Guess’s Current Focus Is To Grow Its International Business And Focus On Profitability With A Reduced Presence In The Americas

-8.27%
Downside
25.03
Market
22.96
Trefis
GES: Guess? logo
GES
Guess?

Guess is slated to release its Q1 FY 2018 earnings on May 24th (fiscal year ends in January). The company is currently focusing more on its international markets, that account for more than half of its business, and towards that end, we expect to see good progress of Guess’s strategic expansion plans in the Asian and European markets. However, Guess has been lagging behind in its domestic, American market, where it is currently trying to reduce footprints while increasing profitability.

Guess’ International Progress

  • With an increased focus on Asia, the company has doubled its capital allocation for the Asian stores and the e-commerce business in Asia with a greater presence in websites like Tmall, JD.com, and Guess.cn. Around 35 stores will be opened in the region this year. Guess aims to grow in Asia with a special emphasis on China and hence it has opened new stores in several Chinese cities including Shanghai, Beijing, Kunming, Changsha, Chongqing, Shiyan, Harbin, Nanjing, Suzhou, and Wuxi.

  • In fiscal 2017, Guess’s growth in Europe was driven by an increase in store openings, positive comparable sales, a greater footfall and sales conversion, and the rapid growth of e-commerce.  Currently, the retail business in Europe, accounting for around 55% of total European sales, is growing faster than the wholesale business.

Guess’ Strategies in The Americas

  • Guess is focusing on closing more stores for the weak Guess? and Marciano brands and keeping more stores of the Factory and G by Guess brands which are performing relatively better. Until last fiscal year, it had 400 stores in the region. In 2017, Guess will close around 60 stores in the Americas and it expects to close around 100 to 120 odd stores in the next year.
  • Though Guess’ presence in retail is bigger in the Americas, its wholesale business seems to be doing better. Even though it is not planning on pursuing a more wholesale-centric model in the Americas, it will surely create a better balance between the American retail and wholesale businesses to reap more benefits from this changing trend.
  • Its inventory management will continue in sync with the store closures in the region. It expects to report a better inventory situation in the first quarter.
  • Like all retailers, Guess is also trying to integrate its retail and e-commerce channels, though the results have not been too encouraging in the region so far. The company is also focusing on marketing initiatives like hiring social media influencers and using celebrity endorsements to revive its American business.

Notes:

1) The purpose of these analyses is to help readers focus on a few important things. We hope such communication sparks thinking, and encourages readers to comment and ask questions on the comment section, or email content@trefis.com
2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to our complete analysis for Guess
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