Just last week, Guess?, Inc. (NYSE:GES) won a long legal battle with high-end designer Gucci, over the use of the letter G in Italy. The court ruled that Gucci could not stop Guess?, Inc. (NYSE:GES) from using the letter to brand its merchandise in Italy, and that the letter was not an intrusion on Gucci’s double-G logo. While Guess? executives are surely happy to have the four-year-old case done with — although other cases continue in France and China — the victory isn’t going to stop Guess?, Inc. (NYSE:GES) from struggling.
Over the last 12 months, the designer’s stock has been flat, but there are new products and locations in the pipeline that it’s hoping will turn the boat around. So far, efforts have had limited success, with the company reporting lower revenue, operating income, and comparable sales last year.
The fall of Guess?
A 6.6% drop in comparable-store sales over the company’s last year, topped off by a 6.3% decline in the fourth quarter, set Guess? up for failure. The company was unable to entice customers into its stores, and as a result of the ensuing promotional environment, sales and margins fell. That’s all behind us now, though, so what is Guess? going to do to fix it?
The answer isn’t immediately clear. Whereas investors can look at the Asian expansion planned by The Gap Inc. (NYSE:GPS) or the new Kate Spade Saturday line from Fifth & Pacific Companies Inc (NYSE:FNP), Guess?, Inc. (NYSE:GES) has less to draw on. The company is forecasting fiscal 2014 revenue to be in line with fiscal 2013, and it’s anticipating a decline in operating margin.
Those numbers are driven by the expectation of lowered comparable sales over the coming year. That’s already been seen in the company’s first quarter, as it reported operating margins were down. To support margins, the company is hoping to manage its pricing through the rest of the year, so that promotions are not as prevalent as they have been recently.
Guess?, Inc. (NYSE:GES) has made a change at the top that may help the company over the long run. Just last week, it announced that it had a new chief design officer, Sharleen Ernster Lazear. Lazear comes to Guess? from Victoria’s Secret, where she spent the last 13 years. The company must hope that her experience in the intimates retail world will translate to success with its own intimates line, which has played a large role in the company’s South Korea operation.