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Guess' (GES) Q4 Earnings & Sales Miss Estimates; Issues View
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After missing estimates in the third quarter of fiscal 2017, apparel retailer Guess’, Inc. (GES - Free Report) again succumbed to a negative surprise of 2.4% as it reported the fourth quarter of fiscal 2017 results on Mar 15. In fact, we note that the retailer has missed the consensus mark thrice in the trailing four quarters. Consequently, the dismal performance weighed upon the stock and its price dipped 12.5% in the after-hours trading following the earnings results.
In fact, in the past one year, the shares of this apparel retailer have declined 47%, underperforming the Zacks categorized Textile-Apparel Manufacturing industry’s gain of 25.5%.
Guess’ reported adjusted earnings of 41 cents per share, missing the Zacks Consensus Estimate of 42 cents. Earnings came in at the lower end of management’s projected earnings range of 40–50 cents. Further, the bottom line declined 28.1% from the year-ago result. Additionally, currency fluctuations impacted earnings by 1 cent.
Revenues and Margins
Revenues gained 3.2% year over year to $679.3 million as deterioration in American retail and Licensing business was mitigated by improvement in Europe, American Wholesale and Asia. On a constant currency basis, revenues grew 4.3%, which is towards the lower end of management’s guided range of 4–8% growth. Further, revenues missed the Zacks Consensus Estimate of by 1.5%.
Total gross margin contracted 170 basis points (bps) to 34.8% due to the negative impact of markdowns, occupancy deleverage in the Americas, and negative product mix.
Operating margin contracted 270 bps to 7.9%, primarily owing to higher expenses stemming from retail expansion and the negative impact from currency exchange rate fluctuations.
Segment Results
Starting from the second quarter of fiscal 2017, Guess’ changed the names of its "North American Retail" and "North American Wholesale" segments to "Americas Retail" and "Americas Wholesale," respectively.
Revenues from retail stores and eCommerce sites at the Americas Retail segment declined 6.3% and 7.4%, respectively, on a constant currency basis. Decline of revenues in North American retail segment was due to lower average unit prices and traffic decline in a highly promotional holiday environment.
The European segment's revenues were up 11.4%. On a constant currency basis, revenues increased 13.5%. Revenue growth in the segment came on the back of new stores, higher traffic, higher conversion and a better product offering.
Revenues from Asia increased 26.6% (up 28% in constant currency) owing to store openings, eCommerce and comps growth in Greater China.
Net revenues at the American Wholesale segment inched up 1% and gained 3.7% year over year in constant currency.
Licensing revenues dropped 8.6% both in U.S. dollars and constant currency.
Fiscal Results
Adjusted earnings of 44 cents per share, missed the Zacks Consensus Estimate of 50 cents. Further, the bottom line declined 55.1% from the year-ago result. Additionally, currency fluctuations impacted earnings by 13 cents. Revenues gained almost 0.2% year over year to $2.21 billion in line with the Zacks Consensus Estimate.
Other Financial Update
Guess’ exited the quarter with cash and cash equivalents of $396.1 million compared with $349.1 million in the previous quarter. The company had long-term debt of $23.48 million compared with $23.54 million in the previous quarter.
During the fourth quarter, the company’s board approved a quarterly cash dividend of 22.5 cents per share on common stock. The dividend will be payable on Apr 13, 2017 to shareholders of record at the close of business on Mar 29, 2017.
Guidance for Fiscal First Quarter
The company anticipates net revenue decrease of 2–4%, on a constant currency basis.
The company anticipates operating loss between 7% and 6%, including 30 bps of currency headwind. The company expects a loss in the band of 33–30 cents.
Guidance for Fiscal 2018
For fiscal 2018, Guess’ estimates adjusted earnings per share in the range of 28–40 cents. This compares unfavorably with 44 cents per share reported in fiscal 2017. Currency headwinds are expected to impact earnings negatively by 8 cents.
The company anticipates net revenues to rise in the range of 4% and 6% in constant currency. Currency is anticipated to have a negative impact of about 2%.
Adjusted operating margin is expected between 2.2% and 3%.
While Burlington Stores has an expected earnings growth of 19.9%, Best Buy and At Home has an expected earnings growth rate of 10.5% and 25%, respectively.
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Guess' (GES) Q4 Earnings & Sales Miss Estimates; Issues View
After missing estimates in the third quarter of fiscal 2017, apparel retailer Guess’, Inc. (GES - Free Report) again succumbed to a negative surprise of 2.4% as it reported the fourth quarter of fiscal 2017 results on Mar 15. In fact, we note that the retailer has missed the consensus mark thrice in the trailing four quarters. Consequently, the dismal performance weighed upon the stock and its price dipped 12.5% in the after-hours trading following the earnings results.
In fact, in the past one year, the shares of this apparel retailer have declined 47%, underperforming the Zacks categorized Textile-Apparel Manufacturing industry’s gain of 25.5%.
Guess’ reported adjusted earnings of 41 cents per share, missing the Zacks Consensus Estimate of 42 cents. Earnings came in at the lower end of management’s projected earnings range of 40–50 cents. Further, the bottom line declined 28.1% from the year-ago result. Additionally, currency fluctuations impacted earnings by 1 cent.
Revenues and Margins
Revenues gained 3.2% year over year to $679.3 million as deterioration in American retail and Licensing business was mitigated by improvement in Europe, American Wholesale and Asia. On a constant currency basis, revenues grew 4.3%, which is towards the lower end of management’s guided range of 4–8% growth. Further, revenues missed the Zacks Consensus Estimate of by 1.5%.
Total gross margin contracted 170 basis points (bps) to 34.8% due to the negative impact of markdowns, occupancy deleverage in the Americas, and negative product mix.
Guess?, Inc. Price, Consensus and EPS Surprise
Guess?, Inc. Price, Consensus and EPS Surprise | Guess?, Inc. Quote
Operating margin contracted 270 bps to 7.9%, primarily owing to higher expenses stemming from retail expansion and the negative impact from currency exchange rate fluctuations.
Segment Results
Starting from the second quarter of fiscal 2017, Guess’ changed the names of its "North American Retail" and "North American Wholesale" segments to "Americas Retail" and "Americas Wholesale," respectively.
Revenues from retail stores and eCommerce sites at the Americas Retail segment declined 6.3% and 7.4%, respectively, on a constant currency basis. Decline of revenues in North American retail segment was due to lower average unit prices and traffic decline in a highly promotional holiday environment.
The European segment's revenues were up 11.4%. On a constant currency basis, revenues increased 13.5%. Revenue growth in the segment came on the back of new stores, higher traffic, higher conversion and a better product offering.
Revenues from Asia increased 26.6% (up 28% in constant currency) owing to store openings, eCommerce and comps growth in Greater China.
Net revenues at the American Wholesale segment inched up 1% and gained 3.7% year over year in constant currency.
Licensing revenues dropped 8.6% both in U.S. dollars and constant currency.
Fiscal Results
Adjusted earnings of 44 cents per share, missed the Zacks Consensus Estimate of 50 cents. Further, the bottom line declined 55.1% from the year-ago result. Additionally, currency fluctuations impacted earnings by 13 cents. Revenues gained almost 0.2% year over year to $2.21 billion in line with the Zacks Consensus Estimate.
Other Financial Update
Guess’ exited the quarter with cash and cash equivalents of $396.1 million compared with $349.1 million in the previous quarter. The company had long-term debt of $23.48 million compared with $23.54 million in the previous quarter.
During the fourth quarter, the company’s board approved a quarterly cash dividend of 22.5 cents per share on common stock. The dividend will be payable on Apr 13, 2017 to shareholders of record at the close of business on Mar 29, 2017.
Guidance for Fiscal First Quarter
The company anticipates net revenue decrease of 2–4%, on a constant currency basis.
The company anticipates operating loss between 7% and 6%, including 30 bps of currency headwind. The company expects a loss in the band of 33–30 cents.
Guidance for Fiscal 2018
For fiscal 2018, Guess’ estimates adjusted earnings per share in the range of 28–40 cents. This compares unfavorably with 44 cents per share reported in fiscal 2017. Currency headwinds are expected to impact earnings negatively by 8 cents.
The company anticipates net revenues to rise in the range of 4% and 6% in constant currency. Currency is anticipated to have a negative impact of about 2%.
Adjusted operating margin is expected between 2.2% and 3%.
Guess’ currently carries a Zacks Rank #4 (Sell).
Stock Picks
Some better-ranked stocks in the retail sector are Burlington Stores Inc. (BURL - Free Report) , Best Buy Co. Inc. (BBY - Free Report) and At Home Group Inc. , all carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
While Burlington Stores has an expected earnings growth of 19.9%, Best Buy and At Home has an expected earnings growth rate of 10.5% and 25%, respectively.
More Stock News: 8 Companies Verge on Apple-Like Run
Did you miss Apple's 9X stock explosion after they launched their iPhone in 2007? Now 2017 looks to be a pivotal year to get in on another emerging technology expected to rock the market. Demand could soar from almost nothing to $42 billion by 2025. Reports suggest it could save 10 million lives per decade which could in turn save $200 billion in U.S. healthcare costs.
A bonus Zacks Special Report names this breakthrough and the 8 best stocks to exploit it. Like Apple in 2007, these companies are already strong and coiling for potential mega-gains. Click to see them right now >>