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Guess? (GES) Q1 Earnings Miss Estimates, Revenues Up Y/Y

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Guess? Inc. (GES - Free Report) reported first-quarter fiscal 2023 results, with the top and the bottom line increasing year over year. Earnings missed the Zacks Consensus Estimates while revenues surpassed the same.

Management is impressed with an impressive start to fiscal 2023. First-quarter top line and operating profit topped expectations despite inflation, the war in Ukraine and a few isolated COVID restrictions. The company witnessed revenue growth across all segments during the quarter.

Guess, Inc. Price and EPS Surprise

 

Guess, Inc. Price and EPS Surprise

Guess, Inc. price-eps-surprise | Guess, Inc. Quote

 

Result in Detail

Guess? posted adjusted earnings of 24 cents per share, up 14.3% from 21 cents reported in the year-ago quarter. Earnings in the quarter were driven by a favorable impact from its share buybacks, offset by a negative impact from currency translations. The bottom line missed the Zacks Consensus Estimate of 29 cents per share.

Net revenues amounted to $593.5 million, which surpassed the consensus mark of $585.2 million. The metric rose 14% from $520 million reported in the year-ago quarter. On a constant-currency (cc) basis, net revenues increased 21% year over year. The upside was driven by the year-ago periods’ temporary store closures and solid performance in the European wholesale business and increased Americas wholesale shipments.

The company’s gross margin expanded to 41.6% from 40.7% reported in the year-ago quarter. The upside was driven by the leverage of the retail cost base. As a percentage of sales, SG&A expenses declined to 35.3% from 35.9% in the prior-year quarter’s level.

In the first quarter of fiscal 2023, adjusted earnings from operations jumped 61% to $41.7 million. Adjusted operating margin came in at 7%, up from 5% reported in the year-ago quarter. The upside was mainly fueled by overall expense leverage. These were somewhat offset by increased store labor costs across Americas Retail and unfavorable currency impact.

Segment Performance

Revenues in the Americas Retail segment increased 7% year over year on a reported basis and at cc. Retail comp sales (including e-commerce) rose 3% on a reported basis and at cc. Segmental operating margin came in at 8.6% compared with 13% in the year-ago quarter.

Revenues in the Americas Wholesale unit rallied 50% (same at cc) year over year. Segmental operating margin came in at 25.5% compared with 25.4% in the year-ago quarter.

The Europe segment’s revenues rose 14% (up 26% at cc) year on year. Retail comp sales (including e-commerce) fell 6% (up 3% at cc). Segmental operating margin came in at 6.5% compared with 1.7% in the year-ago quarter.

Asia revenues inched up 1% (up 8% at cc) year on year. Retail comp sales (including e-commerce) fell 11% (down 5% at cc).

Licensing revenues rose 23% (same at cc) year over year. The operating margin came in at 92.6% compared with 90.3% in the year-ago quarter.

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Other Updates

The Zacks Rank #3 (Hold) company exited the quarter with cash and cash equivalents of $147.9 million and long-term debt and finance lease obligations of almost $51.6 million. Stockholders’ equity was $403.1 million. Net cash used by operating activities for three months ended Apr 30, 2022, amounted to $54.6 million.

The company declared a quarterly dividend of 22.5 cents, payable on Jun 24, 2022, to shareholders on record as of Jun 8.

On Mar 14, 2022, the company expanded its repurchase authorization by $100 million taking the new capacity to $249. On Mar 18, 2022, the company entered into an accelerated share repurchase arrangement worth $175 Million. During first-quarter fiscal 2023, the company repurchased nearly 3.8 million shares for $81.7 million.

Outlook

For the second quarter of fiscal 2023, management expects revenues to be nearly 1% (up 8% at cc) year over year. The operating margin is likely to be around 7.5% in the fiscal second quarter.

For fiscal 2023, the company anticipates revenues to grow by roughly 4% (up 10% at cc) year over year. The outlook assumes that the company will not witness any material COVID-induced shutdowns. Adjusted operating margin is now likely to come in around 10.3% in fiscal 2023. Earlier, the company expected an operating margin of nearly 10.5% in fiscal 2023.

Share Performance

GES’s stock has slumped 17.7% in the past three months compared with the industry’s 27.1% decline.

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