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Guess? (GES) Gains on Growing Online Business & Strategic Plan

Guess? Inc. GES is benefiting from its strategic business plan. Strength in the company’s digital business has also been aiding growth. However, the apparel and accessories company is not immune to the rising inflationary environment.

Let’s delve deeper.

Factors Favoring Guess?

Guess? is committed to its six key strategies and has made remarkable progress against each of them. The core strategies include organization and culture, functional capacities, brand relevance with three main consumer groups (heritage, Millennials and Generation Z customers), customer focus, product brilliance and international footprint.

With respect to its salesforce and omnichannel capacity rollout, Guess? focuses on implementing Customer 360 — a solution developed by salesforce for personalized marketing, customer data optimization and customers’ journey engagement, among other objectives. As part of the Customer 360 project, management launched its CRM platform in 2021, which gives the company a 360 view of the customer and fuels improved personalization, marketing and promotional strategies.

Speaking on digital transformation and CRM, management highlighted that it is in progress to optimize the new platform utilization and implement the CRM solution. The company rolled out the suite across Europe by the end of 2022 and across North America at the beginning of 2023. The company recently developed a new clienteling application and is on track to launch it in Europe.

In addition, Guess? is focused on a brand-elevation strategy, which includes enhancing product quality, visual merchandising and boosting customers’ shopping experience across stores and online. In terms of brand elevation, the company is benefiting from the launch of its global line for all product categories over the last few years. These efforts improve all aspects of design like taste, style, quality and sustainability. Management is also committed to enhancing pricing, marketing campaigns, e-commerce inventory and visual merchandising. Guess? is on track with supply chain and inventory management to counter supply chain disruptions.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

Hurdles on the Way

The company reported dismal third-quarter fiscal 2023 results, with the top and the bottom line declining year over year and the latter falling short of the Zacks Consensus Estimate. Guess? posted adjusted earnings of 44 cents per share, down 29%. Earnings were hurt by the negative impact of currency translations. Net revenues amounted to $633.4 million, declining 2% from the figure reported in the year-ago quarter. Gross margin contracted 320 basis points to 42.5%, mainly due to unfavorable currency headwinds. In addition, a greater mix of markdowns relative to the year-ago quarter was a concern.

Guess? has been battling the adverse impacts of global inflation and softening economic sentiment. In its last earnings call, management highlighted that it expects soft consumer demand and inflationary pressures to continue affecting its fourth-quarter fiscal 2023 results and beyond. In addition, adverse impacts of unfavorable foreign currency rates are hurdles on the way. For the fiscal fourth quarter, Guess? Expects revenues to be down almost 3.5% on a reported basis.

That said, we believe that the aforementioned upsides are likely to help this Zacks Rank #3 (Hold) company stay afloat amid such hurdles.

GES’s stock has gained 42.3% in the past three months compared with the industry’s growth of 18.1%.

Stocks to Consider

Some better-ranked companies from the Consumer Discretionary sector are Ralph Lauren RL, PVH Corp. PVH and Oxford Industries OXM

Ralph Lauren presently carries a Zacks Rank #2 (Buy). The company has a trailing four-quarter earnings surprise of 28.7%, on average. RL has an expected long-term earnings growth rate of 4.3%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for Ralph Lauren’s current financial-year sales suggests growth of 0.1% from the year-ago period’s reported numbers, while the EPS estimate indicates a decline of 7.8%.

PVH Corp currently carries a Zacks Rank #2. PVH has a trailing four-quarter earnings surprise of 22.9%, on average. PVH has a long-term earnings growth rate of 10.2%.

The Zacks Consensus Estimate for PVH Corp’s current financial-year sales and EPS indicates declines of 3.1% and 18.6%, respectively, from the year-ago period’s reported levels.

Oxford Industries currently carries a Zacks Rank #2. The company has a trailing four-quarter earnings surprise of 18.9%, on average.

The Zacks Consensus Estimate for Oxford Industries’ current financial-year sales and earnings suggests growth of 23.3% and 34.2% from the year-ago period’s reported numbers, respectively.

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