Why Guess? Inc. Stock Dropped Today

What happened

Shares of Guess? Inc. (NYSE: GES) fell 19.4% on Thursday after the clothing retailer announced solid fiscal first-quarter 2019 results but followed with underwhelming forward earnings guidance.

On the former, the company’s quarterly revenue grew 14.7% year over year (or 8% at constant currency), to $521.3 million. This translated to an adjusted loss of $17.8 million, or $0.23 per share, narrowed from a loss of $0.24 per share in the same year-ago period. Analysts, on average, were looking for roughly the same adjusted loss on lower revenue of $508 million.


So what

Guess? CEO Victor Herrero noted that the company’s results were near the high end of the company’s expectations and credited particularly strong momentum in both Europe and Asia. Herrero also praised its efforts in North America, where the company achieved 1% comparable-sales growth “while being significantly less promotional.”

“Overall, I am very excited by the continued momentum, as the first quarter marks the seventh consecutive quarter of revenue growth for the company,” Herrero added. “For me, it speaks to the global strength and potential of the Guess? brand.”

Now what

Looking forward to the fiscal second quarter, however, Guess? told investors to expect revenue growth of between 14% and 15.5%, with adjusted earnings of $0.27 to $0.30 per share. By contrast, most investors were looking for a more modest 8.5% revenue growth, but with earnings near the high end of the company’s guidance range.

Finally, for the full fiscal year, Guess? sees revenue climbing between 8.5% and 9.5%, marking an increase from its previous guidance for 7% to 8% growth, with adjusted earnings per share of $0.88 to $0.99. Here again, Wall Street was anticipating earnings near the high end of the company’s range, at $0.97 per share, and more modest full fiscal-year revenue growth of 7.6%.

In the end, while it’s hard to fault Guess? for its better-than-expected top-line growth, the market is disappointed that this growth still seems to be coming at the expense of profitability. With shares nearly doubling in the year leading up to this report, it’s no surprise to see the stock pulling back today.

10 stocks we like better than Guess
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has quadrupled the market.*

David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now… and Guess wasn’t one of them! That’s right — they think these 10 stocks are even better buys.

Click here to learn about these picks!

*Stock Advisor returns as of May 8, 2018

Steve Symington has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

You May Also Like

About the Author: Over 50 Finance