Guess? Inc. (GES Quick QuoteGES - Free Report) is witnessing a dynamic and complex environment, which includes rising costs. Weakness in the Americas retail business is a concern. The apparel and accessories company’s international presence exposes it to risks related to unfavorable currency rates.

Let’s discuss in detail all the factors that are hurting Guess?’s performance.

High Costs Hurt

The company is operating in a volatile global shopping environment stemming from geopolitical issues and reduced consumer confidence. Escalated operating costs and expenses are major concerns for Guess?. In third-quarter fiscal 2024, adjusted SG&A increased 10% to $233 million. The rise in performance-based compensation remained a headwind. Also, management witnessed inflationary pressures on its cost structure. Escalated selling expenses across retail stores and investments in infrastructure led to a rise in costs.

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Weak Americas Retail Unit: A Hurdle

Guess? is witnessing persistent weakness across its Americas retail business amid a dynamic macroeconomic environment. The trend continued in the third quarter of fiscal 2024, with revenues in the Americas Retail segment falling 7% on softness in customer traffic amid a soft consumer spending environment. Management witnessed contractions across all major categories, like women's and men's apparel and accessories, thanks to drab customer traffic. Persistent weakness in the Americas Retail business is likely to remain a threat to the top line.

Unfavorable Currency Headwinds

The company’s international presence exposes it to the risk of adverse currency fluctuations. Unfavorable currency rates may affect net revenues, operating income and earnings. In the fiscal third quarter, unfavorable foreign currency affected the adjusted operating profit by $7 million and the adjusted operating margin by 120 basis points.

Final Thoughts

Guess? is benefiting from a focus on three key factors to drive long-term growth, which includes global brand awareness. Management is on track to progress in its customer-centric initiatives, including omnichannel capabilities and advanced data analytics.

Let’s see if these upsides can help the company counter the hurdles mentioned above.

The Zacks Rank #5 (Sell) company’s shares have dropped 0.3% in the past year against the industry’s growth of 6.1%.

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