GES - Guess Jeans

[DTEJD1997]

Hey all:

 

Anybody got GES on their radar scope?

 

Member of my family bought some shares back in the 90's...

 

They have a strong balance sheet, lots of cash, high dividend, still making money...

 

That is the good.

 

The bad is that earnings are weak.

 

Any intelligent thoughts? 

[oddballstocks]

 

 

Member of my family bought some shares back in the 90's...

 

 

I think that's the problem, in the 90s...that's the last time I purchased their clothes as well.

 

The stuff on their site mostly looks stylish.  They sell at Macy's, not sure if their brand recognition is still good or not.

 

Then they sell stuff like this: https://shop.guess.com/en/Catalog/View/denim/women/view-all/tailored-jumpsuit/W64A20D2GR0

When I think of people wearing jeans jumpsuits I'm thinking more like this: http://www.target.com/p/women-s-plus-size-denim-jumpsuit-dark-blue-wash-1x-dollhouse-juniors/-/A-51086604?ref=tgt_adv_XS000000&AFID=google_pla_df&CPNG=PLA_Women+Shopping&adgroup=Jumpsuits_SC&LID=700000001170770pgs&network=g&device=c&location=9005947&gclid=CLe_8d3OptECFZFXDQodVCMBfA&gclsrc=aw.ds

 

 

[DooDiligence]

Buckle?

[bbarberayr]

My 20-something year old daughters asked for Guess stuff for Christmas this year, so must still be in fashion for that age group.  Seem to be more popular in bags/accessories than jeans, which they were originally known for.

[DTEJD1997]

Hey all:

 

Guess was down again Friday and is now below $12/share.  It is getting mighty tempting...

 

Net cash is close to $4/share. 

 

EV/EBIDTA is about 4.5/1 with almost no debt.  This is also with depressed margins.

 

Dividend yield is above 7.5%, and unless business collapses, they should be able to maintain the dividend for the foreseeable future.

 

I am tempted to pick some up and write covered calls if it appreciates a couple of points.

[JayGatsby]

EV/EBIDTA is about 4.5/1 with almost no debt.  This is also with depressed margins.

I don't know anything about the company, but be careful looking at a retail company as having "no debt". The operating leverage or retail stores is huge (leases, utilities, store employees) and sales declines have big impacts on the bottom line. Underperforming leases with a remaining life can quickly become a debt. My understanding is a lot of retail/restaurant companies will appear to have low leverage on a debt/ebitda basis . The retail companies with a lot of debt are the ones that have a lot of real estate (sears, macy).

 

Not saying it's a bad investment, just not sure anything retail is low risk.

[MrB]

EV/EBIDTA is about 4.5/1 with almost no debt.  This is also with depressed margins.

I don't know anything about the company, but be careful looking at a retail company as having "no debt". The operating leverage or retail stores is huge (leases, utilities, store employees) and sales declines have big impacts on the bottom line. Underperforming leases with a remaining life can quickly become a debt. My understanding is a lot of retail/restaurant companies will appear to have low leverage on a debt/ebitda basis . The retail companies with a lot of debt are the ones that have a lot of real estate (sears, macy).

 

Not saying it's a bad investment, just not sure anything retail is low risk.

 

Generally true, but not always. One helpful metric is what we call "rent cover" (similar to interest cover); (EBIT + Rent expense)/(Rent expense + Interest expense) and in my view should be at least 2x

Another is to capitalize operating leases (rent expense x 8) and include it in your leverage ratios. I think Oddball discussed this one before. 

[DTEJD1997]

Hey all:

 

Anybody see GES hit a new 52 week low today?  I sure did...I have not initiated a position yet...but my trigger finger is getting itchy.

 

One of the key things is what percentage of North American leases are expiring OR getting close to expiring?  VERSUS, how many of those leases at "problem" locations have more than 1-2 years left?

 

While the leases are certainly problematic and a liability...it is hard to ignore that GES has a rock solid balance sheet as far as retailers go.  I still think they've got a recognizable brand that isn't garbage.

 

If they can hold the dividend, get NA in the right direction, exit some lease, build their interweb presence...this could be a tremendous investment?

 

The other retailer that I am looking closely at is "Buckle".

 

Any thoughts?

[DooDiligence]

Hey all:

 

Anybody see GES hit a new 52 week low today?  I sure did...I have not initiated a position yet...but my trigger finger is getting itchy.

 

One of the key things is what percentage of North American leases are expiring OR getting close to expiring?  VERSUS, how many of those leases at "problem" locations have more than 1-2 years left?

 

While the leases are certainly problematic and a liability...it is hard to ignore that GES has a rock solid balance sheet as far as retailers go.  I still think they've got a recognizable brand that isn't garbage.

 

If they can hold the dividend, get NA in the right direction, exit some lease, build their interweb presence...this could be a tremendous investment?

 

The other retailer that I am looking closely at is "Buckle".

 

Any thoughts?

 

I just listened to the last BKE call the other day & I don't think these guys really have a handle on the future.

 

Optically, based on historical measures, BKE continues to look cheap.

 

If they could staunch same store sales & e-commerce YOY decreases & raise avg price points & GM, then we would see E, B & FCF supporting an increased P. (unfortunately, they are having a tough time influencing traffic to both channels.)

 

I still see BKE as a semi-exclusive, personal touch, faux tailored experience.

Their customers like in store attention & this demographic will always exist (IMO.)

Unfortunately, with mall traffic down, you got fewer prospects in the stores.

 

They have a very nice selection of designer jeans & the Fast & Furious line looks like a great idea, we are on e8 in the franchise (personally, I think they ought to get some current, really high profile, artists/productions tied in here (add in some Indie musicians for peripheral branding opportunities that could potentially get bigger...)

 

This is a tough nut to crack (do you pivot to online, like everyone else? or do you continue with your core, tailored experience shopper?)

 

IMO, you stay with your high attention customer base & add "personal shopper" capability so a "stylist" could hear from a client (one which the rep knows well thanks to SalesForce or another service) who has a date that night & needs something special.

 

The rep picks out a few options & gets the tissue papered plumage to the client at work or wherever (they have to return what they didn't like in to their buddy at the store.)

 

Tie this in with e-com.

 

IMO, they need to be a strong outside sales organization. (like a jeweler, you cannot rely on foot traffic) you MUST do trunk shows & promote them through personalized channels (client list, phone calls) which requires responsive CRM for all who are at the sharp end of the stick.

 

Additional touches like hand signed rep/stylist invitations & involvement with non employee influencers (liquor brand tie ins, local hot spot fashion shows...)

 

Their efforts (if any) in these areas seem weak.

 

(they need a cult of personality, of cool people, in store, who everyone wants to be friends with...)

 

They have to make rain here & generate in store traffic increases.

 

CEO Q - How do you plan on connecting with young shoppers if not online? Weak answer (CEO seems out of touch...)

 

CEO says "we've been running an ecom biz for quite a while now (but made no mention of the lack of traction...)

 

Huge ownership stake by Chairman Hirschfield $310M so this guy has a lot of say here (who influences hand him & is he anchored into survivorship bias?)

 

Huge % of float short with almost 15 days to cover (doesn't mean anything if the shorts are right...)

 

Kari Smith & Michelle Hoffman & Kelli Molczyk seem to be the ones to ask questions of & not the CEO.

 

All of this could very well be nonsense...

[DTEJD1997]

Hey all:

 

Anybody else looking at this small cap?

 

I almost missed it, but I got a few shares just before the market closed on WEDS.  It was about $3.80/share.  I figured that just could not be an "accurate" price, so I bought some.  Earnings were coming out after the market closed, so I thought there is a chance they might be good.

 

They were indeed good, but GES has suspended the dividend.

 

Today, the stock is up.  It is up more than I've ever seen a "normal" stock go up in a day, about 180%.

 

So I sold some out of the money covered calls for almost what I paid for it on Weds.  If the stock goes back down in price, I'll buy back the calls.

 

Anybody else looking at this?

 

 

[LC]

Not my kind of company, but congrats on the great trade!

 

Did you cover the entire position?