Guess Who's Coming to Retail
On the heels of a record third quarter, Los Angeles–based apparel maker and retailer Guess? Inc. announced plans for a new apparel/retail venture, G by Guess. The new, mall-based retail chain is the latest addition to the company’s retail roster, which includes the 2-year-old Guess Accessories and Marciano store concepts.
“With the success of the retail and factory divisions, [we] looked to see how [we] could grow the business in the retail environment,” said Carlos Alberini, president and chief operating officer of Guess. The company reported earnings of $48.7 million for the quarter ending Sept. 30, up from $20.7 million for the same period last year. “Since pre-2000 we’ve gone through a significant transformation of our business model to become more retail-driven and cut back on our wholesale business,” Alberini said.
Known for its blue jeans and racy ads, the company targets contemporary shoppers with several brands. Its Guess brand sells sexy lace tops for $69 and black silk party dresses for $98, and Marciano reaches a more high-end customer with $400 pantsuits and $500 fur coats. Los Angeles Denim Atelier, a men’s brand launched in 2005, retails exclusively at high-end specialty stores such as Fred Segal and Bloomingdale’s. The brand sells blazers for $216 and jeans for $195. A women’s L.A. Denim Atelier line launched in October. With these brands, Guess is already in the top 20 percent of malls in the country, Alberini said.
Diversification is a key word for the company. “We want to make profits more predictable—that includes having different retail concepts and a portfolio of brands as well as multiple territories. We don’t want to be dependent on any single concept or territory,” Alberini said.
So, rather than re-tread familiar territory, Guess saw greener pastures out among the masses for its newest retail concept. “The rest of the country consists of mid-level malls that have product for a more price-conscious and mainstream customer, and the G by Guess product fits directly in line with that need,” Alberini said. Perched between the company’s Guess-branded contemporary offerings and its lower-priced Guess Factory goods, G by Guess represents a new price point for the retailer.
The idea is to entice those Factory clients with more-sophisticated tastes as well as potential Guess clients who can’t quite grasp the brand.
Retail prices for G by Guess, which will roll out in April, hover at 30 percent less than Guess-branded offerings, but 15 percent to 20 percent above its moderately priced Factory goods. Core prices for the brand will be between $24.50 and $59.50—but could reach up to $225 for some pieces. Categories for the brand include young contemporary, men’s, shoes, handbags, accessories, wallets, belts, jewelry, sunglasses and luggage.
This price-focused, staple-driven approach will pit G by Guess against retailers such as Hollister and American Eagle. By the end of 2005, Guess hopes to have 30 G by Guess stores.
Analyst Eric Beder, with Brean Murray, Caret & Co. in New York, said launching diverse store concepts is a good way for companies to stay vital as their core business reaches its peak. “I don’t think that has happened or will happen any time soon with Guess, but it is smart to have additional store concepts to keep growth momentum,” he said.
Not all of Guess’ attempts at diversification have been blockbusters. Guess Accessories hasn’t exceeded expectations, but the upscale Marciano brand and store is ideal, he said, because it represented an entirely new concept and customer. “Marciano is for a different stratosphere of customer. It is for the girl who shopped at Bebe or Arden B.,” Beder said.
In recent years Guess has been able to elevate its prices and fashion focus. And, in the Federated/May department-store merger, it was one of the few brands to see additional business and fewer markdowns, Beder noted. Customers who shopped Guess during sales or opted for less fashion-forward pieces are primed for the idea and the price point of G by Guess.
Fears of G by Guess cannibalizing Guess’ other retail concepts are unfounded, Alberini said. Guess will roll out G by Guess by converting its best Factory stores and weakest Guess stores into G by Guess stores. “All of the G locations will be in markets where we don’t have any other concepts,” he said.
Analyst Christine Chen of Pacific Growth Equities (which owns shares in Guess) likens Guess’ diversification to that of Ralph Lauren’s Polo brand. “Everybody wears Polo—whether you buy Purple Label or Black Label or Polo Jeans—because of the strength of the brand,” she said. Appealing to an underserved demographic with a new concept preserves the integrity of the other Guess brands. “They don’t want to overextend the Guess brand. In the world of fashion, you don’t want to be Starbucks. The allure is in the exclusivity,” Chen said.
Even as this new concept is getting ready to roll out, Alberini said Guess isn’t done growing. Declining to say if there are any new retail concepts in the works, Alberini said Guess’ focus going into the next year continues to be growing its retail operations worldwide.
