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Guess (GES) Up 15% Since Last Earnings Report: Can It Continue?
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It has been about a month since the last earnings report for Guess (GES - Free Report) . Shares have added about 15% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Guess due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Guess? reported third-quarter fiscal 2024 results, as the top and the bottom line increased year over year. However, both metrics missed the Zacks Consensus Estimate. The company is operating in a volatile shopping environment globally, stemming from geopolitical issues and reduced consumer confidence. Taking into account these factors and the recent sales trends, management offered a cautious view for the fiscal fourth quarter while lowering its fiscal 2024 outlook.
Results in Detail
Guess? posted adjusted earnings of 49 cents per share, up 11% from 44 cents reported in the year-ago period. Earnings were positively impacted by share buybacks, partly negated by currency headwinds. The bottom line missed the Zacks Consensus Estimate of 62 cents per share.
Net revenues amounted to $651.2 million, missing the consensus mark of $656.2 million. The metric rose 3% from $633.4 million reported in the year-ago quarter. On a cc basis, net revenues inched up 1%. Revenues grew in all regions except Americas Retail.
The company’s gross margin expanded from 42.5% to 44.7% in the reported quarter. As a percentage of sales, SG&A expenses increased to 36% from 33.6% in the prior-year quarter’s level. We expected a gross margin of 42.9% and SG&A expenses to be 35% of sales in the fiscal third quarter.
Adjusted earnings from operations came in at $57.9 million, slightly down from $58 million reported in the year-ago quarter. The adjusted operating margin inched down 0.2% to 8.9%, mainly due to increased expenses like greater performance-based compensation and unfavorable currency impact. These were somewhat offset by increased initial markups and the positive impact of the business mix. We had projected the metric to come in at 8% in the quarter under review.
Segment Performance
Revenues in the Americas Retail segment fell 7% year over year on a reported basis and 8% at cc. Retail comp sales (including e-commerce) dropped 5% on a reported basis and at cc. The segment’s operating margin fell 1.6% to 5.3% in the quarter.
Americas Wholesale revenues rose 4% on a reported basis but fell 1% at cc. The segment’s operating margin jumped 9.9% to 29.1% in the quarter.
The Europe segment’s revenues increased 6% on a reported basis and rose 5% at cc. Retail comp sales (including e-commerce) climbed 8% on a reported basis and 7% on a cc basis. The segmental operating margin was 10.3%, down 0.9% year over year.
Asia revenues advanced 2% on a reported basis and remained flat year over year at cc. Retail comp sales (including e-commerce) fell 8% on a reported basis, while the same declined 9% at cc. The operating margin for the segment stood at 1%, reflecting 1% year-over-year growth.
Licensing revenues rallied 19% on a reported basis and at cc. The segmental operating margin was 93.1% compared with 89.6% in the year-ago quarter.
Other Updates
The company exited the quarter with cash and cash equivalents of $244.1 million and long-term debt and finance lease obligations of nearly $131.8 million. Stockholders’ equity was around $514.1 million. Net cash provided by operating activities for the nine months ended Oct 28, 2023 was $40.9 million. GES announced a quarterly dividend of 30 cents per share, payable on Dec 22, 2023, to shareholders on record as of Dec 6.
Guidance
For fiscal 2024, Guess? anticipates revenues to grow in the range of 1.8-2.4% compared with the earlier range of 2.5-4% growth. The adjusted operating margin is likely to be 8.9-9.1%. The GAAP operating margin is likely to be 8.7-8.9%. Per the second-quarter earnings release, the adjusted operating margin was likely to be 9-9.4% in fiscal 2024. The GAAP operating margin was projected at 8.9-9.3%. Management expects adjusted EPS in the band of $2.67-$2.74 in fiscal 2024 compared with $2.74 recorded in fiscal 2023. On a GAAP basis, EPS is envisioned in the range of $2.49-$2.55 compared with $2.18 reported in fiscal 2023. Management had earlier forecasted adjusted EPS in the band of $2.88-$3.08 for fiscal 2024. On a GAAP basis, EPS was earlier envisioned in the range of $2.22-$2.37.
For the fourth quarter of fiscal 2024, management expects revenue growth of 4-6%. The company expects the adjusted operating margin and the GAAP operating margin to be in the range of 14.1-14.4%. On an adjusted basis, Guess? expects EPS in the band of $1.53-$1.60 per share. On a GAAP basis, it expects EPS in the range of $1.22-$1.28 for the fourth quarter of fiscal 2024.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended downward during the past month.
The consensus estimate has shifted -9.6% due to these changes.
VGM Scores
At this time, Guess has a poor Growth Score of F, a grade with the same score on the momentum front. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Guess has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.
Performance of an Industry Player
Guess belongs to the Zacks Textile - Apparel industry. Another stock from the same industry, Under Armour (UAA - Free Report) , has gained 20.2% over the past month. More than a month has passed since the company reported results for the quarter ended September 2023.
Under Armour reported revenues of $1.57 billion in the last reported quarter, representing a year-over-year change of -0.5%. EPS of $0.24 for the same period compares with $0.20 a year ago.
Under Armour is expected to post earnings of $0.11 per share for the current quarter, representing a year-over-year change of -31.3%. Over the last 30 days, the Zacks Consensus Estimate remained unchanged.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Under Armour. Also, the stock has a VGM Score of D.
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Guess (GES) Up 15% Since Last Earnings Report: Can It Continue?
It has been about a month since the last earnings report for Guess (GES - Free Report) . Shares have added about 15% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Guess due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Guess? Misses Q3 Earnings Estimate, Lowers FY24 View
Guess? reported third-quarter fiscal 2024 results, as the top and the bottom line increased year over year. However, both metrics missed the Zacks Consensus Estimate. The company is operating in a volatile shopping environment globally, stemming from geopolitical issues and reduced consumer confidence. Taking into account these factors and the recent sales trends, management offered a cautious view for the fiscal fourth quarter while lowering its fiscal 2024 outlook.
Results in Detail
Guess? posted adjusted earnings of 49 cents per share, up 11% from 44 cents reported in the year-ago period. Earnings were positively impacted by share buybacks, partly negated by currency headwinds. The bottom line missed the Zacks Consensus Estimate of 62 cents per share.
Net revenues amounted to $651.2 million, missing the consensus mark of $656.2 million. The metric rose 3% from $633.4 million reported in the year-ago quarter. On a cc basis, net revenues inched up 1%. Revenues grew in all regions except Americas Retail.
The company’s gross margin expanded from 42.5% to 44.7% in the reported quarter. As a percentage of sales, SG&A expenses increased to 36% from 33.6% in the prior-year quarter’s level. We expected a gross margin of 42.9% and SG&A expenses to be 35% of sales in the fiscal third quarter.
Adjusted earnings from operations came in at $57.9 million, slightly down from $58 million reported in the year-ago quarter. The adjusted operating margin inched down 0.2% to 8.9%, mainly due to increased expenses like greater performance-based compensation and unfavorable currency impact. These were somewhat offset by increased initial markups and the positive impact of the business mix. We had projected the metric to come in at 8% in the quarter under review.
Segment Performance
Revenues in the Americas Retail segment fell 7% year over year on a reported basis and 8% at cc. Retail comp sales (including e-commerce) dropped 5% on a reported basis and at cc. The segment’s operating margin fell 1.6% to 5.3% in the quarter.
Americas Wholesale revenues rose 4% on a reported basis but fell 1% at cc. The segment’s operating margin jumped 9.9% to 29.1% in the quarter.
The Europe segment’s revenues increased 6% on a reported basis and rose 5% at cc. Retail comp sales (including e-commerce) climbed 8% on a reported basis and 7% on a cc basis. The segmental operating margin was 10.3%, down 0.9% year over year.
Asia revenues advanced 2% on a reported basis and remained flat year over year at cc. Retail comp sales (including e-commerce) fell 8% on a reported basis, while the same declined 9% at cc. The operating margin for the segment stood at 1%, reflecting 1% year-over-year growth.
Licensing revenues rallied 19% on a reported basis and at cc. The segmental operating margin was 93.1% compared with 89.6% in the year-ago quarter.
Other Updates
The company exited the quarter with cash and cash equivalents of $244.1 million and long-term debt and finance lease obligations of nearly $131.8 million. Stockholders’ equity was around $514.1 million. Net cash provided by operating activities for the nine months ended Oct 28, 2023 was $40.9 million. GES announced a quarterly dividend of 30 cents per share, payable on Dec 22, 2023, to shareholders on record as of Dec 6.
Guidance
For fiscal 2024, Guess? anticipates revenues to grow in the range of 1.8-2.4% compared with the earlier range of 2.5-4% growth. The adjusted operating margin is likely to be 8.9-9.1%. The GAAP operating margin is likely to be 8.7-8.9%. Per the second-quarter earnings release, the adjusted operating margin was likely to be 9-9.4% in fiscal 2024. The GAAP operating margin was projected at 8.9-9.3%. Management expects adjusted EPS in the band of $2.67-$2.74 in fiscal 2024 compared with $2.74 recorded in fiscal 2023. On a GAAP basis, EPS is envisioned in the range of $2.49-$2.55 compared with $2.18 reported in fiscal 2023. Management had earlier forecasted adjusted EPS in the band of $2.88-$3.08 for fiscal 2024. On a GAAP basis, EPS was earlier envisioned in the range of $2.22-$2.37.
For the fourth quarter of fiscal 2024, management expects revenue growth of 4-6%. The company expects the adjusted operating margin and the GAAP operating margin to be in the range of 14.1-14.4%. On an adjusted basis, Guess? expects EPS in the band of $1.53-$1.60 per share. On a GAAP basis, it expects EPS in the range of $1.22-$1.28 for the fourth quarter of fiscal 2024.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended downward during the past month.
The consensus estimate has shifted -9.6% due to these changes.
VGM Scores
At this time, Guess has a poor Growth Score of F, a grade with the same score on the momentum front. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Guess has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.
Performance of an Industry Player
Guess belongs to the Zacks Textile - Apparel industry. Another stock from the same industry, Under Armour (UAA - Free Report) , has gained 20.2% over the past month. More than a month has passed since the company reported results for the quarter ended September 2023.
Under Armour reported revenues of $1.57 billion in the last reported quarter, representing a year-over-year change of -0.5%. EPS of $0.24 for the same period compares with $0.20 a year ago.
Under Armour is expected to post earnings of $0.11 per share for the current quarter, representing a year-over-year change of -31.3%. Over the last 30 days, the Zacks Consensus Estimate remained unchanged.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Under Armour. Also, the stock has a VGM Score of D.