Guess?, Inc. (NYSE: GES) pessimism leads investors to lose patience on the stock

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Guess?, Inc. (NYSE: GES) stock plunged 19.98% on June 10th, 2020 and continued its bearish momentum on June 11th, 2020, falling over 9.8% (as of 10:47 am GMT-4; Source: Google finance) after the company posted lower than expected results for the first quarter of FY 21 & gave a weak sales outlook. The company has reported the net loss of $157.7 million for the first quarter of FY 21 after a loss of $21.4 million last year. In North America and Europe, by mid-March, the company had decided to temporarily close most of its stores. At present, the company has reopened more than 400 stores in Europe and over 180 stores in the US and Canada with operations resuming over the course of mid-April to June. Some of its U.S. and Canadian stores began operating again in mid-May. All stores in Asia have now opened and e-commerce is available in all regions. Traffic and revenue have substantially reduced at locations that have reopened, and though traffic is down online. Meanwhile, the company has removed more than $60 million in operating expenses from the business this quarter. The company has significantly decreased capital expenditures, spent only one-third of what the company had spent in Q1 last year and postponed the decision to pay the dividend. The company has ended the quarter with $419 million in cash, including $194 million of borrowings on the credit facilities.

GES in the first quarter of FY 21 has reported the adjusted loss per share of $1.81, missing the analysts’ estimates for the adjusted loss per share of 91 cents, according to analysts surveyed by FactSet. The company had reported 52 percent fall in the adjusted revenue to $260.3 million in the first quarter of FY 21, missing the analysts’ estimates for revenue of $303 million. Sales for stores that have been open since May 2 are at 75% of last year in the U.S. and Canada, and 70% for Europe. The company posted the gross margin for the first quarter of 13.2%, which is 20.7% lower than the prior year. The company delivered the adjusted operating loss for the first quarter of $109 million compared to a loss of $22 million last year. The company has generated negative free cash flow for the first quarter of $68 million, which represents an increase of $46 million versus a negative $115 million last year.

The second quarter revenue is projected to “have a decrease similar to that of the first quarter.”

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