What happened
Shares of clothing retailer Guess? (GES +0.00%) were plummeting on Wednesday because of its report for the first quarter of fiscal 2021. As of 11:15 a.m. EDT today, the stock was down a painful 21%.
Revenue for Q1 fell 52% year over year. That result isn't so surprising since stores were closed. But where stores have reopened, Guess? sales are still way down.
Image source: Getty Images.
So what
In response to the COVID-19 pandemic, Guess? followed the blueprint of many other consumer-discretionary retail businesses. It closed stores, furloughed workers, reduced corporate pay, and cut expenses including postponing its quarterly dividend. Even with all these cost-saving decisions, it's hard to excel when revenue is cut in half.
It recorded a $2.40 loss per share according to generally accepted accounting principles (GAAP). Its loss last year was only $0.27 per share. Even when allowing for things like its $53 million noncash asset impairment charge, adjusted EPS was abysmal at a loss of $1.81 per share.
To move inventory, Guess? resorted to substantially marking down merchandise. In many cases, the company sold clothes at a loss. Only two of its five operating segments had a positive operating margin: Americas wholesale and licensing.
Now what
Over the past month, Guess? stock has strongly rebounded, as investors likely anticipated the company reopening stores and returning to normal. But it's time to hit pause on those cheery hopes. The company reported that sales at reopened stores in the U.S. are only 75% of what they were prior to the coronavirus, and only about 70% of pre-virus sales in Europe.
As such, Guess? is still a company with a long way to go in its recovery. In recognition of this, the company is still withholding guidance for the remainder of the year. It's also still pausing dividend payouts.
