It’s a bad time to be a retailer, and Guess? (NYSE:GES), which I will refer to as Guess, is no different. The company lost 6.1% in pre-market trading on Wednesday ahead of the holiday weekend but wiped out all those losses so far. Guess’ earnings report is the cause for the volatility. The company posted $0.44 per share in earnings, which failed to match TipRanks’ projections of $0.55 per share. This is the fourth quarter in a row that Guess has failed to match earnings estimates.
Revenue was a slightly different story. The company posted $633.4 million in revenue, which beat projections by 3.16%.
The company cited ongoing macroeconomic challenges for retailers and the strong U.S dollar as reasons behind the slump. It noted, however, that it was “well-positioned for the holiday season.”
Guess will have plenty of headwinds to take on, thanks to the overall economic landscape. Yet, there exists a surprisingly large number of points in favor of Guess’ operations. Still, the negatives are enough to leave me neutral on the company.
Is Guess Stock a Good Buy, According to Analysts?
Turning to Wall Street, GES stock has a Moderate Buy consensus rating based on just one Buy assigned in the past three months. Guess’ price target of $28 implies 40.8% upside potential.
Meanwhile, Guess has a Smart Score of 8 out of 10 on TipRanks, giving Guess a fairly solid chance to do better than the broader market, going forward.
Additionally, Hedge funds augmented their positions after a slight decline, adding 263,600 shares in the last quarter.
Yet, insider trading at Guess has turned negative. It’s been seven months since an insider bought stock in the company. Over the last three months, insiders sold $166,000 worth of stock, and that’s been all the transactions the company has seen.
Revenue figures at the company are something of a mixed bag, too. Guess lost revenue between July and October 2022 after gaining ground between April and July 2022. In Q1, Guess posted $593.47 million in revenue. That jumped to $642.99 million in Q2 but dropped back to $633.4 million in Q3.
Anyone’s Guess Where This Company’s Headed
Aside from being in a good position for the holiday shopping season, things don’t look good at Guess right now. When an internationally-famous artist is calling on shoplifters to ransack stores, you know things aren’t good.
Street and performance artist Banksy recently called on his Instagram followers to “go to Guess on Regent Street.” Banksy noted that Guess “helped themselves to my artwork without asking” and summed up by noting, “how can it be wrong for you to do the same to their clothes?”.
It’s a safe bet that law enforcement will dispute such a point should it be pressed later.
Moreover, consumers—facing inflationary pressures from multiple markets—are increasingly looking to bargain alternatives to help cut rising costs. As far back as July, customers were reportedly making moves away from Ben & Jerry’s ice cream and over to Breyers instead.
That trend hasn’t declined much if at all, going into the holiday shopping season. Despite Guess’ assurances that it’s well-positioned for the holiday shopping season, a late October study noted that over 15 million U.S shoppers were uncertain whether or not they’d even buy gifts this year.
Among those who planned to, 59% expected inflation’s impact to be “moderate or significant,” and nearly everybody (89%) expected an impact of some kind to hit. That’s not a recipe for good news for more upscale clothing brands like Guess, especially given that Guess expects its holiday to go off reasonably smoothly.
Yet, there are signs that trends can be beaten. American Eagle Outfitters (NYSE:AEO) just did as much in its recent earnings. Surging demand for dresses and other more socially-appropriate clothing gave the company an edge.
Conclusion: There’s Still Hope to Beat the Trend
Granted, some aspects of Guess look pretty solid right now. The fact that retail investors aren’t fleeing for the doors is a point in Guess’ favor. So too, is the improving position of hedge funds. Guess trading well below its price target also suggests a good buy-in point.
However, the negative insider sentiment isn’t ideal, and the macroeconomic picture will continue to put up headwinds for just about every retailer around for the foreseeable future.
While there’s hope to beat the trend, it’s still going to be an uphill battle. That’s exactly why I’m neutral on Guess, who may chime in as an example of how to beat the trend. Of course, it also might not.
