The textile apparel sector has had a rough ride so far this year. In the first quarter of fiscal 2016, the sector reported dismal results with a variety of apparel companies reporting below-par results due to lower comps, in spite of conservative estimates.
One such apparel stock is Guess?Inc.GES has been suffering losses for quite some time now due to substantially lower revenues.
Here we highlight four reasons why Kirkland's might not be a great pick for your portfolio at the moment.
Rank; Estimates and Share Price: Guess carries a Zacks Rank #4 (Sell). Moreover, Guess' had a poor run since the beginning of 2016 with its share price declining around 16.79%. Over the past 30 days, the fiscal 2017estimates declined around 23.4%.
Unimpressive First-Quarter Results, Lowered Guidance: Guess reported wider-than-expected loss and revenue miss in the first quarter of fiscal 2017. For fiscal 2017, Guess lowered its earnings outlook to the range of 55 cents to 75 cents from the previous guidance of 65 cents to 85 cents. The lowered guidance reflects a challenging environment and the company's soft start to fiscal 2017.
Traffic Trends : The company has been reporting declining revenues since fiscal 2014 due to lower store traffic in North America. Tough retail conditions negatively affected Guess, resulting in lackluster traffic and conversion rates. Though the company has undertaken several initiatives to improve traffic in North America, no improvement is expected in the near term.
Growth in Asia: Guess is strategically focusing on expansion in Asia and expects long-term growth in the region. However, soft macroeconomic conditions in Greater China are impeding growth for the company in Asia. Lower consumer spending owing to uncertain economic conditions along with lower exports and slow growth in industrial production, retail sales and construction activity are the major factors denting Guess' sales in China.
Stocks to Consider
Not all the stocks are performing as poorly as Guess. Here are some better stocks n the textile apparel sector include Hanesbrands Inc. HBI , Perry Ellis International Inc. PERY and Delta Apparel Inc. DLA . While Delta Apparel sports a Zacks Rank #1 (Strong Buy), Perry Ellis and Hanesbrands carry a Zacks Rank #2 (Buy).