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Earnings Preview: Guess? Inc.

ANF GES

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Guess? Inc. (GES - Analyst Report), one of the world’s leading designer and distributor of lifestyle apparels, is scheduled to report its third quarter 2012 financial results before the opening bells on November 30, 2011.

The current Zacks Consensus Estimate for the quarter’s earnings is pegged at 74 cents a share. The Zacks Consensus Estimate projects revenues for the quarter to come in at $658 million.

Second Quarter 2012 Recap

Guess? Inc., which faces stiff competition from Abercrombie & Fitch Co.(ANF - Analyst Report) and Gap Inc. , posted second quarter 2012 adjusted earnings per share (EPS) of 84 cents, which surpassed the Zacks estimate by 3 cents. It also exceeded the year-ago earnings of 72 cents by 16.7%.

Revenues in the quarter soared 17.3% year over year to $677.2 million. In constant dollar terms, net revenue went up 9.5% from the previous year.

Operating income grew 17.3% to $113.0 million, reflecting favorable currency, volume/mix gains and lower overheads.

Operating Income margin remained flat with the prior year quarter at 16.7%. Product margin climbed up owing to higher relative occupancy, distribution and selling expenses.

Read The Whole Story at Guess? Beats; Profits Overseas

Management Guidance

Based on the results posted in the second quarter, the company estimated the third quarter diluted earnings to be in the range of 71 cents to 74 cents. For fiscal 2012, the company expects earnings in the range of $3.25 to $3.35 and GAAP diluted earnings per share between $3.06 and $3.16.

Third-Quarter 2012 Zacks Consensus

Earnings estimates for the third quarter of 2012, as provided by the analysts, range from a low of 70 cents to a high of 77 cents. Thus, the current Zacks Consensus Estimate for the quarter is pegged at 74 cents per share, reflecting a year-over-year decline of one penny.

Over the past 30 days, none of the analysts have revised the earnings estimate. Hence, the Zacks Consensus Estimate did not change. However, the estimate increased by 1 penny over the last 90 days.

Earnings History: Ahead of Zacks

With respect to earnings surprises, Guess? topped the Zacks Consensus Estimate in all the preceding four quarters. Over the last four quarters, the earnings surprise ranged from 3.70% to 27.12%, with the average earnings surprise being 15.14%, suggesting that Guess? has always outperformed the Zacks Consensus Estimate over that period.

Recommendation

The company’s in-house team of dedicated designers and product specialists enable the company to stay ahead in the face of changing lifestyle and fashion trends by bringing innovative and unique products to its customers. However, stiff competition from numerous manufacturers, importers and distributors; having significantly greater financial, distribution, advertising and marketing resources concerns us.

Currently, we prefer to rate the stock as Neutral. However, Guess? holds the Zacks #4 Rank, which translates into a short-term 'Sell' rating.

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