Guess Inc. is evolving, through the tariff storm and more.
The denim brand’s fourth quarter came in stronger than analysts forecast and the company laid out a series of initiatives to reorient operations — from shuttering 20 North American stores to looking for a partner to take on its business in China.
Fourth-quarter revenues increased 5 percent to $932 million while adjusted earnings per share fell 26.4 percent to $1.48, but were still better than the $1.37 analysts forecast, according to FactSet.
But there’s plenty more change and potential change on the horizon.
Guess said a special committee of its board has retained investment bank Solomon Partners and law firm Willkie Farr & Gallagher as it evaluated a buyout offer from brand management company WHP Global.
Last month, WHP offered to pay $13 a share to investors other than cofounders Paul and Maurice Marciano and chief executive officer Carlos Alberini. That sets up a scenario where WHP would own the intellectual property while the Marcianos and Alberini take on the operating portion of the company, a source told WWD.
But no matter who owns the business, Guess is going to have to figure out how to operate in a world with higher duties.
Guess forecast sales would rise 3.9 percent to 6.2 percent this year, but that projection didn’t account for any impact from President Donald Trump’s towering “Liberation Day” tariffs set to reorder the global sourcing landscape.
On a call with analysts, Alberini painted a picture of a company that is well-balanced and ready to push ahead.
“We operate a very diversified business model geographically,” Alberini told analysts on the call. “Roughly 75 percent of our business is conducted outside of the U.S. and therefore, not subject to increased tariffs.
“With respect to the remaining 25 percent, our estimate of the cost of the products that we directly produce and distribute in the U.S. is roughly $200 million,” he said. “About one-third of this total relates to Rag & Bone, which attracts a more affluent customer, which gives us greater flexibility and pricing power. The remaining two-thirds of that relates to the gift business in the U.S., where we have a substantial outlet business.
“Based on the nature of the products that we carry in our outlet assortment, we feel there are significant opportunities to counter source these products in markets, especially in Latin America, where the tariffs announced tend to be more moderate,” he said.
Guess would ultimately feel the pinch no matter who is making the goods and bringing them in as any price increase will ripple up to the company one way or another.
In addition to changing up where it makes products, Guess is looking to change where it directly sells goods.
Alberini said the company’s business in Greater China would lose about $20 million this year.
“In spite of how challenging this market has been for us over the years, we continue to believe that there is an opportunity for the Guess brand in Greater China as our brand awareness is high, and the market is very large and compelling,” he said. “We plan to turn this business over to a third party to run it. We have already met several potential candidates for consideration. We expect for this transition to be completed before the end of this year, which should contribute to a significant improvement in our profitability in fiscal year 2027 and beyond.”
