Paul and Maurice Marciano sound like they’re just getting started.
Three decades after founding Guess, the American-flavored jeanswear line that would evolve into an international lifestyle brand with ongoing denim “cred” and 2011 revenues of $2.69 billion, the brothers maintain a long list of corporate objectives.
These include far deeper penetration of the Internet and social media; further expansion of their 1,559-store retail network in the U.S. and abroad; continuing development of the more youth-oriented, lower-priced G by Guess brand even as it continues to fine-tune the flagship Guess label; reentry into the Brazilian and Japanese markets, and perhaps new or revisited ventures in categories such as lingerie and home.
With Paul serving as chairman and chief executive officer and Maurice now in the role of non-executive chairman following his official retirement in January, the 30th anniversary will be anything but the only item on their agendas. The anniversary comes on the heels of what was by most measures an uncharacteristically difficult year for the Los Angeles-based company. Led by a 24.8 percent surge to more than $250 million in its expanding Asian operations, overall sales rose 8.1 percent to approach the $2.7 billion mark — more than quadruple the $636.6 million of 2003 — but net income, hurt by a settlement charge involving a European logistics provider, fell 8.3 percent to $265.5 million. It was the first decline since the company registered a net loss back in 2002, which was the firm’s only deficit in 15 years as a public company. RELATED STORY: Timeline: Guess at 30 >>
Paul Marciano considers the 2011 numbers a minor stumble, indicative of efforts to maintain and even burnish the Guess brand amid challenging macroeconomic conditions. Even in a frantically bargain-oriented holiday environment, brand integrity remained the focus.
“We managed our resources carefully, especially on inventories, protecting our brand through the holiday season, avoiding much of the massive discounting in the malls,” he said on the company’s March earnings call. “Considering what Europe went through this past holiday season, we’re very pleased with these results.”
He was particularly pleased to be able to report that the four-year-old G by Guess unit broke even in 2011 and was expected to turn a profit in the new year.
Following Nancy Shachtman’s promotion to president of all North American operations in March 2011, little effort was spared to upgrade the firm’s women’s assortments, an initiative that officials inside and outside the company said met with considerable success. The same energy is expected to be invested in men’s wear and accessories this year, even as the company invests more heavily in off-line as well as online marketing to commemorate its anniversary and further elevate brand visibility.
Go to guess.com and there’s already a “30 Gifts in 30 Days” promotion in place to promote the firm’s “30 Sexy Years.” The same tag line appears on the anniversary ad campaign that reunited Guess with perhaps the best-known of the Guess Girls, Claudia Schiffer, and heralds a new capsule collection inspired by Schiffer and other actresses and models who’ve become synonymous with the brand and its all-American, California-sun-soaked image. RELATED STORY: Claudia Schiffer Helps Guess Mark Three Decades >>
Even with, and partially because of, the big anniversary promotional push, Guess’s financial expectations for the year are modest. Revenues are expected to rise 1.9 to 3.4 percent to between $2.74 billion and $2.78 billion, and earnings, limited by increased marketing investment and unfavorable currency translation, are forecast to decline to between $2.50 and $2.65 a diluted share. That guidance, issued on March 14, sent the company’s shares down more than 10 percent the following day, to $32.97, and they’ve yet to regain the ground they lost, closing at $29.28, up 0.2 percent, on Monday. The stock hit a 52-week high of $45.73 on the last day of May 2011. The final price on Monday values the Marcianos’ 26.7 percent stake at about $818.5 million, $455.1 million for Maurice and $363.4 million for Paul.
The recent performance on Wall Street clearly isn’t something that pleases the Marciano brothers, who’ve felt Wall Street’s wrath before, but it’s hardly something that keeps them awake at night in the homes they occupy, within easy walking distance of each other, in Beverly Hills. Having been private and public, sole owners and partners, they take a decidedly more long-term view. ‘FIVE-POCKET HERITAGE’
“What we have done in the last 30 years is build a lifetime asset,” said Paul. “Maurice and I, coming to the U.S. from France, had a vision of something American, a brand that was young, sexy and adventurous, and we’ve never changed that vision. It was based on denim, with the authenticity of denim. It’s our five-pocket heritage, what made the brand Guess. With what you attach to that image, you create something permanent and lasting.
“It takes a long time to do that and yet it’s very easy to destroy,” he added.
While “young, sexy and adventurous” are the three adjectives ascribed to the brand, nouns immediately flow forth when the subject turns to the corporate attributes they most admire, emulate and value in the Guess corporate culture. “Vision, discipline and consistency,” Paul contributed, to which Maurice quickly added, “Execution.”
“What I actually think is different about us as we enter our 30s is the value of consistency, about not jumping around so much,” Paul said.
A recent round of litigation hasn’t altered the ceo’s established admiration. Considering the time and expense spent defending itself against charges of trademark infringement filed three years ago by Gucci America, leading up to a trial that ended only last month and for which a verdict is still pending, his choice of role models is a bit surprising.
“Domenico De Sole,” he fired off without hesitation, speaking of the former president and ceo of Gucci Group. “To do what he did — take a brand that was nearly extinguished, apply his vision and then bring in Tom Ford, a designer with the same kind of vision — is just extraordinary. Together, they built back Gucci from the ashes in the Nineties, and it was consistency and execution that did it. He’s a real architect.”
They offer similar expressions of admiration for Lew Frankfort and Reed Krakoff’s work as brand resuscitators at Coach, as well as for the many brand-building successes of Ralph Lauren. Kismet brought the brothers together with Lauren on a European airline flight in 1985, leading not only to a high-altitude brainstorming session but to subsequent meetings with Lauren in New York. Paul called Lauren “the person I respect most in the industry” and his work “legendary.”
VISIBILITY AND CONFLICT
Guess has amassed some significant accomplishments of its own in its 30 years, emerging as the dominant survivor of the status jeans craze of the Eighties that presaged the premium jeans boom of the last decade.
Paul took the lead in marketing the product, forming Guess Advertising in the company’s inaugural year and quickly establishing a consistent creative approach that produced some of the fashion industry’s most iconic and enduring advertising imagery. Even as the young company struggled through the twists and turns of the fashion denim business, the sensual black-and-white advertisements garnered numerous Clio awards, including seven in 1996, and helped to launch or invigorate the careers of Guess Girls including Anna Nicole Smith, Paris Hilton, Naomi Campbell, Eva Herzigova and future French First Lady Carla Bruni-Sarkozy. RELATED STORY: Game Changers: Guess Girls and Photographers Look Back >>
By the turn of the century, brand messaging was of necessity taking a back seat to the company’s viability in the marketplace.
By the time its higher-priced stonewashed denim jeans in flattering fits began to catch on, first at Bloomingdale’s and later at such better specialty stores as Fred Segal, Maurice, Paul and their brothers Georges and Armand already were veterans of European and then American retailing. Seeking expertise in wholesaling, the four brothers had sold half their business to Jordache Enterprises’ Nakash brothers in 1983, and the legal fight to regain ownership took the better part of a decade to resolve, finally ending with a jury’s determination that the Nakashes had fraudulently induced the Marcianos to sell them a 51 percent stake. The jury returned full ownership of the company to the founders.
No sooner was that conflict settled than cracks began to appear in the bond between the brothers themselves. The Marcianos’ own M.G.A. stores were experiencing strong sell-throughs on their own higher-priced, fashion-focused Guess jeans as well as some of the French imports they carried even as department stores were promoting heavily and trading down and a number of brands were moving into the mass channel.
Georges, who owned 40 percent of the company, voted “mass” while Maurice opted for “class” and, in 1992, left the company, working briefly with Lawrence Stroll and Silas Chou. Georges attempted to acquire all of Guess but instead wound up selling his stake to his three brothers for $240 million in cash and bonds, effectively valuing the company at $600 million and bringing Maurice back into the fold in the process. (Armand would leave for medical reasons in 2003 and later become Allen Schwartz’s partner in A.B.S. by Allen Schwartz.)
Because the bonds used in the acquisition of Georges’ stake were public, Guess began reporting numbers like a public company and, in 1996, became one with a listing on the New York Stock Exchange under the ticker GES. The move coincided with the firm’s decision to begin to shift the bulk of its production outside the U.S., where its wage and labor practices had attracted the scrutiny of UNITE as early as 1997. UNITE filed an unfair labor practice charge against the company in 1999, which was dismissed the following year but appealed by the National Labor Relations Board and finally settled in 2003.
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