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Here's Why Guess? Is Tanking Today

By Brian Feroldi – Updated Apr 14, 2019 at 6:04PM

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Shares plunge after the retailer reports fourth-quarter results that missed the mark. Here's what investors need to know.

What happened

Following a mixed fiscal 2019 fourth-quarter earnings report, shares of fashion designer Guess? (GES -1.41%) dropped 15% as of 10:25 a.m. EDT on Thursday.

So what

Here's a look at the key numbers from the company's fourth quarter:

  • Revenue grew 6% to $837 million. That was ahead of the $831 million in revenue that Wall Street had expected.
  • GAAP earnings per share (EPS) were $0.28. 
  • Non-GAAP net income grew 13% to $58.2 million, or $0.70 per share. That fell short of the $0.75 that analysts were expecting.

Here's a review of the headline numbers from fiscal 2019:

  • Revenue grew 10% to $2.61 billion.
  • GAAP net income was $14.1 million, or $0.16 per share.
  • Non-GAAP net income grew 37% to $80.4 million.
  • Non-GAAP EPS grew 40% to $0.98. This figure was behind the $1.03 that Wall Street was modeling.
Man seated in front of a laptop hold his head in his hand

Image source: Getty Images.

Management shared the following guidance with investors for the upcoming quarter and year ahead:

  • Revenue is expected to grow between 2.5% and 3.5% in the first quarter of fiscal 2020. Market watchers were expecting 2.9% growth.
  • For the first quarter, the company expects a GAAP loss of between $0.25 and $0.29 per share. For context, Wall Street was predicting a per-share loss of $0.14, so this was much worse than expected.
  • For the full year, revenue is expected to grow between 4% and 5%. The midpoint of this range is a smidge behind the 4.6% growth rate that Wall Street was modeling.
  • Full-year fiscal 2020 GAAP EPS is expected to land between $1.09 and $1.21. That's well behind the $1.38 that analysts had projected. 

Given the mixed quarterly results and disappointing EPS guidance, it isn't hard to figure out why shares are being sold off today.

Check out the latest earnings call transcript for Guess?

Now what

New CEO Carlos Alberini did his best to express optimism about the company's future:

I believe there is a tremendous opportunity for Guess today, as the brand continues to gain relevancy with younger consumers all over the world where I see significant white space for continued growth. I also think that there are several areas of the operation that offer opportunities for improvement, which should result in operating margin growth over time.

This certainly sounds good, but since Guess is still in turnaround mode and has a new leader at the helm, I think that watching this company from the sidelines makes the most sense.

Brian Feroldi has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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