Market Overview

Guess? Falls 11% in Wake of Q4 Results, Poor Guidance; Is Retail In Trouble?


Apparel retailer Guess? Inc. (NYSE: GES) released its Q4 earnings results on Wednesday after the closing bell. The company reported earnings of $95.9 million or $1.05 per share, compared to $103.3 million or $1.11 per share, in the year ago period. This was in line with Wall Street analysts' consensus EPS estimates of $1.05.

With earnings season over, and few other companies reporting results, traders were primarily focused on retail stocks as Vera Bradley (NYSE: VRA) and rue21 (NYSE: RUE) also announced earnings on Wednesday after the market close.

Revenues for the quarter were up 2.5% to $775.8 million versus $756.9 million in last year's fourth quarter. This compared to Street consensus revenue estimates of $778.53 million.

Comparable store sales at Guess? fell 5% in U.S. Dollar terms versus last year's corresponding quarter.

While the company's earnings were in-line with Street estimates, revenues were light and comparable store sales also are a cause for concern. Guess' real problem, however, would be its forward looking guidance which was terrible.

Looking ahead to fiscal Q1, the company issued revenue guidance between $560 million to $575 million. Earnings per share is expected to be between $0.25 and $0.28. This compares to current EPS estimates for the first quarter of $0.48 on revenues of $609.66 million.

For fiscal 2013, Guess? sees consolidated net revenues between $2.74 billion to $2.78 billion. Earnings per share are expected in a range between $2.50 to $2.65. This compares to current Wall Street EPS estimates of $3.18 on revenues of $2.83 billion.

As a result of the light Q4 revenue and very disappointing forward looking guidance, GES shares have lost roughly 11% on Thursday to $32.70. If the company had been the only retailer to issue disappointing earnings and guidance, it would be much easier to discount the information as a company specific setback. Vera Bradley and rue21, however, also failed to impress and both stocks are trading down on Thursday.

While VRA beat Street expectations on both the top and bottom line for Q4, its guidance was also shaky. For Q4, the company reported EPS of $0.50 versus estimates of $0.47 and revenues came in at $134.5 million compared to consensus of $130.04 million.

Looking ahead, VRA provided both fiscal Q1 and full-year guidance. The EPS outlook for Q1 came in below current consensus estimates while revenue was at the low end of analysts' estimates. For Q1, VRA sees EPS between $0.27 and $0.29 on revenues of between $115 million to $117 million. This compares to current Street consensus of $0.32 on revenue of $117 million. As you can see, EPS guidance was light. As a result VRA shares have lost roughly 9% to $33.71 on Thursday.

While Q1 guidance was disappointing, the company's full-year outlook was not too terrible. VRA sees EPS between $1.68 and $1.71 on revenues between $540 million to $545 million. This compares to current consensus EPS estimates of $1.68 on revenue of $531.11 million for fiscal 2013.

rue21's earnings report was also a disappointment and that stock has lost 6% to $27.01 on Thursday. RUE reported better than expected Q4 EPS, but revenue came in below consensus.

Looking ahead to Q1, RUE provided EPS guidance between $0.42 and $0.44 which compares to estimates of $0.44. For the fiscal year, the company sees EPS between $1.74 and $1.79 versus current Street consensus of $1.77.

In assessing the results, all three of these companies showed some weakness. In particular, the outlook for Q1 does not inspire confidence. Not surprisingly, the Street has pushed all of these stocks down and other retailers are also seeing some pressure as there could be building concern over the entire sector.

Stocks such as Michael Kors Holdings (NASDAQ: KORS), Ralph Lauren (NYSE: RL), American Eagle (NYSE: AEO), Abercrombie & Fitch (NYSE: ANF), and the Buckle (NYSE: BKE), to name a few, are all underperforming the S&P by a fairly wide margin on Thursday.

Looking ahead, it is possible that the earnings results and guidance from Guess?, Vera Bradley, and rue21, could provide a headwind for the entire sector and some well researched short positions could pay off for traders looking to capitalize on a potential shift in sentiment.

Posted-In: Earnings Long Ideas News Guidance Short Ideas Intraday Update Movers Trading Ideas Best of Benzinga


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