Guess Stock Dividend Analysis (GES)
Guess? (GES) has paid a dividend since 2008, and is included in the Arbor Dividend Growers / Producers list because the payout has been increased substantially over the years. However, because the company doesn’t have a dividend policy of increasing the dividend every year, it does not qualify for other dividend lists.
Current Dividend: $0.90
Dividend Yield: 7.7%
Cash Dividend Payout Ratio: 79%
Market Capitalization: 1.0 B
Enterprise Value: 0.7 B
Sector: Consumer Cyclical
Industry: Apparel Stores
Guess? Inc. designs, markets, distributes, and licenses apparel and accessories through wholesale accounts, retail stores, and retail websites. The Guess main target market is style conscious customers between the ages of 18 and 35. It is a global company with about half of revenues coming from outside the U.S. and Canada.
Guess apparel is marketed under a variety of trademarks including: Guess, Guess?, Guess U.S.A., Guess Jeans, Triangle Design, Question Mark and Triangle Design, a stylized G, Guess Kinds, Marciano, and others. The lines include full assortment of clothing, including jeans, pants, jackets, skirts, blouses, overalls, knitwear, and intimate apparel. In addition it offers complementary products such as swimwear, handbags, watches, eyewear, kids and infant apparel, jewelry, and fragrances.
Guess has a rock solid balance sheet with tremendous liquidity. The company is currently addressing the challenging environment by closing unproductive stores and making organizational changes. Other strengths include a strong brand, global diversification, multiple store concepts, and multiple distribution channels.
Guess has developed a distinctive global image that the company calls “fun, fashionable, and sexy”. The company has brand loyalty, name awareness, perceived quality, and favorable publicity; all of which they use to boost the reputation and integrity of the brand.
Global diversification reduces the company’s reliance on any one area. In addition to approximately 480 stores in the U.S., the company operates or licenses over 1100 stores in 90 different countries.
To meet the different needs of its customers, Guess has six different store concepts: full-price retail stores, factory outlet stores, G by Guess stores, Guess? Accessories stores, Marciano stores, and Guess? Kid stores.
Guess uses multiple distribution channels to maximize its marketing reach. Direct to consumer includes different size retail stores and retail websites that showcase their products and allow customers to conveniently make purchases. Wholesale customers consist mainly of department stores, including Macy’s, Bloomingdales, Liverpool, and The Bay, plus select specialty retailers.
Guess’s target market (18-35) has been the most affected by the economy and stagnating wage growth. This is also a demographic group that cares less about fashion than previous generations. This is causing apparel companies such as Guess, to look to emerging market for growth. While emerging markets may provide needed growth they also bring added economic and currency risk in a period where profit margins are declining.
The new CEO, Victor Herrero, is bringing fresh ideas and emphasis on cost controls and international growth (particularly in Asia). The company has been closely controlled by the Founders (Paul and Maurice Marciano) in the past. Bringing in a new CEO offers hope to a company with a solid financial foundation.
The tug of war between sales growth and margin declines continues to erode profits. Negative comparable-store sales is a trend that must be reversed at some point.
Dividend Analyzer Checklist
(updated December 2016)
Dividend Safety Score (15/33 points)
Dividend Per Share (ttm): $0.90
Dividend Payout Ratio (ttm): 30%
Dividend Per Share (10 Year Growth): n/a
Cash From Operations (CFO) Per Share (ttm): $1.00
CFO Dividend Coverage (CFO / DPS): 1.1 (0/6 points)
Free Cash Flow (FCF) Per Share (ttm): $0.48
FCF Dividend Coverage (FCF / DPS): 0.5 (0/6 points)
Net Financial Debt: $ -325 B
Total Assets: $1580 M
Net Financial Debt / Total Assets: -21% (12/12 points)
Net Financial Debt to EBITDA (ttm): 11%
Total Liabilities to Assets Ratio (Qtr.): 37%
Piotroski Score (1-9) (TTM): (3/9 points)
Profitability & Growth Score (16/33 points)
Revenue (10 Year Growth) *CAGR > 4.14%: 8.9% (4/4 points)
EPS Basic Cont. Operations (10 Year Growth) CAGR > 4.14%: 3.9% (0/4 points)
Cash From Operations (10 Year Growth) CAGR > 4.14%: 2.2% (0/6 points)
Operating Earnings Yield (ttm): 6.2% (2/7 points)
Net Income (ttm): $64 M
Gross Profit (ttm): $749 M
Total Assets: $1580 M
Gross Profitability Ratio = GP / Total Assets: 47% (10/12 points)
Cash Return On Invested Capital (CROIC)(ttm): 4%
Return on Invested Capital (ROIC): 6%
Return on Invested Capital (ROIC) (5 Year Median): 12%
Return on Invested Capital (ROIC) (10 Year Median): 23%
Valuation Score (27/34 points)
Free Cash Flow Yield (ttm): 3.5% (4/9 points)
EV to EBIT (ttm): 8.3 (8/9 points)
EV to EBITDA (ttm): 5.5 (8/9 points)
PE10: 6.3 (7/7 points)
Price to Sales Ratio (ttm): 0.5
Price to Book Value: 1.2
Price to Earnings Ratio (P/E) (ttm): 18.3
TOTAL POINTS – (58/100) (50 is an average score)
*Compound Annual Growth Rate (CAGR)
**A Compound Annual Growth Rate of 4.14% = a 50% gain over 10 years.
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(updated December 2016)
Type of Investor / Recommendation
Large Diversified Dividend Portfolios / Should Be Considered
Looking For Exposure to Consumer Cyclical Sector / Can Be Considered
Deep Value Investors / Should Be Considered
Guess (GES) is ranked #69 (out of 246) overall and #18 (out of 30) in the Consumer Cyclical sector by the Dividend Analyzer.
Guess has a pristine balance sheet that gives it some margin of safety. Investors who hold the stock for the long term can collect an above average dividend while waiting for a turnaround.
Portfolio Position Disclosures:
DVB Foundation Portfolio – None
DVB Dividend Growth – None
DVB High Income – Long
Arbor Asset Allocation Model Portfolio (AAAMP) – Long
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