How Has Guess’s Asia Business Been Faring Currently?
Guess had been grappling with its Asia business since 2013, after witnessing significant growth in revenues for several years. In 2014, Guess’s revenues in Asia declined by 4% to $281 million, primarily due to the macroeconomic weakness in its core market, China. When Victor Herrero assumed the position of Guess’s CEO in mid-2015, one of his strategy initiatives included more focus on the Asia Pacific business. Herrero, who had a tremendous success story of building a $4 billion business from scratch for Inditex Asia, wanted to replicate the same growth for Guess in Asia. Towards that end, in Q3 FY2016, the company hired a new Director for China and a new Director of the Middle East, India, and Southeast Asia. Both the directors are Mr. Herrero’s ex-colleagues from Inditex. Further, the company doubled its capital allocation for the Asian stores and the e-commerce business in Asia was strengthened by a greater presence in websites like Tmall, JD.com, and Guess.cn. Asia contributes to around 10% of Guess’s revenues currently (~$250 million) and Mr. Herrero aims to increase the contribution to $750 million or around 25% of the company’s total revenues.
As a result of all these efforts, Guess’s Asia Business showed the greatest improvement in its performance in Q3 FY2017 when compared to its performance in Q2 FY2017. While Guess Asia revenues declined by around 6% y-o-y in Q2 FY2017, the same revenues witnessed a 10% y-o-y growth in Q3 FY2017. Not only that, even its operating loss which was 138% y-o-y in the third quarter, was almost 500% y-o-y in the second quarter. Guess’s Asia division had shown the maximum quarter-over-quarter improvement in performance and we think this might just be the beginning.
The revenue growth in Asia came as a result of new store openings and due to positive comparable sales in Greater China. Fourteen stores were opened in Asia in the third quarter. The company plans on opening 65 stores in the region with a focus on China by 2016 and it has been on track so far.
Have more questions about Guess? See the links below.
- What Is Guess’s Revenue And EBITDA Breakdown?
- How Has Guess’s Revenue And EBITDA Composition Changed Over 2012-2016E?
- Guess Q4 FY2016 Pre-Earnings Report
- What Led To Guess’ Revenue And EBITDA Decline Over The Last Five Years?
- Guess: Fiscal Year 2016 In Review
- How Did Guess’s Stock Perform Vis-A-Vis Its Peers Over The Last 5 Years ?
- What Is Guess’ Fundamental Value Based On 2016 Estimated Numbers?
- How Did Guess’ Different Segments Perform Over The Last 5 Years?
- Guess Q1 FY 2017 Earnings Preview
- Key Takeaways From Guess’s Q1 FY 2017 Earnings
- Guess’s Expected Revenue And EBITDA For 2016: Trefis Estimate
- Is The Guess Stock Price Driven By Current Earnings Or By Market Sentiments?
- How Do We Expect Guess’s North American Retail Business To Grow Over The Next 5 Years?
- How Is Guess’s Revenue Composition Expected To Trend?
- How Fast Is Guess’s Asia Operation Expected To Grow Over The Next Five Years?
- Guess’s Q2 FY2017 Earnings Preview
- How Do we Expect Guess To Perform In Its Q3 FY 2017 Earnings?
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