Montreal—The Guess brand has been struggling to recover lost sales, especially internationally, now the company faces another rift: disputes among the founders, the Marciano brothers.
Earlier this week, Georges Marciano, who founded Guess and then left the company in the 1990s, said he was initiating legal action to reacquire the right to use his name for the commercialization of new products. The litigation comes on the heels of the formal opposition recently filed by Guess with the Canadian Intellectual Property Office to prevent him from using the words “Georges Marciano” in the course of his commercial activities.
Georges Marciano charges that the license agreement for his name became void when transferred his shares to his brothers Armand, Maurice and Paul Marciano in 1993.
“It was agreed that Georges Marciano could continue to freely use his name in connection with his business. In overstepping this agreement, Guess is abusing its rights and putting Georges Marciano’s business at serious risk.”
Given that his introduction of stonewashed denim was so iconic, Georges Marciano now wants to continue using his name to offer consumers the style with which he is associated. “I’m the founder of Guess, but I am first and foremost a fashion designer. My creations are recognized worldwide, so it is essential, both for me and for the public, that the styles continue to be associated with the person who created it,” asserted Georges Marciano.
In a motion to the Superior Court of Quebec in Montreal filed March 18, Georges Marciano demands to be compensated for the losses resulting from Guess’ opposition to his use of the words “Georges Marciano” as part of his activities and restores the truth about the founding of Guess by stating that he is the founder of Guess with Georges Atlan. He also asked the Court to rule on the use of the “Marciano” brand by Guess, since there is potential for confusion with the “Georges Marciano” designation.
Facing Intense Competition
Any prolonged legal battle is likely to be a distraction to Guess just when it has been struggling for the past few quarters, with intense competition in key markets, weak traffic not to mention soft consumer sentiment. The strengthening of the U.S. dollar is also hurt, since Guess has such a large international business.
For the fourth quarter ended January 31, the Los Angeles-based company reported earlier this week net income of $53.9 million, or 63 cents a share, compared to $69.6 million, or 82 cents a share, for the year-ago quarter. Analysts had expected 57 cents a share.
Total fourth quarter net revenue fell 9.3% to $696.73 million from $768.36 million in the same quarter last year. Fourth quarter net revenue decreased 4.1% in constant currency. Sales also missed analysts’ consensus for $704.59 million.
Twelve analysts had a consensus revenue estimate of $704.59 million for the fourth quarter.
For the fourth quarter, North American retail revenues decreased 3.7% to $317.0 million; retail comparable store sales including e-commerce declined 5%. North American Wholesale revenues fell 10.2% to $36.6 million.
European revenues dropped 16.1% to $240.9 million in the fourth quarter. European revenues decreased 5% in constant currency.
Asian revenues decreased 9.1% to $75.4 million in the fourth quarter. In constant currency, Asian revenues fell 7%.
Similarly Guess gave a weak forecast.
Looking forward to the first quarter, Guess forecasts a net revenue decline between 8 and 7 percentage points and a loss of 3 to 6 cents a share. Analysts expect the company to post a loss of 3 cents a share on revenue decline of 6%.
As for its fiscal year ending January 30, 2016, Guess forecasts net revenue decline between 9 and 7 percentage points and earnings of 75 to 95 cents a share. On the other hand, analysts currently expect the company to earn $1.04 a share on revenue decline of 2.5% for the fiscal year 2016.