Guess? Inc. (GES) staged a notable recovery in trading Thursday, with shares jumping more than 10% following its Q4 earnings release, even after a shaky start that saw the stock drop over 5% at the open.
The fashion retailer posted a 5% revenue increase year-over-year to $932.3 million, beating analysts’ expectations by nearly $26 million. Adjusted earnings per share (EPS) came in at $1.48, comfortably ahead of the $1.38 consensus.
The market’s early volatility stemmed from mixed full-year fiscal 2026 guidance. While management projected revenue growth of 3.9% to 6.2%, surpassing analyst expectations, it guided to adjusted EPS of $1.54 at the midpoint—missing the Street’s forecast by more than 20%. A sharp year-over-year drop in operating margin, from 16.3% to 11.1%, added to concerns about profitability.
Still, CEO Carlos Alberini struck an optimistic tone, pointing to a robust close to the fiscal year and momentum driven by the rag & bone acquisition and licensing growth. Excluding currency effects and an extra week last year, underlying sales grew 14% year-over-year.
Margin Pressure and Geopolitical Uncertainty Cloud Outlook
While revenue trends were encouraging, underlying challenges remain. Margin pressures were evident, with the company’s free cash flow margin nearly halving year-over-year and gross margin landing at 44.1%, below internal targets. Operating expenses climbed 11%, driven by rag & bone integration costs and stepped-up marketing spend.
The company acknowledged it has yet to incorporate recently announced U.S. tariffs into its FY26 outlook, potentially understating future cost pressures. However, Guess? noted that 75% of its business lies outside the U.S., insulating it from the bulk of tariff impacts. Of the remainder, about a third caters to higher-income consumers, giving Guess? some pricing flexibility.
Retail performance remained mixed geographically. North America and Asia disappointed, with comparable sales in the U.S. and Canada down 14% in constant currency and Asia revenue dropping in the high teens, driven by weak traffic in South Korea and China. Conversely, Europe posted solid 5% comp growth in constant currency, buoyed by higher units per transaction.
Expansion Initiatives and New CFO Signal Strategic Pivot
Despite the uneven retail environment, Guess? is taking strategic steps to reposition itself. Its acquisition of New York-based fashion brand rag & bone marks a new chapter, expanding its portfolio and injecting momentum through e-commerce growth and product innovation like the Miramar collection. Initial store performance in Europe has been strong, with flagship locations planned for West Hollywood and Tokyo.
The company also launched Guess? Jeans globally, targeting Gen Z with sustainable denim at accessible price points. In the Middle East, a joint venture with Chalhoub Group is expected to fuel regional growth.
As Guess? works to streamline operations and boost efficiency, a leadership change is underway. Alberto Toni, a seasoned finance executive with experience at Bata, Deoleo, and Heineken, will assume the CFO role by mid-June. He replaces interim CFO Dennis Secor, who will stay on through September to assist with the transition.
While a recent $13.00 per share takeover proposal from WHP Global looms in the background, Guess? has yet to provide an update. A special board committee continues to evaluate the offer.
Conclusion
Guess?’s strong top-line performance and renewed focus on strategic growth through acquisitions, licensing, and market expansion have sparked renewed investor interest, even as margin pressures and global uncertainty temper long-term enthusiasm. With a new CFO stepping in and an acquisition-driven strategy gaining traction, the company faces a pivotal fiscal year—one that could determine whether this rebound has legs.
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