Both Wall Street and Guess Inc.’s compensation committee gave Victor Herrero a warm welcome Wednesday on his appointment as the jeanswear giant’s new chief executive officer.
Shares of Guess rallied 7 percent to close at $22.65 in New York Stock Exchange trading.
Herrero, the Inditex veteran who will succeed Paul Marciano as ceo on Aug. 1 and become the first individual from outside the Marciano family to lead the firm, will receive $1.2 million in annual salary from the company, with amounts above $1 million subject to deferment.
In addition to relocation benefits, Herrero will receive a signing bonus of $2 million and a restricted stock unit award and 150,000 shares of the company’s common stock as compensation for incentives forfeited by his departure from Inditex, parent of Zara. Half of the cash amount will be deferred.
Depending on the company’s performance under his leadership, Herrero at the conclusion of each fiscal year will receive threshold, target or stretch bonuses corresponding to one, two and three times, or amounts in between, his annual salary. This year, his bonus opportunity will be $1 million and subject to the achievement by the firm of an earnings from operations goal established by the compensation committee of the board for the second half of the year, until about the end of January.
Guess also granted Herrero stock options to purchase 600,000 shares of the company’s common stock, with one-fourth of the amount vesting on the first four anniversaries of the day his employment at the company began on July 7. Until he succeeds Marciano at the start of next month, he is serving as executive vice president of the company.
He was also granted an additional restricted stock unit award covering 250,000 shares, which will vest on a schedule similar to the stock options but only if operating profit targets are met.
Effective July 7, the term of the employment agreement is for four years, with automatic one-year renewals unless he or the company notifies the other of an intention not to renew.
Last year, Marciano, who will become chairman and chief creative officer, earned $1.5 million in salary as part of a nearly $9 million compensation package, $3.7 million of which was deemed “realizable” rather than subject to vesting requirements, stock performance or other considerations.
Herrero’s appointment as ceo on Tuesday led to an upgrade of the stock by Telsey Advisory Group to “market perform” from “underperform.” Wunderlich Securities analyst Eric Beder raised his price target to $24 from $20. Beder said the appointment “reflects growing confidence that the turnaround is taking hold and will be driven [in the second half] by further solid gains from denim and a slow turn in Europe.”