Against a largely dreary retail backdrop, Guess (GES) gave investors something to cheer about by posting a big earnings beat and following it up with raised guidance.
Shares of Guess surged 13% as the apparel maker impressed Wall Street by posting stronger-than-expected sales in North America and a surprise expansion in operating margins thanks to aggressive cost-cutting moves.
Reporting after Wednesday’s close, Guess revealed non-GAAP EPS of 52 cents, which blew away consensus calls from analysts for just 36 cents.
Revenue inched up 0.6% to $639 million, which exceeded the Street’s view of $622.9 million. North American revenue gained 0.5% to $254.3 million even as same-store sales dropped 2%.
Gross margins slipped to 38.9% from 39.6%. However, adjusted operating margins soared to 10.5% from 9%, solidly surpassing management’s call for a decline to 8.5%.
“The earnings not only reflect the achievement of our revenue expectations for the quarter, but also the benefits of our expense management and cost control efforts,” Guess CEO Paul Marciano said in a statement.
Looking ahead, Guess raised its full-year non-GAAP target to $1.78 to $1.92, which compares favorably with the Street’s view of $1.79.
While Marciano said Guess is “very encouraged” by the improving trends in North America, he warned the economic environment in Southern Europe “continues to be challenging” and said the company is “beginning to see a slowdown in China.”
Following the earnings report, Jefferies reiterated its “hold” rating on Guess, although the firm did raise its price target to $29 from $27.
“Despite the strong beat on the bottom line, we await signs of sustainable improvement before becoming more positive on the name,” Jefferies analyst Randal Konik wrote in a note.
Shares of L.A.-based Guess spiked 12.23% to $30.65 Thursday morning, leaving then 24.5% in the green on the year.