said that foreign exchange headwinds are expected to negatively impact sales by 2 percent in the quarter.
In addition, operating margin was guided to between 5.3 percent to 6.1 percent, versus 9.8 percent a year ago and Wall Street’s prior expectation of 7.6 percent. Those forecasts now has second quarter earnings per share guidance in the range of 38 cents to 47 cents, below both the 72 cents posted a year ago and the prior consensus forecast of 65 cents.
Higher expenses over the near term are impacting the bottom line as the company continues its investment in Guess Jeans and due to its acquisition of Rag & Bone, Telsey noted.
Jefferies analyst Corey Tarlowe said that while second quarter projections reflect headwinds, those should soften throughout the year. He noted that management expects foreign exchange and Red Sea issues to be first half headwinds, with the second half and beyond to benefit from the Rag & Bone acquisition.
