What To Expect From Guess’ Stock Post Q2?

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[Note: Guess’ FY’23 ended on Jan 28, 2023]

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 second-quarter results on Wednesday, August 23. We expect GES stock to likely see little movement post fiscal Q2 results with revenues and earnings coming in line with expectations. The retailer’s international businesses were particularly strong during the first quarter, which partially offset softness in the Americas Retail business as a result of slower customer traffic into its stores. We expect this trend to continue in the second quarter as well. For the full year FY 2024, the company expects revenue growth of +2% to +4% year-over-year (y-o-y) and earnings per share in the range of $2.60 to $2.90.

Notably, GES stock had a Sharpe Ratio of 0.4 since early 2017, which is lower than the figure of 0.6 for the S&P 500 Index over the same period. Compare this with the Sharpe of 1.2 for the Trefis Reinforced Value portfolio. Sharpe is a measure of return per unit of risk, and high-performance portfolios can provide the best of both worlds.

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Our forecast indicates that the company’s valuation is around $21 a share, which is almost in line with the current market price. Look at our interactive dashboard analysis on Guess’ Earnings Preview: What To Expect in Fiscal Q2? for more details.

 

(1) Revenues expected to be in line with consensus estimates

Trefis estimates GES’ FQ2 revenues to be around $641 million, matching with the market expectations. In Q1, the company’s revenue fell 4% y-o-y to around $570 million. Under the Americas Retail segment of the company, retail comparable sales were down by 14%. In addition, Americas Wholesale segment revenues fell by 25% and Licensing business was down by 10%. However, Asia (+26%) and Europe (+2%) showed positive growth. Guess has given up its pursuit of younger teenage consumers and has moved toward consumers in their 20’s and early 30’s. The company has taken off in Europe, and that has to do with lifestyle and also excellent marketing.

2) EPS likely to match consensus estimates 

GES’ FQ2 earnings per share (EPS) is expected to be 40 cents per Trefis analysis, in line with the consensus estimate. In Q1, the company’s adjusted operating margin decreased to 0.3% from 7.0% a year ago, driven primarily by higher costs, lower government subsidies compared to the same prior-year quarter, higher markdowns, and the unfavorable impact of currency, partially offset by higher initial markups.  On the bottom line, the company earned -$0.22 per share in Q1, compared to $0.12 in the year-ago quarter.

(3) Stock price estimate similar to the current market price

Going by our Guess’ Valuation, with adjusted earnings per share (EPS) estimate of around $2.68 and a P/E multiple of almost 7.9 in fiscal 2024, this translates into a price of $21, which is only 5% higher than the current market price.

It is helpful to see how its peers stack up. GES Peers shows how Guess’ stock compares against peers on metrics that matter. You will find other useful comparisons for companies across industries at Peer Comparisons.

Returns Aug 2023
MTD [1]
2023
YTD [1]
2017-23
Total [2]
 GES Return -10% -8% 57%
 S&P 500 Return -4% 15% 97%
 Trefis Reinforced Value Portfolio -6% 28% 558%

[1] Month-to-date and year-to-date as of 8/22/2023
[2] Cumulative total returns since the end of 2016

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