On Jun 13, 2014 we issued an updated research report on Guess? Inc. (GES).
Guess? Inc. posted mixed results in first-quarter fiscal 2014. The apparel retailer’s first-quarter loss of 3 cents compared unfavorably with prior-year earnings of 14 cents mainly due to weak top line. However, the loss was narrower than the Zacks Consensus Estimate of a loss of 6 cents as well as management’s expected range of 9–5 cents loss.
Comps fell 3.8% in the quarter due to lower mall traffic. However, the comps decline was better than 5% shortfall in the previous quarter. Excluding the currency impact, comps slipped 2.3%. Though the first two months of the quarter were affected by the change in Easter timing and adverse weather conditions, the business rebounded strongly in April.
Moreover, Guess?’ recent strategic initiatives to improve its comps are encouraging. The company enhanced its e-Commerce platform with the launch of the mobile shopping app. The company is also planning to extend its online shopping to Europe in fiscal 2015, which is currently restricted to the U.S. This is expected to boost sales as online shopping is growing increasingly popular.
However, the company did not provide an encouraging outlook for the upcoming quarter. It expects both revenues and earnings to be lower than the prior year level. The disappointing second-quarter outlook signals that revival in consumer spending will take time. Though comps improved slightly in the first quarter, a sustained increase in comps is necessary.
Other Stocks to Consider
Guess? carries a Zacks Rank #4 (Sell). Better-ranked stocks in the retail and apparel sector include Carters Inc. (CRI), Iconix Brand Group Inc. (ICON) and Rocky Brands Inc. (RCKY). All these stocks sport a Zacks Rank #2 (Buy).
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