How Guess Thinks About Q3 And Beyond

While Guess Inc.’s second-quarter earnings could have been better, the company does see opportunity ahead for growth.

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“Guess has big opportunities in multiple product categories and in multiple markets,” company CEO Carlos Alberini told investors during the company conference call last month.

Alberini cited India, noting that the market is “growing really in a very aggressive way.” He also was optimistic about the Middle East, “where we think that there is a big, big plan. We are working with a great partner, Chalhoub organization there, a new partner for us, for the last three or four years, and we see a lot of opportunity to grow there, and there are multiple markets like that.”

Alberini said that company doesn’t plan to say on the sidelines when there is opportunity to grow the business. And he’s referring to the core business, separate from opportunities for its new Gen Z-focused Guess Jeans line and the plan to grow Rag & Bone , which it acquired earlier this year. The CEO also said that because Rag & Bone has higher prices than typical in the Guess portfolio, the margins for that business are “very healthy.”

What Guess is also looking at are sales patterns in Europe, which he said decelerated over the summer. While the reason wasn’t immediately clear, the CEO said the hot weather might have been an issue.

“There were several weeks after the clearance period where you would expect that the new product, the fall product, would start selling, and that did not happen with the same level of intensity as in prior years because the weather was still so hot throughout Europe,” he said, adding that it isn’t clear if weather was the issue or if consumer shopping patterns shifted during that time.

The uncertainty did have the company rethink merchandise offerings, particularly at “transitional seasons, such as the June-July timeframe and the January-February timeframe. We are looking at changing some of those transitional collections to really make those seasons more extended in summer months and in the winter months,” Alberini said. He also noted he was looking at different “fabrications that will be more conducive to those weather patterns.”

As for other geographies, Alberini said Asia appears to be challenging for fashion brands, and not just Guess. The company is working with a third party in Asia and working on changing the product assortment to be “a lot more localized.” Retail traffic in Americas Retail, its North American business, remains challenging, with the slower customer traffic trends in the U.S. extending into Canada.

“One of the things that we are looking at is the product assortment,” Alberini said. “Denim trends is an area that we are very focused on. We see some changes in silhouettes that we are trying to capitalize on.”

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In addition to the analysis on denim trends, weather patterns in Europe and a focus on a transitional assortment mix, as well as localization, he said the company has tried different promotional tactics as the customer is “a lot more sensitive to price,” but emphasized that Guess is “very, very careful with not going into heavy discounting.”

Another area of focus will be marketing to increase the level of engagement with customers, such as through social media and collaborations.

While Alberini didn’t share further details about denim silhouettes, Abercrombie & Fitch Co. CEO Fran Horowitz said during the company conference call last month that “we’re seeing nice excitement about denim. This low-rise baggy that we called out here at Abercrombie a couple of months ago and got after is working.”

Abercrombie saw second-quarter comparable sales growth across its all geographic markets, helped by its focus on localized assortments. “We are energized to see the progress we’ve made to localize our playbook across regions this quarter, but we know there’s more runway ahead of us,” she said.

“Denim is our mainstay [and] we love the new trends that are emerging,” American Eagle Outfitters Inc. president and executive creative director Jennifer Foyle said during the company’s call last month. American Eagle is a big denim player for teens, especially for the back-to-school season.

Citing jeans as a rite of passage for American Eagle, she said, “We have an incredible denim business. We’re number one for 15- to 25-year olds and the number one for women of all ages. So, we’re really leaning into women’s.” Foyle said the retailer feels “really good about lower and looser silhouette,” adding that its seeing really “nice results there.”

Foyle also said that the men’s business is improving, but it still has “some more work to do in denim, but we like the fits that are coming through.”

In a recent interview with Renee Heim , chief product officer for the American Eagle brand, she told Sourcing Journal that newer fits for fall include stovepipe and barrel. She noted that women’s styles emphasize “puddling around the shoe,” while men want denim “with just enough flex for all-day comfort.”

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