I'll be the first to admit that Guess? (NYSE:GES) is a difficult stock to hold. It looks pricey. It's got very little buzz. The business press is fascinated with juggernaut Abercrombie & Fitch (NYSE:ANF), horror stories like Hot Topic (NASDAQ:HOTT), perennial idler Gap (NYSE:GPS), or knit cap and slackwear providers like Zumiez (NYSE:ZUMZ) and Volcom (NASDAQ:VLCM), with its hilarious, irony-free corporate motto "Youth Against Establishment." Nothing sticks it to the man like when a teenager shells out $25 for an acrylic stocking cap, or $150 for jeans, right?
But I get it. Volcom has some kind of street cred. Shoppers of all ages still giggle when I mention Guess? The stock jumps every time something happens, as it did on the heels of last week's nonsensical downgrade from some ridiculously late-to-the-party analyst shop -- one that boasts giggle-worthy, coin-flip accuracy, according to our tracking in Motley Fool CAPS.
Today, shares are jumpy again, but they're heading back up. That's because the company broke from its more usual, tight-lipped ways and upped guidance for the year to a range of $1.85 to $1.90 a share. That's a 3.4% increase over previous guidance. If it doesn't sound that impressive, consider that's almost a 40% increase over last year's $1.34 a share. That bump up comes as a result of Guess's 48% revenue jump on the back of a very impressive double-digit growth in same-store sales, which reportedly accelerated in October.
I'm not surprised.
I visited Guess? HQ in Florence, Italy, over the summer and came away very impressed. I met with CEO Paul Marciano and his team, and I got a look at the company's design process, as well as its expansion plans. Here's what sticks in my mind most: I heard very little of the self-congratulatory, pumped-up, go-go growth jargon I expect from companies putting up numbers like 40% revenue growth and 70% earnings growth. Instead, I heard stuff like this, during a discussion of the growing footwear business: "This is a difficult market to get right, but we think we can do it, and we have formed partnerships with experienced operators."
That's a paraphrase, but it captures the essence of what excites me about Guess? Humility to go along with confidence. This company has been around a long time, and it's been through some bad, bad years. It knows where the rookie mistakes are, and management is modest enough to know that it doesn't know everything. As such, its expansion plans remain conservative, with no near-term sacrifice of profits and cash flow in pursuit of growth. When things go better than expected, you get days like today.
That's why, although this stock may not look cheap, I wouldn't bet against it. As my colleague Bill Mann said a couple weeks back, it's very dangerous to bet against a bunch of smart guys running a company well, because they tend to go ahead and keep doing smart stuff.
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