Guess’ stock (NYSE: GES), a retailer that designs, markets, distributes, and licenses apparel and accessories for men, women, and children, has increased 8% over the last twenty-one trading days (one month) and currently stands at around $24. It should be noted that the broader S&P500 returned only a 3% growth during the same period. We expect the company’s stock to decline going forward, due to a mixed Q2 and fall in the retailer’s store traffic. The company’s gains in the global e-commerce platform have been completely offset by consumers’ fewer store visits. In Q2 ended July 31, Guess’ earnings came ahead of the consensus estimate, but its revenues missed expectations. The company’s revenues grew 58% year-over-year over the much depressed 2020, but were still down 8% over the two-year ago level. This was largely due to a timing shift of European wholesale shipments into the third quarter and the impact of permanent store closures. Most apparel retailers have been reporting Q2 sales greater than they generated in 2019, indicating a growing business. But Guess is struggling to regain its momentum as it still expects full-year revenue to be down mid-single digits versus pre-pandemic levels. However, it raised its guidance for full-year operating margin to reach ~10.0% from prior guidance of 8.6%. It should be noted that the permanent store closures are accretive to profitability, as the company more than doubled operating margin versus the pre-pandemic levels to reach 13.9% in Q2 itself.
We believe that the company’s stock looks overvalued and could see declines in the near term. Specifically, there is a 52% chance of a fall for GES stock over the next month (twenty-one trading days) based on our machine learning analysis of trends in the stock price over the last ten years. See our analysis on GES Stock Chances of Fall for more details.
Calculation of ‘Event Probability’ and ‘Chance of rising’ using last 10 year data
 1.7% or higher return during five-day period in 869 times out of 2517; Stock rose in the next 5 days in 405 of these 869 instances
 6.9% or higher return during ten-day period in 444 times out of 2517; Stock rose in the next 10 days in 205 of these 444 instances
 8.1% or higher return during twenty-one-day period in 571 times out of 2517; Stock rose in the next 21 days in 276 of these 571 instances