Guess (NYSE:GES) Exceeds Q1 Expectations

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3 days ago

Contemporary clothing brand Guess (NYSE:GES) reported Q1 CY2025 results exceeding the market's revenue expectations , with sales up 9.4% year on year to $647.8 million. The company expects next quarter's revenue to be around $760.4 million, close to analysts' estimates. Its non-GAAP loss of $0.44 per share was 36.2% above analysts' consensus estimates.
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Revenue: $647.8 million vs analyst estimates of $632.7 million (9.4% year-on-year growth, 2.4% beat)
Adjusted EPS: -$0.44 vs analyst estimates of -$0.69 (36.2% beat)
Revenue Guidance for Q2 CY2025 is $760.4 million at the midpoint, roughly in line with what analysts were expecting
Management lowered its full-year Adjusted EPS guidance to $1.48 at the midpoint, a 3.9% decrease
Operating Margin: -5.1%, down from -3.4% in the same quarter last year
Free Cash Flow was -$96.42 million compared to -$44.02 million in the same quarter last year
Market Capitalization: $577.8 million
Carlos Alberini, Chief Executive Officer, commented, 'We are encouraged by our first quarter performance, which came in ahead of expectations across key metrics. Revenue grew 9% in U.S. dollars and 12% in constant currency, reflecting the successful integration of rag & bone and continued momentum in our wholesale businesses across Europe and the Americas. Disciplined expense management, combined with the better than expected top-line performance, enabled us to report operating results ahead of our guidance range, narrowing our loss for the quarter.'
Flexing the iconic upside-down triangle logo with a question mark, Guess (NYSE:GES) is a global fashion brand known for its trendy clothing, accessories, and denim wear.
A company's long-term sales performance is one signal of its overall quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Regrettably, Guess's sales grew at a sluggish 4.9% compounded annual growth rate over the last five years. This fell short of our benchmark for the consumer discretionary sector and is a tough starting point for our analysis.
We at StockStory place the most emphasis on long-term growth, but within consumer discretionary, a stretched historical view may miss a company riding a successful new product or trend. Guess's annualized revenue growth of 7% over the last two years is above its five-year trend, but we were still disappointed by the results.
This quarter, Guess reported year-on-year revenue growth of 9.4%, and its $647.8 million of revenue exceeded Wall Street's estimates by 2.4%. Company management is currently guiding for a 3.8% year-on-year increase in sales next quarter.
Looking further ahead, sell-side analysts expect revenue to grow 3% over the next 12 months, a deceleration versus the last two years. This projection is underwhelming and suggests its products and services will see some demand headwinds.
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Guess's operating margin has shrunk over the last 12 months and averaged 6.9% over the last two years. The company's profitability was mediocre for a consumer discretionary business and shows it couldn't pass its higher operating expenses onto its customers.
In Q1, Guess generated an operating margin profit margin of negative 5.1%, down 1.8 percentage points year on year. This reduction is quite minuscule and indicates the company's overall cost structure has been relatively stable.
Revenue trends explain a company's historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.
Guess's EPS grew at an astounding 183% compounded annual growth rate over the last five years, higher than its 4.9% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.
In Q1, Guess reported EPS at negative $0.44, down from negative $0.27 in the same quarter last year. Despite falling year on year, this print easily cleared analysts' estimates. Over the next 12 months, Wall Street expects Guess's full-year EPS of $1.80 to shrink by 9.1%.
We were impressed by how significantly Guess blew past analysts' EPS expectations this quarter. We were also happy its revenue outperformed Wall Street's estimates. On the other hand, its EPS guidance for next quarter missed. Zooming out, we think this was a mixed quarter. The stock traded up 1.1% to $11.17 immediately after reporting.
Is Guess an attractive investment opportunity at the current price? The latest quarter does matter, but not nearly as much as longer-term fundamentals and valuation, when deciding if the stock is a buy. We cover that in our actionable full research report which you can read here, it's free.