Guess pleased with quarter, but market disagrees

As anticipated, the upscale retailer's profits fell. Management projects a dismal outlook for the full year.

By Benzinga Mar 15, 2012 4:32PM

By Katey Stapleton, Benzinga Staff Writer


As CEOs tend to do, Guess' (GES) Paul Marciano attempted to save face by claiming on an earnings call Wednesday that his company can withstand the dismal economy in Europe. But investors weren't buying it.


Guess shares fell more than 12% in after-hours trading Wednesday. On Thursday, shares fell more than 10% to close at $32.97. The drop reflected expectations that the bleak European market Marciano mentioned would hurt customer spending.


The company reported that fourth-quarter profit fell 7% from a year earlier to $95.9 million, or $1.05 a share. Revenue rose 2.5% from a year earlier to $775.8 million. Profit was about what Wall Street expected, but analysts were hoping for slightly higher revenue of $778.8 million.


The company said it expects modest revenue growth this year as it attempts to remain strong and grow despite bumps in the road.


But its forecasts still disappointed analysts. Guess said that for the current quarter, it's expecting a profit of 25 cents to 28 cents a share -- far less than the 48 cents analysts expected. The company estimated revenue at between $560 million and $575 million -- less than the $610.7 million analysts wanted to see.


Despite the grim news, analysts, including those at Bank of America, applauded Guess for being realistic about the future.


"Europe remains challenging," Bank of America said in a report published Thursday. "That is reflected in guidance."


Other research firms, such as Wedbush, were not as optimistic. The company lowered its price target on the stock to $29 from $31.


Things could be worse for Guess. Other retailers, such as Urban Outfitters (URBN), have recently come under fire for failing to perform in the market and with customers. Urban Outfitters is trading down 10.6% from last year.


Regardless of retailer stresses in Europe and an unenthusiastic full-year outlook, Guess is optimistic that it will pull through. But it must do more to convince investors; the stock is down some 27% from a year ago.


More from Benzinga:
6Comments
Mar 16, 2012 12:35PM
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I'm surprised Guess is performing worse than Urban Outfitters - Hopefully there will be some headway with the challenges in Europe to get the company back on their feet. 
Mar 16, 2012 12:11PM
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I love Guess. Great clothing, but you can buy most of their stuff cheaper at department stores! There's no reason to go to their individual stores!
Mar 16, 2012 12:00PM
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Interesting pattern despite positive earnings, Guess? should continue to stay strong.
Mar 16, 2012 11:56AM
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I remember when Guess was popular...15+ years ago. I thought they had closed since then. But that was a (for lack of a better explanation) really bad, umm, "guess."
Mar 16, 2012 11:55AM
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Good try from Marciano, but the company should be doing better.

Mar 16, 2012 11:36AM
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I don't think I'm disappointed in these results, but I am surprised. I wasn't expecting the stock to lose 1/4 of its value in a year's time - especially Guess, let alone falling so far behind the S&P. Crazy. 
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