What To Expect From Guess’s Q1 Earnings
Guess (NYSE: GES) is scheduled to announce its first quarter 2019 earnings. The company had a successful fiscal 2018 (fiscal year ends in January), going by its performance over all the four quarters of the fiscal year. For the Q4 quarter, the company’s revenues increased by 18% to $792 million while its full year 2018 Revenues increased 8% to $2.4 Billion, driven by its rising comparable store sales and e-commerce sales in both Europe and Asia (especially China), its well-positioned customer-centric strategies, growth through digital initiatives, and the building of its omni-channel capabilities working in its favor.
Management forecasts first quarter Net revenue to rise between 11.0% and 12.5%. However, earnings (loss) is expected to be between $ (0.27) to $(0.24) due to the impact of adopting the new revenue recognition standard in the United States and foreign currency rate fluctuations.
Please refer to our dashboard analysis on Guess.
Below are key factors that will likely drive Guess’s first quarter earning results.
Guess’ Market Specific Strategies are working in its favor especially in Europe and Asia- Guess’ profitability in the wholesale business has been on a growing trend in Europe and Asia. The European wholesale segment grew by double digits, 39.7% in U.S. dollars and 24.1% in constant currency, and the trend is expected to carry on in the coming quarters as well. The growth was propelled by a rise in comparable store sales, including e-commerce sales, and a host of store openings. The e-commerce business in Europe was boosted by Guess’ own website along with the partnerships it forged with websites like Zalando, and the Retail comp sales, including e-commerce, increased 18% in U.S. dollars.
The company also doubled its capital allocation for the Asian stores and the e-commerce business in Asia strengthened by a greater presence on websites like Tmall, JD.com, and Guess.cn. Asia revenues increased 40.2% in U.S. dollars driven by a rise in store openings, and comparable store sales (which included e-commerce sales as well) increased 14% in U.S. dollars.
Focus On Higher Profitability And A Smaller Presence In North America – Guess has been suffering in North America for a few years due to a lack of footfall in the brick-and-mortar stores. Hence, currently the company is gradually trying to reduce its footprint and increase its profitability in the region. For the Q4 quarter Americas Retail revenues decreased 6.1% in U.S. dollars and Retail comp sales including e-commerce decreased 4% in U.S. dollars. The company created 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. For Q4, America’s Wholesale revenues increased 3.8% in U.S. dollars.
Well-positioned customer strategy and a steady focus on delivering a differentiated customer experience will fuel strong returns – Guess continues to revamp its 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 have been on the rise 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 Q1 and beyond.
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