Today’s news: Guess?, Inc. (GES) reports fourth-quarter results.
GUESS?, Inc. (GES – dividend temporarily suspended) reported fourth-quarter results yesterday afternoon. Adjusted earnings per share of $1.22 were much higher than the $1.12 consensus estimate. Revenue of $842.3 million missed the consensus estimate of $851.2 million.
The quarter’s revenue surged in their Europe and licensing businesses, and lagged in their Americas Retail, Americas Wholesale and Asia businesses. The quarter’s operating margin increased substantially vs. a year ago, driven by a significant increase in Europe. The company repurchased $288.1 million shares during the full fiscal year.
Carlos Alberini, Chief Executive Officer, commented, “I am very pleased to report that we had a strong fourth quarter performance, exceeding our guidance for earnings per share and delivering operating profit at the high end of our expectations. We closed the year with strong liquidity and a solid balance sheet, which positions us well to navigate through the current coronavirus crisis. In the near term, we are actively managing the global situation, prioritizing the health and well-being of our associates around the world. While we hope that the crisis will be temporary, we do expect it will have a significant negative impact on our financial results for the first quarter and may impact future results, including potential disruptions in our supply chain.”
The press release continues, “During March 2020, as a precautionary measure to ensure financial flexibility and maintain maximum liquidity in response to the coronavirus outbreak, the Company has drawn down approximately $212 million under certain of its credit facilities in the U.S., Canada and Europe. In addition, in light of the current uncertain situation, the Company has decided to postpone its decision related to the potential declaration of a quarterly cash dividend for the first quarter of fiscal 2021.”
Guess is a global manufacturer of an iconic apparel brand, selling sexy GUESS and Marciano brand clothing and merchandise to Gen Z, Millennial and Heritage consumers through 1,743 stores worldwide, in over 100 countries. GES is a greatly undervalued small-cap stock. This company has been delivering better earnings growth than all of its retail apparel peers. The company experienced tremendous profit growth in the fiscal 2020 year completed in January 2020. At this time, it appears that the temporary slowdown in global commerce will cause Guess to achieve lower profits in fiscal 2021 than in the prior year. However, the company is not suffering financially.
The stock rose 20% in after-hours trading on Wednesday, as the earnings report was well-received. The share price has been trashed, alongside most retail apparel peers. My sense is that the worst is over for the share price. However, I feel obligated to officially leave my recommendation as a Hold until the stock shows a bottoming pattern on the price chart. Traders take note: There are likely some distinct trading opportunities in this small-cap stock. Always know that any price surge – even if GES triples within a week’s time – will invariably be met with subsequent downward action in the near term. The stock will simply be volatile for a while. I have great confidence in the company. Hold.