Guess Jumps as Faster Sales Overshadow Misconduct Investigation

(Bloomberg) -- Guess? Inc.’s surprisingly strong sales growth is taking the focus off its sexual-harassment scandal.

The shares surged the most in almost 20 years after revenue jumped in the quarter that ended Feb. 3, fueled by rapid growth in Europe and Asia and signs of recovery in the U.S. The result, which was well above Wall Street’s expectations, also showed higher profitability in the Americas. The company sidestepped questions about allegations against its co-founder.

“We were most encouraged by the progress in North America,” Jefferies analyst Janine Stichter wrote in a research note.

Guess Jumps as Faster Sales Overshadow Misconduct Investigation

The gains come as the retailer grapples with sexual-harassment accusations by model Kate Upton and other women against the company’s co-founder, chairman and chief creative officer Paul Marciano. The allegations, which two independent board members are investigating, had roiled Guess’s shares this year and threatened to distract from its efforts to reverse a sales slump in North America.

The shares erased their 2018 loss on Thursday, jumping as much as 29 percent to $19.97 -- the largest advance since 1998. The stock has now risen more than 80 percent in the last 12 months.

Chief Executive Officer Victor Herrero said during a call with investors that the company would not comment on the ongoing investigation.

‘Risk Remains’

After a series of tweets invoking the #MeToo movement in late January, Upton told Time that Marciano touched her inappropriately after she began shooting a Guess ad campaign when she was 19. Guess said Marciano has denied the allegations. Marciano has stepped away from the business without drawing a salary.

Dana Telsey, head of Telsey Advisory Group, said that “headline risk remains” for Guess due to the investigation. She has a “hold” rating on the stock.

Other retailers have also taken the spotlight recently for challenges with workplace behavior. The president of Nike Inc.’s namesake brand resigned last week amid a companywide internal review of inappropriate behavior. And Lululemon Athletica Inc.’s chief executive split with the company last month for reasons said to include a relationship that he had with a subordinate.

Regardless of the probe’s outcome, investors were heartened by revenue growth of 18 percent, to $792 million, and a more optimistic outlook.

©2018 Bloomberg L.P.