Summary: Guess Inc delivered a solid top-line in QQ2 2025, with revenue of $732.6 million and 10% year-over-year growth, aided by the Rag & Bone acquisition and continued strength in European wholesale. However, GAAP net income was negative (-$10.6 million) as the company invested aggressively in growth initiatives, marketing, and platform integration, leaving adjusted earnings per share (EPS) at $0.42 for the quarter. The results reflect a hybrid story: near-term margin pressure from higher occupancy costs, elevated marketing spend, and integration costs, countered by improving mixes (Europe wholesale, accessories/licensing) and a powerful growth platform that management believes can unlock multi-brand, multi-region upside over the medium term.
The quarter underscored the strategic pivot to a broader Guess platform, with Rag & Bone now embedded in the portfolio and Guess Jeans being positioned as a new, youth-oriented lifestyle brand. Management signaled a material investment cadence (marketing, CRM, social media, and new store concepts) and guided for a resilient FY2025 despite a softer consumer backdrop. Key takeaways include: (1) FY2025 revenue growth guidance of 9.5%–11%, (2) adjusted operating margin target of 7.3%–7.8% for the year with Q3 margin of 4.7%–5.8% and Q4 margin expansion expected, (3) roughly $100 million of free cash flow in 2025, aided by a stronger European wholesale book and operational leverage, and (4) a strengthened balance sheet with expanded liquidity, refinanced converts to 2028, and European credit facility expansion.
Investors should monitor: the trajectory of Rag & Bone’s contribution to top-line and margins, the effectiveness of the new marketing and CRM initiatives, currency dynamics (notably euro strength/weakness), freight/logistics costs (approx. $10 million back-half headwind), and the pace of regional turnarounds in Americas retail and Asia. Overall, the company’s long-term thesis hinges on leveraging a diversified, brand-led platform to drive accelerated growth across geographies and channels.”,
Key Performance Indicators
Revenue
732.56M
QoQ: 23.76% | YoY:10.24%
Gross Profit
319.94M
43.67% margin
QoQ: 28.69% | YoY:8.66%
Operating Income
47.78M
QoQ: 386.05% | YoY:-26.04%
Net Income
-10.60M
QoQ: -181.42% | YoY:-127.16%
EPS
-0.21
QoQ: -187.50% | YoY:-128.77%
Revenue Trend
Margin Analysis
Key Insights
Revenue: $732.6 million, up 10.0% YoY and 23.8% QoQ on a reported/constant basis (YoY 10.24% in incomeMetrics).
Gross margin: 43.7% (down 60 bps YoY), driven by higher store occupancy costs, offset by better IMUs.
Adjusted EPS: $0.42 (vs. $0.72 in the prior-year Q2).
Financial Highlights
Revenue and profitability highlights (QQ2 2025 vs. QQ2 2024, and QQ2 2025 vs. QQ1 2025):
- Revenue: $732.6 million, up 10.0% YoY and 23.8% QoQ on a reported/constant basis (YoY 10.24% in incomeMetrics).
- Gross margin: 43.7% (down 60 bps YoY), driven by higher store occupancy costs, offset by better IMUs.
- Adjusted SG&A: $281 million, up 23% YoY; adjusted SG&A rate 38.4% (up ~3.9 ppts).
- Adjusted operating margin: 5.2% (down ~4.6 ppts YoY).
- Adjusted EPS: $0.42 (vs. $0.72 in the prior-year Q2).
- GAAP net income: -$10.6 million; GAAP EPS: -$0.21 basic / -$0.16 diluted.
- EBITDA: $28.1 million; EBITDA margin 3.84% (EBITDA/Revenue).
- Operating profit/loss drivers: Rag & Bone acquisition contributing to SG&A and occupancy costs; higher marketing spend; Europe vs Americas performance divergence.
- Cash flow and liquidity: Net cash from operating activities $44.7 million; free cash flow $24.3 million; cash at period-end $220.3 million; total debt $1.405 billion; net debt $1.187 billion; liquidity facilities totaling >$600 million including EUR100 million European facility expansion.
- Capital discipline: CapEx roughly $41 million in H1; 4Q plans include selective store remodels/openings and technology investments.
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
732.56M
10.24%
23.76%
Gross Profit
319.94M
8.66%
28.69%
Operating Income
47.78M
-26.04%
386.05%
Net Income
-10.60M
-127.16%
-181.42%
EPS
-0.21
-128.77%
-187.50%
Key Financial Ratios
currentRatio
1.47
grossProfitMargin
43.7%
operatingProfitMargin
6.52%
netProfitMargin
-1.45%
returnOnAssets
-0.38%
returnOnEquity
-2.16%
debtEquityRatio
2.86
operatingCashFlowPerShare
$0.85
freeCashFlowPerShare
$0.46
dividendPayoutRatio
-151.6%
priceToBookRatio
2.39
priceEarningsRatio
-27.73
Net Income vs. Revenue
Expense Breakdown
Management Commentary
Key management takeaways by theme:
- Strategy and platform expansion: Carlos Alberini framed Guess as a growing, multi-brand platform with Rag & Bone acquisition as a catalyst for scale and diversification. He highlighted the Guess Jeans launch as a vehicle to attract a younger customer while integrating with the broader platform. Quote: This year is the inflection point, a year of transition and investment as we begin to execute on our vision.
- Marketing and brand investments: Dennis Secor noted the company more than doubled marketing investments in Q2 and intends to maintain elevated levels in the second half, acknowledging that near-term operating margins would bear the cost but are necessary to build brand equity and future growth. Quote: We more than doubled our marketing investments in the second quarter and we plan to continue to invest at higher levels than last year in the second half of the year as well.
- Geographies and channel dynamics: CEO Carlos stressed Europe wholesale strength and offsetting declines in Americas retail and Asia, with Europe wholesale delivering mid-single-digit revenue growth and a 9.8% operating margin (vs ~13% YoY decline due to higher costs). He attributed resilience to improved assortment, replenishment, and stronger conversion/AUR in Europe, and noted ongoing traffic headwinds in the U.S. and Canada. He also discussed Asia softness (Korea/China) and currency headwinds.
- Operations and logistics: The call underscored the U.S. logistics transition to GXO Logistics and the European network alignment, including a U.S. DC sale and a EUR100 million European facility expansion. Management described this as a path to greater efficiency and cost discipline over time.
- Capital structure and balance sheet: The team emphasized capital flexibility, including refinancing convertibles to 2028, expanding U.S. facilities for Rag & Bone, and strengthening Europe facilities to ensure runway for growth. Dennis highlighted excess liquidity of over $600 million and strong cash generation as enablers of the strategic plan.
- Risk factors and market backdrop: Management acknowledged a cautious consumer environment and price sensitivity, with potential volatility from shipping costs (approximately $10 million incremental freight headwind) and FX tailwinds/headwinds depending on EUR/USD movements.
This year is the inflection point, a year of transition and investment as we begin to execute on our vision.
— Carlos Alberini
We more than doubled our marketing investments in the second quarter and we plan to continue to invest at higher levels than last year in the second half of the year as well.
— Dennis Secor
Forward Guidance
Outlook and risk assessment:
- Revenue trajectory: Full-year revenue growth guided to 9.5%–11% (down from prior 10.7%–12.7%), reflecting a softer consumer environment but offset by currency tailwinds (euro) and stronger European wholesale positioning. Third-quarter revenue growth is expected to accelerate to 14.5%–16.5% due to Rag & Bone and the holiday delivery profile, with Q4 growth moderating due to last year's extra week and Rag & Bone seasonality.
- Margins and costs: Freight and logistics headwinds are expected to add roughly $10 million of incremental costs in the back half, with greater impact in Q3 than Q4. A continued ramp in marketing investments is planned, with a tug-of-war between near-term margin pressure and longer-term brand-building benefits. Management projects meaningful gross margin expansion in Q4 as markdown intensity declines and IMUs improve, particularly in Europe.
- Free cash flow and capital allocation: Free cash flow guidance is about $100 million for the year, hindered by higher freight costs and working capital movements associated with tighter delivery reliability across wholesale partners. Capex for strategic initiatives remains disciplined at roughly $40–$50 million in H2, focused on remodels, openings and technology.
- Monitoring points for investors: (1) Rag & Bone’s top-line contribution and profitability, (2) the effectiveness of increased marketing spend on customer acquisition/CRM, (3) currency dynamics (euro strength/weakness implications), (4) freight/logistics cost trajectory and steps to mitigate, (5) regional traffic trends in Americas and Asia, and (6) progress of Guess Jeans and broader brand extension in new markets.
- Bottom-line view: While near-term profitability of QQ2 2025 reflects deliberate investment, the company anticipates margin expansion in Q4 and into FY2026 as initiatives scale and supply-chain efficiencies accrue.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
GES Focus
43.67%
6.52%
-2.16%
-27.73%
ROST
28.30%
12.50%
10.30%
21.91%
PLCE
35.00%
-6.81%
46.60%
-72.80%
BKE
46.90%
17.10%
8.56%
12.48%
HIBB
32.80%
4.27%
2.74%
13.27%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
Base-case thesis: Guess is executing a platform strategy that could unlock significant upside over 2–3 years through Rag & Bone’s international footprint, Guess Jeans’ brand extension, and stronger brand-building capabilities. The company preserves substantial liquidity, a strengthened capital structure, and an aggressive but prudent investment plan to gain share in wholesale and accelerate direct-to-consumer growth. Key catalysts include European wholesale momentum, successful integration and expansion of Rag & Bone, and the monetization of increased marketing/CRM investments through higher traffic, conversion, and ASP. Risks include consumer softness, freight/cost headwinds, and operational integration risk, which management acknowledges and is addressing via cost discipline and targeted investments.
Key Investment Factors
Growth Potential
Biggest growth catalysts are Rag & Bone international rollout (Europe and other markets), the Guess Jeans brand expansion (multi-category, Gen-Z focus), and enhanced marketing/CRM to lift traffic and conversion. The platform approach enables cross-brand synergies (distribution, licensing, and wholesale-to-retail flows) and potential new licenses across geographies.
Profitability Risk
Near-term margin compression from aggressive marketing spend and higher occupancy costs; integration risks with Rag & Bone; macro consumer softness in North America; freight/logistics volatility and currency headwinds; reliance on wholesale channels in Europe where delivery reliability is critical.
Financial Position
Solid balance sheet with ample liquidity (> $600 million available), extended debt maturities to 2028 via convertible refinancings, and EUR100 million European credit facility expansion. Positive free cash flow target (~$100 million) supports deleveraging flexibility and strategic investments.
SWOT Analysis
Strengths
Diversified brand portfolio with Guess, Guess Jeans, Rag & Bone and licensing; strong gross margin relative to many peers; global footprint across Americas, Europe, Asia; multi-channel exposure (retail, wholesale, e-commerce); solid balance sheet and liquidity readiness for growth initiatives.
Weaknesses
Near-term earnings volatility due to aggressive brand-building spend; regional weakness in Americas retail and Asia; integration risk from Rag & Bone ramp; higher occupancy costs and potential markdown pressure in a softer consumer environment.
Opportunities
European wholesale expansion and share gains; Guess Jeans brand scale and new product categories (accessories, handbags); acceleration of e-commerce and CRM programs; geographic diversification (India, Middle East, Latin America) via partnerships; capital-light licensing expansion.
Threats
Macro consumer slowdown in key markets (especially U.S./Canada); currency volatility (EUR/USD) impacting revenue and margins; freight/logistics cost volatility (Red Sea route) and potential supply-chain disruptions; intense fashion and competitive dynamics in apparel