Here's What Guess? is Doing as Coronavirus Spreads Rapidly

Zacks Equity Research

With coronavirus growing at a dangerously rapid pace, retailers have been taking increased measures to contain the spread. Companies that were earlier closing stores or limiting working hours have extended store closures, considering the increased scare surrounding the outbreak. Also, several companies have withdrawn guidance alongside adopting ways and means to improve financial position.

Toward this end, companies are drawing under their credit facilities, temporarily suspending dividends and share buybacks, and undertaking other expense control measures. In this regard, Guess?, Inc. GES, which recently prolonged its store closures in the United States and Canada, has announced additional ways to reduce the adverse operating and financial impacts from COVID-19 spread.

Incidentally, the company is furloughing all its U.S. and Canada store associates from Apr 2. However, they will receive payments for the period stretching over the start of store closures until Apr 1. Apart from this, the company is furloughing nearly half of its U.S. and Canada corporate associates alongside most associates at its distribution centers, beginning Apr 2.  Markedly, Guess? will sponsor all eligible workers with health insurance premiums during the furloughed period.

Among other moves, Guess? is undertaking tiered salary curtailments temporarily for all its U.S. corporate workers at the management level. Further, it is delaying annual merit raises and considerably reducing store occupancy costs, capital expenditures, inventory purchases and overall expenses. Also, the company has drawn about $212 million under some of its credit facilities and has postponed its dividend payment-related information for the first quarter of fiscal 2021.

Notably, Guess? extended its store closure plans on Mar 28. The company stated that it will prolong the temporary store closure plan across the United States and Canada until further notice. Moreover, company-operated stores in various countries across Europe were shuttered in the past. Apart from Guess?, many other retailers like Nordstrom JWN, Ulta Beauty ULTA and Kohl’s KSS, to name a few, have taken to prolonged store closures as the impact of the pandemic is expanding. The pandemic has infected more than 750,000 people worldwide and the death toll has crossed 35,000.

Coming back to Guess?, management had, nonetheless, previously stated that customers can continue to make online purchases via the Guess, Marciano, Guess Factory and gbyguess websites. Markedly, digital operations have been aiding Guess?’s top line for a while now, thanks to its efforts to boost online sales. However, the impact of such prolonged closures is likely to get reflected on the company’s performance in the first quarter of fiscal 2021.

Shares of this Zacks Rank #3 (Hold) company have plummeted 63.8% in a year compared with the industry’s decline of 36%.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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