Guess’ New Chief Talks Tariffs

● Carlos Alberini shares how the company is planning to mitigate potential new levies on Chinese and Mexican imports.

Guess Inc. is the latest publicly traded company to address tariffs.

Speaking to investors following the release of its first-quarter results, its new chief executive officer Carlos Alberini said that as tariffs on apparel and footwear imports from China and Mexico loom, it has been “taking actions to mitigate the impact.”

This includes cost sharing with its suppliers and shifting sourcing to other countries, as well as raising prices.

The U.S. has begun the paperwork to unleash 25 percent tariffs on all remaining Chinese imports that are yet to be targeted, including apparel and footwear. President Donald Trump advised earlier today that a final decision will be made after the G20 meeting in Japan at the end of this month.

Mexico, meanwhile, will be hit with 5 percent tariffs on Monday unless it can broker a deal with the U.S. before then. These levies are set to rise gradually until they reach 25 percent in October.

Alberini also revealed that it has become clear during the course of the first quarter that there has been a significant softening in its Asia business, but stressed that it’s very difficult to speculate on what is driving it and to know if it’s the trade dispute.

“We see that in the form of the lower traffic both to our stores on our e-commerce platform,” he said, adding that weakness was felt in China, Korea and Japan and that he believes this softening to be market-driven and not brand-specific.

Nevertheless, Guess is confident it can still build a big business in China, expanding its store network and digital offering.

As for its financials, total net revenue for the first quarter of fiscal 2020 increased 3 percent to $536.7 million, up from $521.3 million in the prioryear quarter and in line with analysts’ forecasts, according to FactSet data. Within that, Americas revenue was up 3 percent, Europe by 2.2 percent and Asia by 1.4 percent.

During the same period, its net loss widened to $19.6 million, from $17.8 million. Adjusted diluted loss per share deteriorated 8.7 percent to 25 cents. This, however, surpassed Wall Street expectations for a loss of 26 cents a share.

“I am pleased with our progress this period, as we had another quarter of solid performance with strong revenue growth, improved gross margins and well-managed expenses,” said Alberini.