After Hitting Economic Headwinds, Guess Inc. Appoints Tom Barrack to Its Board of Directors
The Los Angeles lifestyle brand lost $11 million in its first quarter after seeing tough sales in the Americas.
Guess Inc. saw a colder winter affecting sales of lighter-weight items. COURTESY OF GUESS INC.
Barrack, a controversial figure who was indicted a few years ago by the federal government, was named to the board where he also will sit on the compensation committee.
“We look forward to benefiting from Tom’s insights as we continue to execute on our strategic initiatives and deliver enhanced value for our shareholders,” noted Alex Yemenidjian, the board’s chairman. “In addition to extensive global real estate and investment expertise, he brings a significant track record of executive leadership as well as years of experience serving on other public and private company boards.”
Barrack, who grew up in L.A. and attended the University of Southern California, has a colorful past. For years, he was a close friend and fundraiser for former President Donald J. Trump and was chairman of Trump’s inaugural committee. He is also the founder and former executive chairman and chief executive of Colony Capital Inc., now known as DigitalBridge Group Inc., a digital infrastructure investment firm.
In 2021 and 2022, he was indicted on nine charges related to alleged lobbying for the United Arab Emirates, reportedly serving as an unregistered foreign agent. Late last year, he was found not guilty on all charges.
Barrack’s nomination to the board was made on May 24, the same day the decades-old lifestyle label, founded by the Marciano brothers, shared its first-quarter financial results for fiscal 2024. The company reported a first-quarter net loss of $11.8 million on $569.8 million in revenues for the period ending April 29. For the previous first quarter, net income totaled $8 million on $593.5 million in revenues.
Business in the Americas was hit the hardest with same-store and e-commerce sales down 12 percent over the previous first quarter. Retail revenues for the Americas dropped 14 percent to $143.5 million while wholesale revenues plummeted 25 percent to $51.4 million. “Based on the softer performance and uncertain consumer spending environment, we are now managing the Americas segment with a more cautious view of the business for the remainder of the year,” said Guess Chief Executive Carlos Alberini.
“We had planned for our American wholesale business revenues to be down year-over-year due to the timing of shipments, which were heavily weighted to the first quarter of the prior year.”
Alberini said he felt the company’s product mix was strong but with a colder winter, items such as jackets, coats and sweaters did better than more popular products including dresses. Going forward, Guess is trying to figure out how to improve conversion rates and increase units per transaction without being highly promotional. However, customers are being very price-sensitive right now, which has been seen in stores and online, Alberini said.
Sales in Europe, the company’s largest market, were positive, rising 2 percent to $280.2 million over last year. Meanwhile, business was robust in Asia as China opened up after months of pandemic lockdowns. Asia revenues increased 26 percent to $70.7 million over last year while retail comp sales, including e-commerce, inched up 1 percent. Revenues in South Korea climbed significantly, particularly because Guess took over some stores operated by third-party entities, said Dennis Secor, interim chief financial officer.
Going forward, Alberini said the company wants to expand the number of casual products in its lineup while trying to avoid markdowns. “We are also strengthening the assortment of our seasonal pre-collection offerings so our wholesale customers can order products earlier and optimize time on the floor for each product,” the CEO said.
With first-quarter licensing revenues down 10 percent to $23.8 million, Guess is taking back some of its licensing business to produce in-house. “We are now planning to internalize our current licensing business with G-III, consisting of design development and distribution of outerwear and dresses in North America,” Alberini said. “These are businesses that represent $50 million a year in wholesale. We think that we can run this business internally and more profitably as these are categories we are already developing and distributing. As a result, we will not be renewing our license with G-III, which expires this coming December.”
Looking at the rest of the year, Guess is predicting revenues will rise 2 percent to 4 percent, after seeing annual revenues last year of $2.69 billion.