On Wednesday, Telsey Advisory Group adjusted its price target for Guess Inc (NYSE:GES), reducing it to $18.00 from the previous $21.00, while maintaining a Market Perform rating on the stock. The firm's decision followed Guess's third-quarter performance, which saw disappointing sales figures that could not be compensated for by slight improvements in gross margin and expense management.
The earnings for the quarter fell short of expectations, prompting the analyst to take a more cautious stance on Guess's prospects for the fourth quarter and the full year. This revision marks the second consecutive quarter of a moderated outlook for the company. The analyst cited various factors for the reduced price target, including lower retail traffic in the Americas and Asia, a consumer base that is increasingly price-sensitive, and greater macroeconomic pressures on consumers.
Furthermore, the company's continued investment in marketing to bolster its global brand has not translated into improved sales, as was hoped. Elevated freight rates added to the company's challenges, contributing to the subdued forecast. The new price target of $18.00 is based on a 7.7x multiple on the two-year forward earnings per share (EPS) estimate of $2.34, which is aligned with the one-year next twelve months (NTM) average multiple of 7.8x.
The analyst's commentary reflects a cautious outlook for Guess, acknowledging the company's efforts in marketing but also recognizing the headwinds it faces in a competitive and changing consumer environment. Despite these challenges, the Market Perform rating suggests a neutral stance on the stock's potential performance relative to the market.
In other recent news, Guess Inc. reported a 13% increase in Q3 revenue, reaching $739 million, largely attributed to the acquisition of the Rag and Bone brand. However, the company experienced challenges in North American and Asian retail markets, marked by decreased store traffic and changing consumer spending patterns.
The company's strategic initiatives include significant marketing investments and the expansion of the Rag and Bone brand. Guess revised its full-year revenue guidance to 7-8% growth and adjusted EPS outlook to $1.85-$2.00. Despite a mixed regional performance and cautious expectations, CEO Carlos Alberini expressed confidence in the company's long-term growth and the potential of new brand initiatives.
InvestingPro Insights
Complementing Telsey Advisory Group's analysis, InvestingPro data provides additional context for Guess Inc's current financial position. The company's P/E ratio of 5.39 and adjusted P/E ratio of 4.98 for the last twelve months as of Q2 2025 suggest that the stock may be undervalued relative to its earnings. This aligns with an InvestingPro Tip indicating that Guess is "Trading at a low earnings multiple."
Despite the challenges highlighted in the article, Guess maintains a strong dividend yield of 6.92%, which is particularly noteworthy given the current market conditions. An InvestingPro Tip reveals that the company "Has maintained dividend payments for 18 consecutive years," demonstrating a commitment to shareholder returns even in the face of recent headwinds.
The stock's recent performance, with a 6-month price total return of -26.76%, reflects the concerns raised by Telsey Advisory Group. However, an InvestingPro Tip notes that "Management has been aggressively buying back shares," which could signal confidence in the company's long-term prospects.
For investors seeking a more comprehensive analysis, InvestingPro offers 13 additional tips for Guess Inc, providing a deeper understanding of the company's financial health and market position.
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