Guess? wants you to get in its jeans. Founded to make flattering designer jeans, the company manufactures trendy, upscale apparel and accessories for men, women, and children under brands GUESS, GUESS Kids, Baby GUESS, and GUESS by MARCIANO, among others. Its trademark sexy ads, featuring the likes of Claudia Schiffer, are designed in-house. Guess? operates a noteworthy 1,690 stores worldwide. It directly operates more than 830 stores and concessions in the US, Canada, Europe, the Middle East, and Asia. Another 800 stores and concessions are run by licensees in the same markets. To get more bang from its brand, Guess? licenses its name for eyewear, footwear, jewelry, and watches.
Guess? divides its business into five reportable segments: Europe, North American Retail, Asia, North American Wholesale, and Licensing.
The Europe segment comprises its wholesale and retail operations in Europe and the Middle East. The North American Retail segment consists of retail operations in North America. The Asia segment includes the company's wholesale and retail operations in Asia. The North American Wholesale segment focuses on both wholesale operations in North America and export sales to Central and South America. And lastly, the Licensing segment comprises Guess?'s worldwide licensing operations.
The company's retail operations in North America account for 42% of its revenue. Guess? is also a wholesaler to major department stores, including Macy's and Dillard's, specialty shops, and upscale boutiques. During 2011 Guess? tweaked its segment reporting, separating its North American wholesale and Asia segments, to better reflect how it manages its operations.
Sales and Marketing
Guess? logged more than $59 million in advertising and marketing expenses in fiscal 2013. The ads that have made Guess? iconic are designed in-house.
Besides its brick-and-mortar retail operations, Guess? wholesales its apparel and accessories to mass merchandisers, specialty shops, and upscale boutiques worldwide. The company also sells products online and through licensees and distributors in South America, Europe, Asia, Africa, Australia, and the Middle East.
To diversify its operations, Guess? has been looking to make its business more global to reduce its risk in any one market. It's also considering raising prices for some of its products -- anticipating increased costs for raw materials, labor, freight, and commodities such as oil -- while it works to implement savings in its supply chain. To boost retail sales, Guess? is banking on its new G by GUESS store concept, which caters to cost-conscious consumers and is flexible enough at a typical 5,000 sq. ft. to be adapted to placement in mall locations.
Scoffing at the economic downturn, Guess? in 2011 opened its world's largest flagship store (with more than 13,000 sq. ft.) in New York City. In Europe and Asia, its growth strategy is similar. Guess? is focused on developing new markets in Northern Europe and springboarding from its success in Western and Southern Europe. With its licensee partners, the company opened 98 stores in Europe in fiscal 2013 and acquired 26 stores from one of its European licensees. (During 2012 Guess? opened 120 retail stores in Europe.) In fiscal 2014, the company aims to open 70 stores primarily in Northern and Eastern Europe; about a third of the stores will be company-operated. Meanwhile, Guess? slowed its store openings in Southern Europe as it works to improve the performance of its existing stores there.
Mergers and Acquisitions
Guess? continues to focus on international expansion, particularly in Asia and Europe. To this end, the company acquired its licensee of children's apparel, BARN S.r.l.; a majority stake in Italy's Focus Europe; and Maco, one of its Italian licensees. As a result, the company's sales outside North America represent nearly half of its overall revenue, up from one-fifth in 2005. Guess? has also brought its kids and adult apparel businesses in Europe in-house.
Guess? logged a modest 1% decline in revenue during fiscal 2013 as compared to 2012 mainly due to sales decreases from the Europe and Licensing segments. Revenues declined in Europe mainly due to the decrease in the wholesale business as a result of lower apparel sales. While the company grew its business in newer markets, such as Russia and Germany, the sales momentum was offset by declines in more mature markets, such as Italy and France. Net royalty revenue from licensing operations dropped, as well, thanks to lower sales by the company’s licensees in the handbag and watch categories.
Net income for Guess? decreased 33% during the same reporting period primarily due to a decrease in revenues and increase in SG&A expenses. The increase in SG&A expenses was due primarily to higher selling expenses and higher global advertising and marketing expenses.
Each with a stake in Guess?, chairman Maurice Marciano (16%) and his brother Paul (14%) run the company founded by their father. FMR LLC also owns a more than 13% share in Guess?.