Guess? Beat on Earnings but Are There Better Opportunities Out There?

Recently Guess? (NYSE: GES  ) reported earnings for its third fiscal quarter. While Guess managed to beat analyst expectations, it reported weaker results than it did last year which is a sign that perhaps the business could face more challenging times ahead. To see what this earnings release means for the company and how it stacks up against its peers now, let's dig into its financials as well as the recent financial results of Gap (NYSE: GPS  ) and Polo Ralph Lauren (NYSE: RL  ) .

What Mr. Market expected and how Guess? delivered
For the quarter, Mr. Market had fairly low expectations for Guess?. The company was expected to report revenue of $613.6 million, a 2.4% decline from the $628.8 million the company reported for the same quarter a year earlier. Guess? fell just shy of its revenue estimate with sales of $613.5 million.

According to its earnings release, the falloff in revenue came about as a result of a 5% decline in comparable-store sales (4% if you exclude foreign currency fluctuations), partially offset by a 2.5% increase in the number of stores in operation.

While revenue declined in each of the company's regions, the fall was most drastic in its North American wholesale segment. This portion of Guess? logged a 7% drop in revenue and a 19% drop in income from operating activities. The company's North American retail and Asia segments tied for second with 3% drops in revenue, as well as 31% and 24% drops in income from operating activities, respectively.

The company's negative revenue growth also had another implication; lower net income. Lower revenue impaired the company's bottom line, but so too did an increase in its cost of sales which rose from 60.6% to 62.8% of revenue. All in all, these factors caused Guess? to report earnings per share of $0.40. This represents a 7% decline in earnings from the $0.43 the company reported in the same quarter a year ago. On the upside though, this quarter's earnings per share surpassed the $0.38 in EPS that analysts expected, which implies that maybe the situation at Guess? isn't as bad as some might think.

Guess? just can't measure up to Gap and Polo Ralph Lauren
Though Guess? exceeded analyst expectations on its bottom line, it's still rather depressing to see how it performed when measured against rivals like Gap and Ralph Lauren. To illustrate this, let's look at how each of these competitors fared over the past quarter.

For starters, Gap in its most recent quarter reported earnings per share of $0.72, $0.01 above estimates and 14.3% more than the $0.63 the company reported last year. This increase was partially due to lower costs relative to sales, but it was also attributable to fewer shares outstanding as Gap has been buying back stock. Another positive factor for Gap's bottom line was its 3.1% increase in revenue year over year.

Ralph Lauren performed similarly when it comes to earnings per share. The company earned $2.23 per share, $0.03 more than analysts expected, but it fell short of the EPS of $2.29 that it reported during the same quarter last year. Like Gap, Ralph Lauren's revenue rose (for an increase of 2.8%). However, the company was negatively affected by an increase in costs across the board, primarily in the form of higher cost of sales and higher selling, general, and administrative expenses.

Foolish takeaway
As we can see, Guess? did beat analyst estimates for the quarter, but given its results from last year there isn't much to be proud about. This appears to mirror the situation that Ralph Lauren has fallen victim to over the past year, something that Gap has been able to escape.

While it's unclear what the future holds for all of these companies, the earnings beats for both Guess? and Ralph Lauren suggest that their businesses are doing better than what analysts originally thought. This might imply that the future for both companies is bright. However, the earnings beat and year-over-year revenue growth for Gap is far more impressive and points toward a future that is probably less bumpy than it could be for its competitors.

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