Guess Inc., more than 40 years in, is seeing a major evolution of its business taking place.
The Los Angeles-based company, which executives see hitting record revenue of $3 billion in the future, is moving away from the idea of a single brand operator to a springboard that incubates and scales other labels through its 43 years growing its namesake label.
“As we have been reflecting and thinking and doing a lot of work on our strategic vision for the company, it became very obvious to us that over the last 43 years, [co-founder and Chief Creative Officer] Paul [Marciano] and his brothers, they have built a pretty incredible machine here where one brand benefited from multiple capabilities, including understanding how to run in each and every one of the channels where we sell product with,” CEO Carlos Alberini said during the company’s earnings call Wednesday. “So, we have capabilities in retail, in e-commerce. We know how to do the wholesale business. We have probably every single business model that you can imagine in our industry is represented in our network one way or the other….”
The business maturation was recognized as Alberini fielded a question on what the company fancies itself as it readies for the closing on its acquisition of Rag & Bone and market launch of Guess Jeans.
The conclusion: At this point, Guess Inc. is more than a denim brand.
“When you think about… for all these 43 years, this whole ecosystem has served the Guess brand very well,” Alberini said. “But then we started thinking, ‘Well, why couldn’t we just bring additional business through this platform and really give them access to all these capabilities?’”
An Incubator
One way it’s doing that is through the launch of Guess Jeans, which is targeting Gen Z and sustainably-minded consumers. The label is being led by Marciano’s son Nicolai Marciano.
The concept of a platform becomes clearer in what Guess aims to do with Rag & Bone.
“[If] you think about an opportunity like Rag & Bone, Rag & Bone brings an incredible match to what we think that this platform can offer,” Alberini said.
Last month, Guess partnered with New York brand management firm WHP Global in the acquisition of Rag & Bone’s intellectual property. Guess also acquired Rag & Bone’s 34 stores, inventory and other operating assets. The denim company will then license the Rag & Bone brand from the joint venture to make and sell various branded products.
Rag & Bone in 2023 generated net revenue of about $250 million and adjusted earnings before interest, taxes, depreciation and amortization of $18 million.
“We have an ambitious vision for Rag & Bone and we plan to expand its product offerings through a combination of owned product development and licensing specific categories that we believe has significant potential for growth,” Alberini said.
Rag & Bone distribution will also expand internationally with the help of the Guess distribution and licensing network.
“The inflection point, the evolution for us, is that we view these [business] capabilities as a platform to drive outsized growth, a platform that gives us the power to do things that others simply cannot do,” Alberini said. “The power to take a smaller, regional or national brand and make it global. The power to leverage our portfolio of product categories and build a mono-category brand into a lifestyle brand. The power to make something exponentially bigger because we can grow it across multiple dimensions. That’s not easy to do, but we feel we have built the right platform to do it.”
Growth Story
The comments came as Guess reported its fiscal fourth quarter and full-year results, both of which ended Feb. 3.
Net earnings in the quarter jumped 20 percent to $115.3 million on net revenue of $891.1 million. Revenue was up 9 percent year over year in constant currency.
The quarterly results showed growth across most of the business divisions: Europe rose 10 percent in constant currency, Americas wholesale grew 39 percent, Asia was up 19 percent and licensing increased 15 percent. The Americas retail business ended the quarter flat.
For the full year, the company generated net revenue of $2.8 billion, up 3 percent in constant currency from the previous year. Net earnings spiked 32 percent to $198.2 million.
For details on the Guess Jeans launch and its store strategy, click here.
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