Fur-Free, but Still Warm and Fuzzy at Guess

Sept. 13, 2007
Longstanding licensing agreements pave the way for joint ventures, in turn paving the way for a strong international retail presence for an iconic American lifestyle line.

On July 17 of this year, fashion and lifestyle products company and IW 50 Best Manufacturer for 2007, Guess Inc. announced to the press that it would be going "fur free" by eliminating the use of animal fur in any of its lines of clothing and sales channels.

The move by Guess, which received a lot of attention amongst the consumer activist community, was perhaps made easier by the fact that the Los Angeles, Calif.-based clothing producer has a string of record-setting earnings to keep shareholders feeling warm and fuzzy.

The company recently posted its 16th consecutive quarter of earnings growth, and for the second quarter of fiscal 2008, the company reported record net earnings of $37.5 million, an increase of 81.5% compared with net earnings of $20.6 million for the quarter ended July 29, 2006. Diluted earnings per share increased 81.8% to $0.40 per share in the current quarter versus $0.22 per share in the prior year quarter.

These strong corporate earnings are bolstered by a multifaceted campaign of international investment. For example, late last year Guess entered into a joint venture agreement in Mexico with an affiliate of Grupo Axo, a Mexican company that helps the development of Guess competitors (other internationally known brands such as Coach, DKNY and Tommy Hilfiger, for example) in Mexico. Guess is the majority owner in the joint venture, which will manufacture, distribute and retail Guess fashion apparel, accessories and other related products in Mexico. The first Guess retail store under the new agreement opened in May 2006 in Mexico City, and the second one opened in Cancun in July 2006.

Calling Mexico "an exciting opportunity for Guess," CEO Paul Marciano commented, "The formation of our new Mexican joint venture is another step forward in our international expansion. The Guess brand is already well recognized in Mexico as we had an apparel license in this region for over twenty years until 2004."

Guess Inc.
At A Glance

Guess Inc.
Los Angeles, Calif.
Primary Industry: Apparel
Number of Employees: 8,800
2006 In Review
Revenue: $1.2 billion
Profit Margin: 10.39%
Sales Turnover: 1.42
Inventory Turnover: 4.64
Revenue Growth: 26.61%
Return On Assets: 19.45%
Return On Equity: 42.72%

Mr. Marciano added, "We have experienced incredible success with Guess in Canada, which also started out as a joint venture in 1994 and is now a wholly owned subsidiary of Guess and one of our best performing regions. We hope to achieve similar success with our joint venture partners in Mexico."

Europe and Asia are also strong, noted Marciano, fleshing out a total global strategy that has reaped dividends for the company and its shareholders. "We are very pleased with our record financial results this quarter, which reflect the continued strength of the Guess brand, the success of our ongoing investments in long-term initiatives, such as Europe, Asia, and our accessories lines, and the consistency with which we are growing our business in North America and abroad," said Marciano in a September 4 statement to investors. "We increased our revenues by 48%, as all of our businesses delivered double digit revenue increases."

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