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Guess? Inc. GES reported first-quarter fiscal 2022 results, with the top and the bottom line beating the Zacks Consensus Estimate. Moreover, revenues and earnings increased year over year. Notably, this Zacks Rank #1 (Strong Buy) stock has rallied 16.6% in the past three months compared with the industry’s growth of 4.4%.
Quarter in Detail
Guess? posted adjusted earnings of 21 cents per share. Notably, the metric compares favorably against the Zacks Consensus Estimate of a loss of 20 cents. The company had reported an adjusted loss of $1.81 per share in the year-ago quarter. Notably, share repurchases and currency rate had a positive impact of 1 cent and 9 cents on adjusted earnings per share, respectively.
Net revenues amounted to $520 million, which beat the consensus mark of $495.4 million. Also, the metric increased significantly from $260.3 million reported in the year-ago quarter. On a constant-currency (cc) basis, net revenues surged 90.3% year over year. The upside can be attributed to sales momentum in European wholesale, e-commerce channels, U.S. retail business and global licensing business. That being said, the company’s net revenues declined from first-quarter fiscal 2020 levels. The downside was due to persistent pandemic-led challenges like reduced demand, temporary store closures as well as capacity restrictions.
The company’s gross margin expanded to 40.7% from 13.2% reported in the year-ago quarter. As a percentage of sales, SG&A expenses declined to 35.9% from 55% reported in the prior-year quarter’s level.
During the quarter, adjusted earnings from operations came in at $26.0 million against an adjusted operating loss of $108.6 million posted in the year-ago quarter. Further, adjusted operating margin increased 46.7% to 5.0%, mainly on the back of expense leverage.
Revenues in the Americas Retail segment surged significantly year over year on a reported and cc basis. Further, retail comp sales including e-commerce was up 6% (up 5% at cc) in the segment. Moreover, operating margin in Americas Retail segment surged 62.2% to 13.0%, mainly due to expenses leverage and reduced markdowns.
Revenues in Americas Wholesale unit rallied 75.6% (up 71% at cc). Meanwhile, operating margin in the segment increased 19.1% to 25.4% primarily driven by reduced markdowns and leveraging of costs.
The Europe segment’s revenues surged significantly year over year on a reported and cc basis. Further, retail comp sales including e-commerce rallied 44% (up 32% at cc). Segmental operating margin came in at 1.7%, up 43.4%. The upside was driven by leveraging of expenses.
Asia revenues grew 37.8% (up 29.3% at cc). Moreover, retail comp sales including e-commerce surged 32% (up 23% at cc).
Licensing revenues advanced 66.4% year over year. Operating margin was up 12.3% to 90.3% on expense leverage.
Guess, Inc. Price, Consensus and EPS Surprise
Guess, Inc. price-consensus-eps-surprise-chart | Guess, Inc. Quote
The company exited the quarter with cash and cash equivalents of $395.1 million as well as long-term debt and finance lease obligations of $86.7 million. Further, stockholders’ equity was $554.2 million. Net cash used in operating activities for three months ended May 1, 2021 amounted to $53.6 million.
The company announced a quarterly dividend of 11.25 cents per share, which is payable on Jun 25, 2021 to shareholders as of Jun 9.
In late fiscal 2021, the company had begun a new round of government-mandated temporary store closures, mainly in Europe. While the number of temporary closures varied throughout the quarter, these stores were closed for less than 20% of the total days in the first quarter of fiscal 2022, primarily in Europe and Canada. As of May 1, 2021, 80% of the stores were open, with most of the closed stores situated mainly in Europe and Canada. As of May 19, 2021, nearly 95% of the company’s stores were open.
For the second quarter and fiscal 2022, the company is not offering any detailed view owing to the uncertainty surrounding coronavirus. However, the company offered revenue growth guidance for the second quarter and fiscal 2022 from pre-pandemic level (fiscal 2020) to offer a relatively-normalized comparison.
Guess? envisions second-quarter fiscal 2022 revenues to decline in mid single digits from the fiscal 2020 level owing to the pandemic-induced store closures and reduced traffic. This is likely to be somewhat made up by strength in the company’s global e-commerce business
For fiscal 2022, management expects revenues to decline in mid single digits from fiscal 2020, considering that there will not be any pandemic-related closures after the second quarter. Further, the company expects operating margin to come in at nearly 8.6% in fiscal 2022. The view includes expectations of a back-to-normal pace of product development and shipments in the European wholesale business.
3 More Solid Textile-Apparel Picks
Gildan Activewear, Inc. GIL which sports a Zacks Rank #1, has a long-term earnings growth rate of 28.6%. You can see the complete list of today’s Zacks #1 Rank stocks here.
Crocs, Inc CROX, which sports a Zacks Rank #1, has a long-term earnings growth rate of 15%.
G-III Apparel Group, Ltd. GIII, which carries a Zacks Rank #2 (Buy), has a long-term earnings growth rate of 11.6%.
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