Empire's sunset: hard times came for Guess Jeans

History of the brand proves that the family business is not always stable.
08.09.2015
Forbes
Origin source
Suffice it to five words, to understand what the future once predicted for Guess Marciano brothers founded them, Inc. "Our scope of activity - the whole world" - these handwritten words are highlighted as the sign of the bar on the second floor in the corporate headquarters in Los Angeles in front of a huge poster with the usual advertising campaigns for Guess half-naked models. "This is my handwriting, - says Paul Marciano, CEO and deputy chairman of the board of directors. - All this - my handwriting. "

Formally, Guess became a public company in 1996. But in regard to the operational management, in fact it remains a family company, which was since its inception in 1981. Emotional, addictive and stubborn Paul (he, 63 years) and his brothers Maurice, Georges, Armand lined denim empire, relying on their own opinion on everything from style jeans (narrow and stylish, light fabric) to marketing (trademark technique was the use of sexual Guess images of girls, the most famous of them was Anna Nicole Smith - she made working clothes seductive as lowerie underwear).

Throughout the company, no one could almost argue with the entire history of the founders of the authoritative opinion. When Guess stock prices reached their maximum value $ 57.2 in October 2007, the cumulative state of the brothers, who own nearly half of the company amounted to an estimated $ 2.7 billion, while Paul and Maurice became billionaires.
But then it is a difficult time for the family-run enterprise. Revenue falls for the third consecutive year, onasostavila $ 2.4 billion last year; profit shrank to $ 95 million - is the minimum value over the past 10 years. Share price fell by 65% ​​compared with a peak, while the S & P 500 over the same period decreased by 40%. Today Marciano brothers with a combined fortune of $ 1.2 billion already struggling to get into the top 200 wealthiest families of America, according to Forbes.

Accord between the brothers is also less. George, who is now 68 years old, angry with the brothers sold him his stake in 1993 and walked away from the control. In 2009, he moved to Montreal, but still mindful of the company, the creation of which involved. George recently filed suit for $ 21 million to Guess and the Kuwaiti company Universal Perfumes & Cosmetics, accusingI have them in violation of its trademark rights. According to him, Universal Perfumes sells on its website a line of perfume products bearing his name that alludes to the existence of a link between the Universal and Guess. The Universal Forbes did not respond to calls, and lawyer Paul Marciano, the last of the brothers, who remained in the Guess and now heads a company called the claim unfounded, explaining that Guess has for many years does not sell licenses for the manufacture of perfumes.

Septuagenarian Arman, who was always in the shadow of his brothers, quietly retired in 2003 after a long sick leave. At the helm were Maurice and Paul, but Maurice (he is now 66 years old) left in 2007 as CEO, which he shared with Paul, became Chairman of the Board of Directors and focused on the development of its own estate of 22 hectares, and the winery in the Napa Valley. In 2012, he officially retired. And although it is still a lot of talking with Paul, in the affairs of the company Maurice does not take part: he recovers from a car accident in May. Paul, the youngest of the brothers, was a full head of Guess.

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In recent years, the company Paul feels lonely. "It is no secret that our business has changed a lot," - he says. But he insists that does not produce a radical change: Guess will always keep the roots. According to many former employees and analysts on Wall Street, it can lead to the death of the company. "We need a new management, new blood, - says Bridget Vayskhaar from Morningstar. - Need a new brand image. Collections should resonate with today's youth. "

Marciano brothers grew up in poverty, in a family of an Orthodox rabbi in Marseille - away from the beaches of Southern California and the luxury girls who have become key elements of the image of Guess. They soon went into business and opened a number of stores in France. In 1977 they moved to America, leaving at home a dozen of its institutions and the unpaid debt for taxes by nearly $ 10 million (as a result of the negotiations it was reduced to $ 2.2 million and eventually repay).

Guess history began in 1981, at the beginnings of the company were George and Maurice, and then they were joined by Armand and Paul. George created the clothing styles and developed firmsnny style Guess: boiled denim, light and soft, and more fitting than those of competitors. Maurice took over product management, Arman engaged in distribution, and Paul developed advertising - all done in-house.

Sell ​​jeans assisted sexual attraction patterns. Paul came up with advertising that connected the new brand with seductive images of women, who were not wearing almost nothing, except for Guess jeans. "All images were seductive, yet elegant," - he says. He insisted to invite anyone not well-known models. Paul always chose the people who like to buyers; so he found many later became famous models Claudia Schiffer, Naomi Campbell, Laetitia Casta and Anna Nicole Smith.

The first big success brought Guess Jeans Marilyn - so narrow that they had lightning also on each pant leg. Although the brothers had his own shop in Beverly Hills, they are parallel to the model sold in a network of department stores Bloomingdale's, which put a price tag on it a dizzying $ 60. Already in the first year of sales achievementr $ 6 million.

But plans to expand the business quickly emptied the bank account of the company. To raise funds, Marciano in 1983 sold 50% shares of Guess for $ 4.7 million Nakash brothers, Jordache owners, large companies tailoring, which already had its own factory in Hong Kong. Soon, however, Marciano sued the new partners, accusing them that they copy the styles Guess.Tyazhba lasted for 70 court proceedings and demanded hundreds of testimony and 300 000 documents.
In turn, the Nakash brothers accused of Marciano in the use of sliding schemes and that they were paying themselves double the salary than stipulated in the contract. As he wrote earlier of Forbes, the situation became even more complicated when Marciano friends with the IRS agent and began to tell him about the tax schemes Nakash brothers - after the US congressional committee accused the high-ranking employees of the Tax administration in malfeasance. Marciano rejected all accusations. Two clan entrepreneurs brothers agreed to in 1990, and although the content of their agreements without disclosingaxis Marciano came out of the scrum sole owners of the company Guess, which all these years has flourished.

Inside the theater

However, Marciano began to quarrel with each other. George wanted to bring Guess products in supermarkets economy like JC Penney. His brothers strongly opposed to the idea. In the company there were two opposing camps: some staff members shared the view of Georges, others maintained the opposite direction. In the end, George gave up and sold his share of the brothers for $ 214.2 million. In order to finance the purchase, they took $ 210 million and three years later, were owed $ 105 million. In order to raise funds, the brothers decided to take the company to the stock exchange. "I have never had a boss who'd worked hard more than they do - says Karen Ioli, a former vice president of licensing, which is subordinated to Georges first, and then Paul. - We worked on Saturdays - they worked on Saturdays. It has always been very hard work. " Prior to the IPO, the brothers took care of most of exclusivity of its brand. Guess beginning terminate contracts with all wholesalers,which could destroy the image, although cooperation with the networks of department stores Bloomingdale's and Dillard continued. Selling to wholesalers, which brought 67% of revenue in 1993, it decreased to 56% in two years.

After entering the stock exchange situation has not improved. A former top managers Guess recalls a very busy session devoted to the logo on the jeans. Angered by Maurice in full throat screamed that logos must be replaced immediately. On the question of the manager, what to do then with the inventory, Maurice replied: "Burn them." "Jeans we seem not to burn steel - says a top manager. - This order was part of the theater, which was formed within the company. " (The company said they did not know anything about this incident.)

As Guess continued to shift from cooperation with wholesalers to trade through their own branded stores, including those in Europe, things were going well. In the four years after the IPO, the company's revenue grew by 40%.

This gave Marciano courage, and they have launched a number of new store formats around the world. One group of stores sell only accessories. Magazins under the guise of G by Guess positioned as selling at discounted prices. A third network received a special load - the name of Marciano. These stores, with an area half the size of standard stores Guess, we had to remind the boutiques, and sold more expensive women's clothing in them. But in spite of the development strategy of their own trade, the brothers agreed to sell the license for opening Guess stores in Asia, where it was the most difficult to do business on their own.

Without buffer

Marciano, who until now had never shared with anyone the power of the company, in 2000, found a capable leader in the person of Carlos Alberini, who previously worked in the department store chain Bon-Ton and drugstore chain now known as CVS. The Guess he was involved in developing a strategy together with Marciano and helped to bring these plans to the other members of the leadership. "Carlos was the key to their success. They owe him very much, - says one of the former leaders of Guess. - He could be a buffer between Marciano and the rest of the company. " When he entered the board of directors,'s Guess, it seemed to be unstoppable. Over the decade, the number of its pac ross stores increased from 427 to 1373, and revenues reached $ 2.5 billion.

The turning point in the history of Guess was the departure of two key people. In 2007, from his post as director general left Maurice, who own all the forces devoted Marciano Estate winery in Northern California. Three years later the company left Alberini to lead the furniture company Restoration Hardware. Since his departure, Guess shares fell 40%, while the overall market has almost doubled. After the final departure of Maurice retired in January 2012, the company's shares fell 30%, while the market grew by 60%.

Guess has always been difficult to keep their employees in the company. "Marciano extremely inconsistent in regard to personnel management and corporate culture as a whole", - said the former vice-president who lasted there less than three years, almost all of the former employees, who were given no comments for this article, to remain anonymous, to avoid friction with Marciano. The main thing that spoiled the atmosphere in the company. "It looked like a third world war", - said the former vice president of retail trade; in hissaid Marciano constantly focus on the mistakes of others. Paul refused to comment, but said Alberini of Forbes, that "never seen them in such a state."

The brothers were never able to stick to build a strategic plan - the problem haunts the company throughout its history. "It was possible to establish a plan for a three- or five-year term, and then, if some two weeks accessories sold better than usual, they decided to give half of the area under the accessories in the stores - says a former executive. - Long-term plans for nobody cared. No one asked, "How are you going to strengthen this area?" This is not about them. " (Paul is not commenting.)

This lack of foresight on the background of a sports-type clothing boom, which rose Lululemon, and other competitors are working on the scheme fastfeshen, with a shorter production cycle (from Guess from design style to the appearance of new models on the shelves takes eight times longer than the companies like Zara), impact on profitability. At the core of the company's hatred-screw business in North America, the company that brings the most revenue, level of repeat sales - a key metric for retailers - fell from last year's 4.9% to 3.7%. Net profit at the same time reduced by 40%. Ironically, the most profitable segment of the business has now become a tiny division of licensing. It brings in revenue of 4.6% and 80% of profits.

Paul responded to the problems of the closing of some stores, giving the voices of critics who say that Guess has grown too fast, but has not made any large-scale changes. In North America, the number of stores decreased by 5% over three years, up to 481. Most of the closed shops belonged to the new format, which Maurice and Paul have created in the 2000s. Paul has also introduced a premium women's clothing from the shelves of stores in Marciano Guess usual assortment of shops. And the face of the brand Gigi Hadid gained great fame as a fashion model. Recently, her picture appeared in the issue of Sports Illustrated, dedicated to swimsuits.

Still enough to go on a weekend into a giant shopping mall in New Jersey, in order to assess in which provisionsSRI was firm. Marciano store is completely empty. The store Guess few casual visitors puzzled study range: short shorts with rhinestones, trousers, suits reminiscent of astronauts, and a variety of jewelry with a large emblem of the Guess. The ubiquitous logo - he played on large two-thirds of all the goods - any purchase equates to an act of idolatry.
Almost 5,000 km away in negotiating Guess headquarters under the photo of another idol, model Guess 1990s, Claudia Schiffer, Paul defends the future of the family business. "We believe in our brand. We believe that if the company will have to become smaller, so be it, - he says. - If you have to reduce the number of stores from 1,600 to 800, we will. We must believe that the business will continue through 10, and 20 years later, because it's my dream. "

If the last despot of Clan Marciano wants to impress all your vision, so be it.

Without Guess

New life of Georges Marciano For many years, Georges Marciano was nearer his brothers brand Guess, and it was his talent firm owes most successful style. He suddenly left the company in 1993 and sold the brothers share for $ 214.2 million. Since then, George broke all ties with the company. He was too busy spending money on wine, art, cars, watches, and jewelry; among other things he bought for $ 16.2 million diamond, named after his daughter Chloe. Marciano was again in sight of the press in 2003, when divorced from his wife, Megan. In the following years, he participated in several litigation with its former employees, who are accused of stealing. His librarian said in court that he threatened to "ruin" her life. Another staff member said that because of his behavior was plunged into a deep depression and she took a course of treatment. The court ruled in favor of workers. After that, George moved to Montreal, the staff are still trying to recover their money awarded to him. Georges through a spokesman declined to comment. Today, George is trying again to achieve success as a fashion designer, this time alone. A year ago, he opened a boutique that bears his andme, in the historic part of Montreal.



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