Despite the soft retail environment in America, Guess (GES, Financial) posted good results that were in line with the company’s expectations. The retailer is pleased with its operational performance and is confident of a better performance in the upcoming quarters. Guess is seeing a positive response from both of its retail and wholesale businesses and is now focusing on different aspects and segments to drive profitability.
Better times expected
Guess is seeing good growth in its e-commerce channel. This offering has grown about 48% in the third quarter which shows that it has got much steam in it for future. Even Guess is also putting efforts to make this more attractive to see more success across the platform. The company has extended this platform to not only an Omni-channel experience but also has extended it to mobile and online platforms. This is helping Guess to see growth in the customer engagement, creating a true and consistent shopping experience.
On the other hand, Guess is facing some challenging in some segments. The sales in the women's segment, especially woven, basic denim and dresses, are under pressure due to soft demand. However, Guess is seeing improvement in the performance of its accessories and footwear business which is giving strength to company’s growth strategy. Guess continues to introduce new products which is making its portfolio more attractive.
Merchandise improvements
Under this, women's handbags and women's footwear are among the top sellers under the label. Moving on, Guess is also seeing weakness in the international markets as well. The company is worried about the declining sales in South Korea which is mainly due to the soft economic environment leading to decline in the demand. To get over this, Guess is planning to undertake aggressive promotional strategies. Also in China, Guess is suffering due to negative macroeconomic environment.
For the future, Guess has planning to be on a defensive move. It is focusing on driving its product offering to strengthen its product portfolio. It is now laser focused on the most profitable ventures. Guess is now putting efforts reduce the size and overall cost structure to improve its margins. To support its cost structure further, Guess is also reducing the complexity across its brand portfolio.
Conclusion
With a trailing P/E of 15.96 the stock looks quite reasonable and the earnings are also expected to grow in the near term as its Forward P/E of 16.15 indicates. But in the next five years the investment in the stock can be disappointing. Its earnings are growing at a CAGR of 2.70% which is less that the industry average of 14.53%. All these statistics and facts indicates a soft retail market in future. Even Guess is also expecting its metrics to remain soft. Considering all these facts I would like to suggest the investors to pick the stock for short term but in a long term the investors should stay away from it until it shows concrete signs of gaining market share.
