American fashion retailer Guess Inc has formulated a strategic five-year plan aimed at improving the group’s business capabilities and promoting profitability. The plan focuses on overall sales in fiscal year 2025 to increase by another 2.5% billion, the group’s operating profit will benefit from consolidating the number of suppliers and withdrawing from purchases from China.
The 5-year plan, released at the company’s Investor Day in New York City on December 3, 2019, will focus on 5 long-term strategies and key initiatives designed to Achieve global business expansion, profit growth and value creation. These include: compared with the 2020 fiscal year, the financial target of increasing sales by another US$250 million in 2025 will increase the group’s overall sales to approximately US$3 billion.
According to BRiley analyst Susan Anderson, Guess plans to increase its operating profit margin to 10% and plans to use some methods to reduce the U.S. tax increase measures against China. For example: moving production out of China, reducing the number of integrated suppliers from 529 to about 200, establishing more direct relationships with suppliers, and digitizing the distribution process.
The move is consistent with trends outlined by Guess CEO Carlos Alberini during the company’s third-quarter earnings call in early December.
He said that in this season, we are reducing our procurement dependence on China and mitigating potential tariff risks without compromising product quality and improving cost-effectiveness. continued to make good progress.
Our product development and procurement teams excel in this area. I believe their efforts to optimize quality, speed and cost, especially in terms of infrastructure and product capabilities, have a significant long-term impact.
We are reaching production cost negotiations with those suppliers who are still committed to sourcing from China. Although tariffs may increase, they are still willing to provide very attractive prices. . Therefore, we expect that the proportion of ready-made garments purchased in China may increase from 12% to 23% in 2020. If new tariffs are implemented, the tariff increase should not have a negative impact on our costs.
Among other newly listed priorities of the company, it will focus on three target consumer groups such as Heritage (over 40 years old), Millennials Millennials (25-39 years old), Generation Z (10-23 years old); expand its distribution channels; and strive to strengthen demand for local products. The company also expects to drive improvements in the company’s operating performance, including procurement, product development and production, over the next five years.
Alberini told investors that he believed the plan would serve as a “solid roadmap” for the Guess team to grow its business and improve profitability.
Guess will adopt a five-pronged approach, focusing on the following:
(1) Brand relevance : In addition to focusing on the company’s three target consumer groups (traditional generations, millennials, and Generation Z), the company also plans to continue to maintain partnerships and collaborations with celebrities and social influencers, which is regarded as a “key” approach , in order to more effectively engage young people and the wider public.
(2) Customer-centric: The company will implement procedures and platforms to provide customers with a seamless, full-channel experience.
(3) Global territory: In order to expand the scope of its brand influence, its goal is to optimize the productivity and profitability that the company can currently control, and expand its distribution channels.
(4) Product excellence: Expand and customize the product portfolio according to modern people’s lifestyles and local product needs.
(5) Various functions: Prioritize investment in the areas of logistics, procurement, product development and production, inventory management and overall infrastructure.
Financial Targets
Among the Company’s financial targets, expected as of February 1, 2020 Its overall sales for the fiscal year to date will grow 2.7-3% compared with net income of $2.61 billion in the 12 months ended February 2, 2019. If Guess achieves sales growth of 3% during this period, net income for the period is expected to be approximately $2.69 billion.
Looking forward to the fiscal year ending February 1, 2025, sales are expected to grow by approximately US$250 million to US$2.94 billion.
By region, in fiscal year 2020, the European region’s revenue target will achieve high-single-digit growth, but the Americas will have a low-single-digit decline. In Asia, sales fell by mid-single-digit percentage points.
However, Guess expects that compared with 2020, its net income will be in the low single digits in the retail business in the Americas, Europe and Asia in fiscal year 2025. growing up. These estimates are based on the average annual growth rate in each of the five fiscal years from 2021 to 2025, compared with the same period in the previous year.
It is expected that operating profit in fiscal year 2020 will increase by 26-30% compared with 2019, and gross profit margin is expected to increase by 160 basis points compared with 2019. Operating profit in fiscal year 2025 is expected to increase by $150 million, with gross profit margin increasing 400 basis points during this period compared with fiscal year 2010.
As of the latest financial report for the third quarter on November 2, 2019, Guess’s net profit reached US$12.4 million and turned a profit.��This is better than the net loss of US$13.4 million in the same period in 2018. Adjusted net profit increased 41.2% to $14.9 million, and overall net income increased 1.7% to $615.9 million.
BRiley’s Anderson pointed out: We believe that Guess is a strong brand that can grow with the younger generation, and there are huge profit margin opportunities in the group’s business, which will Make Guess reach the 10% profit target.
