Guess Inc.’s work to revive the brand with elevated product and an end to heavy promotions is serving the Los Angeles denim brand well.
CEO Carlos Alberini told analysts Wednesday Guess, which is currently a $5.5 billion business, could easily grow beyond that with the company’s multi-pronged effort to bolster the brand in effect.
“We think that this number could be a lot bigger than that,” Alberini said. “I’m talking about when you look at some of the global brands, some of them are in the $8 billion, $9 billion size and this is with less product categories than we have with less of a lifestyle type of offering [than] we have. So a lot of opportunity.”
The denim firm has worked in more recent years to breathe new life into its brand by creating a global product line, a focus on full-price selling, re-pricing strategies and store remodels.
“Our teams’ efforts to elevate our brands have been powerful and transformational for our company,” co-founder and Chief Creative Officer Paul Marciano said in a statement.
Brighter Outlook
The upbeat sentiments follow a strong fiscal second quarter, which ended July 29 for Guess.
Guess Inc. capped the quarter with adjusted earnings of $65 million on net revenue of $664.5 million. Both figures reflected year-over-year increases.
The results prompted the company to up its guidance for the full year.
Net revenue for the fiscal year is expected to be up 2.5 percent to 4 percent, compared to prior guidance of an increase between 2 percent and 4 percent.
Adjusted diluted earnings per share are now expected to be in the range of $2.88 to $3.08, up from an earlier forecast of $2.60 to $2.90.
Mixed Bag
Guess’ second-quarter performance was led by its results in Europe and Asia, where shoppers continue to scoop up everything from the company’s denim and accessories, to dresses and tops.
European revenue rose 8 percent in constant currency during the quarter, with same-store sales rising 11 percent.
In Asia, revenue jumped 22 percent excluding the impact of exchange rates, with same-store sales up 5 percent.
The Americas market offered a different read on consumers. Revenue in the region fell 8 percent in constant currency, while same-store sales declined 6 percent. Sales in the region were off across women’s, men’s and accessories.
Alberini pointed out the lackluster performance was not for lack of on-trend product, but in response to the broader challenges facing Americas consumers.
“Right now, there is a lot weighing on the global consumer,” Alberini said. “Despite tighter labor markets and rising wages, higher interest rates and inflation are impacting consumer confidence, and we expect that this will continue for some time.”
Alberini pointed out categories such as sweaters and denim have had success in the Americas, indicating the market’s challenges are not tied to product.
“There are a lot of things that we think are working very well, but we continue to see that the consumer is a little bit more pressured and looking for a lot of value,” Alberini said. “We have been careful not to promote and we have been able to really do well with that, in spite of the environment being very promotional in general.”
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