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Europe & Asia Regions to Drive Guess?' (GES) Q4 Earnings

Zacks Equity Research

Guess?, Inc. GES is slated to release fourth-quarter fiscal 2019 results on Mar 20. This leading designer and distributor of lifestyle products has a mixed record of earnings surprises over the trailing four quarters. Let’s see what’s in store for the company this time around.

Strong Regions & Digital Growth Likely to Aid

Strength in Europe and Asia businesses has been driving the company’s performance for long. Notably, these regions are delivering superb results courtesy of constant store openings and e-commerce expansion, which is leading to positive comps growth. Markedly, comps improved for the 13th straight time in Europe, when the company reported third-quarter fiscal 2019 results. Further, we note that management’s strategy to improve sales quality and merchandising structure are yielding. The company is committed toward making capital investments to tap into the opportunities in these regions in fiscal 2019. That said, we expect the Europe and Asia businesses to remain a key catalyst in the impending quarter as well. In fact, textile-apparel players like Columbia Sportswear COLM and lululemon athletica LULU among others are also benefitting from their international strength.

Coming back to Guess?, the company also strives to enhance the performance of Americas Retail. Further, we note that the company is on track with digital-first initiative and is investing in brand building through social media platforms such as Facebook FB, Instagram and YouTube. Further, the company is focusing on linking brick-and-mortar stores, e-commerce and mobile sales to improve online operations.

Will Margin Growth Efforts Pare Rising Cost Woes?

Guess?’s SG&A expenses (as a percentage of sales) is rising due to increased distribution costs stemming from the repositioning of the European distribution center. Management expects SG&A expense to increase year over year in the fourth quarter due to higher digital-marketing and advertising costs along with increased distribution costs in Europe.

Nonetheless, we note that the company has implemented stringent cost control and margin-growth initiatives that are likely to cushion the adverse impacts of high costs. Incidentally, backed by savings efforts, the company posted its sixth and fourth straight quarter of gross as well as operating margin expansion in third-quarter fiscal 2019.

Going ahead, for the fourth quarter, management expects gross margin to increase owing to lower markdowns and rents as well as IMU enhancements from supply-chain efforts. Further, it expects to deliver operating margin of 7.5%, backed by consistent revenue improvements and cost-containment efforts. Such upsides boost our hopes regarding the company’s bottom-line performance in the impending quarter.

Guess?, Inc. Price, Consensus and EPS Surprise

 

Guess?, Inc. Price, Consensus and EPS Surprise | Guess?, Inc. Quote

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Estimates Look Positive

The Zacks Consensus Estimate for earnings has been stable in the past 30 days at 76 cents, which reflects a jump of 22.6% from 62 cents per share in the year-ago quarter. Further, the consensus mark for revenues is pegged at $840.4 million, reflecting close to 6.1% growth from the year-ago quarter’s tally.

What the Zacks Model Unveils

Our proven model doesn’t show that Guess? is likely to beat bottom-line estimates this quarter. For this to happen, the stock needs to have a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold). You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Though Guess? carries a Zacks Rank #2 (Buy), it has an Earnings ESP of 0.00%, which makes surprise prediction difficult. You can see the complete list of today’s Zacks #1 Rank stocks here.

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Facebook, Inc. (FB) : Free Stock Analysis Report
 
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Guess?, Inc. (GES) : Free Stock Analysis Report
 
Columbia Sportswear Company (COLM) : Free Stock Analysis Report
 
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