Excess inventory has plagued many companies of late due to a lack of sales and over-ordering in an attempt to battle ongoing global supply-chain delays.
Although Guess CEO Carlos Alberini admitted in a Q3 earnings call in November to having 19 percent more excess inventory than in Q3 2021, the company’s European arm has successfully implemented new software to keep inventory under control and improve its operating margin.
As part of its pre-covid strategy, Guess Europe Sagl had planned to overhaul its business model and expand operating margin by responding more quickly to marketplace disruptions, moving premium product lines onshore and reducing overstock and discounting.
Operating in about 30 countries in Europe with four 8,000-SKU collections each year and approximately 1,000 directly operated stores worldwide, the company could no longer rely on its outdated system of using Excel spreadsheets to plan merchandising and buying. “Our management team and key business executives needed a high-level overview of the situation but couldn’t get it with the existing process,” said Daniel Botey, vice president of global inventory management at Guess Europe Sagl. “A spreadsheet-based program was no longer powerful enough to handle the sheer amount of complexity and information.”
The plan was temporarily put on hold at the start of the pandemic but quickly revived by Botey and Alberini during the first lockdown. The two chose Centric Planning software from Centric, a Silicon Valley-based solutions provider, that helps reduce markdowns and increase stock availability through advanced analytics and AI-driven forecasting. It also helped transfer inventory online when brick-and-mortar shopping was disrupted by lockdowns.
Botey said that Guess achieved improved results almost immediately. Pre-covid operating margin was 5.6 percent at the end of fiscal year 2020 but had leapt to 12 percent by fiscal 2021. “You can see an increase of 250 basis points due to lower promotional activities alone,” Botey said. “If we had a lot of inventory we could not have done it.”
Centric, which was founded in 1998, has provided product lifecycle management (PLM) software to several other fashion companies including European retailer KaDeWe, Rock & Roll Denim parent company Westmoor, Tom Tailor, Silver Jeans Co. and Bestseller, among others.