How Low Will Guess? Go?

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Shares of Guess? (NYS: GES) hit a 52-week low yesterday. Let's look at how it got here and whether clouds are ahead.

How it got here
The decline of shares in the last two months has been due to conservative guidance given by management when it reported fourth-quarter earnings. Management said earnings per share for 2012 would be $2.50 to $2.65 and revenue would be $2.74 billion to $2.78 billion. Analysts had expected earnings per share of $3.21 and revenue of $2.84 billion.

When you miss Wall Street's expectations, it doesn't usually bode well for the stock.


Guess? has been in a funk for more than two years, falling since it hit a post-recession high in 2010. But it isn't alone. American Eagle (NYS: AEO) and Abercrombie & Fitch (NYS: ANF) have struggled, falling behind Gap (NYS: GPS) since its recent pop.

GES Chart

GES data by YCharts

Many clothing retailers have had a tough time in the last few years. The combination of soft spending, high cotton prices, and general economic uncertainty has pushed American Eagle, Abercrombie & Fitch, and Guess? to five-year losses. Gap would have joined their ranks as well if it were not for its impressive surge year to date.

Company

Price/Sales

Return on Assets

Quarterly Revenue Growth

Forward P/E

Guess?0.914.8%2.5%8.6
Gap0.912.6%(1.9%)12.6
Abercrombie & Fitch1.06.4%15.6%10.2
American Eagle1.28.3%13.8%14.5

Source: Yahoo! Finance.

The big question now is if Guess? is starting to flounder or if the stock is trading at a great value.

What's next?
I'm taking a very cautious approach to Guess?' future because the fall can be fast and hard for retailers trying to appeal to trendy teens. When you stop growing, it's a sign that you're already in trouble, and I need to see more signs of growth before jumping into the stock.

Analyst estimates have been crashing down for three months, and the company's conservative guidance must be considered. CAPS members have brushed off market worries, seeing this as a buying opportunity and giving the stock a four-star rating, but I can't agree just yet.

I'll sit out the new low and watch revenue growth in coming quarters. If growth picks up, this stock could be a buy. I'm just worried that it's slowly going out of style.

Interested in reading more about Guess? Click here to add it to My Watchlist, and My Watchlist will find all of our Foolish analysis on this stock.

At the time this article was published Fool contributor Travis Hoium does not have a position in any company mentioned. You can follow Travis on Twitter at @FlushDrawFool, check out his personal stock holdings or follow his CAPS picks at TMFFlushDraw.The Motley Fool owns shares of Guess. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.

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