Guess Stumbles Down Wall Street Runway

Guess Inc., the high-profile maker of high-fashion sportswear, made an inauspicious entrance Thursday on Wall Street.

The Los Angeles-based company’s initial public offering opened flat on the New York Stock Exchange, highlighting the overall malaise in the market for new issues and aggravated by Guess’ recent labor difficulties.

Guess sold nearly 17% of its stock to underwriters late Wednesday. The offering had been delayed twice previously, and the Los Angeles jeans and sportswear maker had to reduce the sale to 7 million shares from 9.2 million as originally planned. The company trimmed the price to $18 a share from original estimates of $21 to $23.

On Thursday, it began trading under the symbol GES. It remained stuck at $18 a share despite heavy volume.

The stagnant price was a sign that “some of the folks who bought it were expecting perhaps a little better trading performance and, not having seen it, were bailing out,” said Richard A. Smith at Montgomery Securities in San Francisco.

But it was not a mass dumping of shares, said David Menlow, president of the IPO Financial Network in Springfield, N.J. Although the issue was near the top of the list of high-volume trades on the Big Board at more than 3 million shares by midafternoon, that was still not a big enough portion of the total 7 million shares to indicate that investors were throwing in the towel.

An IPO these days must be “squeaky clean” to get a good launching, Menlow said. That was not the case earlier in the year when the stock market was on a record-shattering run. But after July’s sharp sell-off, followed by a stunning recovery, investors are more skittish about jumping in on new offerings.

Guess was unable to sew up the squeaky-clean requirement. Its most immediate problem was a lawsuit filed Wednesday by the Union of Needletrades, Industrial and Textile Employees, or UNITE, accusing Guess of ignoring sweatshop conditions at its suppliers.

The company denies wrongdoing and cites the praise it has received from the government for its efforts to eliminate sweatshops.

Analysts also questioned the compensation packages of the company’s founder and chairman, Maurice Marciano, and his two brothers, co-founders Paul and Armand, which were outlined in the deal’s preliminary prospectus. The Marcianos retain the remaining 83.2% of the shares.

Any company that markets to fashion-conscious teenagers, who are notoriously capricious in their buying habits, has to watch the competition, analysts said.