Guess? (GES) Appears in a Tough Spot for 2024, Hurt by Costs
Guess? Inc. GES is operating in a challenging environment that remains volatile and complex. The company is grappling with inflationary headwinds and unfavorable currency translations. Weakness in the Americas retail business is hurting the apparel and accessories company.
Let’s delve deeper.
What’s Hurting Guess?’s Performance?
Escalated operating costs and expenses are major concerns for Guess?. In third-quarter fiscal 2024, adjusted SG&A increased 10% to $233 million. The rise in performance-based compensation remained a headwind. Also, management witnessed inflationary pressures on its cost structure. Escalated selling expenses across retail stores and investments in infrastructure led to a rise in costs.
Guess? is witnessing persistent weakness across its Americas retail business amid a dynamic macroeconomic environment. The trend continued in the third quarter of fiscal 2024, with revenues in the Americas Retail segment falling 7% on softness in customer traffic amid a soft consumer spending environment. Management witnessed contractions across all major categories, like women's and men's apparel and accessories, thanks to drab customer traffic. Persistent weakness in the Americas Retail business is likely to remain a threat to the top-line growth.
In addition, the company’s international presence exposes it to the risk of adverse currency fluctuations. Unfavorable currency rates may affect net revenues, operating income and earnings. In the fiscal third quarter, unfavorable foreign currency adversely impacted adjusted operating profit by $7 million and the adjusted operating margin by 120 basis points.
Road Ahead Looks Challenging
The Zacks Rank #5 (Strong Sell) company is operating in a volatile global shopping environment stemming from geopolitical issues and reduced consumer confidence. Considering these factors, management lowered its fiscal 2024 outlook. Guess? anticipates revenues to increase in the range of 1.8-2.4% compared with the earlier range of 2.5-4% growth. Management expects adjusted earnings per share (EPS) in the band of $2.67-$2.74 for the fiscal 2024. The company had earlier projected adjusted EPS in the band of $2.88-$3.08.
GES’s stock has increased 6.8% in the past three months compared with the industry’s growth of 23.5%.
Top 3 Picks
G-III Apparel Group, Ltd. GIII is a manufacturer, designer and distributor of apparel and accessories under licensed brands, owned brands and private label brands. The company currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for G-III Apparel Group’s current fiscal-year earnings indicates growth of 39.3% from the previous year’s reported figures. GIII has a trailing four-quarter average earnings surprise of 541.8%.
lululemon athletica inc. LULU designs, manufactures and distributes athletic apparel and accessories for women, men and female youth. The company currently has a Zacks Rank #2 (Buy).
The Zacks Consensus Estimate for lululemon athletica’s current fiscal-year earnings and sales indicates growth of 23.3% and 18.3%, respectively, from the previous year’s reported figures. LULU has a trailing four-quarter average earnings surprise of 9.2%.
Skechers U.S.A., Inc. SKX carries a Zacks Rank #2. SKX has a trailing four-quarter earnings surprise of 50.3% on average.
The Zacks Consensus Estimate for SKX’s current fiscal-year earnings and sales indicates growth of 44.1% and 8.2%, respectively, from the previous year’s reported figures.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Skechers U.S.A., Inc. (SKX) : Free Stock Analysis Report
Guess?, Inc. (GES) : Free Stock Analysis Report
lululemon athletica inc. (LULU) : Free Stock Analysis Report
G-III Apparel Group, LTD. (GIII) : Free Stock Analysis Report
