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Investment Overview for Guess? (NYSE:GES)
Below are key drivers of Guess' value that present opportunities for upside or downside to the current Trefis price estimate for Guess:
European Business Revenue
- European Business Revenue:
Revenues from European operations have grown from $538 million in 2007 to $1,011 million in 2011. Going forward we expect European business revenues to decline in the near term and gradually increase thereafter to reach $1,070 million by the end of Trefis forecast period.
If Guess' European revenues increase to $1,250 million by the end of the Trefis forecast period, there could be a 5% upside to the Trefis estimate for Guess. On the other hand, if it decreases to $892 million, there could be a 5% downside to the Trefis estimate.
Revenue per Square Foot - North American Retail
- Revenue per Square Foot:
Guess' revenue per square foot in North America declined 3% in 2011 to $478. The decline was primarily due to -3.5% comparable sales growth for Guess' U.S. and Canada stores. Going forward we expect the figure to decline in 2012, and thereafter increase to reach $482 by the end of the Trefis forecast period.
If revenue per square foot increases to $568 by the end of the Trefis forecast period, there could be a 5% upside to the Trefis estimate for Guess. On the other hand, if it decreases to $400, there could be a 5% downside to the Trefis estimate.
Guess is a specialty retailer that designs, markets, distributes and licenses one of the world's leading lifestyle collections of contemporary apparel and accessories for men, women and children. Some of the company's most popular brands include GUESS, G by GUESS, and MARCIANO. Guess' core customers are style conscious customers between the ages of 18 and 32. At the end of 2011, the company had 504 directly operated stores in North America alone. The company also has a large footprint in Southern Europe and is rapidly expanding distribution in Northern and Eastern Europe and Asia.
Europe Segment is the largest contributor to the company's stock price
The European division includes retail as well as wholesale operations. Revenues for the division have increased from $538 million in 2007 to $1,011 million in 2011. Based on the company's expansion plans in Northern Europe offset by the weak macroeconomic conditions in the region, we estimate revenues for the division to reach $1.07 billion by the end of the Trefis forecast period.
Weak Macroeconomic Conditions in Europe are a Near Term Threat
Since most of Guess' European business comes from Southern Europe, operations in the region are extremely vulnerable to the current weak macroeconomic situation in Spain, Italy, and Greece.
Increasing Product Quality and Elevating Brand
Since last year the company has been focused on increasing its full price sell through in North America. It has been reducing inventory, offering fewer discounts and promotions, and planning its product design more carefully. If the company is successful at elevating its brand in North America, it should lead to higher retail margins in the region.
Guess' currently has a large footprint in Southern Europe and is looking to expand its presence in Northern and Eastern Europe as well as Asia. Within Asia, the company is focused on South Korea and China where it has been operating directly since 2007. Asian consumers have become a large driver of demand for apparel as their discretionary income continues to increase rapidly.
How Does Trefis Modelling Work?
How do we get the historical numbers for this chart?
Trefis has a team of in-house Analysts who gather historical data from company filings and other verifiable sources. When historicals are available, we explain how we got them at the bottom of the Trefis analysis section below.
Who came up with the Trefis forecast for future years?
The Trefis team of in-house Analysts considers a variety of factors when projecting any forecast. The rationale for our projections is explained in the Trefis analysis section below.
How does my dragging the trendline on the chart impact the stock price?
- We use forecasts for business drivers to calculate forecasted Revenues and Profits for each division of the company.
- We then use forecasted Profits in a Discounted Cash Flow (DCF) model to obtain the Price Estimate for the company.
See more on: DCF Methodology
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