Market Overview

Earnings Analysis: Guess?

Guess? (NYSE: GES) reports preliminary financial results for the quarter ended 2012-10-31.

Guess? Inc. recently reported its preliminary financial results based on which we provide a unique peer-based analysis of the company. Our analysis is based on the company's performance over the last twelve months (unless stated otherwise). For a more detailed analysis of this company (and over 40,000 other global equities) please visit

Guess? Inc.'s analysis versus peers uses the following peer-set: Gap Inc. (GPS), Urban Outfitters Inc. (URBN), American Eagle Outfitters Inc. (AEO), Abercrombie & Fitch Co. Cl A (ANF), Carter's Inc. (CRI), Fifth & Pacific Companies Inc. (FNP), Stein Mart Inc. (SMRT) and bebe Stores Inc. (BEBE). The table below shows the preliminary results along with the recent trend for revenues, net income and returns.
Quarterly (USD million) 2012-10-31 2012-07-31 2012-04-30 2012-01-31 2011-10-31
Revenues 628.8 635.4 579.3 775.8 642.8
Revenue Growth % (1.0) 9.7 (25.3) 20.7 (5.1)
Net Income 36.6 42.6 26.5 95.2 65.7
Net Income Growth % (14.0) 60.9 (72.2) 44.7 9.3
Net Margin % 5.8 6.7 4.6 12.3 10.2
ROE % (Annualized) 13.6 15.2 9.0 31.8 22.0
ROA % (Annualized) 8.6 9.7 5.7 20.5 14.3

Valuation Drivers

Guess? Inc.'s current Price/Book of 2.1 is about median in its peer group. The market expects less growth from GES-US than the median of its chosen peers (PE of 11.4 compared to peer median of 22.4) and for its current rates of return that are around peer median (ROE of 17.3%) to decline.

The company attempts to achieve high profit margins (currently 7.7% vs. peer median of 6.4%) through differentiated products. It currently operates with peer median asset turns of 1.5x. GES-US's net margin is its lowest relative to the last five years and compares to a high of 11.5% in 2011.

Economic Moat

Changes in the company's revenues are in-line with its peers (annual revenue changed by 8.1%) but its earnings performance has been better -- its annual earnings changed by -8.1% compared to the peer median of -16.6%, implying that it has better cost control relative to its peers. GES-US currently converts every 1% of change in revenue into -1.0% of change in annual reported earnings.

GES-US's current return on assets is around peer median (11.1% vs. peer median 11.1%). This contrasts with its higher than peer median return on assets over the past five years (17.2% vs. peer median 8.4%), suggesting that the company's relative operating performance has declined.

The company's gross margin of 43.4% is around peer median suggesting that GES-US's operations do not benefit from any differentiating pricing advantage. In addition, GES-US's pre-tax margin of 11.6% is also around the peer median suggesting no operating cost advantage relative to peers.

Growth & Investment Strategy

While GES-US's revenues growth has been above the peer median (8.7% vs. 1.9% respectively for the past three years), the stock's PE ratio of 11.4 is less than the peer median. This implies that the company's earnings are peaking and the market expects a decline in its growth expectations.

GES-US's annualized rate of change in capital of 13.4% over the past three years is higher than its peer median of -1.4%. This investment has generated an above peer median return on capital of 25.6% averaged over the same three years. Evidently, the relatively high capital investment was successful given the relatively strong growth in its returns.

Earnings Quality

GES-US has reported relatively strong net income margin for the last twelve months (7.7% vs. peer median of 6.4%). This strong margin performance was accompanied by a level of accruals that was around peer median (4.2% vs. peer median of 4.2%) suggesting that the reported net income is supported by a reasonable level of accruals.

GES-US's accruals over the last twelve months are positive suggesting a buildup of reserves. However, this level of accruals is also around the peer median and suggests the company is recording a proper level of reserves compared to its peers.

Trend Charts

Graph of Revenues Trend for Guess?
Graph of Revenues Trend for Guess?
Graph of Net Margin Trend for Guess?
Graph of Net Margin Trend for Guess?
Graph of Accruals Trend (% revenues, Quarterly) for Guess?
Graph of Accruals Trend (% revenues, Annual or TTM) for Guess?

Company Profile

Guess?, Inc. designs, markets, distributes and licenses a lifestyle collections of contemporary apparel and accessories for men, women and children that reflect the American lifestyle and European fashion sensibilities. Its apparel is marketed under numerous trademarks including GUESS, GUESS?, GUESS U.S.A., GUESS Jeans and Triangle Design, MARCIANO, Question Mark and Triangle Design, a stylized G and a stylized M, GUESS Kids, Baby GUESS, YES, G by GUESS, GUESS by MARCIANO and Gc. The company operates its business through five segments: North American Retail, Europe, Asia, North American Wholesale and Licensing. The North American Retail segment includes the company's retail operations in North America. The Europe segment includes the company's wholesale and retail operations in Europe and the Middle East. The Asia segment includes the company's wholesale and retail operations in Asia. The North American Wholesale segment includes the company's wholesale operations in North America and export sales to Latin and South America. The Licensing segment includes the worldwide licensing operations of the company. The company was founded by Maurice Marciano in 1981 and is headquartered in Los Angeles, CA.


The information presented in this report has been obtained from sources deemed to be reliable, but AnalytixInsight does not make any representation about the accuracy, completeness, or timeliness of this information. This report was produced by AnalytixInsight for informational purposes only and nothing contained herein should be construed as an offer to buy or sell or as a solicitation of an offer to buy or sell any security or derivative instrument. This report is current only as of the date that it was published and the opinions, estimates, ratings and other information may change without notice or publication. Past performance is no guarantee of future results. Prior to making an investment or other financial decision, please consult with your financial, legal and tax advisors. AnalytixInsight shall not be liable for any party's use of this report. AnalytixInsight is not a broker-dealer and does not buy, sell, maintain a position, or make a market in any security referred to herein. One of the principal tenets for us at AnalytixInsight is that the best person to handle your finances is you. By your use of our services or by reading any our reports, you're agreeing that you bear responsibility for your own investment research and investment decisions. You also agree that AnalytixInsight, its directors, its employees, and its agents will not be liable for any investment decision made or action taken by you and others based on news, information, opinion, or any other material generated by us and/or published through our services. For a complete copy of our disclaimer, please visit our website

The following article is from one of our external contributors. It does not represent the opinion of Benzinga and has not been edited.

Posted-In: Earnings News Trading Ideas


Most Popular

Related Articles (GES)

Around the Web, We're Loving...

Partner Network

Get Benzinga's News Delivered Free