Shares of Guess?, Inc. (GES) hit a 52-week low of $19.69 after reporting disappointing third-quarter fiscal 2015 results and a cut in fiscal 2015 guidance on Dec 5.
Why the Share Price Decline?
Guess? posted third-quarter fiscal 2015 earnings per share of 24 cents, which declined 43% from the prior-year results due to a weak top line and drop in consumer spending.
Revenues slipped 3.9% year over year to $589.6 million due to soft sales in most of the company’s segments. Additionally, in Europe, soft traffic and tough retail conditions prevailing affected revenues. The top line also missed the Zacks Consensus Estimate by 1.1% and management's expectation of $590 to $600 million marginally.
Adjusted operating earnings slipped 50.1% to $24.9 million as against adjusted operating income of $49.8 million in the year-ago quarter. Operating margin shrank 390 basis points (bps) year over year to negative 4.2% due to higher fixed cost charges.
Management is not optimistic about the fourth quarter. Comps were soft in the early days of the quarter. So far in the fourth quarter, comps have been down in the mid single-digits and management does not expect it to improve in the rest of the quarter.
Guess? also lowered the fiscal 2015 outlook following soft third-quarter results. The company now expects revenues in the range of $2.42 to $2.43 billion, down from $2.44 to $2.48 billion expected previously. Operating margin is expected within 5% to 5.5% versus 5.5% to 6% as announced during the third-quarter earnings conference call. Adjusted earnings are expected in the range of $1.00 to $1.10 compared with $1.05 to $1.20 expected previously.
Stocks to Consider
Guess? currently carries a Zacks Rank #4 (Sell). Some better-ranked stocks to consider in the apparel industry include Columbia Sports Inc. (COLM), G-III Apparel (GII) and Hanesbrands Inc. (HBI). While Columbia Sports and G-III Apparel sport a Zacks Rank #1 (Strong Buy), Hanesbrands carries a Zacks Rank #2 (Buy).
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