UPDATE: Piper Jaffray Downgrades Guess (GES) to Underweight

(Updated - February 18, 2015 11:15 AM EST)

Piper Jaffray downgraded Guess (NYSE: GES) from Neutral to Underweight with a price target of $15. The change follows a disappointing report yesterday from peer Fossil Group (NASDAQ: FOSL).

Analyst Erinn E. Murphy said, "We view the set up in shares over the next 12 months as somewhat similar. Both stocks have been out of favor. Investors have had similar concerns on the health of both the Guess and the Fossil (core) brands. In addition, both companies have similar global footprints--each with over one-third sales exposure in Europe and over 50% outside of the U.S. In addition, watches is a category that we saw decline for the first time in over five years on Fossil's Q4 release. For Guess, watches are 9-10% of sales. Taking this all together, we are reducing our estimates again for FY16-- taking EPS from $0.95 to $0.85. We need to gain better visibility on guidance, store portfolio optimization opportunities and margin drivers before revisiting our rating."

"While we recognize we have been on the sidelines since August 2014, we believe there is further downside risk to our numbers for FY16. GES derives over 50% of their sales from markets OUS and with underlying FX headwinds, we are concerned about the translation and the transactional risk in particular to the Euro. GES has ~35% exposure to Europe. In addition, Guess has its corporate European HQ in Lugano, Switzerland which adds another layer of complexity to FX risk given appreciation of the Swiss Franc--think higher expense outflow currency," added the analyst.

For an analyst ratings summary and ratings history on Guess click here. For more ratings news on Guess click here.

Shares of Guess closed at $18.81 yesterday.

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