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 first-quarter results on Wednesday, May 25. We expect GES stock to likely trade higher post fiscal Q1 results with revenues coming in line and earnings beating estimates marginally. In fiscal 2022 (year ended Jan’22), the retailer’s margins benefited from increased consumer retail activity and cost-cutting initiatives and grew to 12% from pre-pandemic levels of 5%. Consequently, the company’s earnings per share also doubled from the pre-pandemic levels in FY’22. However, the company’s revenues fell 3% during this period, due to some permanent store closures. Going forward, we expect the upcoming Q1 to be driven by the rapid growth of Guess’ profitable wholesale business and an increase in digital sales. But the rising inflationary pressures and supply chain shortages will also have a meaningful impact on the company’s top and bottom line. It should be noted that the company’s stock has been trading lower recently on concerns over the rising prices of cotton and higher overall manufacturing costs in Asian nations like Vietnam and China.
Our forecast indicates that the company’s valuation is $20 a share, which is around 4% higher than the current market price. Look at our interactive dashboard analysis on Guess’ Earnings Preview: What To Expect in Fiscal Q1? for more details.
(1) Revenues are expected to likely come in line
Trefis estimates GES’ FQ1 revenues to be around $586 million, in line with the market expectations of $584 million. In Q4, the company’s revenue grew 23% year-over-year (y-o-y) to $800 million and was down 5% compared to the pre-pandemic levels. These results were driven by European Wholesale, Americas Retail, and Licensing businesses across the board. Looking ahead, the first quarter revenues are expected to be up in the low-teens y-o-y, mainly driven by last year’s temporary store closures, wholesale growth, and positive store comps. Q1 2023 will also benefit from the shift of European wholesale shipments from the fourth quarter of 2022 into the first quarter. For full-year 2023, the company expects revenue to be up in the low single digits y-o-y and an operating margin to reach approximately 10.5%. We forecast Guess’ Revenues to grow 3% y-o-y to $2.7 billion. The outlook for the first quarter and the year reflects significant disruptions in Russia.
2) EPS likely to be marginally above consensus estimates
GES’ FQ1 2023 earnings per share (EPS) is expected to be 30 cents per Trefis analysis, slightly ahead of the consensus estimate of 29 cents. In Q4, the retailer’s operating margin expanded 460 basis points to 15.7%. The increase was linked to overall leveraging of expenses, lower markdowns, and higher initial markups, partially offset by the prior year’s rent relief and government subsidies. However, the company earned $1.04 per share in Q4 2022, down from $1.08 in fiscal 2021 and $1.18 in fiscal 2020 – driven by the unfavorable impact of negative comps sales in Europe.
(3) Stock price estimate higher than the current market price
Going by our Guess’ Valuation, with earnings per share (EPS) estimate of around $3.06 and a P/E multiple of almost 6.6x in fiscal 2021, this translates into a price of $20, which is around 4% higher than the current market price.
It is helpful to see how its peers stack up. Guess Peers shows how Guess compares against its peers on metrics that matter. You will find other useful comparisons for companies across industries at Peer Comparisons.
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