Guess Again! The Apparel Giant's Outlook Amid Unpredictable Consumer Spending And European Uncertainties

Telsey Advisory Group analyst Dana Telsey reiterated a Market Perform rating on the shares of Guess? Inc GES with a price target of $23.
GES reported 1Q23 adjusted EPS of ($0.07), above the consensus. Total sales declined 4.0% to $570 million, better than the consensus.
The earnings upside was driven by better-than-expected sales and gross margin performance, offsetting higher expenses, said the analyst.
Taken together, the 1Q23 operating margin came in at 0.3% (down 670 basis points), as compared to the market’s expectation of (0.9%) (down 790 basis points) and guidance of (1.2%) - (0.5%), added the analyst.
In 2Q23, management expects revenue to be flat to down 1.5% YoY, as compared to $643 million in the second quarter of FY22 and the prior consensus of up 0.5% to $646 million.
GES' diversified operating model served the company well in Q1, as it outperformed in a difficult macro environment and delivered better-than-expected top and bottom lines, added the analyst.
GES continues to take a cautious view on the consumer, reflected in its second quarter outlook falling short of market expectations, which the analyst believe is appropriate.
That said, the analyst cautioned that the company’s overall outlook reflects a still cautious consumer spending environment in the U.S. and uncertainties in Europe, along with tighter inventories at retail.
While FX headwinds have subsided and COVID restrictions have lifted globally, the ongoing impact of macro and inflationary headwinds is evident in the GES’ cautious view of the year ahead with limited visibility to an improved operating environment.
Price Action: GES shares are trading higher by 4.07% at $19.57 on the last check Friday.

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