Guess Stock Skyrockets 26% As Privatization Deal Unfolds, But Is the Risk Too High?

August 21st, 2025 by Trefis Team
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Guess

Guess Stock (NYSE: GES) is entering a pivotal phase, announcing plans to go private in a $1.4 billion deal with co-founders Maurice and Paul Marciano, CEO Carlos Alberini, and Authentic Brands, owner of Reebok. Authentic Brands will acquire 51% of Guess’s intellectual property, while existing shareholders retain the rest. Shareholders will receive $16.75 per share in cash, a 26% premium over the prior close. The transaction is expected to close by Q4 of the current fiscal year (ending Jan 2026), pending regulatory approval.

Following the announcement, Guess shares jumped nearly 26% on August 20, reflecting investor optimism. The move offers the company strategic flexibility amid a challenging retail environment and heightened M&A activity in apparel. As a private entity, Guess can pursue long-term operational and brand initiatives without the pressure of quarterly earnings or market scrutiny. Authentic Brands’ expertise in licensing and brand management could further expand Guess’s global footprint. See Buy or Fear Guess Stock?

That said, investing in a any single stock carries high risk. The Trefis High Quality Portfolio is designed to reduce stock-specific risk while giving upside exposure. Separately see Bigbear.ai: BBAI Stock To $1?

Risks to Consider

While the privatization deal provides strategic advantages, several risks remain:

  • Regulatory and financing hurdles: Completion of the deal depends on regulatory approval and financing, and delays or failures could negatively impact share prices.

  • High leverage: Privatization typically involves significant debt. Guess carries $1.6 billion in debt against an $876 million market cap, which may constrain operational flexibility.

  • Operational execution risk: Improvements and brand expansion could take longer than expected.

  • Market sensitivity: The core apparel business is highly sensitive to consumer spending and competitive pressures.

Financial Profile

  • Revenue growth: Modest overall, with a 3-year average of 4.7% slightly trailing the S&P 500’s 6.1%. Recent performance shows acceleration, with revenues up 9% over the past twelve months to $3.1 billion and a 10.6% year-over-year increase in the latest quarter. For more details, see: GES Revenue Comparison

  • Profitability: Weak, with the last twelve months reporting $157 million in operating income (5.1% margin), $71 million in operating cash flow (2.3%), and net income of $14 million (0.5% margin), all below market averages. For more details, see: GES Operating Income Comparison

  • Financial stability: Cash on hand is limited to $151 million (5.3% of assets), and leverage is high, with a debt-to-equity ratio of 184.6%. Historically, the stock has shown weak downturn resilience, falling more sharply than the S&P 500 during crises and taking longer to recover.

Looking for Smarter Alternatives?

The privatization deal gives Guess strategic flexibility and potential long-term benefits, but significant operational, financial, and market risks remain. Weak margins and debt levels make the stock risky for current investors.

While you would do well to avoid GES stock’s seeming limited upside for now, you could explore the Trefis Reinforced Value (RV) Portfolio, which has outperformed its all-cap stocks benchmark (combination of the S&P 500, S&P mid-cap, and Russell 2000 benchmark indices) to produce strong returns for investors. Why is that? The quarterly rebalanced mix of large-, mid- and small-cap RV Portfolio stocks provided a responsive way to make the most of upbeat market conditions while limiting losses when markets head south, as detailed in RV Portfolio performance metrics.

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