Guess? operates 488 retail stores in the United States and Canada and 349 retail stores in Europe, Asia and Latin America. It also licenses a lifestyle collection of handbags, watches and footwear which are sold in department and specialty stores around the world.
Rare Miss in the Second Quarter
On Aug 27, Guess? reported its second quarter results and missed on the Zacks Consensus by 2 cents. It was the first earnings miss since 2012.
The North American retail environment remained rocky. Revenue in North America fell 4% and comparable sales, including e-commerce, actually declined 5%.
Traffic remained “soft” in North America and promotional activity put the stores under pressure. However, in a bright spot, e-commerce sales grew by 50% in the quarter.
Europe and Asia were also weak, with revenues down 6% in Europe and 2% in Asia.
It doesn’t sound like North America is getting any better. The company said its Fall Collection hadn’t been gaining traction in the third quarter. Therefore it cut its full year guidance to the range of $1.05 to $1.20 from prior guidance of $1.40 to $1.60.
The analysts all followed suit, as 4 estimates have been cut for fiscal 2015 over the last 60 days. The fiscal 2015 Zacks Consensus Estimate plunged to $1.12 from $1.47 just 90 days ago.
That is an earnings decline of 42% compared to last year.
Shares Hit New Low: Are They Cheap?
Guess? shares have steadily been declining throughout the year and recently hit a 52-week low.
Does that make them a deal?
Guess? still isn’t cheap even after the decline. It trades with a forward P/E of 19. That’s above the average of the S&P 500 of 17.1.
And until North America turns around, it looks like it could be a rough ride.
If you’re interested in an international retailer that has fewer short-term problems, you may want to consider VF Corporation (VFC – Analyst Report). It’s a Zacks Rank #2 (Buy) and earnings are expected to grow 13% this year.
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