GUESS Inc (GES), Mid/Small Cap AI Study of the Week

September 19, 2024

Weekly AI Study from the S&P 400 or S&P 600

Company Overview

Guess?, Inc. (GUESS) is a global fashion brand that designs, markets, and distributes contemporary apparel and accessories for men, women, and children, drawing from both American and European styles. The company operates under various trademarks including GUESS, GUESS JEANS, MARCIANO, and G by GUESS, and licenses products such as eyewear, watches, handbags, and footwear. GUESS sells its products via direct-to-consumer channels, wholesale, and licensing, maintaining a strong international presence. The company targets three key customer segments: Heritage, Millennials, and Generation Z, and is launching GUESS JEANS to specifically attract Millennial and Generation Z customers. A significant growth initiative is the planned acquisition of the New York-based fashion brand rag & bone in 2024, aiming to diversify its portfolio and enhance growth prospects.

GUESS operates across several business segments, including Europe, Americas Retail, Americas Wholesale, Asia, and Licensing, covering retail, e-commerce, and wholesale operations. The company’s products are sold globally through various store concepts, including full-price retail stores, factory outlets, and specialized stores like G by GUESS and MARCIANO. Notably, the Americas Wholesale business performs strongly from July to November, leveraging shop-in-shops within department stores. In Asia, GUESS combines brick-and-mortar stores with a significant e-commerce presence, ending Fiscal 2024 with 103 directly operated stores and 295 licensed retail stores. GUESS is committed to social responsibility, rigorous quality control, and using environmentally preferred materials. The company’s marketing strategy focuses on brand consistency and customer engagement through various media, including social platforms. Additionally, GUESS operates loyalty programs to drive repeat business and deepen customer relationships. The company is transitioning its U.S. distribution center operations to a third-party logistics provider and uses third-party distributors and facilities for global distribution. GUESS differentiates itself by offering a global lifestyle brand, utilizing multiple distribution channels, and investing in technology to maintain its competitive edge. The company is also committed to diversity, inclusion, and employee development through initiatives such as the Diversity & Inclusion Council and various training and wellness programs.

By the Numbers

Annual 10-K Report Summary for Fiscal 2024:

• Net earnings attributable to GUESS? Inc.: $198.2 million (up 32.5% from $149.6 million)
• Diluted earnings per share (EPS): $3.09 (up from $2.18)
• Total net revenue: $2.78 billion (up 3.3%)
• Gross margin: 44.0% (improved by 130 basis points)
• Selling, general, and administrative (SG&A) expenses: $954.1 million (up 6.8%)
• SG&A rate: 34.4%
• Effective income tax rate: 10.8% (down from 18.4%)
• Store count at fiscal year-end: 1,553 stores and 333 concessions
• Net revenue increase year-over-year: $89 million (3%)
• Gross profit increase year-over-year: $74 million (6%)
• SG&A expenses increase year-over-year: $61 million
• Operating margin: 9.5% (up from 9.2%)
• Earnings from operations: $263 million (up from $248 million)
• Diluted EPS increase: $0.91
• Share buybacks impact on EPS: $0.19
• Currency fluctuations impact on EPS: -$0.02

Quarterly 10-Q Report Summary for Quarter Ended August 3, 2024:

• Net loss: $10.6 million (down from net income of $39.0 million)
• Loss per share: $0.28 (down from earnings of $0.59 per share)
• Total net revenue: $732.6 million (up 10.2%)
• Gross margin: 43.7% (decreased by 60 basis points)
• SG&A expenses: $283.0 million (up 23.2%)
• Effective income tax rate: 373.9% (up from 26.5%)
• Cash and cash equivalents: $218.9 million
• Inventory: $603.3 million (up 8.8%)
• Net revenue increase year-over-year for the quarter: $68 million (10%)
• Gross margin decrease year-over-year for the quarter: 0.6%
• SG&A expenses increase year-over-year for the quarter: $53 million (23%)
• Earnings from operations decrease year-over-year for the quarter: $17 million
• Net loss attributable to Guess Inc.: -$10.6 million (down from $39 million net earnings)
• Gain on sale of U.S. distribution center: $14 million