EPS of $-0.47 decreased by 159.6% from previous year
Gross margin of 43.6%
Net income of -23.40M
""Rag & Bone’s top line was short of our plans for the quarter, though some of that relates to a shift in the timing of wholesale shipments, which we now expect in Q4. Overall, the business remains on a solid trajectory and its direct-to-consumer trends were particularly strong in October."" - Dennis Secor
Guess Inc delivered a solid top-line increase in QQ3 2025, with revenue of $738.5 million, up 13.4% year over year, largely driven by the Rag & Bone acquisition and stronger European wholesale performances. Management emphasized that shipments in Europe occurred earlier than expected, contributing roughly $10 million to Q4 revenue, and reiterated a strategy to leverage the company’s platform to expand multiple brands beyond Guess. However, the quarter also underscored profitability headwinds from higher marketing investments, channel mix, and currency effects, resulting in GAAP net income of -$23.4 million and an adjusted operating margin of 5.8%. The company reaffirmed a forward-looking framework targeting mid-to-high single-digit growth in full-year revenue and a path to double-digit operating margins as platform initiatives mature.
Key takeaways include: (1) a diversified growth engine centered on Rag & Bone, Guess Jeans, and European wholesale; (2) a disciplined investment cadence in marketing and brand-building to drive mid-term top-line momentum, with a heavy emphasis on social media, collaborations, and loyalty programs; (3) meaningful currency headwinds and freight-cost pressures that complicate margin recovery in the near term; and (4) a focused plan to reclaim U.S. market momentum through pricing actions, customer engagement, and an optimized store footprint. Investors should monitor progression of Rag & Bone profitability, the rollout of Guess Jeans in the U.S., currency trends, and the effectiveness of the marketing engine as indicators of earnings power re-acceleration.
Key Performance Indicators
Revenue
738.52M
QoQ: 0.81% | YoY:13.41%
Gross Profit
321.88M
43.58% margin
QoQ: 0.60% | YoY:10.55%
Operating Income
42.28M
QoQ: -11.51% | YoY:-22.82%
Net Income
-23.40M
QoQ: -120.65% | YoY:-142.00%
EPS
-0.62
QoQ: -195.24% | YoY:-159.62%
Revenue Trend
Margin Analysis
Key Insights
Revenue: $738.5m (+13.41% YoY; +0.81% QoQ)
Gross profit: $321.9m (+10.55% YoY; +0.60% QoQ)
Gross margin: 43.58% (flat vs prior year, modest expansion guidance implied by IMU trend)
Revenue and profitability snapshot (USD, QoQ vs YoY):
- Revenue: $738.5m (+13.41% YoY; +0.81% QoQ)
- Gross profit: $321.9m (+10.55% YoY; +0.60% QoQ)
- Gross margin: 43.58% (flat vs prior year, modest expansion guidance implied by IMU trend)
- Operating income: $42.28m (-22.82% YoY; -11.51% QoQ)
- Net income: -$23.40m (-142.00% YoY; -120.65% QoQ)
- Diluted EPS: -$0.47 (adjusted: $0.34 in Q3, vs $0.49 prior year)
- Adjusted EBITDA: $16.60m (EBITDA margin ~2.25%)
- Adjusted SG&A: $279.0m (+~20% YoY), driven by Rag & Bone and heightened marketing
Balance sheet and cash flow:
- Cash & equivalents: $141.0m; Total debt: $1.473B; Net debt: $1.332B
- Inventories: $676m (+20% YoY; ~8 pp in transit inventory related to in-transit shipments)
- Free cash flow: -$105.36m; Operating cash flow: -$83.29m
- Working capital and capex: Capex ~$22.07m; Cash flow from financing activities: +$33.46m; Liquidity: $486m available capacity
Guidance and outlook:
- Full-year revenue growth guidance: 7%–8%; Revenue around or slightly below $3.0B
- Adjusted EPS guidance: $1.85–$2.00 for the year
- Q4 revenue growth: 2.2%–5.4%; Adjusted operating margin 12.2%–13.0%; Adjusted EPS $1.37–$1.52
- Key tailwinds: Europe wholesale momentum; new Guess Jeans initiative in Europe and U.S.; early shipments partially offset by stronger USD and higher freight costs
- Key headwinds: USD strength, freight costs, softening U.S. and Asia retail traffic, currency translation impact (~$45m revenue and ~$10m op-profit for the year)
Overall view: The QQ3 2025 results reflect a transition phase where Guess continues to invest in a platform-driven growth model, balancing near-term profitability pressures against a longer-term improvement trajectory driven by Rag & Bone integration, geographic expansion, and brand elevation across multiple channels.
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
738.52M
13.41%
0.81%
Gross Profit
321.88M
10.55%
0.60%
Operating Income
42.28M
-22.82%
-11.51%
Net Income
-23.40M
-142.00%
-120.65%
EPS
-0.62
-159.62%
-195.24%
Key Financial Ratios
currentRatio
1.54
grossProfitMargin
43.6%
operatingProfitMargin
5.72%
netProfitMargin
-3.17%
returnOnAssets
-0.84%
returnOnEquity
-5.19%
debtEquityRatio
3.27
operatingCashFlowPerShare
$-1.64
freeCashFlowPerShare
$-2.07
dividendPayoutRatio
-66.2%
priceToBookRatio
1.91
priceEarningsRatio
-9.21
Net Income vs. Revenue
Expense Breakdown
Management Commentary
Key management insights from the QQ3 2025 earnings call, grouped by themes:
Strategy and growth
- Carlos Alberini: The company is focused on growth through a multi-brand platform, leveraging a global distribution footprint across 100 countries and 25 product categories. He highlighted opportunities in Rag & Bone, Guess Jeans, and geographic expansion (Europe, Middle East, Mexico, Canada, Australia). He stated: ”we are now focused on leveraging the powerful platform that we have built at this company to support not just the continually expansion of the Guess brand, but the expansion of multiple brands.”
- Dennis Secor: Rag & Bone is on a solid growth trajectory but near-term top-line upside shifted to Q4 due to timing of wholesale shipments; he noted double-digit sales growth for Rag & Bone year-to-date. He added: “Rag & Bone’s top line was short of our plans for the quarter, though some of that relates to a shift in the timing of wholesale shipments.”
- Carlos Alberini: Guess Jeans is a priority to re-accelerate US growth with a new product cadence, faster introductions, and a planned U.S. launch of Guess Man at Pitti Uomo, signaling a broader lifestyle platform strategy.
Operations and margins
- Dennis Secor: Q3 gross margin was 43.6%, with channel mix and occupancy deleverage being the main margin headwinds; he cited higher marketing investments and infrastructure costs as drivers of SG&A expansion.
- Carlos Alberini: Marketing/range investments rose markedly (about 85% YoY in Q3) to build brand awareness and loyalty, including influencer campaigns (Georgina Rodriguez) and in-store events (over 80 events in period). He framed this as investments to drive longer-term top-line momentum and margin recovery.
- Dennis Secor: Currency headwinds and higher freight costs reduced operating profit; he estimated about a $10m op-profit headwind in the full year from currency, with freight costs adding to Q4 drag.
Outlook and guidance
- Carlos Alberini: Guided full-year revenues to roughly 7–8% growth and adjusted EPS of $1.85–$2.00, with Q4 revenue growth of 2.2%–5.4% and Q4 adjusted op margin 12.2%–13%. He emphasized the plan to optimize the platform while addressing near-term headwinds, including price sensitivity in the market.
- Dennis Secor: Provided a bridge to Q4 that factors in last year’s extra selling week and currency effects; he noted that Rag & Bone is a non-comp contributor in Q4, but European wholesale should remain a growth driver; he indicated that normalized results, excluding those distortions, imply roughly flat operating profits year-over-year on a normalized basis.
Market conditions and customer engagement
- Carlos Alberini: European wholesale remains robust; North America retail faced softer traffic but improved conversion and higher AUR helped comps; Asia was softer (notably South Korea and China). He cited the need to optimize pricing strategy in North America given rising price sensitivity.
- Dennis Secor: Anticipates higher freight costs in Q4 and continued USD strength; emphasized the need to monitor currency and freight dynamics as drivers of the near-term profitability profile.
"Rag & Bone’s top line was short of our plans for the quarter, though some of that relates to a shift in the timing of wholesale shipments, which we now expect in Q4. Overall, the business remains on a solid trajectory and its direct-to-consumer trends were particularly strong in October."
— Dennis Secor
"Double-digit operating margin is definitely within our sites. Rag & Bone today is dilutive to our operating margin, but we don't think that's going to be the case for long... there is a lot of opportunity there."
— Carlos Alberini
Forward Guidance
Assessment of the forward-looking outlook based on management guidance and industry dynamics:
- Revenue trajectory: Expect continued growth from Europe wholesale momentum and the Rag & Bone platform, offset by currency headwinds and softer North America/Asia retail traffic. The company guides 7–8% full-year revenue growth, implying a normalization after the currency tailwinds/subtractions and geling Rag & Bone integration in the later quarters.
- Operating profitability: Management targets a return to higher-margin contribution as the Rag & Bone integration ramps and Guess Jeans expands, but near-term margins are pressured by elevated marketing investments, occupancy costs, and onboarding costs associated with the platform shift. The stated full-year adjusted operating margin target of 6.2%–6.5% (from QQ3) implies a material margin recovery still dependent on mix shifts and scale effects from the platform expansion.
- Cash flow and capital allocation: Free cash flow guidance around $40 million suggests near-term cash generation remains challenged by operating headwinds and working capital needs; however, the company plans continued investments in brand-building and store openings/remodels that should contribute to long-term revenue growth.
- Key risk factors to monitor: USD strength and currency translation effects, higher freight costs, promotional intensity in a price-sensitive environment, and the pace of Rag & Bone profitability normalization. Investors should watch the ramp of Guess Jeans in the U.S. and Europe, the success of loyalty programs in Europe, and the effectiveness of social-media/CRM initiatives on conversion and AUR.
- Bottom line take: The QQ3 results underscore a strategic pivot toward a multi-brand platform with international growth, requiring patience on near-term profitability as investments transition into revenue scale and higher-margin royalty contributions from the Rag & Bone and licensing ecosystem. Investors should assess the pace of margin normalization as the platform realizes synergies and brand elevation takes hold across geographies.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
GES Focus
43.58%
5.72%
-5.19%
-9.21%
ROST
28.30%
11.90%
9.29%
23.66%
PLCE
35.50%
7.50%
-40.50%
2.24%
BKE
47.70%
18.60%
9.04%
11.90%
HIBB
34.30%
7.90%
7.57%
7.91%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
Investment thesis centers on a platform-driven elevating strategy across multiple brands (Guess, Rag & Bone, Guess Jeans) with international reach and channel diversification. Near-term profitability will be pressured by marketing investments, higher freight costs, and currency headwinds, but the long-run earnings power hinges on successful Rag & Bone integration, US market re-acceleration via Guess Jeans, and a scalable, data-driven marketing engine. Key milestones to watch include: (1) Rag & Bone profitability progression and contributing royalties; (2) European wholesale momentum sustaining mid-single-digit growth; (3) U.S. path to improved customer acquisition/engagement and pricing strategy; (4) effectiveness of loyalty programs in Europe andCRM-driven product design cycles.
Key Investment Factors
Growth Potential
Strategic platform expansion (Rag & Bone, Guess Jeans) with potential to convert high-margin royalties into substantial earnings power over time; European wholesale momentum and new U.S. Guess Jeans positioning offer multiple levers for sustained revenue growth; early shipments in Europe provided near-term top-line upside and inventory flow efficiency.
Profitability Risk
Near-term margin pressure from elevated marketing spend and occupancy costs; currency headwinds and freight cost volatility; slower-than-expected market recovery in North America and Asia; dependence on successful integration of Rag & Bone and execution of Guess Jeans in the U.S.
Financial Position
Moderate liquidity with $142m cash and $1.473b total debt; net debt of $1.332b; inventory up 20% YoY with in-transit portion (~8 pp); free cash flow negative in QQ3; projected FCF around $40m for the year; leverage metrics indicate ongoing balance sheet risk but room for cash-flow-driven deleveraging as the platform scales.
SWOT Analysis
Strengths
Diversified brand platform (Guess, Rag & Bone, Guess Jeans) and multi-channel distribution (own stores, e-commerce, wholesale, licensing) in 100+ countries
Strong gross margin in QQ3 at ~43.6% indicating pricing power in product mix and lower markdowns
Global brand elevation strategy with high-impact marketing, collaborations, and experiential activations
Weaknesses
Near-term profitability dilution from platform investments and integration costs (Rag & Bone)
Significant exposure to currency and freight costs creating margin volatility
Consumer price-sensitivity pressures impacting North American retail performance
Opportunities
Expansion of Guess Jeans in the U.S. and Europe to broaden casual/lifestyle mix; potential new product categories and international store openings
Loyalty programs and CRM enhancements to improve retention and AUR
Leveraging the platform to accelerate global category expansion (handbags, footwear, fragrances) and new geographies
Threats
Currency volatility and macro headwinds impacting consumer demand
Promotional intensity in a highly competitive retail environment
Geopolitical/regulatory risks affecting cross-border supply chains and tariffs