Undeterred by Foul Weather and the Economy, Guess Continues Spectacular Growth

Implications: With almost flawless execution of their global retail strategy and powerful brand extensions, Guess continues its dramatic growth in revenue and profit. Offering no excuses about the weather, high gasoline prices and a soft housing market, Guess reported that U.S. same-store sales for their first quarter grew 13.6 percent awhile total company earnings increased 71.9 percent. Wholesale revenues at Guess grew 77 percent, in spite of the brands rapid expansion of their own retail stores and growing Internet business. The experienced and talented upper management of the company was able to change the business model from a wholesale department store resource to a leading global retail brand in six years. Guess is established as a fashion leader in the “contemporary” fashion segment and its well merchandised product assortments uniquely position the brand for further global expansion.

Analysis:  

How do you go about transforming a medium sized jeans manufacturer that is barely surviving, into a $1.5 billion global multichannel brand in six years? For an answer you might want to talk Paul and Maurice Marciano, who along with two older brothers, founded Guess about twenty-five years ago.

From the start, Guess had a unique contemporary point of view, with sexy, highly engineered premium jeans at the core of the collection. They sold their products through better department stores and upscale boutiques, but grew weary of what they considered to be unreasonable demands for allowances and markdown money from the big stores. To gain better control of the brands distribution and image Guess management decided to build some of their own retail stores and sell their products online through their website. Ten years ago these initiatives were considered very risky for an apparel brand that seemed to be at the mercy of the big department stores – after all they were now becoming competitors with their prime customers. In spite of some veiled threats from the department store channel, the brand remained a presence in contemporary departments across the country and continued to perform well.

By 2001, the company felt as if they had reached a crossroad in and decided to reinvent themselves as a global retail brand with wholesale playing a much smaller role. After fifteen straight quarters of earnings growth, the company outdid itself by posting a staggering 71.0% in earnings growth on a consolidated basis. Same store sales in North America were up 13.6% and operating margin for the company improved 240 basis point to15.3%. What is so amazing is that results were up significantly in every business channel including Europe, Asia, The Middle East, North America and global wholesale.

It is no secret that the apparel industry is suffering from a dearth of top tier leadership with the vision, passion, determination and merchandising skill’s needed to turn ailing brands around in a very competitive environment. Paul and Maurice Mariano also brought an often overlooked element by apparel retailers seeking new leadership at the top: hard core apparel industry experience.

Guess is an outstanding example of a multi-brand, multichannel, global apparel company that has executed its ambitious business model at a level that is close to perfection and I wouldn’t be surprised (if the company’s management stay’s in tact), that revenue doubles, from $1.5 billion to $3.0 billion within the next five years.