Having tumbled through a rough patch in its business stretching from North to South America, Guess Inc. is looking to Victor Herrero to lead the way toward growth in Europe and Asia. After all, that’s where the Spanish native made his mark. Prior to succeeding cofounder Paul Marciano as chief executive officer in August 2015, he accumulated more than 20 years of experience in those regions. He most recently spent a decade building the Asian business for Inditex, the Spanish conglomerate that owns fast-fashion giant Zara and other brands.
Herrero’s efforts bore fruit for Guess in its third quarter, when the bright spots of Europe and Asia offset lackluster performance in the Americas. While its net earnings for the quarter ended Oct. 29 decreased 27 percent to $9.1 million from $12.4 million, revenue rose 3 percent to $536.3 million from $521 million. In its full-year outlook revealed in November, the company projected that sales in its Americas retail and wholesale networks would decline in low-single digits while revenue in Europe would rise in the high-single digits to low-double digits and sales in Asia would grow in the low-single digits. In total, it expects to report a sales increase of between 0.5 and 1.5 percent in the year ended Jan. 28.
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Part of Herrero’s strategy for the Los Angeles-based company includes moving beyond denim jeans to entice shoppers with a total look and appealing to a wide swath of customers, from children to octogenarians. The easygoing executive sat with WWD to assess his first year as a self-professed “no-ego ceo,” the company’s lasting power amid flameouts of once-high-flying brands such as Nasty Gal, and the buzz surrounding the City of Angels.
How has your first year as Guess’ ceo been?
It’s been a very good experience. I think that it’s a complex business because we have different channels. We have wholesale. We have licensees. We have retail. We have e-commerce. I’ve been working with all of them and I’m trying to meet all the people everywhere. I’m a very hands-on ceo. It means that they can call me any time they want. Everyone has my mobile. I’m calling everyone by Whatsapp. And everyone knows that they can, whenever they want to, tell me something. Don’t be scared of telling me — I mean, there will be no [repercussions] on telling me their problems. What [will] be [considered an] accountability is not performing, you know? And this is clear. I’m a very hands-on, very humble and no-ego ceo. And this is something that I think in corporate America is kind of…fresh air. Definitely here, they are very surprised that I act this way.
Denim appeared to have made a comeback late last year in terms of showing an industry-wide increase in sales. How has that affected Guess?
Denim for us is a very important category, but it’s not the only one. I was mentioning from the very beginning on all my analyst calls that, for us, denim is relevant, but at the same time, we want to do the total outfit, which is very important. I don’t want to miss anything. I want a customer to come to our store and definitely go first to denim because we are well-known for that, but at the same time they say, “Oh my God — I’m not going to buy denim today. They are great, but there is a cargo pant that I like a lot. Or there is a top that I love or maybe I’m going to buy both, or in addition to that, I’m going to buy a handbag, which I love.”
So we are doing much more [with the] outfit than the denim. I’m happy because denim is very fashionable at this moment…and we have to take advantage of that. The denim is a little bit of the substitute for the legging.…But at the same time, you have to continue having leggings because some customers prefer the legging, or you will need to have a jogging pant. It depends. But definitely I don’t want to miss any trend — or anything — because we’re a denim company. I’m very proud of being a denim company. I think there’s not a single [brand] better in terms of fit and quality than Guess in the market, and definitely we will continue on this trend. But at the same time, it’s the total look, you know? I want that you go there and buy three pieces instead of going and buying only denim.
Why was it important to have a 35th anniversary collection?
Guess is about history, and we are very proud of our history. The first campaign of Gigi Hadid was with Guess, and [so was] the first campaign that Claudia Schiffer did. You have to respect the history of the company and we are where we are because of what they did in the last 35 years. It’s most important to summarize our [first] 35 years and [look at the next] 35 years to come. At the end of the day, everyone is saying, “Oh my god — the retail environment…and this kind of thing.” We’re still a very profitable company with almost zero debt and with a lot of cash in the bank. We still have a good dividend for our shareholders. It’s not only a question of what happened in the past. We have to honor the past, but at the same, the 35th anniversary capsule [collection looks] a little bit toward the future, the bright future that we have.
What has helped Guess to continue performing all these decades, even when hot brands such as American Apparel and Nasty Gal burn out fast and fall into bankruptcy?
Paul and Maurice are very passionate. They really want the best for the company and they don’t have any problems saying: “OK, we are wrong, you know. We recognize that we are wrong.” I come from a school that says whenever you are wrong, you have to admit it. No problem.…and we have to do it in a different way. They really care about the company. Paul’s still very passionate about the image…they are wealthy people, but it doesn’t really matter. It’s something that’s in their heart and that’s the difference between this company and others: We’re still successful, doing very well but, at the same time, always very worried about what is happening because, I mean, it’s a tough environment in North America.
The trend among Millennials is that they seem to value experiences over things like clothes. How has that influenced the way you design clothes, operate your stores and handle marketing and social media?
I’m going to give you two points on this one. The Millennials and then Generation Z are super important, [but] all the generations are important. We are doing fashionable clothes from kids all the way to, I don’t know, [people who are] 60 or 70 or 80 years old. But with the Millennials, you have to be very strong in terms of social media — we’re doing a big push on social media. The CRM [customer relationship management] has to be very strong, growing a lot. You have to do a lot of promotions in terms of bloggers or incorporating with bloggers, with fashion [influencers], with anyone that you believe is the right person to express your brand. This is the first point and, believe me, we are doing a lot about that.
But at the same time, people tend to classify too much. For me, it’s not so much about that. It’s more about if you have the right product for everyone. And that’s the key, essentially. I would like to have a lot of Millennials. I would like to have a lot of Generation Y. I would like to have Generation Z because they are starting to be 18, 19, 20 years old. But it doesn’t really matter. We have to understand what the Millennials want in order to be strong with them. Or we have to know what Generation Y wants because we have to be strong on that one.…It means that we have to have the tools for every generation. Once you have the tools, the most important thing is the product….It doesn’t matter how they interact [with your brand] or if you are the best in the world on social media. If you don’t have the right product, it’s not going to sell.
But interaction on social media is not only through famous people. It has to be bloggers or people who really have a say on fashion, trying to work with them. At the same time, it’s not only that this is driving the buyer. Right now, [customers] are not very loyal to one particular brand. So even if I’m going to study the Millennials, I’m going to try to react to them, but the problem is right now there’s no loyalties. Here in North America, when you want to buy a lot, customers check on the Internet about which brand they think they like but [also if] it has the highest discount.
In the licensing business, watches have shown softness. Why? Which licensed categories are strong and how does Guess plan to capitalize on those and grow sales?
The watch category is challenging for everyone. The good thing is we have a good licensee [Sequel]. We work with them. We try to understand their needs and they try to understand our needs. Hopefully, everyone will continue buying watches but at this moment it’s very challenging because everyone is using their mobile phones to tell the time.
We have a really long partnership with all of our licensees. It’s still a very profitable business for us. We just renewed three of the major licensees last year [in watches; handbags with Signal, and footwear with Marc Fisher].
What kind of impact will Donald Trump’s policies regarding trade and imports have on Guess and the fashion industry? What is the aftermath of Brexit?
It’s an interesting question but, to be honest, I am not too familiar with American politics. I’m still learning. It was a surprise for me but at the same time we are going to have at least four years of President Trump and hopefully he’s going to do an outstanding job and we will be very happy. To be honest, it’s too early. Maybe in one year’s time I will let you know.
Since Brexit, we are doing much better in the U.K., and why? It’s because the pound went down and [there’s] plenty of tourism right now. So you never know. It looked like Brexit was the end of the world for the U.K., and it’s the other way around for us. We can view it right now with perspective. Honestly, for us, what is important is we are not in a very strategic [business]. We are not manufacturing rockets…we will try to cope with whatever is coming.
Always, there is an excuse. Brexit is an excuse not to sell. The Trump [factor] may be an excuse not to sell. No, no, no, no. What you have to think is: What are you doing wrong [that makes you] not sell? It’s true that in North America there are some structural changes in terms of customer behavior in general, but this is something that we have to analyze and try to improve the product offering. But all the other things — the macroeconomic issues, that somebody’s getting angry with somebody — who cares? I don’t care too much. I have to focus on not having an excuse for why I am not selling.
Maybe there are some structural changes and maybe we need to improve on an operational point of view or lack of product, or whatever to help us increase our performance in North America. I think plenty of people buy — it’s becoming [such a] commodity and fashion is so stagnant that it’s very difficult to be different. Honestly, I think we are different. Our product offering is different. We have to differentiate ourselves because I don’t think that you are going to go to Guess to buy a legging — a simple legging of $29 — because you are going to go to Uniqlo or you are going to go to any specialty store that we know, Lululemon or Nike or whatever. But definitely we have to have a legging that you are willing to pay a little bit more for, because it’s a much better quality, and it’s going to last. This is very important.
L.A.’s fashion industry has received a lot of attention recently, especially in light of the high-profile runway shows that have been staged here in the past couple of years and are continuing in February. What do you think of that spotlight being directed on L.A.?
We have to take advantage of that because we’ve been in Los Angeles for 35 years. I mean, one of the reasons we do the product we do is because of L.A. — L.A. is becoming one of the important places in the world in terms of fashion. And why? I think it’s because we have unique weather, a lot of people that are open-minded to try anything, and also that you have the East Coast [and] you have Asia very close. It’s kind of like a middle ground for the Pacific.