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Why You Should Avoid Guess' Inc. (GES) Stock This Year
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The textile-apparel industry is currently going through difficult times and Guess' Inc. (GES - Free Report) is no exception to the trend. The company’s shares have declined 36% in the past one year, underperforming the Zacks categorized Textile-Apparel Manufacturing industry, which witnessed a decline of 12.2%. Further, the chances of a rebound of this Zacks Rank #4 (Sell) stock seem minimal as the industry occupies a space in the bottom 50% of the Zacks Classified industries.
The industry-wide weakness can be attributed to the fact of apparel companies grappling with headwinds like competition from online sales and declining footfall. Additionally, these companies are under pressure to strike the right chord with the fashion-conscious consumers as “change is the only constant” for this industry.
Guess' is grappling with waning comps in the North American Retail segment. Comps declined 4.9%, 2% and 4% in the first three quarters of fiscal 2017. Further, the company is experiencing lower margins due to escalating cost of sales. While gross margins contracted 170 basis points (bps) in third-quarter fiscal 2017, it contracted 220 bps in the second quarter and 280 bps during the first quarter.
Further, currency headwinds and a lackluster performance in the Greater China is putting pressure on the company’s sales. Although the company is taking several cost cutting initiatives, higher promotional environment and competitive retail environment are putting pressure on gross margins.
Moreover, decelerating traffic at its North American retail stores and soft wholesale segment are straining top-line results. Nevertheless, the company in a bid to improve sales is enhancing its denim stocks and shifting focus from higher-margin products to making the clothes affordable. The company is also changing its stocks more often to reflect the ever-changing fashion trends. However, analysts believe that these initiatives will take time to reap benefits.
The company’s performance it does not unveil a favorable picture. The company has missed earnings estimates in three of the last four trailing quarters. In third-quarter of fiscal 2017 Guess’ succumbed to a negative earnings surprise and also missed the top line expectations. The company now estimates adjusted earnings per share in the range of 42–52 cents compared with 62–75 cents, expected previously. Further, it lowered its revenue growth outlook and now anticipates net revenue to rise in the range of 1–2% in constant currency compared to a range of 2.5–4.5%, expected earlier.
We noted that Guess' succumbed to a negative earnings surprise in third-quarter fiscal 2017 and has consequently witnessed downward estimate revisions in the past 60 days. Moreover, the Zacks Consensus Estimate for fiscal 2017 is 50 cents, down 13.8% in the past 30 days and that for 2018 is 66 cents, down 8.4% over the same period. Furthermore, lower-than-expected results compelled management to lower its earnings and sales outlook for fiscal 2017.
Guess’ currently carries a Zacks Rank #4 (Sell).
Stocks to Consider
Better-ranked stocks in the broader consumer discretionary sector arePerry Ellis International Inc. , Tailored brands Inc. and Francesca’s Holdings Corporation .
Perry Ellis carries a Zacks Rank #2 (Buy). It has an average earnings surprise of 19.5% in the trailing four quarters.
Zacks' Top 10 Stocks for 2017
In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-hold tickers for the entirety of 2017?
Who wouldn't? As of early December, the 2016 Top 10 produced 5 double-digit winners including oil and natural gas giant Pioneer Natural Resources which racked up a stellar +50% gain. The new list is painstakingly hand-picked from 4,400 companies covered by the Zacks Rank. Be among the very first to see it>>
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Why You Should Avoid Guess' Inc. (GES) Stock This Year
The textile-apparel industry is currently going through difficult times and Guess' Inc. (GES - Free Report) is no exception to the trend. The company’s shares have declined 36% in the past one year, underperforming the Zacks categorized Textile-Apparel Manufacturing industry, which witnessed a decline of 12.2%. Further, the chances of a rebound of this Zacks Rank #4 (Sell) stock seem minimal as the industry occupies a space in the bottom 50% of the Zacks Classified industries.
The industry-wide weakness can be attributed to the fact of apparel companies grappling with headwinds like competition from online sales and declining footfall. Additionally, these companies are under pressure to strike the right chord with the fashion-conscious consumers as “change is the only constant” for this industry.
Guess' is grappling with waning comps in the North American Retail segment. Comps declined 4.9%, 2% and 4% in the first three quarters of fiscal 2017. Further, the company is experiencing lower margins due to escalating cost of sales. While gross margins contracted 170 basis points (bps) in third-quarter fiscal 2017, it contracted 220 bps in the second quarter and 280 bps during the first quarter.
Further, currency headwinds and a lackluster performance in the Greater China is putting pressure on the company’s sales. Although the company is taking several cost cutting initiatives, higher promotional environment and competitive retail environment are putting pressure on gross margins.
Moreover, decelerating traffic at its North American retail stores and soft wholesale segment are straining top-line results. Nevertheless, the company in a bid to improve sales is enhancing its denim stocks and shifting focus from higher-margin products to making the clothes affordable. The company is also changing its stocks more often to reflect the ever-changing fashion trends. However, analysts believe that these initiatives will take time to reap benefits.
The company’s performance it does not unveil a favorable picture. The company has missed earnings estimates in three of the last four trailing quarters. In third-quarter of fiscal 2017 Guess’ succumbed to a negative earnings surprise and also missed the top line expectations. The company now estimates adjusted earnings per share in the range of 42–52 cents compared with 62–75 cents, expected previously. Further, it lowered its revenue growth outlook and now anticipates net revenue to rise in the range of 1–2% in constant currency compared to a range of 2.5–4.5%, expected earlier.
We noted that Guess' succumbed to a negative earnings surprise in third-quarter fiscal 2017 and has consequently witnessed downward estimate revisions in the past 60 days. Moreover, the Zacks Consensus Estimate for fiscal 2017 is 50 cents, down 13.8% in the past 30 days and that for 2018 is 66 cents, down 8.4% over the same period. Furthermore, lower-than-expected results compelled management to lower its earnings and sales outlook for fiscal 2017.
Guess’ currently carries a Zacks Rank #4 (Sell).
Stocks to Consider
Better-ranked stocks in the broader consumer discretionary sector arePerry Ellis International Inc. , Tailored brands Inc. and Francesca’s Holdings Corporation .
Tailored Brands and Francesca’s both sport a Zacks Rank #1 (Strong Buy) and has an expected earnings growth of 17.5% and 13.8%, respectively. You can see the complete list of today’s Zacks #1 Rank stocks here.
Perry Ellis carries a Zacks Rank #2 (Buy). It has an average earnings surprise of 19.5% in the trailing four quarters.
Zacks' Top 10 Stocks for 2017
In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-hold tickers for the entirety of 2017?
Who wouldn't? As of early December, the 2016 Top 10 produced 5 double-digit winners including oil and natural gas giant Pioneer Natural Resources which racked up a stellar +50% gain. The new list is painstakingly hand-picked from 4,400 companies covered by the Zacks Rank. Be among the very first to see it>>