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Group 1 - Guess? Inc. (GES) is an American apparel retailer founded in 1981 and became publicly traded in 1996 [1] - The article discusses the share price performance of Guess? Inc. since its IPO [1] Group 2 - The analyst expresses a focus on investing at the intersection of value and growth, particularly in small-cap stocks [1] - The investment strategy includes looking for long-term compounders and special situations [1]

Group 1 - The article emphasizes the investment philosophy focused on small cap companies, highlighting the importance of identifying mispriced securities through understanding financial drivers and utilizing DCF model valuation [1] - The methodology allows for a flexible approach to investing, not confined to traditional categories such as value, dividend, or growth investing, but rather assessing all prospects of a stock to evaluate risk-to-reward [1] Group 2 - There is a potential interest in initiating a long position in GES within the next 72 hours, indicating a strategic move based on the analysis presented [2] - The article expresses personal opinions of the author without any compensation from companies mentioned, ensuring an unbiased perspective [2]

Core Viewpoint - Guess?, Inc. is facing significant challenges in its operating environment, particularly in North America and Asia, leading to a notable decline in stock performance and revised financial projections [1][8]. Financial Performance - In the third quarter, comparable sales in North America fell by 15%, while in Asia, constant currency comparable sales dropped by 16%, primarily due to weak demand in key markets like China and South Korea [2]. - The company's gross margin contracted by 110 basis points to 43.6%, and SG&A expenses increased by 180 basis points to 37.8% of sales, resulting in an adjusted operating margin of 5.8%, down from 8.9% a year ago [5]. Cost Pressures - Freight costs have significantly impacted the company's operations, with an additional $5 million in freight-related expenses anticipated for the fourth quarter due to the Red Sea crisis [4]. - The company is experiencing pressure from rising marketing expenditures, occupancy costs, and an unfavorable channel mix, contributing to operational inefficiencies [5]. Revised Outlook - The company has lowered its fiscal 2025 revenue growth expectations to a range of 7.1% to 8.1%, down from a previous forecast of 9.5% to 11%, and adjusted earnings per share are now projected between $1.85 and $2, compared to the earlier range of $2.42 to $2.70 [8]. Strategic Initiatives - The acquisition of rag & bone has strengthened Guess?'s multi-brand portfolio, with plans for expansion into high-potential markets such as Europe, the Middle East, and Canada [9]. - The wholesale business in the Americas has shown robust growth, with revenues surging 79% year over year in the third quarter, driven by internalizing the outerwear business [9]. Digital Strategy - The company is focusing on digital growth, evidenced by a 16% year-over-year increase in European e-commerce sales in the third quarter [10]. - A new loyalty program in Europe aims to enhance customer retention through cross-border point redemption and improved personalization efforts [10].

Acquisition and Integration - The acquisition of rag & bone was completed on April 2, 2024, integrating it into existing segments for financial reporting purposes[212]. - Inventory increased by $113.4 million, or 20.2%, to $675.8 million, primarily due to the rag & bone acquisition and higher in-transit inventory[258]. - Accounts receivable increased by $42.6 million, or 12.5%, to $383.4 million, driven by the rag & bone acquisition[259]. - Net revenue from the Americas Wholesale segment increased by $44 million, or 79%, driven mainly by the newly acquired rag & bone business[284]. - Gross profit increased by $31 million, driven by the impact of newly acquired businesses, including rag & bone[267]. Financial Performance - Net loss attributable to Guess?, Inc. was $23.4 million, or diluted net loss per share of $0.47, for the quarter ended November 2, 2024, compared to net earnings of $55.7 million, or diluted net earnings per share of $0.82, for the quarter ended October 28, 2023[247]. - Total net revenue increased 13.4% to $738.5 million for the quarter ended November 2, 2024, compared to $651.2 million in the same prior-year quarter[249]. - Gross margin decreased 110 basis points to 43.6% for the quarter ended November 2, 2024, compared to 44.7% in the same prior-year quarter[249]. - SG&A expenses increased 19.3% to $279.4 million for the quarter ended November 2, 2024, compared to $234.1 million in the same prior-year quarter[250]. - Operating margin decreased 270 basis points to 5.7% for the quarter ended November 2, 2024, compared to 8.4% in the same prior-year quarter[253]. Economic and Market Conditions - The ongoing wars in Ukraine and Gaza, along with macroeconomic conditions, are negatively impacting business operations[207]. - Inflationary pressures have impacted overall cost structure, including transportation, employee compensation, and raw materials, negatively affecting margins and expenses[218]. - Continued inflationary conditions could adversely impact consumer discretionary spending, negatively affecting sales and results[222]. - The average U.S. dollar rate was stronger against several currencies, negatively impacting the translation of international revenues and earnings for the nine months ended November 2, 2024[216]. - Currency fluctuations can significantly impact the translation of international revenues and earnings into U.S. dollars, affecting operating margins[214]. Operational Challenges - The company has experienced increased costs and transit times associated with deliveries related to operations in Russia due to sanctions and new procedures[227]. - The company continues to strategically manage expenses to protect profitability amid supply chain disruptions, including the Red Sea crisis[208]. - The company continues to assess operations in Russia to ensure compliance with applicable sanctions, with no material impact on operations to date[228]. Shareholder Returns and Capital Management - The company plans to prioritize capital allocation toward investments that support growth and infrastructure while managing product buys and inventory ownership rigorously[237]. - A special cash dividend of $2.25 per share was announced on March 20, 2024, in addition to a regular quarterly cash dividend of $0.30 per share[348]. - The company repurchased 2.6 million shares at an aggregate cost of $60.8 million during the nine months ended November 2, 2024, under the 2024 Share Repurchase Program[353]. - The company plans to return value to shareholders through dividends and share repurchases while considering strategic acquisitions that leverage its global infrastructure[237]. Tax and Compliance - The effective income tax rate was an expense of 128.9% for the quarter ended November 2, 2024, compared to a benefit of 44.5% in the same prior-year quarter[254]. - The effective income tax rate was 355.1%, compared to a benefit of 6.3% in the prior year, primarily due to a net unrealized loss on derivatives[305]. - The company is monitoring the OECD Pillar 2 guidelines, which may affect its future tax rate starting in 2024[306]. Cash Flow and Liquidity - As of November 2, 2024, cash and cash equivalents decreased to $140.9 million from $244.1 million as of October 28, 2023[255]. - Net cash used in operating activities was $61.6 million for the nine months ended November 2, 2024, compared to net cash provided of $40.9 million for the same prior-year period, indicating a deterioration of $102.4 million[338]. - The company anticipates satisfying ongoing cash requirements for at least the next 12 months primarily through cash flow from operations and existing cash balances[333]. Strategic Focus and Future Plans - The company plans to focus on increasing productivity in existing markets and pursuing brand extensions and category expansions for revenue growth[233]. - The company aims to enhance customer experience through a seamless omni-channel strategy and expand its digital business[234]. - The company intends to operate with high efficiency and effectiveness, leveraging technology and data analytics to improve operations and decision-making[236]. - The company aims to design and extend its product offerings to better address local product needs and support various lifestyle occasions[235].

Financial Data and Key Metrics Changes - The company reported a revenue growth of 13%, reaching $739 million, slightly below expectations due to a stronger US dollar [6][32] - Adjusted earnings per share (EPS) for the quarter was $0.34, compared to $0.49 in the same quarter last year [42] - Total company gross margin was 43.6%, which is 110 basis points lower than the previous year [39] Business Line Data and Key Metrics Changes - The core Guess business saw low single-digit revenue growth, while the Americas wholesale business increased by approximately 79% due to the addition of Rag & Bone [34][36] - European wholesale revenue grew by 7% in US dollars, with retail comps increasing by 8% [34] - The licensing segment's revenues were flat, despite internalizing outerwear [38] Market Data and Key Metrics Changes - In Europe, retail comps increased by 5% in constant currency, while in Asia, retail comps decreased by 16% [35][38] - The Americas retail business experienced a 14% constant currency comp decline, with an operating loss margin of 4.3% [36] - The company faced challenges in North America and Asia, with traffic headwinds impacting sales [48] Company Strategy and Development Direction - The company is focused on leveraging its platform to support the expansion of multiple brands, including Rag & Bone and Guess Jeans [17][29] - There is an emphasis on enhancing marketing capabilities and customer engagement to improve brand relevance [24][25] - The company is reevaluating pricing strategies in response to consumer sentiment and competitive pressures [9][23] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the impact of a stronger US dollar and inflation on consumer behavior, leading to adjustments in revenue expectations for the fourth quarter [15][50] - The company is optimistic about long-term growth opportunities, particularly with Rag & Bone and the Guess Jeans brand [31][62] - Management highlighted the importance of adapting to market conditions and consumer preferences to reclaim brand strength in North America [30][78] Other Important Information - The company increased marketing and advertising investments by approximately 85% compared to the previous year [12] - Inventory levels rose by 20% year-over-year, influenced by the acquisition of Rag & Bone [43] - The company expects full-year revenues to be slightly below $3 billion, with growth between 7% and 8% [15][51] Q&A Session Summary Question: Insights on Q4 revenue growth and operating margin opportunities - Management noted that early shipments in Europe contributed about $10 million to Q3 revenue, which would impact Q4 [58] - They expressed confidence in achieving double-digit operating margins in the long term despite current challenges [62] Question: Shift to a universal product offering and its impact - Management confirmed the success of the global product line in Europe but acknowledged challenges in the US market [75][76] - They emphasized ongoing efforts to elevate the brand and improve customer engagement through targeted marketing [79][80] Question: Response to potential tariff increases - The company is actively reducing dependency on China and exploring alternative sourcing options to mitigate tariff impacts [86]

Core Insights - Guess?, Inc. (GES) reported third-quarter fiscal 2025 results with both revenue and earnings falling short of Zacks Consensus Estimates, and earnings declined year over year [1][2][3] Financial Performance - Adjusted earnings per share (EPS) were 34 cents, missing the consensus estimate of 43 cents and representing a 31% decline year over year [3] - Net revenues reached $738.5 million, a 13% increase year over year, but below the consensus mark of $751 million; on a constant-currency basis, revenues rose 14% [5] - Gross margin decreased to 43.6% from 44.7% in the prior year, while selling, general and administrative (SG&A) expenses increased to 37.8% from 36% [6] Segment Performance - Americas Retail segment revenues increased by 12% in U.S. dollars and 14% at constant currency, but retail comparable sales declined by 14% in U.S. dollars and 12% at constant currency [8] - Americas Wholesale revenues surged by 79% on a reported basis and 83% at constant currency, although the operating margin decreased to 25.7% [9] - Europe segment revenues grew by 7% on a reported basis, with retail comparable sales increasing by 8% [10] - Asia revenues rose by 2%, but retail comparable sales fell by 17% [11] - Licensing revenues remained flat, with an operating margin of 91.8% [12] Financial Health - The company ended the quarter with cash and cash equivalents of $140.9 million and long-term debt of approximately $238.3 million [13] - Free cash flow for the nine months ended November 2, 2024, was negative $130.4 million, with expectations of $40 million for fiscal 2025 [13][14] Future Outlook - For fiscal 2025, GES expects revenues to be at or slightly below $3 billion, indicating growth of 7.1% to 8.1%, revised down from 9.5% to 11% [15] - Adjusted EPS is forecasted to be between $1.85 and $2, down from a previous range of $2.42 to $2.70 [16] - For the fourth quarter of fiscal 2025, revenue growth is anticipated in the range of 2.2% to 5.4%, with adjusted EPS expected between $1.37 and $1.52 [17]

Group 1 - Guess?, Inc. (NYSE: GES) shares have declined by 20% over the past year due to a sluggish consumer environment [1] - The company's disappointing Q3 results are not expected to improve its performance [1]

Core Viewpoint - Guess (GES) reported quarterly earnings of $0.34 per share, missing the Zacks Consensus Estimate of $0.43 per share, representing a -20.93% earnings surprise [1] - The company posted revenues of $738.52 million for the quarter ended October 2024, missing the Zacks Consensus Estimate by 1.66% [2] Financial Performance - Earnings per share decreased from $0.49 a year ago to $0.34 this quarter [1] - Revenues increased from $651.17 million a year ago to $738.52 million this quarter [2] - Over the last four quarters, the company has surpassed consensus EPS estimates two times and topped consensus revenue estimates three times [2] Stock Performance - Guess shares have lost approximately 21.8% since the beginning of the year, contrasting with the S&P 500's gain of 25.5% [4] - The current Zacks Rank for Guess is 3 (Hold), indicating expected performance in line with the market in the near future [7] Future Outlook - The current consensus EPS estimate for the coming quarter is $2.04 on revenues of $989.5 million, and for the current fiscal year, it is $2.63 on revenues of $3.06 billion [8] - The estimate revisions trend for Guess is mixed, and future earnings expectations will depend on management's commentary during the earnings call [3][5] Industry Context - The Textile - Apparel industry, to which Guess belongs, is currently in the top 20% of over 250 Zacks industries, indicating a favorable outlook [9] - Another company in the same industry, Oxford Industries (OXM), is expected to report a significant decline in earnings, with a consensus EPS estimate of $0.11, representing a year-over-year change of -89.1% [10][11]

Financial Performance - Revenues for the third quarter of fiscal 2025 increased to $739 million, up 13% in U.S. dollars and 14% in constant currency[2]. - GAAP net loss for the third quarter was $23.4 million, with a GAAP loss per share of $0.47, compared to GAAP net earnings of $55.7 million and EPS of $0.82 in the same prior-year quarter[7]. - Adjusted net earnings decreased 35% to $17.7 million, with adjusted diluted EPS of $0.34, down 31% from $0.49 in the same prior-year quarter[8]. - The Company expects consolidated net revenue for the fourth quarter of fiscal 2025 to increase between 2.2% and 5.4%, and for the full fiscal year 2025 to increase between 7.1% and 8.1%[41]. - GAAP diluted EPS for the fourth quarter of fiscal 2025 is projected to be between $1.10 and $1.22, while for the full fiscal year 2025, it is expected to be between $0.70 and $0.82[41]. - The adjusted diluted EPS outlook for the fourth quarter of fiscal 2025 is between $1.37 and $1.52, and for the full fiscal year 2025, it is between $1.85 and $2.00[43]. - The Company anticipates free cash flow for the full fiscal year 2025 to be approximately $135 million[44]. - The Company reported a total net revenue of $2.06 billion for the nine months ended October 28, 2023, a 9% increase from $1.89 billion in the same period last year[76]. Revenue Segments - Americas Wholesale revenues increased 79% in U.S. dollars and 83% in constant currency for the third quarter[12]. - Europe revenues increased 7% in U.S. dollars and 6% in constant currency, with retail comparable sales up 8% in U.S. dollars[10]. - Licensing segment revenues remained flat, while Asia revenues increased 2% in both U.S. dollars and constant currency[12][13]. - The Americas Retail segment experienced a 12% revenue growth, reaching $172.8 million, up from $153.9 million year-over-year[73]. - Europe segment revenue increased by 7% to $368.4 million for the three months ended October 28, 2023, compared to $344.5 million in the prior year[76]. Expenses and Margins - GAAP operating margin decreased to 5.7% from 8.4% in the same prior-year quarter, driven by higher expenses and unfavorable channel mix[14]. - Gross profit margin decreased to 43.6% in Q3 2024 from 44.7% in Q3 2023, with gross profit amounting to $321,877,000[63]. - Selling, general and administrative expenses rose to $279,389,000, representing 37.8% of net revenue, compared to 36.0% in the prior year[63]. - Total cost of product sales increased to $416,641,000, representing 56.4% of net revenue, compared to 55.3% in the prior year[63]. - The adjusted operating margin for the total company was 5.8% for the three months ended October 28, 2023, down from 8.9% in the prior year[73]. Shareholder Actions - The Board of Directors approved a quarterly cash dividend of $0.30 per share, payable on December 27, 2024[45]. - The Company repurchased approximately 2.6 million shares for $60.3 million during the nine months ended November 2, 2024, leaving a capacity of $139.8 million under the share repurchase program[47]. Acquisitions and Market Presence - The rag & bone acquisition completed on April 2, 2024, integrated into existing segments, contributing to revenue growth[6]. - The Company acquired all operating assets and a 50% interest in the intellectual property assets of rag & bone on April 2, 2024, expanding its market presence[54]. - As of November 2, 2024, the Company operated 1,057 retail stores directly and an additional 541 stores through partners and distributors worldwide[54]. Future Outlook - The company expects current consumer sentiment and slow customer traffic in North America and Asia to persist, negatively impacting fourth quarter performance[3]. - The company anticipates that foreign currency exchange rates will remain at recently prevailing rates for the fourth quarter and full fiscal year 2025[89]. - The outlook for fiscal 2025 excludes certain costs related to professional services, transaction costs from the rag & bone acquisition, and asset impairment charges[90]. Tax and Other Financial Metrics - The company reported an effective income tax rate of 36.6% for the current quarter, compared to 30.9% in the same quarter last year[64]. - The adjusted effective income tax rate for the nine months ended October 28, 2023, was 35.7%, compared to 28.8% for the same period last year[67]. - The company incurred $1,091,000 in asset impairment charges for the three months ended October 28, 2023[67]. - The company reported a loss on extinguishment of debt of $1,952,000 for the nine months ended October 28, 2023[67]. Cash Flow and Assets - Cash and cash equivalents decreased to $140.9 million from $244.1 million year-over-year[79]. - Net cash provided by (used in) operating activities for the nine months ended November 2, 2024, was $(61,555) thousand, compared to $40,881 thousand for the nine months ended October 28, 2023[82]. - Free cash flow for the nine months ended November 2, 2024, was $(130,391) thousand, a significant decrease from $(16,486) thousand for the same period last year[82]. - Total assets increased to $2.79 billion as of November 2, 2024, compared to $2.48 billion as of October 28, 2023[79].