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Shares of Guess?, Inc. (GES - Analyst Report) hit a 52-week low of $25.25 after reporting loss in first-quarter fiscal 2015 and issuing a weak outlook for the second quarter, on May 29.

The apparel retailer’s share price declined slightly more than 5% ever since it released the quarterly earnings.

Why the Share Price Decline?

Though better than expected, first-quarter fiscal 2015 results declined from the year-ago quarter.

Diluted loss per share of 3 cents compared unfavorably with the adjusted prior-year earnings of 14 cents per share due to a weak top line against a difficult retail backdrop. However, the first-quarter loss was better than the Zacks Consensus Estimate of a loss of 6 cents and management’s expectation of a loss of 9 to 5 cents per share due to tight expense management.

Revenues slipped 4.8% (down 5.6% on a constant currency basis) to $522.5 million due to lower traffic in most of the company’s North American stores, as a result of severe weather conditions. Comps declined 4% in the North American retail business. Also, revenues declined in Europe due to lower wholesale shipments and in Asia due to weakness in China and Korea. Though revenues beat the Zacks Consensus Estimate of $522 million marginally, the same were at the lower end of management's expectation of $520 to $535 million.

Operating margin shrank 290 basis points (bps) year over year to negative 0.4%. The margin contraction was due to the deleverage impact of lower European wholesale shipments and negative comps in North American retail.

With the soft traffic trend expected to continue in the second quarter, the company expects revenues in the range of $615 to $630 million, representing a year-over-year decline. Guess? expects operating margin in the range of 5.5% to 6.5%, much lower than 10.5% recorded in the second quarter fiscal 2014. Earnings per share are expected in the range of 25 to 30 cents, much lower than 52 cents recorded in the prior-year quarter. Earnings expectations also fell short of the Zacks Consensus Estimate of 41 cents. The weak second-quarter expectations signal that revival in consumer spending will take time.

Guess? slightly tightened the fiscal 2015 top-line expectations from a range of $2.53–$2.58 billion to $2.53–$2.57 billion. Operating margin is expected within 7.0% to 8.0%. Adjusted earnings are expected in the range of $1.40 to $1.60.

Other Stocks to Consider

Guess? currently carries a Zacks Rank #4 (Sell). Some better-ranked stocks in the apparel industry include Hanesbrands Inc. (HBI - Analyst Report), Columbia Sports Inc. (COLM - Snapshot Report) and Michael Kors Inc. (KORS - Analyst Report). All these stocks carry a Zacks Rank #2 (Buy).

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