Guess Posts 6% Revenue Gain in Q2

Key Points

• Revenue exceeded Q2 FY2026 guidance, driven by strong European sales and sequential improvement in Americas Retail.

• Adjusted profitability weakened, with EPS down 38% and operating margin compressed due to higher expenses in Q2 FY2026.

• Management suspended financial guidance and earnings calls for FY2026 due to the proposed take-private transaction.

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Guess? (NYSE:GES), best known for its iconic denim and global fashion lifestyle collections, reported second quarter results for fiscal 2026 on August 27, 2025. The company delivered GAAP revenue ahead of expectations, as strong European results and improvement in Americas Retail offset softness elsewhere in Q2 FY2026. Total revenue rose to $772.9 million, a 6% increase compared to the same quarter last year, exceeding the company’s prior guidance range of 2.9% to 4.7% growth.

However, underlying profitability fell short, with adjusted earnings per share of $0.26, down from $0.42 the prior year, and adjusted operating margin compressed to 3.7%. Management suspended forward guidance for FY2026 and canceled the usual earnings call due to the pending take-private deal, leaving limited visibility for investors. The quarter showcased strong top-line growth but highlighted ongoing margin and expense headwinds, signaling a mixed performance.

Source: Analyst estimates provided by FactSet. Management expectations based on management's guidance, as provided in Q1 2026 earnings report.

Company Overview and Strategic Focus

Guess? operates as a global apparel and accessories business, with a renowned portfolio anchored by denim, casualwear, and lifestyle products. Its reach extends across direct retail, wholesale distribution, and royalty-based licensing, enabling it to access customers both in stores and through partners worldwide.

Key success factors for Guess? include building and maintaining strong brand equity, expanding global diversification, leveraging multiple distribution channels, and executing strategic acquisitions. Product innovation and effective marketing are crucial for staying relevant with consumers. Geographic diversification -- especially in Europe and Asia -- strengthens the business by reducing dependency on a single region. Recent years have also seen a push into sustainability initiatives and targeted acquisitions, such as the addition of contemporary fashion brand rag & bone and partnership activities in the Middle East and Asia.

Quarter Highlights: Revenue Growth, Margin Compression, and Segment Trends

Total revenue climbed 6.0% in Q2 FY2026, driven by strong sales in the European region. Europe posted revenue of $436.9 million -- a 14% increase year over year -- boosted by an 11% jump in comparable store sales in Q2 FY2026. Operating margin for the segment also improved to 10.6%, supported by higher revenues and positive currency effects in Q2 FY2026.

The Americas Retail segment, which consists of U.S., Canadian, and Mexican direct-to-consumer stores and e-commerce, saw revenue decrease 1%, with retail comparable sales down 5% in Q2 FY2026. This segment reported an operating loss, and operating margin contracted from 1.5% to -3.7% in Q2 FY2026. Higher expenses for advertising and store operations, alongside more markdowns and a decrease in full-price sales, drove this decline. Despite a reported sequential improvement from earlier in the year, the Americas still face significant hurdles, particularly in store traffic and brand traction.

Wholesale results were mixed. Americas Wholesale, supplying product to retail partners, saw GAAP revenue drop 11% year over year, though its operating margin edged up slightly in Q2 FY2026. Timing changes contributed to this shift, as a surge in Q1 FY2026 wholesale shipments pulled forward sales, leaving the quarter comparably weaker.

Asia, which covers Greater China, South Korea, and other regional markets, delivered modest revenue growth of 3% year over year, but saw further margin deterioration to a -6.8% operating margin in Q2 FY2026 (GAAP). Comparable store sales fell 2%. This continues a pattern highlighted in past quarters, where ongoing restructuring and turnarounds in China and broader Asia have yet to visibly reverse profitability pressures. The Licensing business, representing royalties from third-party product categories such as fragrance and footwear, shrank 10% in revenue but continued to deliver very high GAAP operating margins above 95%.

Strategic Progress, Operations, and Special Events

Guess?’s international mix was evident, with approximately 72% of revenue now generated outside the United States in FY2025. The company’s balance across direct retail, wholesale, and licensing channels has historically provided cushion, but this quarter saw simultaneous pressure in both Americas Retail and Americas Wholesale. Licensing’s revenue declined again, though the capital-light structure secures continued profitability.

The acquisition of contemporary designer brand rag & bone was fully integrated this quarter. While specific results were not broken out, it is included in the Americas and Europe segment figures. In earlier quarters, rag & bone’s contribution was cited as a driver of wholesale growth, with management stating expectations of around $320 million in annualized sales from the addition in FY2026 and a focus on expanding the store footprint. However, the current quarter release does not disaggregate rag & bone’s impact, leaving the numbers blended into broader segment trends.

A proposed take-private transaction with Authentic Brands Group was front and center in company announcements: management suspended all forward guidance and the customary earnings call. If approved, the deal will lead to public shareholders being cashed out at $16.75 per share and change the business’s structure, splitting operating and intellectual property ownership. The company also declared a $0.225 per share dividend for Q3 FY2026.

Looking Ahead: Uncertain Guidance, Cash Flow Pressures, and Investor Implications

Guess? provided no forward-looking guidance or outlook for FY2026, citing the pending take-private proposal as the reason for suspending forecasts. No conference call or commentary on expected revenue, profitability, or operational targets was provided for the balance of the year. The absence of management guidance, combined with operational uncertainty, increases the difficulty for investors to assess future trajectory as the company transitions to private control.

Free cash flow for the first six months of FY2026 was negative $44.6 million, compared to a $23.0 million outflow in the prior-year period. Inventory levels reached $668 million as of Q2 FY2026. While the business maintains a diverse international and multi-channel footprint, ongoing cost inflation, margin compression, and negative retail comps in key regions remain notable risks for the quarters ahead. The quarterly dividend was maintained at $0.225 per share.

Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.

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