Guess (GES) Q2 2026: Europe Shines as Americas Falter, Profits Squeezed

Guess Inc. (GES), the global apparel and accessories brand, recently released its financial results for the second quarter of its fiscal year 2026. In their latest 10-Q filing with the SEC, the numbers reveal a period of revenue growth overshadowed by significant pressure on profitability. Let's break down the key takeaways from their income statement.

For the three months ending August 2, 2025, Guess reported total revenues of $772.9 million, a 5.5% increase from the same period last year. However, the bottom line tells a more complex story, with net income landing at $8.3 million, resulting in a slim net margin of just 1.1%.

To better understand how Guess generated its revenue and where the money went, the following flow diagram visualizes the company's income statement.

A Tale of Two Continents

The headline revenue growth was almost entirely fueled by the company's European segment, which saw sales jump 14.0% to $436.9 million. This division wasn't just growing; it was profitable, with operating income climbing 24.0% to $46.4 million. Europe is clearly the powerhouse for Guess right now.

The story is starkly different in the Americas.

• Americas Retail revenue slipped 1.5% to $178.8 million. More concerningly, this segment swung from a $2.7 million operating profit last year to a $6.6 million operating loss this quarter.
• Americas Wholesale also faced challenges, with revenue dropping 10.9% to $75.2 million.

The highly profitable Licensing segment, which boasts an impressive 95.4% operating margin, saw a modest 9.8% decline in revenue.

The Profitability Squeeze

Despite bringing in more money, Guess's profitability took a substantial hit. The company's operating income plummeted by 62.1% year-over-year, falling from $47.8 million to just $18.1 million. The operating margin, a key measure of profitability, compressed sharply from 6.5% to 2.3%.

Two main factors drove this decline:

1. Cost of Product Sales: These costs rose 7.6%, outpacing revenue growth and shrinking the company's gross margin from 43.7% to 42.5%.
2. Operating Expenses (SG&A): Selling, general, and administrative expenses also grew faster than revenue, increasing by 9.1% to $308.6 million.

A Company in Transition

It's impossible to view these results in a vacuum. The filing notes a significant development: a "Proposed Take-Private Transaction with Authentic Brands Group" announced on August 20, 2025. This pending transaction adds a layer of uncertainty and strategic importance to the company's current performance.

In conclusion, Guess finds itself at a crossroads. While its European business is thriving, mounting costs and significant weakness in its home market of the Americas are eroding profitability. As the company navigates a potential take-private deal, its ability to rein in expenses and revitalize its American retail operations will be critical in a fiercely competitive fashion landscape.