A month has gone by since the last earnings report for Guess?, Inc.GES . Shares were flat in that time frame, underperforming the market.
Will the recent trend continue leading up to the stock's next earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Guess? Q1 Loss Narrower than Expected, Revenues Beat
After delivering earnings for three straight quarters, Guess?, Inc. began fiscal 2018 on a weak note by reporting loss per share of $0.24 in the first quarter. Although, it fared better than the Zacks Consensus Estimate of a loss of $0.31 and management's guided loss in the range of $0.33-$0.30, but the loss widened by a penny from the prior-year period. Further, the bottom line in the quarter was impacted by currency tailwinds of nearly 3 cents per share.
The company posted GAAP net loss of $0.26 a share in the reported quarter compared with a loss of $0.30 recorded in the year-ago period.
Revenues and Margins
Net revenue came in at $458.6 million in the quarter that improved 2.2% and also outpaced the Zacks Consensus Estimate of $447 million. On a constant-currency basis, revenues grew 4%. In fact, this quarter marked the third straight quarter of revenue improvement. The upside came on the back of solid sales at the Europe, Asia and American Wholesale segments, somewhat offset by soft revenues across the Americas Retail and Licensing segments.
Gross profit inched up 1.3% to $144.6 million in the quarter. However, gross margin contracted 30 basis points (bps) to 31.5%.
Furthermore, the company reported adjusted operating loss of $22.8 million that inched up 0.4% in the quarter.
Starting from the second quarter of fiscal 2017, Guess? changed the names of its "North American Retail" and "North American Wholesale" segments to "Americas Retail" and "Americas Wholesale," respectively.
Revenues of $173.7 million at the Americas Retail segment were down 14.9% (14.7% on a constant-currency basis). Further, Retail comp sales including e-commerce declined 15% in both the U.S. dollars and constant-currency basis.
The Europe segment's revenues of $165.4 million were up 23.3% (29.1% on a constant currency-basis). Moreover, Retail comp sales including e-commerce improved 5% in U.S. dollars as well as 11% in constant currency.
Revenues of $63.4 million from Asia increased 16.9% (up 15.5% in constant currency). Additionally, Retail comp sales including e-commerce grew 4% in U.S. dollars and 2% on a constant-currency basis.
Net revenues of $35.9 million at the American Wholesale segment rose 5.7% (up 7.7% on a constant-currency basis).
However, net revenues of $20.3 million at the Licensing segment decreased 9.3% in both the U.S. dollars and constant currency.
Other Financial Update
Guess? exited the quarter with cash and cash equivalents of $316.4 million compared with $396.1 million in the previous quarter. The company had long-term debt of $23.3 million compared with $23.4 million in the previous quarter. Further, the stockholders' equity as of Apr 29 was $926.1 million.
During the first quarter, the company's board approved a quarterly cash dividend of $0.225 per share payable on Jun 23 to shareholders of record at the close of business on Jun 7, 2017. Also, it bought back 1.5 million shares worth $80 million in the quarter.
Moving ahead, capital expenditure is anticipated in the band of $85-$95 million for fiscal 2018, backed by consistent investment in the retail improvement in the Europe and Asian regions.
For fiscal 2018, management expects consolidated net revenues to rise between 3.5-5% versus 2-4% guided earlier. Excluding the impact of currency, consolidated net revenues are anticipated to grow between 4-5.5% on a constant-currency basis, down from the previous estimate of 4-6%. The impact of 53rd week on the revenues is anticipated to rise by 1%.
Also, the company's adjusted operating margin is projected in the band of 2.3-3% and the GAAP operating margin is expected in the range of 2.2-2.9% for the full year.
Adjusted earnings per share for fiscal 2018 are forecasted in the range of $0.34-$0.44. Further, the GAAP earnings are projected in the band of $0.32-$0.42. Earlier, earnings per share were expected in the band of $0.28-$0.40. Currency is likely to have a negative impact of $0.03 per share. The Zacks Consensus Estimate for fiscal 2018 is currently pegged at the lower-end of the company's guided range.
For the second quarter of fiscal 2018, management expects consolidated net revenues to improve between 2-4%. Excluding the impact of currency, consolidated net revenues are anticipated to grow between 3.5-5.5% on a constant-currency basis.
Moreover, the company's adjusted as well as GAAP operating margin is projected in the band of 2.2-3%.
Adjusted as well as GAAP earnings per share for the second quarter are forecasted in the range of $0.08-$0.11. Currency is likely to have a negative impact of $0.04 per share.
How Have Estimates Been Moving Since Then?
Analysts were quiet during the last one month period as none of them issued any earnings estimate revisions.
Guess?, Inc. Price and Consensus
At this time, Guess?' stock has a poor Growth Score of 'F'. However, its Momentum is doing a lot better with a 'C'. The stock was allocated a grade of 'B' on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregte VGM Score of 'D'. If you aren't focused on one strategy, this score is the one you should be interested in.
Our style scores indicate that the stock is more suitable for value investors than momentum investors.
The stock has a Zacks Rank #2 (Buy). We are looking for above average returns from the stock in the next few months.
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