Earnings Preview: Guess? Inc. - Analyst Blog
August 23 2011 - 5:45AM
Zacks
Guess? Inc. (GES)
is scheduled to report its second-quarter 2012 financial results on
Wednesday, August 24, 2011 after market. The current Zacks
Consensus Estimate for the quarter is pegged at 81 cents a share.
The Zacks Consensus Estimate projects revenues for the quarter to
be $657 million.
First Quarter 2012
Recap
Guess? Inc., which faces stiff
competition from Abercrombie & Fitch Co. (ANF)
and Gap Inc. (GAP), posted strong earnings for the
first quarter of fiscal 2012, driven by significant expansion in
Europe and Asia.
Adjusted earnings for the quarter
were 55 cents a share well ahead of the Zacks Consensus Estimate of
44 cents per share.
Higher sales across the globe
helped revenues increase by 10% year on year to $592.2 million.
North America, which accounted for 42% of total revenue, saw a 5%
increase in sales year-over-year despite a 3.1% decline in
same-store sales.
The European market continued its
strength as revenues rose 12%. Europe accounted for 36% of total
revenue. The company's Asia segment was also strong, with sales
rising an impressive 24% year-over-year. The Asian market made up
10% of the overall revenue in 1Q12.
Management
Guidance
Following the solid first quarter
results, management reiterated its EPS guidance for fiscal 2012.
The company expects to earn between $3.30 and $3.50 per share, with
an operating margin between 16.5% and 17.0%.
Zacks Consensus
Estimate
Although management held its EPS
projections steady, analysts revised their estimates higher. The
2012 Zacks Consensus Estimate is within guidance at $3.46, which
represents an 11% growth over 2011 EPS. The 2013 consensus estimate
also moved higher and currently stands at $3.97. This corresponds
to a 15% EPS growth.
Second-Quarter 2012 Zacks
Consensus
Earnings estimates for the second
quarter of 2012, as provided by the analysts, range from a low of
75 cents to a high of 84 cents. Thus, the current Zacks Consensus
Estimate for the quarter is pegged at 81 cents per share.
Agreement of
Analysts
Over the past 30 days, one of the
10 analysts revised his earnings estimate for the second
quarter and hence the current Zacks Consensus Estimate inched up by
a penny to the current level of 81 cents. The fiscal 2012 earnings
estimate also inched up by a penny over the same period.
Analysts feel that in the second
quarter, Europe will be a major concern for the company, owing to
limited pricing increases and economic recession in Italy, which is
a major market for Guess? in Europe. However, they are also of the
opinion that with lower domestic competition and reduced promotion
costs, the company can fight the challenges in Europe.
Earnings History Outpaces
Zacks
With respect to earnings surprises,
Guess? has topped the Zacks Consensus Estimate in the preceding
four quarters. Over the last four quarters, the earnings surprise
ranged from a 4.35% to a positive of 27.12%, with the average
earnings surprise being a positive 15.3%, suggesting that Guess?
has topped the Zacks Consensus Estimate by that measure.
Recommendation
We are encouraged by Guess?' focus
on cost-control efforts, balance sheet management, and growth
opportunities and global expansion.
However, commodity-price inflation,
global recession and competition in the highly fragmented apparel
industry along with presence of stiff competition are matters of
concern.
Currently Guess? holds a Zacks #3
Rank. On a long-term basis, we maintain a Neutral rating on the
stock with a short-term Hold rating.
ABERCROMBIE (ANF): Free Stock Analysis Report
GUESS INC (GES): Free Stock Analysis Report
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