Is The Market Pricing Guess Fairly?

by Trefis Team
-0.36%
Downside
12.16
Market
12.12
Trefis
GES
Guess?
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Guess (NYSE: GES) engages in the designs, markets, distributes, and licenses lifestyle collections of apparel and accessories for men, women, and children. During the latest quarterly reports, Guess’s net sales rose by 10% to $605 Million and Increased 13% in Constant Currency. This performance was boosted by its rising comparable store sales and e-commerce sales in both Europe and Asia (especially China), growth through digital initiatives, its well-positioned customer-centric strategies, and the building of its omni-channel capabilities. Guess’s profitability in the wholesale business has been on a upward trend in Europe and Asia. The European wholesale segment grew by 20.2% in U.S. dollars  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’s own website along with the partnerships it forged with websites like Zalando, and the Retail comp sales, including e-commerce, increased 9% in U.S. dollars.  A sustained focus on cost containment, inventory management, merchandise, and speed-to-market initiatives has kept Guess afloat in a competitive environment.

We anticipate the company to post progressive results as the management remains focused on the strategic initiatives to create long-term shareholder value by balancing top-line growth and strong margins. Guess is focused on improving the customer experience in stores and online and improving assortments in compelling new product launches. They still see a lot of opportunity in the Europe and Asia geographies, where they will continue to allocate capital and  plan to continue growing sales while also expanding margins. They also plan to keep working on improving the profitability of the Americas by executing on their cost reduction and margin improvement initiatives. All these factors, coupled with strong sales momentum, will enable Guess Inc to continue to grow its top line in 2019 and beyond.
We thus expect the company’s revenue to be around $2.7 billion for FY2019 and the net income margin to be 6.6%. We assume a Price-to-Earnings multiple of 12.3x and an average share count of 82 million, translating into a share price estimate of $23.96 per share, a tad up from the current market price.
 

Detailed steps to arrive at our price estimate are outlined in our interactive dashboard Guess’s Outlook For 2019. You can modify the key value drivers to see how they impact the company’s revenues, bottom line, and valuation.

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