Guess Posts Q3 Beat and Doubles Dividend; Shares Up 9%

Guess (GES) shares jumped over 9% during the extended trading session on November 23, after the American clothing brand and retailer delivered a blowout third-quarter results, and doubled its quarterly dividend to $0.225 per share from $0.1125 paid earlier.

The beat was driven by continued momentum in the global e-commerce business leading to robust performances across European Wholesale, Americas Retail, and Licensing businesses.

Q3 Performance

Encouragingly, adjusted earnings of $0.62 per share grew 6.9% year-over-year and significantly exceeded analysts’ expectations of $0.45 per share. The company reported earnings of $0.58 per share in the prior-year period.

Furthermore, revenues jumped 13% year-over-year to $643 million and outpaced consensus estimates of $611.3 million.

On top of that, adjusted operating margin increased a whopping 720 bps to 10.9%, primarily driven by lower promotional activity and markdowns, higher initial markups, and lower expenses and occupancy costs despite higher freight costs due to the supply chain disruptions.

Raised Outlook

Based on the robust quarterly results and assuming no increased COVID-related shutdowns, the company raised its full-year operating margin to 11% and forecasts revenues to be down low-single digits year-over-year.

Due to the impact of permanent store closures and shift of European wholesale shipments from the fourth quarter into the first quarter of next year, the company expects Q4 revenues to be down mid-single digits year-over-year .

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CEO Comments

Guess CEO, Carlos Alberini, commented, “I am very pleased with our performance for the current year but I am even more excited with what lies ahead for us. I believe that we are at an inflection point at Guess and I am very confident our business is well positioned to generate superior returns in the future.”

Wall Street’s Take

Overall, the stock has a Moderate Buy consensus rating based on 1 Buy and 2 Hold. The average Guess price target of $34.33 implies 41.9% upside potential from current levels.