Guess reports solid Q1 earnings, mixed outlook

Guess’ (NYSE: GES) stock decreased 2% in the after-market trading as the retailer’s Q2 earnings outlook failed to impress the street. However, Q1 results came in better-than-expected. The retailer touched a new 52-week low of $15.16 earlier today as the investors were skeptical about the Q1 earnings.

Revenue for the first quarter rose 3% to $536.7 million compared to $536.58 million expected by the street. Adjusted loss per share came in at $0.25, a cent better than the analyst estimates. Sales grew across most of its segments with American Wholesale recording 14% growth offset by 5% drop in the licensing division.

CEO Carlos Alberini took charge as CEO in January 2019 to turnaround the lifestyle retailer. Alberini has been credited with the strong growth posted from the international business. After the solid results, Alberini commented, “I couldn’t be more excited about our Company’s future.”

He also added, “We continue to see significant white space to grow globally and our opportunities to improve operations and reduce costs are very material.”

Adjusted operating loss widened to $22.4 million compared to $20.5 million last year hurt by deleveraging expenses in Asia offset by strong sales and price increases in Europe and Americas Retail divisions.

The retailer reduced dividends to $0.1125 per share, a decrease of 50% from the prior dividend of $0.225 per share. The reduction is part of the capital allocation changes undertook by the management as part of the turnaround strategy. It also announced a $150 million share repurchase program in April to restore investor confidence.

Mixed Q2 Outlook

Guess is forecasting revenue to increase in the range of 4-5% and adjusted EPS of $0.27-0.30. Analysts are expecting sales of $674.8 million and adjusted earnings per share of 38 cents. The retailer’s top line is in line with estimates, but the EPS fell short of street expectations.

Full-Year Outlook

The retailer expects the top line to improve in the 3.5% to 4.5% range and adjusted earnings to be between $1.19 and $1.30 per share. For the same period, the street is anticipating sales growth of 4.3% and non-GAAP EPS of $1.21, which is in line with the company’s outlook.

It’s important to note that last quarter Guess has guided revenue to grow between 4% and 5%. Today, it has contracted the sales outlook range by 0.5%.

Looking Back

Last quarter, Guess reported mixed results with adjusted earnings increasing 12.9% to 70 cents, compared to 62 cents in the prior-year quarter. Revenue increased by 6% and surpassed estimates. The transition tax payment has negatively impacted the results in the quarter.

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