Apparel maker Guess?, Inc. (NYSE: GES), competitor of Gap (NYSE: GPS), reported some fashionable stats for its third quarter on Thursday after the market close. Indeed, double-digit growth rates are always in style as far as Wall Street is concerned. Especially during this tough period for retail selling.
Guess? said that total net sales for Q3 increased over 12% to nearly $528 million. Diluted earnings per share expanded by over 11% to $0.69. This was a six-penny beat on the bottom line. You know, you can't really blame the analysts for missing this one by such a wide margin. Honestly, you would figure that a company like Guess? would have a difficult time moving its clothing and accessories with all the financial turmoil going on around it.
Management, apparently, wasn't asleep at the wheel. However, there are some important negatives to note. First, gross and operating margins slipped during the quarter. Second, comps at the company's retail locations dipped 0.8%. Third, guidance has changed to a lower range due to a conservative outlook. This is to be expected, certainly, since it is hard to believe that Guess? won't find some issues with its business model in the short-term considering that the brand premium associated with its jeans might not be viewed as the best value proposition out there by the struggling Christmas-shopping consumer.
Shares of Guess? were trading higher in the after-hours session on Thursday evening. They weren't shooting up like a rocket or anything like that, but they did pop almost 3%.
With the lowered guidance and the declining margins, I can't say I'd want to buy the stock right now. Like many, many stocks out there, Guess? can probably be considered a value. But, for my money, this is not a stock I'd be looking at since I still believe that the consumer's willingness to spend is not something to be counted on at the moment.
Disclosure: I don't own any company mentioned; positions can change at any time.
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