Guess? Q1 Loss Narrower Than Expected, Revenues Up 9% Y/Y

Guess?, Inc. (GES) reported a narrower-than-expected adjusted loss of $0.44 per share for Q1 fiscal 2026, compared to an expected loss of $0.70, with revenues up 9% year-over-year to $647.8 million, surpassing estimates due to the acquisition of rag & bone and wholesale growth. Despite the revenue beat, the adjusted operating margin declined to -4% from -1.3% due to increased expenses, and the company updated its full-year revenue growth outlook to 5.5%-7.4% while slightly lowering adjusted operating margin and EPS guidance.

Analysis

Guess?, Inc. (GES) reported mixed first-quarter fiscal 2026 results, with an adjusted loss per share of $0.44, which, while narrower than the Zacks Consensus Estimate of a $0.70 loss, deteriorated from the $0.27 loss in the prior-year quarter. Net revenues increased 9% year-over-year to $647.8 million (12% at constant currency), surpassing the consensus mark of $631 million, primarily driven by the acquisition of rag & bone and strong performance in European and Americas wholesale businesses. However, profitability faced headwinds: gross margin contracted to 39.9% from 41.9%, and adjusted SG&A expenses rose to 44% of sales from 43.2%. Consequently, the adjusted operating margin declined significantly to negative 4% from negative 1.3% year-over-year, attributed to increased advertising, store costs, performance-based compensation, unfavorable business mix, and currency impacts, partially offset by contributions from newly acquired businesses. Segmental performance was varied: Americas Retail saw a 9% revenue increase but an 11% decline in comparable sales and a worsening operating margin to negative 10.5%. Americas Wholesale revenues surged 63%, though its operating margin fell to 19.9%. Europe's revenues grew 8%, but comparable sales fell 4%, and its operating margin declined to negative 2.9%. Asia experienced a sharp 20% revenue decrease and a 24% drop in comparable sales, with its operating margin deteriorating to negative 3.1%. Licensing revenues also decreased by 14%. The company updated its fiscal 2026 outlook, raising revenue growth expectations to between 5.5% and 7.4% (from 3.9-6.2%), but lowered its adjusted operating margin forecast to 4.4%-5.1% (from 4.5-5.4%) and its adjusted EPS guidance to $1.32-$1.64 (compared to a prior $1.32-$1.76 and actual $1.96 in fiscal 2025). For Q2 fiscal 2026, revenue growth is guided at 2.9% to 4.7% with adjusted EPS between 11 and 21 cents. Despite a 3.7% share price increase over the past three months, the company holds a Zacks Rank #4 (Sell).

Key Decisions for Investors

• Investors should note the dichotomy of Guess?'s Q1 performance: top-line growth driven by acquisitions and wholesale strength is positive, but declining comparable store sales across key retail segments and significant margin erosion raise concerns about core operational health.
• The upward revision in full-year revenue guidance is encouraging, yet the simultaneous reduction in projected operating margins and adjusted EPS, notably below fiscal 2025 actuals, suggests persistent cost pressures and challenges in translating sales growth into improved profitability.