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Guess Is Far From Being A Fashionable Stock But It At Least Reported A Profit

Guess Is Far From Being A Fashionable Stock But It At Least Reported A Profit

Guess Inc (NYSE: GES) released its earnings report after the market closed on Tuesday, November 26th. The shares of Guess', Inc. have decreased 8 percent this year alone. But after reporting a loss in the comparable quarter last year, the Los Angeles-based company just reported a net income of $12.4 million resulting in 18 cents per share. Shares were slightly up, 1.15 percent to be exact, after third quarter EPS exceeded even the highest analyst estimate.

Third Quarter

Revenue amounted to $615.9 million in the period, increasing 1.7% but missing estimates as analysts expected $620 million. Adjusted earnings increased from 13 cents to 22 cents a share. The company operates directly via 1174 stores in America, Europe and Asia as of November 2. Revenues of these segment revenues changed as follows comparing to last year: Americas Retail dropped 5%, while Americas Wholesale climbed 7%. Europe also increased 9% remaining as the company's bright spot but Asia dropped 8% in US dollars.

The company recorded adjusted net earnings of 14.9 million dollars, which is a 41.2 percent increase from the comparable quarter of the previous fiscal year.

Overall, the clothing company expects full-year unadjusted earnings of $1.20-$1.25 per share and adjusted earnings in the range of $1.31-$1.36 per share. Consolidated net revenues are expected to increase 2.7-3% in fiscal 2020.

Challenged Industry

Tariffs placed on almost 90% of Chinese clothing and textile imports by the Trump administration have been posing a significant challenge for apparel stocks throughout the year. But savvy industry players continue to win over shoppers by refining their marketing strategies, forming strategic alliances, and enhancing their digital footprint. Apparel companies with international exposure are also finding opportunities in unsaturated markets like Asia and Europe to boost sales growth.

The Whole Sector Is Struggling- But Some Manage To Remain At The Forefront

Some of these fashion apparel companies that have taken proactive steps to ensure that they remain at the industry's forefront is the $7.73 billion New York-based Ralph Lauren Corporation (NYSE: RL) present in America, Europe, and Asia. It owns well-known brands including Polo Ralph Lauren, Lauren Ralph Lauren, Chaps, and Club Monaco. To attract younger buyers, the firm has boosted its marketing investment by 18% in fiscal 2019 compared with last year and plans to increase that budget to 5% of total sales.

Recently, the company has worked with social media-savvy celebrities that helped sell its products. The fashion retailer's shares dropped roughly 37% between May and August, but price has rallied 24% from its August low and the stock continues to show increased momentum. So, Ralph Laurent's strategy is starting to paying off as it gains attractive attention from investors.


Guess', Inc. is an apparel giant that markets and licenses lifestyle collections of apparel and accessories for men, women, and children. Its iconic fashion brands such as Guess, Marciano, and G by Guess are sold through wholesale channels, retail outlets, and online. Growth efforts in the company's brightest spot, Europe, include optimizing distribution networks and improving efficiency in sourcing and product development.

Management is pleased with the results that show operating earnings and earnings per share for the period above the high-end of expectations while raising the low end of the guidance for the full year. But Guess' management has more tweaking work to do on its agenda in order to engage customers of today and tomorrow. Such initiatives, if effective, will surely help to offset the increasing expenses and weakening macroeconomic effects.

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© 2019 Benzinga does not provide investment advice. All rights reserved.

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Image by Michal Jarmoluk from Pixabay


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