What To Expect From Guess’ Q4 Earnings
Guess (NYSE: GES) is scheduled to announce its fourth quarter 2018 earnings on March 21. The company has had a successful fiscal 2018 (fiscal year ends in January) so far, going by its performance over the first nine months of the fiscal year. Guess’s pursuit of a strategy of expanding its presence in Europe and Asia while gradually decreasing its presence in its domestic American markets, is working in its favor. It has witnessed a quarter over quarter improvement in its performance in fiscal 2018 and the growth rate is expected to accelerate in the next fiscal year. Guess is currently witnessing double digit growth in Europe and Asia. For its customer base, the company is mainly targeting the millennials and in order to do so, it is strengthening its digital presence and upgrading omni-channel capabilities. Additionally, it is transitioning all its websites into a state-of-the-art responsive site, which will improve user experience with faster speed and less navigation steps. It has recently partnered with marketplaces such as Tmall, JD, and vip.com in China, La Redoute and Otto in Europe, and Amazon in the U.S. and Canada in order to further build omni-channel capabilities.
Management envisions fourth-quarter earnings to be approximately between $0.48 to $0.55 as the company has invested in several growth initiatives which are likely to pay good returns.
Please refer to our dashboard analysis on Guess.
Below are key factors that will likely drive Guess’s fourth quarter earning results.
Guess’ Market Specific Strategies working in its favor especially in Europe and Asia- Guess’ profitability in the wholesale business is currently growing in Europe and Asia which is evident from the fact that despite not growing the number of wholesale dealers significantly over the past year, revenues from the wholesale business kept growing. A few months ago, the company opened a new 625,000 square-foot distribution center in Venlo, in the Eastern part of the Netherlands. The distribution center will help Guess further with its supply chain management in Europe. The company also doubled its capital allocation for the Asian stores and the e-commerce business in Asia was strengthened by a greater presence on websites like Tmall, JD.com, and Guess.cn. The company’s double digit y-o-y growth in the Asian markets for the first nine months of fiscal 2018 was driven by a rise in store openings and comparable store sales (which included e-commerce sales as well).
The Company Is Focusing On Higher Profitability And A Smaller Presence In North America – Due to a lack of footfall in the brick-and-mortar stores, Guess had been suffering in North America for a few years. Hence, currently the company is gradually trying to reduce its footprint and increase its profitability in the region. Currently, 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.
Well-positioned customer strategy and a steady focus on delivering a differentiated customer experience will fuel strong returns – Guess continues to revamp business by improving the store experience, localizing assortments, and enhancing direct business. These measures will facilitate it to generate incremental sales and increase store transactions through higher conversion rates. A sustained focus on cost containment, inventory management, merchandise, and speed-to-market initiatives has kept Guess afloat in a competitive environment. This is evident from the company’s positive earnings history.
Guess’s rising e-commerce sales – Driven by the growing trend of online shopping, online sales of the company rose in every geography underlining this to be a global trend especially in Europe and Asia. With rising disposable incomes and people continuing to spend more online, this channel will constitute an increasing share of the company’s top line.
Driven by these key trends, we anticipate Guess will continue to post better results in Q4, compared to its performance in the first nine months of the fiscal year.
What’s behind Trefis? See How It’s Powering New Collaboration and What-Ifs
For CFOs and Finance Teams | Product, R&D, and Marketing Teams
Like our charts? Explore example interactive dashboards and create your own.