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Guess (GES) Shares Slide Further: Time to Sell the Stock?

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Guess Inc.GES seems to have hit a rough patch at the moment. The stock is weighed down at the moment, primarily due to lower comps and gross margin in the Americas Retail segment, currency headwinds, and a lackluster performance in the Greater China. Moreover, the company has missed earnings estimates in three of the last four trailing quarters.

The dismal performance has been reflected in the share price movement as well. So far this year, the shares of this retailer have declined 32.3%, underperforming the Zacks categorized Textile-Apparel Manufacturing industry which has showcased a decline of 6.3%. In fact, Guess reached its 52-week low of $12.73 on Dec 15, eventually closing at $13.20.

What's Pulling the Stock Lower?

Notably, Guess lowered its earnings outlook for fiscal 2017, reflecting lower comps and gross margin in the Americas Retail segment. The company now estimates adjusted earnings per share in the range of 42-52 cents compared with 62-75 cents expected previously. Further, it lowered its revenue growth outlook and now anticipates net revenue to rise in the range of 1-2% in constant currency compared to a range of 2.5-4.5% expected earlier.

Lower-than-expected results during the third quarter compelled management to lower the outlook. Moreover, the company has been experiencing downward estimate revision in the past 60 days. The Zacks Consensus Estimate for fiscal 2017 and 2018 declined by 13.8% and 8.4%, respectively.

Decelerating traffic at its North American retail stores and soft wholesale segment are straining top-line results. Although the company is taking several cost cutting initiatives, higher promotional environment and competitive retail environment are putting pressure on gross margins.

GUESS INC Price, Consensus and EPS Surprise

GUESS INC Price, Consensus and EPS Surprise | GUESS INC Quote

Further, the Zacks Rank #4 (Sell) company is facing macroeconomic challenges in Greater China in turn slowing the company's growth in Asia. Lower consumer spending owing to uncertain economic environment along with falling exports and slow growth in industrial production, retail sales and construction activity is hindering Guess' sales growth in the U.S. Though Guess is strategically focusing on expansion in Asia and expects long-term growth in the region, the headwinds are anticipated to hinder the future plans of the company in the region.

Stocks to Consider

Better ranked stocks in the broader consumer discretionary sector arePerry Ellis International Inc. PERY , Tailored brands Inc. TLRD and Francesca's Holdings Corp. FRAN .

Tailored Brands and Francesca's both sport a Zacks Rank #1 (Strong Buy) and has an expected earnings growth of 17.5% and 13.8%, respectively. You can see the complete list of today's Zacks #1 Rank stocks here.

Perry Ellis carries a Zacks Rank #2 (Buy) and has an average earnings surprise of 19.5% in the trailing four quarters.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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