Supermodels like Claudia Schiffer and Anna Nicole Smith were once the face of Guess? (NYSE:GES), back in the company's prime, and shoppers bought the brand to mimic their stylish and sultry looks. By 2007, the retailer's stock reached a high of about $50 a share, and the company reported diluted annual earnings of more than $4.50 per share.

Since then, management troubles and struggles to keep up with the ever-changing market have put pressure on earnings, Guess? shares have tumbled, and the company's market valuation fell to $1.4 billion from more than $4.5 billion.

Bright news may be on the horizon, however, after the company's December announcement of a five-year strategic plan. Guess? CEO Carlos Alberini unveiled the plan, saying it was a "clear path to double-digit operating margin performance mainly anchored on operational efficiencies."

A female model wearing Guess? Jeans holds a Guess? shopping bag

Image Source: Guess?

Five key points to revenue and operating profit growth

The new corporate roadmap includes five key points:

  • With brand relevancy, Guess? promises to stay connected with target customers, including millennials and Generation Z (Gen Zers are currently college-age and younger).
  • Customer centricity means the company will focus on the customer and offer a smooth omnichannel experience.
  • As part of its global footprint effort, Guess? will optimize productivity and expand distribution channels.
  • As for product excellence, the goal is to provide customers with products that suit their lifestyles.
  • And finally, work on functional capabilities should result in improved logistics, sourcing, product development, inventory management, and overall infrastructure.

Guess? set financial targets including a 34% to 39% increase in earnings per share this fiscal year, to the range of $1.31 to $1.36, and EPS of $3 by fiscal 2025.

While details remain vague, a few elements stand out. Investors should keep an eye on them as Guess? gets started on its plan, and reports the first few quarters of sales and earnings.

Partnering with influencers

As part of the "brand relevancy" step, Guess? aims to partner with influencers and celebrities to better reach a younger and broader audience. This is an important part of the puzzle, considering that millennials are the biggest shoppers. A report by Pymnts.com showed that millennials make the largest number of apparel and accessories purchases per year, compared with other generations. And about 72% of millennials say they've bought a fashion or beauty item after seeing a related Instagram post, according to CNA | SOPHIS. If Guess? is able to partner with the right influencers, this could be a big boost to the company's image, and drive buyers into its stores and to its website.

The omnichannel experience

For Guess?, its focus on the customer and the omnichannel experience are also essential elements. "Omnichannel" means the experiences of buying in a physical store and online are integrated -- so, for example, a customer might buy an item online and then pick it up in the company's store. According to Aberdeen Group, strong omnichannel operations have resulted in annual revenue increases of 9.5% year over year for "top-performing" companies.

While Guess? has an e-commerce site and an app that allows customers to keep track of orders and access the loyalty program, its online sales haven't been brilliant. In the third quarter of fiscal 2020, same-store retail sales in the Americas, including e-commerce, fell 3%, missing company forecasts. While European same-store sales and e-commerce together grew 1%, Asia reinforced the negative trend. Comparable-store sales in that market, including e-commerce, tumbled 21%.

Guess? said on its recent earnings call that it's working toward making the e-commerce site the biggest representation of the brand, with a full selection of the company's products. How Guess? plans to further integrate its physical stores and the online shopping experience will be key to attracting customers and future revenue growth.

Sequined dresses, in black and white, on hangers in a store

Image source: Getty Images.

Inventory management

Inventory management will be another factor that can make or break the company's recovery. Guess? started 2019 with too many old styles on hand, which weighed on its ability to stock and sell newer items. But it's already made progress, saying on the third-quarter earnings call that it lowered global inventory by 5% compared to the year-earlier period. The company said it expects to end the year with a double-digit decrease in inventory.

Guess? shares are trading at around $22, ending 2019 close to where they started the year. With a price-to-earnings ratio of 43 and the stock a dollar away from reaching analysts' price targets, shares don't look like a buy -- for now.

The company's strategic plan could change things; investors interested in the Guess? story should watch its statements for comments on partnerships with influencers, and the next earnings report (the current fiscal year ends Feb. 1) for details about inventories and online sales. If Guess? can make progress in those areas, the stock might come into fashion in the new year.