Why Guess? Shares Plunged

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Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of fashion retailer Guess? (NYS: GES) were getting marked down today, falling as much as 23% in intraday trading after the company announced second-quarter earnings.

So what: For deciphering the reason for the big drop, all you really need to know is this: Guess?'s new forecast is well below what Wall Street had expected. On the bottom line, the company now expects that it will earn between $2.15 and $2.30 per share for the year. That's a significant adjustment from its previous forecast range of $2.50 to $2.65 and easily short of analysts' average estimate of $2.56. Revenue is now also expected to be softer than previously thought, as management's $2.62 billion to $2.65 billion range is beneath the $2.7 billion that Wall Street had projected.


Now what: It shouldn't be too shocking to hear that sluggish shopping in North America along with tough times in southern Europe (think Italy and France) are driving the disappointing outlook. However, this shouldn't be a surprise to management, either, and so they obviously dropped the ball on evaluating the environment or executing in the business -- or a bit of both.

Higher-end retail is a tough business when economies around the world are slow, but if Guess? is able to get the wheels back on straight, the stock's valuation following this big fall, along with the 2.6% dividend yield, could prove a pretty attractive proposition.

Want to keep up to date on Guess??Add it to your watchlist.

The article Why Guess? Shares Plunged originally appeared on Fool.com.

The Motley Fool owns shares of Guess?. Motley Fool newsletter services have recommended buying shares of Guess?. Motley Fool newsletter services have also recommended writing covered calls on Guess?. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.Fool contributor Matt Koppenheffer does not have a financial interest in any of the companies mentioned. You can check out what Matt is keeping an eye on by visiting his CAPS portfolio, or you can follow Matt on Twitter @KoppTheFool or Facebook. The Fool's disclosure policy prefers dividends over a sharp stick in the eye.

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