Post Earnings Coverage Guess Same Stores Sale Decline

LONDON, UK / ACCESSWIRE / August 30, 2016 / Active Wall St. announces its post-earnings coverage on Guess’, Inc. (NYSE: GES). The company reported second quarter fiscal 2017 results, on August 24, 2016. The Apparel retailer upgraded its earnings outlook for the year as earnings outperformed consensus estimate but sales declined. Register with us now for your free membership at: http://www.activewallst.com/register/.

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Earnings Numbers

For the quarter ended on July 30, 2016, Guess’ reported earnings of $32.27 million, or $0.38 per share, up from $18.29 million, or $0.21 per share, in the year ago quarter. During Q2 FY17, the company recognized a gain from the sale of a minority interest investment of approximately $22.3 million, or $0.24 per share. Excluding the gain, adjusted net earnings were $12.0 million, or $0.14 per share, which topped analysts’ projection of $0.07 per share. Earnings also compared favorably with management’s projected range of a loss of 4 cents to 8 cents.

Revenues declined marginally by 0.2% to $544.96 million as improvement in Europe was offset by deterioration in American retail and wholesale business. On a constant currency basis, revenues inched up 0.5%, in-line with management’s guided range growth of 0.5% to 2.5%; however, revenues came in short of consensus estimate of $554.5 million.

Victor Herrero, Guess’ Chief Executive Officer, commented: “We are pleased to deliver second quarter earnings that exceeded our expectations both in earnings per share and operating margin.”

Guess’ gross margin contracted 220 basis points (bps) to 34.1% from $36.3% in the year earlier period. The company’s operating margin tapered 190 bps to 2.9 from 4.8%, primarily by higher expenses due to retail expansion and the negative impact from currency exchange rate fluctuations, partially offset by lower charges related to legal matters. The negative impact of currency on operating margin for the quarter was roughly 70 basis points.

Segment Results

Guess’ comparable same store sales (comps) declined 2.5%, however, the decline was less than the 4.2% drop analysts had expected. Guess’ has logged same-store sales declines since the start of 2011. During Q2 FY17, the company’s retail stores and ecommerce sites at the Americas Retail segment reported a decline of 3% at $226.55 million with comps in its Americas division including ecommerce dropping 2%. Guess’ revenues from the European segment’s revenues were up 7% on y-o-y basis to $213.47 million with comp store sales growing in the low-double digit. Revenues from Asia decreased 6% to $53.25 as positive comps in Korea, Mainland China, and Japan were offset by weakness in Greater China. American Wholesale segment sales were down 8% to $29.25 million.

Financials

As of July 30, 2016, Guess’ had cash and cash equivalent worth $415.50 million and long-term debt of $23.64 million compared to cash and cash equivalent of $445.80 and long-term debt of $2.32 million as of January 30, 2016.

Dividend

The company’s board approved a quarterly cash dividend of $0.22 per share on its common stock. The dividend will be payable on September 23, 2016, to shareholders on record at the close of business on September 7, 2016.

Outlook

For Q3 FY17, Guess’ is forecasting 5% to 8% growth that would come to approximately $554 million in revenue. Analysts have estimated $568.8 million in Q3 FY17 sales. The company is anticipating for adjusted earnings of $0.11 per share to $0.16 per share in Q3 FY17. For the year ending in January 2017, Guess’ is projecting adjusted earnings of $0.62 per share to $0.75 per share compared to earlier guidance of $0.55 per share to $0.75 per share and above the $0.60 per share analysts have estimated. The company said revenue would rise between 3% and 5%, or between 2.5% and 4.5% on a currency-adjusted basis, translating to about $2.29 billion and roughly in-line with analysts’ average estimate.

Stock Performance

At the closing bell, on August 29, 2016, Guess’ shares traded down 0.22%, finishing the trading session at $17.89. A total volume of 1.45 million shares were traded for the day, which was above the 3 months average volume of 1.14 million shares. For the last one month and the previous three months, the company’s share price have advanced 21.54% and 15.08%. Guess’ shares are trading at a PE ratio of 28.62. The stock has a dividend yield of 5.03%.

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