Guess Inc. wants to expand its business south of the border with a new joint venture.
The Los Angeles-based company has taken a majority ownership in a joint venture with an affiliate of Mexico’s Grupo Axo, a company that has worked with brands such as Coach, DKNY and Tommy Hilfiger in the Mexican market. The partnership will handle manufacturing, wholesale and retail sales of Guess apparel and accessories, and it already has resulted in the opening of two stores in Mexico City and Cancún, Mexico.
Financial terms of the deal were not disclosed.
“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,” Paul Marciano, co-chairman and co-chief executive officer, said in a statement. “We hope to achieve similar success with our joint venture partners in Mexico.”
The new venture expects to open “several” freestanding stores and more than 50 in-store shops over the next several years, according to a statement.
“Being a majority owner of this joint venture gives us an opportunity to really own the business, whereas in the past we had a licensee structure,” Carlos Alberini, president and chief operating officer, said in an interview.
Grupo Axo’s experience with high-end brands and its established relationships with landlords and Mexico’s department store management teams made the company an attractive partner for Guess. Grupo Axo owns and operates 39 retail stores and more than 300 store-in-stores across Mexico.
“It was important to us to partner with someone who can build the business very quickly,” Alberini said.
There is no specific target for the number of freestanding stores the company expects to open in Mexico, Alberini said. However, he acknowledged that those stores presented the best opportunity to showcase the brand’s “lifestyle essence.”
Similarities between U.S. and Mexican buyers also should require only slight changes to the company’s product assortments. Alberini noted that Guess stores located along the U.S.-Mexican border had generated strong sales, generating confidence that the brand would resonate with Mexican consumers.
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Guess owns and operates 326 stores in the U.S. and Canada. In Guess’ most recent quarter, ended in July, earnings jumped 229.8 percent to $13.7 million, or 30 cents a diluted share, outpacing Wall Street’s consensus estimate of 22 cents a share.The company reported earnings of $4.2 million, or 9 cents a share, in the same period a year ago.
Revenues spiked 29.6 percent to $231 million from $178 million, and sales rose 28.8 percent to $217.6 million from $168.9 million.