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Guess? (GES) Q3 Earnings & Revenues Top Estimates, Up Y/Y

Guess? Inc. GES reported splendid third-quarter fiscal 2022 results, with the top and the bottom line increasing year over year. Revenues and earnings surpassed their respective Zacks Consensus Estimates. Management raised its fiscal 2022 revenues and operating margin outlook. The company increased its quarterly dividend rate to boost shareholders’ returns.

Quarterly performance gained from sales growth across allregions, except Asia. Management is particularly impressed with strong growth in operating margin driven by solid gross margin expansion thanks to reduced promotional activity and better IMUs.

Guess, Inc. Price, Consensus and EPS Surprise

 

Guess, Inc. price-consensus-eps-surprise-chart | Guess, Inc. Quote

 

Quarter in Detail

Guess? posted adjusted earnings of 62 cents per share, up 6.9% from the year-ago quarter’s reported figure. Earnings in the quarter reflect favorable currency translations and minimal impact from share repurchases as well as convertible notes transactions. Earnings surpassed the Zacks Consensus Estimate of 46 cents. Adjusted earnings surged 181.8% from 22 cents reported in third-quarter fiscal 2020.

Net revenues amounted to $643.1 million, which surpassed the consensus mark of $615.1 million. The metric went up 13% from $569.3 million reported in the year-ago quarter. On a constant-currency (cc) basis, net revenues increased 12.8% year over year. The upside can be attributed to solid performance across European Wholesale, Americas Retail and Licensing businesses.

The company’s net revenues rose 4.4% from $615.9 million reported in third-quarter fiscal 2020 (pre-pandemic period), reflecting solid growth in European business driven by the wholesale and e-commerce categories. Permanently-closed stores and negative same-store sales in Europe and Asia affected the metric.

The company’s gross margin expanded to 45.7% from 42.1% reported in the year-ago quarter. As a percentage of sales, SG&A expenses increased to 34.8% from 32.5% in the prior-year quarter’s level.

During the quarter, adjusted earnings from operations came in at $70.4 million, up from $55.3 million posted in the year-ago quarter. Adjusted operating margin came in at 10.9%, up 1.2% year on year on the back of reduced markdowns, increased initial markups and leveraging expenses. These upsides were somewhat offset by increased performance-based compensation.

Segment Performance

Revenues in the Americas Retail segment rallied 30% year over year on a reported basis, while increasing 29% at cc. Revenues fell 5% from third-quarter fiscal 2020 levels. Segmental operating margin came in at 14.2% compared with 0.4% in the year-ago quarter.

Revenues in the Americas Wholesale unit rallied 64% (up 61% at cc) year over year. Revenues were up 5% from third-quarter fiscal 2020 levels. Segmental operating margin came in at 29.3% compared with 22.9% in the year-ago quarter.

The Europe segment’s revenues rose 3% (up 4% at cc) year on year. Revenues increased 19% from third-quarter fiscal 2020 levels. Segmental operating margin came in at 13.5% compared with 16% in the year-ago quarter.

Asia revenues declined 8% (same at cc) year on year. The metric fell 31% from third-quarter fiscal 2020 levels.

Licensing revenues advanced 37% year over year. The unit’s revenues were up 20% compared with third-quarter fiscal 2020 levels. The operating margin came in at 91.8% compared with 93.8% in the year-ago quarter.

Other Updates

The company exited the quarter with cash and cash equivalents of $391.1 million as well as long-term debt and finance lease obligations of $67.5 million. Stockholders’ equity was $625.3 million. Net cash provided by operating activities for the nine months ended Oct 30, 2021 amounted to $4.6 million.

The company increased its quarterly dividend from 11.25 cents per share to 22.5 cents. The revised dividend is payable on Dec 24, 2021 to shareholders on record as of Dec 8.

COVID-19 Update

The pandemic-related disruptions continue to impact the company’s operations. Although quarterly revenues increased year over year, management continued to face challenges related to lower store traffic and capacity restrictions. The company started the third quarter with all directly-operated stores open for business. However, some government-mandated temporary store closures came into effect toward the end of the quarter. The company witnessed less than 5% directly-operated store closures as of Oct 30, 2021, mainly in Europe.

In the wake of the ongoing uncertainties related to the pandemic, Guess? continues to monitor global and regional developments, especially in Europe. Also, the company is managing expenses to preserve profitability.

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Outlook

For fourth-quarter fiscal 2022, the company expects revenues to be down mid-single digits from fourth-quarter fiscal 2020. The guidance indicates impact from permanent store closures and unfavorable shift of European wholesale shipments from fourth-quarter fiscal 2022 to first-quarter 2023. These are likely to be partially offset by the ongoing momentum in the company’s global e-commerce business.

For fiscal 2022, management now expects revenues to decline in low-single digits from fiscal 2020 levels, considering there will not be any more pandemic-related closures. The company now expects operating margin to come in at nearly 11% in fiscal 2022. Earlier, the company guided fiscal 2022 revenues to decline in mid-single digits from fiscal 2020 levels. The company had earlier anticipated operating margin to come in at nearly 10% in fiscal 2022.

The Zacks Rank #3 (Hold) stock has declined 11.8% in the past three months against the industry’s growth of 5.9%.

Upcoming Earning Releases in the Consumer Discretionary Sector

PVH Corp. PVH, is slated to report earnings on Dec 1, 2021. The company is likely to register a bottom-line increase when it reports third-quarter 2021 results. The Zacks Consensus Estimate for quarterly earnings per share (EPS) has remained unchanged in the past 30 days at $2.06. The figure suggests an increase of 56.1% from the year-ago quarter’s reported number.

PVH Corp’s top line is expected to rise year over year. The Zacks Consensus Estimate for quarterly revenues is pegged at $2,398 million, suggesting an increase of 13.2% from the figure reported in the prior-year quarter. PVH presently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Duluth Holdings Inc. DLTH is slated to report earnings on Dec 2, 2021. The company is likely to register a bottom-line decline when it reports third-quarter 2021 numbers. The Zacks Consensus Estimate for the bottom line has remained unchanged in the past 30 days at a loss of 19 cents per share. The projection suggests a significant decline from EPS of 3 cents reported in the year-ago quarter.

Duluth Holdings’ top line is expected to grow year over year. The Zacks Consensus Estimate for quarterly revenues is pegged at $142.5 million, suggesting growth of 5.1% from the figure reported in the prior-year quarter. DLTH carries a Zacks Rank #3.

NIKE, Inc. NKE is slated to report earnings on Dec 20, 2021. The company is likely to register a bottom-line decline when it reports second-quarter fiscal 2022 results. The Zacks Consensus Estimate for quarterly EPS has remained unchanged in the past 30 days at 62 cents. The figure suggests a slump of 20.5% from the year-ago quarter’s reported number.

NIKE’s top line is also expected to fall year over year. The Zacks Consensus Estimate for quarterly revenues is pegged at $11,233 million, suggesting a drop of 0.1% from the figure reported in the prior-year quarter. NKE carries a Zacks Rank #4 (Sell).


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