Q3 2024 Guess? Inc Earnings Call

Yeah.

Speaker 1: Good day, everyone, and welcome to the Guest Third Quarter Fiscal 2024 Earnings Conference Call.

Good day, everyone and welcome to the gas third quarter fiscal 'twenty 'twenty four earnings conference call.

Speaker 1: I would like to turn the call over to Fabrice Ben-Arouche, Senior Vice President of Finance, Investor Relations, and Chief Accounting Officer.

Like to turn the call over to Bruce <unk> senior.

Senior Vice President Finance, Investor Relations, and Chief Accounting Officer.

Speaker 2: Thank you, operator. Good afternoon, everyone. And thank you for joining us.

Thank you operator, good afternoon, everyone and thank you for joining us today.

Speaker 2: On the call today with me are Carlos Alberini, Chief Executive Officer, and Marcus Newbren, Chief Financial Officer.

On the call today with me are Carlos are there any chief Executive Officer, and Marcus New brands Chief Financial Officer.

Speaker 2: During today's call, the company will be making forward-looking statements, including comments regarding future plans.

During today's call the company will be making forward looking statements, including comments regarding future plans.

Speaker 2: strategic initiatives, capital allocation, and short and long-term.

Initiatives capital allocation.

Kitchen, and short and long term.

Speaker 2: The company's actual results may differ materially from current expectations.

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.

Speaker 2: based on risk factors included in today's press release and the company's quarterly and annual report signed with the SEC. Comments will also reference

Cold months will also reference certain non-GAAP or adjusted measures to.

Speaker 2: gap reconciliation and description of these measures can be found in today's earnings release.

GAAP reconciliations and descriptions of these measures can be found in today's earnings release.

Now I will turn it over to Carlos.

Speaker 3: Thank you, Fabrice. Good afternoon, everyone, and thank you for joining us today.

Thank you <unk> good afternoon, everyone and thank you for joining us today.

Speaker 3: Our performance this quarter is once again the result of three key factors working harmoniously together.

Our performance this quarter is once again the result of three key factors working harmoniously together.

Speaker 3: First, our strong global brand awareness and continued momentum.

First our strong global brand awareness and continued momentum.

Speaker 3: Second, the power of our highly diversified business model across product categories, geographies, and channels of distribution. And third, our highly entrepreneurial and unique culture that makes guests a great place to work and where a long-term focus drives all important decisions and people feel accountable and empowered.

Second the power of our highly diversified business model across product categories geographies and channels of distribution and third our highly entrepreneurial and unique culture that makes guests a great place to work and we're a long term focus price all important decisions and people feel okay.

Interval unempowered.

Speaker 3: And consistent with these three factors, we are very pleased to report our third-quarter results with revenue growth in line with our expectations and adjusted operating profit performance beating the high end of our guidance range, which was in line with last year.

And consistent with this three factors we are very pleased to report our third quarter results with revenue growth in line with our expectations and adjusted operating profit performance, beating the high end of our guidance range, which was in line with last year's.

Speaker 3: We achieved an almost 9% adjusted operating margin for the quarter, exceeding our expectations and also consistent with last year's.

We achieved an almost 9% adjusted operating margin for the quarter.

Hitting our expectations and also consistent with last year's performance.

Speaker 3: All but one of our business segments delivered revenue increases in U.S. dollars, with our licensing, Europe , and America's wholesale segments reporting higher revenue growth for the period at 19 percent, 6 percent, and 4 percent respectively.

But one of our business segments delivered revenue increases in U S dollars with our licensing Europe and Americas wholesale segment reporting higher revenue growth for the period at 19%, 6% and 4% respectively.

Speaker 3: As expected, amidst a dynamic macroeconomic environment, our America's retail segment posted a decline in revenue.

As expected amidst a dynamic macroeconomic environment, our Americas retail segment posted a decline in revenues.

Speaker 3: During the period, our teams continue to run the business well, delivering strong gross margin performance and effective cost management.

During the period, our teams continued to run the business well delivering strong gross margin performance and effective cost management there.

Speaker 3: Their ability to navigate and manage the factors that we can control has been exemplary.

Their ability to navigate and manage the factors that we can control has been exemplary.

Speaker 3: Paul and I are very pleased with our team's performance. I want to thank everyone for their unwavering commitment and invaluable contributions, especially during this time of global uncertainty.

Paul and I are very pleased with our team's performance I want to thank everyone for their unwavering commitment and invaluable contributions, especially during this time of global uncertainty.

Speaker 3: Net revenues for the third quarter grew 3% in U.S. dollars, and adjusted earnings from operations reached $58 million, consistent with Q3 of last year.

Net revenues for the third quarter grew 3% in U S dollars and adjusted earnings from operations reached $58 million consistent.

Consistent with Q3 of last year.

Speaker 3: Briefly touching on segment results, our business in Europe delivered a revenue increase of 6% with solid performance in our wholesale business, but a softer than expected direct-to-consumer comp growth, which posted an increase of 8%, primarily driven by growth in average unit retail value, partially offset by a deceleration of customer traffic into our stores from the second quarter.

Briefly touching on segment results our business in Europe delivered a revenue increase of 6% with solid performance in our wholesale business, but a softer than expected direct to consumer comp growth, which posted an increase of 8% primarily driven by growth in average unit retail.

<unk>, partially offset by a deceleration of customer traffic into our stores from the second quarter trends.

Speaker 3: Our Europe segment reported a 2% decrease in operating earnings from last year.

Our Europe segment reported a 2% decrease in operating earnings from last year.

Speaker 3: As expected, our America's retail business segment posted at 7% decline in revenues due to slow customer traffic. However, with our team's effective cost management and improved gross margin performance, we are pleased to have delivered better than expected operating.

As expected our Americas retail business segment posted a 7% decline in revenues due to slow customer traffic. However, with our teams effective cost management and improved gross margin performance. We are pleased to have delivered better than expected operating earnings.

Speaker 3: Our America's wholesale business had a good quarter, reporting a better-than-planned revenue increase of 4% and an outstanding 29.1% operating margin.

Our Americas wholesale business had a good quarter reporting a better than planned revenue increase of 4% and an outstanding 29, 1% operating margin operating earnings for this segment grew by 57% versus last year's Q3, well ahead of our expectations powered by strong.

Speaker 3: Operating earnings for this segment grew by 57% versus last year's Q3, well ahead of our expectations, powered by strong gross margin performance and cost leverage.

Gross margin performance and cost leveraging.

Speaker 3: Our Asia business reported a 2% increase in revenues and posted a profit in the period, better than expected, and benefited from improved performance in China and Hong Kong.

Our Asia business reported a 2% increase in revenues and posted a profit in the period better than expected and benefited from improved performance in China and Hong Kong.

Speaker 3: And lastly, our licensing business delivered an exceptional quarter, with revenues increasing 19% in the period and operating profit growing by 24%, exceeding our expectations for both, partially impacted by a one-time adjustment.

And lastly, our licensing business delivered an exceptional quarter with revenues, increasing 19% in the period and operating profit growing by 24% exceeding our expectations for both partially impacted by a onetime adjustment.

Speaker 3: Best performing product categories include fragrances, handbags, watches, eyewear, and footwear.

The best performing product categories included fragrances, handbags watches eyewear and footwear.

Speaker 3: Turning to product performance in line with trends observed during the previous two quarters, we continue to see regional variations in our results.

Turning to product performance in line with trends observed during the previous two quarters, we continue to see regional variations in our results in.

Speaker 3: In Europe , we observed growth in sales across women's and men's apparel, Marciano, and accessories, with Marciano and accessories leading the way and expanding their contribution to our overall

In Europe, we observed growth in sales across women's and men's apparel, marciano and accessories with marciano and accessories, leading the way and expanding their contribution to our overall business.

Speaker 3: Notably, the best-performing product categories included knit tops, woven shirts, shorts, dresses, and men's activewear. It's worth noting that weather conditions played a significant role, with a warmer climate contributing to stronger sales of shorts and a dip in outerwear sales, despite promising initial sell-through rates for outerwear products in both genders.

Notably the best performing product categories included knit tops woven shirts shorts dresses and men's activewear it's.

Worth, noting that weather conditions played a significant role with a warmer climate contributing to stronger sales of shorts and it did in outerwear sales. Despite promising initial sell through rates for outerwear products in both genders.

Speaker 3: In the realm of accessories, women's handbags and men's bags, women's travel items, and small leather goods, belts, footwear, watches, and jewelry all showed strong performance.

In the realm of accessories women's handbags, and men's bags women's travel items and small leather goods belts footwear watches and jewelry all showed strong performances.

Speaker 3: In our America's retail business, we observed contractions in all major categories, including women's and men's apparel and accessories.

In our Americas retail business, we observed contractions in all major categories, including women's and men's apparel and accessories.

Speaker 3: This was primarily attributed to reduced customer.

This was primarily attributable to reduced customer traffic. However.

Speaker 3: However, we did see pockets of success with growth in short.

However, we did see pockets of success with growth in shorts.

Speaker 3: sweaters, robins, and knit tops, activewear, men's pants, and children's apparel.

Sweaters woven and knit tops activewear mens and childrens apparel.

Speaker 3: Additionally, several denim products perform well, driven by new fashion styles such as straight-leg jeans, cargo silhouettes, jumpsuits, and overalls.

Additionally, several denim products performed well driven by new fashion styles, such as straight leg jeans cargo silhouette jumpsuits and overhauls.

Speaker 3: Similar to Europe , the weather played a role in the product performance during the quarter.

Similar to Europe, the weather played a role in the product performance during the quarter.

Speaker 3: In accessories, handbags remain the driving force and deliver a solid

Accessories handbags remains a driving force and deliver a solid quarter.

Speaker 3: Across the Asian market, we continue to see strong performance in accessories, followed by men's and women's apparel. In accessories, women's handbags, watches, small leather goods, and men's belts led the chart.

Across the Asian market, we continued to see strong performance in accessories, followed by men's and women's apparel.

In accessories women's handbags watches small leather goods and mens belt led the charge.

Speaker 3: Among apparel categories, women's and men's sweaters, skirts, and shorts achieved strong performance. Our children's apparel segment also performed well during the period.

Among our apparel category women's and men's sweaters skirts and shorts achieved strong performance our children's apparel segment also performed well during the period.

During the third quarter, we benefited from pulse efforts and our investments in advertising and marketing, including our recent campaign with Georgina Rodriguez at the face of gas of Marciano for fall 2023.

Speaker 3: All the products modeled by Georgina have strong filters.

All of the product model to buy Georgina had strong sell through.

Speaker 3: Based on this success, Poe and the team are currently shooting next year's campaign and once again featuring Georgina. In addition, we just announced that Italian singer and rising international star Matteo Bocelli, son of the world-renowned sensation Andrea Bocelli, is being featured in our 2023 holiday campaign.

Based on this success, Paul and the team are currently shooting next year's campaign and once again featuring Georgina.

In addition, we just announced that Italian singer on rising International Star Matteo Bocelli song of the World renowned sensation Andrea Bocelli is being featured in our 2023 holiday campaign.

Speaker 3: As we look towards the holiday season, we are confident in our plans and very pleased with our inventory position.

As we look towards the holiday season, we are confident in our plans and I'm very pleased with our inventory position.

We believe that consumers will be looking for value and they offered and have been sensitive to base with our product assortment plan and our promotional cadence in calendar <unk>.

Speaker 3: We closed the third quarter period with inventories 2% lower than a year ago and in line with our plan. We are very pleased with the composition of our inventory and believe that we are well positioned to respond to customer demand during the holidays and into the new year.

We closed the third quarter period, with inventories, 2% lower than a year ago and in line with our plan. We are very pleased with the composition of our inventory and believe that we are well positioned to respond to customer demand during the holidays and into the new year.

Speaker 3: We still expect to close the year with inventories 10% below last year.

We still expect to close the year with inventory, 10% below last year's levels.

Speaker 3: Regarding our outlook for the fourth quarter, we have taken a close look at our recent customer traffic and sales trends for our direct-to-consumer business in each region of the world.

Regarding our outlook for the fourth quarter, we have taken a close look at our recent customer traffic and sales trends for our direct to consumer business in each region of the world.

Speaker 3: We have also updated our other business expectations and are assessing the state of the consumer across markets, including the impact current geopolitical factors are having on the consumer's mindset.

We have also updated our other business expectations and are assessing the state of the consumer cross market, including the impact current geopolitical factors are having on the consumer's mindset.

Speaker 3: Based on this, we have taken a more cautious view of our outlook and tempered our top and bottom line expectations for the fourth quarter and the fiscal year.

Based on this we have taken a more cautious view of our outlook and tempered our top and bottom line expectations for the fourth quarter and the fiscal year.

Speaker 3: All said, we now expect revenue growth for the fiscal year between 1.8% and 2.4% in U.S. dollars and an adjusted operating margin for the year between 8.9 and 9.1%.

All said, we now expect revenue growth for the fiscal year between one 8% and two 4% in U S dollars and an adjusted operating margin for the year between eight nine and nine 1%.

Speaker 3: Regarding earnings per share, which Marcus will discuss further, mark-to-market adjustments resulting from foreign currency and bond and equity market exposures, mostly unrealized, negatively impacted our EPS return.

Regarding earnings per share, which markets will discuss further mark to market adjustments, resulting from foreign currency on bond and equity market exposures, mostly unrealized negatively impacted our EPS results.

Speaker 3: Inclusive of this charge, we now expect adjusted EPS for the fiscal year to reach between $2.67 and $2.74.

Inclusive of this charge, we now expect adjusted EPS for the fiscal year to reach between $2 67.

And $2 74 per share.

Speaker 3: As we look ahead, we are invigorated by the multitude of opportunities that await our country.

As we look ahead, we are invigorated by the multitude of opportunities that await our company.

Speaker 3: We have been diligently engaged in our strategic planning process, and we are executed against six critical objects.

We have been diligently engaged in our strategic planning process and we are executing against six critical objectives.

Speaker 3: These objectives relate to organization and talent growth.

This objectives relate to organization and talent.

Speaker 3: brand relevancy, customer centricity and digital expansion, product excellence, and last, optimization, efficiency, profitability, and return on invested capital.

Growth Bruce.

Brand relevancy.

Customer Centricity and digital expansion product excellence and lost optimization efficiency profitability and return on invested capital.

Speaker 3: These serve as the cornerstones of our strategic plan, which I look forward to sharing in more detail at a later date.

These serve as the cornerstones of our strategic plan, which I look forward to sharing in more detail at a later date.

Speaker 3: At a high level, starting with the organization and talent, our goal is to have a best-in-class team of highly engaged and strongly committed individuals capable to lead and take this company to the next level of growth and value.

At a high level, starting with the organization on talent. Our goal is to have a best in class team of highly engaged and strongly committed individuals capable to lead and take this company to the next level of growth and value creation.

Speaker 3: We are currently working with an international consulting company to conduct an assessment of our global organization to benchmark our talent and improve lines of reporting and accountability to ensure we are well positioned to grow.

We are currently working with an international consulting company to conduct an assessment of our global organization to benchmark, our talent and improved lines of reporting on a kind of ability to ensure we are well positioned to grow.

Speaker 3: Regarding our culture and our work environment, we are very proud to share with you our first-place ranking in the recent list of the top 25 companies in Los Angeles by the Business Report. Next.

Regarding our culture and our work environment, we're very proud to share with you. Our first place ranking in the recent list of the top 25 companies in Los Angeles by the business report.

Next I will focus on our growth objectives.

Speaker 3: Our goal is to accelerate our revenue growth rate for the company and deliver a faster growth rate of our operating earnings, which will result in the consistent expansion of our operating

Our goal is to accelerate our revenue growth rate for the company and deliver a faster growth rate of our operating earnings which will result in the consistent expansion of our operating margins.

Speaker 3: In a previous call, I mentioned the opportunity to internalize businesses that are being licensed, such as the current license that we have with G3 for the design, development, and distribution of dresses and outerwear in North America.

Previous call I mentioned, the opportunity to internalize businesses that are being licensed such as the current license that we have with G. III for the design development and distribution of dresses and outerwear in North America.

Speaker 3: These businesses represented $50 million per year at Wholesale, and we are now in the process of transitioning them to our internal organization.

This business represented $50 million per year at wholesale.

And we are now in the process of transitioning them to our internal organization.

Speaker 3: Our teams have already developed the product for both categories and have presented the collections to our wholesale customers at market recently.

Our teams have already developed the product for both categories and have presented the collections to our wholesale customers at market recently.

Speaker 3: While it is early in the cycle, customers reacted well to the assortment and we are optimistic about the potential of this change to drive both top and bottom line growth.

It is early in the cycle customers reacted well to the assortment and we are optimistic about the potential of this change to drive both top and bottom line growth.

Speaker 3: Building on our growth opportunities, I'm very excited to share with you today the expansion of our brand portfolio with the launch of our new Guess Jeans brand.

Building on our growth opportunities I'm very excited to share with you today the expansion of our brand portfolio with the launch of our new guest jeans brand.

Speaker 3: With guest genes, we'll be addressing the casual business head-on, and while the brand is targeting the younger Gen Z and millennial audience, the assortment is truly for everyone, multi-generation.

With guest Jean will be addressing the casual business head on and while the brand is targeting the younger Gen Z and millennial audience. The assortment is truly for everyone multi generational.

Speaker 3: Nicolai Marciano is leading this expansion and we are very excited with this opportunity.

Nicolai Marciano is leading this expansion and we are very excited with this opportunity a.

Speaker 3: As you well know, during the last few years, we executed a significant elevation of our guest brand.

As you well know during the last few years, we executed a significant elevation of our guest brands.

Speaker 3: As a result of this transformation, we created great separation between our current, very sophisticated, more dressy assortment and the more casual product assortment that was part of our brand's DNA since the inception of Guess in the world of dance.

As a result of this transformation, we created great separation between our current very sophisticated more dressy assortments and the more casual product assortment that was part of our brand DNA since the inception of guests in the worlds of denim.

Speaker 3: We now see tremendous opportunity in this casual lifestyle space. And we plan to reclaim our denim legacy with the launch of the new brand in 2020.

We now see tremendous opportunity in this casual lifestyle space and we plan to reclaim our denim legacy with the launch of the new brands in 2024.

Speaker 3: focused on product innovation, a present-day mindset centered around sustainable manufacturing, and supported by a robust celebrity marketing strategy embodying the American West Coast denim.

<unk> focused on product innovation, a present day mindset center around sustainable manufacturing and supported by a robust celebrity marketing strategy and barring the American West Coast Denim brands.

Speaker 3: The plan will also include a new visual identity and the unveiling of a new ritual.

Plan will also include a new visual identity and the unveiling of our new retail concept.

Speaker 3: We expect to capture a wide audience with the guest genes offering, primarily the men's category.

We expect to capture a wide audience with the guests James offering primarily the men's customer.

Speaker 3: The new brand is poised to establish a new benchmark in denim practices and innovation, reaffirming our dominance and our roots in the denim category.

The new brand is poised to establish a new benchmark in denim practices and innovation, we are affirming our dominance and our roots in the denim category.

Speaker 3: The brand will be distributed globally in the wholesale market and through the company's direct-to-consumer channels in companies' own stores and websites.

The brand will be distributed globally in the wholesale market and through the company's direct to consumer channels and company owned stores and website.

Speaker 3: Price points are very competitive and the product quality and design capitalized on our rich archives which contain over 40 years of amazing design, styling and creativity.

Price points are very competitive and the product quality and design capitalized on our rich archives, which contain over 40 years of amazing design styling and creativity.

Speaker 3: My last point of growth relates to a new project that we're working on in China.

My last point on growth relates to a new project that we're working on in China.

Speaker 3: We have engaged a Chinese consulting company called Sunqi based in Shanghai.

We have engaged a Chinese consulting company called <unk> based in Shanghai.

Speaker 3: This firm has significant capabilities in design, merchandising, and managing retail and e-commerce business.

This firm has significant capabilities in design merchandising and managing retail and e-commerce businesses.

Speaker 3: They also have strong relationships in the entertainment and celebrity network.

They also have strong relationships in the entertainment and celebrity networks.

Speaker 3: They have helped many brands succeed in the local marketplace and are developing a plan to help us achieve continued

They have helped many brands succeed in the local marketplace and are developing a plan to help us achieve continued success.

Speaker 3: We are excited about the opportunities here and plan to begin execution of this plan in the near future.

We are excited about the opportunities here and plan to begin execution of this plan in the new year.

Speaker 3: The guest brand is well-known in China, and we believe we have a good chance to expand our business there and improve profitability.

The guess brand is well known in China, and we believe we have a good chance to expand our business there and improve profitability.

Speaker 3: The next objective that I'd like to address today is optimization, efficiency, profitability, and return invested.

The next objective that I'd like to address today's optimization efficiency profitability and return on invested capital.

Speaker 3: We are really proud of our accomplishments to date on this.

We're really proud of our accomplishments to date on this front.

Speaker 3: During the last few years, we used our capital efficiently and rewarded shareholders handsomely with significant share repurchases and generous dividends.

During the last few years, we used our capital efficiently and rewarded shareholders handsomely with significant share repurchases and generous dividend.

Speaker 3: We almost doubled our operating margin. And we achieved significant improvements in return investment.

<unk> doubled our operating margin and we achieved significant improvements in return on invested capital.

Speaker 3: Nevertheless, we see significant opportunities for further optimization and profitability growth. We strongly believe that the use of technology and innovation can unlock significant value creation across the business.

Nevertheless, we see significant opportunities for further optimization on profitability growth.

We strongly believe that the use of technology and innovation can unlock significant value creation across the businesses.

Speaker 3: The last few years, we have implemented several new applications to improve data analysis and decision-making.

Last few years, we have implemented several new applications to improve data analysis and decision making.

Speaker 3: The new applications focused on customer analytics, primarily the Salesforce solution called Customer 360.

The new applications focus on customer analytics, primarily the salesforce solution called customer 360.

Speaker 3: inventory planning, allocation, and store transfers, and we are now in the process of implementing a new PLM system called Centric-8 and a new markdown optimization solution, both of which should be completed by next

Inventory planning allocation and store transfers and we are now in the process of implementing a new <unk> system called centric eight and a new markdown optimization solution, both of which should be completed by next year.

Speaker 3: I am confident that our success in managing inventories well through the very challenging times that we faced due to the pandemic and supply chain disruptions was driven by great teams that were enabled with this new.

I am confident that our success in managing inventories well through the very challenging times that we face due to the pandemic and supply chain disruptions was driven by great teams that were enabled with this new tools.

Speaker 3: Last, to support our strategic planning process, we have been working together with a consulting firm to analyze, assess, and make recommendations regarding every aspect of our business based on data analytics and peer industry benches.

Lost to support our strategic planning process, we have been working together with a consulting firm to analyze assess and make recommendations regarding every aspects of our business based on data analytics and peer industry benchmarking.

Speaker 3: This work should be finalized by February of 2024 and will help inform our long-term plan development.

This work should be finalized by February of 2024.

Will help inform our long term plan development.

Speaker 3: As we have previously mentioned, we anticipate sharing our strategic plan at an investor day event, which we now plan to schedule in the upcoming.

As we have previously mentioned, we anticipate sharing our strategic plan at an Investor day event, which we now plan to schedule in the upcoming year.

Speaker 3: As I close my remarks today, I want to share with you why I believe that Guess is in a very special time of its history and at an inflection point of its development.

As I close my remarks today I want to share with you why I believe the guest is in a very special time of its history.

The inflection point of its development.

Speaker 3: Our guest brand and company are celebrating 42 years of business success and a history of global growth. Today, we see a unique list of accomplishments built over the years. We have built brand awareness.

Our guess brand and company are celebrating 42 years of business success, and a history of global growth.

Today, we see a unique list of accomplishments build to over the years.

We have built brand awareness all over the world.

Speaker 3: Our internal teams and licensee partners have developed amazing, relevant products that represent an entire lifestyle our customers love and embrace.

Our internal teams and licensee partners have developed amazing relevant products that represent an entire lifestyle, our customers love and embrace.

Speaker 3: We have created a distribution network, which combines different channels that optimize distribution models by market with local organizations to support each system.

We have created a distribution network, which combined different channels that optimize distribution models by market with local organizations to support each business.

Speaker 3: We assembled an efficient infrastructure that services and supports each area of our business, including design, product development, sourcing and distribution, image production and marketing, and many more.

We have assembled an efficient infrastructure that services and supports each area of our business, including design product development sourcing and distribution image production on marketing on many more functions.

Speaker 3: We have built a strong capital structure that has capacity to grow, deliver high returns on invested capital, and create significant shareholder value. And lastly, we have a world-class global team of leaders and associates that have done a fantastic job getting the business here and looking ahead can meaningfully contribute to its further expansion and profitability growth.

We have built a strong capital structure that has capacity to grow deliver high returns on invested capital and create significant shareholder value and lastly.

We have a world class global team of leaders and associates that have done a fantastic job getting the business here.

Looking ahead can meaningfully contribute to its further expansion and profitability growth.

Speaker 3: What we have a guest today is an incredible platform that up to now has only serviced one brand and model. The opportunity is clear, this platform can power a bigger business, one that can better generate margin expansion, synergistic growth and significant value creation over time.

While we have a gas today is an incredible platform that up to now is only serviced one brand and model.

The opportunity is clear.

This platform can power a bigger business, one that can better generate margin expansion synergistic growth and significant value creation over time.

Speaker 3: Our recent initiatives, including the internalization of existing licenses and the launch of guest genes to target the young consumer, are good examples of growth that leverage our infrastructure.

Our recent initiatives, including the internalization of existing licenses and the launch of guests genes to target. The young consumer are good examples of growth that leverage our infrastructure.

Speaker 3: I want to take a moment to acknowledge that this exciting opportunity is built upon the strong foundation that was established over 42 years ago when Guess was created.

I want to take a moment to acknowledge that this exciting opportunity to build upon the strong foundation that was established over 42 years ago when gas was created.

Speaker 3: It was then when the four Marciano brothers came to the U.S. from France to pursue their own American dream. That dream has been converted.

It was then when the foreign Marciano brothers came to the U S from France to pursue their own American Dream.

That dream has been converted into a legacy.

Speaker 3: And Paul continues to carry the torch every day with his unwavering commitment, passion, vision and leadership.

I am Paul continues to carry the torch everyday with its unwavering commitment passion vision and leadership.

Speaker 3: previously announced Maurice, after 42 years of amazing vision and hard work helping oversee Guess's evolution from a small family business and then a pioneer into a global lifestyle brand, has decided to retire and focus on his health and

Previously announced more east up to 42 years of Amazing vision and hard work, helping oversee gives us evolution from a small family business in denim pioneer into a global lifestyle brand.

It's either to retire and focus on his health and family.

Speaker 3: From our entire guest family, we thank Maurice for all his extraordinary contributions to this company and to this team and wish him the very best.

Our Interrogates family, we think Maurice for all his extraordinary contributions to this company into this team and wish him the very best.

Speaker 3: Looking ahead, our key strategic focus will be on growth. And I couldn't be more excited to leverage our amazing infrastructure built over the last 42 years to capture our extraordinary opportunity to develop multiple devices.

Looking ahead, our key strategic focus will be on growth and.

And I couldnt be more excited to leverage our amazing infrastructure built over the last 42 years to capture our extraordinary opportunity to develop multiple businesses.

Speaker 3: With that, I would like to press the call to Marcus. Marcus, please go ahead.

With that I would like to pass the call to Markus Markus. Please go ahead.

Speaker 4: Thank you, Carlos, and good afternoon, everyone. We are pleased with our performance this quarter.

Thank you Carlos and good afternoon, everyone. We are pleased with our performance this quarter.

Speaker 4: Revenue growth was in line with our expectations, driven primarily by our strong licensing business, which offset lower-than-expected revenues in our direct-to-consumer channels in Europe and Asia.

Revenue growth was in line with our expectations, driven primarily by our strong licensing business, which offset lower than expected revenues in our direct to consumer channel in Europe and Asia.

Speaker 4: Adjusted operating earnings exceeded our expectations for the quarter, driven by better-than-expected performance of our licensing business.

Adjusted operating earnings exceeded our expectations for the quarter driven by better than expected performance of our licensing business.

Speaker 4: and strong cost controls enabling us to deliver an adjusted operating margin of 8.9 percent.

And strong cost controls, enabling us to deliver an adjusted operating margin of eight 9% exceeding our guidance.

Speaker 4: As Carlos alluded in his opening remarks, yet again, we demonstrated the power of our diversified business model to lean on areas of strength in our business to mitigate pockets of weakness and deliver our operating results in a dynamic environment.

Carlos alluded in his opening remarks, yet again, we demonstrated the power of our diversified business model to lean on areas of strength in our business to mitigate pockets of weakness and deliver our operating results in a dynamic environment.

Speaker 4: Our last 12-month free cash flow reached US$154 million.

Our last 12 months free cash flow reached 154 million U S dollars.

Speaker 4: And we are on track to achieve our fiscal year 24 target of 160 million.

And we are on track to achieve our fiscal year 'twenty four targets of $160 million.

Speaker 4: We are proud of our strong balance sheet that enables us to invest in the growth of our business and build on our commitment to returning capital to our shareholders.

We are proud of our strong balance sheet that enables us to invest in the growth of our business and built on our commitment to returning capital to our shareholders.

Speaker 4: With this discipline, we entered the holiday season with clean and healthy inventories. Let me take you through.

With this discipline, we entered the holiday season with clean and healthy inventories.

Let me take you through our third quarter results in more detail.

Speaker 4: Total company revenues in the third quarter were $651 million.

Total company revenues in the third quarter for a $651 million.

Speaker 4: an increase of 3% in U.S. dollars from last year's third quarter and 1% in constant cash.

An increase of 3% in U S dollars from last year's third quarter, and 1% in constant currency, which reflects the strong growth performance from our Europe and licensing segments.

Speaker 4: which reflects the strong growth performance from our European Lightning Team.

Speaker 4: Turning to our segment performance, starting with Europe .

Turning to our segment performance starting with Europe.

Speaker 4: During the third quarter, strong retail comparable sales drove our continued European business.

In the third quarter strong retail comparable sales growth all continued European defense growth.

Speaker 4: with revenues increasing 6% in U.S. dollars and 5% in conglomerates.

Revenues, increasing 6% in U S dollars and 5% in constant currency.

Speaker 4: third quarter retail comps, including e-commerce, increased 7% in concentration.

Third quarter retail comps, including e-commerce increased 7% in constant currencies.

Speaker 4: However, we did observe a deceleration in traffic into our stores and our website.

However, we did observe a deceleration in traffic into our stores and our website.

Speaker 4: As a result, our Omnicomp growth decelerated from 11% in the second quarter to 7% in the third quarter.

As a result, our omni comp growth decelerated from 11% in the second quarter to 7% in the third quarter.

Speaker 4: Our stores delivered an 8% constant currency comp increase in Q3, driven by continued strong AUR growth, more than offsetting a modest conversion.

Our stores delivered an 8% constant currency comp increase in Q3, driven by continued strong AUR growth more than offsetting a modest conversion decline.

Speaker 4: As in the past few quarters, Turkey's hyperinflation had a meaningful impact on the comps and excluding Turkey, that comp increase would have been

As in the past few quarters, Turkey, hyper inflation had a meaningful impact on our comp and excluding Turkey that comp increase would have been 6%.

Speaker 4: In European wholesale, our revenues increased 1% in constant current.

And European wholesale revenues increased 1% in constant currency.

Speaker 4: The operating margin in our European business decreased by 90 basis points to 10.3%.

The operating margin in our European business decreased by 90 basis points to 10, 3%.

Speaker 4: Currency headwinds and higher expenses were partially offset by higher initial markups and strong comp sales.

Currency headwinds and higher expenses were partially offset by higher initial markups and strong comp sales.

In Americas retail.

Speaker 4: Revenues decreased 7% in U.S. dollars and 8% in constant current.

Revenues decreased 7% in U S dollars and 8% in constant currency.

Speaker 4: North American retail comps, including e-commerce, declined 5% in contrast.

North American retail comps, including e-commerce declined 5% in constant currency.

Speaker 4: As Carlos shared, traffic remains under pressure in our North American stores, and our store comps decreased 6% in constant currency in the quarter.

As Carla shared traffic remains under pressure in our North American stores, and our store comps decreased 6% in constant currency in the quarter.

Speaker 4: The decrease was driven by the U.S. stores, while our stores in Canada achieved a low single-digit Stockholm increase in the quarter.

The decrease was driven by the U S stores, while our stores in Canada achieved low single digit store comp increase in the quarter.

Speaker 4: We anticipate these underlying trends will continue throughout the fourth.

We anticipate these underlying trends will continue throughout the fourth quarter.

Speaker 4: Our US and Canada Ecom business performance was flat compared to Q3 of last year.

Our U S and Canada E Comm business performance was flat compared to Q3 of last year.

Speaker 4: with a higher average order value offsetting lower traffic to our website.

With a higher average order value offsetting lower traffic to our website.

Speaker 4: America's retail posted a 5.3% operating margin compared to a 6.9% operating margin a year.

Americas retail posted a five 3% operating margin compared to six 9% operating margin a year earlier.

Speaker 4: The 160 basis points decrease in operating margin was mainly driven by unfavorable impact from lower revenues and higher expenses, partially offset by a higher IMF.

Steve 160 basis points decrease in operating margin was mainly driven by unfavorable impact from lower revenues and higher expenses, partially offset by a higher ICU.

Speaker 4: In American wholesale, revenues increased by 4% in U.S. dollars and decreased 1% in constant currency.

In Americas wholesale revenues increased by 4% in U S dollars and decreased 1% in constant currency.

Speaker 4: Higher shipments in Mexico were offset by lower deliveries in the US and Canada.

Higher shipments in Mexico were offset by lower deliveries in the U S and Canada.

Speaker 4: Operating margin reached 29.1%, a meaningful improvement of 9.9 points from Q3 of last year, mainly driven by improved product margin.

Operating margin reached 29, 1% a meaningful improvement of $9 nine points from Q3 of last year, mainly driven by improved product margins.

Speaker 4: In Asia, revenue grew 2% in US dollars and remained flat in constant currency.

In Asia revenue grew 2% in U S dollars and remained flat in constant currency.

Speaker 4: Retail comps, including e-commerce for the region, decreased 9% in constant currency, mainly offset by growth in net new stores in Korea.

Retail comps, including e-commerce for the region decreased 9% in constant currency, mainly offset by growth in net new stores in Korea.

Speaker 4: Operating margin improved 100 basis points to 1% driven by the performance of these new stores and partially offset by higher income.

Operating margin improved 100 basis points to 1% driven by the performance of these new stores and partially offset by higher expenses.

Speaker 4: We are very pleased with the progress in the first three quarters of fiscal 24 as we improve the earnings from operations by $11 million from negative $7 million to positive $4 million mainly driven by Korea and greater

We are very pleased with the progress in.

In the first three quarters of fiscal 'twenty fall as we improve the earnings from operations by $11 million from negative $7 million.

Positive 4 million, mainly driven by Korea, and greater China.

Speaker 4: And finally, our licensing segment had a strong quarter and exceeded our expectations with revenues increasing 19% in both U.S. dollars and constant currency.

And finally, our licensing segment had a strong quarter and exceeded our expectations with revenues, increasing 19% in both U S dollars and constant currency.

Speaker 4: Fragrances, handbags, watches, eyewear and footwear had a very strong performance during the quarter.

Fragrances handbags watches eyewear and footwear had a very strong performance during the quarter.

Speaker 4: Excluding a positive one-time adjustment in the third quarter, our licensed business increased revenues in the low teens. Segment operating margin was 93.1%.

Excluding a positive one time adjustments in the third quarter, our license business increased revenues in the low teens.

Segment operating.

Operating margin was 93, 1% and operating profit increased by 24%.

Speaker 4: Total company gross margin was 44.7% in Q3, an improvement of 220 basis points from last year.

Total company gross margin was 44, 7% in Q3, an improvement of 220 basis points from last year.

Speaker 4: Improved IMUs, mainly from low inbound freight and disabled second mix, especially driven by our licensing segment, were partially offset by a negative currency impact on our product model.

Improved <unk>, mainly from lower inbound freight.

And disable second mix, especially driven by our licensing segment were partially offset by a negative currency impact on our product margins.

Speaker 4: Adjusted SG&A for the quarter increased 10% to $233 million.

Adjusted SG&A for the quarter increased 10% to $233 million.

Speaker 4: Performance-based compensation in the third quarter increased $9 million versus last year.

Performance based compensation in the third quarter increased $9 million versus last year.

SPL lapping of reversal adjustment.

Speaker 4: This represented roughly 40% of this year's SG&A expenditure.

This represented roughly 40% of this year's SG&A expense increase.

Speaker 4: Currency headwinds accounted for another 30% of the expense increase in the third quarter of fiscal 2020.

Currency headwinds accounted for another 40% of the expense increase in the third quarter of fiscal 'twenty four.

Speaker 4: Further, we experience inflationary pressures on our cost structure, including higher self-employment.

Further we experienced inflationary pressures on our cost structure, including higher selling expenses in our retail store and.

Speaker 4: and we made investments in our infrastructure, most notably in Europe .

And we've made investments in our infrastructure, most notably in Europe.

Speaker 4: For the quarter, our adjusted SG&A rate increased 240 basis points to 35.8%.

For the quarter, our adjusted SG&A rate increased 240 basis points to 35, 8%.

Speaker 4: The adjusted operating profit reached $58 million on Pawe?'s last bid.

Adjusted operating profit reached $58 million on published last year.

Speaker 4: Our better-than-expected adjusted operating margin was 8.9%.

Our better than expected adjusted operating margin was eight 9% 20 basis points below last year's Q3, driven primarily by a higher initial markup.

Speaker 4: 20 basis points below last year's Q3, driven primarily by a higher initial markup, favorable business mix, offset by the negative currency impact, and higher expenses, including higher performance.

<unk> business mix offset by the negative currency impact and higher expenses, including higher performance based compensation.

Speaker 4: Currency headwinds negatively affected adjusted operating profit by $7 million and adjusted operating margin by $120 billion.

Currency headwinds negatively affected adjusted operating profit by $7 million and adjusted operating margin by 120 basis points.

Speaker 4: In the quarter, we recorded non-operating net charges of $11 million. These charges, most...

In the quarter, we recorded non operating net charges of $11 million.

These charges most of which are unrealized relate to the revaluation of certain of our foreign subsidiaries net assets and liabilities into U S dollars and the net charges to mark our deferred compensation plan and surf plant assets to market.

Speaker 4: relate to the revaluation of certain of our foreign subsidiaries' net assets and liabilities into U.S. dollars and the net charges to mark our Deferred Compensation Plan and SERP plan assets to mark them.

Speaker 4: and we recorded and adjusted the effective tax rate of 31%.

And we recorded an adjusted effective tax rate of 31%.

Speaker 4: The adjusted tax rate excludes a discrete tax benefit of $31 million, which is recorded in our GAAP results, related primarily to our Swiss subsidies.

The adjusted tax rate excludes a discrete tax benefit of $31 million in U S dollars, which is recorded in our GAAP results related primarily to our Swiss subsidiary.

Speaker 4: adjusted Q3 diluted earnings per share was $0.49 compared to $0.44 of earnings per share in last year's third quarter.

Adjusted Q3 diluted earnings per share was <unk> 49.

Compared to 44 of earnings per share in last year's third quarter.

Speaker 4: Excluding the negative impact of the non-operating net charges of 11 million US dollars, our earnings per share would be close to the high end of our Q3 EPS guidance.

Excluding the negative impact of the nonoperating net charges of 11 million U S dollars our earnings per share would be close to the high end of our Q3 EPS guidance.

Moving to the balance sheets.

Speaker 4: We ended the quarter with $244 million in cash.

We ended the quarter with $244 million in cash.

Speaker 4: compared to 174 million a year ago.

Compared to $174 million a year ago.

Speaker 4: The most significant drivers of that $70 million cash bill over the last four quarters include $154 million of free cash flow offset by $59 million in dividends and $16 million lower borrowings on our credit

The most significant drivers of that $70 million cash builds over the last four quarters include $154 million of free cash flow offset by $59 million in dividends and $16 million lower borrowings on our credit facilities.

Speaker 4: We ended the quarter with a total of $315 million of borrowing capacity on our various global facilities.

We ended the quarter with a total of $315 million of borrowing capacity on our various global facilities.

Speaker 4: So roughly 560 million US dollars of available.

So roughly $560 million of available liquidity.

Speaker 4: We continued managing our inventory as well. We ended the quarter with $562 million, down 2% in US dollars, and 4% in constant currency versus last.

We continued managing our inventory as well.

We ended the quarter with $562 million down 2% in U S dollars and 4% in constant currency versus last year.

Speaker 4: Overall, we are very pleased with our inventory composition and forward orders and feel we are well positioned to support our business during the holiday season and beyond.

Overall, we are very pleased with our inventory composition and forward orders and field, we are well positioned to support our business during the holiday season and beyond.

Speaker 4: Our receivables were 341 million U.S. dollars.

Our receivables were $341 million.

Speaker 4: 7% increase versus last year's $319 million.

A 7% increase versus last year's $319 million.

Speaker 4: On a constant currency basis, receivables increase by 3%.

On a constant currency basis receivables increased by 3%.

Speaker 4: For the first three quarters, capital expenditures were $52 million, mainly driven by investments in story models and technology.

For the first three quarters capital expenditures for our $52 million.

Mainly driven by investments in store Remodels and technology.

Speaker 4: This compared to 72 million U.S. dollars in the same period last year.

This compared to $72 million in the same period last year.

Speaker 4: In the first three quarters, we consumed $16 million of free cash flow, an improvement of $82 million compared with the cash consumption of $98 million for the same period last year.

In the first three quarters, we consumed $16 million of free cash flow, an improvement of $82 million compared with the cash consumption of $98 million for the same period last year.

Speaker 4: The improved pre-cash flow resulted from favorable changes in working capital, including a substantial reduction in inventories and lower capital expenditures.

The improved free cash flow resulted from favorable changes in working capital, including a substantial reduction in inventories and lower capital expenditures.

Turning now to our outlook for the rest of the year.

Speaker 4: As we assess the fourth quarter, we do expect some of the softening consumer trends prevalent in the third quarter to continue into the fourth.

As we assess the fourth quarter, we do expect some of the softening consumer trends prevalent in the third quarter to continue into the fourth.

Speaker 4: Looking ahead, our outlook is based on our best assessment of the current geopolitical backdrop as well as the overall macroeconomic environment.

Looking ahead, our outlook is based on our best assessment of the current geopolitical backdrop as well as the overall macroeconomic environment.

Speaker 4: This includes inflationary pressures and other consumer spending-related headwinds and foreign currency volatility, among others.

This includes inflationary pressures and other consumer spending related headwind and foreign currency volatility among others.

Speaker 4: in Europe , but we do expect to continue to see productivity improvements in our stores in the fourth quarter.

In Europe, while we do expect to continue to see productivity improvements in our stores in the fourth quarter.

Speaker 4: We are planning the business with lower traffic trends to both our stores and websites similar to Q3.

We are planning the business with lower traffic trends to both our stores and website similar to Q3.

Speaker 4: Our European wholesale order book for the spring summer 24 collection is roughly flat in constant

Our European wholesale order book for the spring Summer 'twenty four collection, it's roughly flat in constant currencies.

Speaker 4: In North America, also in our direct-to-consumer businesses, our traffic headwinds per...

In North America also in our direct to consumer businesses.

Traffic headwinds persist.

Speaker 4: We are taking a more cautious view on our sales expectations for the full.

We are taking a more cautious view on our sales expectations for the fourth quarter.

Speaker 4: Therefore, for the fourth quarter, we expect revenues will increase in the range of 4 to 6% both in U.S. dollars and in constant cash.

Therefore for the fourth quarter, we expect revenues will increase in the range of two 6%.

<unk> in U S dollars and in constant currency.

Speaker 4: This includes the benefit of the fourth quarter's extra week, which we estimate to be about $30 million.

This includes the benefit of the fourth quarter's extra week, which we estimate to be about 30 million U S dollars.

Speaker 4: For the fourth quarter, we expect adjusted operating margins to expand to range between 14.1% and 14.4%, up from 13.1% last year.

For the fourth quarter, we expect adjusted operating margin to expand to range between $14, one and 14, 4% up from 13, 1% last year.

Speaker 4: As higher product margins, fueled mainly by lower trade costs, will be partially offset by higher expenses, supporting our revenue.

Higher product margin fueled mainly by lower freight costs will be partially offset by higher expenses supporting our revenue growth.

Speaker 4: For the fourth quarter, we expect adjusted earnings per share in the range of $1.53 to $1.63.

For the fourth quarter, we expect adjusted earnings per share in the range of $1 53.

Two $1 60.

Speaker 4: For the full year, we expect revenues will grow in the range between 1.8 and 2.4%. Both in US dollars.

For the full year, we expect revenues will grow in the range between one eight and two 4%.

Both in U S dollars and in constant currency.

Speaker 4: We expect adjusted operating margin between 8.9% and 9.1% with a higher expense rate, more than offsetting expanded gross margin.

We expect adjusted operating margin between eight 9% and nine 1%.

If a higher expense rate more than offsetting the gross margin.

Speaker 4: For the full year, we expect adjusted earnings per share in the range of $2.67 and $2.74. And with that.

For the full year, we expect adjusted earnings per share in the range of $2 and 67%.

$2.

74000.

And with that.

We can now open the call up for questions.

Speaker 1: Thank you. Ladies and gentlemen, if you'd like to ask a question, please press star 1 1 on your telephone. Again, if you would like to ask a question, please press star 1 1. One moment for our first question.

Thank you.

Ladies and gentlemen would like to ask a question. Please press star one on your telephone again, if you would like to ask a question. Please press star one one.

One moment for your first question.

Yes.

Okay.

Oh.

Speaker 4: Our 1st question comes from the line of Eric Beter. Your line is a small cap. Your line is open. Good afternoon. Hi, how are you?

Our first question comes from the line of Eric Beater your lineup of small cap. Your line is open.

Good afternoon.

Hi, how are you Eric.

Good how are you.

I'm very well thank you.

So.

When we look at.

Speaker 5: look at growth in the ramp up next year, how should we be thinking about the drivers here? You talked about the wholesale. How should we be thinking about when the U.S. business on the retail side will start to once again generate positive comps again? I know you've done a tremendous job with the product, but how do you get the consumer, I guess, to come in more often and shop with it?

From the ramp up next year, how should we be thinking about the drivers here you've talked about the wholesale how should we be thinking about when the U S business.

On the retail side, who will search once again generate positive comps again, I know you've done a tremendous job with the product.

Do you get the consumer I guess to come in more often and shop with us.

Speaker 3: Yes, Eric, it's a very good question. We are not prepared to to formally provide any guidance today for next year. But, you know, maybe we can help you with some of the key levels here. You know, just as I mentioned during my prepared remarks, we are working on our strategic plan and we are focusing on those six key strategic objectives. I don't think we need to repeat those, but

Yeah, It's Eric it's a it's a very good question.

We are not prepared to to formally provide any guidance today for next year, but maybe.

Maybe we can help you with some of the key levers here.

Just as I mentioned during my prepared remarks.

We are working on our strategic plan and we are focusing on those six key strategic objectives that I don't think we need to repeat those but.

Speaker 3: one of those is growth. And we are looking at this with a very keen focus on the many opportunities that we have to really bring growth into the organization. And of course, the two examples that I mentioned are gonna impact next year.

One of those is growth and we are looking at this with a very keen focus on the.

The many opportunities that we have to really bring growth into the organization and and of course. The two examples that I mentioned are going to impact.

Next year.

Yes.

Speaker 3: some of them and I'm talking about the internalization of our license.

Some of them.

Talking about the internalization of our license.

Speaker 3: on with the G3 that we are doing now direct.

With G. III that we are doing now a direct and the introduction of the launch of our new brand guests gene and we are very excited about guest James obviously this is going to take some time for us to really build the business, but we feel that this is a very.

Speaker 3: and the introduction, the launch of our new brand Guess Jeans.

Speaker 3: And we are very excited about GetGenes. Obviously this is going to take some time for us to really build the business.

Speaker 3: but we feel that this is a very natural space for us. We think that with the elevation of the brand, of the guest brand, we have created a pretty significant separation from that more dressy, more sophisticated look, more contemporary look.

Natural space for US, we think that with the elevation of the brands of the guess brand we have created a pretty significant separation from that more dressy more.

Sophisticated look more contemporary look.

Speaker 3: from that to what made Guess a very significant, dominant player in denim and in the casual world.

From that to what.

Made guess a very significant dominant player in denim and casual wear.

Speaker 3: So we see a big opportunity here to really go after that. When you think about the more specifics on when are we going to see comps in the different stores and so forth, that is a very difficult question to answer. What we are doing is trying to really concentrate on improving conversion rates.

So we see a big opportunity here to really go after that when you think about more specifics on on when are we going to see comps.

And the different stores and so forth that is very difficult question to answer what we are doing it.

Trying to really concentrate on improving conversion rates.

Speaker 3: We have seen that customer traffic has really slowed down and we don't think that we are alone, especially in our space.

We have seen that customer traffic has really slowed down and we don't think that we are alone, especially in our space.

Speaker 3: We think that our product assortments are really compelling and strong and we see that when the customer is inside the store.

We think that our product assortments are really compelling and strong and we see that when the customer is inside the store.

Speaker 3: We are doing what we can to really enhance our marketing. You know, I'm talking about more of the direct marketing. We're doing.

We are doing what we can to really.

Enhance our marketing and you know them.

Talking about more of the direct marketing we're doing.

Speaker 3: uh some new events to really enhance uh upts and and really uh uh in uh entice the customer to really

Some new events to really enhance our UPC and really.

And entice the customers to really buy more pieces or just gulfport look instead of just buying items.

Speaker 3: buy more pieces or just go for looks instead of just buying items.

Speaker 3: Um, and, um, you know, when you go outside the US You know, just we had a very healthy business in in Canada during the third quarter, too. So, you know, just this were two very different performances on. They were primarily related to customer traffic.

You know when you go outside the U S. We had a very healthy business and in Canada. During the third quarter. Two so you know just this work two very different performances and they were primarily related to customer traffic. When you go to Europe.

Speaker 3: When you go to Europe , we were having a very strong comeback from the pandemic days.

We're having a very strong come back from the pandemic days and we have rebuilt that customer traffic very nicely.

Speaker 3: And we have rebuilt that customer traffic very nicely. We, we saw a deceleration in the third quarter and we are, we think that a lot of this.

We saw deceleration in the third quarter and we are we think that a lot of this had to do with some of the geopolitical situations that we are facing there.

Speaker 3: had to do with some of the geopolitical situations that we are facing there.

Speaker 3: combined with the fact that weather was kind of challenging, especially for fall products. So, you know, overall, I think that we have a good plan. We are looking at next year as an opportunity to see growth again.

Combined with the fact that whether it was kind of challenging especially for fall product. So you know.

Overall, I think that we have a good plan. We are looking at next year as a as an opportunity to see growth again.

Speaker 3: We are going to come back to you with a more specific.

We're going to come back to you with a more specific we have some markets, where we think that we can develop further and you know a good example is India. We're going to end this year with a 25 stores in India. This is up from nothing.

Speaker 3: We have some markets where we think that we can develop further. A good example is India. We're going to end this year with 25 stores in India. This is up from nothing a couple of years ago.

A couple of years ago.

Speaker 3: We have great partners there and every store is profitable. So that gives you an idea of, you know, with the size of that market, what that opportunity could be. You know, we could be talking about over a hundred stores in a few years.

We have great partners, there and every store is profitable. So that gives you an idea of the size of that market.

The opportunity could be we could be talking about over 100 stores in a few years.

Speaker 3: And then, you know, just there are some specifics that I think you have to keep in mind when you think about next year, obviously, we are not going to anniversary the 53rd week that we have this year that represents some, some growth. And, and we think that they are just very.

And then just there are some specifics that I think that you will have to keep in mind. When you think about next year, obviously, we're not gonna.

Diversity, the 50 <unk> week that we have this year that represents some.

Some growth.

And we think that they are.

Just Barry.

Speaker 3: good comparisons when it comes to margin and expenses. We think that we will be able to control the business well. We are not expecting to have, again, a significant increase in margins, because we are now normalizing most of the costs, including inbound freight. But overall, we think that the margin structure of the business should be preserved and protected.

Good comparisons when it comes to margin and expenses, we think that we will be able to control the business well, we are not expecting to have.

Again, a significant increase in margins.

So we are now normalizing most of the costs, including our inbound freight.

So overall, we think that.

The margin structure of the business it should be.

Reserve then protected.

Speaker 5: One more. Marciano, you've done a great job with it. We've seen the expansion of Marciano into men's for Q4. Where does that play in terms of raising the overall impact and potentially driving profits going forward as a potential growth vehicle? Thank you. Good luck for the holiday.

Yeah.

One more marciano, you've done a great job with that we've.

You've seen the expansion of marciano into men's for Q4, where does that play in terms of are you seeing the overall.

Impact potentially driving profits going forward as a potential growth vehicle. Thank you good luck for the holiday.

Speaker 3: Yeah, thank you, Eric. Well, so Marciano is a brand that we continue to invest in. We are expanding that business. You know, Marciano had a very good quarter in Europe .

Yeah. Thank you Eric.

Well, so marciano is a brand that we continue to invest in we.

We are.

Expanding that business in a more central had a very good quarter.

In Europe.

And we think that there is a place in the marketplace.

We think that the product looks beautiful and we have invested in additional quality, we're doing a lot to really be sustainability.

Friendly and and the.

What we have been doing this building some other product classifications with success.

Speaker 3: We think that there is opportunity for this brand and we'll continue to support it. The marketing has been very strong, you know, Georgina was featured with wearing and modeling Marciano products and some of those products were the ones that had the best...

We think that.

There is opportunity for this brand and we'll continue to support it.

The marketing has been a very strong Georgina was featured with wearing and modeling.

Product.

Some of those products were the ones I've had the best sell throughs. So we'll continue pushing with respect to mens just that is a very very small part of the collection and a very small part of the business. You know our focus is primarily on the women's side.

Speaker 3: sell-throughs so you know we'll continue pushing with respect to men's you know just that is a very very small part of the collection and a very small part of the business you know our focus is primarily on on the women's side.

Thank you.

One moment please.

Speaker 1: Our next question comes from the line of Corey Tarlow of Jeffries. Your line is open. Great.

Our next question comes from the line of Corey Carlo.

Of Jefferies. Your line is open.

Okay.

Great. Thanks.

Carlos as you assess the.

<unk>.

Speaker 6: health of your customer and the trajectory for the America's business, what do you think is due to, as you look to pick apart the performance in the Americas, how do you parse out what's just...

Health of your customer.

And the trajectory for the Americas business, what do you think is due to.

As you look to pick apart the performance in the Americas, how do you parse out.

What's just.

Speaker 6: some general weakness in the consumer versus just taking time for some of your initiatives to take hold and gain traction among the consumer. Would be great to get just get some color on the behavior of your customer. And how that is affecting the business overall in the American.

Some general weakness in the consumer versus just taking time for.

Some of your initiatives to take hold and gain traction along with the consumer.

Would be would be great to just get some color on the behavior of your customer.

And how that.

Is affecting the business overall in the Americas.

Speaker 3: Yeah, thank you, Corey. Hi. You know, just when we see the way the consumer is behaving once they are in our stores, you know, we don't see significant differences from how the consumer was behaving in the past. Really, the number one variable here is with customer traffic.

Yes, Thank you Corey hi.

Yeah.

Uh huh.

When we see the way the consumer is behaving one once they are in our stores you know we don't see significant differences from how the consumer was behaving in the past.

Really the number one variable here is.

With customer traffic and and we think that.

Speaker 3: And we think that that is something that is.

That is something that is obviously may be reflective of what the consumer is going through I mean, we all read the same papers inflation high interest rate fears of recession high consumer debt.

Speaker 3: obviously, may be reflective of what the consumer is going through. I mean, we all read the same papers, you know, inflation, high interest rates.

Speaker 3: fears of recession, high consumer debt, just credit card maximized and so forth.

Credit card maximize and so forth.

Speaker 3: I mean, obviously, all those things are impacting the consumer and our consumer is in the middle of that. So, for sure, there must be some type of impact, but what we believe is that having the right product

Obviously all of those things are impacting the consumer on and our consumer is is in the middle of that.

So for sure there must be some type of impact, but what we believe is that having the right product pricing it well, which is something that we have been spending a lot of time and effort on.

Speaker 3: Pricing it well, which is something that we have been spending a lot of time and effort

Speaker 3: is key to be able to win in this market. We said it during our prepared remarks, we think that the consumer is going to

Is key to be able to win in this market.

We said during our prepared remark.

We think that the consumer is going to be looking for value add.

Speaker 3: And that's because they are very sensitive to price. We are making a huge effort to number one, put the right products into our assortment. We revisited some of the pricing structure that we have in all brands.

And that's because they are very sensitive to price.

We are making a huge effort to the number one.

Put the right products into our Assortments, we revisited some of the Pri.

Pricing structure that we have in all brands and.

Speaker 3: And we were able to make changes to really.

We were able to make changes to really.

Speaker 3: make sure that we had the right, you know, just offering in front of the customer. But in addition to that, to having the right product at the right price, it's important that we, we are careful with how much we

Make sure that we had the right.

Test offering in front of the customer but.

But in addition to that to having the right product at the right price.

It's important that.

We are careful with how much we buy and.

Speaker 3: And in order not to create excess inventory, I think this is something that we pride ourselves on for now many years. I think we have done a good job in managing inventory.

And that in order not to create excess inventory I think this is something that we pride ourselves on.

On.

Now many years. So I think we have done a good job in managing inventories and the key was to not buy an excess.

Speaker 3: and the key was to not buy in excess.

Speaker 3: And, you know, just also really monitoring how the competition is performing and how aggressive they are.

And just also.

Really monitoring how the competition is performing and how aggressive they are.

Speaker 3: We, so far, we have been able to stay on in our lane on this and we have been able to really manage to our elevation of the brand strategy that we have, which has been very, very critical for our success in repositioning the brand in the minds of the consumer.

We so far we have been able to stay in our lane on this and we have been able to really.

Manage to our elevation of the brand strategy that we have which has been very very critical for our success in repositioning the brand in the minds of the consumer.

Speaker 3: You know, just it's very difficult to really try to anticipate where the customer is going to be, you know, just a few months from now. I mean, there is a lot of uncertainty. And this is one of the main reasons why we have been more cautious in in the way we looked at the at the our outlook for fourth quarter.

It's just it's very difficult to really.

Tried to anticipate where the customer is going to be.

A few months from now I mean, there is a lot of uncertainty and this is one of the main reasons why we have been more cautious in the way we looked at the at the our outlook for fourth quarter.

Speaker 3: So, you know, just we will give more more color when we are ready to provide guidance for next year, but, but, you know, just our plan has been and our strategy has been to continue to really watch how the consumer is responding and navigating through the current times and then acting accordingly, you know, in terms of how we position our business.

So yes.

We will give more color when we are ready to provide guidance for next year, but.

Our plan has been.

And our strategy has seem to continue to really watch how the consumer is responding and navigating through.

One time, and then acting accordingly.

So for how we position our business plan.

Speaker 4: Hi, Cory, this is Marcus. Adding to what Carlos just explained for America's retail, what we've seen in the third quarter as shared, Canada performed better than the U.S.

Hi, Cory in this market.

Adding to what Carlos just explained for Americas retail what we've seen in the first quarter as shared cannot perform better than the U S. We've been up I think.

Speaker 4: I think we've been up, I think, with positive store coms, losing a widget. I think a shared for US traffic was the key, I think, driver for the negative store coms.

With positive store comp low single digits, helping a share to four U S traffic was the key driver for.

<unk> 40 negative store comps.

Speaker 4: In addition, I think to share I think what we've seen now in our more tourist stores, we've seen a relatively better performance compared to our non-tourist.

In addition to offering to share I think what we've seen now in our more tourist stores, we've seen relatively better performance compared to our non tourists one and adding to what Carlos also just set to nothing if you see if you look at our inventories we are down 2% in U S dollars, 4% in constant currency. If you look at the regional breakdown.

Speaker 4: And adding to what Carlos also just said, and I think if you see, if you look at our inventories, we're down 2% in US dollars, 4% in constant currency. If you look at the regional breakdown, we've been down in the Americas and in Europe . I think then also just confirming, I think then also in the line with our clients, I think as Carlos shared, and we are on track also to end the year with 10% lower inventories compared to last year. Lower. Lower, yes, lower.

We've been down in the Americas and in Europe. I'll think then also just confirming I think on auto and aligned with our clients I think as Carla shared and we are on track to end the year with 10% lower inventories compared to last year lower lower.

Speaker 6: That's great, and then just shifting gears a little bit, the gross margin performance has been very, very strong. Is there a way?

That's great.

And then just shifting gears a little bit the gross margin performance has been.

Very strong is there a way to.

Speaker 6: parse out for us within that gross margin line what you believe is sustainable going forward and maybe qualitatively some of the puts and takes that are associated with the gross margin as we look ahead.

Parse out for us within that gross margin line.

What you believe is sustainable going forward and maybe qualitatively some of the puts and takes that are associated with the gross margin as we look ahead.

Speaker 3: Yeah, Corey, I'm just gonna make a very general statement here. But, you know, just I think that, you know, we saw a lot of

Yes.

Korea.

It's going to make a very general statement here, but you know just.

I think that that we saw a lot of.

Speaker 3: of change in our margin structure during the last few years and some of it.

Of change in our margin structure in the last few years and some of it.

Speaker 3: were things that we drove, you know, just the elevation of the brand being one of them.

Are things that we drove just the elevation of the brand being one of them.

Speaker 3: uh just uh being very very uh disciplined with the way we were buying inventory another one

Just being very very disciplined with the way we were buying inventory another one increase.

Speaker 3: Increases in prices, they were pretty significant when you compare our average unit retail today to what they were pre-pandemic, I mean, you're talking about, you know, increases over 20%.

Increases in prices there were pretty significant when you compare our average unit retail today to what they were pre pandemic.

You are talking about increases over 20%.

Speaker 3: And that is that has been kind of like a very big catalyst to for margin expansion in our business.

And that is that has been kind of like a very big catalyst to core margin expansion in our business.

Speaker 3: This past year, or the current year, we benefited from inbound freight reductions in cost. I mean, I think that this has happened in the industry, so everybody is running the same boat. But we feel that now we are in a much more stable place.

This past year or they currently are.

We benefited from inbound freight reductions in costs.

This has happened in the industry. So everybody is brought into the same boat.

But we feel that now we are in a much more stable.

Speaker 3: And we are not expecting that we'll increase prices significantly. We are not expecting that there are going to be significant cost increases. You know, just we are working with our vendors across the board. And I think we're seeing that there is stability in cost.

<unk>.

And we're not expecting that we will increase prices significantly we are not expecting that they are going to be significant cost increases we are working with our vendors across the board and I think we're seeing that there is stability in the end.

Speaker 3: Um, so overall, I don't think that you should expect other than for me.

Cost.

So overall I don't think you should expect other than mix that.

Speaker 3: that there will be a significant change in in our growth margin struck.

There will be a significant change in and out.

Our gross margin structure of the business, adding to what Carlos just set.

Speaker 4: Adding to what Carlos just said, from a product margin point of view, we do not expect material headwinds or tailwinds, I think, going into, I think, the new year. A lot of the improvements that we've had now in the initial markup are mainly driven by the inbound rate, I think they've already been executed and are realized this year. And also, in addition to it, at the prevailing exchange rate, we do not anticipate meaningful upsides or downsides from currencies on our product.

From a product margin point of view, we do not expect material headwind or tailwind.

I think going into the new year.

<unk> at least acknowledge initial mark up mainly driven by the inbound freight I think they have already been executed and realized this year and also in addition trips at the prevailing exchange rates, we do not anticipate meaningful upsides or downsides from currencies on a product margin.

Speaker 3: And I would add one more thing, you know, because I talk quite a bit about our platform.

And I would add one more thing because I saw quite a bit about our platform and the opportunities to really do a lot more with that with the infrastructure that we have we have a phenomenal sourcing and production team and.

Speaker 3: and the opportunities to really do a lot more with the infrastructure that we have. We have a phenomenal sourcing and production team and set of vendors.

Speaker 3: We have contracted the vendor base tremendously during the last few years. And I'm talking about going from 535 vendors I think we had four or five years ago to slightly over 120, 139.

Set of vendors.

We have contracted the vendor base tremendously in the last few years.

I'm talking about going from 535 vendors I think we had four or five years ago to slightly over 120, <unk> hundred 30, now so big big concentration of vendors, which means that each vendor gets a pretty sizable business with us and as a result of that.

Speaker 3: So big, big concentration of vendors, which means that each vendor gets a pretty sizable business with us. And as a result of that, we can really get a lot of efficiency here and optimization, of course. So when you think about an initiative like the Guess Jeans initiative, where we want to be very competitive with pricing, and that's how the entire collection is

We can really get a lot of efficiency here and and the optimization of cost. So when you think about and initiative like the guests jeans initiative, where we want to be very competitive with pricing and that is how the entire collection.

Is price.

Speaker 3: you know, just very competitively, but in spite of that, we have been able to really lock in a very attractive initial markup.

That's very competitively but.

But in spite of that we have been able to really lock in very attractive initial markup.

Speaker 3: as a result of the sourcing of this product. So, you know, just when you think about even the new ideas and the new initiatives, you know, we think that we can continue to protect a great margin for our business. And then when you think about some of the growth that we are experiencing, like licensing, as you know,

As a result of the the sourcing of this product so.

Yes.

When you think about even the new ideas.

We think that we can continue to protect our great margin for our business and then when you think about some of the.

The growth that we are experiencing like licensing.

Speaker 3: that licensing business generates an operating margin in excess of 90 percent, so the more we grow that, you know, the more margin expansion we can see for the overall company.

No that licensing business generates an operating margin in excess of 90%. So the more we grow that.

The more margin expansion, we can see for the overall company.

Great. Thank you so much for all the color and best of luck.

Thank you good morning, Thank you.

Speaker 1: Thank you. Again, ladies and gentlemen, if you'd like to ask a question, please press star 11 on your telephone. Again, to ask a question, please press star 11. One moment, please.

Thank you.

Again, ladies and gentlemen, if you'd like to ask a question. Please press star one on your telephone again to ask a question. Please press star 111 moment. Please.

One moment for our next question.

Speaker 1: Our next question comes from the line of Mauricio Serna of UBS, your line is open.

Our next question comes from the line of Mauricio Serna of.

Of UBS your line is open.

Speaker 7: Great, thanks for taking my questions. I guess just wanted to elaborate a little bit, ask if you could elaborate a little bit more on what you were seeing in Europe . I guess if it's fair to assume that the kind of growth you saw in Q3 continues in Q4, maybe we just add the benefit of the additional week on the retail business.

Great. Thanks for taking my question I guess just wanted to elaborate.

If you could elaborate a little bit more on what you were seeing in Europe.

I guess is it fair to assume that the kind of growth you saw in Q3 continued in Q4, maybe you can just add the benefit of the additional.

Weak on the retail business.

Speaker 7: And I'm kind of curious overall, like in Europe and America, what are you hearing from the wholesale partners, especially just interested in hearing more about the sequential improvement in America. And then lastly, on the Q4 margin guidance, you know, I think, you know, it implies 100 basis points, roughly 100 to 130 basis points margin expansion. Just wondering, like, if I look at what happened in Q3,

And kind of curious overall like in Europe and America. What are you hearing from the wholesale partners, especially interested in hearing more about the sequential improvement in America, and then lastly on the Q4 margin guidance.

It implies a 100 basis points, roughly 100 to 130 basis points margin expansion.

Just wondering like if I look at what happened in Q3.

Speaker 7: and try to think about Q4 is it is that margin expansion more related to like stronger growth margin expansion or like moderation in the SG&A dollar growth just a bit of a more help bridging that will be very helpful.

Trying to think about Q4 as it.

Is that margin expansion and more related to like stronger gross margin expansion or like moderation in SG&A dollar growth just a bit of more help bridging that will be very helpful. Thank you.

Speaker 3: OK, so let me start and then I'm going to ask Marcus to jump in here. But, you know, just you talk about Europe . You know, we we have a huge business in Europe , as you all know, and and we have had.

Okay. So let me start and then I'm going to ask Marcus to jump in here, but you know just you talked about Europe.

We have a huge business in Europe as you all know and and we have had.

Speaker 3: great record of good performance there. As I mentioned before, you know, just that consumer and the customer traffic was pretty solid and we were seeing a very nice positive comp.

Great record of good performance there.

As I mentioned before you know just that consumer.

Customer traffic was pretty solid and we were seeing very nice.

It's had a comp a.

Speaker 3: traffic for many, many months, many quarters actually. And now what we saw in the third quarter is that things decelerated. We don't know exactly to which degree this is a more significant or permanent change.

Traffic and.

For many many months many quarters actually and.

And now what we saw in the third quarter is that things decelerate there we don't know exactly.

Degree this is it.

A more significant.

Significant or permanent change.

Speaker 3: But, you know, what we are doing now is looking at the fourth quarter and

But what we are doing now is looking at the fourth quarter and.

Speaker 3: reducing our expectations for customer traffic, which in turn reduces the expectation for sales. You know, we see that AURs are still seeing a tailwind and we saw that in the third quarter in a significant way. But we see that this tailwind is somewhat tempered from the first half of the year in terms of the trends that we're seeing.

Reducing our expectations for customer traffic, which in turn reduces the expectation for sales.

We see that AUR.

Still seeing a tailwind and we saw that in the third quarter in a significant way.

But but we see that this tailwind is somewhat tempered from the first half of the year in terms of the trends that we're seeing.

Speaker 3: We think that that Europe is still healthy for the brand. We don't know exactly what's happening with other brands. You know, we see that our customers at hotel continue to be very interested in the brand. And if anything, they are buying more those.

We think that.

That Europe is still healthy for the brands, we don't know exactly what's happening with other brands, we see that.

Our.

Customers had wholesale continues to be very interested in the brands and if anything they are buying more of those.

Speaker 3: customers that are investing in it. And we think that that is a very healthy move. We have been shipping pretty much in line with the schedule. So we are not seeing that those customers are canceling any of the orders. You know, just the attitude has been very, very healthy and strong.

Customers that are.

Investing in it and we think that that is a very healthy move.

We have been shipping pretty much in line with the schedule. So.

We have not seen that those customers are canceling any of the orders just the attitude has been very very healthy and strong.

Speaker 3: With respect to the Americas, in wholesale, we had some strength coming from some of the other pieces that contribute to the Americas wholesale business, and that is primarily Mexico that is also being helped by currency trends.

With respect to the Americas, even though just.

In wholesale we had some strength coming from some of the other pieces that contribute to the Americas wholesale Samsung that is primarily in Mexico that is also being helped by currency trends.

Speaker 3: So, you know, the business there has been very strong for us and across the board. I think that the brand is having a very strong momentum and that is impacting how we do business both direct to consumer, but also at wholesale. And we have some very strong partners there.

No.

The business there has been very strong for us.

Across the board I think that the brands that is having a very strong momentum and.

That is impacting how we do business both direct to consumer but also.

At wholesale and we have some very strong partners there.

Speaker 3: um and with respect to you know what we see here in in the U.S.

And with respect to.

What we see here in the U S. A.

Speaker 3: The business has been pretty much in line with what we saw before, consistent, you know, the partner stores, especially our customers at wholesale have been very careful with the way they are ordering inventory and buying and receiving those products.

But the months the business has been pretty much.

In line with what we saw before consistence.

Department stores, especially our customers at wholesale have been very careful with the way. We are they are ordering inventory and buying and receiving those products and.

Speaker 3: And and as a result, you know, just we are trying to be very careful in the way we manage our side of that equation to make sure that we are not left with excess inventory. The good thing is that I think our supply chain has become more dynamic.

And as a result, we are trying to be very careful in the way, we manage our side of that equation to.

To make sure that we are not left with excess inventory.

The good thing is that I think our.

Supply chain has become more dynamic so in some cases, even if we don't have.

Speaker 3: So, in some cases, even if we don't have concrete orders from those customers, we have the opportunity to really reposition inventory or orders to be able to respond to their demand if that demand has not been preplanned.

Concrete orders from those customers, we have the opportunity to really reposition inventory or orders to be able to respond to their demands if that demand has not been pre.

Pre plant.

Speaker 3: And we have been doing good business using this type of business model.

And and we have been doing good business using this.

This type of.

Speaker 3: And then, you know, just our business in Canada is relatively small at wholesale, but we're doing okay there. And we feel that, you know, just we can continue to deliver a very nice margin. You saw the operating margin of that business this quarter was really extraordinary. And we think that we have a margin structure that can allow us to continue to deliver that kind of return. So we are very.

Our business model.

And then just our business in Canada is relatively small at wholesale.

Doing all pay there and and we feel that.

We can continue to deliver a very nice margin and you saw the operating margin.

That business. This quarter was really extraordinary and we think that we have a margin structure that can allow us to continue to deliver that kind of returns. So we are very happy with that so.

Speaker 4: So, the question regarding the operating margin in the fourth quarter, we expect 14.1 to 14.4%, roughly up 100 basis points compared to last year. The main drivers for the improvement are the initial markup, I think as we expect to continue from low inbound rates, I think with your assumption you were right.

We do have one.

Question regarding the operating margin in the fourth quarter.

We expect 14, 1% to 14, 4% roughly up 100 basis points compared to last year. The main drivers of it.

<unk> are the initial markup often guys do you expect to continue from lower inbound freight softened here with your assumptions to provide a clearly the impact of the 50 <unk> week offering is another positive on the fourth quarter expense growth I think <unk> model rates I think that's also.

Speaker 8: Clearly, the impact of the 53rd week, I think, is another positive on the fourth quarter. Expense growth, I think, will moderate. I think that's over. And in addition, the currency will still be a negative impact on the fourth quarter operating margin. Great. Thanks so much.

In addition, the currency will still be a negative impact on the fourth quarter operating margin.

Great. Thanks, so much.

Okay.

Thank you Mauricio.

Thank you one moment please.

Speaker 1: Our next question comes from the line of Jeff Lick of B Raleigh. Your line is open. Good morning, gentlemen.

Our next question comes from the line of Jeff <unk> of B Riley Your line is open.

Good morning, gentlemen, or good afternoon, gentlemen, how are you.

Speaker 9: Very well, thank you. How are you, Jeff? Great. So if I just look at your Q4 guidance as, you know, relative to the implied Q4 guidance you went into this quarter with, it looks like it.

Very well. Thank you how are you Jeff.

So if I just look at your Q4 guidance as relative to the implied Q4 guidance you went into this quarter with it looks like it's.

Speaker 9: You know, sales are down. You took sales down two percent, operating margin down nine percent.

Sales are down you took sales down 2% operating margin down 9%.

Speaker 9: Um, I'm just curious if you might want to highlight your where.

I'm just curious if.

I want to highlight.

Speaker 9: is the place where you are seeing that variance come from the most? And then, you know, maybe this is for Marcus. I'm just curious, given that you reversed bonus accruals, is there.

Is the place where you are seeing.

That variance come from the most and then maybe this is for Mark. So I'm just curious given that you reversed bonus accruals is there.

Speaker 9: a level now where you could actually reverse it back, meaning that it would be difficult not to hit your Q4 operating guidance because there's almost like a shock absorber with performance accruals.

Level, now, where you could actually reverse it back meaning that it would be difficult not to hit your Q4 operating guidance because there's almost like a shock absorber.

Our performance accruals.

Speaker 3: So Jeff, let me let me just start and then Marcus can address your question on the bonus. But I want to say that what we have done for the fourth quarter is primarily just mirroring some of the trends that we saw in the third quarter that were not in line with what we had originally expected when we provided guidance for the third quarter and the year.

So Jeff Let me, let me just start and then markets can kind of address your question on the bonus but.

I I I want to say that.

What we have done for the fourth quarter is primarily.

Just mirroring.

Some of the trends that we saw in the third quarter that were not in line with what we had originally expected when we provided guidance for the third quarter and the year.

Speaker 3: uh so and and it's primarily the impact that we saw in some of the business didn't perform as well and it's primarily Europe

So and it's primarily the impact that we saw in some of the business didn't perform as well and it's primarily Europe.

Speaker 3: And within Europe , you know, just our hotel business.

And within Europe.

Speaker 3: did pretty much had a performance that was pretty much consistent with what we had anticipated. But our direct-to-consumer business was the one that slowed down.

Our wholesale business did pretty much had a performance that was pretty much consistent with what we had anticipated.

But our direct to consumer business was the one that slowed down and this has two parts in all our stores.

Speaker 3: And this has two parts, you know, our stores that were impacted by customer traffic, slow deceleration, and also our e-commerce business, which was also impacted by traffic. And as a result, we ended up with a lower number than what we had anticipated on top line, which drove bottom line, you know, just a reduction as well.

That were impacted by customer traffic slow deceleration and also our E Commerce business, which was also impacted by traffic and as a result, we ended up with a lower number than what we had anticipated on top line, which drove our bottom line.

Just Uh huh.

Reduction as well.

Speaker 3: um we that's all we have done you know just we took a look at that we looked at how uh the month of November has been going and uh and we are seeing a similar type of behavior and as a result of that we uh we

That's all we have done that.

We took a look at that we looked at how the months of November has been growing and we are seeing a similar type of behavior and as a result of that.

Speaker 3: brought that those new expectations into the guidance and and of course in the fourth quarter additional volume has a major impact on profitability so when you take some volume away it's very difficult to really protect that they flow through because all that additional volume normally is is very profitable compared to the base.

We brought that those new expectations into the guidance in and of course in the fourth quarter additional volume has a major impact on profitability. So when you take some volume away is very difficult to really protect the flow through.

Because all of that additional volume normally is a is very profitable compared to the base.

Speaker 3: So, and that's why you see what may seem as a, you know,

And that's why you see.

What may seem.

You know.

Speaker 3: more significant drop in operating margin or in operating profit than the drop in

More significant drop in operating margin or an operating profit than the drop in sales.

Speaker 4: Regarding your question, regarding the, let me start a bit broader with the SG&A development for the third quarter. Overall, we've been up 10% or $22 million in the third quarter compared to last year.

Regarding your question regarding E. Let me, it's a bit broader with the SG&A development for the third quarter.

<unk> always been up 10% or $22 million in the third quarter compared to last year.

Speaker 4: If you look at their two, I think, distinctive impacts that are also called out in the prepared remarks, one is the performance-based compensation that is $9 million higher compared to last year, as well as currency, I think it's their tailwind on the revenues, but a headwind on

If you look at there too I think distinctive impacts that are also called out in the prepared remarks. One is the performance based compensation that is $9 million higher compared to last year.

As well as currency tailwind.

Tailwind on the revenues by the headwinds on the expenses those two effects account for 70% of the expense decrease in the third quarter. If you look at the third quarter in a row sharing because we were lapping a reversal of the performance based compensation adjustment from last year as we were trending in deferred.

Speaker 4: Those two effects account for 70% of the expense decrease in the third quarter.

Speaker 4: If you look at the third quarter, and I was sharing this, we were lapping a reversal of the performance-based compensation adjustment from last year. As we were trending in the third quarter of last year, we were trending below, I think, then also the targets also for the full year. There was a reversal in those performance-based compensation adjustments that we are now lapping. So and I think that's where now, in comparison, I think with Q3 of this year compared to last year, we should get $9 million.

Quarter of last year, we are trending lower I think and also the targets although for the full year. There was a reversal in those performance based compensation adjustments that we are now lapping so and I think thats for now in comparison with Q3 of this year compared to last year, that's $9 million.

Speaker 3: Yeah but so your question is can you reverse that you know the key issue here is that the company is performing in line with the expectations and target plan.

That's great. Yeah. So your question is can you reverse that.

The key issue here is that the company is performing in line with the expectations on target plan.

Speaker 3: So as a result, you know, we're doing for the accounting what needs to be done, you know, just assuming that we deliver on the numbers that we have, you know, share with you, you know, just that would mean that the company would meet its financial targets and as a result, the bonus will be paid.

As a result.

We are doing for the accounting of what needs to be done Tessa assuming that we deliver on that.

Numbers that we have.

I'll share with you.

That that would mean that the company would meet its financial targets and as a result, the bonus will be paid.

Speaker 9: Yeah, the point of the question was, if for some reason revenue was well below what you guided.

Yes, the point of the question was it for some reason revenue was well below what you guided.

Speaker 9: it would seem like that it wouldn't operating income would not go down it's at least for the first

It would seem like that would be.

It Wouldnt operating income would not go down.

Lisa.

First.

Speaker 3: tranche of that myth, maybe as much. Yeah, yeah. I mean, all this works together, you know, just so your point, if, if the company is less profitable, obviously that will have an impact on, on variable compensation.

Tranche of that Miss maybe as much yeah.

Yes.

Yes, I mean, all of this works together.

So your point is if the company is less profitable obviously that will have an impact on.

Variable compensation pool.

Speaker 9: And then another question, just I'm just curious if you could maybe highlight or speak to any lessons or observations with the Georgina Rodriguez partnership. If there's anything that you've learned that you would apply, maybe even, you know, with the gas change us.

And then another question just I am just curious if you could maybe highlight to speak to any lessons or observations with the Georgina Rodriguez partnership.

If there is anything that you learned that you would apply and maybe even with the guest change U S.

Speaker 9: Yeah. Doing, you know, social influencing there with someone in the U.S. I think you did make reference to celebrity marketing. I'm just kind of curious what you're learning there given your heritage of successfully using, you know, collaborators and spokesmodels.

Yes.

Doing.

Social influencing there was somewhat in the U S. I think you did make reference to celebrity marketing I'm just kind of curious what you are learning there given your heritage of successfully using.

Collaborators spokesmodel.

Speaker 3: Yeah, well, let me let me start by saying, you know, we are we are thrilled with the performance of that.

Yeah, well, let me let me start by saying you know we are we are thrilled with the performance of that.

Speaker 3: collaboration and relationship. I mean, to the point that

Collaboration and relationship I mean to the point that I think I mentioned in my prepared remarks that you know.

Speaker 3: I think I mentioned in my prepared remarks that, you know, just we are, you know, just doing another campaign with Georgina. I mean, all the products that she modeled had a great sell through and.

Yes, we are.

Just doing another campaign with gene I mean are all the products that she modeled.

Had a great sell throughs and we saw a lot of opportunity even.

Speaker 3: And, you know, we saw a lot of opportunity even, you know, for the future, you know, with the type of activities that we engaged in with her. She has been a terrific ambassador.

For the future.

With the with the type of activities that we engaged in with her she has been terrific ambassador of the brand.

Speaker 3: Now, what I mentioned is that when you look at Guess Jeans, you know, this is a brand that is targeting a much

Now what I mentioned is that when you look at guess jeans.

This is a this is a brand that is targeting a much younger consumer just about Gen Z consumer primarily but also millennials and and we are building the plan the strategy to launch this brand to the market.

Speaker 3: younger consumer, you know, just that Gen Z consumer primarily, but also millennials.

Speaker 3: and we are building the plan, the strategy to launch this brand to the market with a very strong, robust marketing campaign that involves celebrities and

With a very strong robust marketing campaign that involve celebrities and and.

Speaker 3: And a lot of, you know, just.

A lot of.

Just.

Speaker 3: meaningful, effective collaborations that that consumer will be, you know, open to.

Meaningful effective collaborations that that consumer will be.

Speaker 3: So we are in the process of working on that. But definitely, we feel that this type of marketing can be very powerful for us. And you're right, Jeff. We do have a long legacy with this type of collaboration. And I think that we are going to.

Open too. So we are in the process of working on that but definitely we feel that this type of marketing can be very powerful for us and youre right, Jeff We do have.

Our long legacy.

At this type of collaborations.

And I think that we're going to take.

Speaker 3: take the opportunity to really invest on this.

Opportunity to really invest on this again.

Speaker 9: Great. Well, congrats on the quarter and look forward to chatting with you soon. All right. Thank you.

Great.

Congrats on the quarter and look forward to chatting with you soon.

Alright, Thank you Jeff.

Thank you.

Speaker 1: That does conclude our questions for the day. I'd like to turn the call back over to Carlos for any closing remarks.

That does conclude our questions for the day I'd like to turn the call back over to Carlos for any closing remarks.

Speaker 3: Yes, thank you. Well, first of all, thank you all for participating today. You know, we know that everybody's very busy, and there are multiple calls, so I'm sure that this takes a special effort. We are in front of the most significant period of the year, and we believe that we are well positioned, and we believe that we have a very good plan to win here.

Yes. Thank you well first of all thank you all for participating today, we know that everybody is very busy and.

And there are multiple calls so I'm sure that the.

Takes a special effort.

We are in front of the most significant period of the year and we believe that we are well positioned and.

We believe that we have a very good plan to win here.

Speaker 3: I just wanted to, you know, just invite you guys, if you are interested, anybody listening here to, if you want to let us know, if you would like to attend.

Just wanted to.

Judging by you guys. If you are interested anybody listening here.

Two if you didn't want to let US know if you would like to attend I guess jeans event that is going to take place in PT Walmart visits in Florence and then this is going to happen in January of 2024.

Speaker 3: a guest jeans event that is going to take place in PT Walmart. This is in Florence.

Speaker 3: And this is going to happen in January of 2024.

Speaker 3: This is part of our launch. We are going to have some experiential, you know, presentation there. I think it will be very interesting for people to see. So, if you're interested, let us know. This will be, I think it's the week of 8th, 9th, 10th of January . So, let us know.

This is part of our launch we are going to have some experiential.

Presentation, there I think it will be very interesting for people to see so if you're interested let us know this will be I think it's a week off.

Eighth ninth 10th of January.

So let us know.

Speaker 3: So we want to wish you all a very happy Thanksgiving with your families, friends, and so forth. And we look forward to updating you on our progress in the future. Thank you.

No.

We want to wish you all a very happy Thanksgiving with your families friends and so forth and we look forward to updating you on our progress in the future. Thank you so much for your time.

Speaker 1: Thank you. Ladies and gentlemen, this does conclude today's conference. Thank you all for participating. You may now disconnect. Have a great day.

Thank you ladies and gentlemen, this does conclude today's conference. Thank you all participating you may now disconnect have a great day.

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Speaker 10: I.

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Speaker 10: I.

Speaker 10: And the.

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Speaker 10: I.

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