By  on November 7, 2007

Guess is adding a touch of European flair to its top namesake U.S. stores with an updated design that zeroes in on accessories.

The design was rolled out last month in Los Angeles in a new store at the Hollywood & Highland Center and in a renovated unit in the Beverly Center. It will launch at Guess' Rodeo Drive store next month, and in New York, Miami, Philadelphia and King of Prussia, Pa., all of which are to be remodeled by the spring.

Although not a complete makeover, the revised version of the Guess store — dubbed as "concept one" by the company — relies on subtle elements to give the stores a boutique feel. The 5,000-square-foot Hollywood & Highland store, for instance, has two lounging areas, a partial mirrored ceiling and seated mannequins in the mold of Guess' fit model. For the exterior, red borders have been downsized and the Guess nameplate has been enlarged.

"It is a hybrid between our European design and our latest American design," said David Chiovetti, vice president of stores, Guess retail and Marciano. "We are really focusing on slowing the customers down....The longer the customer is in the store, we can engage them in a conversation that hopefully becomes a transaction."

The pièce de résistance is the accessories layout. Guess has made building its accessories business a strategic initiative, and the design is the physical embodiment of that effort. It puts the licensed accessories lines, including handbags (Signal is the licensee), shoes (Marc Fisher Footwear), watches (Sequel), eyewear (Viva International Group), women's jewelry (Vendome) and belts (Max Leather Group), at center stage.

"We have really exaggerated the handbag presence and watches and footwear," Chiovetti said. "You walk in and can't help but notice."

Handbags range from $85 to $138, watches from $65 to $1,150 for the most expensive Guess Collection timepiece and footwear from $90 to $275.

Chiovetti estimated that the square footage dedicated to accessories is 5 to 10 percent greater than it was in the previous retail concept. Sales of handbags, watches and sunglasses typically constitute 18 to 20 percent of Guess store volume, he said."We expect that to be much higher at this store," Chiovetti predicted, referring to the Hollywood & Highland location.

To highlight the handbags, excess store fixtures were removed and open-walled shelving was added. To increase shoe purchases, footwear specialists are being brought in to provide shoppers with customer service similar to what is offered in department store shoe sections. Footwear sales have totaled about 4 to 5 percent of Guess stores' revenues, and have the potential to hit 8 to 10 percent at Hollywood & Highland and similar concept stores, Chiovetti said.

Los Angeles-based Guess' retail portfolio has several formats, but Harriet Sustarsic, the retail division's senior vice president and general merchandise manager, said they don't directly compete against each other. As of the latest quarterly report, the company operated 347 stores in the U.S. and Canada, comprising 180 full-priced retail stores, 94 factory outlet stores, 32 Marciano stores, 16 Guess accessories stores and 25 G by Guess stores.

"Our accessories have such a strong brand position globally. They are the calling cards for the brand....We have not experienced cannibalization," said Sustarsic, referring to the accessories-only stores and the redesigned Guess units. "We are very careful as to where we open the different concepts."

The company reached $1.2 billion in sales last fiscal year and more than doubled earnings for the third year in a row. Sales per square foot in Guess retail stores climbed to $432 in fiscal year 2006 from $395 the previous year. Net sales for Guess' retail segment as a whole jumped 17.7 percent from $612.9 million in fiscal year 2006 to $721.3 million the subsequent fiscal year.

The new design is costlier than the previous concept, but Chiovetti declined to disclose the price tag. Guess measures return on its investment in terms of brand exposure in venues with high traffic flow, as well as sales. The Hollywood & Highland Center, which includes entertainment and hotel space as well as retail, is a tourist attraction next to the landmark Grauman's Chinese Theater. The Beverly Center store ranks among the company's top 10.

"These stores are great branding vehicles," Chiovetti said. "It is great to put this kind of [design] look on them because it helps keep the brand perception high. We want to be cool and cutting-edge, and we want to make sure our flagships represent that."
Guess on Tuesday raised guidance for diluted earnings per share for the fiscal year ending Feb. 2 to from $1.85 to $1.90, from previous estimates of $1.79 to $1.84. The company said all of its business segments have continued to perform ahead of plan and that revenues for the second half of the fiscal year have exceeded expectations. Guess said revenues were growing by more than 30 percent in the third quarter compared with a year ago.

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