Guess plans dramatic growth by 2019
The combination of an unspecified number of new stores, e-commerce and same store sales growth will enable Guess Inc., to surpass annual sales of $3 billion in three years, according to new CEO Victor Herrero.
Guess ended its most recent fiscal year with total sales of roughly $2.2 billion, but CEO Victor Herrero, who joined the company last July from Inditex, believes the company can add $800 million in worldwide volume in the next three years, despite sales and profit declines last year.
“This $800 million increase is expected to be driven by growth in e-commerce, retail expansion and positive comp store sales. In terms of regional growth, we expect $300 million of this increase to be driven by the Americas, $300 million by Europe and $200 million by Asia,” Herrero said. “Again, assuming currencies remain at prevailing levels, we are planning for operating margin to reach 7.5% in three years, mainly driven by leverage, and for earnings per share to increase at a compound annual growth rate of 20%. Overall, more than ever, I truly believe in the potential of the Guess brand and these three-year plans are a reflection of that."
Herrero joined Guess last July after previously serving as head of Asia Pacific for global apparel retailer Inditex Group. The ambitious sales goal he outlined was made in conjunction with the release of fourth quarter results that showed the company managed to achieve profit targets despite sales pressures and currency exchange headwinds.
“In Europe, our retail business performed extremely well and delivered positive comp store sales in the high-single digits. In the Americas, our retail business in the U.S. and Canada also achieved positive comps in constant currency,” Herrero said. “There is still more work to be done, but I am convinced that the initiatives we have started to implement in the last few months have contributed to these encouraging results."
Total net revenue for the fourth quarter decreased 5.5% to $658.3 million and earnings declined 11.4% to $47.8 million and earnings per share fell 9.5% to 57 cents. The negative impact of currency on earnings per share in the fourth quarter of fiscal 2016 was approximately $0.19 per share. For the full year, revenues declined 8.8% to $2.2 billion, earnings declined 13.4% to $94.6 million and earnings per share, including a 43 cent a share impact from currency exchange, declined 13.5% to 96 cents.
As for the initiatives Herrero said the company has begun implementing in recent months, those related primarily to personnel, structural and operational challenges. For example, one initiative involves elevating the quality of the sales and merchandising organization to build product knowledge, better digital marketing and social media capabilities and improved visual merchandising. Other initiatives relate to building the business in Asia and reinforcing the company’s culture of purpose and accountability.
Guess ended last year with 835 stores throughout the Americas, Europe and Asia and its licensees and distributors operated 804 additional retail stores worldwide in 95 countries.