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Guess? (GES) Up on Solid Digital Operations & Strategic Plan

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The coronavirus outbreak and consequent social-distancing trend have accelerated consumers’ shift to online shopping. One company benefiting from this rapid shift is Guess?, Inc. GES. It is also gaining on strength in its six key strategies. These upsides were reflected in its first-quarter fiscal 2022 results, with the top and the bottom line increasing year over year as well as surpassing the Zacks Consensus Estimate.

Currently, Zacks Consensus Estimate for fiscal 2022 sales as well as earnings, project significant year-over-year growth. The Zacks Rank #1 (Strong Buy) stock has more than doubled in the past year compared with the industry’s growth of 47.8%. The stock has also outperformed the Zacks Consumer Discretionary sector’s increase of 24.9% during the same period.

Let’s discuss further.

Zacks Investment Research
Zacks Investment Research

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Digital Strength

Guess? is benefiting from its solid digital business, which performed well in the fiscal first quarter. The company’s e-commerce business in North America and Europe soared 61% sequentially in the quarter, following 38%, 19% and 9% improvements in the fourth, the third and the second quarter, respectively. Management expects to see continued improvement in its global e-commerce business through fiscal 2022.

Guess? is on track with its digital-first initiative and investing in brand building through social media platforms. The company is also focused on linking brick-and-mortar stores, e-commerce and mobile sales to improve online operations. Guess? is improving e-commerce operations through better data capturing, improved customer profiling, personalized marketing and relationship management. These efforts are expected to help the company enhance customer base and enhance experience, which in turn is likely to drive sales.

Strategic Plan Holds Promise

Guess? has been focused on its strategic business plan that was unveiled in December 2019. Its six key strategies include organization and culture, functional capacities, brand relevance with three main consumer groups (heritage, Millennials and Generation Z customers), customer focus, product brilliance and international footprint. Management, in its last earnings call, highlighted that it has made remarkable progress against each of them over the last 15 months amid the pandemic

In connection with its salesforce and omnichannel capacity rollout, Guess? is focused on implementing Customer 360 — a solution developed by salesforce for personalized marketing, data optimization and customers’ journey engagement among other objectives. The company has also been rationalizing its store portfolio by shutting underperforming retail locations and renegotiating leases with favorable terms. As part of the strategic plan, Guess? is focused on building a better retail business with higher number of full price selling coupled with reduced promotional activity. Apart from this, management is on track to streamline its cost structure to enhance operating model and reduce SG&A expenses.

All said, we believe that Guess?’s focus on strategic initiatives coupled with impressive e-commerce business is likely to help it keep up the splendid momentum.

More Solid Textile-Apparel Picks

G-III Apparel Group, Ltd. GIII, which sports a Zacks Rank #1, has a long-term earnings growth rate of 11.6%. You can see the complete list of today’s Zacks #1 Rank stocks here.

Gildan Activewear, Inc. GIL, which carries a Zacks Rank #2 (Buy), has a long-term earnings growth rate of 28.6%.

Crocs, Inc CROX, which carries a Zacks Rank #2, has a long-term earnings growth rate of 15%.

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Guess, Inc. (GES) : Free Stock Analysis Report

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Gildan Activewear, Inc. (GIL) : Free Stock Analysis Report

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