Is Guess (GES) Poised for a Post-Earnings Rebound Amid a Weak EPS Outlook?

Guess (GES) has long been a bellwether for the fashion industry's cyclical nature, but its Q2 2025 earnings report has sparked a critical debate: Can the company's robust revenue growth, strategic regional expansion, and positive investor sentiment offset a sharp decline in earnings per share (EPS) and catalyze a short-term rebound? The answer lies in dissecting the interplay between financial performance, operational strategy, and market dynamics.

Revenue Growth: A Double-Edged Sword

Guess reported Q2 2025 net revenue of $732.6 million, a 10% increase in U.S. dollars and 13% in constant currency, driven by the acquisition of rag & bone and strong wholesale performance in Europe and the Americas. This growth, however, came at the cost of a GAAP loss per share of $0.28 and an adjusted EPS of $0.42—a 42% decline from the prior year. The disconnect between top-line growth and bottom-line profitability raises questions about the sustainability of this expansion.

The company's revenue growth is largely attributable to strategic acquisitions and wholesale momentum, but these gains are offset by rising expenses, including marketing investments and integration costs for rag & bone. reveal a widening gap between revenue and profitability, with EPS declining despite consistent revenue growth. This suggests that the company's current strategy prioritizes market share and brand diversification over near-term profitability—a common tactic in growth phases but one that risks eroding investor confidence if not balanced with margin improvement.

Regional Strategy: Europe and Americas as Growth Engines

The Americas Wholesale segment saw a 93% revenue surge, driven by rag & bone's inclusion, while Europe's revenue grew 5% in U.S. dollars and 8% in constant currency. These regions are now the backbone of Guess's growth, with the CEO emphasizing “transformation and investment” as key themes. However, the Asia segment's 8% revenue decline in U.S. dollars highlights regional vulnerabilities, particularly in markets where consumer demand is softening.

Investor sentiment appears cautiously optimistic about Europe and the Americas, where the company is expanding its retail footprint and leveraging digital channels. underscores the shift in focus toward these markets, which now account for over 60% of total revenue. The challenge lies in replicating this success in Asia, where declining retail comparable sales (-14%) indicate deeper structural issues, such as shifting consumer preferences or competitive pressures.

EPS Decline and Guidance: A Signal of Structural Pressures

The 42% drop in adjusted EPS and the company's lowered full-year guidance—projecting adjusted EPS of $2.42–$2.70—reflect ongoing operational challenges. Guess's gross margin contracted 200 basis points to 39.9% in Q2 2025, and its adjusted operating margin guidance of 7.3–7.8% for fiscal 2025 is a 100-basis-point decline from prior expectations. These metrics suggest that the company's cost structure is under pressure, likely due to higher marketing spend, supply chain costs, and integration expenses.

Analysts have maintained their $0.14 EPS estimate for Q2 2025, but the lack of revisions over the past 30 days indicates a lack of confidence in near-term improvements. shows a consistent underperformance, with the stock now trading at a price-to-earnings (P/E) ratio of -55.28, reflecting its unprofitable state. While the company's share repurchase program and 9% dividend yield offer some shareholder value, these measures may not offset the EPS drag without meaningful margin expansion.

Investor Sentiment and the Take-Private Bid: A Catalyst for Rebound?

Despite the weak EPS outlook, investor sentiment has been buoyed by the company's strategic initiatives and the pending take-private transaction. The stock has surged 27.3% in the past month, outperforming the S&P 500, as investors price in the $16.75-per-share offer from Authentic Brands Group—a 73% premium to its March 2025 closing price. This transaction, valued at $1.4 billion, signals confidence in Guess's long-term potential but also raises questions about short-term volatility.

The take-private bid could act as a short-term catalyst, with shares potentially trading at a premium to reflect the acquisition premium. However, the delisting from the NYSE and the shift to private ownership may reduce liquidity, limiting the stock's upside in the near term. For now, the market appears to be betting on the company's ability to streamline operations and leverage its brand portfolio post-acquisition.

Conclusion: A Rebound is Possible, But Conditions Are Mixed

Guess's post-earnings rebound hinges on three factors:
1. Margin Recovery: The company must demonstrate that its cost structure can stabilize or improve, particularly in light of its full-year margin guidance.
2. Regional Execution: Sustaining growth in Europe and the Americas while addressing Asia's challenges will be critical to maintaining investor confidence.
3. Take-Private Synergies: The acquisition by Authentic Brands Group could unlock value through operational efficiencies, but execution risks remain.

For investors, the stock's current valuation (trading at a 10% premium to its 12-month price target of $15.50) suggests that much of the optimism is already priced in. A rebound would require either a surprise in earnings or a significant shift in the company's strategic direction. Given the mixed fundamentals, a cautious approach is warranted—positioning for a potential rebound in the context of a broader market rally or a positive earnings surprise, but avoiding overexposure to a stock with structural margin pressures.

provides a useful benchmark for assessing its relative strength. While the stock has outperformed the index, its volatility and earnings risks mean that any rebound will likely be short-lived without a clear path to profitability. For now, the jury is out on whether Guess can transform its revenue growth into sustainable shareholder value.