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What's in the Cards for Guess? (GES) This Earnings Season?

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Guess?, Inc. (GES - Free Report) is slated to release first-quarter fiscal 2019 results on May 30. Notably, the company’s bottom line outpaced the Zacks Consensus Estimate in the trailing four quarters, the average being 34.7%. With this in mind, let’s delve into how things are shaping up for the upcoming announcement and see if this leading designer and distributor of lifestyle products can maintain its positive earnings surprise streak.

Europe & Asia Segments: Key Growth Catalysts

Guess?’ Europe and Asia businesses have been projecting sturdy growth for a while, courtesy of constant store openings and e-commerce initiatives. During the fourth quarter of fiscal 2018, the company introduced 15 directly operated stores in Europe and opened 25 new stores in Asia. Well, such factors have aided revenue growth of 40% across Europe and Asia in the fourth quarter of fiscal 2018.   

Driven by robust opportunities, Guess? continues to make capital investments in the European and the Asia businesses. It plans to make 60 store openings in Europe in fiscal 2018. In fact, e-commerce growth in the company’s Europe and Asia segments played a major role in augmenting comps and the top line in the past. Management stated that e-commerce business in Europe is gradually approaching the size of American e-commerce operations. As for Asia, digital sales in China have been a major driver, owing to the company’s alliance with Tmall.

Going ahead, the company expects sales in Europe and Asia to continue rising in double-digits, while margins are expected to expand in fiscal 2019. Such positive sentiments raise our hope regarding splendid performance from these regions in the upcoming quarterly release.  Incidentally, the Zacks Consensus Estimate for sales for the first-quarter from the European and Asian segments are currently pegged at $195 million and $81 million, respectively, depicting growth of almost 17.9% and 27.8% from the prior-year quarter’s tally.

Strong European and Asian operations are likely to fuel the company’s top-line performance in the impending quarter. Notably, management expects consolidated net revenues to improve in the range of 11-12.5% for the first quarter. On a constant-currency basis, consolidated net revenues are projected to grow 5.5-7%.

Further, analysts polled by Zacks expect net revenues of $510.5 million for the first quarter, reflecting an improvement of 11.3% from the year-ago figure.

Guess?, Inc. Price, Consensus and EPS Surprise

Other Efforts to Drive Performance

Guess? has been making constant investments in the digital and social media space, like Weibo and WeChat. These efforts are expected to help Guess? enhance customer base and enrich experience, which will help it to drive sales consistently. Apart from this, the company has implemented stringent cost control and margin-growth initiatives. Guess? is also executing its supply chain initiatives through product-cost improvements. In this respect, the company strives to develop long-term partnerships with high-quality supplier to gain operating scale efficiencies.

Hurdles in North America Pose Worries

Guess? has been facing a tough retail environment in the United States and Canada. Lower store traffic and intense promotional activity have been affecting the company’s revenues in these regions. Evidently, revenues in the Americas Retail unit fell 6% during the fourth quarter. Moreover Guess? has been undertaking strategic store closures in North America, to focus on other prospective regions. Markedly, during fiscal 2018, the company closed 62 North American stores and plans to shutter 20-25 stores across the United States and Canada in future.

Which Way are Bottom-Line Estimates Treading?

Guess? had earlier guided first-quarter loss in the range of 24-27 cents per share.

Moreover, the Zacks Consensus Estimates for loss is within management’s expectations and is currently pegged at 23 cents. This estimate, which has been stable over the past 30 days, depicts an improvement of 4.2% from the prior-year quarters loss of 24 cents.

A Look at the Zacks Model

Our proven model shows that Guess? is not likely to beat earnings estimates this quarter. A stock needs to have a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. You may uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Although Guess? carries a Zacks Rank #2, its Earnings ESP of 0.00% makes surprise prediction difficult.

Stocks With Favorable Combinations

Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat:

Michael Kors Holdings Limited (KORS - Free Report) has an Earnings ESP of +11.30% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

G-III Apparel Group, LTD. (GIII - Free Report) has an Earnings ESP of +11.11% and a Zacks Rank #3.

Duluth Holdings Inc. (DLTH - Free Report) has an Earnings ESP of +42.86% and a Zacks Rank #3.

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