Guess?' Strategic Efforts Place The Stock Favorably For 2018

A robust earnings history combined with solid business performance in the European and Asian regions have been aiding Guess? Inc.’s (NYSE:GES) bull run. Evidently, shares of this leading designer, marketer and distributor of apparel items and accessories have soared 45.1% in a year, comfortably surpassing the industry’s gain of 15.7%.

Factors Driving Performance

Guess? has been delivering year-over-year growth in its top line since five straight quarters primarily due to sturdy Europe and Asia business operations. The company’s businesses in these regions have been faring well on the back of store openings and comps growth.

During third-quarter fiscal 2018, Guess? opened 22 directly-operated stores in Europe, amongst which a greater proportion of stores were opened in Turkey and Russia. With regards to operations in Asia, the company opened 10 directly-operated stores in China.

The company’s partnership with Tmall is also growing at a rapid pace. Guess? has been steadily expanding presence in these regions. Additionally, the company has been focusing on linking the brick-and-mortar stores, e-commerce and mobile sales to develop a well-knit omni-channel network. Management has also been executing supply chain initiatives through product cost improvements.

Troubled Waters in North America

Guess? has been facing a tough retail environment in the United States and Canada. Lower consumer spending and store traffic has been affecting revenues in these regions. Consequently, the company has restrained investments in the Americas to focus on other prospective regions. Guess? has also been resorting to store closures and plans to shutter 70 stores across the United States and Canada during fiscal 2018.

To improve performance in these regions, Guess? has been implementing stringent cost control and margin-growth initiatives. However, whether these endeavors will help the company to turnaround remains a wait-and-watch story.

Final Thoughts

While we are concerned regarding Guess?’ sluggish business yield from the North American region, the company’s endeavors to boost online sales, induce efficiency and enhance international business remain impressive. Encouragingly, such endeavors led management to raise its fiscal 2018 earnings view.

Further, the company’s booming international business is expected to help it tide over current challenges. Moreover, the company’s long-term growth rate of 17.5% instills confidence in this Zacks Rank #3 (Hold) stock.

Looking for More? Check These Trending Stocks

Other stocks worth considering in the same sector include Michael Kors Holdings Limited (NYSE:KORS) , Crocs, Inc. (NASDAQ:CROX) and Carter's, Inc. (NYSE:CRI) , all carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Michael Kors delivered an average positive earnings surprise of 23.7% in the trailing four quarters. It has a long-term earnings growth rate of 7.5%.

Crocs came up with an average positive earnings surprise of 108.9% in the trailing four quarters. It has a long-term earnings growth rate of 15%.

Carter's pulled off an average positive earnings surprise of 9% in the trailing four quarters. It has a long-term earnings growth rate of 10.3%.

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