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Guess? (GES) Q1 Loss Narrower Than Expected, Revenues Dip Y/Y
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Guess? Inc. (GES - Free Report) reported first-quarter fiscal 2024 results, wherein the top and bottom lines came ahead of their respective Zacks Consensus Estimate. However, both metrics declined year over year.
The company gained strength from its international business. This, along with robust product margins and cost-control measures, helped counter weakness in the Americas Retail business, which stemmed from soft customer traffic in stores. Guess’s focus on elevating brands, together with its strong global distribution and diversified business model, has been working well.
Management continues to expect low single-digit top-line growth for fiscal 2024, wherein it also expects strong profit performance and robust cash flow generation. Shares of the company climbed 1.3% during the after-market trading session on May 24.
Results in Detail
Guess? posted an adjusted loss of 7 cents per share against adjusted earnings of 24 cents reported in the year-ago quarter. Earnings were adversely impacted by share buybacks, partly made up of the positive impact from currency translations. The bottom line was narrower than the Zacks Consensus Estimate of a loss of 28 cents per share.
Net revenues amounted to $569.8 million, surpassing the consensus mark of $555 million. The metric fell 4% from the figure reported in the year-ago quarter. On a constant-currency (cc) basis, net revenues fell 2%, mainly due to a decline in the Americas business.
The company’s gross margin contracted to 40.7% from 41.6% reported in the year-ago quarter. As a percentage of sales, SG&A expenses increased to 40.6% from 35.3% in the prior-year quarter’s level.
In the first quarter of fiscal 2024, adjusted earnings from operations came in at $1.9 million, down 95% from $41.7 million reported in the year-ago quarter. The adjusted operating margin contracted to 0.3% from 7% owing to escalated costs, reduced government subsidies, increased markdowns and currency headwinds, somewhat negated by increased initial markups.
Segment Performance
Revenues in the Americas Retail segment fell 14% year over year on a reported basis and 13% at cc. Retail comp sales (including e-commerce) dropped 12% on a reported basis and at cc.
Americas Wholesale revenues fell 25% on a reported basis and 26% at cc. The segmental operating margin was 2.5%, flat year over year.
The Europe segment’s revenues jumped 2% on a reported basis and rose 5% at cc. Retail comp sales (including e-commerce) climbed 10% on a reported basis and increased 13% at cc. The segmental operating margin dropped to 0.6% from 5.9%.
Asia revenues advanced 26% on a reported basis and rose 34% at cc. Retail comp sales (including e-commerce) rose 1% on a reported basis, while the same increased 8% at cc. The segmental operating margin contracted to 5.4% from 11.6%.
Licensing revenues tumbled 10% on a reported basis and at cc. The segmental operating margin was 93.3% compared with 92.6% in the year-ago quarter.
Other Updates
This Zacks Rank #3 (Hold) company exited the quarter with cash and cash equivalents of $298.6 million and long-term debt and finance lease obligations of $159.4 million. Stockholders’ equity was $452 million. Net cash used in operating activities for the three months ended Apr 29, 2023, was $12.7 million.
GES announced a hike in its quarterly dividend, taking it from 22.5 cents to 30 cents, payable on Jun 23, 2023, to shareholders on record as of Jun 7.
In April 2023, the company repurchased nearly 2.2 million shares, amounting to $42.8 million.
Guidance
For fiscal 2024, the company anticipates revenues to grow in the range of 2-4%. Adjusted operating margin is likely to be 8.2-8.8%. GAAP operating margin is likely to be 8.1-8.7%.
Management expects adjusted earnings per share (EPS) of $2.60-$2.90 in fiscal 2024 compared with $2.74 recorded in fiscal 2023. On a GAAP basis, EPS is envisioned in the range of $2.01-$2.25 compared with $2.18 reported in fiscal 2023.
For the second quarter of fiscal 2024, management expects revenue growth to be flat to decline 1.5%. The company expects both adjusted operating margin and GAAP operating margin of 5.2% and 6%, respectively. On an adjusted basis, the company expects EPS of 35-42 cents per share. On a GAAP basis, it expects EPS of 30-36 cents for the second quarter of fiscal 2024.
GES’s stock has lost 13.5% in the past six months compared with the industry’s 10% decline.
Stocks to Consider
Here we have highlighted three better-ranked stocks.
The Zacks Consensus Estimate for Crocs’ current financial-year revenues suggests growth of 13.2% from the year-ago reported figure.
Kroger (KR - Free Report) , a renowned grocery retailer, currently carries a Zacks Rank #2. KR has an EPS growth rate of 6% for three to five years.
The Zacks Consensus Estimate for Kroger’s current financial-year EPS suggests an increase of 6.6% from the year-ago reported figure. Kroger has a trailing four-quarter negative earnings surprise of 9.8%, on average.
The TJX Companies (TJX - Free Report) currently carries a Zacks Rank #2. This off-price retailer has an expected EPS growth rate of 10.5% for three to five years.
The Zacks Consensus Estimate for The TJX Companies’ current financial-year EPS suggests growth of 14.5% from the year-ago reported figure. TJX has a trailing four-quarter earnings surprise of 4.4%, on average.
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Guess? (GES) Q1 Loss Narrower Than Expected, Revenues Dip Y/Y
Guess? Inc. (GES - Free Report) reported first-quarter fiscal 2024 results, wherein the top and bottom lines came ahead of their respective Zacks Consensus Estimate. However, both metrics declined year over year.
The company gained strength from its international business. This, along with robust product margins and cost-control measures, helped counter weakness in the Americas Retail business, which stemmed from soft customer traffic in stores. Guess’s focus on elevating brands, together with its strong global distribution and diversified business model, has been working well.
Management continues to expect low single-digit top-line growth for fiscal 2024, wherein it also expects strong profit performance and robust cash flow generation. Shares of the company climbed 1.3% during the after-market trading session on May 24.
Results in Detail
Guess? posted an adjusted loss of 7 cents per share against adjusted earnings of 24 cents reported in the year-ago quarter. Earnings were adversely impacted by share buybacks, partly made up of the positive impact from currency translations. The bottom line was narrower than the Zacks Consensus Estimate of a loss of 28 cents per share.
Guess?, Inc. Price, Consensus and EPS Surprise
Guess?, Inc. price-consensus-eps-surprise-chart | Guess?, Inc. Quote
Net revenues amounted to $569.8 million, surpassing the consensus mark of $555 million. The metric fell 4% from the figure reported in the year-ago quarter. On a constant-currency (cc) basis, net revenues fell 2%, mainly due to a decline in the Americas business.
The company’s gross margin contracted to 40.7% from 41.6% reported in the year-ago quarter. As a percentage of sales, SG&A expenses increased to 40.6% from 35.3% in the prior-year quarter’s level.
In the first quarter of fiscal 2024, adjusted earnings from operations came in at $1.9 million, down 95% from $41.7 million reported in the year-ago quarter. The adjusted operating margin contracted to 0.3% from 7% owing to escalated costs, reduced government subsidies, increased markdowns and currency headwinds, somewhat negated by increased initial markups.
Segment Performance
Revenues in the Americas Retail segment fell 14% year over year on a reported basis and 13% at cc. Retail comp sales (including e-commerce) dropped 12% on a reported basis and at cc.
Americas Wholesale revenues fell 25% on a reported basis and 26% at cc. The segmental operating margin was 2.5%, flat year over year.
The Europe segment’s revenues jumped 2% on a reported basis and rose 5% at cc. Retail comp sales (including e-commerce) climbed 10% on a reported basis and increased 13% at cc. The segmental operating margin dropped to 0.6% from 5.9%.
Asia revenues advanced 26% on a reported basis and rose 34% at cc. Retail comp sales (including e-commerce) rose 1% on a reported basis, while the same increased 8% at cc. The segmental operating margin contracted to 5.4% from 11.6%.
Licensing revenues tumbled 10% on a reported basis and at cc. The segmental operating margin was 93.3% compared with 92.6% in the year-ago quarter.
Other Updates
This Zacks Rank #3 (Hold) company exited the quarter with cash and cash equivalents of $298.6 million and long-term debt and finance lease obligations of $159.4 million. Stockholders’ equity was $452 million. Net cash used in operating activities for the three months ended Apr 29, 2023, was $12.7 million.
GES announced a hike in its quarterly dividend, taking it from 22.5 cents to 30 cents, payable on Jun 23, 2023, to shareholders on record as of Jun 7.
In April 2023, the company repurchased nearly 2.2 million shares, amounting to $42.8 million.
Guidance
For fiscal 2024, the company anticipates revenues to grow in the range of 2-4%. Adjusted operating margin is likely to be 8.2-8.8%. GAAP operating margin is likely to be 8.1-8.7%.
Management expects adjusted earnings per share (EPS) of $2.60-$2.90 in fiscal 2024 compared with $2.74 recorded in fiscal 2023. On a GAAP basis, EPS is envisioned in the range of $2.01-$2.25 compared with $2.18 reported in fiscal 2023.
For the second quarter of fiscal 2024, management expects revenue growth to be flat to decline 1.5%. The company expects both adjusted operating margin and GAAP operating margin of 5.2% and 6%, respectively. On an adjusted basis, the company expects EPS of 35-42 cents per share. On a GAAP basis, it expects EPS of 30-36 cents for the second quarter of fiscal 2024.
GES’s stock has lost 13.5% in the past six months compared with the industry’s 10% decline.
Stocks to Consider
Here we have highlighted three better-ranked stocks.
Crocs, Inc. (CROX - Free Report) , a casual lifestyle footwear and accessories company, carries a Zacks Rank #2 (Buy) at present. CROX has a trailing four-quarter earnings surprise of 19.6%, on average. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Crocs’ current financial-year revenues suggests growth of 13.2% from the year-ago reported figure.
Kroger (KR - Free Report) , a renowned grocery retailer, currently carries a Zacks Rank #2. KR has an EPS growth rate of 6% for three to five years.
The Zacks Consensus Estimate for Kroger’s current financial-year EPS suggests an increase of 6.6% from the year-ago reported figure. Kroger has a trailing four-quarter negative earnings surprise of 9.8%, on average.
The TJX Companies (TJX - Free Report) currently carries a Zacks Rank #2. This off-price retailer has an expected EPS growth rate of 10.5% for three to five years.
The Zacks Consensus Estimate for The TJX Companies’ current financial-year EPS suggests growth of 14.5% from the year-ago reported figure. TJX has a trailing four-quarter earnings surprise of 4.4%, on average.