Guess Inc. wants a bigger presence on the worldwide stage as it looks for new avenues for growth.
For 2023 and beyond, Guess is eyeing four key pillars for expansion. The first involves an increase in sales productivity in existing stores and market-share gains. Another is organic growth in all of its markets. Brand extensions and category expansion is the third key pillar, and the final one centers on leveraging its core competencies, according to Carlos Alberini, Guess’ CEO, who spoke at a company presentation on Thursday at the UBS Global Consumer and Retail Conference at the Lotte New York Palace.
Alberini said Guess will continue to optimize its store portfolio to make it more productive, looking also at providing a better return of capital “by making it more asset-light.” That can mean anything from better control of the supply chain to tightening its assortment mix.
He described the firm’s supply chain infrastructure as one that “works well,” particularly given recent disruptions. But Guess won’t be resting on its laurels on that front. “We think the supply chain can still be further optimized,” he said, identifying “proximity sourcing” as one area where it can bring sourcing closer to its markets.
Currently, more than 80 percent of its customer base is comprised of its heritage consumer and younger millennial counterpart. The balance is its growing pool of Gen Z customers, which is a reflection of “where we are going. Gen Z is our future customer base,” Alberini said.
According to Alberini, Gen Z has access to money, whether its own or through their parents, and they “pay full price if you have the right things,” he said. Guess’ approach in targeting this demographic includes having celebrity relationships that are leveraged to put the brand in front of the consumer. Guess-sponsored concerts and celebrity capsule lines work for the Gen Z crowd. “This consumer wants to see scarcity in the offer of any type of product,” Alberini said.
He also said leveraging the company’s core competencies was a “big opportunity” for Guess. It’s one that includes the “potential acquisition of both brands and businesses,” Alberini said, adding that the company has a “strong capital structure” and it plans to take advantage of that.
Dennis Secor, chief financial officer, said the company has a “good liquidity position,” with about $270 million of cash on hand and $350 million available on its different credit lines. Moreover, the business generates strong cash flow. “The goal this year is to generate $150 million in cash flow,” Secor said, adding that the dry powder will help the company to execute on its initiatives, including investing in new businesses.
So how did Guess get to the point where it can consider acquisitions?
When Alberini returned to the brand in 2019—he was president and chief operating officer of Guess from 2000 to 2010—his initial focus was on restoring Guess’ dominance in denim. Other areas of the business followed, including a streamlining of operations.
“Brand elevation has been a major initiative for us to really transform the business model,” Alberini told attendees at the UBS presentation.
He said that chairman Paul Marciano led the initiative, which has included all 25 different product categories that now make the Guess “truly a lifestyle brand” that touches multiple facets and occasions that are a part of its customers’ lives. One big change initiated during the middle of the COVID pandemic was the shift to a single global product line. Previously, there was one line for North America and a second line for the European market.
“We are benefiting [from] incredible synergies and a lot of efficiency,” Alberini said, explaining that delivering just one global product line has been a “major drive for vendor consolidation.” He said that about four years ago, the company worked with 535 vendors and now it has just slightly more than 100 suppliers. The new line also allows for greater full-price sell throughs. Alberini said the company only buys the amount of product that it thinks is representative of customer demand, a move that helps it “maintain lower promotional activity.”
European sales currently represent almost 50 percent of the brand’s total revenue base. Wholesale sales in Europe account for half of its European sales. Advertising and marketing for a single line across all markets keeps the message consistent, and the company has also worked on elevating the customer experience, including upgrades on the digital front to remodeling 80 percent of the store fleet so they now feel more like boutiques.
“The density of product in the stores today is significantly less than it used to be,” Alberini said. He said this shift is more effective since consumers often search online before they decide to shop in a Guess store. In addition, the store upgrades includes those at the company’s outlet locations, which Alberini said makes the outlet locations feel as if one was “shopping in a full-price environment.”
With much of the heavy lifting completed for the brand elevation initiative, growth is now its next big focus.