LOS ANGELES — Guess chief executive officer Victor Herrero is never one to dance around questions about the business. He accepts them and answers them in full — as he did in a wide-ranging conversation on what Guess is doing on the technology, consumer experiences and product fronts as the denim firm — with $2.4 billion in net revenue for the year ended Feb. 3 — continues to course correct.
There’s plenty that’s been happening outside of the firestorm and media frenzy that erupted in February when Kate Upton lodged allegations of sexual harassment against cofounder and chief creative officer Paul Marciano. The company, after forming a special committee to investigate Upton’s and others’ allegations, said in June its investigation reached a conclusion that included $500,000 in settlements and Marciano stepping down as executive chairman. Marciano, at the time, also indicated to the board he would not renew his contract and will transfer his existing duties to Herrero by Jan. 30.
Herrero cited the company’s first-quarter results for the three months ended May 5 in response to how the actual business fared during the time of the investigation.
“I want to reply [to] you with results. Q1 we did double-digit [net revenue] growth, the company, and we are guiding for single-digit growth for the whole year,” Herrero said in a phone interview.
He went on to cite the company’s press release on Marciano.
“He stepped down as chairman of the board but he continues [to remain] on the board,” he said. “I mean, he’s one of the founders and he’s the legacy…. He’s an amazing individual so definitely we will continue. I think the results were not really affected by anything.”
Clearly, the business and planning on new initiatives continued during that time. In the May quarter, Guess reported net revenue up 14.7 percent to $521.3 million. The company’s adjusted net loss narrowed from $19.4 million in the year-ago period to $17.8 million during the May quarter.
The company last month began participating in an artificial intelligence-backed concept shop run by Alibaba’s Fashion AI initiative in China.
When Herrero joined Guess three years ago, the denim firm launched a partnership with Tmall, who the ceo had a relationship with while serving as former head of Asia Pacific for Inditex and Zara Greater China. Guess has since worked with the platform on consistency across aspects such as product placement and promotions. So when Alibaba approached Guess with an idea for an AI-powered shop, which would marry Alibaba’s consumer data with Guess’ expertise on the physical retail side, the denim firm jumped at the chance.
“It was a very interesting thing and we are in the process of improving that technology,” Herrero said. “We are trying to merge a technology company and a retailer. I think that was really relevant because it’s something that many people are doing in terms of they are trying to understand what is the new shop and the new retail for the next coming years.”
Magic mirror technology and making product recommendations in store based on customer behavior from a few years back are just some of the tech-savvy features being considered now for a possible test in a Guess store.
All of this is important as Guess refines and defines what its stores of the future look like. Herrero, like many, guesses stores will have more technology but whether they look dramatically different from today remains to be seen, and the ceo said he believes adoption of new technologies will take hold faster in the U.S.
“In China at this moment there is no money [payment by cash]. Everyone is paying with WeChat or Alipay,” he said. “Nobody’s really paying for anything with physical money. So basically they are very advanced in terms of mobile technology, but at the same time I think the U.S. is going to be the reference for everyone and the U.S. will apply all the technologies at the same time or before everyone else. Most of the state-of-the-art technology companies are in the U.S. and I think that they are the ones taking risks in order to evolve the technology that we are using in our daily lives.”
In the nearer term, it’s summer as retailers Stateside begin gearing up for back-to-school and eventually another round of Black Friday. The increased promotional cadence in more recent years had in some ways stunted those more traditional selling periods, calling into question their significance any longer to business. But Herrero views it with a different perspective.
“At the end of the day, it’s another promotional period,” he said. “We have that promotional period in China. We have 11/11 [Singles’ Day] and right now in Europe [Black Friday] started being very important. The important thing is that it’s another opportunity to capture the attention of people. Of course you have to be promotional, but at the same time you have an opportunity to express yourselves. Maybe if you’re desperate you might go minus 60 [percent], minus 80 [percent]. I think it’s more of an opportunity than something that is over.”
Guess continues to open stores in Europe and Asia as it focuses on shuttering U.S. doors, the latter a market Herrero said — and has said before — that the company overexpanded in the past. How much longer it takes to correct the U.S. portfolio is unclear, but Herrero sees bright spots in the business.
“The company is in the middle of a turnaround and basically we comped positive in Q1 and also a part of that we had margin expansion,” he said. “So it means we are much less promotional than we were in the past. I think at the end of the day, at this moment, we are in a much better position than we were in the past and we will continue improving over the next few months.”
Guess’ messaging to consumers would certainly seem to mirror that sentiment. The company recently hosted an ambitious festival-style, streetwear-inspired Farmers Market concept during Cinco de Mayo weekend in downtown L.A. that wove in live music, exclusive drops and collaborations with some of the category’s hottest names, including Darren Romanelli, Sean Wotherspoon and Anwar Carrots, along with brands such as Chinatown Market and Pleasures.
Yes, Farmers Market — which expanded internationally in June and July — was a good marketing play but it’s also about getting closer to the consumer via the company’s Guess Jeans U.S.A. incubator arm, Herrero pointed out.
“Part of our growth strategy is investing in several key focus areas,” he said. “One is tech. One is product and the third one is customer experience, and Guess Jeans U.S.A. is an innovation incubator, a great way for us to test our new concepts and not only on what’s fresh but also determining the fashion trend of the moment.”
That was a ball set in motion with Guess’ collaboration with A$AP Rocky in 2016, followed by last year’s participation in ComplexCon.
“It was the first time there [at ComplexCon] that we had a stand. [There were] a lot of queues, so it was very cool,” Herrero said. “It’s part of our marketing strategy but at the same time it’s [Guess Jeans U.S.A.] a product that is really in our DNA and we believe that this product is also helping us in terms of the relevancy of the brand. We are doing collaborations with Sean Wotherspoon, with Darren Romanelli, so plenty of people that are really into that urban fashion world where we believe we belong. Guess Jeans U.S.A. is helping us to capture the attention of people. For example, Generation Z and also some part of the Millennials that maybe we are not reaching sometimes with other product.”
Herrero, said he would be there right alongside Guess at this year’s ComplexCon, joking he’d likely be the oldest one there and suggested a good pair of walking shoes to get around.
“If you are cool, you belong [in] ComplexCon more than anything else,” the ceo said. “It can be a high-end brand or fast fashion…. I spent maybe the whole day [last year]. I was lining [up] to go see the Nike stand or the Puma stand. I think we performed very well, but it’s not only about performing. It’s about engagement.”