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Europe & Asia Likely to Drive Guess? (GES) in Q2 Earnings
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Guess?, Inc. (GES - Free Report) is slated to release second-quarter fiscal 2019 results on Aug 29. The company’s bottom-line outpaced the Zacks Consensus Estimate in three of the trailing four quarters, the average beat being 29%. Notably, Guess? posted a loss in the first quarter of fiscal 2019, in line with the consensus mark. With this in mind, let’s delve into how things are shaping up for the upcoming announcement for this leading designer and distributor of lifestyle products.
Europe & Asia to Bolster Performance
Guess?’s top-line performance has long been gaining from strength in Europe and Asia businesses. These regions have been benefitting from constant store openings and e-commerce strategies, ultimately leading to positive comps growth. During the first quarter, the company introduced seven net directly-operated stores in Europe, across Italy, France, Spain, Turkey, Finland, Russia, and Poland. In Asia, Guess? opened 12 new stores in the first quarter, which included eight directly-operated outlets in China.
Further, e-commerce growth in the Europe and Asia segments played a major role in augmenting comps and top line in the past. Management had earlier stated that e-commerce business in Europe is gradually approaching the size of its domestic operations. As for Asia, digital sales in China have been a major driver as the company’s alliance with Tmall is growing at a considerable rate. Recently, the company, in partnership with Alibaba, announced plans to launch artificial intelligence in stores.
As a result of such robust endeavors, revenues in Europe surged 24.2% (up 9.1% on a constant-currency basis) in the first quarter. Markedly, comps improved for the 11th straight quarter in Europe. Moving to Asia, sales advanced 32.6% and grew 25.1% on a currency-neutral basis. In fact, Asia witnessed its sixth straight quarter of operating margin growth.
Going ahead, management is committed toward making capital investments to tap into the bountiful opportunities in these regions in fiscal 2019. Thanks to these factors, the company expects sales in Europe and Asia to continue rising in double-digits in the second quarter.
Guess? has been focusing on linking brick-and-mortar stores, e-commerce and mobile sales to improve online operations. This has enabled customers to reserve merchandise online and pick them up in stores. Guess? is also making constant investments in the digital and social media space, like Weibo and WeChat. Additionally, the company is executing supply chain initiatives through product cost improvements. In this respect, the company strives to develop long-term partnerships with high-quality supplier to gain operating scale efficiencies.
Weakness in America & High Costs are a Worry
The company has been reporting soft revenues in Americas Retail for quite some time. This can be accountable to a tough retail environment and soft traffic. Revenues in the Americas Retail unit fell 1.4% during the first quarter and declined 2.1% on a currency-neutral basis.
Further, the company witnessed higher distribution costs in the first quarter, stemming from the repositioning of the European distribution center. These expenses along with higher digital marketing and advertising costs are expected to increase overall SG&A costs in the second quarter. This is likely to dent the company’s margins and the bottom line.
Nevertheless, we are encouraged by the fact that the company has implemented stringent cost control and margin-growth initiatives, especially for North American operations. Further, the company’s initiative to improve product costs through supply chain efficiencies are encouraging. We expect such efforts to aid countering aforementioned hurdles in the second quarter.
Estimates Reflect a Positive Picture
Guess?’s robust efforts are expected to help the company enhance its customer base and enrich their experience, which in turn is likely to drive sales. That said, management issued a favorable view for the second quarter. The company expects consolidated net revenues to improve in the range of 14-15.5%. At constant currency, consolidated net revenues are projected to grow 11-12.5%. The company also anticipates adjusted earnings for the second quarter in the range of 27-30 cents, including currency impacts of 8 cents. This depicts a considerable growth from the prior-year quarter’s earnings of 19 cents.
The Zacks Consensus Estimates for earnings is currently pegged at 33 cents. This estimate, which has been stable in the past 30 days, depicts an improvement of almost 73.7% from the prior-year quarter’s figure. Further, the consensus mark for revenues of $651 million reflects an improvement of 13.5% from the year-ago quarter’s figure.
What Picture Does the Zacks Model Unveil?
Our proven model shows that Guess? is not likely to beat earnings estimates this quarter. A stock needs to have a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. You may uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Although Guess? carries a Zacks Rank #2, its Earnings ESP of 0.00% makes surprise prediction difficult.
Stocks With Favorable Combinations
Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat:
Penn National Gaming, Inc (PENN - Free Report) has an Earnings ESP of +0.23% and a Zacks Rank #2.
lululemon athletica inc (LULU - Free Report) has an Earnings ESP of +1.02% and a Zacks Rank #3.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.
Image: Bigstock
Europe & Asia Likely to Drive Guess? (GES) in Q2 Earnings
Guess?, Inc. (GES - Free Report) is slated to release second-quarter fiscal 2019 results on Aug 29. The company’s bottom-line outpaced the Zacks Consensus Estimate in three of the trailing four quarters, the average beat being 29%. Notably, Guess? posted a loss in the first quarter of fiscal 2019, in line with the consensus mark. With this in mind, let’s delve into how things are shaping up for the upcoming announcement for this leading designer and distributor of lifestyle products.
Europe & Asia to Bolster Performance
Guess?’s top-line performance has long been gaining from strength in Europe and Asia businesses. These regions have been benefitting from constant store openings and e-commerce strategies, ultimately leading to positive comps growth. During the first quarter, the company introduced seven net directly-operated stores in Europe, across Italy, France, Spain, Turkey, Finland, Russia, and Poland. In Asia, Guess? opened 12 new stores in the first quarter, which included eight directly-operated outlets in China.
Further, e-commerce growth in the Europe and Asia segments played a major role in augmenting comps and top line in the past. Management had earlier stated that e-commerce business in Europe is gradually approaching the size of its domestic operations. As for Asia, digital sales in China have been a major driver as the company’s alliance with Tmall is growing at a considerable rate. Recently, the company, in partnership with Alibaba, announced plans to launch artificial intelligence in stores.
As a result of such robust endeavors, revenues in Europe surged 24.2% (up 9.1% on a constant-currency basis) in the first quarter. Markedly, comps improved for the 11th straight quarter in Europe. Moving to Asia, sales advanced 32.6% and grew 25.1% on a currency-neutral basis. In fact, Asia witnessed its sixth straight quarter of operating margin growth.
Going ahead, management is committed toward making capital investments to tap into the bountiful opportunities in these regions in fiscal 2019. Thanks to these factors, the company expects sales in Europe and Asia to continue rising in double-digits in the second quarter.
Guess?, Inc. Price, Consensus and EPS Surprise
Guess?, Inc. Price, Consensus and EPS Surprise | Guess?, Inc. Quote
Digital Efforts to Drive Growth
Guess? has been focusing on linking brick-and-mortar stores, e-commerce and mobile sales to improve online operations. This has enabled customers to reserve merchandise online and pick them up in stores. Guess? is also making constant investments in the digital and social media space, like Weibo and WeChat. Additionally, the company is executing supply chain initiatives through product cost improvements. In this respect, the company strives to develop long-term partnerships with high-quality supplier to gain operating scale efficiencies.
Weakness in America & High Costs are a Worry
The company has been reporting soft revenues in Americas Retail for quite some time. This can be accountable to a tough retail environment and soft traffic. Revenues in the Americas Retail unit fell 1.4% during the first quarter and declined 2.1% on a currency-neutral basis.
Further, the company witnessed higher distribution costs in the first quarter, stemming from the repositioning of the European distribution center. These expenses along with higher digital marketing and advertising costs are expected to increase overall SG&A costs in the second quarter. This is likely to dent the company’s margins and the bottom line.
Nevertheless, we are encouraged by the fact that the company has implemented stringent cost control and margin-growth initiatives, especially for North American operations. Further, the company’s initiative to improve product costs through supply chain efficiencies are encouraging. We expect such efforts to aid countering aforementioned hurdles in the second quarter.
Estimates Reflect a Positive Picture
Guess?’s robust efforts are expected to help the company enhance its customer base and enrich their experience, which in turn is likely to drive sales. That said, management issued a favorable view for the second quarter. The company expects consolidated net revenues to improve in the range of 14-15.5%. At constant currency, consolidated net revenues are projected to grow 11-12.5%. The company also anticipates adjusted earnings for the second quarter in the range of 27-30 cents, including currency impacts of 8 cents. This depicts a considerable growth from the prior-year quarter’s earnings of 19 cents.
The Zacks Consensus Estimates for earnings is currently pegged at 33 cents. This estimate, which has been stable in the past 30 days, depicts an improvement of almost 73.7% from the prior-year quarter’s figure. Further, the consensus mark for revenues of $651 million reflects an improvement of 13.5% from the year-ago quarter’s figure.
What Picture Does the Zacks Model Unveil?
Our proven model shows that Guess? is not likely to beat earnings estimates this quarter. A stock needs to have a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. You may uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Although Guess? carries a Zacks Rank #2, its Earnings ESP of 0.00% makes surprise prediction difficult.
Stocks With Favorable Combinations
Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat:
Michael Kors Holdings Limited has an Earnings ESP of +0.31% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Penn National Gaming, Inc (PENN - Free Report) has an Earnings ESP of +0.23% and a Zacks Rank #2.
lululemon athletica inc (LULU - Free Report) has an Earnings ESP of +1.02% and a Zacks Rank #3.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.
Click here for the 6 trades >>