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HenryTo
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 Posted: Tue Dec 01, 2009 8:45 pm Post subject: Guess (GES) |
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Guess' business is still humming along. Following is Morningstar's take on its 3Q earnings:
http://quicktake.morningstar.com/Stocknet/san.aspx?id=318016
| Quote: | | Guess GES reported third-quarter results that put the company on course to significantly exceed our 2009 expectations. We are placing our fair value estimate under review as we reassess our forecast. |
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HenryTo
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| Posted: Thu Mar 15, 2012 3:37 pm Post subject: |
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Morningstar on GES' fiscal 4Q earnings and 2013 outlook. Stock down just slightly over 10% today.
| Quote: | | Guess' GES fiscal 2012 fourth-quarter sales results reflected ongoing weakness in Europe, which constitutes 39% of net sales, and though margins came in at the low end of management's range, share buybacks helped the firm meet the midpoint of its earnings per share guidance. We expect shares to come under pressure in the next trading session, owing to management's stark fiscal 2013 (January 2013) outlook, which calls for limited sales growth, 300 basis points of margin contraction (owing largely to unfavorable currency and cost headwinds), and a 10% drop in EPS (at the midpoint of the $2.50-$2.65 range). We had anticipated a revenue slowdown and some margin contraction next year, but the magnitude of foreign exchange was greater than we expected. Still, we generally view these issues as temporary in nature, and the firm's fundamental growth strategy and our $43 fair value estimate remain intact. Sales in the fourth quarter inched up 2.5% to $776 million, as Asia growth accelerated to 27% (up from 18% in the third quarter), partially offset weakness in Europe (down 1%). North American comparable-store sales dropped again (by 5%) as we suspect the firm chose to protect margins during an overly aggressive promotional environment during the holidays. Reported operating margins came in at 17.5%, still healthy but below our expectations, and the firm was forced to again trim expenses and use share buybacks in the quarter to post $1.05 in EPS versus management's $1.03-$1.09 range. The shares could remain range-bound and relatively volatile, given the current macro uncertainties, but we view Guess as well positioned even if the European outlook dims further. Selective price increases appear to be sticking, the company still generated $200 million in normalized free cash flow, and management maintains an extremely conservative balance sheet (with no debt and more than $5.00 per share in net cash). The company pays a $0.20 per share quarterly dividend (2.4% yield at the current share price), and its share-repurchase program, of which $158 million remains, should pacify some investors. In our view, the firm can still deliver low-single-digit comparable sales over time, and we expect management to execute and deliver on its international growth plan. With shares trading at a 25% discount to our fair value estimate and less than 13 times our updated (lowered) January 2013 earnings estimate, we don't believe they have necessarily bottomed out, but we continue to see long-term value in Guess. |
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HenryTo
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Location: Los Angeles, California
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| Posted: Thu Dec 01, 2011 5:19 pm Post subject: |
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Morningstar on GES' 3Q earnings:
| Quote: | | Guess GES reported fiscal third-quarter results Wednesday that came in at the low end of guidance, and based on a stark drop in consumer confidence across many European nations, management tempered its implied fourth-quarter and full-year outlook. We acknowledge that the shares could remain range-bound and relatively volatile given the current macro uncertainties, but we are not making a change to our $43 fair value estimate. As we digest the puts and takes of the quarter and look through the current headwinds, we see value in this mid-cap fashion retailer and advise long-term investors to take a close look. Net revenue ticked up 5% to $643 million, as strength across Asia (up 18%) partially offset relative weakness in Europe (up 2% but down 4% in local currency). North American comparable-store sales fell 4% and overall segment revenue increased 5%, both in line with management's guidance, and the general takeaway from the conference call was that inventories have been well managed leading into the holiday season. Reported operating margins came in at 15.1%, in line with our projection, and were particularly impressive given the drop in same-store sales. Management attributed the margin performance to smaller markdowns at North American retail, lower incentive-based compensation, and expense control, an indication of swift reaction to the external environment. A higher tax rate (based on geographic mix) and slightly lower share count, when combined with the revenue and margin performance, drove diluted earnings per share of $0.71, at the low end of management's $0.71-$0.74 range. We don't necessarily believe that the stock has bottomed, particularly if the European outlook dims further (since Europe accounts for more than 35% of com pany revenue). However, we think management has positioned the firm well for this eventuality, as inventories remain in check, supported by the limited markdowns during the quarter; selective price increases have been accepted to date; capital expenditures will be lower than previously anticipated; Guess still generates $200 million in normalized free cash flow, a 7% yield; and the company still carries more than $3.00 per share in net cash on the balance sheet. The company pays a $0.20 per share quarterly dividend (2.8% yield at the current share price), and its recently expanded share-repurchase program should pacify some investors. In our view, the firm can still deliver low-single-digit comparable sales over time, and we expect management to execute and deliver on its international growth plan. With shares trading at a 35% discount to our fair value estimate, equivalent to roughly 10 times our updated (lowered) January 2013 earnings estimate, we see long-term value in Guess. |
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HenryTo
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| Posted: Thu Aug 25, 2011 2:55 pm Post subject: |
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Morningstar on GES' 2Q earnings:
| Quote: | | Guess GES posted solid adjusted second-quarter results that again exceeded management's and analysts' expectations, though the updated full-year outlook raised a few questions. Investors are likely to focus on management's lowered full-year outlook and more-cautious commentary. While this could provide some near-term volatility in the name (not uncommon in specialty retail) and we plan to adjust our financial assumptions accordingly, our $43 fair value estimate remains intact. Guess' consolidated sales increased 17% to $677 million in the quarter as the firm increasingly chose margins over volume, a recurrence across the retail industry. As a result, revenue in North American retail ticked up 8%, while sales in Europe (up 14% in constant currency) and Asia (up 31% ) provided an incremental boost. Still, the combined impact of rising commodity costs, deleveraging of fixed costs, and channel mix in Asia led to flat adjusted operating margins of 16.7% in the quarter. When excluding the $0.19 per share in settlement charges associated with an Italian logistics provider, the firm reported $0.84 in diluted earnings per share, which was $0.01 above the high end of management's range and $0.03 ahead of our own internal estimate. We've highlighted risk factors, such as fashion and economic uncertainties, which could result in swings in the firm's quarterly results, and the second quarter was no exception. Management effectively lowered its margin outlook for the year as it pulls back its distribution in accessories and copes with slowing demand across North American and Europe. Although it's a tough time to lower guidance, we view it as prudent, and we note that management did the exact same thing last year after its second-quarter results. Guess still has ample runway to expand in Europe and Asia, and nearly 80% of second-quarter sales growth came from these markets. The company remains debt-free with more than $4 per share in net cash, pays a $0.20 per share quarterly dividend, and expanded its share-repurchase program, which should pacify some investors. In our view, the firm can still deliver low-single-digit comparable sales growth over time, and we expect management to execute and deliver on its international growth plan. With shares now trading at roughly a 25% discount to our $43 fair value estimate and about 10 times forward (January 2012) earnings, we see long-term value in the name. |
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HenryTo
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| Posted: Thu May 26, 2011 6:51 pm Post subject: |
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Morningstar on GES' 1Q earnings:
| Quote: | | Guess GES reported solid first-quarter results Wednesday that exceeded management's expectations, and the firm is well positioned to meet our full-year projections. Profitability was down year over year, as planned, but we view current merchandise and commodity headwinds as manageable, and our fair value estimate remains intact. Guess' consolidated sales rose 10% to $592 million during the quarter, driven by revenue growth across Europe (up 12%) and Asia (up 24%) and the addition of new stores. Importantly, the North American retail business stabilized somewhat in the first quarter, after the liquidation of post-holiday merchandise, and we are encouraged to hear that the firm has seen limited consumer pushback to its recent price increases. Still, the impact of rising commodity costs, select markdowns, and deleveraging of fixed costs drove a 230-basis-point drop in operating margins (to 12%). All in, the firm reported $0.46 in diluted earnings per share, which was $0.02 above the high end of management's range, an indication of balance between internal expense control and reaction to the external environment. While investors must get comfortable with a certain level of fashion risk, Guess is a company with ample runway to expand in Europe and Asia. Its products appear to be gaining traction, and management went so far as to say that it is on pace to deliver $1 billion in European revenue one year ahead of schedule, which is particularly encouraging. The company remains nearly debt-free, pays a $0.20 per share quarterly dividend, and expanded its share-repurchase program, which should pacify some investors. In our view, the firm can still deliver low-single-digit comparable sales growth over time, and we expect management to execute a nd deliver on its international growth plan. However, with shares trading near our $43 fair value estimate after a 12% after-hours rally, we see a balanced risk/reward and would wait for a more attractive entry point to build a position. |
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HenryTo
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| Posted: Thu Mar 17, 2011 6:42 pm Post subject: |
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Morningstar on GES' 4Q earnings. Note that the stock plunged 14% to $37.71 today.
| Quote: | | Guess GES reported fiscal fourth-quarter full-year results Wednesday for the period ended Jan. 29 that came in slightly ahead of our internal projections. However, it was not a balanced quarter, as outperformance in Europe and lower corporate overhead spending offset relative weakness and negative retail comparable sales in North America. Management provided a fairly mixed fiscal 2012 outlook in which the positives (footprint growth and expected pricing action) were somewhat overshadowed by concerns surrounding accelerated markdowns (fashion misses?), wage and cost of goods inflation, and required infrastructure spending. While we expect to make minor changes to our financial model, the net impact will not be large enough to move our fair value estimate. However, we are keeping tabs on micro and macro trends, as we believe the firm will need to execute well to achieve its financial targets in fiscal 2012. Guess' top line increased 18% to a record $757 million during the quarter, driven by new stores and positive sales growth across Europe (up 32%) and Asia (up 23%). The North American retail business delivered a 9% increase in revenue, but same-store-sales dropped 1.1% as traffic gains didn't materialize, despite earlier and more aggressive promotions during the holiday season. As a result, corporate gross margins dropped 160 basis points year over year, and expense management on the selling, general, and administrative expense line was needed to deliver the adjusted earnings pr share of $1.06 (in line with consensus). We still believe Guess has ample runway to expand in Europe and Asia, though it could become increasingly difficult for the company to gain wallet share in a crowded marketplace, even as it seeks to diversify further. In our view, the firm can still deliver low-single-digit comparable sales over time, and we expect management to execute and deliver on its international growth plan. The company remains nearly debt-free, pays a $0.20 per share quarterly dividend, and expanded its share-repurchase program (now $250 million), which should pacify some investors. However, with shares trading within 5% of our $43 fair value estimate, we see a balanced risk/reward and would wait for a more attractive entry point before building a position. |
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HenryTo
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Posts: 11735
Location: Los Angeles, California
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| Posted: Thu Mar 18, 2010 10:51 am Post subject: |
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Morningstar's latest take on GES:
| Quote: | | Guess GES reported impressive fiscal 2010 fourth-quarter results, exceeding our expectations and reflecting another sign of stabilization in consumer spending. Positive sales trends continued across geographies and channels, which, combined with tighter cost controls and a less promotional holiday environment, drove record earnings in the quarter. Although our sales estimate for fiscal 2011 is at the lower end of management's guidance, our operating margin assumption looks to be on the high side. As a result, our earnings projection is in line with management's outlook, and we are maintaining our fair value estimate. Total global revenue grew to $642 million, a 14% year-over-year increase. Same-store sales in North America turned positive, up 5.3% (2.0% in constan t dollars), while overall segment sales increased 7.2% to $309.4 million, driven by incremental sales from new stores. Wholesale segment revenue, which includes Asian operations, improved to $84.7 million, an impressive 21% increase, driven by strength in South Korea. European segment sales grew 24% from the prior-year period as the company expanded its geographic reach beyond Italy to France, Spain, and the United Kingdom (which collectively grew 22% for the year). Gross margins improved 550 basis points in the quarter, to 46%, on higher sales volume and tighter inventory management, which led to fewer markdowns. Operating margins, excluding a one-time impairment charge, were 19.5% in the quarter, with higher gross margins partially offset by increased selling, store opening, and compensation expenses. We think new products in denim, jewelry, footwear, and handbags will continue to resonate with consumers, and the firm can leverage this momentum and resume its retail expans ion and marketing strategy in 2011. |
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