Guess? Earnings Call Insights: Q1 Conversion Rate and Europe Outlook

Guess?(NYSE:GES) recently reported its first quarter earnings and discussed the following topics in its earnings conference call.

Q1 Conversion Rate

Erinn Murphy – Piper Jaffray: Nice to see some of the top line improvements in North America. I guess, I wanted to focus a little bit more on that segment specifically just kind of pacing out both the top line kind of recent improvement and then coupling that with kind of the profitability in the quarter. I guess the first part of this is how should we think about the conversion rate in the first quarter as you did start to kind of test some of the product, kind of, sharper price points in the product categories as $79 denim. Did that actually help improve conversion? Then what kind of products have you been seeing standout in the second quarter to date?

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Russell Bowers – CFO, North America Retail Business: So to follow-up on that. Yes, we did see trends get a lot better during the quarter. With the first half we were down in the teens and the second half we were down mid-singles. In May so far we’ve improved even more and just as importantly, we haven’t given up as much in product margin as we did in the first quarter, it’s down, but it’s only down about a third of what we lost in Q1, so trends are really looking better across the board. In regards to the conversion rate, yes conversion has improved for us. It was up over last year during the first quarter and it’s still up so far in the second quarter. So we are encouraged by that. In relation to the pricing, it’s still early to draw a lot of conclusions based on that because we haven’t done it in a big way yet. I mean we’ve really just added $179 style to the denim wall and there was another style that we repriced that wasn’t as significant. But we have seen some positive results with the lower price denim so far and a lot of the entry-level price point glasses have also done well. Of course the overall numbers are better too. So we are encouraged.

Europe Outlook

Betty Chen – Wedbush Morgan Securities Inc.: Congratulations on managing well and the nice improvement in the business. I was wondering if you can talk a little bit about Europe, it feels like while Southern Europe remains weak, I think you mentioned that comps have also improved in the second quarter. How should we think about that and whether you believe that the consumer appetite has improved a little bit and that we might be set up for multiple quarters of them finally feeling comfortable to buy. And in terms of the new market are there any other new markets that you are thinking about going into besides Russia, Germany that have done so well?

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Paul Marciano – CEO, Vice Chairman and Creative Director: This is Paul. There are few factors here, Betty, we should address; one is the continued pressure in France and Italy and it is no secret for anybody that they are much more challenging even than Spain; also for us because we are so largely present in these two countries. But by expending North Europe and Eastern Europe we have been able to really manage to have that percentage of presence reduce slowly to more comfortable numbers. What we have not expected has been as of today, as of last weekend, as of last week is a drastic weather condition will continue to be like beating Europe like we have not seen for – some time (indiscernible). To give you just some color some ski station are reopening this weekend in June. I have never heard that in my life that people will be going skiing in June. So, it is happening right now in France. So, the weather has been a big factor. Today, the French government got some relief from the European community to release some rules and I think that will help the austerity to hit so hard the consumers in France. So, I am getting much more hopeful than where we the last quarter and the last three quarters in France and in Italy. Italy, we should see also some move little bit, but we try to be – because I go there a lot and the sense of the Street continue to be cautious, the sense of the Street is nervous, apprehensive and we don’t see the consumer rushing to the stores and say oh, wow, I want to shop today. It’s much more controlled. I’m on my way next week to Europe again, and I think we will evaluate that. But you talk about new markets and new markets like we’re pushing right now has been the Middle East which has been really strong we are there for 20 year but we continue to expand very strongly in Middle East, which we have no issue of credit or austerity or whatsoever. In Eastern Europe like Poland, we just opened a brand new showroom a few months ago. We are opening seven stores now. I am on my way to visit (indiscernible) and I’m very hopeful about all these countries along that and Turkey of course. So, I’ll give you the best color I can right now. Europe is a very large market for us and we are monitoring very closely and we believe that things should turnaround on Q3.

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