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Publication: "Barron's"
Publication title: "Skimpy Jeans, Hefty Profits"
Publication Date: 4/24/2010
Brief Summary:

According to this Barron's article, Guess?, Inc. (GES) is finding a new edge. In addition to updated versions of its trademark jeans, it's selling jeggings (jeans/leggings) for young women, and embroidered, distressed t-shirts for young men. Furthermore, the company is taking all of this global, expanding rapidly in Asia and Europe. "Looking at the stores and the merchandise, I get the sense they're on a little bit of a roll," says Craig Johnson, president of retail consultant Customer Growth Partners.

From a fundamental perspective, the company's same-store sales growth at its North American stores turned positive for the first time since August 2008, climbing 5.3%. This year, sales may grow in the double digits, and hit a record $2.4 billion.

Analysts remain positive as well. "If you look at the specialty apparel universe, there are only a handful of real growth stories," says Christine Chen of brokerage firm Needham & Co.; she rates the company a "strong buy." "There's a misperception that Guess is a mature brand," Chen adds.

In addition, the retailer successfully navigated the economic downturn, limiting markdowns -- and as a result, it could reap outsized benefits in the recovery. Guess is "a well-managed company, and it's proven that over this recession by how it's managed inventories and maintained very good earnings-per-share growth," says Tony Dong, vice chairman of Munder Capital, whose Mid-Cap Core Growth Fund holds a sizable stake in the retailer.

Contrarian Takeaway:

Analysts aren't the only group to be enamored of the company. Options players also remain optimistic. The Schaeffer's put/call open interest ratio for GES stands at 0.62, which is lower than 91% of all those taken during the past 12 months. In other words, short-term options players have been more optimistically aligned only 9% of the time during the past year.

Furthermore, the International Securities Exchange (ISE) has reported 2.4 calls purchased to open for every one put purchased to open during the past 10 trading sessions. This ratio of calls to puts is higher than 76% of all those taken during the past year, pointing to a continuing optimism.

Technically speaking, it appears that this bullish sentiment is warranted. The stock has gained more than 18% since the beginning of the year. Furthermore, the equity has climbed along the support of its rising 10-week and 20-week moving averages since March 2009. These trendlines should continue to carry the security higher during the near term.

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