The thirty-year-old company with its distinctive logo and award-winning advertising campaign will reach sales of almost $2.5 billion this year. While remaining true to its core 18-32-year-old fashion-conscious contemporary consumer by catering to the daughters of its original customers, Guess? realizes that if it is to grow, it must stay on the move in more ways than just demographics. With the mature US retail market putting the brakes on growth, the Marciano brothers have found that going global is the best way to pursue the American Dream.
Pursuing The American Dream In 1981 four brothers from southern France came to California looking for inspiration for their fledgling sportswear business. Armand, Georges, Maurice and Paul Marciano were the sons of a Marseille rabbi. As little boys, garment industry legend has it, they shared a cot in the kitchen of the synagogue in which their father worked. As they grew older, they began to share a fascination for business, fashion, and Hollywood films. Once in Los Angeles they decided to indulge all three, and created a stonewashed 3-zip jean called the Marilyn (after Monroe, of course), the first batch of which sold out at Bloomingdales within a few hours.
The Early Years Some of the dramatic events that followed the birth of the Guess? business could have been conjured up only by silver screenwriters: the rapid rise from rags to riches, the lavish Beverly Hills lifestyle, the failed partnership with the Nakash brothers of Jordache that ended in a years-long bitter legal battle, the at-times controversial ad campaigns, and the eventual exit of Armand and Georges from the company.
The Business Now, almost 30 years later, Guess? is a multi-brand, multi-tiered multi-million-dollar global business enjoying impressively rapid growth in a tough economic market. The company boasts comprehensive collections in men’s and women’s sportswear, childrenswear, accessories, footwear, jewelry, and licensed products ranging from swimwear to fragrance and eyeglasses. In the year ended January 2010, sales were a record $2 billion, and earnings $240 million, almost unheard-of in this economic environment. In recent years, the company has bought back many of its product licenses, and launched brand extensions such as more affordable G by Guess and higher-end Marciano by Guess.
The Guess Brand The distinctive in-house advertising campaign conceived by Paul Marciano, shot for many years in black and white, has cemented the sexy, fun, fashionable image of the Guess brand, which will forever conjure up glamorous, tight-fitting jeans and curvaceous, low-cut woven plaid shirts and cowboy boots. Anna Nicole Smith and Claudia Schiffer are two of the many Guess models who have graced the pages of fashion magazines and billboards over the years. Distribution The company has been in the forefront of brands controlling their destiny through distribution. In 1995 over half of revenues came from the US wholesale business, a number that declined to 14% in 2009 and will no doubt shrink even further in coming years. Store count has grown from 150 15 years ago to almost 1,400 today.
Going Global Guess’s 472 stores in Europe and the Middle East (340 of which are operated by local partners or licensees) and 351 in Asia, primarily South Korea and China, has fueled most of the company’s growth in recent years. Two-thirds of revenue growth and an even higher portion of earnings came from outside North America in the last quarter, when domestic comps were only 1.5%.
Operations Getting the right product out to stores at the right time at the right cost is equally key to Guess’s success. According to company financials over the years, the bulk of its production has systematically moved from the Los Angeles area to Mexico to China and now seems poised to shift to Vietnam and Cambodia as labor costs in China have risen. Last year, despite a very promotional retail environment, volatile currency situation and the opening of over 200 more stores, SG&A remained a steady proportion of sales, and gross margin rose.
The Future of Guess? The company plans to continue to expand into underpenetrated parts of the world, and says it will open another 200+ stores in the coming year. China is a market of particular interest. There is little dispute about the amazing resilience of the brand, the consistency of positioning, and the uncanny fashion sense and unstoppable work ethic of its founders. The two remaining brothers in the company, Maurice (age 61) and Paul (58), together control 33% of the company’s stock, and are inextricably linked to the brand – so much so that it’s difficult to imagine what would happen to the business without them. Although there may be many larger companies out there who would love to have Guess?’s balance sheet and global retail infrastructure, this management team probably wouldn’t want to work for anyone else, and it’s doubtful whether the brand, and its vision, could be executed as well by anyone but them.