Guess’s growth driven by Europe, Asia, 60 store openings planned in both regions in 2018

By

Olivier Guyot

Translated by
Nicola Mira

Published
Mar 27, 2018

Victor Herrero is focusing entirely on business. The General Manager of Guess, who joined the US group two years ago to steady its highly troubled course on the domestic market, isn't concerned about the accusations hanging over Paul Marciano, one of the label's founder siblings. Spanish manager Herrero is instead concentrating on deploying his five-pronged plan, designed to put a different, more attractive complexion on the group's financial performance in all of its markets.

For the 2017-18 financial year, closed at the start of February, Herrero's single-minded focus seems to be what Guess needed. The group recorded a revenue of $2.364 billion (€1.9 billion), equivalent to an 8% increase, driven by a fourth quarter in which revenue leapt 18%, reaching $792 million. Is it the J-Lo effect ? Whatever it is, Guess's performance undoubtedly stepped up a few gears in the last quarter. The retail sales shortfall in the Americas region slowed down (-6%), bringing the total for the financial year to -11% ($833 million). The slump was partly explained by a spate of store closures. "Last year, we closed down 62 stores in North America, and negotiated a rent reduction in 88 others," said Herrero. "We currently have greater [financial] flexibility in our store network in the USA and Canada," he added.

Above all, in the last quarter the group's sales skyrocketed in Europe and Asia (+40%). For the entire financial year, Guess sales were worth $999 million in Europe (+27%) and $309 million in Asia (+24%). The wholesale business in the Americas generated $150 million (+3%) and licensing revenue was $73 million (+1%).

"Fourth-quarter growth was driven by an 18% increase in comparable sales in Europe. The size of our European e-business is expanding fast, and it is now close to that of the Americas region," said Victor Herrero, who added: "In the last quarter, we opened 15 directly operated stores in Italy, France, Spain, Portugal, Switzerland, Belgium, the Netherlands, Russia and Poland. And we're planning another 60 openings this year. Our wholesale revenue has grown in double figures for two seasons, and we're on our way to a third growth season." Also, Herrero is relying on this growth to be profitable. Guess's new logistics hub, which will be fully operational by the end of the summer, is expected to improve the group's margins.

Guess is on a steady growth track in Asia too, notably in China, where it opened 25 new stores in the last quarter. China will in fact be a strong focus for the current financial year, during which the plan is to open 60 stores in Asia. Guess has also opened its first subsidiary in Singapore. In the last financial year, the group said it improved its gross margin in Asia by 470 base points.

In the 2017-18 financial year, Guess's total operating income improved by 37%, reaching $187 million. In the same period of time, its operating margin grew from 2.9% to 3.6%.