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Guess Looks to China, More Efficient Supply Chain, to Reach 2025 Financial Goals

Los Angeles-based denim company Guess is in rebound mode after reporting lower net revenue during the fourth quarter of fiscal 2021 compared to the same prior-year period. But despite the challenges, CEO Carlos Alberini is “encouraged by trends entering the New Year,” and anticipates an uptick in consumer spending.

“We are confident in our business as we emerge from this pandemic,” he said during an earnings call on Wednesday. “As vaccination levels increase across different countries in the upcoming months as we have seen in the U.S., the consumer will be inspired to venture out and buy new clothes.”

The company’s latest focus on both athleisure and occasionwear falls in line with the latest trend reports from Edited indicating the two categories are on the rise in post-pandemic societies. Alberini calls its product assortment “ideal” for this time period and feels Guess is well positioned for the future.

Alberini said Guess is on track to achieve its aggressive financial goals for 2025, which include delivering net revenues of $2.9 billion and an operating margin of 10 percent. He projects that the company will be able to more than double its earnings per share to $3 and increase free cash flow by 65 percent by fiscal 2025 compared to fiscal 2020.

To achieve these targets, the company is focused on six pillars, beginning with organization and culture. Guess recently underwent a reorganization and is now developing each market with an omnichannel approach. Rather than using a traditional method in which each channel and business unit operates in silos, one team will develop all channels in a market for shared accountability.

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The second pillar is brand relevancy, in which guess will focus on growing among heritage, millennial and Gen Z customers. Its recent collections featuring former Guess girl Drew Barrymore and an upbeat, playful collaboration with FriendsWithYou aims to follow through on this initiative. Third, product excellence, will focus on opportunities to increase quality and expand into new categories and global markets.

Guess plans to focus on China market and cut inefficiencies within its supply chain to meet aggressive financial goals for 2025.
Guess Originals x Pleasures Drew Barrymore Courtesy

Customer centricity is another pillar of Guess’ strategies for achieving its 2025 financial goals. Alberini is confident that the company’s new developments in Salesforce and data capture will help drive its Customer 360 initiative, a fully integrated solution that will help analyze every point of customer engagement.

Guess is also focused on another important pillar, improving functional capabilities, and has ongoing plans to invest in infrastructure that will support the business long-term. The last pillar centers on expanding its global footprint in regions such as China, Russia, Poland and Germany, where Alberini says Guess has ample are opportunities for development.

Guess is especially homing in on the Chinese market, mirroring the recent strategies of Levi’s, Wrangler and Lee, which have all used this time to branch out into the growing region.

“We love that the [Chinese] consumer base is very young and energetic,” Alberini said. “We are talking about the biggest middle class in the world—a huge economy with $13 trillion. It is a big deal.”

The company is putting together a team that will offer a more local approach to its Chinese customers, as Alberini says each region in the country has unique preferences. Marketing will also look different in China, as he says Guess has been “too promotional” and has strayed from its brand persona. Instead, it will launch collaborations with local artists and celebrities and call on its local e-commerce partnerships including Tmall, one of the region’s largest B2C retail platforms.

Guess has also rearranged its supply chain with cost and operational efficiencies top of mind. It ceased its logistics partnership with a large unnamed facility at no cost and established a deal with a provider in Poland, which Alberini calls “an attractive place for logistics and distribution work.” Over the past two years, it has cut the number of suppliers it works with by more than 60 percent, citing speed to market a top priority. For these same reasons, it is also committed to digitalizing its product development processes, which it said could reduce lead times by up to two months.

Guess reported that 80 percent of its leases worldwide are expiring in the next three years, and will be more strategic in the locations it keeps.

Overall, Alberini said the six pillars and expansion strategies will put Guess in a favorable position long-term.

“The proof of courage in Guess is evident with every decision we make, always running the business with a long-term view, leading our team with a clear vision to build the company and the value of our brand for the next generation, not just the next quarter,” he said.