Citi Optimistic On Guess Following Earnings Report & Guidance

Guess's GES 4Q came in sloppier than Citi expected, with a $0.99 print when you exclude a $0.05 benefit from loyalty card breakage and a $0.07 benefit from a shift in European sales; consensus was $1.06. US comps have improved a bit thus far in the quarter but there's little visibility into the women's business with Europe still a challenge.

Citi compares ease in 2H but full year guidance assumes an improvement in both sales trends and markdown rates in 2H, that against a double-digit rise in costs. Citi is lowering its PT to $46 and see continued execution risk near term. Citi maintains a Hold rating on GES.

1Q guidance is set low and implies material margin degradation driven by negative comps in the US; the shift in sales in Europe should also result in more deleverage in 1Q. Sales are expected to increase +MSD versus 18% in 4Q. Citi's estimate moves to $0.42 from $0.56.

GES closed Wednesday at $43.87