MARKET INSIGHT: Guess Inc. Fulfills Fashion's Desires

Guess Incorporated () designs, markets, distributes and licenses a lifestyle collection of contemporary apparel and accessories for men, women and children that reflect the American lifestyle and European fashion sensibilities. The lines include collections of denim and cotton clothing, including jeans, pants, overalls, skirts, dresses, shorts, blouses, shirts, jackets and knitwear.

The company also selectively grants licenses to manufacture and distributes a range of products that complement its apparel lines, including eyewear, watches, handbags, footwear, kids' and infants' apparel, leather apparel, fragrance, jewelry and other fashion accessories. Its business is organized into four segments: retail, wholesale, European and licensing.

Guess recently announced that it will stop purchasing fur in any of the apparel collections as of September 1, 2007. Any clothing using fur already in production will be phased out of sales channels by April 2008. The company supports the prevention of cruelty to animals. They went on to say that they will continue to strongly pursue original and inventive methods of design and production with the use of faux fur. The immense variety of faux furs on the market today is not only comparable to actual fur, but also offers more room for creativity.

Fundamentally, Guess Incorporated has great sales growth and return on equity. The latest earnings showed an increase of 71.9 percent, compared to net earnings of $20.7 million for the recent quarter. Diluted earnings per share increased 65 percent to $0.38 per share in the current quarter versus $0.23 per share in the prior year quarter. Total net revenue increased 42.3 percent to $377.9 million, from $265.7 million in the prior-year period.

Technically, the stock appears to be poised to move up to the $56 per share area. The company offers a very liquid options market with lots of open interest and tight bid/ask spreads. There are no LEAPS, but the current cycle extends out to March of 2008, which is more than enough time for the options strategist to take advantage of this particular opportunity.

Figure 1:  Elliot Wave-4 Buy Pattern for Guess Incorporated

Happy Trading.

Jeff Neal 
Senior Writer, Options Strategist & Profit Strategies Radio Show Market Correspondent
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