Guess stock (NYSE: GES), a retailer that designs, markets, distributes, and licenses apparel and accessories for men, women, and children, is scheduled to report its fiscal fourth-quarter results on Wednesday, March 31. We expect GES stock to likely trade sideways due to mixed fiscal Q4 2021 results with earnings beating estimates and revenues missing consensus. While the increased consumer retail activity and cost-cutting initiatives are looking good for the retailer’s margins, the top-line declines, particularly in the U.S. market, remain a key issue in the near term.
Our forecast indicates that the company’s valuation is around $22 a share, which is largely around the current market price. Look at our interactive dashboard analysis on Guess’ pre-earnings: What To Expect in Fiscal Q4? for more details.
(1) Revenues expected to likely miss consensus estimates
Trefis estimates GES’ FQ4 2021 revenues to be around $652 million, marginally below the market expectations of $660 million. It should be noted that revenues declined by 8% y-o-y in Q3, which was a meaningful improvement compared with the 46% y-o-y declines that the apparel maker suffered through the first half of the year. To break down into comparable sales – retail comps in the U.S. and Canada fell 23% y-o-y while Europe comps grew 39% y-o-y in Q3. Going forward, the company expects revenue in the fiscal fourth quarter to be down in the low to mid-twenties percentages due to store closures and product development changes. For full-year 2020, we expect Guess’ revenues to decline 30% y-o-y.
Guess has given up its pursuit of younger teenage consumers and has moved toward consumers in their 20’s and early 30’s. They have taken off in Europe, and that has to do with lifestyle and also excellent marketing. However, sales in the U.S. have been falling, which is a concern.
2) EPS likely to be below consensus estimates
GES’ FQ4 2020 earnings per share (EPS) is expected to be 58 cents per Trefis analysis, 4% ahead of the consensus estimate of 56 cents. In Q3, the retailer’s gross profit margin was 480 basis points higher y-o-y at 42.1%, and operating profit increased 140% to $55 million. Evidently, there are more cost-saving measures in place, such as lower promotions and higher initial markup value. As a result, earnings per share also came in at 55 cents in Q3, compared to 22 cents during the same period last year. Looking ahead, we expect the company’s earnings to post a loss for the full-year, largely due to a much weaker fiscal first half.
(3) Stock price estimate in line with the current market price
Going by our Guess’ Valuation, with a revenue per share (RPS) estimate of around $28.62 and a P/S multiple of almost 0.8x in fiscal 2020, this translates into a price of $22, which is largely around the current market price.
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