Guess Limits Tariff Impact to Less Than $10M, Adjusts Sourcing and Buying Strategies

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4 hours ago

Guess Inc. is taking steps to mitigate the effects of President Trump's tariff war.
During the company's Q1 2026 earnings call Thursday, Guess Inc. CEO Carlos Alberini said roughly 75 percent of Guess Inc.'s business is outside of the U.S and therefore not directly impacted by the tariffs. The remaining 25 percent of directly produced and distributed products represents roughly $200 million in annual purchase.
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'Both our Guess and Rag & Bone sourcing teams have undertaken a massive effort to move a substantial amount of our production out of China to other markets. We also reworked costs with vendors and pricing with retail customers,' he said.
Alberini expects the year over year impact of tariffs on Guess Inc.'s margins will be less than $10 million this year—an amount that Guess will achieve with 'very minimal price increases.'
'The tariffs have also sparked renewed fears of inflation or recession, but we have not attempted to predict how they may affect the consumer's appetite to spend their disposable income,' he said.
Despite these economic uncertainties, Alberini ended Q1 on a positive note. 'We are very pleased with the start of our year. We are encouraged by the early results of our initiatives regarding product marketing and retail productivity in both North America and in Europe, and we believe that these successes can be leveraged across the rest of our direct-to-consumer business, and especially in the second half of the year,' he said.
Q1 results came in ahead of expectations across key financial metrics reflecting the successful integration of Rag & Bone and continued momentum in Guess' wholesale businesses across Europe and the Americas. Alberini said discipline expense management, combined with a better-than-expected top line enabled Guess to report operating results ahead of the company's guidance range, narrowing losses for the quarter.
Total net revenue for the first quarter of fiscal 2026 increased 9 percent to $647.8 million from $591.9 million in the same prior-year quarter.
In Europe, revenue increased 8 percent to $306 million. In particular, the wholesale business performed well with revenues increasing in the mid-teens. Guess was able to accelerate product deliveries to mitigate against potential disruptions from the ongoing Red Sea crisis.
Americas retail revenue increased 9 percent. Comps from U.S. and Canadian Guess stores declined 10 percent in constant currency, though Dennis Secor, Guess Inc.'s interim CFO, said the trend was improving in the latter part of the quarter. Traffic to Guess stores continued to be down, though some of that was offset with an improvement in conversion.
Americas wholesale revenue increased 63 percent to $101 million, driven by the addition of Rag & Bone and higher Guess shipments in the U.S. and Mexico. Secor said the increase in the U.S. Guess business was primarily due to its off-price accounts.
In Asia, revenues decreased 20 percent to $58 million. South Korea and China, where the company is purposedly constraining its business, saw the biggest declines.
For the first quarter ended Jan. 31, the company posted a GAAP net loss of $32.9 million, compared to GAAP net earnings of $13 million for the same prior-year quarter. Adjusted net loss was $22.3 million, a 61 percent increase from $13.8 million for the same prior-year quarter.
Adjusted diluted net loss per share increased 63 percent to $0.44, compared to $0.27 for the same prior-year quarter. The company estimates a negative impact from its share buybacks of $0.02 and a positive impact from currency of $0.08 on adjusted diluted EPS in the first quarter of fiscal 2026 when compared to the same prior-year quarter.
'We are beginning with the implementation of several initiatives as we speak, including the reorganization of our teams, the deployment of new practices and increasing investment into social channels and relationships with influencers and other collaborations to attract a younger audience,' Alberini said.
One of the key challenges for Guess over the last several years has been the decline in customer traffic into its stores and website. The trends have persisted in the U.S. and Asia for some time, and the brand is seeing similar patterns emerge in our European retail business.
To address this, Guess is rolling out a range of initiatives aimed at re-engaging customers and driving higher traffic across both physical and digital channels. 'We continue to see a significant opportunity to increase brand awareness and customer engagement through increased marketing investment,' Alberini said, adding that consulting firm General Idea is crafting a 'new market vision to transform our social media strategy' and 'reignite our brand relevance and awareness with today's consumer.'
Guess plans to expand the customer loyalty program it recently launched in Italy and Poland to Germany, Austria and Spain. Alberini said the program is driving consumers to return to the stores with greater frequency and spend more per visit. 'As we continue to sign up more customers into our database and we gain insights into their shopping habits, we are investing improving our customer insights capabilities using AI-powered tools,' he said.
Efforts to drive production costs down, like committing to larger and earlier production values, left less open to buy later in the season. This resulted in missing certain trend and sacrificing revenues. To counter this, Alberini said the Guess team is developing fast track capabilities within its supply chain to more quickly replenish best sellers and inject additional products into the market as trends develop in the season.
'We used to operate in this manner several years ago and had success, primarily in North America. We are implementing this again with our Spring/Summer '26 collection, with our goal ultimately to leave 50 percent of our buy open after we place our initial orders,' he said.
Additionally, Guess is rebalancing its product assortment to increase penetration and offer more opening price point products. Alberini said the company's efforts to increase quality over the past few years by elevating fabrics and embellishments has left some consumers behind.
'While the program was successful in many ways, our recent analysis of pricing suggests that some of our legacy customers were not able to make that journey with us. It's also reflective of what we have experienced with today's consumer, who tends to be quite sensitive to pricing,' he said.
The company is encouraged by growth opportunities for Rag & Bone, Guess Jeans and the women's category.
Guess is going after more casual assortment and trying to bring more denim into the product selection.
In the first quarter that women's apparel was up 3 percent, which Alberini said Guess hasn't seen in a long time. 'Our business now is primarily focusing on women—we think that the customer represents about 85 percent of the total customer base. If we turn women's, that's a major sign of success for us,' he said.
Guess Inc.'s plan for Rag & Bone is grow the business from $250 million to $320 million in 2026. Growth will be driven by new stores and product categories, Alberini said. There are currently open 41 stores, up from 38 when Guess acquired the brand. Ten more stores are planned for the next few months. Expanding into new markets is opening new opportunities as well. Two more stores will open in Germany in a few months, and one in Amsterdam. Licensed products like handbags are already in stores and performing well. Deals for watches and eyewear are finalized and now the company is working on fragrances.
On top of that, Alberini said the Rag & Bone team, led by Andrew Rosen, is doing a great job at expanding key product categories like the Miramar denim collection and adjusting the brand's outlet strategy. Whereas Rag & Bone's outlets used to run on excess product from the other channels, Guess Inc. has created an entirely new business model where it is making product for those stores.
Guess Jeans continues to exceed the company's expectations—not by a huge amount but better than anticipated, Alberini said. The brand, which launched last year, has 'nice' distribution in Europe and is primarily a wholesale business.
'There is a lot of work that is being done by the teams to really improve our product offering,' he said, adding that the team is in 'listening mode' to make sure they're developing products based on what their retail partners see is resonating with men and women. 'We are trying to understand where the customer is gravitating, to strengthen the offering based on that,' he said.
Though he wishes Guess Jeans' North American business was larger by now, Alberini said he's confident that the product and pricing is where they need to be. 'We think that we are in a very good place in terms of the type of trends that are in the marketplace and how we are addressing them with our product,' he said.
Guess Jeans will open stores in Tokyo and on Melrose Avenue in Los Angeles soon. The store openings will be supported by a robust social media strategy—a must, he added, for a jeans brand that appeals to a young consumer who lives on social media.