What Happened?

Shares of contemporary clothing brand Guess (NYSE:GES) fell 12.9% in the morning session after the company reported weak third-quarter results, with sales and earnings falling below Wall Street's expectations. The core business recorded even weaker growth as management attributed some of the top-line strength to inorganic contributions from the Rag & Bone acquisition. Some of the headwinds were attributed to a more challenging business in North America and Asia, which resulted in slow customer traffic. This caused the company to revise its fourth-quarter outlook for revenues and earnings. Consequently, full-year sales and earnings are also expected to fall short of prior forecasts, making this a challenging quarter overall.

The shares closed the day at $16.39, down 5.6% from previous close.

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What The Market Is Telling Us

Guess’s shares are not very volatile and have only had 7 moves greater than 5% over the last year. Moves this big are rare for Guess and indicate this news significantly impacted the market’s perception of the business.

The biggest move we wrote about over the last year was 8 months ago when the stock gained 23.1% on the news that the company reported fourth quarter results that blew past analysts' EPS expectations. Its revenue and operating margin also outperformed Wall Street's estimates.

On the other hand, its full-year earnings guidance fell short of Wall Street's estimates, but we note its revenue outlook was strong. During the earnings release, the company declared a special dividend of $2.25 per share and a quarterly dividend of $0.30 per share. Zooming out, we think this was still a good quarter, showing that the company is staying on track.

Guess is down 31.5% since the beginning of the year, and at $16.39 per share, it is trading 50.9% below its 52-week high of $33.40 from March 2024. Investors who bought $1,000 worth of Guess’s shares 5 years ago would now be looking at an investment worth $839.22.

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