Guess?, Inc.

Good day, everyone, and welcome to the guest's fourth quarter fiscal 2024 earnings conference call. I would like to turn the call over to Fabrice Benarouch, Senior Vice President of Finance, Investor Relations, and Chief Accounting Officer.

Good afternoon, everyone, and thank you for joining us today. On the call today with me are Carlos Alberini, Chief Executive Officer, and Marcuse Brand, Chief Financial Officer. During today's call, the company will be making forward-looking statements, including comments regarding future plans, strategic initiatives, capital allocation, and short- and long-term outlooks. The company's actual results may differ materially from current expectations based on risk factors included in today's press release and the company's quarterly and annual reports filed with the SEC. Comments will also reference certain non-GAAP or adjusted measures. Gap reconciliation and descriptions of these measures can be found in today's earnings release. Now I will turn it over to Carlos.

Thank you, Fabrice. Good afternoon, everyone. We appreciate you joining us today. On behalf of Paul and myself, I'd like to begin by thanking all of our associates worldwide for their valuable contributions throughout the past year. Our teams performed very well. delivering solid top-line growth, improved gross margins, and disciplined expense performance. The results speak for themselves, and we couldn't be more proud of our team's accomplishments this year. We closed our fiscal year with a very strong fourth quarter performance, resulting in adjusted earnings per share of $3.14 for the year. The last time that our company reached this level of EPS performance was 12 years ago in fiscal year 2012. Revenues for the year increased to $2.8 billion, up 3% in both US dollars and constant currency. And we delivered an adjusted operating margin of 9.2%. Our ability to deliver this performance was the result of our strong brand momentum around the world, the robust customer response to our great product assortment, and the amazing attitude and discipline our teams continue to demonstrate. Our performance in both the fourth quarter and the full fiscal year shows the benefits of our unique diversified business model and how we are leveraging our powerful platform across multiple product categories, geographies, and channels of distribution. We are at an infection point in our company's development, and we couldn't be more excited about our future. Before I turn to our fourth quarter performance, I want to touch on two exciting announcements. First, the special dividends. As you know, returning capital directly to our shareholders is a high priority for our board. Over the past five years, we have returned nearly $840 million in capital to shareholders, either through share repurchases or quarterly dividends. In line with our commitment to reward our shareholders, our Board approved a special dividend of $2.25 per share, in addition to the regular quarterly dividend of $0.30 per share. Both of these dividends will be paid on May 3, 2024, to shareholders of record as of April 17, 2024. We are very pleased with this action and proud of our performance that enabled it. I'd like to turn to our recently announced acquisition of Rag & Bone with a global management firm, WHP Global. This is the first acquisition in the 43-year history of guests, and we are thrilled to add such an iconic brand to our portfolio. As Paul noted at the time of our acquisition announcement, Rag & Bone is a brand that is well known for its preeminence in American fashion, that over the years has stayed true to its roots and founding values with an unwavering commitment to quality and authenticity. The brand is known for blending traditional craftsmanship with modern cultural references. And over the years, it has become synonymous with effortless quality clothing for men and women with an innovative yet understated New York aesthetic and a strong expertise in denim. The brand appeals to a very attractive customer base that is complementary to that of our guests and Marciano brands. Currently, Rag & Bone directly operates 34 stores in the US and two stores in the UK. The stores are highly productive and generate healthy forward contributions. The product is also distributed in high-end boutiques, select department stores, and through e-commerce platforms globally. Last year, Rag & Bond generated sales of $252 million and adjusted EBITDA of 18 million. We are excited about the opportunities to grow this brand, and I'll speak more about those later on the call. Now moving to our fourth quarter results. We are very pleased with our performance as we deliver results ahead of our expectations for revenue and earnings growth. Revenues grow by 9% in the period and adjusted earnings from operations reached 130 million, growing 21% versus last year. We achieved an adjusted operating margin of 14.6% in the quarter, which was 150 basis points ahead of last year. Our segment results were impressive this quarter, as all of our five business segments grew revenues with America's wholesale, Asia, licensing, and Europe, posting the biggest increases to last year. all segments but america's retail posted operating earnings growth in the period and deliver operating margin expansion regarding product performance we continue to see different levels of performance across regions with accessories footwear and marciano performing best during the quarter we close the year with a strong inventory position in spite of the ongoing supply chain challenges that we are facing due to the red sea crisis Inventories were down 9% at the end of the year, and our inventory composition was in line with our plan. During the last few years, we have been able to re-architect our business to optimize inventory productivity and cash flow generation. We believe that these changes represent a permanent improvement to our model. During our last earnings call, I spoke briefly about our strategic planning process and the six critical objectives that we are focused on going forward. Just to remind you, this relates to organization and talent, growth, brand relevancy, customer centricity and digital expansion, product excellence, and last, optimization to drive efficiency, profitability, and return on invested capital. I would like to provide an update on our ongoing work in connection with these objectives. Starting with our organization and talent objective, we have completed an organizational assessment and have identified key opportunities to improve our accountability and facilitate decision making. We plan to act on this assessment and develop detailed plans in the next few weeks. In addition, we remain committed to building strong management capabilities across the organization to support growth. and have launched three key searches for senior roles that will be based in Europe. Regarding our growth objective, we made tremendous progress during the period. We have already completed the internalization of the G3 licensed businesses, finalized the design of all products, including full new collections of outerwear and dresses, taken orders from our household customers, and we are in production as we speak. With respect to our new Guess Jeans brand, the first season's collection has been developed and offered to customers around the world. The first sales campaign for Guess Jeans has been completed, and the results were ahead of our initial expectations. As part of the brand's launch, we have already secured a few locations to open new Guess Jeans stores in the US and several key cities in the European market. We strongly believe that this brand and its products will serve Gen Z consumers around the world very, very well. In connection with the launch of the Guess Jeans brand, Nicolai Marciano led two events to launch the brand worldwide. In October, Guess Jeans launched exclusively to its top press and trade partners in Milan with a private exhibition hosted at Spazio Maiocchi. This was an exclusive, immersive event showcasing the history, innovation, and sustainability of Guess Jeans. Following Milan, Guess Jeans had its first public introduction at the January 2024 edition of PDUomo in Florence. With over 3,000 people in attendance, it was a monumental event for the brand. The exhibition, which spanned across four days, featured a denim-centric retrospective of the brand and showcased the first look of the next 40 years of denim with the introduction of Guess Air Wash, a state-of-the-art sustainable alternative to stone washing. Also during the quarter, we negotiated the purchase of the Guess business in Chile and Peru, which was built over the last several years by our exclusive distributor in that market. The business consists of 15 guest stores, an e-commerce business, and a wholesale business. This acquisition was executed a few weeks ago by a joint venture that we formed with Grupo Axel, our partners in our Mexico business for the last 18 years. The stores are well located, and they have the potential to deliver about $20 million in sales annually in the short term, as we reposition and recapitalize the business, including strengthening inventory buys that have been insufficient for some time in the market compared to the potential of that market. And speaking about growth, probably the most exciting news of fall relates to our recently announced acquisition of Rag & Bone that I mentioned earlier on the call. Paul has jumped in with both feet to build on this dream. We have an ambitious vision for Rag & Bone and we plan to expand its product offering through a combination of own product development and licensing specific categories that we believe has significant potential for growth. We also plan to expand the brand's presence and distribution internationally. Guest and WHP Global combined have an outstanding global distribution network and powerful licensees that will enable us to drive the growth of the Rag & Bone business globally. Leading up to the signing of the agreement to acquire Rag & Bone, Paul and I had the opportunity to spend time with Andrew Rosen, chair of the board, and the Rag & Bone management team. And we couldn't be more impressed with the quality, expertise, and depth of the leadership and of the overall organization, including store personnel. We can't wait to begin working together. Turning finally to optimization of our operations, we just launched a project to convert our distribution center operation in the US to a third party provider. We selected our logistics partners in Europe to run our facility located in Louisville, Kentucky. This company is the number one global company in the business. Our Kentucky operation currently services our entire US retail and wholesale businesses. We also plan to sell that facility and our partner will lease it back to operate it. We are currently negotiating a self-transaction with several interested parties. This change should have a positive impact on our cost structure and the expected benefits have been incorporated into our guidance. We look forward to further updating you on our strategic plan as the year progresses. This includes specific initiatives to address the observations our consultants have identified together with other key initiatives and strategies that we have developed, such as plans to optimize our product assortments and pricing, grow our digital business, enhance customer engagement, and increase the use of data and technology, all with the goal to improve our decision-making and operations further. Moving to our outlook for the new fiscal year, We expect to grow our top line between 11.5% and 13.5% and deliver revenues of over $3 billion for the first time in our company's history. We also plan to generate adjusted operating margin between 7.5% and 8.5% and adjusted earnings per share of $2.56 to $3. This outlook includes the benefits of the Rag & Bone acquisition, the growth of our core business, and the other growth initiatives that I mentioned earlier. Marcus will elaborate further about our guidance in just a minute. In closing, we are very pleased with our results this year. I'm very proud of our team's accomplishments. The company's performance demonstrates how Paul's vision and our team's efforts over the last few years to elevate our brand and transform our business are paying off. We are enjoying strong momentum across the world with the Guest and Marciano brands, and customers are responding well to our product assortments across categories. We appeal to three distinct customer groups with our Guest, Guest Jeans, and Marciano brands. And now, by adding Rag & Bone to our portfolio, we are positioned to expand into a more affluent and very attractive customer base. We have a strong and highly diversified business model and a solid capital structure. We have built a platform that can power a bigger business, generate synergistic growth and margin expansion, and deliver significant value creation over time. We have expertise in virtually every distribution model in which our products are sold. We work with wholesale partners from large department stores to mom and pop. And we have developed a network of licensee partners that supports our portfolio of several different product categories. Over the past 43 years, those powerful capabilities have clearly served the guest brand well, bringing us to the precipice of a $3 billion company. The inflection point, the evolution for us, is that we view these capabilities as a platform to drive outsized growth. A platform that gives us the power to do things that others simply cannot do. The power to take a smaller regional or national brand and make it global. The power to leverage our portfolio of product categories and build a monocategory brand into a lifestyle brand. The power to make something exponentially bigger because we can grow it across multiple dimensions. That's not easy to do. but we feel that we have built the right platform to do it. This is why we are so excited about our future. As we build this bigger ecosystem, we will continue to be opportunistic with the use of capital to drive our performance and create value, including continuing to invest in the business and opportunistically consider strategic acquisition, as well as continuing to return capital to our shareholders. And with that, I conclude my remarks I pass the call to Markus. Thank you. Markus, please go ahead.