Case Study on Guess Inc.

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The main content for our analysis is the improvement of Guess? Inc., within the distribution, advertising, and design of the clothes.  With that being said we are proposing that the combination of a dramatic number of new stores, e-commerce and same store sales growth will help Guess Inc., to surpass their old annual sales.  With the ending of the most recent fiscal year with a total sales of approximately $2.2 billion, we believe that the company can add roughly more than $500 million in worldwide volume in the next couple years, regardless of the sales and profit declines of the past years.  The $500 million increase can be expected to be driven by growth in e-commerce, expansion of retails and an increase in store sales.  The goals which we set for sales that are described were created in conjunction with disclosure of fourth quarter results last year.  The fourth quarter results of last year announced that the company managed to achieve profit targets despite the drop of sales and the currency exchange headwinds.  

        Throughout Europe, the retail business was able to perform relatively well and also delivered extremely positive comp store sales in the high-single digits.  At the same time in the Americas, the business in the retailer stores for U.S. and Canada also achieved positive comps in constant currency growth.  Yet, there is still a lot of work to be done, and we as team Business Analysts believe that the initiatives we are stating in this case study for Guess? Inc., to implement will encourage huge profit margins.

        As for the initiatives that we are proposing for the future of the company are related to primarily personnel, structural and operational challenges.  For example, the first initiative involves elevating and increasing the quality of the sale and merchandising organization to build product knowledge.  Secondly, a better digital marketing and social media capability will assist in bringing more attention to the brand.  Lastly, improving the visual merchandising will dramatically help in consumers being able to see the merchandise to their standards.  Other initiatives relate to building the business in the Asian market and reinforcing the company’s culture of purpose and accountability of the brand and business.

Guess? Inc., a well-known specialty apparel retailer operates and manages close to 500 retail stores in the U.S. Canada along with a wholesale distribution channel that consists of roughly 33% of its value as per our estimates.  This specific retailer is famous when it has to do with American apparel, yet it only attains less than 0.5% share in the United States apparel market.  This interpretation means that there is a very highly developed and huge competitive retail landscape in the United States.  Although such a small participation in the apparel market would indicate that there is a substantial room for improvement, it is surprising that Guess? Inc., has lost its share in the apparel market over the past five to seven years even with the continuation of expansion.  Guesses? Inc., retail strategic planning, its weakness in the online market, and the weak performance of accessories business and the growth of fast-fashion brands are without a doubt the few factors that are responsible for the market share loss.

During 2009, Guess? Inc., held a market share within the apparel industry of about 0.55% in the United States and accessories market that was roughly $205 billion.  Years after, the company’s share in the apparel market improved to 0.59%, which was driven by the opening of almost 50 new stores and an increase of 18% in growth in wholesale revenue.  Yet. Guess’s share in the market made slight decline to 0.57% within 2011, although the North American net revenue increase by almost 4.3%.  We as the Business Analysts figured out that the main reason behind this was the strong growth in the overall apparel and accessories market which “…made an increase from $200 billion in 2010 to $229 billion in 2011, and easily outpaced Guess’s revenue growth.  In 2012, the company’s share fell further to 0.54% as its retail revenues remained flat, and wholesale revenues increased just 3.7%, while the market grew 5.2%” (Troy 2016).  The United States accessories and apparel market growth declined to just about 3% in 2013 on account of a pullback in consumer spending, which we as a team felt should have been alarming to Guess? Inc.  The total retail revenue as a company made a dramatic fall to 3.7%, which had to do with store consolidation as well as their wholesale revenues which were down almost 8%.  Moreover, at the end of the 3rd quarter of 2014 the market share for the retail fell .05% in total.

        As the Business Analysts we have concluded that Guess? Inc. has not been able to hold a significant small portion of the market because it’s retailing strategies and merchandise issues.  If Guess? Inc., implements our strategic planning that we planned for their future, their business might have a bright future.  

Our team has estimated Guess’s market share based on its reported North American retail and wholesale revenues.  Since the company does not provide any revenue break-up for U.S. and Canada, we have used net revenues from the regions for the purpose of comparison.  However, it must be noted that Guess’s market share in the U.S. is actually less than the figure mentioned.

Guess and its licensee partners operate with six different store concepts: the Guess full-price retail stores, the Guess factory outlet stores, G by Guess stores, the Guess Accessories stores, the Marciano stores and the Guess Kids stores.  “While the company does not differentiate between these concepts while reporting revenues, it has on occasions said that weak performance of its accessories business and full-price stores has been the main reason behind its struggle.  These two formats make up over 30% of Guess’s retail store fleet in the country and hence, their weak performance is reflected on the retailer’s overall results” (Trefis Team, 2015).  The company’s strategy of operating with full prices in its largest store concept has driven customers to other brands who offer attractive deals and discounts.

Affordable fashion-forward players such as Zara, Forever 21 and H&M have been very successful over the past few years, due to an expansive product range that has resonated very well with price and fashion conscious buyers.  They have taken customers away from affordable casual apparel retailers such as Aeropostale and American Eagle Outfitters, and relatively upscale players such as Guess, by providing a balanced option between the two segments.  As a result, these players have somewhat lost their footing in the market.

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