Guess (GES) Crushes Earnings Expectations

Shares of apparel retailer Guess (GES) surged last week, after the company reported strong second quarter earnings that topped analyst estimates. Guess earned $0.52 per share, a 6.1% increase from the prior year quarter, topping the consensus estimate of $0.36. Revenue rose 1% to $639 million, also topping the $625 million that analysts had expected. Top line growth also exceeded the $620 million to $635 million that the company had originally projected.

Excluding currency impacts, however, revenue actually fell 1.4% from the previous year. Daily Chart
Guess attributed its solid second quarter earnings to better cost controls and stable growth throughout its geographic regions. Sales in North America edged up 0.5% to $254.3 million, although same-store sales declined 2.0% due to unfavorable weather. E-commerce sales in the region, however, surged 25% year-on-year, boosted by the company's introduction of e-commerce fulfillment at brick-and-mortar locations during the quarter. The North American Wholesale segment reported a 0.7% decline to $41.4 million, while its Licensing segment reported nearly flat growth at $27.1 million. Sales in Europe rose 1.4% to $250.4 million (3.3% excluding currency impacts). Sales across the region were boosted by new key markets like Russia and Germany. Sales in Asia, however, declined 1.5% (3.6% excluding currency impacts) to $65.9 million, due to lower consumer spending in the nation, which has been struggling with slower GDP growth. Operating margin rose 150 basis points to 10.5%, thanks to lower selling, general and administrative (SG&A) expenses during the quarter. It also benefited from a favorable comparison to the prior year quarter, when results were weighed down by a bad debt provision. Guess' cash and equivalents also climbed from $30.6.4 million to $343.7 million. Looking forward, the company is continuing its "back to the basics" approach by highlighting its denim collections. This approach helped Guess stay ahead of other struggling retailers, such as Abercrombie & Fitch (ANF) and Aeropostale (ARO), which have both been reporting double-digit declines in same-store sales. Shares of Guess currently trade at 14.7 times forward earnings with a 5-year PEG ratio of 2.6, which indicates that the stock is fairly valued but faces sluggish long-term earnings growth ahead. The stock pays a quarterly dividend of $0.20 per share -- a 2.6% yield at current prices. The stock has rallied more than 16% over the past twelve months. Other News About GES Guess: Stock Price as Sexy as Its Ads Is Guess a sexy investment again? Why Guess? Shares Shot Up Guess' earnings in a nutshell. Other Stocks in the News The Halo Effect of EHRs in Drugstores Are EHRs helping boost same store sales at drugstore chains? The Robot Doctor, Dr. Kinect, and the Future of Telemedicine Will these robot doctors be the future of healthcare? Copyright 2013 by InvestorGuide.com, Inc. InvestorGuide has no control over the sites we link to, is not affiliated with these sites, and cannot take responsibility for their quality or suitability. The news, analysis, commentary and profile information is not meant to be comprehensive, and the data provided is not guaranteed to be accurate. WebFinance Inc., the publisher of this newsletter, is not a registered investment advisor or a broker/dealer. This is not a stock recommendation newsletter but rather a source for investment ideas, and we encourage you to fully research any company before considering investing. The opinions expressed herein are those of the author and do not necessarily represent the views of nor are they endorsed by WebFinance Inc. No employee of WebFinance has owned or currently owns any shares in the company described above. The above is neither an offer nor solicitation to buy or sell any securities. The trading of securities may not be suitable for all potential readers of this newsletter, and the purchase of stocks mentioned in this newsletter may result in the loss of some or all of any investment made. We recommend that you consult a stockbroker or financial advisor before buying or selling securities or making investment decisions. We are not responsible for claims made by advertisers and sponsors. Anyone who makes decisions based on what they read here does so at their own risk and cannot hold WebFinance Inc. (DBA InvestorGuide.com, Inc.) or its employees responsible.

Published on Sep 6, 2013
By Leo Sun
Leo Sun
Leo Sun is a freelance finance writer and position trader. He focuses on a combination of value and momentum investing, with a strong interest in the trading philosophies of Warren Buffett and Peter Lynch. Leo also has experience writing articles to help small business owners acquire loans and manage their finances. He regularly contributes to the Stock of the Day analysis.

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