Guess, Inc. Financial Accounting Final Project

Topics: Foreign exchange market, Currency, Balance sheet Pages: 7 (2254 words) Published: January 31, 2014
Financial Accounting – My Company Case

A. OVERVIEW
Guess?, Inc. (“Guess”) was founded in 1981 by the Marciano brothers; Paul, Georges, Maurice and Armand. Paul Marciano currently acts as the Chief Executive Officer and Principal Executive Officer of the Board of Directors for Guess. The company designs, markets, distributes and licenses one of the world’s leading contemporary apparel and accessories for men and women. The success of Guess began with jeans. The Marciano brothers developed a unique washing technique, which set them apart from other jean designers. Their continued success is primarily attributed to Paul Marciano’s direct contributions to the marketing efforts of the company. The “Guess?” brand has strong global presence, which projects an image of fun, fashionable and sexy. 1. Although the company has a wide global reach, the headquarters are in Los Angeles, California. Guess operates in North America (Canada, U.S., Mexico), Europe, Asia, and Central and South America. The company has flagship stores in Paris, Barcelona, Dusseldorf, London and Milan. 2. Guess finds itself in a hybrid of growth and maturity. The company has been in business for over 20 years and has experienced many ups and downs, which points to its maturity. However, growth is critical to its continued success in the competitive and fast moving apparel industry. 3. The core activities of Guess are the design, marketing and license of women’s and men’s apparel and accessories in a global market. a. The business segments are divided as follows:

Europe (37.6% Revenue, 42% Earnings from Operations)
North America Retail (41.6% Revenue, 33.5% Earnings from Operations) Asia (9.3% Revenue, 7.2% Earnings from Operations)
North America Wholesale (7% Revenue, 11.9% Earnings from Operations) Licensing (4.5% Revenue, 27.3% Earnings from Operations)
b. The primary goal of Guess is continued growth in the international markets, with an emphasis on the expansion of their retail store base. The global success of the company has provided diversification, which has allowed them to grow in times of economic unrest. The percentage of revenues generated from outside the U.S. and Canada grew from one fifth of total revenues for the year ending December 31, 2005 to approximately half of the revenues for the year ending January 28, 2012. However, this has proven to work to their advantage and disadvantage. c. The fluctuation in foreign currencies has presented problems for Guess. The majority of international purchases are conducted in foreign currencies. Therefore, fluctuations in currencies may have a significant impact on the translation of revenues to U.S. Dollars. The company hedges certain exposures to changes in foreign currency rates. Because the hedge activities are designed to protect the company from the volatility of the changes in rates, they reduce the negative impact of a strong U.S. dollar, but also reduce the positive impact of a weak U.S. dollar. This presents a risk for Guess as it continues to grow in the global markets. 4. Guess is in the apparel and accessories industry, particularly the contemporary, high end fashion design. Once considered an industry leader (late 80’s and early 90’s), Guess has slipped below Urban Outfitters and American Eagle, both of which portray a more relaxed, hippy, sexy style. The women’s and men’s apparel and accessories industry is highly competitive, with low barriers to entry. Trends in fashion are fast moving, so the importance of staying one step ahead of the rest is crucial to the success of their designs. Guess expects to rise to the top of the industry with their global expansion efforts, especially in the emerging markets of China and Brazil. B. TREND ANALYSIS OF SALES AND EARNINGS GROWTH

1. Sales Growth: The sales growth of Guess over the past five years was inconsistent. However, a noticeable pattern was detected. There was an increased rise in year 1...

References: Marciano Brothers Time of Trial – Los Angeles Times – January 21, 1990
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