Guess Inc. (NYSE:GES) Shows Disappointing Guidance


Guess Inc. (NYSE:GES) showed disappointing results for its profits due to declining sales, lowering demand in its North America region and the uncertain economic situation in Asia and Europe. The revenues in its Third Quarter dropped 4%, making it $589.8 million. This has made its profits lowered to $20.8 million; dropping 39%. Since they made huge promotional activity raises their sales, that activity had an impact on its SG&A expenses, which raised up to 3% due to asset impairment charges. But the Earning per Share at $0.24 was better than the expected $0.15 to $0.20, and that had an impact on the fourth quarter and whole year guidance. That changed the whole EPS guidance for the Q4 to $.053-$0.63, which before was at $0.69. They also changed the guidance for the full year from $1.05-$1.20 to $1.00-$1.15, and also cut its guidance for revenue for the whole year by $30 million.

In North America, Guess Inc. (NYSE:GES) retailers dropped revenues by 4% because the company were made to do heavy markdowns to compensate due to low demand and less store traffic. On the other hand, the retailers were pulled down to 670 basis points ending in 4.3% due to higher impairment charges. In all, during Q3 they lost 11 million. Guess Inc. (NYSE:GES) in Europe projected their sales to be flat, but due to economic uncertainty the sales declined resulting in 3% revenue decline. But due to higher impairment charges that fall in profit was far much higher and intense. Guess Inc. (NYSE:GES) had a 43% crashed in operating earnings ending up to just $8 million. In Asia, the story was the same due to weakness of South Korean and Chinese economic conditions Guess’s (NYSE:GES) retailers saw their revenue down by 5% and operating earnings and constant currency downed by 64%. All in all, Q3 was disappointing for its bottom-line growth.

While Q3 2015 results are weak for Guess Inc. (NYSE:GES), the guidance for Q4 was also disappointing. The National Retail Federation believes that sales for the holiday season will see an increase up to 4.1%, but the Guess Inc. (NYSE:GES) expects the North American revenue for retail will decline to high-single digits. As the growth is more likely to come through online channel, in this part; Guess Inc. (NYSE:GES) remains a small presences. In Europe Guess (NYSE:GES) is doing really well in low-single digits for Q4. Still, Guess (NYSE:GES) could see a failure to meet the expectations again. Asia facing economic environment uncertainty will result in declining revenue in mid-to-high single digits.

But still, there are some positives in the form of its online revenue, which saw 48% revenue increased for the quarter. This growth has a small off setting impact on the declining revenue. North America saw 38% increase in online revenue, which had an impact of 2% on overall sales. Guess Inc. (NYSE:GES) even saw a positive response in Europe and Asia dismal economy. If this growth rate is sustained by the retailers on the internet Guess (NYSE:GES) can start material contribution in short period of time.