Guess’ Growth Strategies And International Market Focus Are Ensuring Its Steady Recovery

-8.27%
Downside
25.03
Market
22.96
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Guess?

With an eye towards expansion in the European and Asian markets and decreasing its presence in the American markets, Guess is making a healthy recovery in its performance with each successive quarter. The company’s strategic plans are progressing well. Its supply chain initiatives improved the cost structure resulting in an estimated saving of $24 million in Q1 FY 2018. The company’s brand positioning is focusing on a more authentic connect with the millennial and Gen Z buyers. Finally, it is expanding its digital footprints by transitioning its entire gamut of websites into a state-of-the-art responsive site, which will improve the user experience with faster speed and less navigation steps. It is also upgrading its omni-channel capabilities and it continues to partner with marketplaces such as Tmall, JD, and vip.com in China, La Redoute and Otto in Europe, and Amazon in the U.S. and Canada.

For the first quarter of fiscal 2018 (fiscal year ends in January), Guess’ top line grew by 2% which is a considerable recovery from its 6% revenue decline in Q1 FY 2017.

Q1 FY 2018

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Americas’ Contribution Will Keep Declining

As we had mentioned in our earnings preview for Guess, the contribution of its American markets in its revenues is gradually declining while the contribution of Europe and Asia are increasing. The company is currently shutting down stores in the Americas where footsteps have been declining in the brick-and-mortar stores. Guess plans on achieving a 7.5% overall long term operating margin. Its profitability is currently being dampened by the weak American markets.

Also, the company is currently thinking more in terms of markets in specific regions rather than the regions themselves. For example, in Europe, Guess has over 20 markets, with a lot of untapped potential in some of the Eastern European markets. In Asia, Guess’ two main markets are Korea and China. Out of its 35 new store openings in fiscal 2018, most of it will happen in China. The company is also tapping the huge e-commerce marketplace in China through Tmall, JD.com, and vip.com.

 

Wholesale Business

Guess’ overall wholesale business is growing in a healthy way, especially in the European region. The productivity and profitability of its wholesale dealers are improving, thus ensuring better business for Guess as well. Also, in Americas the wholesale business is doing better than the retail business, especially in markets like Canada and Mexico, where the wholesale business has shown impressive growth.

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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