Guess?'s (GES) Spring Capsule Collection to Boost Growth
Guess?, Inc. GES has been focused on achieving growth via partnerships, product replenishments and by strengthening the digital business, among other efforts. Moving on these lines, the company unveiled that it is partnering with FriendsWithYou in Spring 2021, for a wide range of colorful silhouettes and fabrications. Markedly, the capsule collection will hit select retail outlets of Guess? globally and be available on guess.com starting Apr 15, 2021.
The capsule collection includes an array of statement pieces for both men and women, designed with attractive embellishments. Accessories like backpacks and watches are also included in the collection. Further, Guess? plans to offer its limited-edition capsule collection to kids. Certainly, its efforts to augment business through such prudent moves are worth noting.
What Else is Driving Guess?
The company has been benefiting from its solid digital business, which performed well in the fourth quarter of fiscal 2021. Notably, the company’s e-commerce business in North America and Europe increased 38% in the fourth quarter of fiscal 2021, following 19% and 9% improvements in the third and second quarters, respectively. Guess?’s e-commerce penetration increased to 20% in the past year, partly due to the pandemic-led store closures. Management envisions e-commerce penetration of its direct-to-consumer sales to increase to 23% in fiscal 2025, from 13% in fiscal 2020.
Importantly, Guess? has been focused on its five-year strategic plan that was unveiled in December 2019. To this end, the company is committed to its six key strategies and has made remarkable progress on each of them to date, amid the pandemic. The core 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 targets achieving an operating margin of 10% by fiscal 2025. Net revenues are expected to be $2.9 billion, indicating a CAGR of 2% from fiscal 2020. Further, management intends to double its earnings per share to $3 by fiscal 2025, from $1.33 reported in fiscal 2020.
In connection with its strategic plan, the company completed the implementation of the salesforce platform in the United States, Canada and Europe in the past year, and is encouraged with the initial results. Moreover, the company rationalized its store portfolio during the year by shutting more than 125 underperforming stores and renegotiating 290 leases with favorable terms. Finally, management undertook steps to transform its business model, which includes the global reorganization of its team, omnichannel focus on the company’s direct-to-consumer business, development of Guess?’s first global product line and the introduction of product categories like essentials and athleisure. We note that demand for these categories is likely to be high amid the pandemic-induced stay-at-home trends.
These upsides are helping the company stay firm amid the pandemic-led reduced demand, temporary store closures as well as capacity constraints, mainly in Europe and Canada. Shares of the Zacks Rank #3 (Hold) company have gained 10.5% in the past three months compared with the industry’s growth of 1.4%.
3 Solid Textile-Apparel Picks
Gildan Activewear GIL, with a Zacks Rank #1 (Strong Buy), has a long-term earnings growth rate of 9%. You can see the complete list of today’s Zacks #1 Rank stocks here.
G-III Apparel GIII, with a Zacks Rank #1, has a long-term earnings growth rate of 11.6%.
Crocs CROX, with a Zacks Rank #2 (Buy), has a long-term earnings growth rate of 15%.
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Guess, Inc. (GES) : Free Stock Analysis Report
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