Guess? (GES) Last Update 7/5/21
Related: BBY CL COST HD
% of Stock Price
Revenue
Gross Profits
Free Cash Flow
Guess?
$31.28
Yours
Trefis Price
N/A
$22.61
Market
 
Top Drivers for Period
Key Drivers
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TREFIS Analysis


Trefis Report
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RECENT NEWS AND ANALYSIS

Potential upside & downside to trefis price

Guess? Company

VALUATION HIGHLIGHTS

  1. European Operations constitute 53% of the Trefis price estimate for Guess?'s stock.
  2. Licensing & Other constitutes 29% of the Trefis price estimate for Guess?'s stock.
  3. North American Wholesale constitutes 13% of the Trefis price estimate for Guess?'s stock.

WHAT HAS CHANGED?

  1. Guess Tops Estimates in Q1 FY 2022
Revenue in the fiscal first quarter grew a strong 2x to $520 million, beating the consensus estimate by $22 million. That was a meaningful improvement compared with the declines that the apparel maker suffered in 2020. That resulted in adjusted earnings per share of $0.21, beating the Wall Street analysts by 41 cents.

  1. Guidance for Fiscal 2022
For the full fiscal year 2022, assuming no Covid-related shutdowns past the second quarter, the company expects revenues to be down mid-single digits versus fiscal 2020 (the calendar year 2019) and operating margin to reach approximately 8.6%. The expectations for the full year also assume a return to a normal cadence of product development and shipments for its European wholesale business.

BUSINESS SUMMARY

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's core customers are style-conscious customers between the ages of 18 and 32. At the end of fiscal 2021, the company directly operated 1,046 retail stores in the Americas, Europe, and Asia. The Company’s partners operated 524 additional retail stores worldwide

SOURCES OF VALUE

Europe Segment is one of the largest contributor to the company's stock price

Guess' profitability in the European wholesale business is currently growing, which is evident from the fact that despite not growing the number of wholesale dealers significantly over the past year, the revenues from the wholesale business kept growing. Going forward, we expect European business revenues to reach around $1.6 billion by the end of our forecast period as the company expands in lucrative markets such as Russia and Germany. However, if Guess's European revenues increase to over $2 billion by the end of the Trefis forecast period driven by aggressive expansion in lucrative markets, there could be a 15% upside to our price estimate for Guess.

KEY TRENDS

Foot traffic decline in the U.S. troubling stores

Due to a lack of footfall in the brick-and-mortar stores, Guess had been suffering in the Americas, specifically in North America, for quite a few years in the past. Hence, currently, the company is gradually trying to reduce its footprint and increase its profitability in the region. Now, the Americas contribute over 40% to Guess' total revenues. The management plans on reducing this contribution to around 25% in the future, and it plans on achieving a 7.5% overall long term operating margin in the Americas. To achieve these goals, the company is creating a better balance between the American retail and wholesale businesses, while closing stores, improving its product offerings, and building a stronger online presence through celebrity endorsements, marketing, and promotions.

Susceptibility to currency fluctuations

Guess earns close to 50% of its revenues from outside North America, and hence, its growth is highly susceptible to currency fluctuations. In 2014, for instance, the dollar appreciated significantly against the euro and Asian currencies, which pummeled Guess's revenues coming in from Europe and Asia, adding to its existing problems. Though this is something the company cannot control, it remains a significant threat.