Plenty rests on the successful expansion of Rag & Bone.
In fact, the majority of parent Guess Inc.’s growth in its current fiscal year is expected to come from the New York contemporary brand’s ability to quickly scale under the Los Angeles denim firm.
“The Rag & Bone acquisition is providing the lion’s share of this year’s growth for us,” Guess Inc. interim CFO Dennis Secor said this week during the ICR Conference in Orlando, Fla. “That brand was already on a solid growth trajectory when we acquired it.”
Guess made waves last February when, for the first time in its 43-year history, it bought a brand in Rag & Bone. Guess scooped up the brand’s operations, which was 36 stores. It also went in with New York brand management firm WHP Global to buy Rag & Bone’s intellectual property, with Guess spending $56.5 million.
Rag & Bone generated about $250 million in 2023 revenue and adjusted earnings before interest, taxes, depreciation and amortization of $18 million.
Now, Guess Inc. wants to “supercharge” Rag & Bone’s growth, Secor said.
It’s opening a store in Amsterdam and recently inked a licensing deal for handbags. With Guess Inc.’s expertise in 25 categories, it sees room for Rag & Bone to diversify its assortment.
Out of the $250 million in 2023 revenue, 90 percent of it came from U.S. sales, while the remainder came from Europe and Asia.
By comparison, sister brand Guess generates 75 percent of its revenue from outside the U.S.
“So that gives you an idea in terms of the potential for Rag & Bone,” Fabrice Benarouche, senior vice president of finance and investors relations and chief accounting officer, said at ICR.
Getting it Right
A lot more than just Rag & Bone’s numbers hinges on the brand’s successful growth.
It also offers a test as to whether Guess Inc. has the chops to take its operational expertise, from design and marketing to manufacturing and licensing, and apply it to other brands.
“We can leverage all those capabilities and partner with other brands and really grow things much more quickly than those brands could have done otherwise on their own,” Secor said. “And Rag & Bone is the first manifestation of that.”
The CFO said it’s still “early innings” for Rag & Bone, but it’s expected to provide the template for future M&A.
“We’re not operating to a particular timeline,” he said, “but we want to make sure that we learn how to do this so that we don’t miss the next opportunity.”
Thinking Young
It’s also testing its ability to incubate brands in-house, with Guess Jeans.
“In many ways, we’re following a similar playbook,” Secor said of how it aims to scale that brand.
The label’s launch is clearly not resting on its hometown market.
Guess Jeans already counts three stores located in Amsterdam, Germany and Italy. It’s also set to open a door in Tokyo and a North American flagship on Melrose Avenue in West Hollywood.
Guess Jeans aims to speak to a younger consumer with what Benarouche called “sharper price points,” more basics and a view toward sustainability.
The momentum and buzz around the newer labels is helping make up for Guess, the brand’s, more recent challenges with North American retail.
The company said it’s looking at pricing, particularly in its off-price channel, to remain competitive. It’s also looking at marketing for its namesake label after conducting a brand review for Guess.
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