Victor Herrero is out as chief executive officer of Guess Inc., but cofounder Paul Marciano will remain as its creative chief despite being at the center of the sexual harassment storm that rocked the company last year.
Taking the market by surprise and triggering a near-15 percent slide in its share price, Guess said Monday morning it had poached Lucky Brand ceo Carlos Alberini to take over the helm and that Herrero would leave his current job at the end of the week.
The company added that, at the request of the board, Marciano agreed to stay on as chief creative officer, with his employment being “at will.”
This marked an about-turn from the summer when Marciano said he had voluntarily recused himself as executive chairman and had started to pass his duties as chief creative officer over to Herrero in preparation for a Jan. 30 departure, although he would stay on the board.
While Guess gave no further details surrounding the ceo switch and did not respond to request for comment, analysts speculated that Herrero was likely pushed out to make way for Alberini, who worked at Guess as its president and chief operating officer between 2000 and 2010 — and that the switch might have had something to do with Marciano’s comeback.
“I think it was the board’s choice,” said Susan Anderson, a senior research analyst at B. Riley. “Looking at the details of everything, it seems like he probably had a disagreement with the board. Basically Paul and his brother….Maybe [Paul] didn’t want to step aside and maybe maintain some level of control.”
Janine Stichter, an equity analyst at Jefferies, added: “I’m pretty sure it wasn’t [Herrero’s choice to leave] just because he’s receiving severance. His contract expires in July and so he’s leaving six months ahead of that and then he’s receiving I believe two years’ severance.”
While Marciano’s comeback was unexpected, she believes the stock slump was mainly due to Herrero’s departure, even though Alberini is highly regarded in the industry, especially for his time as co-ceo of Restoration Hardware between 2010 and 2014 when he helped take the company public.
That’s because Herrero, who joined Guess in 2015, brought a certain level of “discipline” to the company. This included implementing expense control such as negotiating with suppliers and landlords, as well as bringing a new level or sourcing expertise to the table. Now there are concerns that this could change under new leadership.
“On one hand people really liked Victor and were really pleased with a lot of changes he was making, so that’s why you’re seeing the stock react the way it is,” Stichter added. “But at the same time when Carlos was there — granted it was a while ago now — he was viewed very favorably and when he left, it was viewed as a big loss to the company.”
As for Marciano, his remaining on as chief creative officer will no doubt raise eyebrows as he was accused last year of sexual harassment by model and actress Kate Upton and others.
Guess subsequently set up a special committee to investigate these allegations and in June concluded that it would pay out $500,000 in settlements to five individuals and that he would step down from his role of executive chairman. He remained on the board, but his brother, Maurice Marciano, was appointed chairman.
The firm stressed at the time that the settlements did not admit liability or fault and were done to avoid the cost of taking the matters to court.
In addition, in a move that was seen as a response to this and the wider women’s empowerment movement, Guess said in October it was adding two women — former Spanx ceo Laurie Ann Goldman and Coresight Research founder Deborah Weinswig — to its board as independent directors. This pushed the total number of independent directors to six.
In prepared remarks to accompany the switch, Maurice Marciano, who will be acting as interim ceo during the transition, avoided commenting on his brother’s continued input in the company, but instead lauded Alberini’s return to Guess.
“I am very excited to have Carlos coming back as ceo at Guess. He was instrumental in building the international business in Europe and Asia during his 10-year tenure with the company,” he said.
Shares in the apparel company closed down 14.6 percent, or $3.27, at $19.17. That cut the value of Paul Marciano’s 12.7 million shares in the company by $41.5 million — a costly comeback.