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Guess? (GES) Gains on Digital Business Strength Amid Risks
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Guess? Inc. (GES - Free Report) currently boasts solid prospects based on strength across its businesses in Europe and Asia, strategic business plan and its digital initiatives. However, the apparel and accessories company has been witnessing weakness across its Americas retail business amid a rising inflationary environment.
This Zacks Rank #3 (Hold) company has a market capitalization of $1.1 billion. In the past six months, it has lost 8.4% compared with the industry’s decline of 8.9%.
Image Source: Zacks Investment Research
Let’s delve deeper.
Factors Favoring Guess?
Guess? is poised to benefit from solid momentum in its businesses across Europe and Asia, driven by strength across its retail end markets. In first-quarter fiscal 2024, the company’s Europe segment’s revenues increased 2% on a reported basis and rose 5% at constant currency (cc). Results were driven by solid retail store performance (including new stores).
Also, revenues from Guess?’ Asia segment jumped 26% on a reported basis and increased 34% at cc. The revenue growth was driven by business strength in South Korea and the Greater China region due to increased consumer activity. For fiscal 2024, GES anticipates revenues to grow by 2-4%, higher than its earlier projection of 1-3%.
Guess? has been focused on its six key strategies and has made significant progress in each of them. The core strategies include organization and culture, functional capacities, brand relevance with three main consumer groups (heritage, Millennials and Generation Z customers), customer focus, product brilliance and an international footprint. With respect to its salesforce and omnichannel capacity rollout, Guess? remains focused on implementing Customer 360, which is a solution developed by salesforce for personalized marketing, customer data optimization and customers’ journey engagement, among other objectives.
The company is also enhancing customer experience by implementing various upgrades to its store and e-commerce infrastructure to improve the ease of shopping and increase customer conversion. Further, it is on track to streamline its cost structure to enhance its operating model and reduce operating expenses. The company expects to reinvest these cost savings in enhancing marketing and omnichannel capabilities.
The company’s digital transformation initiatives are also likely to be beneficial in the quarters ahead. With respect to digital initiatives and CRM, the management is making progress on optimizing the new platform utilization and implementing the CRM solution. It rolled out the suite across Europe at 2022-end and across North America at the beginning of 2023.
Factors Affecting the Company
Guess? is witnessing softness across its Americas retail business. In first-quarter fiscal 2024, revenues from its Americas retail segment declined 14% year over year. The results were impacted by slower customer traffic and conversion, owing to a soft consumer spending environment. For the second quarter of fiscal 2024, management expects revenues to be within the break-even level to 1.5% decline range.
Further, rising operating costs and expenses have been a major concern for the company over the past few quarters. For instance, in the fiscal first quarter, its gross margin contracted to 40.7% from 41.6% reported in the prior-year quarter. Adjusted selling, general and administrative costs escalated 12% to $231 million due to elevated store selling expenses, including labor inflation and increased investments in its infrastructure in Europe.
In the fiscal first quarter, adjusted earnings from operations came in at $1.9 million, down 95% year over year. The adjusted operating margin contracted to 0.3% from 7%, owing to escalated costs, reduced government subsidies, increased markdowns and currency headwinds. The company’s management stated that though inflationary pressure is easing, it expects increased interest rates to affect consumer spending in the near term.
Celsius Holdings specializes in commercializing healthier, functional foods, beverages and dietary supplements. The Zacks Consensus Estimate for CELH’s current financial-year sales suggest 67.9% growth, while earnings per share are expected to rise by 154% from the corresponding year-ago reported figures. The company had an earnings surprise of 81.8%, in the last reported quarter.
Nomad Foods manufactures and distributes frozen foods. The Zacks Rank #1 company has a trailing four-quarter earnings surprise of 8.5%, on average. The Zacks Consensus Estimate for NOMD’s current financial year sales suggest growth of 8%, while earnings are likely to decline 3.4% from the prior-year reported numbers.
Conagra Brands operates as a leading branded food company in North America. The Zacks Consensus Estimate for CAG’s current financial-year sales and earnings per share suggests growth of 7.1% and 17%, respectively, from the corresponding year-ago reported figures. This Zacks Rank #2 (Buy) company has a trailing four-quarter earnings surprise of 13.2%, on average.
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Guess? (GES) Gains on Digital Business Strength Amid Risks
Guess? Inc. (GES - Free Report) currently boasts solid prospects based on strength across its businesses in Europe and Asia, strategic business plan and its digital initiatives. However, the apparel and accessories company has been witnessing weakness across its Americas retail business amid a rising inflationary environment.
This Zacks Rank #3 (Hold) company has a market capitalization of $1.1 billion. In the past six months, it has lost 8.4% compared with the industry’s decline of 8.9%.
Image Source: Zacks Investment Research
Let’s delve deeper.
Factors Favoring Guess?
Guess? is poised to benefit from solid momentum in its businesses across Europe and Asia, driven by strength across its retail end markets. In first-quarter fiscal 2024, the company’s Europe segment’s revenues increased 2% on a reported basis and rose 5% at constant currency (cc). Results were driven by solid retail store performance (including new stores).
Also, revenues from Guess?’ Asia segment jumped 26% on a reported basis and increased 34% at cc. The revenue growth was driven by business strength in South Korea and the Greater China region due to increased consumer activity. For fiscal 2024, GES anticipates revenues to grow by 2-4%, higher than its earlier projection of 1-3%.
Guess? has been focused on its six key strategies and has made significant progress in each of them. The core strategies include organization and culture, functional capacities, brand relevance with three main consumer groups (heritage, Millennials and Generation Z customers), customer focus, product brilliance and an international footprint. With respect to its salesforce and omnichannel capacity rollout, Guess? remains focused on implementing Customer 360, which is a solution developed by salesforce for personalized marketing, customer data optimization and customers’ journey engagement, among other objectives.
The company is also enhancing customer experience by implementing various upgrades to its store and e-commerce infrastructure to improve the ease of shopping and increase customer conversion. Further, it is on track to streamline its cost structure to enhance its operating model and reduce operating expenses. The company expects to reinvest these cost savings in enhancing marketing and omnichannel capabilities.
The company’s digital transformation initiatives are also likely to be beneficial in the quarters ahead. With respect to digital initiatives and CRM, the management is making progress on optimizing the new platform utilization and implementing the CRM solution. It rolled out the suite across Europe at 2022-end and across North America at the beginning of 2023.
Factors Affecting the Company
Guess? is witnessing softness across its Americas retail business. In first-quarter fiscal 2024, revenues from its Americas retail segment declined 14% year over year. The results were impacted by slower customer traffic and conversion, owing to a soft consumer spending environment. For the second quarter of fiscal 2024, management expects revenues to be within the break-even level to 1.5% decline range.
Further, rising operating costs and expenses have been a major concern for the company over the past few quarters. For instance, in the fiscal first quarter, its gross margin contracted to 40.7% from 41.6% reported in the prior-year quarter. Adjusted selling, general and administrative costs escalated 12% to $231 million due to elevated store selling expenses, including labor inflation and increased investments in its infrastructure in Europe.
In the fiscal first quarter, adjusted earnings from operations came in at $1.9 million, down 95% year over year. The adjusted operating margin contracted to 0.3% from 7%, owing to escalated costs, reduced government subsidies, increased markdowns and currency headwinds. The company’s management stated that though inflationary pressure is easing, it expects increased interest rates to affect consumer spending in the near term.
3 Key Picks
Some better-ranked stocks are Celsius Holdings, Inc. (CELH - Free Report) , Nomad Foods Limited (NOMD - Free Report) and Conagra Brands, Inc. (CAG - Free Report) .
Celsius Holdings specializes in commercializing healthier, functional foods, beverages and dietary supplements. The Zacks Consensus Estimate for CELH’s current financial-year sales suggest 67.9% growth, while earnings per share are expected to rise by 154% from the corresponding year-ago reported figures. The company had an earnings surprise of 81.8%, in the last reported quarter.
CELH currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Nomad Foods manufactures and distributes frozen foods. The Zacks Rank #1 company has a trailing four-quarter earnings surprise of 8.5%, on average. The Zacks Consensus Estimate for NOMD’s current financial year sales suggest growth of 8%, while earnings are likely to decline 3.4% from the prior-year reported numbers.
Conagra Brands operates as a leading branded food company in North America. The Zacks Consensus Estimate for CAG’s current financial-year sales and earnings per share suggests growth of 7.1% and 17%, respectively, from the corresponding year-ago reported figures. This Zacks Rank #2 (Buy) company has a trailing four-quarter earnings surprise of 13.2%, on average.