A difficult consumer spending environment in all major markets
is keeping retailers under pressure.
About the Company
Started in 1981 as a family businesss
. designs, markets, distributes and licenses fashion apparel and
accessories. Its products are sold through retail,
wholesale, e-Commerce and licensing distribution channels.
GES directly operates 494 retail stores in the
US and Canada and 346 retail stores in Europe
, Asia and Latin America .
Additionally, 868 retail stores outside of the
US and Canada are operated by company's licensees and
Disappointing Results and Guidance
On March 19
, GES reported its Q4 2014 results. Adjusted earnings for the
quarter were $71.1 million or $0.83 per share, ahead of the Zacks
Consensus Estimate of $0.80 per share and were on the higher end
of management's expected range of $0.74 to $0.84 per share.
Earnings were however down 12.6% year over year due to a weak top
line during the quarter.
Revenues declined 6.0% to $768.4 million mainly due to lower
traffic resulting from bad weather conditions and shortened
holiday season. Revenues also missed the Zacks Consensus Estimate
of $773 million and were near the lower end of management's
expectation of $750 million to $777 million.
According to the management, the traffic into the stores as well
as the overall promotional environment remains challenging
in North America and the European wholesale business is
still under pressure in Southern Europe .
For fiscal 2015, the company expects net revenues in the range of
$2.53 billion to $2.58 billion, operating margin between 7.0% to
8.0% and adjusted earnings in the range of $1.40 to $1.60 per
share. Earnings guidance was below the Zacks Consensus Estimate
of $1.89 per share.
According to the management, "for fiscal year 2015, we still
expect sales in our more developed businesses to be under
pressure, especially in our own stores in North America
and our European wholesale channel".
Due to weak results and uninspiring guidance, quarterly and
annual estimates have been revised downwards in the past few
weeks. Zacks consensus estimates for the current quarter and year
are now ($0.06) per share and $1.57 per share respectively down
from $0.15 per share and $2.01 per share, 60 days ago.
The following chart shows the trend of declining estimates for
Negative estimates revisions send GES back to Zacks Rank # 5
(Strong Sell) last month.
The Bottom Line
The company has globally diversified business operations but
currently it appears to be struggling in all of its major
markets. North America sales continue to be very challenging
despite very promotional retail environment. Further softness in
the South Europe economies and slowdown in China continues to
GES is currently Zacks Rank # 5 (Strong Sell) stock.
Further, Zacks Industry Rank of 223 out of 265 (Bottom 16%)
also indicates some weakness in the short- to mid- term. As such
investors would like to avoid this stock for the time being.
There is no Zacks Rank # 1 (Strong Buy) stock in the Apparel
industry. Investors looking for a better play could consider
HanesBrands, a Zacks Rank # 2 (Buy) stock.
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