Guess's stock slides 8% after earnings fall short and company lowers guidance

By Ciara Linnane

A strong licensing business weighed against softness in direct-to-consumer segment and weak traffic in the Americas

Guess Inc.'s stock tumbled 8% Wednesday, putting it on track for its biggest one-day decline in more than a year, after the clothing, footwear and accessories maker posted worse-than-expected third-quarter earnings and cut its guidance.

"Overall, a strong licensing business combined with a disciplined approach to cost management offset softness in some of our direct-to-consumer businesses and drove earnings from operations for the company that were flat to last year's performance," Chief Executive Carlos Alberini said in a statement.

The Los Angeles-based company (GES) posted net income of $55.7 million, or 82 cents a share, for the quarter, up from $21.8 million, or 34 cents a share, in the same period a year earlier. Adjusted per-share earnings came to 49 cents, below the 61-cent FactSet consensus.

Revenue rose 3% to $651.2 million from $633.4 million a year ago, also below the $656.0 million FactSet consensus.

Revenue rose 6% in Europe, measured in dollars, and was down 7% in the Americas, driven by slow customer traffic. Americas wholesale revenue rose 4%, while Asia revenue rose 2%, driven by improved performance in China and Hong Kong. Licensing revenue rose 19%.

"Best-performing product categories included fragrances, handbags, watches, eyewear and footwear," the executive told analysts on the earnings call, according to a FactSet transcript.

See also: Coach parent's stock rises as analysts say revenue softness is less grim than feared

The company said it now expects full-year adjusted EPS of $2.67 to $2.74, down from prior guidance of $2.88 to $3.08. Revenue is expected to grow 1.8% to 2.4%, compared with prior guidance of 2.5% to 4.0%.

"We are navigating through an uncertain shopping environment in many parts of the world impacted by geopolitical issues and lower consumer confidence," Alberini said.

The executive announced a plan to reclaim the company's denim legacy with the 2024 launch of a new Guess jeans offering that will target the male customer. The brand will be centered on sustainable manufacturing and feature a celebrity marketing strategy.

"The brand will be distributed globally in the wholesale market and through the company's direct-to-consumer channels and company's own stores and website," Alberini said. "Price points are very competitive and the product quality and design capitalize on our rich archives, which contain over 40 years of amazing design, styling and creativity."

The company's European business is currently being promoted by a campaign involving Georgina Rodríguez, a Spanish-Argentine influencer who is also the girlfriend of soccer player Cristiano Ronaldo.

Separately, the company is working with a Chinese consulting firm that has strong links to the entertainment and celebrity networks to promote the brand in China.

Jefferies analysts reiterated their buy rating on the stock but lowered their stock price target to $25 from $28.

"We see meaningful opportunity ahead for Guess to drive margin expansion via cost savings and efficiencies, which we believe remain underappreciated," said analysts led by Corey Tarlowe.

"Additionally, we see continued revenue growth ahead as the global environment stabilizes and the company continues to invest in growth initiatives (digital, new store development, and category expansion)," they added.

The stock has gained 6% in the year to date, while the S&P 500 SPX has gained 18%.

-Ciara Linnane

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11-22-23 1130ET

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