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Guess' (GES) to Post Q4 Earnings: Stock to Disappoint?
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Guess', Inc. (GES - Free Report) is set to report fourth-quarter fiscal 2017 results on Mar 15, after the closing bell. Last quarter, the company posted a negative earnings surprise of 21.4%.
We note that Guess’ surpassed estimates in only one of the trailing four quarters with an average positive surprise of 22.28%.
Let’s see how things are shaping up prior to this announcement.
Factors at Play
Apparel companies like Guess’ are grappling with headwinds like competition from online sales and declining footfall. Although the company has a strong eCommerce business and have recently developed omni-channel strategy to tap in to the growing popularity of online shopping, but these by no means pose any competition for Amazon.com Inc. (AMZN - Free Report) which has captured the major share of eCommerce.
Additionally, the company is under pressure to strike the right chord with the fashion-conscious consumers as “change is the only constant” for this industry.
Guess' is struggling with waning comps in the North American Retail segment. Comps declined 4.9%, 2% and 4%, respectively in the first three quarters of fiscal 2017. Further, currency headwinds and a lackluster performance in the Greater China is putting pressure on the company’s sales. The trend is expected to continue in the fourth quarter as well.
Further, the company is experiencing lower margins due to escalating cost of sales. Although it is taking several cost cutting initiatives, higher promotional environment and competitive retail environment are putting strain on gross margins. There is no possibility of improvement in the condition in the to-be-reported fourth quarter as well.
If we look at the share price movement of the company, the shares have declined 45% in the past one year, wider than the Zacks categorized Textile-Apparel Manufacturing industry which has declined 25% during the same time frame.
However, Guess’ has undertaken a three-pronged approach to improve the performance of retail business in North America. This initiative is anticipated to help the company partly offset comps decline in the to-be-reported quarter. Further, it is on track with cost-reduction initiatives, which are expected to boost margins in the upcoming quarter.
Earnings Whispers
Our proven model does not conclusively show that Guess’ is likely to beat estimates this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here as you will see below.
Zacks ESP: Earnings ESP for Guess’ is 0.00%. This is because the Most Accurate estimate and the Zacks Consensus Estimate are both pegged at 42 cents. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter.
Zacks Rank: Guess’ carries a Zacks Rank #4 (Sell).
We caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks That Warrant a Look
Here are some stocks in the broader consumer discretionary industry that investors may consider which as per our model, have the right combination of elements to post an earnings beat this quarter:
Comcast Corporation (CMCSA - Free Report) with an Earnings ESP of +2.27% and a Zacks Rank #3.
Zacks' 2017 IPO Watch List
Before looking into the stocks mentioned above, you may want to get a head start on potential tech IPOs that are popping up on Zacks' radar. Imagine being in the first wave of investors to jump on a company with almost unlimited growth potential? This Special Report gives you the current scoop on 5 that may go public at any time.
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Guess' (GES) to Post Q4 Earnings: Stock to Disappoint?
Guess', Inc. (GES - Free Report) is set to report fourth-quarter fiscal 2017 results on Mar 15, after the closing bell. Last quarter, the company posted a negative earnings surprise of 21.4%.
We note that Guess’ surpassed estimates in only one of the trailing four quarters with an average positive surprise of 22.28%.
Let’s see how things are shaping up prior to this announcement.
Factors at Play
Apparel companies like Guess’ are grappling with headwinds like competition from online sales and declining footfall. Although the company has a strong eCommerce business and have recently developed omni-channel strategy to tap in to the growing popularity of online shopping, but these by no means pose any competition for Amazon.com Inc. (AMZN - Free Report) which has captured the major share of eCommerce.
Additionally, the company is under pressure to strike the right chord with the fashion-conscious consumers as “change is the only constant” for this industry.
Guess' is struggling with waning comps in the North American Retail segment. Comps declined 4.9%, 2% and 4%, respectively in the first three quarters of fiscal 2017. Further, currency headwinds and a lackluster performance in the Greater China is putting pressure on the company’s sales. The trend is expected to continue in the fourth quarter as well.
Further, the company is experiencing lower margins due to escalating cost of sales. Although it is taking several cost cutting initiatives, higher promotional environment and competitive retail environment are putting strain on gross margins. There is no possibility of improvement in the condition in the to-be-reported fourth quarter as well.
If we look at the share price movement of the company, the shares have declined 45% in the past one year, wider than the Zacks categorized Textile-Apparel Manufacturing industry which has declined 25% during the same time frame.
However, Guess’ has undertaken a three-pronged approach to improve the performance of retail business in North America. This initiative is anticipated to help the company partly offset comps decline in the to-be-reported quarter. Further, it is on track with cost-reduction initiatives, which are expected to boost margins in the upcoming quarter.
Earnings Whispers
Our proven model does not conclusively show that Guess’ is likely to beat estimates this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here as you will see below.
Zacks ESP: Earnings ESP for Guess’ is 0.00%. This is because the Most Accurate estimate and the Zacks Consensus Estimate are both pegged at 42 cents. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter.
Zacks Rank: Guess’ carries a Zacks Rank #4 (Sell).
We caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks That Warrant a Look
Here are some stocks in the broader consumer discretionary industry that investors may consider which as per our model, have the right combination of elements to post an earnings beat this quarter:
Caleres, Inc. (CAL - Free Report) with an Earnings ESP of +5.00% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Comcast Corporation (CMCSA - Free Report) with an Earnings ESP of +2.27% and a Zacks Rank #3.
Zacks' 2017 IPO Watch List
Before looking into the stocks mentioned above, you may want to get a head start on potential tech IPOs that are popping up on Zacks' radar. Imagine being in the first wave of investors to jump on a company with almost unlimited growth potential? This Special Report gives you the current scoop on 5 that may go public at any time.
One has driven from 0 to a $68 billion valuation in 8 years. Four others are a little less obvious but already show jaw-dropping growth. Download this IPO Watch List today for free >>