Guess?, Inc.

fiscal 2025 earnings conference call. I would like to turn the call over to Fabrice Pineruche, Senior Vice President of Finance and Investor Relations and Chief Accounting Officer. Please go ahead.

Thank you, Operator. Good afternoon, everyone, and thank you for joining us today. On the call today with me are Carlos Alberini, Chief Executive Officer, and Marcus Newbrand, 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 reconciliations and description of these measures can be found in today's earnings release. Now, I will turn it over to Carlos.

Thank you, Fabrice, and thank you all for joining us for our Q1 fiscal 2025 quarterly conference call. The year is off to a strong start, and we are pleased to report significant progress against a number of important operational, strategic, and financial objectives. From an operational and financial perspective, our teams executed well during the quarter, which enabled us to deliver results for the first quarter that exceeded our expectations in terms of revenues, operating earnings, and per share results. We grew sales in each of our segments and expanded gross margins, both of which favorably impacted the bottom line. On the strategic front, We are excited to have completed our company's first ever acquisition. We launched a new brand, Guess Jeans, secured the renewal of a key licensing agreement, and transformed our US distribution function. We also made great strides to further strengthen our financial foundation and deliver value for our shareholders, including rewarding them with a special dividend refinancing and repaying our 2024 convertible notes, and obtaining an expanded credit facility. Marcus will share more on these financial highlights in just a few minutes. And we achieved all of this in just a little more than two months since we last spoke. We are proud of these results, which reflect the talent and skill of our dedicated and experienced team members. On behalf of Paul and myself, I want to take this opportunity to recognize our teams around the world for a job well done and thank them for their outstanding contributions. These results also reflect the strength and resilience of our brands and the benefit of our highly diversified business model across product categories, geographies, and channels of distribution. That business model helps to enhance the predictability of our earnings and cash flows. The addition of Rag & Bone to our portfolio even further diversifies our business and should serve to enhance our company's growth in the years to come. For the first quarter, we grew revenues by 4%, reaching $592 million. As I highlighted a moment ago, each one of our operating segments posted a revenue increase, with the Americas wholesale and licensing segments contributing most significantly to the total growth for the quarter. Our guest business in the Americas retail has continued to face challenges with declines in traffic and conversion that resulted in comp sales headwinds. Though, with the addition of Rag & Bone's April revenues, we were able to more than offset that top-line pressure in the segment and deliver very modest growth. On a consolidated basis, the addition of Rag & Bone, which we began to consolidate starting in April, drove the growth for the quarter, with the core guest and Marciano businesses generating revenues up 3% versus last year in constant currency. Overall, we are pleased with the Rag & Bone business, which is performing in line with our expectations and has been a fantastic addition to the guest portfolio. Our team managed the business well, with tight inventory control and careful expense management. Our disciplined approach to inventory management drove a 4% reduction in gas and Marciano inventory levels, a higher level of full price selling, and a 120 basis point increase in gross margins for the quarter. Given the seasonality of the business, we had anticipated an operating loss for the quarter. We cut that anticipated loss in half, reporting only an $8 million adjusted operating loss and a 27 cent adjusted loss per diluted share. Let me offer some regional highlights for the quarter. In Europe, we delivered a 1% increase in revenues, reaching $284 million ahead of expectations. The strong momentum in our European retail business continued as we posted double-digit comps and grew wholesale deliveries both in constant currency. Most of our growth, though, was masked by a significant currency headwind. Our business performed well in mature markets in southern and central Europe, while our softer markets tended to be in the north and the east. Strong product performance was broadly based, with accessories performing best. The business was driven by the healthy performance of handbags, travel accessories, women's jewelry, and fragrances. Our women's apparel business was strong, particularly in knit tops, sweaters, skirts, and denim, and our men's business posted solid increases as well, driven by the demand for knit tops, sweaters, and activewear. In the Americas retail, revenues increased roughly half a percent. reaching $144 million. Across the US and Canada, the retail environment has remained challenging with consumers remaining cautious in their spending. We saw declines in both our women's and men's businesses, while activewear and sweaters were our best performing categories. Accessories outperformed apparel, especially handbags, watches, fragrances, and travel accessories. We are working to navigate the current environment and drive improvements in this business. We feel good about our current product assortment and have been evaluating opportunities to drive more business and improve trends through marketing investments, including trialing different promotional actions, both in-store and online. Our Americas wholesale business was strong and grew 21% in the quarter to $62 million, driven mainly by rag and bone shipments, as well as growth from Mexico. In Asia, revenues increased 3 percent to $73 million. And finally, our licensing business performed extremely well, delivering a revenue increase of 21 percent to $29 million. We are pleased to have delivered on our earnings objectives for the quarter, in addition to driving other key strategic initiatives across our business. Growing guests and expanding our global reach has always been foundational to our strategic vision since Paul and his brothers started the business. In the 43 years since then, we have built a powerful platform anchored by successful regional management centers across the globe. Our products are sold in over 100 countries, and we have developed broad capabilities to sell through virtually every distribution model. Between our company and our network of licensee partners, we bring products to market across 25 different categories, leveraging a diverse supply chain that we feel is truly best in class. As a result, we have built Guess into the thriving $5.5 billion retail business that it is today. Looking to the future, we continue to see multiple opportunities to further grow the Guess brand. Beyond that, we can leverage our powerful platform to support more than just one brand. We know that with our capabilities, we can do more. We have built a platform that can power a bigger and broader business, generate synergistic growth and margin expansion, and deliver significant value creation over time. This is what we call the inflection point, the evolution that I described in our last call. That was to leverage that platform and drive outsized growth through our multiple existing brands, through internally developed or segmented brands, or through acquisitions of new brands. Looking at our core guest brand, the business remains healthy and has been performing well. It is gratifying to see continued success in mature markets in Europe. In addition to that, We are excited about our growth opportunities in newer markets such as Turkey, Middle East, India, and Latin America, where the business is enjoying strong momentum. For our guest brand, handbags have been instrumental in growing the brand, and we see opportunities for further growth as we expand our footprint. That's why we are pleased to share that Paul has renegotiated the extension of our handbag license. cementing that important partnership until 2039 on very favorable terms. The new contract included a $40 million upfront cash payment for the license renewal. Going forward, we see handbags as a strong category to augment the apparel assortment of other lifestyle brands beyond Guess as well. Rag & Bone is a great example with this potential. As you know, We have recently launched our Guess Jeans brand and just finished its first sales campaign, an exciting moment for our company. While it harkens to the legacy of the Guess brand, Guess Jeans is a completely new lifestyle brand with its own identity and multi-category assortment. It employs a brand new store concept with its own marketing strategy and advertising campaigns targeting the younger Gen Z customer, but welcoming all customers. Guess Jeans is an environmentally conscious brand that is introducing Air Wash, an innovative stone washing process for denim that dramatically reduces water consumption. This, combined with an eco-friendly store environment defined by sustainable store materials, will connect well with its target consumers. And with its casual offering and more compelling price points, it fits well within our overall brand and pricing architecture. The brand is already ahead of expectations with wholesale accounts showing great enthusiasm for the brand and product. In France, Galleries Lafayette just featured guest jeans with a special installation and pop-up at their flagship Paris house and store that included air wash, visual effects, a denim customization station with a special product displayed and signage. They also featured our first guest jeans advertising campaign on the facade of the iconic store, which is located in a very high traffic area in Paris. Also in June, Italian department store chain La Rinascente plans to do a special guest jeans presentation in its flagship store on Corso Vittorio Emanuele in Milan. Under the direction of Nicolai Marciano, we just completed the first Guess Jeans advertising campaign featuring English fashion model and actress Iris Law, the daughter of actor Jude Law. We believe her influence will help expand the reach of the Guess Jeans brand globally online, in print, and across social media as well. Also, for the third year during Coachella weekend, Guest Jeans hosted celebrity guests and brand ambassadors in a luxury compound of homes. The weekend included multiple after parties hosted by top performing artists, Anderson Paak, Metro Boomin, and Kate Renata, with a star-studded guest list, including Billie Eilish, I-Spice, J Balvin, Robert Pattinson, Justin, and Hailey Beaver, and more. The event proved enormously successful. resulting in nearly 4 billion impressions and 58 million views. As you know, we completed our acquisition of Rag & Bone in Q1 through a partnership with WHB Global. Rag & Bone is already a quarter billion dollar business, a heritage brand with proven longevity, with a diverse product offering for both women and men, commanding premium pricing and margins, and appealing to a highly affluent consumer base. This nicely complements our existing business. Rag & Bone also brings with it an experienced and talented management team led by Andrew Rosen. Paul and I want to welcome them all to the guest family. We hope you also saw that on Tuesday, we announced Andrew's appointment as Rag & Bone's executive chair. Andrew is a visionary in American fashion and has been involved with Rag & Bone since 2006. He brings a wealth of experience and expertise to the brand, providing strategic direction and oversight to drive the brand's mission forward. It's only been a couple of months, but our teams are already working well together. Paul has been highly engaged with Andrew and the Rag & Bone team, along with our licensees and our country management teams. to begin executing our ambitious agenda to grow the business with new product categories and international expansion. We are already advertising the brand in existing and new markets, and we are actively looking for new store locations, including key cities in Europe. As Rag & Bone continues to operate as an independent fashion brand, together we can help to optimize their operations by sharing resources and leveraging scale, including sourcing opportunities. Turning to a focus on product, during the quarter we made significant progress to reduce our SKU development count in our global apparel lines with a goal to achieve a 30% reduction. We have also tightened the assortment in our retail stores to concentrate our buys into fewer SKUs to increase productivity and service levels. In addition, we continue to refine and perfect our pricing structure by focusing on the customer's perceived value for each and every product. Beyond creating value by growing our business and optimizing our product offering, pricing, and the way we buy, we are focused on continuous improvements in everything we do to drive efficiencies in our operations. To support this goal, The transition to a third-party provider to operate our U.S. distribution center is well underway. We selected GXO Logistics, which has been our distribution partner in Europe for many years. The transition, which is going smoothly, should help reduce costs as well as improve service levels. We have launched a process to sell that facility, with GXO leasing it back to operate. we expect for the sales transaction to be finalized before the end of the third quarter this year. Turning to our outlook, consistent with our previous guidance, we expect strong revenue growth to exceed $3 billion this year for the first time ever, and to deliver nearly $3 in adjusted earnings per share. Before I hand off to Marcus, let me share my personal reflection and what has me so excited about our company and our future. I have been back now a little more than five years, and so much has changed, and that includes with me. Because when I returned in 2019, I brought with me the perspective that I left with in 2010, laser-focused on growing the guest brand, a successful brand, well-known for over 40 years and already well-distributed in over 100 countries. I still strongly believe that there are growth opportunities for guests and great things to come. What I have come to realize, though, is that arguably our most valuable asset is the powerful machine, this platform that we have built that brought guests to the precipice of a $3 billion global brand. What started with Paul and his brother's vision for guests, we can do with other brands, either developed internally or acquired from others. That's the inflection point, recognizing that this company is more than just one brand. It is that platform. Our expansive global footprint, broad channel capabilities, extensive supply chain, diverse category portfolio and strong management team. That's a powerful arsenal, not easy to replicate, but so adaptable. We wake up every day energized by the belief that we can do things that others simply cannot do. To take a regional brand and make it global, to turn a single category brand into a lifestyle brand, to make something exponentially bigger because we can grow it across multiple dimensions. We are off to a great start with DragonBone and Guest Genes already has solid traction. Our strong start to the year reinforces our belief and our passion. We have a strong capital structure and we are careful stewards of our shareholders' capital, so we will move prudently learn as we go, and course correct when necessary. But I'm even more enthusiastic now than I was in 2019, and I couldn't be more excited and confident in our ability to drive outsized growth with this platform and create outsized value for our shareholders. And with that, I will pass the call to Markus. Markus, please go ahead.