Why Shares of Guess?, Inc. Got Cut Today

By Seth McNew Markets Fool.com

What happened

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Shares ofGuess?, Inc. (NYSE: GES)tumbled today as the market continues to digest the company's fourth-quarter and full-year results for thefiscal year ended Jan. 28, which were released yesterday and were below many analysts' expectations. The stock fell as much 16% throughout the trading day.

So what

Guess? has faced some challenges during the fiscal year, including currency fluctuations that hurt its international sales at time when its U.S. same-store sales are in decline. As a result, fiscal-year 2017 sales were essentially flat compared with fiscal 2016, but earnings per share dropped 72% to $0.27. Part of the problemis that the company's gross margin continued its downward spiral to a low of 33.7% as Guess? used discounted pricing to try to move more units out of inventory.

Image source: Guess?, Inc.

Now what

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Not everything was bad for the year. International sales growth looked stronger when adjusting for currency swings, especially in Europe, where sales jumped 9.2% onconstant currency basis, and nearly 5% on those same terms in Asia. In Q4, those numbers started to surge -- up nearly 14% in Europe and an impressive 28% in Asia.

Still, there were plenty more bad signs, such as the fact thatthe company's cash and cash equivalents fell 11% from a year ago. Meanwhile, inventories are up -- a sign that there could be more discounting on the horizon. Additionally, the company faces a growing level of debt. Bottom line: Guess?continuallydisappointed the market throughout 2016, and its stock suffered throughout the year. So far, 2017 looks like it could be similarly painful.

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Seth McNew has no position in any stocks mentioned. The Motley Fool recommends Guess?. The Motley Fool has a disclosure policy.