Guess?, Inc. (NYSE:GES)

CAPS Rating: 3 out of 5

The Company designs, markets, distributes and licenses lifestyle collections of contemporary apparel and accessories for men, women and children that reflect the American lifestyle and European fashion sensibilities.


Player Avatar JohnCLeven (75.80) Submitted: 3/20/2013 1:01:06 PM : Outperform Start Price: $26.27 GES Score: +13.74

So what did I buy for $26.52? I bought a company that has $496 million in cash zero debt which translates into a net cash position of $5.64 PER SHARE. So the better question is, what did I buy for $20.88? ($26.52-$5.64). I bought a company with ZERO debt, a history of returns on equity and returns on capital in the 20-28% range (awesome), still run by the two brothers that founded the company, (each brother owns about 14% of the outstanding shares), for a cash adjusted earnings yield of 13.7% and a cash adjusted free cash flow yield of 12.5%. Yes, clothing is not exactly the most profitable business, and yes GES’s growth has been slowing, but with the sky high ROC, very low valuation, and two managers who’s interests are uncommonly aligned with shareholders…I’m going to pick GES anyway. Add in the 3% dividend yield, and the fact that GES is selling for a slight 6% discount to their Graham Number which is around $28…and I think you have a pretty solid long-term pick.

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Member Avatar ElCid16 (97.05) Submitted: 3/20/2013 1:13:15 PM
Recs: 0

They had around $496MM in net cash as of January 2012, but I think that number is substantially lower now. Maybe closer to $250MM.

You sure do love your retail clothing companies. :)

Member Avatar JohnCLeven (75.80) Submitted: 3/20/2013 1:47:06 PM
Recs: 0

Thanks for the info.

What can I say? Retail's cheap. At least according to my simpleton methods. Maybe it's fear related to the economy, the demise of the middle class, or the rise of Amazon...but whatever it is, retail companies across the board (without much consideration to quality) seem to have been pushed low valuations. And while AMZN has killed, and will continue to kill certain types of retailers(just look at RadioShack, Barnes & Noble, etc), I think there are also a bunch of solid retailers, that have very bright futures ahead. (See BBBY and ROST) Perhaps, this is a good opportunity to go hunting for quality in the retail sector, before people realize that traditional shopping isn't going extinct after all.

either that or i'm the fool at the poker table.

Member Avatar baselineace (< 20) Submitted: 5/21/2013 12:57:27 PM
Recs: 0

Their growth has been slowing due to macro factors, should outperform the consumer discretionary sector going forward.

Member Avatar JohnCLeven (75.80) Submitted: 6/3/2013 10:22:05 AM
Recs: 0

2014 eps guidance is $1.90. Closing pick.

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