Clothing and apparel designer Guess (NYSE: GES)
stock has been chopping in a four to five-point range recently and investors may want to take a closer look at the operations. As a retail apparel maker, it was hit hard during the pandemic
as an epicenter stock. COVID vaccinations have accelerated reopenings
as business returns to pre-COVID levels with enhanced e-commerce and digital innovation
. As the recovery continues, investors are watching the reversions to see where the market prices retailers ahead of the holiday shopping season. Prudent investors seeking exposure in the higher end of the retail apparel spectrum can watch for opportunistic pullbacks in shares of Guess.
Q2 fiscal 2021 Earnings Release
On Aug. 25, 2021, Guess released its second-quarter fiscal 2021 results for the quarter ending July 2021. The Company reported earnings-per-share (EPS) of $0.96 excluding non-recurring items versus consensus analyst estimates for $0.70, a $0.26 per share beat. Revenues rose 58% year-over-year (YoY) to $628.6 million, falling short of consensus analyst estimates for $648.6 million. The Company increased share buyback program to $200 million and declared a $0.1125 per share dividend. Guess CEO Carlos Alberini commented, “We are very pleased with our performance this quarter, which significantly exceeded our earnings expectations. Compared to the second quarter of fiscal 2020, the LLY period, we expanded operating margin by over 700 basis points to 13.9%. Our revenues for the quarter finished down 8% versus LLY. The entire decline was due to a timing shift of European wholesale shipments into the third quarter and the impact of permanent store closures. We achieved this result in spite of the pandemic and being significantly less promotional in all of our direct-to-consumer businesses. Our operating profit growth was strong, up 90% to LLY. This resulted in earnings per share of $0.91, versus $0.35 in the LLY period.”
Full-Year 2022 Guidance
Guess expects full-year fiscal 2022 revenues to be down mid-single digits versus fiscal 2020 (Calendar year 2019) and operating margins to reach 10%.
Conference Call Takeaways
CEO Alberini set the tone, “At Guess’ we remain laser-focused on what we can control. As a global brand we have adapted quickly to the changing levels of demand and restrictions across our markets. We are sizing our inventory buys accordingly adjusting prices to the perceived value of our products, strategically managing promotional activity, and increasing labor rates to attract and retain top talent. We continue to keep costs very tight by eliminating redundancies and increasing efficiencies. We have been relentless in mitigating supply chain disruptions. We are strategically partnering with our vendors to accelerate deliveries when feasible, changing countries of origin when appropriate to increase speed to market and investing in faster transportation modes when it makes sense. Our strategy is working and our results reflect this.”
Regional Performance Breakdown
CEO Alberini covered business in the U.S., “In North America, traffic has improved sequentially each quarter, but remains well below historical levels and we continue to see higher conversion rates and higher average spent. We are in the midst of back to school and we have solid demand for denim, activewear and knits. In addition, we are seeing sequential sales growth for our dresses category, which was positive to LLY for the first time since the pandemic began. Both our Guess and Marciano brands are experiencing increases in sales of dressy apparel and accessories as the customer is returning to social life. We have also been successful with our handbags and wear now products and our men’s business has been particularly strong.” He commented on Europe, “In Europe, we had a stronger start to the second quarter, which leveled off as the Delta variant spread in many countries there. Activewear continued to outperform in this region, both for women and men. And we saw substantial pop in denim in Q2, as well as improved demand for dresses and outerwear. We are encouraged by the progress that most countries in Europe have made with vaccination levels and we remain optimistic about the recovery of this region in the second half of the year.” Lastly, he commented on Asia, “In Asia, our customer traffic is the most challenged due to the virus and the trends remain relatively consistent in Q2 versus Q1. The product categories that have performed better in this environment includes sweaters, denim and outerwear. While we have made good progress in several areas of the operation, our challenges with top line performance remain. We are reassessing our team and we are making leadership changes to reorganize the business today.”
GES Opportunistic Pullback Price Levels
Using the rifle charts on the weekly and daily time frames provides a precision view of the landscape for GES stock. The weekly rifle chart peaked at the $31.12 Fibonacci (fib) level and triggered a weekly market structure high (MSH) sell on the breakdown under $27.73 as it tanked to $20.63 before staging a rally. The weekly rifle chart has a make or break formation with a stalled 5-period moving average (MA) at $23.19 and falling 15-period MA at $24.16. The stochastic has stalled also just under the 30-band. The weekly market structure low (MSL) buy triggers on a breakout above the $23.12. The daily rifle chart has a downtrend led by the falling 5-period MA at $22.62. The daily lower Bollinger Bands sit at $20.71. Prudent investors can watch for opportunistic pullback levels at the $21.26 fib, $20.63 fib, $19.50 fib, $18.60 fib, and the $17.18 fib. Upside trajectories range from the $26.73 fib to the $32.49 level.
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