After a volatile morning, Guess? (GES, Financial) shares are up 9% following positive Q4 earnings and sales results. Initially, the stock fell by 5.1% before rebounding. The mixed FY26 guidance contributed to the volatility, with anticipated revenue growth exceeding consensus but an underwhelming adjusted EPS outlook suggesting possible margin pressures. Additionally, the company has not yet incorporated new tariffs into its FY26 guidance.
GES highlighted that while tariffs may impact earnings, the effect could be minimal because about 75% of its business is outside the U.S., where tariffs are not applied. Of the remaining 25% of its business in the U.S., a third targets affluent consumers, allowing for greater pricing flexibility.
- GES posted solid Q4 results, with adjusted EPS dropping 26% year-over-year to $1.48 and revenue increasing 5% to $932.25 million, both near the high end of its guidance. Excluding FX impacts and an extra week last year, sales grew 14% year-over-year.
- The challenging economic environment has impacted GES, with its stock price falling 65% over the past year. The Red Sea crisis since October 2023 disrupted supply chains, increasing shipping costs and transit times. Inflation has also affected consumer spending, reducing traffic in GES's retail stores.
- Geographic performance varied, with Americas comps down 14% in constant currency, missing expectations. Asia's revenue was at the low end of estimates due to challenging traffic. However, Europe, which hosts half of GES's stores, saw a 5% comp growth in constant currency, driven by higher units per transaction despite weak store traffic.
- For FY26, GES forecasts adjusted EPS of $1.32-1.76 and revenue growth of 3.9-6.2% year-over-year. The company has not addressed WHP Global's $13.00 per share acquisition proposal, although a Special Committee is evaluating it and discussions continue.
While potential margin compression and tariff impacts are medium-term concerns, GES's positive Q4 revenue outlook has pushed its stock higher today. However, the upside may be capped at WHP Global's $13.00 takeover offer price.
