Guess, Inc. (GES - Free Report) is a preferred pick for investors, courtesy of its robust growth strategies. The company has been benefiting from sturdy performance in European operations along with its digital-first initiative. Moreover, management is on track with its cost-saving plans.
In fact, management in its last earnings call stated that sales in fourth-quarter fiscal 2020 are expected to grow in the range of 1-2% year over year. Moreover, adjusted earnings are anticipated between $1.07 and $1.12 per share, which suggests a rise from 70 cents per share reported in the year-ago quarter.
Clearly, encouraging outlook has heightened analysts’ optimism regarding the stock. Evidently, the Zacks Consensus Estimate for fourth-quarter fiscal 2020 earnings has moved up by a penny to $1.12 in the past 30 days. Also, these upsides have helped this Zacks Rank #3 (Hold) stock to showcase a solid bull-run despite rising SG&A expenses and weaknesses in Asia unit. Notably, shares of Guess? have rallied 32.1% in the past six months against the industry’s decline of 0.5%.
What’s Narrating Guess?’ Growth Story?
Strength in the Europe business has been driving Guess?’s top line for long. During third-quarter fiscal 2020, revenues in the European region increased 9.1% (up 13.2% at cc) owing to store openings, improvement in wholesale revenues and comparable sales (comps) growth. Markedly, comps improved for the 17th straight quarter in Europe. Going forward, Europe is likely to continue fuelling the company’s performance, courtesy of constant store openings and e-commerce growth. Moreover, management is optimizing network, inducing efficiency in sourcing and product development as well as managing costs in the European region. Net revenues from this region are expected to increase low-double digits in fiscal fourth quarter.
Further, Guess? is progressing well with its digital-first initiative and has been investing in brand building through social media platforms. Additionally, the company is undertaking efforts such as better data capturing, improved customer profiling, personalized marketing and relationship management to enhance e-commerce operations. Also, it is focused on linking brick-and-mortar stores, e-commerce and mobile sales to improve online operations. This has enabled customers to reserve merchandise online and pick them up in stores. In fact, e-commerce drove the company’s comps in fiscal third quarter.
Also, the company is on track with boosting gross margin through initial markups or IMU improvement and realignment of prices. Further, the company is improving cost structures. Management expects gross margin to expand in fiscal 2020, backed by continued gains from IMUs and lower markdowns.
Guess? continues to battle weakness in Asia due to broad-based softness in significant markets like China, Korea and Japan. Also, the Americas Retail segment has long been witnessing sluggishness due to macroeconomic factors. Moreover, rising SG&A expenses and volatile currency movements are concerns.
Nevertheless, robust growth in Europe business and the aforementioned growth drivers are likely to help Guess? overcome these barriers and boost performance.
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