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With Alberini at the Helm, Guess to Sharpen Focus on Denim

Carlos Alberini has his eye on the Guess denim business.

In his first discussion with analysts after coming on board as CEO, Alberini said, “Denim has always been at our core and has always been a dominant product category for Guess, one that brings the customer into the store. Today, our denim penetration is much lower than our historic levels, and I believe that we can grow it back with a great product assortment, strong store presentation and effective marketing.”

Alberini, who was president and chief operating officer of Guess from 2000 to 2010, added, “When I look at the penetration that the denim product has today relative to what it used to be, I think that it’s very clear that we have an opportunity to really increase our denim penetration.”

In the few weeks since he returned, after stints as co-CEO of Restoration Hardware and then CEO of Lucky Brand, Alberini said he has begun to mobilize efforts to expand denim exposure.

“I think our denim is big opportunity–and I think that when I say that, I mean globally–and I think we have the nimbleness to be able to move relatively quickly, and that is what we are going to try to do,” he told analysts after the company reported fourth quarter and full year sales and earnings on Wednesday. “We all believe very strongly about this and we feel that their team is very excited about reigniting the category in a big way.”

Guess Inc. reported revenue for the fourth quarter ended Feb. 2 increased 5.7 percent to $837 million. For the full year, revenue rose 10.4 percent to $2.61 billion. Net earnings in the fourth quarter jumped to $23.2 million compared to net earnings of $1 million for the year-ago period. For the year, net earnings were $14.1 million compared to net loss of $7.9 million in the prior year.

For denim, which Alberini called “a complex category,” the CEO said the focus will be on improving assortments, fabrics, washes, fits, styling and commanding a greater relevance on the fashion side, too.

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“Then the second big thing is about presentation,” he said. “I think that today if you go to our stores, you don’t feel that we are the kind of powerful denim brand that we used to be, and I think we have to change then and we will.”

The third key area for denim will be marketing, including, according to Alberini, “how we’re going to tell the customers that we are back on this…with big confidence to support what we want to do with both the product and the presentation in stores. So, we feel that we have all this in our sights and we want to make it happen very quickly.”

Denim, he said, is one of those products few will buy without trying it on first, which gives the Guess sales team a chance to engage with that customer in stores for a longer period of time, and it gives them a chance to cross-sell and up-sell into other categories that complement denim purchases.

Turning to other areas of potential growth, Alberini said international sales accelerated during the past few years, and today Guess has distribution in more than 95 countries and global retail value of over $5 billion.

“Considering the strong momentum and position that the brand has today in the global marketplace, its relevancy with consumers and the extensive white space that there is for the brand in all regions, it is easy to see that the opportunity for global growth is still significant,” Alberini said.

What is challenging, he noted, is for a brand that will turn 38 this year to remain relevant with today’s discerning consumers. Guess has been engaging new millennial and Gen Z customers—which Alberini said now represent more than half of the online customers doing business with Guess in the U.S.—through innovative initiatives and meaningful collaborations with key celebrities. The brand has partnered with ASAP Rocky, J Balvin, 88rising, Places + Faces and Sean Wotherspoon.

On the retail level, Alberni said store expansion of the past few years has been “accretive and value enhancing for our store portfolio.”

“The new stores are profitable, with good lease conditions and on average, are achieving plans,” he said. “Still, in spite of the accelerated growth, I believe that we have significant white space for global expansion.”

On the down side, Alberini noted that other comparable brands, with similar distribution but less diversified assortment, have reached between $7 billion and $9 billion in retail sales globally compared to Guess’s $5 billion, “so our opportunity should exceed 40 percent to 80 percent of growth from current levels once we reach development in all global markets.”

Key areas that offer significant opportunities for further development are China, Japan, and Eastern and Northern Europe, he said, which saw double-digit growth this past year.

As for opportunities for savings, Guess has seen logistics and distribution costs increase considerably, Alberini noted, though there’s hope that will abate.

“I see a significant opportunity to reduce costs over time, particularly in logistics and distribution, and to leverage our rent and store payroll costs to improve sales productivity in the future,” Alberini said.

Guess also has opportunities to leverage and support its global business more effectively, according to Alberini, including in areas like sourcing and product development, data capture and analysis regarding product performance, customer history and behavior, and information technology and innovation.