Guess? (GES) Shines on Demand Recovery, Strong Online Sales
Guess? (GES) is gaining from demand surge as consumers resume their shopping habits. Online sales growth is also an upside.
As pandemic led restrictions ease and outdoor movement picks up pace, consumers’ spending on apparel products are rising. Such trends are benefitting retailers, including Guess?, Inc. GES. This well known apparel and accessories company has been gaining from resurgence in demand, as witnessed during second-quarter fiscal 2022. The company is also gaining from growth in digital sales. Its efforts to boost brands and customers’ shopping experience are yielding. The stock has surged 89.6% in a year compared with the industry’s rise of 35.6%. Let’s delve into the aspects driving this Zacks Rank #2 (Buy) company.
Demand Rise Is an Upside
With socializing picking up pace, consumers are looking to revamp their wardrobes and are splurging on apparel products. In its last earnings call, management highlighted that the company is witnessing demand recovery across product categories as stores reopen. During the second quarter, net revenues of $628.6 million went up 57.7% from $398.5 million reported in the year-ago quarter. On a constant-currency (cc) basis, net revenues surged 51.1% year over year. The upside can be attributed to sales momentum across most market regions. Revenues from products sales as well as royalties reflected growth. The company is optimistic regarding its ability to boost revenues in the forthcoming periods and reach $2.8-billion revenue target by fiscal 2024.
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Strong E-commerce Sales
Guess? has been benefitting from its solid digital business, which performed well in the second quarter of fiscal 2022. The company’s e-commerce business in North America and Europe increased 11% year on year. It expects to see continued improvement in its global e-commerce business through fiscal 2022, as it invests more in strategic marketing.
Guess? has been on track with its digital-first initiative and has been investing in brand building through social media platforms such as Facebook, Twitter, Instagram and YouTube. The company has been focusing on linking brick-and-mortar stores, e-commerce and mobile sales to improve its online operations. Guess? has also been improving e-commerce operations by undertaking efforts such as better data capturing, improved customer profiling, personalized marketing and relationship management. These efforts are expected to help the company enhance customer base and enrich their experience, which in turn is likely to drive sales.
Prudent Strategic Efforts
Guess?’ core growth strategies include improving functional capacities, brand relevance with three main consumer groups (heritage, Millennials and Generation Z customers), customer focus, product brilliance and international footprint.
In connection with its customer-centricity initiative, the company completed the implementation of Customer 360 — a solution developed by salesforce. The solution boosts personalized marketing, customer data optimization and customers’ journey engagement among other objectives. The company is also focusing on brand-elevation, which includes enhancing product quality, visual merchandising and boosting customers’ shopping experience across stores and online. It has also been rationalizing its store portfolio by shutting underperforming retail locations and renegotiating leases with favorable terms. The company is focused on building a better retail business with higher number of full price selling coupled with reduced promotional activity. Through this, the company is generating improved product margins. Further, management is on track to streamline its cost structure. The company expects to reinvest these cost savings to enhance marketing and omni-channel capabilities.
The aforementioned factors indicate that Guess? is well placed for growth in the forthcoming periods and will capitalize on favorable market trends. Such strategies are likely to help it overcome the headwinds stemming from store closures in some markets, due to the pandemic. All said, we expect the company to maintain its prominence in the apparel products industry.
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