Guess? (GES) Q4 Earnings: Can Efforts Continue Aiding Growth?

Guess?, Inc. (NYSE:GES) is slated to release fourth-quarter fiscal 2018 results on Mar 21. Notably, the company’s bottom line has outpaced the Zacks Consensus Estimate in three of the trailing four quarters, with an average beat of 28.2%.

With this in mind, let’s delve into how things are shaping up for the upcoming announcement and see if this leading designer and distributor of lifestyle products can maintain its positive earnings surprise streak.

European and Asian Operations Continue to Look Bright

Guess?’ surging European and Asian businesses have been acting as the prime growth catalyst for a while. Notably, the company has been witnessing solid sales growth in these regions for nearly a year. Well, performance in these regions have been benefiting from store openings and positive comps. Additionally, e-commerce growth has also been aiding Guess?’ business to flourish in these regions.

We note that during the third quarter of fiscal 2018, Guess? opened 22 directly-operated stores in Europe, amongst which a greater proportion of stores were opened in Turkey and Russia. Further, as part of the company’s retail expansion initiatives in the region, it opened a distribution centre in Venlo. Guess?’ Asia operations have also been expanding strongly. During the third quarter, the company opened 10 directly-operated stores in China. Guess?’ partnership with Tmall is also growing at a rapid pace. Recently, the company has partnered with VIP.com to augment its digital offerings. Additionally, the company initiated directly-operated stores in Australia during the third quarter.

Backed by such dedicated efforts to solidify European and Asian businesses, Guess? projects continued growth prospects in these regions, which is likely to favor the top line. Moreover, strength in these regions combined with a strong e-commerce platform has enabled Guess? to achieve year-over-year top-line growth for five straight quarters. This has also helped Guess?’ shares gain 25.7% over the past year, almost in-line with the industry’s rally of 25.5%.

Initiatives to Overcome Hurdles & Effecting Growth

While Guess?’ business in the United States and Canada continue to face challenges like lower consumer spending and soft traffic, the company is focused on reducing its footprint in these regions by undertaking store closures. Such a strategy is likely to aid the company to focus on other prospective regions. Further, in an effort to augment business performance in North America, the company has implemented stringent cost control and margin-growth initiatives.

Also, the company is making strong efforts to link brick-and-mortar stores, e-commerce and mobile sales to improve e-commerce operations. This has enabled customers to reserve merchandise online and pick them up from stores. Guess? is also executing supply chain initiatives through product cost improvements. In this respect, the company strives to develop long-term partnerships with high-quality suppliers to gain operating scale efficiencies.

A Confident Management Outlook

The aforementioned factors are likely drive the company’s performance during the fourth quarter. Incidentally, management expects consolidated net revenues to improve in the range of 10-12% for the quarter. On a constant-currency basis, consolidated net revenues are projected to grow 5-7%. The 53rd week is likely to have a positive impact of 3% on sales growth. Moreover, adjusted earnings per share for the fourth quarter are projected in the range of 48-55 cents, marking advancement from the year-ago quarter’s earnings of 41 cents.

For fiscal 2018, management expects consolidated net revenue growth in the range of 6-6.5%. On a constant-currency basis, consolidated net revenues are expected to grow 4-4.5%. The 53rd week in the year is likely to have a positive impact of 1% on sales growth. Adjusted earnings per share for fiscal 2018 are estimated in the range of 56-63 cents, reflecting an improvement from 44 cents reported in the year-ago quarter.

Guess?, Inc. Price, Consensus and EPS Surprise

What Picture Do Estimates Provide?

The Zacks Consensus Estimate for the fourth quarter and fiscal 2018 has gone up by a penny over the past 30 days to reach 53 cents and 62 cents, respectively. Expected earnings for the quarter under review and 2018 depict a year-over-year rise of 29.3% and 40.9%, respectively, from the year-ago reported figures.

Further, analysts polled by Zacks expect net sales of $750.61 million for the fourth quarter, reflecting an improvement of 10.5% from the year-ago quarter. Also, the consensus mark for fiscal 2018 sales is pegged at $2.34 billion, reflecting year-over-year growth of 5.9%.

A Look at the Zacks Model

To top it, our proven model shows that Guess? is likely to beat earnings estimates this quarter. A stock needs to have a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. You may uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Guess?’ Earnings ESP of +1.25% combined with the company’s Zacks Rank #2 make us reasonably confident of an earnings beat.

Other Stocks With Favorable Combinations

Here are some more companies which, according to our model, have the right combination of elements to deliver earnings beat.

G-III Apparel Group, Ltd. (NASDAQ:GIII) has an Earnings ESP of +22.45% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Michael Kors Holdings Limited (NYSE:KORS) has an Earnings ESP of +6.23% and a Zacks Rank #2.

Columbia Sportswear Company (NASDAQ:COLM) has an Earnings ESP of +0.38% and a Zacks Rank #2.

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