The news that Guess Inc. co-founder Paul Marciano plans to step down as chief executive after more than 15 years marks the end of an era – and, for investors, a light at the end of a long tunnel.
The downtown L.A. apparel firm announced July 14 that Marciano, 63, will be replaced as chief executive next month by Victor Herrero, managing director for Asia at Spain’s apparel giant Inditex Group, which holds big-name fashion brands such as Zara and Stradivarius. It’s the first time the company, previously led by Marciano’s brother Maurice, has gone outside of its founding family for leadership.
Guess shares spiked after the announcement, rising 7 percent the following day. That capped a week that saw shares climb 14 percent, closing July 15 at $22.65, making Guess one of the biggest gainers on the LABJ Stock Index. (See page 58.)
Erinn Murphy, an analyst who follows Guess for Minneapolis investment bank Piper Jaffray & Co., said the appointment of industry veteran Herrero was a pleasant surprise after years of pressure on the company to increase profit margins, which have slimmed down from the midteens in 2011 to about 5 percent last year.
“The market is saying that people are pleased there’s at least a change at the top to effect some sustainable change and recovery going forward,” she said.
By bringing Herrero aboard, Murphy said the company improves its prospects of growth in Asia, which represents about 11 percent of Guess sales.
“Herrero brings a very specific skill set, knowing how to grow global businesses in Asia,” Murphy said.
In a press release announcing the transition, Paul Marciano said he and the board, after searching for more than a year, hired Hererro because of his understanding of the Guess brand and his international reach. Representatives for the company did not return calls for comment.
Though investors appear bullish on Herrero, some analysts aren’t sure how big a difference he’ll be able to make. While Marciano is stepping down as chief executive, he will remain with the company as chairman and chief creative officer. And Maurice Marciano, who is stepping down as chairman, will remain on the board.
In a research note that trailed last week’s announcement, Bridget Weishaar, an analyst at Chicago investment research firm Morning Star Inc. wrote that she is weary of the brothers’ board presence and wary of their collective 28 percent stake.
“We are maintaining our poor-stewardship rating until we have further insight into the working relationship between the new CEO and the Marciano brothers,” she wrote.
