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Why Guess? Stock Lost 13% in March

By Demitri Kalogeropoulos – Updated Apr 3, 2019 at 10:03AM

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Excess inventory from key markets threatens to pinch profits in 2019.

What happened

Apparel and accessories retailer Guess? (GES -0.92%) trailed the market last month after shedding 13%, compared with a 1.8% uptick in the S&P 500, according to data provided by S&P Global Market Intelligence.

The slump put the stock down 10% so far in 2019 and lower by the same percentage over the past year, versus an 11% boost in the broader market.

Inside a busy shopping mall.

Guess? says its merchandise isn't moving fast enough. Image source: Getty Images.

So what

Investors panned the chain's fourth-quarter report that, while beating sales expectations, fell short on the bottom line. Guess? found itself with too much inventory in key markets in Europe and China, and so it had to cut prices to keep its products moving.

Now what

Executives said that the inventory overhang will be significant enough to affect results over the next two quarters, with modest losses expected at the start of its fiscal year. From there, the retailer believes it can rebound in the second half of the year to achieve as much as a 23% boost in adjusted earnings per share. A lot could go wrong before the 2019 holiday period, though, so investors are taking a cautious approach toward management's optimism.

Demitrios Kalogeropoulos 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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Stocks Mentioned

Guess Stock Quote
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GES
$20.57 (-0.92%) $0.19

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