Guess? defeats analysts in Q1: Is the buying overdone?

Posted Jun 5th 2009 2:50PM by Steven Mallas
Filed under: Earnings Reports, Penney (J.C.) (JCP), Gap Inc (GPS), Abercrombie and Fitch (ANF)

Guess? Inc. (NYSE: GES), a fashion retailer that competes in the mall with companies like Abercrombie & Fitch (NYSE: ANF), Gap (NYSE: GPS), and JCPenney (NYSE: JCP), told the market how it did in Q1 on Thursday after the bell. As I write this during the early afternoon on Friday, shares of Guess? are up well over 6% on very good volume. Was there something to this earnings report?

I didn't think the numbers were particularly fetching. Revenues declined nearly 10%, thanks in part to the effects of currency translation (maybe that should be no thanks). Earnings per share came in at $0.35, a massive 30% decline. And same-store sales in North America dipped 10% (take out currency, and the dip was 6%, which still wasn't good).

As you can imagine, a beat on the bottom line was probably what most buyers were paying attention to in the release. According to this source, analysts were expecting $0.29 per share. Another thing investors reportedly liked was the guidance.

Okay, I get the idea that the market looks forward and discounts accordingly. Wall Street sees Guess? coming out of its earnings decline sometime in the future. But I'd like to point something out to everyone. On March 9 of this year, Guess? closed at $13.09 according to the chart at AOL Finance. Today, as I write this very sentence, Guess? is trading at $28.86.

You know what I'm going to say now. If you bought shares of Guess? recently and have a nice profit, then you should definitely consider selling. I think Guess? has gotten ahead of itself. Why give back your gains? Book them and be happy!

Guess? could certainly rise from here. But I wouldn't be comfortable holding the shares considering the weak comps and the earnings decline. Especially at a time when job losses are still mounting (albeit at a slower pace). Shareholders can make their own decision, but if it were my portfolio, I'd take profits on a Guess? position.

Disclosure: I don't own any company mentioned; positions can change without notice.

Tags: abercrombie and fitch, AbercrombieAndFitch, ANF, clothing, fashion, Gap, GES, GPS, Guess, j c penney, JCP, JCPenney, mall, retail