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Paul Marciano: Brand Protection, at Any Cost

Reinvention has been key to Guess Inc.’s success.

Paul Marciano

Reinvention has been key to Guess Inc.’s success.

This story first appeared in the May 18, 2011 issue of WWD.  Subscribe Today.

When the company was founded in 1981, the thinking then was: Who needs another brand? There were numerous jeans on the market, such as JouJou and Bonjour, with embroidered back pockets.

“We came with stonewash that no one else had in the U.S. At the beginning, all the laundries kicked us out. We were breaking every machine. We put pumice stones in the pockets, and the machines were breaking every two weeks,” said Paul Marciano, vice chairman and chief executive officer of Guess Inc.

Marciano recalled the 30-year history of Guess with humor and pride. The company, whose worldwide revenues in the year ended Jan. 29 fell just shy of $2.5 billion, has had its ups and downs but has managed to not only survive but flourish in a challenging retail environment.

 

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Soon after the company began, it shipped two pairs of jeans to every store buyer. The first account was Bloomingdale’s. “We sent them 12 pairs, 24 pairs, 300 pairs and then 1,000, 3,000. It was crazy! We did 100 percent of our manufacturing in Los Angeles until 1996. We were making a half-million pairs of denim a week. It was madness,” said Marciano.

He explained that the firm did a full collection of men’s, women’s and children’s wear, and then started licensing products, such as watches, kids, shoes and bags.

“From the very beginning, I was obsessed to create a brand, and I was obsessed with old movies,” he said. He was able to build the company’s print image featuring black-and-white photos of sexy, voluptuous Guess girls such as Claudia Schiffer, Eva Herzigova and Laetitia Casta. In the late Eighties, Guess expanded to Argentina, Mexico, the Philippines and Korea, where the company today is one of the biggest brands in the country.

But as a firm grows, Marciano said, “your number-one job is to protect the brand at any price.”

He remembered how they originally came up with the Guess name. He and his three brothers — Georges, Armand and Maurice, now chairman of the firm — used to carpool together every day from Beverly Hills to downtown Los Angeles and would pass a McDonald’s sign that read, “Guess [in large letters] what is in a new Mac?” They liked the way the word “Guess” looked, so they adopted it as their brand name, and added a question mark.

Ironically, he said, “one of the biggest brands in America [at that time] was Sasson, which was owned by Paul Guez. Strange coincidence.”

Marciano noted that the bigger the company got, the harder it was to control. Today, Guess is in 90 countries. “We are still standing here, and it’s a miracle. We’re blessed to be still in business — so many companies came into the jeans market, and so many are gone. Very few stood 20 to 30 years and still grow 10 to 20 percent a year. The key is to keep reinventing yourself,” said Marciano.

He recalled a critical juncture at the company. It was 1999, and Maurice Marciano decided to get out of the department store business.

“I said, ‘Are you out of your mind?’ At the time, the company was doing $400 million with department stores, and “it was a war on prices.” He said there was a status brand war going on in stores such as Macy’s, Robinsons, Bullock’s and Marshall Field’s, and brands such as ck Jeans, Tommy Hilfiger Jeans, DKNY Jeans and Guess were fighting to have the lowest prices.

“Everybody was shooting at each other, and who was winning? Not us,” said Marciano. They decided to sell one department store chain, and that was it. The company lost 90 percent of its market capitalization in six months.

He recalled saying to his brother, “Congratulations. That was a good idea.” Guess recalled 800,000 units to its warehouse from the stores with which it no longer wanted to do business.

The Marcianos collectively owned approximately 80 percent of the public company at the time, and they had to guarantee the Guess trademark to the bank.

But the Marcianos had a plan, which was to be the masters of their own fate and open their own freestanding stores, which today has proven to be a prescient move. Last year, North American retail operations accounted for 43 percent of the company’s total revenues, or $1.07 billion, and the North American wholesale segment, which previously dominated the business, was down to 7.3 percent of revenues, or $181 million.

Asked whether jeans are still the core of the business, Marciano replied that denim used to be 80 percent of the business, but now the split is 43 percent denim with the remainder nondenim and accessories.

Within four years, 210 accessories stores with licensed product have opened.

“It shows you the power of the brand,” he said.

Asked who his favorite Guess girl of all time is, Marciano replied, “Probably Claudia Schiffer.” He said he never meets the models beforehand and decides who to hire based on their photographs. “I like to be objective” and not be swayed by their personality. Still, he called Schiffer “the most professional and the most beautiful.”

Finally, he addressed what’s next for Guess. Marciano said the company has 400 stores in Europe. “The next big step for us is Asia. We have 80 stores in China. My dream would be to have 500 stores in China. We should be able to do it in the next four to five years,” he said.