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The Evolution of Guess: New Label, Accessories Lead Firm’s Retail Push

At age 22, Guess Inc. is striving to regain its footing with a new contemporary unit, accessories chain and a fresh distribution formula.

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“We wanted the new division to have a completely new chain of stores, to have a completely new approach, a different hand and sensibility to the clothes,’’ Maurice Marciano said. “It is important to separate the two.”

With a 900-square-foot Marciano shop open as of late August in Marseille, the French port city where the brothers grew up, the two stores mark the start of what the Marcianos plan as a chain of 200 more retail outlets in the U.S. in the next three to five years. Another one or two doors will be added outside the country each year in a licensing or joint venture deal with distributors.

The Marciano division, more sophisticated in design and with products about 30 percent more expensive than the core brand, arrives as Guess Inc. has emerged from more than two years in the red, which the Marcianos said didn’t accurately reflect the company’s financial position.

Guess last year turned around a 2002 net loss of $11.3 million to net income of $7.3 million on sales that rose 9.2 percent to $636.6 million.

In the first quarter of 2004, the company surprised Wall Street when it reported a net profit of $800,000, or 2 cents a share, compared with a net loss for the same period last year of $5.8 million, or 13 cents a share. Second-quarter net profit this year was $2.1 million, or 5 cents a share, versus a loss of $5.4 million, or 13 cents, a year ago. The company reported August sales for its stores posted a 5.9 percent gain, less than the 7.4 percent analysts expected.

Standard & Poor’s, the credit-rating agency, boosted its outlook on Guess Inc. to stable from negative on Tuesday based on the company’s improved financial performance. S&P affirmed its BB- corporate rating.

Credit analyst Diane Shand said in a statement that the specialty apparel retailer’s performance in the past year is sustainable. Guess has had a strong product repositioning and the company’s operating margin went to 20.5 percent in the year ended June 26 from 14 percent the previous year, she said.

Guess Inc. shares fell 17 cents to close at $16.48 on Tuesday in New York Stock Exchange trading. The stock is down from a 52-week high of $19.58 in April. The company has been 17 percent public since 1996.
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