Guess? Hits 52-Week Low On Disappointing Traffic Levels
Zacks Investment Research | Jun 27, 2016 11:07PM ET
Shares of Guess?, Inc. (NYSE:GES) hit a 52-week low of $13.89 on Jun 27, and eventually closed at $14.23. The drop in share price was due to a sluggish outlook following disappointing traffic trends recently. In fact, shares of this apparel retailer have been declining since the company reported dismal first quarter numbers.
Guess? also slashed its earnings and revenue guidance for fiscal 2017 in view of the soft start to the fiscal and challenging retail environment.
Factors Hurting Guess?
This Zacks Rank #4 (Sell) company has had a poor run since the beginning of 2016 with its share price declining around 22.7% year-to-date.
We note that the main reason for the slump is substantially lower revenues. The company has been reporting declining revenues since fiscal 2014 due to lower store traffic in North America. Tough retail conditions negatively affected Guess?, resulting in lackluster traffic and conversion rates. Though the company has undertaken several initiatives to improve traffic in North America, no improvement is expected in the near term.
Guess? is strategically focusing on expansion in Asia and expects long-term growth in the region. However, soft macroeconomic conditions in Greater China are impeding growth in Asia. Lower consumer spending owing to uncertain economic conditions along with lower exports and slow growth in industrial production, retail sales and construction activity are the major factors denting Guess?’ sales in China.
Unimpressive First Quarter Results, Lowered Guidance
On May 25, Guess? reported wider-than-expected loss for the first quarter of fiscal 2017 and also missed revenues. For fiscal 2017, Guess? lowered its earnings outlook to the range of 55 cents to 75 cents from the previous guidance of 65 cents to 85 cents. The lowered guidance reflects a challenging environment and the company’s soft start to fiscal 2017. Over the past 60 days, fiscal 2017 estimates declined around 24.7%.
Stocks to Consider
Not all stocks are performing as poorly as Guess?. Some better-ranked stocks in the textile/apparel sector include Delta Apparel Inc. (NYSE:DLA) , Hanesbrands Inc. (NYSE:HBI) and Perry Ellis International Inc. (NASDAQ:PERY) . While Delta Apparel sports a Zacks Rank #1 (Strong Buy), Perry Ellis and Hanesbrands carry a Zacks Rank #2 (Buy).
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