THE EDIT. Click to hide summary.
- Guess Jeans Aims for $100M+ in Sales: CEO Carlos Alberini revealed plans to scale the sustainably-focused Guess Jeans label, with U.S. and Japan rollouts in the pipeline.
- Rag & Bone Powers Growth: Since acquiring Rag & Bone, Guess Inc. has expanded the brand internationally with new stores and strong e-commerce performance. Future licensing deals in eyewear and fragrance aim to deepen its presence among affluent consumers.
- Core Business Adjusts to Market Shifts: Facing global traffic declines and currency pressures, Guess plans to close 20 underperforming stores, expand opening price point assortments and reinvest in speed-to-market strategies to regain its footing.
Guess Inc. revealed big ambitions for its Guess Jeans label – once it works out a few kinks.
When that’s done, CEO Carlos Alberini told analysts Thursday afternoon the company thinks the label could generate over $100 million in sales “very soon.”
The sustainably-focused label, which has been overseen by co-founder Paul Marciano’s son, Nicolai Marciano, rolled out last year.
It has to clear a few hurdles first.
Guess Jeans launched in Europe, with Italy currently the top performer. Most of the sales are generated through wholesale partners, according to Alberini. Although, there are three Guess Jeans European stores.
In a few months, Guess Jeans will make its way to the U.S. with a store on Melrose Avenue in what Alberini said will draw more brand awareness. He acknowledged the domestic rollout has been “a little bit slower” than the activity overseas.
Part of that has been a focus on getting the right sales representatives to grow the wholesale team and business.
A partnership announced this week with Japanese multi-hyphenate artist Verdy could help drive its expansion in Japan, where it plans to open a Tokyo flagship.
“Verdy has done incredible things there and is a very high figure in the Japanese market and very relevant to this customer group that we are looking to attract,” Alberini said.
Guess Jeans will also need to broaden its assortment if it wants to expand, Alberini pointed out.
When the label launched, it focused on essential. Now, the assortment needs a stronger point of view when it comes to trends.
“The results, I think that we could do better,” Alberini said Thursday. “We are looking at the mix of products that we have there. Also, the initial launch had a collection that did not address fashion in a very significant way because, at the time, we thought … going more with a basic collection would be better.”
Retailers are now asking the label for more fashion, according to Alberini.
Rag & Bone Shines
One consistent bright spot for Guess Inc. is New York contemporary brand Rag & Bone, which it bought last year with WHP Global.
The business, which is driven by e-commerce, has opened several stores since the acquisition. That includes a recently opened door in Amsterdam and two in Germany. Meanwhile, the U.S. business continues to be “very strong,” according to Alberini.
Guess executives see Rag & Bone as a growth vehicle, particularly with an affluent customer base Alberini said gives the company “greater flexibility and pricing power” amid concerns over the impacts of this week’s tariffs announcement.
“[The business] is not driven by promotional activities, but more by the strength of the product collection that we are putting in front of the customer and we have some new products that have been doing extremely well,” Alberini said.
More licensing deals for Rag & Bone are expected for categories such as eyewear and fragrances.
Moving Faster at Guess
While Guess Jeans and Rag & Bone have plenty of potential, the company’s namesake business is making adjustments in response to market shifts.
Store traffic declines globally and the strength of the U.S. dollar were pointed to as impacting revenue and margins.
Domestically, the company’s men’s and women’s businesses were down, including accessories and footwear. Meanwhile, women’s activewear performed well.
“We have been in this market for decades and during all that time, we used to have higher productivity in many stores and we have lost some of that,” Alberini said. “We believe strongly in having key retail locations. We think that there are several things we can do, and our leadership team has spent considerable time developing a plan.”
That plan includes shuttering 20 underperforming North American doors this year and creating product exclusives for the retail stores.
The company is also returning to the speed-to-market model, which would ensure it moves faster on trends and also has the ability to quickly re-order best sellers.
Opening price point merchandise will also see an expanded assortment.
In response to this week’s tariffs announcement when it comes to Guess domestically, a “substantial” part of the business are outlet sales. Alberini said the company thinks it can “counter-source” many of those products in the outlets from markets such as Latin America, where the “tariffs tend to be more moderate.”
The business update came with Guess Inc.’s results for its fiscal fourth-quarter and full-year ended Feb. 1.
For the full year, the company’s net earnings dropped 70 percent to $60.4 million on net revenue of $3 billion. Revenue rose 10 percent, excluding the impact of exchange rates.
A special committee formed by the company is currently evaluating a go-private offer from WHP Global, which was made in March. The offer equates to $13 per share.
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