Tuesday, February 21, 2006

Poor Guess, Mr. Wall Street

Apparel giant Guess (GES) was upgraded by DE Investment Research this morning.

As a retailer, Guess is subject to the caprice of evolving teenager tastes and shopping trends.

Understandably, its stock is a jumping bean whose erratic hops few Wall Street denizens have been able to pin down:

The company's COO, Carlos Alberini, gets a Wells Notice from the SEC, and the stock still levitates near its 52-week high. Sure, it was regarding his prior employer, but still: Wells Notice? Stock up? That's kooky. Then, yesterday the firm reports stellar earnings with a 16% gain in same-store sales, margin growth, disciplined store expansion -- all yielding a whopping 73% increase in Q4 earnings per share, and the stock tanks. Free cash flow, by the way, was up 100%.

Ostensibly, El Streeto seems to be worried about tepid guidance for the upcoming quarter and year, particularly the "mid-single-digit" predictions for same-store sales growth for the full year and the low-teen overall sales growth. The Street is hypersensitive to comps sales predictions, even though they turn out so often to be completely wrong. (via Motley Fool)

All that said, we can't ignore the fact that Guess has been beating expectations non-stop and its European, higher margin operations are as hot as a pistol.

As to where the stock will go in the near term, that's anybody's guess.

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