What To Expect From Guess’s Q2 2019 Earnings

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Guess (NYSE: GES) is scheduled to announce its Q2 2019 earnings on August 29. 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 Q1 2019, the company’s revenues increased by 14.7% to $521 million and increased 8% in constant currency. Guess’ performance was boosted 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. Guess had also recorded a net loss per share of $0.27 for Q1 Fiscal 2019, compared to $0.26 in Q1 Fiscal 2018, due to the impact of adopting the new revenue recognition standard in the United States and foreign currency rate fluctuations.

Looking ahead, the company is focused on improving the customer experience in stores and online and improving assortments in compelling new product launches. Based on these factors the company forecasts 2019 second quarter sales to grow by 14.0% to 15.5% and adjusted earnings in the band of $0.27 to $0.30 per share. Please refer to our dashboard on Expectations from Guess’s Q2 Earnings.

Below are key factors that will likely drive Guess’s second quarter earnings 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, 24.2% in U.S. dollars and 9.1% 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 such as Zalando, and the Retail comp sales, including e-commerce, increased 15% 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 32.6% in U.S. dollars driven by a rise in store openings and comparable store sales (which included e-commerce sales as well) increased 22% 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 Q1 quarter, Americas Retail revenues decreased 1.4% in U.S. dollars, and Retail comp sales including e-commerce increased 2.1% 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 Q1, America’s Wholesale revenues increased 13.4% in U.S. dollars.

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.

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.

Driven by these key trends, we anticipate Guess will continue to post better results in Q2 and beyond.

 

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