Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q 
☒         QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended AugustMay 1, 20202021
OR 
☐      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from             to           
Commission file number: 1-11893
GUESS?, INC.
(Exact name of registrant as specified in its charter)
Delaware95-3679695
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
1444 South Alameda Street
Los Angeles,California90021
90021
(Address of principal executive offices and zip code)
(213) (213) 765-3100
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading symbol(s)Name of each exchange on which registered
Common Stock, par value $0.01 per shareGESNew York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes x  No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes x  No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer☐Accelerated filer☒
Non-accelerated filer☐Smaller reporting company☐
Large accelerated filer☒Accelerated filer☐
Non-accelerated filer☐Smaller reporting company☐
Emerging growth company☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes ☐  No x
As of August 31, 2020,May 28, 2021, the registrant had 63,610,47464,923,786 shares of Common Stock, $.01 par value per share, outstanding.


Table of Contents
GUESS?, INC.
FORM 10-Q
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
PART I. FINANCIAL INFORMATIONFinancial Statements (unaudited)
1
Item 1.
Financial Statements (unaudited)
1
1
2
3
4
5
7
3932
6147
6550
PART II. OTHER INFORMATION
6651
6651
6751
6852

i
Table of Contents

PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements.

GUESS?, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data) 
 Aug 1, 2020 Feb 1, 2020
 (unaudited)  
ASSETS 
  
Current assets: 
  
Cash and cash equivalents$327,970
 $284,613
Accounts receivable, net246,471
 327,281
Inventories419,427
 393,129
Other current assets80,069
 59,212
Total current assets1,073,937
 1,064,235
Property and equipment, net240,081
 288,112
Goodwill36,232
 34,777
Deferred tax assets62,444
 63,555
Restricted cash228
 215
Operating lease right-of-use assets766,853
 851,990
Other assets130,954
 126,078
 $2,310,729
 $2,428,962
LIABILITIES AND STOCKHOLDERS’ EQUITY 
  
Current liabilities: 
  
Current portion of borrowings and finance lease obligations$42,321
 $9,490
Accounts payable259,743
 232,761
Accrued expenses and other current liabilities192,667
 204,096
Current portion of operating lease liabilities235,749
 192,066
Total current liabilities730,480
 638,413
Convertible senior notes, net252,988
 247,363
Long-term debt and finance lease obligations66,069
 32,770
Long-term operating lease liabilities659,118
 714,079
Other long-term liabilities143,225
 130,259
 1,851,880
 1,762,884
Redeemable noncontrolling interests4,021
 4,731
    
Commitments and contingencies (Note 13)


 


    
Stockholders’ equity: 
  
Preferred stock, $.01 par value. Authorized 10,000,000 shares; no shares issued and outstanding0
 0
Common stock, $.01 par value. Authorized 150,000,000 shares; issued 142,843,839 and 142,867,947 shares, outstanding 63,614,749 and 65,848,510 shares, as of August 1, 2020 and February 1, 2020, respectively636
 658
Paid-in capital548,602
 563,004
Retained earnings952,707
 1,130,409
Accumulated other comprehensive loss
(131,609) (139,910)
Treasury stock, 79,229,090 and 77,019,437 shares as of August 1, 2020 and February 1, 2020, respectively(932,068) (914,447)
Guess?, Inc. stockholders’ equity438,268
 639,714
Nonredeemable noncontrolling interests16,560
 21,633
Total stockholders’ equity454,828
 661,347
 $2,310,729
 $2,428,962
GUESS?, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data) 
 May 1, 2021Jan 30, 2021
 (unaudited) 
ASSETS  
Current assets:  
Cash and cash equivalents$395,128 $469,110 
Accounts receivable, net306,297 314,147 
Inventories404,851 389,144 
Other current assets67,907 60,123 
Total current assets1,174,183 1,232,524 
Property and equipment, net211,354 216,196 
Goodwill36,516 36,736 
Deferred tax assets71,979 72,417 
Restricted cash233 235 
Operating lease right-of-use assets738,544 764,804 
Other assets145,200 142,956 
 $2,378,009 $2,465,868 
LIABILITIES AND STOCKHOLDERS’ EQUITY  
Current liabilities:  
Current portion of borrowings and finance lease obligations$17,917 $38,710 
Accounts payable257,926 300,427 
Accrued expenses and other current liabilities176,156 200,602 
Current portion of operating lease liabilities224,676 222,800 
Total current liabilities676,675 762,539 
Convertible senior notes, net261,609 258,614 
Long-term debt and finance lease obligations86,724 68,554 
Long-term operating lease liabilities632,574 662,657 
Other long-term liabilities139,285 144,004 
 1,796,867 1,896,368 
Redeemable noncontrolling interests3,949 3,920 
Commitments and contingencies (Note 13)00
Stockholders’ equity:  
Preferred stock, $.01 par value. Authorized 10,000,000 shares; 0 shares issued and outstanding0 0 
Common stock, $.01 par value. Authorized 150,000,000 shares; issued 142,792,840 and 142,793,679 shares, outstanding 64,932,613 and 64,230,162 shares, as of May 1, 2021 and January 30, 2021, respectively649 642 
Paid-in capital550,831 553,111 
Retained earnings1,039,581 1,034,823 
Accumulated other comprehensive loss
(120,902)(120,675)
Treasury stock, 77,860,227 and 78,563,517 shares as of May 1, 2021 and January 30, 2021, respectively(915,964)(924,238)
Guess?, Inc. stockholders’ equity554,195 543,663 
Nonredeemable noncontrolling interests22,998 21,917 
Total stockholders’ equity577,193 565,580 
 $2,378,009 $2,465,868 
 
See accompanying notes to condensed consolidated financial statements.

1
GUESS?, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(in thousands, except per share data)
(unaudited)
 Three Months Ended Six Months Ended
 Aug 1, 2020 Aug 3, 2019 Aug 1, 2020 Aug 3, 2019
Product sales$386,392
 $664,678
 $633,709
 $1,182,551
Net royalties12,147
 18,542
 25,081
 37,360
Net revenue398,539
 683,220
 658,790
 1,219,911
Cost of product sales251,511
 417,554
 477,533
 772,296
Gross profit147,028
 265,666
 181,257
 447,615
Selling, general and administrative expenses150,293
 218,175
 293,581
 422,820
Asset impairment charges11,969
 1,504
 64,941
 3,279
Net gains on lease terminations(885) 0
 (429) 0
Earnings (loss) from operations(14,349) 45,987
 (176,836) 21,516
Other income (expense): 
  
    
Interest expense(5,941) (4,951) (11,403) (6,210)
Interest income436
 313
 1,046
 674
Other income (expense), net5,548
 (6,355) (14,032) (4,284)
 43
 (10,993) (24,389) (9,820)
        
Earnings (loss) before income tax expense (benefit)(14,306) 34,994
 (201,225) 11,696
Income tax expense (benefit)6,386
 8,818
 (19,995) 6,101
Net earnings (loss)(20,692) 26,176
 (181,230) 5,595
Net earnings (loss) attributable to noncontrolling interests(334) 854
 (3,206) 1,647
Net earnings (loss) attributable to Guess?, Inc.$(20,358) $25,322
 $(178,024) $3,948
        
Net earnings (loss) per common share attributable to common stockholders (Note 3):
Basic$(0.31) $0.36
 $(2.72) $0.05
Diluted$(0.31) $0.35
 $(2.72) $0.05
        
Weighted average common shares outstanding attributable to common stockholders (Note 3):
Basic65,177
 70,508
 65,446
 75,216
Diluted65,177
 71,356
 65,446
 76,155
Table of Contents

GUESS?, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(in thousands, except per share data)
(unaudited)
 Three Months Ended
 May 1, 2021May 2, 2020
Product sales$498,477 $247,317 
Net royalties21,525 12,934 
Net revenue520,002 260,251 
Cost of product sales308,444 226,022 
Gross profit211,558 34,229 
Selling, general and administrative expenses186,684 143,288 
Asset impairment charges441 52,972 
Net (gains) losses on lease modifications(2,145)456 
Earnings (loss) from operations26,578 (162,487)
Other income (expense):  
Interest expense(5,926)(5,462)
Interest income374 610 
Other expense, net(2,701)(19,580)
 (8,253)(24,432)
Earnings (loss) before income tax expense (benefit)18,325 (186,919)
Income tax expense (benefit)5,455 (26,381)
Net earnings (loss)12,870 (160,538)
Net earnings (loss) attributable to noncontrolling interests864 (2,872)
Net earnings (loss) attributable to Guess?, Inc.$12,006 $(157,666)
Net earnings (loss) per common share attributable to common stockholders (Note 3):
Basic$0.19 $(2.40)
Diluted$0.18 $(2.40)
Weighted average common shares outstanding attributable to common stockholders (Note 3):
Basic64,035 65,715 
Diluted65,940 65,715 

See accompanying notes to condensed consolidated financial statements.


2
GUESS?, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF
COMPREHENSIVE INCOME (LOSS)
(in thousands)
(unaudited)
 Three Months Ended Six Months Ended
 Aug 1, 2020 Aug 3, 2019 Aug 1, 2020 Aug 3, 2019
Net earnings (loss)$(20,692) $26,176
 $(181,230) $5,595
Other comprehensive income (loss) (“OCI”): 
  
    
Foreign currency translation adjustment       
Gains (losses) arising during the period32,802
 (5,293) 14,303
 (17,360)
Derivative financial instruments designated as cash flow hedges 
  
    
Gains (losses) arising during the period(7,897) 2,286
 (4,361) 6,722
Less income tax effect885
 (308) 529
 (880)
Reclassification to net earnings (loss) for gains realized(2,462) (1,801) (4,450) (2,077)
Less income tax effect264
 229
 483
 324
Defined benefit plans 
  
    
Foreign currency and other adjustments(236) (167) (236) (60)
Less income tax effect25
 16
 24
 5
Net actuarial loss amortization97
 111
 193
 222
Prior service credit amortization
(16) (9) (32) (19)
Less income tax effect(10) (12) (19) (23)
Total comprehensive income (loss)2,760
 21,228
 (174,796) (7,551)
Less comprehensive income (loss) attributable to noncontrolling interests: 
  
    
Net earnings (loss)(334) 854
 (3,206) 1,647
Foreign currency translation adjustment1,759
 (452) (1,867) (142)
Amounts attributable to noncontrolling interests1,425
 402
 (5,073) 1,505
Comprehensive income (loss) attributable to Guess?, Inc.$1,335
 $20,826
 $(169,723) $(9,056)
Table of Contents

GUESS?, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF
COMPREHENSIVE INCOME (LOSS)
(in thousands)
(unaudited)
 Three Months Ended
 May 1, 2021May 2, 2020
Net earnings (loss)$12,870 $(160,538)
Other comprehensive income (loss) (“OCI”):  
Foreign currency translation adjustment
Losses arising during the period(2,216)(18,499)
Derivative financial instruments designated as cash flow hedges  
Gains arising during the period1,781 3,536 
Less income tax effect(228)(356)
Reclassification to net earnings (loss) for (gains) losses realized398 (1,988)
Less income tax effect62 219 
Defined benefit plans  
Foreign currency and other adjustments129 0 
Less income tax effect(13)(1)
Net actuarial loss amortization105 96 
Prior service credit amortization
(17)(16)
Less income tax effect(11)(9)
Total comprehensive income (loss)12,860 (177,556)
Less comprehensive income (loss) attributable to noncontrolling interests:  
Net earnings (loss)864 (2,872)
Foreign currency translation adjustment217 (3,626)
Amounts attributable to noncontrolling interests1,081 (6,498)
Comprehensive income (loss) attributable to Guess?, Inc.$11,779 $(171,058)

See accompanying notes to condensed consolidated financial statements.


3
GUESS?, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
 Six Months Ended
 Aug 1, 2020 Aug 3, 2019
Cash flows from operating activities: 
  
Net earnings (loss)$(181,230) $5,595
Adjustments to reconcile net earnings (loss) to net cash provided by (used in) operating activities: 
  
Depreciation and amortization32,250
 37,225
Amortization of debt discount5,197
 2,662
Amortization of debt issuance costs661
 276
Share-based compensation expense9,789
 9,454
Forward contract gains3,420
 (34)
Net loss on impairment and disposition of property and equipment and long-term assets65,974
 3,753
Other items, net11,889
 5,606
Changes in operating assets and liabilities: 
  
Accounts receivable94,373
 24,492
Inventories(16,002) (22,926)
Prepaid expenses and other assets(20,550) (1,596)
Operating lease assets and liabilities, net39,902
 1,340
Accounts payable and accrued expenses(3,923) (87,423)
Other long-term liabilities(1,065) (1,381)
Net cash provided by (used in) operating activities40,685
 (22,957)
Cash flows from investing activities: 
  
Purchases of property and equipment(10,099) (34,551)
Proceeds from sale of long-term assets336
 0
Net cash settlement of forward contracts(273) 162
Purchases of investments(1,882) 0
Other investing activities(52) 521
Net cash used in investing activities(11,970) (33,868)
Cash flows from financing activities: 
  
Proceeds from borrowings274,594
 90,136
Repayments on borrowings and finance lease obligations(218,267) (63,285)
Proceeds from issuance of convertible senior notes0
 300,000
Proceeds from issuance of warrants0
 28,080
Purchase of convertible note hedges0
 (60,990)
Convertible debt issuance costs0
 (5,068)
Purchase of equity forward contracts0
 (68,000)
Dividends paid(958) (26,901)
Issuance of common stock, net of tax withholdings on vesting of stock awards(2,908) 43
Purchase of treasury stock(38,876) (212,564)
Net cash provided by (used in) financing activities13,585
 (18,549)
Effect of exchange rates on cash, cash equivalents and restricted cash1,070
 (4,042)
Net change in cash, cash equivalents and restricted cash43,370
 (79,416)
Cash, cash equivalents and restricted cash at the beginning of the year284,828
 210,995
Cash, cash equivalents and restricted cash at the end of the period$328,198
 $131,579
    
Supplemental cash flow data: 
  
Interest paid$5,277
 $1,535
Income taxes paid, net of refunds$2,967
 $4,201
    
Non-cash investing and financing activity:   
Assets acquired under finance lease obligations$276
 $3,055
Receivable and related adjustments from sale of retail locations$(364) $5,088
Table of Contents

GUESS?, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
 Three Months Ended
 May 1, 2021May 2, 2020
Cash flows from operating activities:  
Net earnings (loss)$12,870 $(160,538)
Adjustments to reconcile net earnings (loss) to net cash used in operating activities:  
Depreciation and amortization14,188 17,024 
Amortization of debt discount2,781 2,599 
Amortization of debt issuance costs362 307 
Share-based compensation expense4,060 5,786 
Forward contract gains(101)(1,102)
Net loss from impairment and disposition of long-term assets1,011 53,483 
Other items, net2,315 9,951 
Changes in operating assets and liabilities:  
Accounts receivable4,373 84,667 
Inventories(9,574)(7,894)
Prepaid expenses and other assets(15,328)1,059 
Operating lease assets and liabilities, net(1,953)27,704 
Accounts payable and accrued expenses(67,724)(93,294)
Other long-term liabilities(923)(1,305)
Net cash used in operating activities(53,643)(61,553)
Cash flows from investing activities:  
Purchases of property and equipment(9,139)(5,973)
Proceeds from sale of business and long-term assets1,648 257 
Net cash settlement of forward contracts(283)0 
Other investing activities(14)0 
Net cash used in investing activities(7,788)(5,716)
Cash flows from financing activities:  
Proceeds from borrowings5,651 245,961 
Repayments on borrowings and finance lease obligations(9,804)(31,884)
Dividends paid(7,511)(958)
Issuance of common stock, net of tax withholdings on vesting of stock awards1,945 (3,036)
Net cash provided by (used in) financing activities(9,719)210,083 
Effect of exchange rates on cash, cash equivalents and restricted cash(2,834)(8,014)
Net change in cash, cash equivalents and restricted cash(73,984)134,800 
Cash, cash equivalents and restricted cash at the beginning of the year469,345 284,828 
Cash, cash equivalents and restricted cash at the end of the period$395,361 $419,628 
Supplemental cash flow data:  
Interest paid$3,977 $3,960 
Income taxes paid, net of refunds$5,346 $590 
Non-cash investing and financing activity:
Assets acquired under finance lease obligations$2,323 $86 
 
See accompanying notes to condensed consolidated financial statements.

4
Table of Contents
GUESS?, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in thousands, except share data)
For the three months ended May 1, 2021
 Guess?, Inc. Stockholders’ Equity 
Common StockTreasury Stock
 SharesAmountPaid-in
Capital		Retained EarningsAccumulated Other Comprehensive LossSharesAmountNonredeemable
Noncontrolling
Interests		Total
Balance at January 30, 202164,230,162 $642 $553,111 $1,034,823 $(120,675)78,563,517 $(924,238)$21,917 $565,580 
Net earnings— — — 12,006 — — — 864 12,870 
Other comprehensive income (loss), net of income tax of ($190)— — — — (227)— — 217 (10)
Issuance of common stock under stock compensation plans689,653 7 (6,417)— — (690,492)8,123 — 1,713 
Issuance of stock under Employee Stock Purchase Plan12,798 — 81 — — (12,798)151 — 232 
Share-based compensation— — 4,056 4 — — — — 4,060 
Dividends, net of forfeitures on non-participating securities— — — (7,252)— — — — (7,252)
Balance at May 1, 202164,932,613 $649 $550,831 $1,039,581 $(120,902)77,860,227 $(915,964)$22,998 $577,193 

See accompanying notes to condensed consolidated financial statements.
5
 For the three and six months ended August 1, 2020
 Guess?, Inc. Stockholders’ Equity    
 Common Stock       Treasury Stock    
 Shares Amount 
Paid-in
Capital
 Retained Earnings Accumulated Other Comprehensive Loss Shares Amount 
Nonredeemable
Noncontrolling
Interests
 Total
Balance at February 1, 202065,848,510
 $658
 $563,004
 $1,130,409
 $(139,910) 77,019,437
 $(914,447) $21,633
 $661,347
Net loss—
 —
 —
 (157,666) —
 —
 —
 (2,872) (160,538)
Other comprehensive loss, net of income tax of ($147)—
 —
 —
 —
 (13,392) —
 —
 (3,626) (17,018)
Issuance of common stock under stock compensation plans including tax effect1,763,311
 18
 (24,264) —
 —
 (1,770,223) 21,017
 —
 (3,229)
Issuance of stock under Employee Stock Purchase Plan32,427
 —
 (192) —
 —
 (32,427) 385
 —
 193
Share-based compensation—
 —
 5,771
 15
 —
 —
 —
 —
 5,786
Dividends, net of forfeitures on non-participating securities—
 —
 —
 248
 —
 —
 —
 —
 248
Balance at May 2, 202067,644,248
 $676
 $544,319
 $973,006
 $(153,302) 75,216,787
 $(893,045) $15,135
 $486,789
Net loss—
 —
 —
 (20,358) —
 —
 —
 (334) (20,692)
Other comprehensive income, net of income tax of $1,164—
 —
 —
 —
 21,693
 —
 —
 1,759
 23,452
Issuance of common stock under stock compensation plans including tax effect(54,926) —
 429
 —
 —
 37,730
 (448) —
 (19)
Issuance of stock under Employee Stock Purchase Plan25,427
 —
 (154) —
 —
 (25,427) 301
 —
 147
Share-based compensation—
 —
 3,968
 35
 —
 —
 —
 —
 4,003
Dividends, net of forfeitures on non-participating securities—
 —
 —
 24
 —
 —
 —
 —
 24
Share repurchases(4,000,000) (40) 40
 —
 —
 4,000,000
 (38,876) —
 (38,876)
Balance at August 1, 202063,614,749
 $636
 $548,602
 $952,707
 $(131,609) 79,229,090
 $(932,068) $16,560
 $454,828
Table of Contents



GUESS?, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in thousands, except share data)
For the three months ended May 2, 2020
 Guess?, Inc. Stockholders’ Equity 
Common StockTreasury Stock
 SharesAmountPaid-in
Capital		Retained EarningsAccumulated Other Comprehensive LossSharesAmountNonredeemable
Noncontrolling
Interests		Total
Balance at February 1, 202065,848,510 $658 $563,004 $1,130,409 $(139,910)77,019,437 $(914,447)$21,633 $661,347 
Net loss— — — (157,666)— — — (2,872)(160,538)
Other comprehensive loss, net of income tax of ($147)— — — — (13,392)— — (3,626)(17,018)
Issuance of common stock under stock compensation plans including tax effect1,763,311 18 (24,264)— — (1,770,223)21,017 — (3,229)
Issuance of stock under Employee Stock Purchase Plan32,427 0 (192)— — (32,427)385 — 193 
Share-based compensation— — 5,771 15 — — — — 5,786 
Dividends, net of forfeitures on non-participating securities— — — 248 — — — — 248 
Balance at May 2, 202067,644,248 $676 $544,319 $973,006 $(153,302)75,216,787 $(893,045)$15,135 $486,789 
 For the three and six months ended August 3, 2019
 Guess?, Inc. Stockholders’ Equity    
 Common Stock       Treasury Stock    
 Shares Amount 
Paid-in
Capital
 Retained Earnings Accumulated Other Comprehensive Loss Shares Amount 
Nonredeemable
Noncontrolling
Interests
 Total
Balance at February 2, 201981,379,660
 $814
 $523,331
 $1,077,747
 $(126,179) 61,327,640
 $(638,486) $16,418
 $853,645
Cumulative adjustment from adoption of new accounting guidance—
 —
 —
 (1,684) 1,981
 —
 —
 —
 297
Net earnings (loss)—
 —
 —
 (21,374) —
 —
 —
 793
 (20,581)
Other comprehensive income (loss), net of income tax of ($499)—
 —
 —
 —
 (8,508) —
 —
 310
 (8,198)
Issuance of common stock under stock compensation plans including tax effect545,881
 5
 (3,042) —
 —
 (211,221) 2,225
 —
 (812)
Issuance of stock under Employee Stock Purchase Plan11,377
 1
 69
 —
 —
 (11,377) 120
 —
 190
Share-based compensation—
 —
 4,440
 28
 —
 —
 —
 —
 4,468
Dividends, net of forfeitures on non-participating securities—
 —
 —
 (18,331) —
 —
 —
 —
 (18,331)
Share repurchases(10,264,052) (103) 103
 —
 —
 10,264,052
 (201,564) —
 (201,564)
Equity component value of convertible note issuance, net—
 —
 42,324
 —
 —
 —
 —
 —
 42,324
Sale of common stock warrant—
 —
 28,080
 —
 —
 —
 —
 —
 28,080
Purchase of convertible note hedge—
 —
 (46,440) —
 —
 —
 —
 —
 (46,440)
Equity forward contract issuance—
 —
 (68,000) —
 —
 —
 —
 —
 (68,000)
Balance at May 4, 201971,672,866
 $717
 $480,865
 $1,036,386
 $(132,706) 71,369,094
 $(837,705) $17,521
 $565,078
Net earnings—
 —
 —
 25,322
 —
 —
 —
 854
 26,176
Other comprehensive loss, net of income tax of ($75)—
 —
 —
 —
 (4,496) —
 —
 (452) (4,948)
Issuance of common stock under stock compensation plans including tax effect64,080
 —
 (852) —
 —
 (106,039) 1,249
 —
 397
Issuance of stock under Employee Stock Purchase Plan19,538
 —
 38
 —
 —
 (19,538) 230
 —
 268
Share-based compensation—
 —
 4,928
 58
 —
 —
 —
 —
 4,986
Dividends, net of forfeitures on non-participating securities—
 —
 —
 (8,162) —
 —
 —
 —
 (8,162)
Share repurchases(749,252) (7) 7
 —
 —
 749,252
 (11,000) —
 (11,000)
Balance at August 3, 201971,007,232
 $710
 $484,986
 $1,053,604
 $(137,202) 71,992,769
 $(847,226) $17,923
 $572,795

See accompanying notes to condensed consolidated financial statements.

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GUESS?, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AugustMay 1, 20202021
(unaudited) 
(1)Basis of Presentation and New Accounting Guidance
(1)Basis of Presentation
Description of the Business
Guess?, Inc. (the “Company” or “GUESS?”) designs, markets, distributes and licenses a leading lifestyle collection of contemporary apparel and accessories for men, women and children that reflect the American lifestyle and European fashion sensibilities. The Company’s designs are sold in GUESS? owned stores, to a network of wholesale accounts that includes better department stores, selected specialty retailers and upscale boutiques and through the Internet. GUESS? branded products, some of which are produced under license, are also sold internationally through a series of retail store licensees and wholesale distributors.
Basis of PresentationInterim Financial Statements
In the opinion of management, the accompanying unaudited condensed consolidated financial statements of the Company contain all adjustments, consisting of normal recurring adjustments, considered necessary for a fair presentation of the condensed consolidated balance sheets as of AugustMay 1, 20202021 and February 1, 2020,January 30, 2021, the condensed consolidated statements of income (loss), comprehensive income (loss), cash flows and stockholders’ equity for the three and six months ended AugustMay 1, 20202021 and August 3, 2019 and the condensed consolidated statements of cash flows for the six months ended August 1, 2020 and August 3, 2019.May 2, 2020. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the U.S. Generally Accepted Accounting Principles (“GAAP”) for interim financial information and the instructions to Rule 10-01 of Regulation S-X of the Securities and Exchange Commission (the “SEC”). Accordingly, they have been condensed and do not include all of the information and footnotes required by GAAP for complete financial statements. The results of operations and cash flows for the three and six months ended AugustMay 1, 20202021 are not necessarily indicative of the results of operations to be expected for the full fiscal year.
These financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended February 1, 2020.January 30, 2021.
Fiscal Periods
The three and six months ended AugustMay 1, 20202021 had the same number of days as the three and six months ended August 3, 2019.May 2, 2020. All references herein to “fiscal 2021,2022,” “fiscal 2020”2021” and “fiscal 2019”2020” represent the results of the 52-week fiscal yearyears ending January 29, 2022, January 30, 2021 and the 52-week fiscal years ended February 1, 2020, respectively.
COVID-19 Business Update
The coronavirus (or “COVID-19”) pandemic is continuing to impact the Company’s businesses. During the first quarter of fiscal 2022, the Company experienced significantly higher net revenue compared to the first quarter of fiscal 2021 (when government-mandated store closures were much more widespread) but lower net revenue compared to the pre-pandemic first quarter of fiscal 2020 as it remained challenged by lower demand, temporary store closures and February 2, 2019, respectively.capacity restrictions. In light of the current environment, the Company continues to strategically manage expenses in order to protect profitability.
In late fiscal 2021, the Company incurred a new round of government-mandated temporary store closures, mostly in Europe. The number of temporarily closed stores ebbed and flowed during the first quarter of fiscal 2022 based on local conditions. As of May 1, 2021, the majority of closed stores were located primarily in Europe and Canada.
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Summary of Significant Accounting Policies
The accounting policies of the Company are set forth in further detail in Note 1 to the Company's Consolidated Financial Statements contained in the Company’s fiscal 2021 Annual Report on Form 10-K. The Company includes herein certain updates to those policies.
Reclassifications
The Company has made certain reclassifications to prior period amounts to conform to the current period presentation within the accompanying condensed consolidated financial statements and notes to the condensed consolidated financial statements.
Use of Estimates
The preparation of the financial statements in conformity with accounting principles generally accepted in the U.S. requires management to make estimates and assumptions that affect the amounts reported in the financial statements and disclosed in the accompanying notes. Significant areas requiring the use of management estimates relate to the allowances for doubtful accounts, sales return and markdown allowances, gift card and loyalty accruals, valuation of inventories, share-based compensation, income taxes, recoverability of deferred taxes, unrecognized tax benefits, the useful life of assets for depreciation and amortization, evaluation of asset impairment (including goodwill and long-lived assets, such as property and equipment and operating lease right-of-use (“ROU”) assets), pension obligations, workers’ compensation and medical self-insurance expense and accruals, litigation reserves and restructuring expense and accruals. Actual results could differ from those estimates. Revisions in estimates could materially impact the results of operations and financial position.
As discussed further below,above, the coronavirus (or “COVID-19”)COVID-19 pandemic has materially impacted the Company’s results during the three and six months ended AugustMay 1, 2021 and May 2, 2020. The Company’s operations could continue to be impacted in ways we arethe Company is not able to predict today due to the developingevolving situation. While the

Company believes it has made reasonable accounting estimates based on the facts and circumstances that were available as of the reporting date, to the extent there are differences between these estimates and actual results, the Company’s results of operations and financial position could be materially impacted.
COVID-19 Business Update
The COVID-19 pandemic has had and is continuing to have a material impact on the Company’s financial performance. The pandemic is ongoing and dynamic in nature and, to date, the Company has experienced temporary closures in key regions globally. During the second quarter of fiscal 2021, the Company gradually reopened most of its global fleet of brick-and-mortar stores resulting in stores being closed for approximately 30% and 35% of the total days during the three and six months ended August 1, 2020, respectively. As of August 1, 2020, approximately 95% of the Company’s stores were open, with the majority of closed stores located primarily within interior malls in California. The Company will continue to reopen stores (and/or close again, if appropriate), as state and local guidelines and conditions permit or require, taking an informed, measured approach based on a number of factors. The Company’s e-commerce sites have remained open in all regions. In addition, retail stores that are open have and continue to experience significant reductions in traffic and revenue. Many of the Company’s wholesale and licensing partners have also substantially reduced their operations. The Company has been bringing back furloughed store associates and support staff as stores reopen. The extent and duration of the global pandemic remains uncertain and may continue to impact consumer purchasing activity into the foreseeable future.
During the first half of fiscal 2021, in addition to the negative impact from lower net revenue, the Company’s operating results reflected asset impairment charges as well as additional inventory valuation reserves and higher allowances for markdowns and doubtful accounts due to the ongoing effects of the COVID-19 pandemic. These charges were partially offset by lower selling, general and administrative (“SG&A”) expenses driven primarily by expense savings, both one-time, such as furloughs and temporary salary reductions, and permanent, such as headcount reductions and lower discretionary spending. In addition, the Company benefited from various government assistance programs related primarily to the recovery of employee payroll costs as well as certain favorable tax treatments.
During the first half of fiscal 2021, the Company implemented a number of measures to help mitigate the operating and financial impact of the pandemic, including: (i) furloughing its U.S. and Canada store associates and significant portions of its U.S. and Canada corporate and distribution center associates and permanently reducing U.S. corporate headcount; (ii) implementing temporary tiered salary reductions for management level corporate employees, including its executive officers; (iii) deferring annual merit increases; (iv) executing substantial reductions in expenses, store occupancy costs, capital expenditures and overall costs, including through reduced inventory purchases; (v) working globally with country management teams to maximize the Company’s participation in all eligible government or other initiatives available to businesses or employees impacted by the COVID-19 pandemic; (vi) drawing down on certain credit facilities and entering into certain term loans to ensure financial flexibility and maintain maximum liquidity; (vii) engaging with landlords to negotiate rent deferrals or other rent concessions; (viii) working with vendors to extend payment terms; and (ix) postponing its decision related to the payment of its quarterly cash dividend.
During the second quarter of fiscal 2021, as the situation began to stabilize, the Company repaid a significant portion of its previously drawn down credit facilities, continued to bring back furloughed employees, eliminated the temporary tiered salary reductions and invested in share repurchases to return value to its shareholders. Subsequent to the second quarter of fiscal 2021, the Company also announced that it would resume paying its quarterly cash dividend beginning in the third quarter of fiscal 2021, but decided to not declare any cash dividends for the first and second quarters of fiscal 2021.
In response to the COVID-19 pandemic, governments in various jurisdictions have implemented relief programs to provide assistance in the form of wage subsidies and tax related payment deferrals (related to payroll, income, sales and other taxes). The Company is leveraging these relief initiatives where able to help mitigate expenses and provide additional liquidity. An example of such an economic relief program is the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act, which was enacted by the U.S. government in March 2020. The provisions of the CARES Act include the deferral of the employer portion of social security taxes, creation

of refundable employee retention tax credits, modification of net operating loss carryback periods, relaxation of the net interest deduction limitations and technical amendment for qualified improvement property deduction.
In light of store closures and reduced traffic in stores, the Company has taken certain actions with respect to certain of its existing leases, including engaging with landlords to discuss rent deferrals as well as other rent concessions. Since April 2020, the Company has suspended rental payments and/or paid reduced rental amounts with respect to its retail stores that were closed or were experiencing drastically reduced customer traffic as a result of the COVID-19 pandemic. The Company is engaging in discussions with the affected landlords in an effort to achieve appropriate rent relief and other lease concessions and, in some cases, to terminate existing leases. Consistent with updated guidance from the Financial Accounting Standards Board (“FASB”) in April 2020, the Company has elected to treat any such agreed-upon payment deferrals related to the COVID-19 pandemic as if there were no modifications to the lease contract and has accrued such amounts within the current portion of operating lease liabilities in the Company’s condensed consolidated balance sheet. The Company has elected to treat other rent concessions which result in reduced lease payments as variable lease payments if the concessions that are provided are for a period of less than 12 months. For any rent concessions which reduce the lease payments for a period of more than 12 months or change the payment terms from minimum rental amounts to amounts based on a percentage of sales volume for the remainder of the lease term, the Company has elected to treat such changes as lease modifications under the current lease guidance.
Revenue Recognition
The Company recognizes the majority of its revenue from its direct-to-consumer (brick-and-mortar retail stores and concessions as well as e-commerce) and wholesale distribution channels at a point in time when it satisfies a performance obligation and transfers control of the product to the respective customer.
The Company also recognizes royalty revenue from its trademark license agreements. The Company’s trademark license agreements represent symbolic licenses that are dependent on the Company’s continued support over the term of the license agreement. The amount of revenue that is recognized from the licensing arrangements is based on sales-based royalty and advertising fund contributions as well as specific fixed payments, where applicable. The Company’s trademark license agreements customarily provide for a multi-year initial term ranging from three to ten15 years and may contain options to renew prior to expiration for an additional multi-year period. The unrecognized portion of upfront payments is included in deferred royalties in accrued expenses and other long-term liabilities depending on the short or long-term nature of the payments to be recognized. As of AugustMay 1, 2020,2021, the Company had $6.4$6.1 million and $15.7$15.9 million of deferred royalties related to these upfront payments included in accrued expenses and other current liabilities and other long-term liabilities, respectively. This compares to $6.7$6.6 million and $18.7$17.1 million of deferred royalties related to these upfront payments included in accrued expenses and other current liabilities and other long-term liabilities, respectively, at February 1, 2020.January 30, 2021. During the three and six months ended AugustMay 1, 2021 and May 2, 2020, the Company recognized $3.1$3.5 million and $6.7$3.6 million in net royalties related to the amortization of the deferred royalties, respectively. During the three and six months ended August 3, 2019, the Company recognized $3.1 million and $6.1 million in net royalties related to the amortization of the deferred royalties, respectively.
Refer to Note 8 for further information on disaggregation of revenue by segment and country.
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Table of Contents
Allowance for Doubtful Accounts
During the first quarter of fiscal 2021, the Company adopted authoritative guidance related to the measurement of credit losses on financial instruments. This guidance replaces the “as incurred” loss model with an “expected loss” model which requires the recognition of an allowance for credit losses expected to be incurred over an asset’s lifetime. The adoption of this guidance did not have a material impact on the Company’s allowance for doubtful accounts.
In the normal course of business, the Company grants credit directly to certain wholesale customers after a credit analysis is performed based on financial and other criteria. Accounts receivable are recorded net of an allowance for doubtful accounts. The Company maintains allowances for doubtful accounts for estimated losses that may result from the inability of its wholesale customers and licensing partners to make their required payments. The Company bases its allowances on analysis of the aging of accounts receivable at the date of the financial

statements, assessments of historical and current collection trends, an evaluation of the impact of current and future forecasted economic conditions and whether the Company has obtained credit insurance or other guarantees. Management performs regular evaluations concerning the ability of its customers and records a provision for doubtful accounts based on these evaluations.
As of AugustMay 1, 2020,2021, approximately 58%48% of the Company’s total net trade accounts receivable and 68%60% of its European net trade receivables were subject to credit insurance coverage, certain bank guarantees or letters of credit for collection purposes. The Company’s credit insurance coverage contains certain terms and conditions specifying deductibles and annual claim limits. Management evaluates the creditworthiness of the counterparties to the credit insurance, bank guarantees, and letters of credit and records a provision for the risk of loss on these instruments based on these evaluations as considered necessary.
The Company’s credit losses for the periods presented were not significant compared to sales and did not significantly exceed management’s estimates. Refer to Note 5 for further information on the Company’s allowance for doubtful accounts.
Net Gains on Lease Terminations
During the three and six months ended August 1, 2020, the Company recorded net gains on lease terminations of $0.9 million and $0.4 million, respectively, related primarily to the early termination of certain lease agreements.
Other Assets
During fiscal 2019, the Company invested $8.3 million in a privately-held apparel company. During the second quarter of fiscal 2021, the Company invested an additional $1.9 million. The Company’s ownership in this company (a 30% minority interest) is accounted for under the equity method of accounting. The Company recognized its proportionate share of net losses of this company of $2.0 million and $4.1 million in other income (expense) in its condensed consolidated statements of income (loss) during the three and six months ended August 1, 2020, respectively. During the three and six months ended August 3, 2019, the Company recognized its proportionate share of net losses of this company of $2.9 million in other income (expense) in its condensed consolidated statements of income (loss).
Sale of Australian Stores
During fiscal 2020, the Company entered into a definitive agreement to sell its Australian retail locations to the Company’s wholesale distributor in the region for approximately AUD$7.1 million (US$4.9 million), subject to certain adjustments, and recognized a loss on the sale of approximately AUD$1.2 million (US$0.8 million). During the second quarter of fiscal 2021, the Company recorded an adjustment of AUD$0.5 million (US$0.4 million) to reduce the purchase price. As per the terms of the agreement, the wholesale distributor entered into a promissory note with the Company to make periodic payments on the sale through August 2021. As of August 1, 2020, the Company included AUD$2.0 million (US$1.4 million) and AUD$2.6 million (US$1.9 million) in accounts receivable, net and other assets, respectively, in its condensed consolidated balance sheet based on the timing of the payments. This compares to AUD$1.8 million (US$1.2 million) and AUD$3.3 million (US$2.2 million) included in accounts receivable, net and other assets, respectively, as of February 1, 2020.
New Accounting Guidance
Recently Adopted Accounting Guidance
In June 2016, the FASB issued authoritative guidance related to the measurement of credit losses on financial instruments. This guidance replaces the “as incurred” loss model with an “expected loss” model which requires the recognition of an allowance for credit losses expected to be incurred over an asset’s lifetime. The measurement of expected credit losses is based on relevant information about past events, current conditions and reasonable and supportable forecasts impacting the collectibility of the reported amounts. This guidance was adopted as of February 2, 2020 on a modified retrospective basis and did not have a material impact on the Company’s consolidated financial statements or related disclosures.

In August 2018, the FASB issued authoritative guidance to modify the disclosure requirements on fair value measurements. This guidance was adopted as of February 2, 2020 on a prospective basis and did not have a material impact on the Company’s related disclosures.
In August 2018, the FASB issued authoritative guidance to align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). The Company adopted this guidance as of February 2, 2020 on a prospective basis. Prior to the adoption of this guidance, the Company capitalized implementation costs related to a hosting arrangement that is a service contract to property and equipment, net in the Company’s consolidated balance sheets and included such expenditures within the investing section of the Company’s consolidated statements of cash flows. These assets were amortized over their estimated useful life with the related amortization included in depreciation and amortization in either cost of product sales or SG&A expenses in the Company’s consolidated statements of income (loss) depending on the nature of how the assets were used. Subsequent to the adoption of this guidance, these costs are included within other current assets or other assets in the Company’s consolidated balance sheets depending on the short or long-term nature of the underlying hosting agreement with such expenditures included in the operating section of the Company’s consolidated statements of cash flows. These assets are now amortized over the shorter of the estimated useful life or the term of the underlying hosting agreement, including any probable renewal periods, with the related amortization included in cost of product sales or SG&A expenses in the Company’s consolidated statements of income (loss), consistent with the presentation of the expense related to the underlying hosting arrangement. The adoption of this guidance, including the different classification requirements for the implementation costs, did not have a material impact on the Company’s consolidated financial statements or the related disclosures.
In December 2019, the FASB issued authoritative guidance that simplifies the accounting for income taxes by eliminating certain exceptions to general principles related to intraperiod tax allocations, ownership changes in foreign investments and calculating income taxes in an interim period when year-to-date losses exceed total anticipated losses. The new guidance also simplifies the accounting for income taxes related to franchise taxes that are partially based on income, the step up in the tax basis of goodwill, allocation of current and deferred tax expense for certain legal entities and enacted changes in tax laws or rates during interim periods, among other improvements. This guidance was adopted during the second quarter of fiscal 2021 on a prospective basis and did not have a material impact on the Company’s consolidated financial statements or related disclosures.
Recently Issued Accounting Guidance
In August 2018, the FASB issued authoritative guidance to modify the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans. This guidance is effective for fiscal years beginning after December 15, 2020, which will be the Company’s first quarter of fiscal 2022, with early adoption permitted. The Company is currently evaluating the impact of the adoption of this standard on its financial statement disclosures.
In March 2020, the FASBFinancial Accounting Standards Board (“FASB”) issued authoritative guidance to provide temporary optional expedients and exceptions related to contract modifications and hedge accounting to ease the financial reporting burdens of the expected market transition from LIBOR and other interbank offered rates to alternative reference rates, such as SOFR. This guidance may be adopted as of March 12, 2020 through December 31, 2022. This temporary relief cannot be appliedup to contract modifications after December 31, 2022. The Company is currently evaluating its election options and the impact on its consolidated financial statements and related disclosures.
In August 2020, the FASB issued authoritative guidance to simplify the accounting for convertible instruments and contracts in an entity’s own equity and the diluted earnings per share computations for these instruments. This guidance removes major separation models required under current guidance which will enable more convertible debt instruments to be reported as a single liability instrument with no separate accounting for embedded conversion features. This guidance also removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception. The new guidance also requires the “if -converted” method to be applied for all convertible instruments (the treasury stock method is no longer available) and removes

the ability to rebut the presumption of share settlement for contracts that may be settled in cash or stock. In addition, expanded disclosures are required on the terms and features of convertible instruments. This guidance is effective for fiscal years beginning after December 31, 2021, which will be the Company’s first quarter of fiscal 2023, on either a full or modified retrospective basis. Early adoption is permitted for fiscal years beginning after December 31, 2020, which will be the Company’s first quarter of fiscal 2022. The Company is currently evaluating the impact of the adoption of this guidance on its consolidated financial statements and related disclosures.
(2)    Lease Accounting
The Company primarily leases its showrooms, advertising, licensing, sales and merchandising offices, remote distribution and warehousing facilities and retail and factory outlet store locations under operating lease agreements expiring on various dates through January 2039. The Company also leases some of its equipment as well as computer hardware and software under operating and finance lease agreements expiring on various dates through May 2027.
The Company’s lease agreements primarily provide for lease payments based on a minimum annual rental amount, a percentage of annual sales volume, periodic adjustments related to inflation or a combination of such lease payments. Certain retail store leases provide for lease payments based upon the minimum annual rental amount and a percentage of annual sales volume, generally ranging from 3% to 23%28%, when specific sales volumes are exceeded. The Company’s retail concession leases also provide for lease payments primarily based upon a percentage of annual sales volume, which averages approximately 35%33%.
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In addition to the amounts as disclosed below, the Company has estimated additional operating lease commitments of approximately $24.4$5.0 million for leases where the Company has not yet taken possession of the underlying asset as of AugustMay 1, 2020.2021. As such, the related operating lease ROU assets and operating lease liabilities have not been recognized in the Company’s condensed consolidated balance sheet as of AugustMay 1, 2020.2021.
As of August 1, 2020 and February 1, 2020, theThe components of leases are as follows (in thousands):
 Balance Sheet LocationAug 1, 2020 Feb 1, 2020
Assets    
OperatingOperating lease right-of-use assets$766,853
 $851,990
FinanceProperty and equipment, net15,451
 15,972
Total lease assets$782,304
 $867,962
     
Liabilities    
Current:    
OperatingCurrent portion of operating lease liabilities$235,749
 $192,066
FinanceCurrent portion of borrowings and finance lease obligations2,524
 2,273
Noncurrent:    
OperatingLong-term operating lease liabilities659,118
 714,079
FinanceLong-term debt and finance lease obligations13,729
 14,262
Total lease liabilities$911,120
 $922,680

May 1, 2021Jan 30, 2021
AssetsBalance Sheet Location
OperatingOperating lease right-of-use assets$738,544 $764,804 
FinanceProperty and equipment, net21,405 20,595 
Total lease assets$759,949 $785,399 
LiabilitiesBalance Sheet Location
Current:
OperatingCurrent portion of operating lease liabilities$224,676 $222,800 
FinanceCurrent portion of borrowings and finance lease obligations4,551 4,698 
Noncurrent:
OperatingLong-term operating lease liabilities632,574 662,657 
FinanceLong-term debt and finance lease obligations17,870 17,365 
Total lease liabilities$879,671 $907,520 

As of August 1, 2020 and August 3, 2019, theThe components of lease costs are as follows (in thousands):
 Three Months Ended Six Months EndedThree Months Ended
Income Statement LocationAug 1, 2020 Aug 3, 2019 Aug 1, 2020 Aug 3, 2019Income Statement LocationMay 1, 2021May 2, 2020
Operating lease costsCost of product sales$50,005
 $58,749
 $105,374
 $117,565
Operating lease costsCost of product sales$46,684 $55,369 
Operating lease costsSelling, general and administrative expenses5,355
 5,720
 10,531
 10,984
Operating lease costsSelling, general and administrative expenses6,357 5,176 
Operating lease costs1, 2
Operating lease costs1, 2
Net (gains) losses on lease modifications(2,145)456 
Finance lease costs        Finance lease costs
Amortization of leased assets1, 2
Cost of product sales20
 44
 32
 87
Amortization of leased assets1, 2
Selling, general and administrative expenses474
 637
 1,338
 1,180
Amortization of leased assets1, 3
Amortization of leased assets1, 3
Cost of product sales11 12 
Amortization of leased assets1, 3
Amortization of leased assets1, 3
Selling, general and administrative expenses1,361 864 
Interest on lease liabilitiesInterest expense208
 286
 490
 573
Interest on lease liabilitiesInterest expense366 282 
Variable lease costs3
Cost of product sales13,209
 25,083
 27,557
 49,908
Variable lease costs3
Selling, general and administrative expenses638
 628
 1,217
 1,455
Variable lease costs4
Variable lease costs4
Cost of product sales15,739 14,348 
Variable lease costs4
Variable lease costs4
Selling, general and administrative expenses574 579 
Short-term lease costsCost of product sales181
 0
 420
 0
Short-term lease costsCost of product sales105 239 
Short-term lease costsSelling, general and administrative expenses170
 183
 1,959
 395
Short-term lease costsSelling, general and administrative expenses1,171 1,789 
Total lease costs$70,260
 $91,330
 $148,918

$182,147
Total lease costs1
Total lease costs1
$70,223 $79,114 

Notes:
1
1The Company has made certain reclassifications to prior period amounts to conform to the current period presentation.
2During the three months ended May 1, 2021 and May 2, 2020, net (gains) losses on lease modifications related primarily to the early termination of lease agreements for certain of the Company’s retail locations. Operating lease costs for these retail locations prior to the early termination were included in cost of product sales.
3Amortization of leased assets related to finance leases are included in depreciation expense within cost of product sales or selling, general and administrative expenses depending on the nature of the asset in the Company’s condensed consolidated statements of income (loss).
4During the three months ended May 1, 2021 and May 2, 2020, variable lease costs included certain rent concessions of approximately $6.1 million and $2.7 million, respectively, received by the Company, primarily in Europe, related to the COVID-19 pandemic.
10

The Company has made certain reclassifications to prior period amounts to conform to the current period presentation.
2
Amortization of leased assets related to finance leases are included in depreciation expense within cost of product sales or selling, general and administrative expenses depending on the nature of the asset in the Company’s condensed consolidated statements of income (loss).
3
During the three and six months ended August 1, 2020, variable lease costs included certain rent concessions received by the Company, primarily in Europe, related to the COVID-19 pandemic of approximately $7.7 million and $10.5 million, respectively. Refer to Note 1 for further information.

Maturities of the Company’s operating and finance lease liabilities as of AugustMay 1, 20202021 are as follows (in thousands):
Operating Leases
Maturity of Lease LiabilitiesOperating Leases Finance Leases TotalMaturity of Lease LiabilitiesNon-Related PartiesRelated PartiesFinance LeasesTotal
20211
$155,961
 $1,618
 $157,579
2022207,825
 3,904
 211,729
20221
20221
$193,515 $5,965 $4,294 $203,774 
2023172,592
 3,483
 176,075
2023181,879 7,260 5,974 195,113 
2024144,021
 3,260
 147,281
2024146,015 7,678 5,887 159,580 
202599,851
 2,446
 102,297
2025103,560 7,321 3,946 114,827 
After 2025201,665
 5,229
 206,894
2026202673,458 6,928 3,034 83,420 
After 2026After 2026170,672 36,410 3,158 210,240 
Total lease payments981,915
 19,940
 1,001,855
Total lease payments869,099 71,562 26,293 966,954 
Less: Interest87,048
 3,687
 90,735
Less: Interest71,415 11,996 3,872 87,283 
Present value of lease liabilities$894,867
 $16,253
 $911,120
Present value of lease liabilities$797,684 $59,566 $22,421 $879,671 

Notes:
1
1Represents the maturity of lease liabilities for the remainder of fiscal 2022 and also includes rent payments that have been deferred due to the COVID-19 pandemic. This amount does not include payments made during the three months ended May 1, 2021.
Represents the maturity of lease liabilities for the remainder of fiscal 2021 and also includes rent payments that have been deferred due to the COVID-19 pandemic. This amount does not include payments made during the six months ended August 1, 2020.

Other supplemental information is as follows (dollars in thousands):
Lease Term and Discount RateAugMay 1, 20202021
Weighted-average remaining lease term (years)
Operating leases5.7 years6.1 Years
Finance leases5.9 years4.8 Years
Weighted-average discount rate
Operating leases3.7%3.5%
Finance leases7.0%6.8%
 Six Months Ended
Supplemental Cash Flow InformationAug 1, 2020 Aug 3, 2019
Cash paid for amounts included in the measurement of lease liabilities   
Operating cash flows from operating leases$70,890
 $124,687
New operating ROU assets obtained in exchange for lease liabilities$19,566
 $99,951

Three Months Ended
Supplemental Cash Flow InformationMay 1, 2021May 2, 2020
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases$53,428 $32,618 
New operating ROU assets obtained in exchange for lease liabilities$22,596 $16,332 
Impairment
During the three and six months ended AugustMay 1, 2021, there was minimal ROU asset impairment charges recorded. During the three months ended May 2, 2020, the Company recorded ROU asset impairment charges of $8.2$28.2 million and $36.5 million, respectively, related primarily to ROU assets at certain retail locations in North America and, to a lesser extent, Europe. The asset impairment charges were determined based on the excess of carrying value over the fair value of the ROU assets. The Company uses estimates of market participant rents to calculate fair value of the ROU assets. There were 0 asset impairment charges recorded related to the Company’s ROU assets during the three and six months ended August 3, 2019. Refer to Note 15 for more information on the Company’s impairment testing.
(3)
(3)Earnings (Loss) per Share
Basic earnings (loss) per share represents net earnings (loss) attributable to common stockholders divided by the weighted average number of common shares outstanding during the period. The Company considers any restricted stock units with forfeitable dividend rights that are issued and outstanding, but considered contingently returnable if certain service conditions are not met, as common equivalent shares outstanding. These restricted stock units are excluded from the weighted average number of common shares outstanding and basic earnings (loss) per share calculation until the respective service conditions have been met. Diluted earnings per share represents net earnings attributable to common stockholders divided by the weighted average number of common shares outstanding, inclusive of the dilutive impact of common equivalent shares outstanding during the period, and the dilutive impact of the Company’s convertible senior notes and related warrants, as applicable.Share
The Company expects to settle the principal amount of its outstanding convertible senior notes in cash and any excess in shares. As a result, upon conversion of the convertible senior notes, only the amounts in excess of the principal amount are considered in diluted earnings per share under the treasury stock method, if applicable. See Note 10 for more information regarding the Company’s convertible senior notes.
In periods when there is a net loss, the potentially dilutive impact
11
Table of common equivalent shares outstanding is not included in the computation of diluted net loss per share as the impact of the shares would be antidilutive. Nonvested restricted stock awards (referred to as participating securities) are excluded from the dilutive impact of common equivalent shares outstanding in accordance with authoritative guidance under the two-class method since the nonvested restricted stockholders are entitled to participate in dividends declared on common stock as if the shares were fully vested and hence are deemed to be participating securities. Under the two-class method, distributed and undistributed earnings attributable to nonvested restricted stockholders are excluded from net earnings (loss) attributable to common stockholders for purposes of calculating basic and diluted earnings (loss) per common share. However, net losses are not allocated to nonvested restricted stockholders because they are not contractually obligated to share in the losses of the Company.Contents
In addition, the Company has granted certain nonvested stock units that are subject to certain performance-based or market-based vesting conditions as well as continued service requirements through the respective vesting periods. These nonvested stock units are included in the computation of diluted net earnings per common share

attributable to common stockholders only to the extent that the underlying performance-based or market-based vesting conditions are satisfied as of the end of the reporting period, or would be considered satisfied if the end of the reporting period was the end of the related contingency period, and the results would be dilutive under the treasury stock method.
The computation of basic and diluted net earnings (loss) per common share attributable to common stockholders is as follows (in thousands, except per share data):
Three Months Ended Six Months Ended Three Months Ended
Aug 1, 2020 Aug 3, 2019 Aug 1, 2020 Aug 3, 2019 May 1, 2021May 2, 2020
Net earnings (loss) attributable to Guess?, Inc.$(20,358) $25,322
 $(178,024) $3,948
Net earnings (loss) attributable to Guess?, Inc.$12,006 $(157,666)
Less net earnings attributable to nonvested restricted stockholders0
 233
 0
 235
Less net earnings attributable to nonvested restricted stockholders130 0 
Net (earnings) loss attributable to common stockholders$(20,358) $25,089
 $(178,024) $3,713
Net earnings (loss) attributable to common stockholdersNet earnings (loss) attributable to common stockholders$11,876 $(157,666)
       
Weighted average common shares used in basic computations65,177
 70,508
 65,446
 75,216
Weighted average common shares used in basic computations64,035 65,715 
Effect of dilutive securities: 
  
  
  
Stock options and restricted stock units1
0
 848
 0
 939
Effect of dilutive securities: Stock options and restricted stock units1
Effect of dilutive securities: Stock options and restricted stock units1
1,905 0 
Weighted average common shares used in diluted computations65,177
 71,356
 65,446
 76,155
Weighted average common shares used in diluted computations65,940 65,715 
       
Net earnings (loss) per common share attributable to common stockholders:Net earnings (loss) per common share attributable to common stockholders:Net earnings (loss) per common share attributable to common stockholders:
Basic$(0.31) $0.36
 $(2.72) $0.05
Basic$0.19 $(2.40)
Diluted$(0.31) $0.35
 $(2.72) $0.05
Diluted$0.18 $(2.40)

______________________________________________________________________

Notes:
11
For the three and six months ended August 1, 2020, there were 262,086 and 382,222, respectively, of potentially dilutive shares that were not included in the computation of diluted weighted average common shares and common equivalent shares outstanding because their effect would have been antidilutive given the Company’s net loss.
For the three months ended AugustMay 2, 2020, there were 484,674 of potentially dilutive shares that were not included in the computation of diluted weighted average common shares and common equivalent shares outstanding because their effect would have been antidilutive given the Company’s net loss.
During the three months ended May 1, 20202021 and August 3, 2019,May 2, 2020, equity awards granted for 4,121,433390,243 and 3,258,910, respectively, of the Company’s common shares and for the six months ended August 1, 2020 and August 3, 2019, equity awards granted for 3,890,881 and 2,899,760,3,157,824, respectively, of the Company’s common shares were outstanding but were excluded from the computation of diluted weighted average common shares and common equivalent shares outstanding because the assumed proceeds, as calculated under the treasury stock method, resulted in these awards being antidilutive. For the three and six months ended August 1, 2020, the Company also excluded 525,875There were 0 nonvested stock units which are subject to the achievement of performance-based or market-based vesting conditions that were excluded from the computation of diluted weighted average common shares and common equivalent shares outstanding because theseas the respective conditions were not achieved as of AugustMay 1, 2020. For the three and six months ended August 3, 2019, the2021. The Company excluded 1,228,017227,729 nonvested stock units which were subject to the achievement of performance-based vesting conditions from the computation of diluted weighted average common shares and common equivalent shares outstanding because these conditions were not achieved as of August 3, 2019.May 2, 2020.
The conversion spread on the Company’s convertible senior notes will have a dilutive impact on diluted earnings per share when the average market price of the Company’s common stock for a given period exceeds the conversion price of $25.78 per share of common stock. For the three and six months ended AugustMay 1, 20202021 and August 3, 2019,May 2, 2020, the convertible senior notes have been excluded from the computation of diluted earnings per share as the effect would be antidilutive since the conversion price of the convertible senior notes exceeded the average market price of the Company’s common stock. Warrants to initially purchase 11.6 million shares of the Company’s common shares at an initial strike price of $46.88 per share were outstanding as of AugustMay 1, 2021 and May 2, 2020. These warrants were excluded from the computation of diluted earnings per share since the warrants’ adjusted strike price was greater than the average market price of the Company’s common stock during the three and six

months ended AugustMay 1, 20202021 and August 3, 2019. See Note 10 for more information regarding the Company’s convertible senior notes.May 2, 2020.

12
Table of Contents
(4)Stockholders’ Equity
(4)Stockholders’ Equity
Share Repurchase Program
On June 26, 2012, the Company’s Board of Directors authorized a program to repurchase, from time-to-time and as market and business conditions warrant, up to $500 million of the Company’s common stock. Repurchases under the program may be made on the open market or in privately negotiated transactions, pursuant to Rule 10b5-1 trading plans or other available means. There is no minimum or maximum number of shares to be repurchased under the program, which may be discontinued at any time, without prior notice. There were 4,000,000 shares repurchased at an aggregate cost of $38.8 million under the program during the three and six months ended August 1, 2020. During the six months ended August 3, 2019, the Company repurchased 11,013,304 shares under the program at an aggregate cost of $212.5 million, which is inclusive of the shares repurchased under the accelerated share repurchase agreement (the “ASR Contract”) as described below. The Company repurchased 10,264,052 shares at an aggregate cost of $201.5 million during the three months ended May 4, 20191, 2021 and an additional 749,252May 2, 2020, there were no shares at an aggregate cost of $11.0 million duringrepurchased under the three months ended August 3, 2019.Company’s Share Repurchase Program. As of AugustMay 1, 2020,2021, the Company had remaining authority under the program to purchase $47.8 million of its common stock.
On April 26, 2019, pursuant to existing stock repurchase authorizations,Dividends
The following table sets forth the Company entered into an ASR Contract with JPMorgan Chase Bank, National Association (in such capacity, the “ASR Counterparty”), to repurchase an aggregate of $170 million of the Company’s common stock. Under the ASR Contract, the Company made an initial payment of $170 million to the ASR Counterparty and received an initial delivery of approximately 5.2 million shares of common stock, which represented approximately $102 million (or 60%) of the ASR Contract. The Company received a final delivery of an additional 5.4 million shares, or $68 million, under its ASR Contract during the third quarter of fiscal 2020. The final share amount was determined based on the daily volume-weighted average price since the effective date of the ASR Contract, less the applicable contractual discount. When combined with the 5.2 million upfront shares received at the inception of the ASR in April 2019, the Company repurchased approximately 10.6 million of its shares under the ASR at an average repurchase price of $16.09cash dividend declared per share. All shares were repurchased in accordance with the Company’s publicly announced ASR program, which was completed during the third quarter of fiscal 2020. The shares delivered under the ASR Contract reduced the Company’s outstanding shares and its weighted average number of common shares outstanding for purposes of calculating basic and diluted earnings per share.share:
Dividends
Three Months Ended
May 1, 2021May 2, 2020
Cash dividend declared per share$0.1125 $0 
During the first quarter of fiscal 2021, the Company announced that its Board of Directors had deferred the decision with respect to the payment of its quarterly cash dividend. The Board of Directors decided to continue to postpone its decision with respect to the payment of its quarterly cash dividend, during the second quarter of fiscal 2021 in order to preserve the Company’s cash position and provide continued financial flexibility in light of the uncertainties related to the COVID-19 pandemic. As a result, there was 0 cash dividend declared during the three and six months ended August 1, 2020. During the three and six months ended August 1, 2020, dividends paid related to the vesting of restricted stock units that are considered non-participating securities and are only entitled to dividend payments once the respective awards vest. Subsequent to the second quarter of fiscal 2021, theThe Company announced that it would resumeresumed paying its quarterly cash dividend of $0.1125 per share beginning in the third quarter of fiscal 2021, but decided to not declare any cash dividends for the first and second quarters of fiscal 2021.
During the three and six months ended August 3, 2019, the Company declared a cash dividend of $0.1125 per share and $0.3375 per share, respectively.
During the first quarter of fiscal 2020, the Company announced that its Board of Directors reduced the future quarterly cash dividends that may be paid to holdersFor each of the Company’s commonperiods presented, dividends paid also included the impact from vesting of restricted stock when, asunits that are considered non-participating securities and if any suchare only entitled to dividend is declared bypayments once the Company’s Board of Directors, from $0.225 per share to $0.1125 per share to redeploy capital and return incremental value to shareholders through share repurchases.

respective awards vest.
Decisions on whether, when and in what amounts to continue making any future dividend distributions will remain at all times entirely at the discretion of the Company’s Board of Directors, which reserves the right to change or terminate the Company’s dividend practices at any time and for any reason without prior notice. The payment of cash dividends in the future will be based upon a number of business, legal and other considerations, including ourthe Company’s cash flow from operations, capital expenditures, debt service and covenant requirements, cash paid for income taxes, earnings, share repurchases, economic conditions and U.S. and global liquidity.
Accumulated Other Comprehensive Income (Loss)
The changes in accumulated other comprehensive income (loss), net of related income taxes, for the three and six months ended August 1, 2020 and August 3, 2019 are as follows (in thousands):
Three Months Ended May 1, 2021
Foreign Currency Translation AdjustmentDerivative Financial Instruments Designated as Cash Flow HedgesDefined Benefit PlansTotal
Balance at January 30, 2021$(105,970)$(4,876)$(9,829)$(120,675)
Gains (losses) arising during the period(2,433)1,553 116 (764)
Reclassification to net earnings for losses realized
0 460 77 537 
Net other comprehensive income (loss)(2,433)2,013 193 (227)
Balance at May 1, 2021$(108,403)$(2,863)$(9,636)$(120,902)
 Three Months Ended Aug 1, 2020
 Foreign Currency Translation Adjustment Derivative Financial Instruments Designated as Cash Flow Hedges Defined Benefit Plans Total
Balance at May 2, 2020$(152,162) $7,711
 $(8,851) $(153,302)
Gains (losses) arising during the period31,043
 (7,012) (211) 23,820
Reclassification to net loss for (gains) losses realized
0
 (2,198) 71
 (2,127)
Net other comprehensive income (loss)31,043
 (9,210) (140) 21,693
Balance at August 1, 2020$(121,119) $(1,499) $(8,991) $(131,609)
 Six Months Ended Aug 1, 2020
 Foreign Currency Translation Adjustment Derivative Financial Instruments Designated as Cash Flow Hedges Defined Benefit Plans Total
Balance at February 1, 2020$(137,289) $6,300
 $(8,921) $(139,910)
Gains (losses) arising during the period16,170
 (3,832) (212) 12,126
Reclassification to net loss for (gains) losses realized
0
 (3,967) 142
 (3,825)
Net other comprehensive income (loss)16,170
 (7,799) (70) 8,301
Balance at August 1, 2020$(121,119) $(1,499) $(8,991) $(131,609)
 Three Months Ended Aug 3, 2019
 Foreign Currency Translation Adjustment Derivative Financial Instruments Designated as Cash Flow Hedges Defined Benefit Plans Total
Balance at May 4, 2019$(131,923)
$8,663

$(9,446) $(132,706)
Gains (losses) arising during the period(4,841) 1,978
 (151) (3,014)
Reclassification to net earnings for (gains) losses realized0
 (1,572) 90
 (1,482)
Net other comprehensive income (loss)(4,841) 406
 (61) (4,496)
Balance at August 3, 2019$(136,764) $9,069
 $(9,507) $(137,202)


 Six Months Ended Aug 3, 2019
 Foreign Currency Translation Adjustment Derivative Financial Instruments Designated as Cash Flow Hedges Defined Benefit Plans Total
Balance at February 2, 2019$(119,546)
$2,999

$(9,632) $(126,179)
Cumulative adjustment reclassified from retained earnings due to adoption of new accounting guidance1
0
 1,981
 0
 1,981
Gains (losses) arising during the period(17,218) 5,842
 (55) (11,431)
Reclassification to net earnings for (gains) losses realized0
 (1,753) 180
 (1,573)
Net other comprehensive income (loss)(17,218) 4,089
 125
 (13,004)
Balance at August 3, 2019$(136,764) $9,069
 $(9,507) $(137,202)

Notes:
1
During the first quarter of fiscal 2020, the Company adopted new authoritative guidance which eliminated the requirement to separately measure and report ineffectiveness for instruments that qualify for hedge accounting and generally requires that the entire change in the fair value of such instruments ultimately be presented in the same line as the respective hedge item. As a result, there is no interest component recognized for the ineffective portion of instruments that qualify for hedge accounting, but rather all changes in the fair value of such instruments are included in other comprehensive income (loss). Upon adoption of this guidance, the Company reclassified approximately $2.0 million in gains from retained earnings to accumulated other comprehensive loss related to the previously recorded interest component on outstanding instruments that qualified for hedge accounting.
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Table of Contents
Three Months Ended May 2, 2020
Foreign Currency Translation AdjustmentDerivative Financial Instruments Designated as Cash Flow HedgesDefined Benefit PlansTotal
Balance at February 1, 2020$(137,289)$6,300 $(8,921)$(139,910)
Gains (losses) arising during the period(14,873)3,180 (1)(11,694)
Reclassification to net earnings for (gains) losses realized0 (1,769)71 (1,698)
Net other comprehensive income (loss)(14,873)1,411 70 (13,392)
Balance at May 2, 2020$(152,162)$7,711 $(8,851)$(153,302)
Details on reclassifications out of accumulated other comprehensive income (loss) to net earnings (loss) during the three and six months ended August 1, 2020 and August 3, 2019 are as follows (in thousands):
Three Months EndedLocation of (Gain) Loss Reclassified from Accumulated OCI into Earnings (Loss)
May 1, 2021May 2, 2020
Derivative financial instruments designated as cash flow hedges:
Foreign exchange currency contracts$462 $(1,991)Cost of product sales
Interest rate swap(64)3 Interest expense
      Less income tax effect62 219 Income tax expense (benefit)
460 (1,769)
Defined benefit plans:
Net actuarial loss amortization105 96 Other income (expense)
Prior service credit amortization(17)(16)Other income (expense)
      Less income tax effect(11)(9)Income tax expense (benefit)
77 71 
Total reclassifications during the period$537 $(1,698)
 Three Months Ended Six Months Ended Location of (Gain) Loss Reclassified from Accumulated OCI into Earnings (Loss)
 Aug 1, 2020 Aug 3, 2019 Aug 1, 2020 Aug 3, 2019 
Derivative financial instruments designated as cash flow hedges:  
   Foreign exchange currency contracts$(2,504) $(1,757) $(4,495) $(1,987) Cost of product sales
   Interest rate swap42
 (44) 45
 (90) Interest expense
      Less income tax effect264
 229
 483
 324
 Income tax expense (benefit)
 (2,198) (1,572) (3,967) (1,753)  
Defined benefit plans:         
   Net actuarial loss amortization97
 111
 193
 222
 Other income (expense)
   Prior service credit amortization(16) (9) (32) (19) Other income (expense)
      Less income tax effect(10) (12) (19) (23) Income tax expense (benefit)
 71
 90
 142
 180
  
Total reclassifications during the period$(2,127) $(1,482) $(3,825) $(1,573)  

(5)Accounts Receivable

(5)Accounts Receivable
Accounts receivable is summarized as follows (in thousands):
Aug 1, 2020 Feb 1, 2020May 1, 2021Jan 30, 2021
Trade$237,399
 $309,508
Trade$283,787 $288,782 
Royalty9,248
 12,775
Royalty20,187 20,565 
Other14,224
 13,429
Other16,929 19,000 
260,871
 335,712
320,903 328,347 
Less allowances1
14,400
 8,431
Less allowancesLess allowances14,606 14,200 
$246,471
 $327,281
$306,297 $314,147 

Notes:
1
During the first quarter of fiscal 2021, the Company adopted authoritative guidance related to the measurement of credit losses on financial instruments. This guidance replaces the “as incurred” loss model with an “expected loss” model which requires the recognition of an allowance for credit losses expected to be incurred over an asset’s lifetime. The adoption of this guidance did not have a material impact on the Company’s allowance for doubtful accounts. Refer to Note 1 for further information.
Accounts receivable consists of trade receivables relating primarily to the Company’s wholesale business in Europe and, to a lesser extent, to its wholesale businesses in the Americas and Asia, royalty receivables relating to its licensing operations, credit card and retail concession receivables related to its retail businesses and certain other receivables. Other receivables generally relate to amounts due to the Company that result from activities that are not related to the direct sale of the Company’s products or collection of royalties.
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Table of Contents
(6)Inventories
(6)Inventories
Inventories consist of the following (in thousands):
 Aug 1, 2020 Feb 1, 2020
Raw materials$585
 $399
Work in progress43
 52
Finished goods418,799
 392,678
 $419,427
 $393,129

 May 1, 2021Jan 30, 2021
Raw materials$217 $53 
Work in progress24 43 
Finished goods404,610 389,048 
 $404,851 $389,144 
The above balances include an allowance to write down inventories to the lower of cost or net realizable value of $42.6$36.9 million and $24.5$35.5 million as of AugustMay 1, 20202021 and February 1, 2020,January 30, 2021, respectively.
(7)Income Taxes
(7)Income Taxes
Effective Tax Rate
Income tax expense for the interim periods was computed using the tax rate estimated to be applicable for the full fiscal year, adjusted for discrete items. The Company’s effective income tax rate was an expense of 29.8% for the three months ended May 1, 2021, compared to a benefit of 9.9%14.1% for the sixthree months ended August 1, 2020, compared to an expense of 52.2% forMay 2, 2020. During the sixthree months ended August 3, 2019. During the six months ended August 1,May 2, 2020, the Company recognized a tax benefit of approximately $3.9$11.8 million from a tax rate change related to the ability to carryback net operating losses to tax years with a higher federal corporate tax rate as allowed under the CARES Coronavirus Aid, Relief, and Economic Security (“CARES”) Act enacted in March 2020.2020. This benefit was mostlypartially offset by a valuation allowance of $3.7 million resulting from jurisdictions where there have been cumulative net operating losses, limiting the Company’s ability to consider other subjective evidence to continue to recognize the existing deferred tax assets.assets. Excluding the impact of these items, the changeincrease in the effective tax rate was due primarily to a shiftchange in the distributionmix of statutory earnings amongfor the Company’s tax jurisdictions during the sixthree months ended AugustMay 1, 2020,2021, compared to the same prior-year period.
On March 27, 2020, the U.S. government enacted the CARES Act to provide economic relief from the COVID-19 pandemic. The CARES Act includes certain provisions that affect ourthe Company’s income taxes, including temporary five-year net operating loss carryback provisions, relaxation of the net interest deduction limitations and the technical amendment for qualified improvement property deduction.

Unrecognized Tax Benefit
From time-to-time, the Company is subject to routine income and other tax audits on various tax matters around the world in the ordinary course of business. As of AugustMay 1, 2020,2021, several tax audits were ongoing for various periods in multiple jurisdictions. These audits could conclude with an assessment of additional tax liability for the Company. These assessments could arise as the result of timing or permanent differences and could be material to the Company’s net income or future cash flows. In the event the Company disagrees with an assessment from a taxing authority, the Company may elect to appeal, litigate, pursue settlement or take other actions. The Company accrues an amount for its estimate of additional tax liability which the Company, more likely than not, will incur as a result of the ultimate resolution of tax audits (“uncertain tax positions”). The Company reviews and updates the estimates used in the accrual for uncertain tax positions, as appropriate, as more definitive information or interpretations become available from taxing authorities, upon completion of tax audits, upon receipt of assessments, upon expiration of statutes of limitation, or upon occurrence of other events.
During the second quarter of fiscal 2021, the Company became aware of a foreign withholding tax regulation that could be interpreted to apply to certain of its previous transactions. The Company currently does not expect that its exposure, if any, will have a material impact on its condensed consolidated financial position, results of operations or cash flows.
15
Table of Contents
The Company had aggregate accruals for uncertain tax positions, including penalties and interest, of $35.6$40.8 million and $34.0$40.0 million as of AugustMay 1, 20202021 and February 1, 2020,January 30, 2021, respectively. This includes an accrual of $19.9 million for the estimated transition tax (excluding related interest) related to the 2017 Tax Cuts and Jobs Act for each of the periods ended AugustMay 1, 20202021 and February 1, 2020.January 30, 2021.
(8)Segment Information
(8)Segment Information
The Company’s businesses are grouped into 5 reportable segments for management and internal financial reporting purposes: Americas Retail, Americas Wholesale, Europe, Asia and Licensing. The Company’s Americas Retail, Americas Wholesale, Europe and Licensing reportable segments are the same as their respective operating segments. Certain components of the Company’s Asia operating segment are separate operating segments based on region, which have been aggregated into the Asia reportable segment for disclosure purposes.
Management evaluates segment performance based primarily on revenues and earnings (loss) from operations before corporate performance-based compensation costs, asset impairment charges, net gains (losses) on lease terminations,modifications, restructuring charges and certain non-recurring credits (charges), if any. The Company believes this segment reporting reflects how its business segments are managed and how each segment’s performance is evaluated by the Company’s chief operating decision maker to assess performance and make resource allocation decisions. The Americas Retail segment includes the Company’s retail and e-commerce operations in the Americas. The Americas Wholesale segment includes the Company’s wholesale operations in the Americas. The Europe segment includes the Company’s retail, e-commerce and wholesale operations in Europe and the Middle East. The Asia segment includes the Company’s retail, e‑commerce and wholesale operations in Asia and the Pacific. The Licensing segment includes the worldwide licensing operations of the Company. The business segment operating results exclude corporate overhead costs, which consist of shared costs of the organization, asset impairment charges, net gains (losses) on lease terminations, restructuring charges and certain non-recurring credits (charges), if any. Corporate overhead costs are presented separately and generally include, among other things, the following unallocated corporate costs: accounting and finance, executive compensation, corporate performance-based compensation, facilities, global advertising and marketing, human resources, information technology and legal.

Net revenue and earnings (loss) from operations are summarized as follows for the three and six months ended August 1, 2020 and August 3, 2019 (in thousands):    
Three Months Ended Six Months Ended Three Months Ended
Aug 1, 2020 Aug 3, 2019 Aug 1, 2020 Aug 3, 2019 May 1, 2021May 2, 2020
Net revenue: 
  
    Net revenue:  
Americas Retail$110,065
 $198,966
 $184,649
 $375,389
Americas Retail$155,535 $74,584 
Americas Wholesale20,285
 41,902
 46,160
 88,107
Americas Wholesale45,430 25,875 
Europe205,851
 340,509
 312,324
 550,564
Europe241,852 106,473 
Asia50,191
 83,301
 90,576
 168,491
Asia55,660 40,385 
Licensing12,147
 18,542
 25,081
 37,360
Licensing21,525 12,934 
Total net revenue$398,539
 $683,220
 $658,790
 $1,219,911
Total net revenue$520,002 $260,251 
Earnings (loss) from operations: 
  
    Earnings (loss) from operations:  
Americas Retail$(4,704) $5,957
 $(41,377) $4,145
Americas Retail$20,274 $(36,673)
Americas Wholesale1,688
 8,422
 3,312
 16,236
Americas Wholesale11,555 1,624 
Europe20,795
 51,594
 (23,611) 35,267
Europe4,198 (44,406)
Asia(3,367) (4,800) (26,144) (8,003)Asia(1,808)(22,777)
Licensing11,511
 15,547
 21,605
 32,191
Licensing19,431 10,094 
Total segment earnings (loss) from operations25,923
 76,720

(66,215) 79,836
Total segment earnings (loss) from operations53,650 (92,138)
Corporate overhead(29,188) (29,229) (46,109) (55,041)Corporate overhead(28,776)(16,921)
Asset impairment charges1
(11,969) (1,504) (64,941) (3,279)
Asset impairment charges1
(441)(52,972)
Net gains on lease terminations2
885
 0
 429
 0
Net gains (losses) on lease modifications2
Net gains (losses) on lease modifications2
2,145 (456)
Total earnings (loss) from operations$(14,349) $45,987

$(176,836) $21,516
Total earnings (loss) from operations$26,578 $(162,487)

Notes:
______________________________________________________________________1During the three months ended May 1, 2021 and May 2, 2020 , the Company recognized asset impairment charges related primarily to impairment of certain operating lease ROU assets and impairment of property and equipment related to certain retail locations resulting from lower revenue and future cash flow projections from the ongoing effects of the COVID-19 pandemic. Refer to Note 2 and Note 15 for more information regarding these asset impairment charges.
Notes:2During the three months ended May 1, 2021 and May 2, 2020, the Company recorded net gains (losses) on lease modifications related primarily to the early termination of lease agreements for certain of the Company’s retail locations.
1
During the three and six months ended August 1, 2020, the Company recognized asset impairment charges related primarily to impairment of certain operating lease ROU assets and impairment of property and equipment related to certain retail locations resulting from lower revenue and future cash flow projections from the ongoing effects of the COVID-19 pandemic. During the three and six months ended August 3, 2019, the Company’s asset impairment charges related primarily to impairment of property and equipment related to certain retail locations resulting from under-performance and expected store closures. Refer to Note 2 and Note 15 for more information regarding these asset impairment charges.
16
2
During the three and six months ended August 1, 2020, the Company recorded net gains on lease terminations related primarily to the early termination of certain lease agreements.
The table below presents information regarding geographic areas in which the Company operated. Net revenue is classified primarily based on the country where the Company’s customer is located (in thousands):
 Three Months Ended Six Months Ended
 Aug 1, 2020 Aug 3, 2019 Aug 1, 2020 Aug 3, 2019
Net revenue: 
  
    
U.S.$97,202
 $176,557
 $166,667
 $340,928
Italy36,671
 86,497
 56,023
 136,932
South Korea29,092
 32,898
 50,316
 66,815
Germany33,376
 31,990
 44,738
 50,738
Canada24,174
 44,001
 40,851
 82,582
Spain20,381
 39,900
 33,377
 67,897
Other foreign countries145,496
 252,835
 241,737
 436,659
Total product sales386,392
 664,678
 633,709
 1,182,551
Net royalties12,147
 18,542
 25,081
 37,360
Net revenue$398,539
 $683,220
 $658,790
 $1,219,911

 Three Months Ended
 May 1, 2021May 2, 2020
Net revenue:  
U.S.$157,066 $69,465 
Italy47,553 19,352 
Germany34,678 11,362 
South Korea27,809 21,224 
Canada26,640 16,677 
Spain25,507 12,996 
Other foreign countries179,224 96,241 
Total product sales498,477 247,317 
Net royalties21,525 12,934 
Net revenue$520,002 $260,251 
Due to the seasonal nature of the Company’s business segments, the above net revenue and operating results are not necessarily indicative of the results that may be expected for the full fiscal year.

(9)Borrowings and Finance Lease Obligations
(9)Borrowings and Finance Lease Obligations
Borrowings and finance lease obligations are summarized as follows (in thousands):
 Aug 1, 2020 Feb 1, 2020
Term loans$51,823
 $0
Borrowings under credit facilities19,192
 3,957
Mortgage debt18,821
 19,132
Finance lease obligations16,253
 16,535
Other2,301
 2,636
 108,390
 42,260
Less current installments42,321
 9,490
Long-term debt and finance lease obligations$66,069
 $32,770

 May 1, 2021Jan 30, 2021
Term loans$55,951 $56,765 
Finance lease obligations22,421 22,063 
Mortgage debt18,346 18,507 
Borrowings under credit facilities5,097 7,332 
Other2,826 2,597 
 104,641 107,264 
Less current installments17,917 38,710 
Long-term debt and finance lease obligations$86,724 $68,554 
Term Loans
As a precautionary measure to ensure financial flexibility and maintain maximum liquidity in response to the COVID-19 pandemic, in addition to drawing down on certain of the credit facilities as noted below, the Company entered into term loans with certain banks primarily in Europe during the six monthsfiscal year ended August 1, 2020.January 30, 2021. These loans are primarily unsecured, have terms ranging from one-to-fiveone-to-five years and provide annual interest rates ranging between 0.5% to 1.5%2.2%. Certain of these loans also have an option to extend the term for a period of up to five years, subject to certain terms and conditions. As of AugustMay 1, 2020,2021 and January 30, 2021, the Company had outstanding borrowings of $51.8$56.0 million and $56.8 million under these borrowing arrangements.arrangements, respectively.
Finance Lease Obligations
During fiscal 2018, the Company entered into a finance lease related to equipment used in its European distribution center located in the Netherlands. The finance lease primarily provides for monthly minimum lease payments through May 2027 with an effective interest rate of approximately 6%. During fiscal 2021, the Company also entered into finance leases for equipment used in its European distribution centers located in Italy. These finance lease obligations totaled $19.2 million and $18.4 million as of May 1, 2021 and January 30, 2021, respectively.
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Table of Contents
The Company also has smaller finance leases related primarily to computer hardware and software. As of May 1, 2021 and January 30, 2021, these finance lease obligations totaled $3.2 million and $3.7 million, respectively.
Mortgage Debt
During fiscal 2017, the Company entered into a ten-year $21.5 million real estate secured loan (the “Mortgage Debt”) which is secured by the Company’s U.S. distribution center based in Louisville, Kentucky. The Mortgage Debt requires the Company to comply with a fixed charge coverage ratio on a trailing four-quarter basis if consolidated cash, cash equivalents, short-term investment balances and availability under borrowing arrangements fall below certain levels. In addition, the Mortgage Debt contains customary covenants, including covenants that limit or restrict the Company’s ability to incur liens on the mortgaged property and enter into certain contractual obligations. Upon the occurrence of an event of default under the Mortgage Debt, the lender may terminate the Mortgage Debt and declare all amounts outstanding to be immediately due and payable. The Mortgage Debt specifies a number of events of default (some of which are subject to applicable grace or cure periods), including, among other things, non-payment defaults, covenant defaults, cross-defaults to other material indebtedness, bankruptcy and insolvency defaults and material judgment defaults.
Credit Facilities
On April 21, 2020,During fiscal 2021, the Company entered into an amendment of its senior secured asset-based revolving credit facility with Bank of America, N.A. and the other lenders party thereto to extend the maturity date of the credit facility to April 21, 2023, among other changes (as amended, the “Credit Facility”). The Credit Facility provides for a borrowing capacity in an amount up to $120 million, including a Canadian sub-facility up to $20 million, subject to a borrowing base. Based on applicable accounts receivable and inventory balances as of AugustMay 1, 2020,2021, the Company could have borrowed up to $81$109 million under the Credit Facility. The Credit Facility has an option to expand the borrowing capacity by up to $180 million subject to certain terms and conditions, including the willingness of existing or new lenders to assume such increased amount. The Credit Facility is available for direct borrowings and the issuance of letters of credit, subject to certain letters of credit sublimits, and may be used for working capital and other general corporate purposes.
All obligations under the Credit Facility are unconditionally guaranteed by the Company and the Company’s existing and future domestic and Canadian subsidiaries, subject to certain exceptions, and are secured by a first priority lien on substantially all of the assets of the Company and such domestic and Canadian subsidiaries, as applicable.
Direct borrowings under the Credit Facility made by the Company and its domestic subsidiaries shall bear interest at the U.S. base rate plus an applicable margin (varying from 0.75% to 1.25%) or at LIBOR plus an applicable margin (varying from 1.75% to 2.25%), provided that LIBOR may not be less than 1.0%. The U.S. base rate is based on the greater of (i) the U.S. prime rate, (ii) the federal funds rate, plus 0.5%, and (iii) LIBOR for a 30-day interest period, plus 1.0%. Direct borrowings under the Credit Facility made by the Company’s Canadian subsidiaries shall bear interest at the Canadian prime rate plus an applicable margin (varying from 0.75% to 1.25%) or at the Canadian BA rate plus an applicable margin (varying from 1.75% to 2.25%), provided that the Canadian BA rate may not be less than 1.0%. The Canadian prime rate is based on the greater of (i) the Canadian prime rate and (ii) the Canadian BA rate for a one-month interest period, plus 1.0%, provided that the Canadian prime rate may not be less than 0. The applicable margins are calculated quarterly and vary based on the average daily availability of the aggregate borrowing base. The Company is also obligated to pay certain commitment, letter of credit and other fees customary for a credit facility of this size and type. As of AugustMay 1, 2020,2021, the Company had $2.1 million in outstanding standby letters of credit, 0 outstanding documentary letters of credit and 0 outstanding borrowings under the Credit Facility.

The Credit Facility requires the Company to comply with a fixed charge coverage ratio on a trailing four-quarter basis if a default or an event of default occurs under the Credit Facility or generally if borrowings exceed 80% of the borrowing base. In addition, the Credit Facility contains customary covenants, including covenants that limit or restrict the Company and certain of its subsidiaries’ ability to: incur liens, incur indebtedness, make investments, dispose of assets, make certain restricted payments, merge or consolidate and enter into certain transactions with affiliates. Upon the occurrence of an event of default under the Credit Facility, the lenders may cease making loans, terminate the Credit Facility and declare all amounts outstanding to be immediately due and payable. The Credit Facility specifies a number of events of default (some of which are subject to applicable grace or cure periods), including, among other things, non-payment defaults, covenant defaults, cross-defaults to other material indebtedness, bankruptcy and insolvency defaults, and material judgment defaults. The Credit Facility allows for both secured and unsecured borrowings outside of the Credit Facility up to specified amounts.
The Company, through its European subsidiaries, maintains short-term committed and uncommitted borrowing agreements, primarily for working capital purposes, with various banks in Europe. Some of these agreements include certain equity-based financial covenants. As of AugustMay 1, 2020,2021, the Company had $9.4 million in0 outstanding borrowings, 0 outstanding documentary letters of credit and $134.3$113.5 million available for future borrowings under these agreements. The agreements are denominated primarily in euros and provide for annual interest rates ranging from 0.7%1.05% to 1.3%1.1%.
The Company, through its China subsidiary, maintains a short-term uncommitted bank borrowing agreement that provides for a borrowing capacity up to $30 million, primarily for working capital purposes. During the second quarter
18
Table of fiscal 2021, the borrowing capacity under the multicurrency borrowing agreement increased from $20.0 million to $30.0 million. Contents
The Company had $9.6$5.1 million and $4.0$7.3 million in outstanding borrowings under this agreement as of AugustMay 1, 20202021 and February 1, 2020, respectively.
Mortgage Debt
On February 16, 2016, the Company entered into a ten-year $21.5 million real estate secured loan (the “Mortgage Debt”). The Mortgage Debt is secured by the Company’s U.S. distribution center based in Louisville, Kentucky and provides for monthly principal and interest payments based on a 25-year amortization schedule, with the remaining principal balance and any accrued and unpaid interest due at maturity. Outstanding principal balances under the Mortgage Debt bear interest at the one-month LIBOR rate plus 1.5%. As of August 1, 2020, outstanding borrowings under the Mortgage Debt, net of debt issuance costs of $0.1 million, were $18.8 million. At February 1, 2020, outstanding borrowings under the Mortgage Debt, net of debt issuance costs of $0.1 million, were $19.1 million.
The Mortgage Debt requires the Company to comply with a fixed charge coverage ratio on a trailing four-quarter basis if consolidated cash, cash equivalents, short-term investment balances and availability under borrowing arrangements fall below certain levels. In addition, the Mortgage Debt contains customary covenants, including covenants that limit or restrict the Company’s ability to incur liens on the mortgaged property and enter into certain contractual obligations. Upon the occurrence of an event of default under the Mortgage Debt, the lender may terminate the Mortgage Debt and declare all amounts outstanding to be immediately due and payable. The Mortgage Debt specifies a number of events of default (some of which are subject to applicable grace or cure periods), including, among other things, non-payment defaults, covenant defaults, cross-defaults to other material indebtedness, bankruptcy and insolvency defaults and material judgment defaults.
On February 16, 2016, the Company also entered into a separate interest rate swap agreement, designated as a cash flow hedge, that resulted in a swap fixed rate of approximately 3.06%. This interest rate swap agreement matures in January 2026 and converts the nature of the Mortgage Debt from LIBOR floating-rate debt to fixed-rate debt. The fair value of the interest rate swap liability was approximately $1.3 million and $0.3 million as of August 1, 2020 and February 1, 2020, respectively.
Finance Lease Obligations
During fiscal 2018, the Company entered into a finance lease related to equipment used in its European distribution center located in the Netherlands. The finance lease primarily provides for monthly minimum lease

payments through May 2027 with an effective interest rate of approximately 6%. The finance lease obligation was $12.6 million for each of the periods ended August 1, 2020 and February 1, 2020.
The Company also has smaller finance leases related primarily to computer hardware and software. As of August 1, 2020 and February 1, 2020, these finance lease obligations totaled $3.7 million and $4.0 million,30, 2021, respectively.
Other
From time-to-time, the Company will obtain other financing in foreign countries for working capital to finance its local operations.
(10)Convertible Senior Notes and Related Transactions
(10)Convertible Senior Notes and Related Transactions
2.00% Convertible Senior Notes due 2024
In April 2019, the Company issued $300 million principal amount of 2.00% convertible senior notes due 2024 (the “Notes”) in a private offering. In connection with the issuance of the Notes, the Company entered into an indenture (the “Indenture”) with respect to the Notes with U.S. Bank N.A., as trustee (the “Trustee”). The Notes are senior unsecured obligations of the Company and bear interest at an annual rate of 2.00% payable semi-annually in arrears on April 15 and October 15 of each year, beginning on October 15, 2019. The Notes will mature on April 15, 2024, unless earlier repurchased or converted in accordance with their terms.
The Notes are convertible in certain circumstances into cash, shares of the Company’s common stock, or a combination of cash and shares of the Company’s common stock, at the Company’s election, at an initial conversion rate of 38.7879 shares of common stock per $1,000 principal amount of Notes, which is equivalent to an initial conversion price of approximately $25.78 per share, subject to adjustment upon the occurrence of certain events. Prior to November 15, 2023, the Notes are convertible only upon the occurrence of certain events and during certain periods, and thereafter, at any time until the close of business on the second scheduled trading day immediately preceding the maturity date of the Notes. Following certain corporate events described in the Indenture that occur prior to the maturity date, the conversion rate will be increased for a holder who elects to convert its Notes in connection with such corporate event in certain circumstances. The Notes are not redeemable prior to maturity, and no sinking fund is provided for the Notes.
If As of May 1, 2021, none of the Company undergoes a “fundamental change,” as defined in the Indenture, subject to certain conditions allowing holders of the Notes may require theto convert had been met. The Company expects to purchase for cash all or any portion of their Notes. The fundamental change purchase price will be 100% ofsettle the principal amount of the Notes to be purchased plus any accrued and unpaid interest up to but excluding the fundamental change purchase date.
The Indenture contains certain other customary terms and covenants, including that upon certain events of default occurring and continuing, either the Trustee or the holders of at least 25% in principal amount of the outstanding Notes may declare 100% of the principal of, and accrued and unpaid interest on, all the Notes to be due and payable.
Under GAAP, certain convertible debt instruments that may be settled2024 in cash on conversion are required to be separately accounted for as liability and equity components of the instrumentany excess in a manner that reflects the issuer’s non-convertible debt borrowing rate. Accordingly, in accounting for the issuance of the Notes, theshares.
The Company separated the Notes into liability and equity components. The liability component was recorded at fair value, which was derived from a valuation technique used to calculate the fair value of a similar liability without an associated conversion feature.value. The carrying amount of the equity component which was recognized as a debt discount, represented the difference between the proceeds from the issuance of the Notes and the fair value of the liability component of the Notes.component. The excess of the principal amount of the liability component over its carrying amount (“debt discount”) will beis being amortized to interest expense using an effective interest rate of 6.8% over the term of the Notes. The equity component is not remeasured as long as it continues to meet the conditions for equity classification. During the three and six months ended August 1, 2020, the Company recorded approximately $2.6 million and $5.2 million, respectively, of interest expense related to the amortization of the debt discount.

During the three and six months ended August 3, 2019, the Company recorded approximately $2.4 million and $2.7 million of interest expense related to the amortization of the debt discount.
Debt issuance costs related to the Notes were comprised of discounts and commissions payable to the initial purchasers of $3.8 million and third-party offering costs of approximately $1.5 million. In accounting for the debt issuance costs related to the issuance of the Notes, theThe Company allocated the total amount incurred to the liability and equity components based on their relative values. Debt issuance costs attributable to the liability component were recorded as a contra-liability and are presented net against the convertible senior notes balance on the Company’s condensed consolidated balance sheets. These costs are being amortized to interest expense using the effective interest method over the term of the Notes.
During the three and six months ended AugustMay 1, 2021 and May 2, 2020, the Company recorded $0.2$2.8 million and $0.4$2.6 million, respectively, of interest expense related to the amortization of the debt issuance costs. During eachdiscount.
19
Table of the three and six months ended August 3, 2019, the Company recorded $0.2 million related to the amortization of debt issuance costs. Debt issuance costs attributable to the equity component are netted with the equity component in stockholders’ equity.Contents
The Notes consist of the following components as of August 1, 2020 and February 1, 2020 (in thousands):
Aug 1, 2020 Feb 1, 2020May 1, 2021Jan 30, 2021
Liability component:   Liability component:
Principal$300,000
 $300,000
Principal$300,000 $300,000 
Unamortized debt discount(43,820) (49,017)Unamortized debt discount(35,841)(38,623)
Unamortized issuance costs(3,192) (3,620)Unamortized issuance costs(2,550)(2,763)
Net carrying amount$252,988
 $247,363
Net carrying amount$261,609 $258,614 
   
Equity component, net1
$42,320
 $42,320
Equity component, net1
$42,320 $42,320 

Notes:
1
1Included in paid-in capital within stockholders’ equity on the condensed consolidated balance sheets and is net of debt issuance costs and deferred taxes.
Included in paid-in capital within stockholders’ equity on the condensed consolidated balance sheets and is net of debt issuance costs and deferred taxes.
As of AugustMay 1, 20202021 and February 1, 2020,January 30, 2021, the fair value, net of unamortized debt discount and issuance costs, of the Notes was approximately $163.0$339.5 million and $272.0$303.5 million, respectively. The fair value of the Notes is determined based on inputs that are observable in the market and have been classified as Level 2 in the fair value hierarchy.
Convertible Bond Hedge and Warrant Transactions
In connection with the offering of the Notes, the Company entered into convertible note hedge transactions whereby the Company had the option to purchase a total of approximately 11.6 million shares of its common stock at an initial strike price of approximately $25.78 per share, in each case subject to adjustment in certain circumstances. The total cost of the convertible note hedge transactions was $61.0 million. In addition, the Company sold warrants whereby the holders of the warrants had the option to purchase a total of approximately 11.6 millionshares of the Company’s common stock at an initial strike price of $46.88per share. Both the number of shares underlying the convertible note hedges and warrants and the strike price of the instruments are subject to customary adjustments. The Company received $28.1 million in cash proceeds from the sale of these warrants. Taken together, the purchase of the convertible note hedges and sale of the warrants are intended to offset dilution from the conversion of the Notes to the extent the market price per share of the Company’s common stock exceeds the adjusted strike price of the convertible note hedges. The warrant transaction may have a dilutive effect with respect to the Company’s common stock to the extent the market price per share of the Company’s common stock exceeds the adjusted strike price of the warrants. As these transactions meet certain accounting criteria, theThe convertible note hedges and warrants are recorded in stockholders’ equity, are not accounted for as derivatives and are not remeasured each reporting period.
The Company had a deferred tax liability of $11.2$8.8 million in connection with the debt discount associated with the Notes and a deferred tax asset of $12.3$9.7 million in connection with the convertible note hedge transactions

for each of the periods ended AugustMay 1, 20202021 and February 1, 2020.January 30, 2021. The net deferred tax impact was included in deferred tax assets on the Company’s condensed consolidated balance sheets.
(11)Share-Based Compensation
(11)Share-Based Compensation
The following table summarizes the share-based compensation expense recognized under all of the Company’s stock plans during the three and six months ended August 1, 2020 and August 3, 2019(in thousands):
 Three Months Ended
 May 1, 2021May 2, 2020
Stock options$907 $695 
Stock awards/units3,073 4,926 
Employee Stock Purchase Plan80 165 
Total share-based compensation expense$4,060 $5,786 
 Three Months Ended Six Months Ended
 Aug 1, 2020 Aug 3, 2019 Aug 1, 2020 Aug 3, 2019
Stock options$820
 $697
 $1,515
 $1,287
Stock awards/units3,135
 4,205
 8,061
 8,020
Employee Stock Purchase Plan48
 84
 213
 147
Total share-based compensation expense$4,003
 $4,986
 $9,789
 $9,454
20

Table of Contents
Unrecognized compensation cost related to nonvested stock options and nonvested stock awards/units totaled approximately $9.9$7.1 million and $21.9$22.5 million, respectively, as of AugustMay 1, 2020.2021. This cost is expected to be recognized over a weighted average period of 1.81.7 years.
The weighted average grant date fair value per share of stock options granted was $4.33 and $5.41 during the six months ended August 1, 2020 and August 3, 2019, respectively. 
Grants
As a precautionary measure to maintain maximum liquidity in response to the COVID-19 pandemic, the Company elected to pay out its fiscal 2020 corporate bonus in stock awards rather than cash compensation. As such, on April 27, 2020, the Company issued 816,708 restricted stock units that vested immediately. These awards were granted to certain of the Company’s employees that were eligible to receive the corporate bonus based on the satisfaction of certain performance measures during fiscal 2020.
On June 11, 2020, the Company made a grant of 792,057 stock options to certain of its executive employees. On June 29, 2020, the Company made a grant of 736,026 nonvested stock units to certain of its executive employees. These nonvested stock units are subject to certain performance-based or market-based vesting conditions.
In connection with a new employment agreement entered into between the Company and Carlos Alberini (the “Alberini Employment Agreement”), who became the Company’s Chief Executive Officer on February 20, 2019, the Company granted Mr. Alberini 600,000 stock options and 250,000 nonvested stock units which were subject to the achievement of certain performance-based vesting conditions. Mr. Alberini was also granted 150,000 restricted stock units which were considered contingently returnable as a result of certain service conditions set forth in the Alberini Employment Agreement. The service conditions were satisfied during the six months ended August 1, 2020.
On June 10, 2019, the Company made a special grant of 1,077,700 stock options to certain of its employees. On June 20, 2019, the Company also granted select key management 205,339 nonvested stock units which were subject to certain performance-based vesting conditions.
Annual Grants
On April 13, 2020,2021, the Company made an annual grant of 743,800 nonvested stock awards/units to its employees. On March 29, 2019, the Company made an annual grant of 5,100 stock options and 280,700367,440 nonvested stock awards/units to its employees.
Performance-Based Awards
The Company has granted certain nonvested stock units subject to performance-based vesting conditions to select executive officers. Each award of nonvested stock units generally has an initial vesting period from the date of the grant through either (i) the end of the first fiscal year or (ii) the first anniversary of the date of grant, followed by annual vesting periods which may range from two-to-threetwo-to-three years.

The Company has also granted a target number of nonvested stock units to select key management, including certain executive officers. The number of shares that may ultimately vest with respect to each award may range from 0% up to 200% of the target number of shares, subject to the achievement of certain performance-based vesting conditions. Any shares that are ultimately issued are scheduled to vest at the end of the third fiscal year following the grant date.
The following table summarizes the activity for nonvested performance-based units during the sixthree months ended AugustMay 1, 2020:2021:
 Number of Units Weighted Average Grant Date Fair Value
Nonvested at February 1, 20201,140,023
 $16.66
Granted310,881
 9.65
Vested(310,413) 13.99
Forfeited(249,139) 12.24
Nonvested at August 1, 2020891,352
 $16.38

Number of UnitsWeighted Average Grant Date Fair Value
Nonvested at January 30, 2021769,632 $16.15 
Granted0 0 
Vested(166,547)14.06 
Forfeited(186,714)21.83 
Nonvested at May 1, 2021416,371 $14.45 
Market-Based Awards
The Company has granted certain nonvested stock units subject to market-based vesting conditions to select executive officers. The number of shares that may ultimately vest will equal 0% to 150% of the target number of shares, subject to the performance of the Company’s total stockholder return (“TSR”) relative to the TSR of a select group of peer companies over a three-year period. Vesting is also subject to continued service requirements through the vesting date.
The following table summarizes the activity for nonvested market-based units during the sixthree months ended AugustMay 1, 2020:2021:
 Number of Units Weighted Average Grant Date Fair Value
Nonvested at February 1, 2020288,202
 $13.43
Granted1
526,711
 7.20
Vested1
(305,901) 10.62
Nonvested at August 1, 2020509,012
 $8.67

Number of UnitsWeighted Average Grant Date Fair Value
Nonvested at January 30, 2021509,012 $8.67 
Granted1
41,955 20.28 
Vested1
(125,822)20.28 
Nonvested at May 1, 2021425,145 $6.38 

Notes:
1
1As a result of the achievement of certain market-based vesting conditions, there were 41,955 shares that vested in addition to the original target number of shares granted in fiscal 2019.
21
(12)Related Party Transactions
Amounts include, as a result of the achievement of certain market-based vesting conditions, 101,566 shares that vested in addition to the original target number of shares granted in fiscal 2018.
(12)Related Party Transactions
The Company and its subsidiaries periodically enter into transactions with other entities or individuals that are considered related parties, including certain transactions with entities owned by, affiliated with, trustsor for the respective benefit of, Paul Marciano, who is an executive and member of the Board of the Company, and Maurice Marciano, who is also a member of the Board, and certain of their children (the “Marciano Trusts”Entities”).
Leases
The Company leases warehouse and administrative facilities, including the Company’s corporate headquarters in Los Angeles, California, from partnerships affiliated with the Marciano TrustsEntities and certain of their affiliates. There were 4 of these leases in effect as of AugustMay 1, 20202021 with expiration or option exercise dates ranging from calendar years 20202021 to 2021. The2030.
During the first quarter of fiscal 2022, the Company is currently in discussionsentered into a nine-year lease extension with the related party landlordslandlord for extensions of the leases for the corporate headquarter location in Los Angeles and theits existing office location in Paris, France, which includes a Company option for early termination at the end of the third and sixth years. The lease has standard terms with a quarterly base charge plus a variable charge aggregating approximately €0.9 million per year (with subsequent annual rent adjustments based on a specified price index). All other material terms in the meantime, those leases are continuing on a month-to-month basis underpreviously existing Paris lease remain the existing lease terms.

same.
Aggregate lease costs recorded under these 4 related party leases were approximately $2.6$2.2 million and $1.3 million for each of the sixthree months ended AugustMay 1, 2021 and May 2, 2020, and August 3, 2019.respectively. The Company believes that the terms of the related party leases have not been significantly affected by the fact that the Company and the lessors are related.
Aircraft Arrangements
The Company periodically charters aircraft owned by entities affiliated with the Marciano Trusts (the “Aircraft Entities”),Entities through informal arrangements with the AircraftMarciano Entities and independent third-party management companies contracted by the Aircraftsuch Marciano Entities to manage their aircraft. The total fees paid under these arrangements for the sixthree months ended AugustMay 1, 2021 and May 2, 2020 were approximately $1.2 million. There were 0 fees paid$0.9 million and $0.2 million, respectively.
Minority Investment
The Company owns a 30% interest in a privately held men’s footwear company (the “Footwear Company”) in which Marciano Entities also own a 45% interest. In December 2020, the Company provided the Footwear Company with a revolving credit facility for $2.0 million, which provides for an annual interest rate of 2.75% and matures in November 2023. As of both May 1, 2021 and January 30, 2021, the Company had a note receivable of $0.2 million included in other assets in its consolidated balance sheets related to outstanding borrowings by the Footwear Company under these arrangements for the six months ended August 3, 2019.this revolving credit facility.
These related party disclosures should be read in conjunction with the disclosure concerning related party transactions in the Company’s Annual Report on Form 10-K for the year ended February 1, 2020.
(13)    Commitments and Contingencies
(13)Commitments and Contingencies
Investment Commitments
As of AugustMay 1, 2020,2021, the Company had an unfunded commitment to invest €3.6€2.3 million ($4.32.8 million) in a private equity fund. Refer to Note 15 for further information.
Legal and Other Proceedings
The Company is involved in legal proceedings, arising both in the ordinary course of business and otherwise, including the proceedings described below as well as various other claims and other matters incidental to the Company’s business. Unless otherwise stated, the resolution of any particular proceeding is not currently expected to have a material adverse impact on the Company’s financial position, results of operations or cash flows. Even if such an impact could be material, wethe Company may not be able to estimate the reasonably possible loss or range of loss until developments in the proceedings have provided sufficient information to support an assessment.
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The Company has received customs tax assessment notices from the Italian Customs Agency (“ICA”) regarding its customs tax audit of 1 of the Company’s European subsidiaries for the period from July 2010 through December 2012. Such assessments totaled €9.8 million ($11.611.8 million), including potential penalties and interest. The Company strongly disagreed with the ICA’s positions and therefore filed appeals with the Milan First Degree Tax Court (“MFDTC”). Those appeals were split into a number of different cases that were then heard by different sections of the MFDTC. The MFDTC ruled in favor of the Company on all of these appeals. The ICA subsequently appealed €9.7 million ($11.411.7 million) of these favorable MFDTC judgments with the Appeals Court. To date, €8.5 million ($10.010.2 million) have been decided in favor of the Company and €1.2 million ($1.4 million) have been decided in favor of the ICA. The Company believes that the unfavorable Appeals Court ruling is incorrect and inconsistent with the prior rulings on similar matters by both the MFDTC and other judges within the Appeals Court, and plans to appealhas appealed the decision to the Supreme Court. The ICA has appealed most of the favorable Appeals Court rulings to the Supreme Court. To date, of the cases that have been appealed to the Supreme Court, €0.4 million ($0.5 million) have been decided in favor of the Company based on the merits of the case and €1.1 million ($1.3 million) have been remanded back to the lower court for further consideration. There can be no assurances the Company will be successful in the remaining appeals. It also continues to be possible that the Company will receive similar or even larger assessments for periods subsequent to December 2012 or other claims or charges related to the matter in the future.Although the Company believes that it has a strong position and will continue to vigorously defend this matter, it is unable to predict with certainty whether or not these efforts will ultimately be successful or whether the outcome will have a material impact on the Company’s financial position, results of operations or cash flows.
On January 19, 2021, a former model for the Company filed an action against the Company's Chief Creative Officer and the Company in the California Superior Court in Los Angeles (Jane Doe v. Paul Marciano, et al.). The complaint asserts several claims based on allegations that the former model was treated improperly by Mr. Marciano and retaliated against by the Company. The complaint seeks an unspecified amount of general damages, medical expenses, lost earnings, punitive damages and attorneys’ fees. The case is still at an early stage. Mr. Marciano and the Company dispute these claims fully and intend to contest them vigorously. In March and April 2021, the Company received separate communications from two other individuals containing similar allegations against Mr. Marciano and the Company. Mr. Marciano and the Company also dispute these allegations fully. Each individual who contacted the Company in March and April is represented by the same attorney who represents the plaintiff in the January lawsuit, though no complaint has been filed with respect to either of these allegations.
Redeemable Noncontrolling Interests
The Company is party to a put arrangement with respect to the common securities that represent the remaining noncontrolling interest for its majority-owned subsidiary, Guess Brasil Comércio e Distribuição S.A. (“Guess Brazil”), which was established through a majority-owned joint venture during fiscal 2014.. The put arrangement

for Guess Brazil, representing 40% of the total outstanding equity interest of that subsidiary, may be exercised at the discretion of the noncontrolling interest holder by providing written notice to the Company every third anniversary beginning in March 2019, subject to certain time restrictions. The redemption value of the Guess Brazil put arrangement is based on a multiple of Guess Brazil’s earnings before interest, taxes, depreciation and amortization subject to certain adjustments and is classified as a redeemable noncontrolling interest outside of permanent equity in the Company’s condensed consolidated balance sheet. The carrying value of the redeemable noncontrolling interest related to Guess Brazil was $1.0 million and $1.2$0.9 million as of AugustMay 1, 20202021 and February 1, 2020, respectively.January 30, 2021.
The Company is also party to a put arrangement with respect to the common securities that represent the remaining noncontrolling interest for its majority-owned subsidiary, Guess? CIS, LLC (“Guess CIS”), which was established through a majority-owned joint venture during fiscal 2016. The put arrangement for Guess CIS, representing 30% of the total outstanding equity interest of that subsidiary, may be exercised at the discretion of the noncontrolling interest holder by providing written notice to the Company during the period beginning after the fifth anniversary of the agreement through December 31, 2025, or sooner in certain limited circumstances. The redemption value of the Guess CIS put arrangement is based on a multiple of Guess CIS’s
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earnings before interest, taxes, depreciation and amortization subject to certain adjustments and is classified as a redeemable noncontrolling interest outside of permanent equity in the Company’s condensed consolidated balance sheet. The carrying value of the redeemable noncontrolling interest related to Guess CIS was $3.0 million and $3.5 million as of AugustMay 1, 20202021 and February 1, 2020, respectively.January 30, 2021.
A reconciliation of the total carrying amount of redeemable noncontrolling interests for the six months ended August 1, 2020 and August 3, 2019 is as follows (in thousands):
Three Months Ended
May 1, 2021May 2, 2020
Beginning balance$3,920 $4,731 
Foreign currency translation adjustment29 (797)
Ending balance$3,949 $3,934 
 Six Months Ended
 Aug 1, 2020 Aug 3, 2019
Beginning balance$4,731
 $4,853
Foreign currency translation adjustment(710) (69)
Ending balance$4,021
 $4,784

(14)Defined Benefit Plans
(14)Defined Benefit Plans
Supplemental Executive Retirement Plan
On August 23, 2005, the Board of Directors of the Company adopted aThe Company’s Supplemental Executive Retirement Plan (“SERP”) which became effective January 1, 2006. The SERP provides select employees who satisfy certain eligibility requirements with certain benefits upon retirement, termination of employment, death, disability or a change in control of the Company, in certain prescribed circumstances.
As a non-qualified pension plan, no dedicated funding of the SERP is required; however, the Company has made periodic payments into insurance policies held in a rabbi trust to fund the expected obligations arising under the non-qualified SERP. The amount of any future payments into the insurance policies, if any, may vary depending on investment performance of the trust. The cash surrender values of the insurance policies were $68.8$71.6 million and $67.7$72.1 million as of AugustMay 1, 20202021 and February 1, 2020,January 30, 2021, respectively, and were included in other assets in the Company’s condensed consolidated balance sheets. As a result of changes in the value of the insurance policy investments, the Company recorded minimal unrealized gains of $5.1 million(losses) during the three months ended May 1, 2021 and $2.0$(3.1) million in other income and expense(expense) during the three and six months ended August 1, 2020, respectively, and unrealized gains (losses) of $(0.2) million and $3.0 million in other income and expense during the three and six months ended August 3, 2019, respectively.May 2, 2020. The projected benefit obligation was $51.7$52.1 million and $51.9$52.3 million as of AugustMay 1, 20202021 and February 1, 2020,January 30, 2021, respectively, and was included in accrued expenses and other long-term liabilities in the Company’s condensed consolidated balance sheets depending on the expected timing of payments. SERP benefit payments of $0.3$0.5 million and $0.8$0.6 million were made during the three and six months ended AugustMay 1, 2021 and May 2, 2020, respectively. SERP benefit payments of $0.4 million and $0.8 million were made during the three and six months ended August 3, 2019, respectively.

Foreign Pension Plans
In certain foreign jurisdictions, primarily in Switzerland, the Company is required to guarantee the returns on Company-sponsored defined contribution plans in accordance with local regulations. These plans are typically government-mandated defined contribution plans that provide employees with a minimum investment return, and as such, are treated under pension accounting in accordance with authoritative guidance. Under the Swiss plan, both the Company and certain of its employees with annual earnings in excess of government determined amounts are required to make contributions into a fund managed by an independent investment fiduciary. The Company’s contributions must be made in an amount at least equal to the employee’s contribution. Minimum employee contributions are based on the respective employee’s age, salary and gender.
As of AugustMay 1, 20202021 and February 1, 2020,January 30, 2021, the foreign pension plans had a total projected benefit obligation of $36.2$40.6 million and $34.8$41.5 million, respectively, and plan assets held in independent investment fiduciaries of $29.8$34.3 million and $28.9$35.0 million, respectively. The net liability of $6.4$6.3 million and $5.9$6.4 million was included in other long-term liabilities in the Company’s condensed consolidated balance sheets as of AugustMay 1, 20202021 and February 1, 2020,January 30, 2021, respectively.
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The components of net periodic defined benefit pension cost for the three and six months ended August 1, 2020 and August 3, 2019 related to the Company’s defined benefit plans are as follows (in thousands):
 Three Months Ended May 1, 2021
 SERPForeign Pension PlansTotal
Service cost$0 $790 $790 
Interest cost289 19 308 
Expected return on plan assets0 (52)(52)
Net amortization of unrecognized prior service credit0 (17)(17)
Net amortization of actuarial losses20 85 105 
Net periodic defined benefit pension cost$309 $825 $1,134 
 Three Months Ended Aug 1, 2020
 SERP Foreign Pension Plans Total
Service cost$0
 $766
 $766
Interest cost320
 7
 327
Expected return on plan assets0
 (45) (45)
Net amortization of unrecognized prior service credit0
 (16) (16)
Net amortization of actuarial losses10
 87
 97
Net periodic defined benefit pension cost$330
 $799
 $1,129
 Six Months Ended Aug 1, 2020
 SERP Foreign Pension Plans Total
Service cost$0
 $1,530
 $1,530
Interest cost639
 15
 654
Expected return on plan assets0
 (90) (90)
Net amortization of unrecognized prior service credit0
 (32) (32)
Net amortization of actuarial losses20
 173
 193
Net periodic defined benefit pension cost$659
 $1,596
 $2,255
 Three Months Ended Aug 3, 2019
 SERP Foreign Pension Plans Total
Service cost$0
 $808
 $808
Interest cost481
 67
 548
Expected return on plan assets0
 (78) (78)
Net amortization of unrecognized prior service credit0
 (9) (9)
Net amortization of actuarial losses15
 96
 111
Net periodic defined benefit pension cost$496
 $884
 $1,380


 Six Months Ended Aug 3, 2019
 SERP Foreign Pension Plans Total
Service cost$0
 $1,615
 $1,615
Interest cost962
 135
 1,097
Expected return on plan assets0
 (155) (155)
Net amortization of unrecognized prior service credit0
 (19) (19)
Net amortization of actuarial losses31
 191
 222
Net periodic defined benefit pension cost$993
 $1,767
 $2,760

(15)Fair Value Measurements
 Three Months Ended May 2, 2020
 SERPForeign Pension PlansTotal
Service cost$0 $764 $764 
Interest cost319 8 327 
Expected return on plan assets0 (45)(45)
Net amortization of unrecognized prior service credit0 (16)(16)
Net amortization of actuarial losses10 86 96 
Net periodic defined benefit pension cost$329 $797 $1,126 
(15)Fair Value Measurements
Authoritative guidance defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The guidance establishes a fair value hierarchy, which prioritizes the inputs used in measuring fair value into three broad levels as follows:
Level 1—Inputs are unadjusted quoted prices in active markets for identical assets or liabilities that can be accessed at the measurement date.
Level 2—Inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (i.e. interest rates, yield curves, etc.) and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market corroborated inputs).
Level 3—Unobservable inputs that reflect assumptions about what market participants would use in pricing the asset or liability. These inputs would beare based on the best information available, including the Company’s own data.
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The following table presents the fair value hierarchy for those assets and liabilities measured at fair value on a recurring basis as of August 1, 2020 and February 1, 2020 (in thousands):
  Fair Value Measurements Fair Value Measurements
  at Aug 1, 2020 at Feb 1, 2020
Recurring Fair Value Measures Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total
Assets:  
  
  
  
  
  
  
  
Foreign exchange currency contracts $0
 $116
 $0
 $116
 $0
 $4,854
 $0
 $4,854
Total $0
 $116
 $0
 $116
 $0
 $4,854
 $0
 $4,854
Liabilities:        
        
Foreign exchange currency contracts $0
 $5,938
 $0
 $5,938
 $0
 $0
 $0
 $0
Interest rate swap 0
 1,317
 0
 1,317
 0
 348
 0
 348
Deferred compensation obligations 0
 13,538
 0
 13,538
 0
 14,091
 0
 14,091
Total $0
 $20,793
 $0
 $20,793
 $0
 $14,439
 $0
 $14,439
Fair Value MeasurementsFair Value Measurements
 at May 1, 2021at Jan 30, 2021
Recurring Fair Value MeasuresLevel 1Level 2Level 3TotalLevel 1Level 2Level 3Total
Assets:        
Foreign exchange currency contracts$0 $353 $0 $353 $0 $0 $0 $0 
Total$0 $353 $0 $353 $0 $0 $0 $0 
Liabilities:  
Foreign exchange currency contracts$0 $2,580 $0 $2,580 $0 $4,481 $0 $4,481 
Interest rate swap0 665 0 665 0 999 0 999 
Deferred compensation obligations0 16,845 0 16,845 0 15,612 0 15,612 
Total$0 20,090 $0 $20,090 $0 $21,092 $0 $21,092 
Foreign exchange currency contracts may be entered into by the Company to hedge the future payment of inventory and intercompany transactions by non-U.S. subsidiaries. Periodically, the Company may also use foreign exchange currency contracts to hedge the translation and economic exposures related to its net investments in certain of its international subsidiaries. The fair values of the Company’s foreign exchange currency contracts are based on quoted foreign exchange forward rates at the reporting date. The fair values of the Company’s interest rate swaps are based upon inputs corroborated by observable market data. Deferred compensation obligations to employees are adjusted based on changes in the fair value of the underlying employee-directed investments. Fair value of these obligations is based upon inputs corroborated by observable market data.
The Company included €1.2€2.5 million ($1.43.0 million) and €1.2€2.4 million ($1.33.0 million), respectively, in other assets in the Company’s condensed consolidated balance sheetsheets related to its investment in a private equity fund for the periods ended AugustMay 1, 20202021 and February 1, 2020. As permitted in accordance with authoritative guidance, theJanuary 30, 2021, respectively. The Company uses net asset value per share as a practical expedient to measure the fair value of this

investment and has not included this investment in the fair value hierarchy as disclosed above. During the six months ended August 1, 2020, the Company recorded minimal unrealized losses in other income (expense) as a result of changes in the value of the private equity investment. This compares to unrealized losses of €0.1 million ($0.1 million) included in other income (expense) during the six months ended August 3, 2019. As of AugustMay 1, 2020,2021, the Company had an unfunded commitment to invest an additional €3.6€2.3 million ($4.32.8 million) in the private equity fund.
The fair values of the Company’s debt instruments (see Note 9) 9) are based on the amount of future cash flows associated with each instrument discounted using the Company’s incremental borrowing rate. As ofAugust May 1, 20202021 and February 1, 2020,January 30, 2021, the carrying value was not materially different from fair value, as the interest rates on the Company’s debt approximated rates currently available to the Company. The fair value of the Company’s convertible senior notes (see Note 10) is determined based on inputs that are observable in the market and have been classified as Level 2 in the fair value hierarchy.
The carrying amount of the Company’s remaining financial instruments, which principally include cash and cash equivalents, trade receivables, accounts payable and accrued expenses, approximates fair value due to the relatively short maturity of such instruments.
Long-Lived Assets
Long-lived assets, such as property and equipment and operating lease ROU assets, are reviewed for impairment quarterly or whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The majority of the Company’s long-lived assets relate to its retail operations which consist primarily of regular retail and flagship locations. The Company considers each individual regular retail location as an asset group for impairment testing, which is the lowest level at which individual cash flows can be identified. The asset group includes leasehold improvements, furniture, fixtures and equipment, computer hardware and software, operating lease ROU assets including lease acquisition costs, and certain long-term security deposits, and excludes operating lease liabilities. The Company reviews regular retail locations in penetrated markets for impairment risk once the locations have been opened for at least one year in their current condition, or sooner as changes in circumstances require. The Company believes that waiting at least one year allows a location to reach a maturity level where a more comprehensive analysis of financial performance can be performed. The Company evaluates impairment risk for regular retail locations in new markets, where the Company is in the early stages of establishing its presence, once brand awareness has been established. The Company also evaluates impairment risk for retail locations that are expected to be closed in the foreseeable future. The Company has flagship locations whichthat are used as a regional marketing tool to build brand awareness and promote the Company’s current product. Provided the flagship locations continue to meet the appropriate criteria, impairment for these locations is tested at a reporting unit level similar to goodwill since they do not have separately identifiable cash flows.
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An asset is considered to be impaired if the Company determines that the carrying value may not be recoverable based upon its assessment of the asset’s ability to continue to generate earnings from operations and positive cash flow in future periods or if significant changes in the Company’s strategic business objectives and utilization of the assets occurred. If the carrying amount of an asset exceeds its estimated undiscounted future cash flows adjusted for lease payments, an impairment charge is recognized in the amount by which the carrying amount of the asset exceeds the estimated fair value. The Company uses estimates of market participant rents to calculate fair value of ROU assets and discounted future cash flows of the asset group to quantify fair value for other long-lived assets. These nonrecurring fair value measurements are considered Level 3 inputs as defined above. The impairment loss calculations require management to apply judgment in estimating future cash flows and the discount rates that reflect the risk inherent in future cash flows. Future expected cash flows for assets in regular retail locations are based on management’s estimates of future cash flows over the remaining lease period or expected life, if shorter. For expected location closures, the Company will evaluate whether it is necessary to shorten the useful life for any of the assets within the respective asset group. The Company will use this revised useful life when estimating the asset group’s future cash flows. The Company considers historical trends, expected future business trends and other factors when estimating the future cash flow for each regular retail location. The

Company also considers factors such as:as the following: the local environment for each regular retail location, including mall traffic and competition; the Company’s ability to successfully implement strategic initiatives; and the ability to control variable costs such as cost of sales and payroll and, in some cases, renegotiate lease costs. As discussed further in Note 1, the COVID-19 pandemic has materially impacted the Company’s financial results during the three and six months ended AugustMay 1, 2021 and May 2, 2020 and could continue to impact the Company’s operations in ways we arethe Company is not able to predict today due to the developingevolving situation. The Company has made reasonable assumptions and judgments to determine the fair value of the assets tested based on the facts and circumstances that were available as of the reporting date. If actual results are not consistent with the assumptions and judgments used in estimating future cash flows and asset fair values, there may be additional exposure to future impairment losses that could be material to the Company’s results of operations.
The Company recorded asset impairment charges of $12.0$0.4 million and $64.9$53.0 million during the three and six months ended AugustMay 1, 2021 and May 2, 2020, respectively. The Company recognized $8.2 millionminimal ROU asset impairment in the three months ended May 1, 2021 and $36.5$28.2 million in impairment of certain operating lease ROU assets primarily in North America and, to a lesser extent, Europe during the three and six months ended August 1, 2020, respectively.May 2, 2020. The Company also recognized $3.7$0.4 million and $28.5$24.8 million in impairment of property and equipment related to certain retail locations primarily in North America, Europe and Asia driven by lower revenue and future cash flow projections from the ongoing effects of the COVID-19 pandemic during the three and six months ended AugustMay 1, 2020, respectively. This compares to $1.5 million2021 and $3.3 million in impairment of property and equipment related to certain retail locations primarily in Europe and, to a lesser extent, North America resulting from under-performance and expected store closures during the three and six months ended August 3, 2019,May 2, 2020, respectively. Refer to Note 2 for further information on impairment charges recognized on operating lease ROU assets.
Goodwill
Goodwill is tested annually for impairment or more frequently if events and circumstances indicate that the asset might be impaired. An impairment loss is recognized to the extent that the carrying amount exceeds the asset’s fair value. This determination is made at the reporting unit level which may be either an operating segment or one level below an operating segment if discrete financial information is available. Two or more reporting units within an operating segment may be aggregated for impairment testing if they have similar economic characteristics. The Company has identified its Americas Retail segment, its Americas Wholesale segment and its European wholesale and European retail components of its Europe segment as reporting units for goodwill impairment testing. Goodwill associated with its China retail component of its Asia segment was fully impaired during fiscal 2020. If it is more likely than not that the fair value of a reporting unit is less than its carrying amount, the amount of any impairment loss to be recognized for that reporting unit is determined through a quantitative test using two steps. First, the Company determines the fair value of the reporting unit using a discounted cash flow analysis, which requires unobservable inputs (Level 3) within the fair value hierarchy as defined above. These inputs include selection of an appropriate discount rate and the amount and timing of expected future cash flows. Second, if the carrying amount of a reporting unit exceeds its fair value, an impairment loss is recognized based on the difference between a reporting unit’s fair value and its carrying value.
The COVID-19 pandemic has materially impacted the Company’s financial results duringbusinesses beginning in the three and six months ended August 1, 2020 as discussed further in Note 1.first quarter of fiscal 2021. As a result, of these conditions, the Company concluded that a triggering event had occurred resulting in the need to perform quantitative interim impairment testing overon the Company’s goodwill and flagship assets during the first quarteras of fiscal 2021.May 2, 2020. The testing concluded that the fair values of the respective reporting units exceeded their carrying amounts.amounts as of May 2, 2020. Accordingly, the Company did not record any asset impairment charges on its goodwill or flagship assets. In performing its assessment, the Company believed it made reasonable accounting estimates based on the facts and circumstances that were available as of the testing date in light of the evolving situation resulting from the COVID-19 pandemic. If actual results are not consistent with the assumptions and
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judgments used, there may be additional exposure to future impairment losses that could be material to the Company’s results of operations.
The COVID-19 pandemic has continued to impact the Company’s businesses during the first quarter of fiscal 2022. During the second quarter of fiscalthree months ended May 1, 2021, the Company assessed qualitative factors and determined that it is not more likely than not that the fair values of its reporting units are less than their carrying amounts. Accordingly, the Company did not record any asset impairment charges on its goodwill or flagship assets that continued to meet the appropriate criteria during the three and six months ended August 1, 2020. In performing its assessment, the Company believes it made reasonable accounting estimates based on the facts and circumstances that were available as of the testing date in light of the developing situation resulting from the COVID-19 pandemic. If actual results are not consistent

with the assumptions and judgments used, there may be additional exposure to future impairment losses that could be material to the Company’s results of operations.(16)Derivative Financial Instruments
(16)Derivative Financial Instruments
Hedging Strategy
Foreign Exchange Currency Contracts
The Company operates in foreign countries, which exposes it to market risk associated with foreign currency exchange rate fluctuations. The Company has entered into certain forward contracts to hedge the risk of foreign currency rate fluctuations. The Company has elected to apply the hedge accounting rules in accordance with authoritative guidance for certain of these hedges.
The Company’s primary objective is to hedge the variability in forecasted cash flows due to the foreign currency risk. Various transactions that occur primarily in Europe, Canada, South Korea, China, Hong Kong and Mexico are denominated in U.S. dollars, British pounds and Russian roubles and thus are exposed to earnings risk as a result of exchange rate fluctuations when converted to their functional currencies. These types of transactions include U.S. dollar-denominated purchases of merchandise and U.S. dollar- and British pound-denominated intercompany liabilities. In addition, certain operating expenses, tax liabilities and pension-related liabilities are denominated in Swiss francs and are exposed to earnings risk as a result of exchange rate fluctuations when converted to the functional currency. Further, there are certain real estate leases that are denominated in a currency other than the functional currency of the respective entity that entered into the agreement (primarily Swiss francs, Russian roubles and Polish zloty). As a result, the Company may be exposed to volatility related to unrealized gains or losses on the translation of present value of future lease payment obligations when translated at the exchange rate as of a reporting period-end. The Company enters into derivative financial instruments, including forward exchange currency contracts, to offset some, but not all, of the exchange risk on certain of these anticipated foreign currency transactions.
Periodically, the Company may also use foreign exchange currency contracts to hedge the translation and economic exposures related to its net investments in certain of its international subsidiaries.
Interest Rate Swap Agreements
The Company is exposed to interest rate risk on its floating-rate debt. The Company has entered into interest rate swap agreements for certain of these agreements to effectively convert its floating-rate debt to a fixed-rate basis. The principal objective of these contracts is to eliminate or reduce the variability of the cash flows in interest payments associated with the Company’s floating-rate debt, thus reducing the impact of interest rate changes on future interest payment cash flows. The Company has elected to apply the hedge accounting rules in accordance with authoritative guidance for certain of these contracts. Refer to Note 9 for further information.
The impact of the credit risk of the counterparties to the derivative contracts is considered in determining the fair value of the foreign exchange currency contracts and interest rate swap agreements. As of AugustMay 1, 2020,2021, credit risk has not had a significant effect on the fair value of the Company’s foreign exchange currency contracts and interest rate swap agreements.
Hedge Accounting Policy
Foreign Exchange Currency Contracts
U.S. dollar forward contracts are used to hedge forecasted merchandise purchases over specific months. Changes in the fair value of these U.S. dollar forward contracts, designated as cash flow hedges, are recorded as a component of accumulated other comprehensive income (loss) within stockholders’ equity and are
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recognized in cost of product sales in the period that approximates the time the hedged merchandise inventory is sold. The Company may hedge forecasted intercompany royalties over specific months. Changes in the fair value of these U.S. dollar forward contracts, designated as cash flow hedges, are recorded as a component of accumulated other comprehensive income (loss) within stockholders’ equity and are recognized in other income (expense) in the period in which the royalty expense is incurred.

The Company has also used U.S. dollar forward contracts to hedge the net investments of certain of the Company’s international subsidiaries over specific months. Changes in the fair value of these U.S. dollar forward contracts, designated as net investment hedges, are recorded in foreign currency translation adjustment as a component of accumulated other comprehensive income (loss) within stockholders’ equity and are not recognized in earnings (loss) until the sale or liquidation of the hedged net investment.
The Company has also foreign exchange currency contracts that are not designated as hedging instruments for accounting purposes. Changes in fair value of foreign exchange currency contracts not designated as hedging instruments are reported in net earnings (loss) as part of other income (expense).
Interest Rate Swap Agreements
Interest rate swap agreements are used to hedge the variability of the cash flows in interest payments associated with the Company’s floating-rate debt. Changes in the fair value of interest rate swap agreements designated as cash flow hedges are recorded as a component of accumulated other comprehensive income (loss) within stockholders’ equity and are amortized to interest expense over the term of the related debt.
Periodically, the Company may also enter into interest rate swap agreements that are not designated as hedging instruments for accounting purposes. Changes in the fair value of interest rate swap agreements not designated as hedging instruments are reported in net earnings (loss) as part of other income (expense).
Summary of Derivative Instruments
The fair value of derivative instruments in the condensed consolidated balance sheets as of August 1, 2020 and February 1, 2020 is as follows (in thousands):
 Derivative Balance Sheet Location Fair Value at
Aug 1, 2020		 Fair Value at
Feb 1, 2020
ASSETS:   
  
Derivatives designated as hedging instruments:   
  
Cash flow hedges:     
   Foreign exchange currency contracts
Other current assets/
Other assets
 $116
 $3,987
Derivatives not designated as hedging instruments:     
Foreign exchange currency contracts
Other current assets/
Other assets
 0
 867
Total  $116
 $4,854
LIABILITIES:   
  
Derivatives designated as hedging instruments:   
  
Cash flow hedges:     
   Foreign exchange currency contracts
Accrued expenses/
Other long-term liabilities
 $4,184
 $0
   Interest rate swapOther long-term liabilities 1,317
 348
Total derivatives designated as hedging instruments  5,501
 348
Derivatives not designated as hedging instruments:   
  
Foreign exchange currency contractsAccrued expenses 1,754
 0
Total  $7,255
 $348

 Derivative Balance Sheet LocationFair Value at May 1, 2021Fair Value at Jan 30, 2021
ASSETS:   
Derivatives designated as hedging instruments:   
Cash flow hedges:
   Foreign exchange currency contractsOther current assets/Other assets$353 $0 
Total $353 $0 
LIABILITIES:   
Derivatives designated as hedging instruments:   
Cash flow hedges:
   Foreign exchange currency contractsAccrued expenses$1,663 $3,326 
   Interest rate swapOther long-term liabilities665 999 
Total derivatives designated as hedging instruments2,328 4,325 
Derivatives not designated as hedging instruments:   
Foreign exchange currency contractsAccrued expenses917 1,155 
Total $3,245 $5,480 
Derivatives Designated as Hedging Instruments
Foreign Exchange Currency Contracts Designated as Cash Flow Hedges
During the sixthree months ended AugustMay 1, 2020,2021, the Company purchased U.S. dollar forward contracts in Europe totaling US$81.040.0 million that were designated as cash flow hedges. As of AugustMay 1, 2020,2021, the Company had
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had forward contracts outstanding for its European operations of US$139.5126.0 million to hedge forecasted merchandise purchases, which are expected to mature over the next 1715 months.
As of AugustMay 1, 2020,2021, accumulated other comprehensive income (loss) related to foreign exchange currency contracts included a net unrealized loss of approximately $0.4$2.3 million, net of tax, of which a net gain of $0.8 million will be recognized in cost of product sales over the following 12 months, at the then current values on a pre-tax basis, which can be different than the current quarter-end values.
At February 1, 2020,January 30, 2021, the Company had forward contracts outstanding for its European operations of US$148.6100.0 million that were designated as cash flow hedges.
Interest Rate Swap Agreement Designated as Cash Flow Hedge
During fiscal 2017, the Company entered into an interest rate swap agreement with a notional amount of $21.5 million, designated as a cash flow hedge, to hedge the variability of cash flows in interest payments associated with the Company’s floating-rate Mortgage Debt. This interest rate swap agreement matures in January 2026 and converts the nature of the Company’s Mortgage Debt from LIBOR floating-rate debt to fixed-rate debt, resulting in a swap fixed rate of approximately 3.06%.
As of AugustMay 1, 2020,2021, accumulated other comprehensive income (loss) related to the interest rate swap agreement included a net unrealized loss of $1.0$0.5 million, net of tax, which will be recognized in interest expense afterover the following 12 months, at the then current values on a pre-tax basis, which can be different than the current quarter-end values.
The following table summarizes the gains (losses) before taxes recognized on the derivative instruments designated as cash flow hedges in OCI and net earnings (loss) for the three and six months ended AugustMay 1, 20202021 and August 3, 2019May 2, 2020 (in thousands): 
 
Gains (Losses) Recognized in OCI
 Location of Gains (Losses) Reclassified from Accumulated OCI into Earnings (Loss) Gains (Losses) Reclassified from Accumulated OCI into Earnings (Loss)
 Three Months Ended  Three Months Ended
 Aug 1, 2020 Aug 3, 2019  Aug 1, 2020 Aug 3, 2019
Derivatives designated as cash flow hedges: 
  
    
  
Foreign exchange currency contracts$(7,758) $3,063
 Cost of product sales $2,504
 $1,757
Interest rate swap(139) (777) Interest expense (42) 44

 
Gains (Losses) Recognized in OCI
Location of Gains (Losses) Reclassified from Accumulated OCI into EarningsGains (Losses) Reclassified from Accumulated OCI into Earnings
Three Months EndedThree Months Ended
 May 1, 2021May 2, 2020May 1, 2021May 2, 2020
Derivatives designated as cash flow hedges:     
Foreign exchange currency contracts$1,511 $4,410 Cost of product sales$(462)$1,991 
Interest rate swap270 (874)Interest expense64 (3)
 
Gains (Losses) Recognized in OCI
 Location of Gain (Loss) Reclassified from Accumulated OCI into Earnings (Loss) Gains (Losses) Reclassified from Accumulated OCI into Earnings (Loss)
 Six Months Ended  Six Months Ended
 Aug 1, 2020 Aug 3, 2019  Aug 1, 2020 Aug 3, 2019
Derivatives designated as cash flow hedges: 
  
    
  
Foreign exchange currency contracts$(3,348) $7,718
 Cost of product sales $4,495
 $1,987
Interest rate swap(1,013) (996) Interest expense (45) 90


The following table summarizes net after-tax derivative activity recorded in accumulated other comprehensive income (loss) (in thousands):
 Three Months Ended
 May 1, 2021May 2, 2020
Beginning balance gain (loss)$(4,876)$6,300 
Net gains from changes in cash flow hedges1,553 3,180 
Net (gains) losses reclassified into earnings (loss)460 (1,769)
Ending balance gain (loss)$(2,863)$7,711 
 Three Months Ended Six Months Ended
 Aug 1, 2020 Aug 3, 2019 Aug 1, 2020 Aug 3, 2019
Beginning balance gain$7,711
 $8,663
 $6,300
 $2,999
Cumulative adjustment from adoption of new accounting guidance1
0
 0
 0
 1,981
Net gains (losses) from changes in cash flow hedges(7,012) 1,978
 (3,832) 5,842
Net gains reclassified into earnings (loss)(2,198) (1,572) (3,967) (1,753)
Ending balance gain (loss)$(1,499) $9,069
 $(1,499) $9,069
______________________________________________________________________
Notes:
1
During the first quarter of fiscal 2020, the Company adopted new authoritative guidance which eliminated the requirement to separately measure and report ineffectiveness for instruments that qualify for hedge accounting and generally requires that the entire change in the fair value of such instruments ultimately be presented in the same line as the respective hedge item. As a result, there is no interest component recognized for the ineffective portion of instruments that qualify for hedge accounting, but rather all changes in the fair value of such instruments are included in other comprehensive income (loss). Upon adoption of this guidance, the Company reclassified $2.0 million in gains from retained earnings to accumulated other comprehensive loss related to the previously recorded interest component on outstanding instruments that qualified for hedge accounting.
Foreign Exchange Currency Contracts Not Designated as Hedging Instruments
As of AugustMay 1, 2020,2021, the Company had euro foreign exchange currency contracts to purchase US$62.519.0 million expected to mature over the next ten months.one month. As of January 30, 2021, the Company had euro foreign exchange currency contracts to purchase US$19.0 million.
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The following table summarizes the gains (losses) before taxes recognized on the derivative instruments not designated as hedging instruments in other income (expense) for the three and six months ended August 1, 2020 and August 3, 2019(in thousands):
 Location of Gain Recognized in Earnings (Loss)Gain Recognized in Earnings (Loss)
Three Months Ended
 May 1, 2021May 2, 2020
Derivatives not designated as hedging instruments:   
Foreign exchange currency contractsOther income (expense)$71 $1,088 
(17)Subsequent Events
 Location of Gain (Loss) Recognized in Earnings (Loss) Gain (Loss) Recognized in Earnings (Loss)
  Three Months Ended Six Months Ended
  Aug 1, 2020 Aug 3, 2019 Aug 1, 2020 Aug 3, 2019
Derivatives not designated as hedging instruments:   
  
    
Foreign exchange currency contractsOther income (expense) $(4,706) $233
 $(3,618) $808

At February 1, 2020, the Company had euro foreign exchange currency contracts to purchase US$46.1 million.

(17)Subsequent Events
Dividends
On September 2, 2020,May 27, 2021, the Company announced that it was resuming its quarterly cash dividend program and declared a regular quarterly cash dividend of $0.1125 per share on the Company’s common stock. The Company also decided not to declare any cash dividends for the first or second quarters of fiscal 2021. The cash dividend will be paid on October 2, 2020June 25, 2021 to shareholders of record as of the close of business on June 9, 2021.
September 16, 2020.

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ITEM 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations.
ITEM 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations.
General
Unless the context indicates otherwise, when we refer to “we,” “us,” “our” or the “Company” in this Form 10‑Q, we are referring to Guess?, Inc. (“GUESS?”) and its subsidiaries on a consolidated basis.
Important Factors Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q, including documents incorporated by reference herein, contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements may also be contained in the Company’sour other reports filed under the Securities Exchange Act of 1934, as amended, in its press releases and in other documents. In addition, from time-to-time,
Except for historical information contained herein, certain matters discussed in this Quarterly Report, including statements concerning the Company, through its management, may make oral forward-looking statements. These statements relate to expectations, analyses and other information based on current plans, forecasts of future results and estimates of amounts not yet determinable. These statements also relate to our goals, future prospects, potential actions and impacts related to the coronavirus (or “COVID-19”) pandemic,COVID-19 pandemic; statements concerning our future outlook; statements concerning our expectations, goals, future prospects, global cost reduction opportunities, and profitability efforts, capital allocation plans, cash needs and current business strategies and strategic initiatives. Theseinitiatives; and statements expressing optimism or pessimism about future opportunities are forward-looking statements that are identifiedmade pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements, which are frequently indicated by their use of terms and phrases such as “anticipate,“expect,” “could,” “will,” “should,” “goal,” “strategy,” “believe,” “estimate,” “continue,” “could,“outlook,” “plan,” “create,” “estimate,” “expect,” “goal,” “intend,” “may,” “outlook,” “pending,” “plan,” “predict,” “project,” “see,” “should,” “strategy,” “will,” “would,” and other similar terms, are only expectations, and phrases, including references to assumptions.
Although we believe that the expectations reflected in any of our forward-looking statements are reasonable,involve known and unknown risks and uncertainties, which may cause actual results couldin future periods to differ materially from those projected or assumed.what is currently anticipated. Factors which may cause actual results in future periods to differ materially from current expectations include, among others: our ability to maintain our brand image and reputation; domestic and international economic or political conditions, including economic and other events that could negatively impact consumer confidence and discretionary consumer spending; the continuation or worsening of impacts related to the COVID-19 pandemic, including business, financial, human capital, litigation and other impacts to the Companyus and its partners; our ability to successfully negotiate rent relief or other lease-related terms with our landlords; our ability to successfully negotiate or defer our vendor obligations; our ability to maintain adequate levels of liquidity; changes to estimates related to impairments, inventory and other reserves, including the impact of the Coronavirus Aid, Relief, and Economic Security (“CARES”)CARES Act, enacted in March 2020, which were made using the best information available at the time; changes in the competitive marketplace and in our commercial relationships; our ability to anticipate and adapt to changing consumer preferences and trends; our ability to manage our inventory commensurate with customer demand; risks related to the timing and costs of delivering merchandise to our stores and our wholesale customers; unexpected or unseasonable weather conditions; our ability to effectively operate our various retail concepts, including securing, renewing, modifying or terminating leases for store locations; our ability to successfully and/or timely implement our growth strategies and other strategic initiatives; our ability to successfully implement or update information technology systems, including enhancing our global omni-channel capabilities; our ability to expand internationally and operate in regions where we have less experience, including through joint ventures; risks related to our convertible senior notes issued in April 2019, including our ability to settle the liability in cash; our ability to successfully or timely implement plans for cost reductions; our ability to effectively and efficiently manage the volume and costs associated with our European distribution centers without incurring shipment delays; our ability to attract and retain key personnel; obligations or changes in estimates arising from new or existing litigation, income tax and other regulatory proceedings; risks related to the complexity of the Tax Reform, future clarifications and legislative amendments thereto, as well as our ability to accurately interpret and predict its impact on our cash flows and financial condition; the risk of economic uncertainty associated with the transition period of the United Kingdom’s departure from the European Union (“Brexit”) or any other similar referendums that may be held; the occurrence of unforeseen epidemics, such as the COVID-19 pandemic; other catastrophic events; changes in U.S. or foreign income tax or tariff policy, including changes to tariffs on imports into the U.S.; accounting adjustments to our unaudited financial statements identified during the completion of our annual independent audit of financial statements and financial controls or from subsequent events arising after issuance of this release; risk of future non-cash asset impairments, including goodwill, right of-useright-of-use lease assets and/or other
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store asset impairments; restructuring charges; our ability to adapt to new regulatory compliance and disclosure obligations; risks associated with our foreign operations, such as violations of laws prohibiting improper payments and the burdens of complying with a variety of foreign laws and regulations (including global data privacy regulations); risks associated with the acts or omissions of

our third party vendors, including a failure to comply with our vendor code of conduct or other policies; risks associated with cyber-attacks and other cyber security risks; risks associated with our ability to properly collect, use, manage and secure consumer and employee data; risks associated with our vendors’ ability to maintain the strength and security of information technology systems; and changes in economic, political, social and other conditions affecting our foreign operations and sourcing, including the impact of currency fluctuations, global income tax rates and economic and market conditions in the various countries in which we operate. TheseIn addition to these factors, the economic, technological, managerial, and other risks and uncertainties are discussedidentified in further detail under “Part I, Item 1A. Risk Factors” contained in the Company’sour most recent Annual Reportannual report on Form 10-K, for the fiscal year ended February 1, 2020 and under “Part II, Item 1A. Risk Factors” contained herein, as such risk factors may be updated in ourand other filings made from time-to-time with the Securities and Exchange Commission, (“SEC”) afterincluding but not limited to the daterisk factors discussed therein, could cause actual results to differ materially from current expectations. The current global economic climate, length and severity of this report.the COVID-19 pandemic, and uncertainty surrounding potential changes in U.S. policies and regulations may amplify many of these risks. We do not intend, and undertake no obligation to publicly update ouror revise any forward-looking statements, to reflectwhether as a result of new information, future events or circumstances. If we do update or correct one or more of these statements, investors and others should not conclude that we will make additional updates or corrections.otherwise.
COVID-19 Business Update
The COVID-19coronavirus (or “COVID-19”) pandemic has had and is continuing to have a material impact on the Company’s financial performance. The pandemic is ongoing and dynamic in nature and, to date,businesses. During the first quarter of fiscal 2022, the Company has experienced temporary closures in key regions globally. Duringsignificantly higher net revenue compared to the secondfirst quarter of fiscal 2021 (when government-mandated store closures were much more widespread) but lower net revenue compared to the pre-pandemic first quarter of fiscal 2020 as it remained challenged by lower demand, temporary store closures and capacity restrictions. In light of the current environment, we continue to strategically manage expenses in order to protect profitability.
In late fiscal 2021, the Company gradually reopened mostincurred a new round of its global fleetgovernment-mandated temporary store closures, mostly in Europe. The number of brick-and-mortartemporarily closed stores resultingebbed and flowed during the first quarter of fiscal 2022 based on local conditions. The overall impact resulted in stores being closed for approximately 30% and 35%less than 20% of the total days during the threefirst quarter of fiscal 2022, primarily in Europe and six months ended August 1, 2020, respectively.Canada. As of AugustMay 1, 2020, approximately 95%2021 80% of the Company’sour stores were open, with the majority of closed stores located primarily within interior malls in California. The Company will continue to reopenEurope and Canada. As of May 19, 2021 nearly 95% of our stores (and/or close again, if appropriate), as state and local guidelines and conditions permit or require, taking an informed, measured approach based on a number of factors. The Company’s e-commerce sites have remained open in all regions. In addition, retail stores that are open have and continue to experience significant reductions in traffic and revenue. Many of the Company’s wholesale and licensing partners have also substantially reduced their operations. The Company has been bringing back furloughed store associates and support staff as stores reopen.
During the first half of fiscal 2021, in addition to the negative impact from lower net revenue, the Company’s operating results reflected asset impairment charges as well as additional inventory valuation reserves and higher allowances for markdowns and doubtful accounts due to the ongoing effects of the COVID-19 pandemic. These charges were partially offset by lower SG&A expenses driven primarily by expense savings, both one-time, such as furloughs and temporary salary reductions, and permanent, such as headcount reductions and lower discretionary spending. In addition, the Company benefited from various government assistance programs related primarily to the recovery of employee payroll costs as well as certain favorable tax treatments.
During the first half of fiscal 2021, the Company implemented a number of measures to help mitigate the operating and financial impact of the pandemic, including: (i) furloughing its U.S. and Canada store associates and significant portions of its U.S. and Canada corporate and distribution center associates and permanently reducing U.S. corporate headcount; (ii) implementing temporary tiered salary reductions for management level corporate employees, including its executive officers; (iii) deferring annual merit increases; (iv) executing substantial reductions in expenses, store occupancy costs, capital expenditures and overall costs, including through reduced inventory purchases; (v) working globally with country management teams to maximize the Company’s participation in all eligible government or other initiatives available to businesses or employees impacted by the COVID-19 pandemic; (vi) drawing down on certain credit facilities and entering into certain term loans to ensure financial flexibility and maintain maximum liquidity; (vii) engaging with landlords to negotiate rent deferrals or other rent concessions; (viii) working with vendors to extend payment terms; and (ix) postponing its decision related to the payment of its quarterly cash dividend.
During the second quarter of fiscal 2021, as the situation began to stabilize, the Company repaid a significant portion of its previously drawn down credit facilities, continued to bring back furloughed employees, eliminated the temporary tiered salary reductions and invested in share repurchases to return value to its shareholders. Subsequent to the second quarter of fiscal 2021, the Company also announced that it would resume paying its

quarterly cash dividend beginning in the third quarter of fiscal 2021, but decided to not declare any cash dividends for the first and second quarters of fiscal 2021.
Although we are unable to determine with any degree of accuracy the length and severity of the COVID-19 pandemic, we expect it will continue to have a material impact on our consolidated financial position, consolidated results of operations, and consolidated cash flows into the foreseeable future.open.
Business Segments
The Company’s businesses are grouped into five reportable segments for management and internal financial reporting purposes: Americas Retail, Americas Wholesale, Europe, Asia and Licensing. The Company’s Americas Retail, Americas Wholesale, Europe and Licensing reportable segments are the same as their respective operating segments. Certain components of the Company’s Asia operating segment are separate operating segments based on region, which have been aggregated into the Asia reportable segment for disclosure purposes.
Management evaluates segment performance based primarily on revenues and earnings (loss) from operations before corporate performance-based compensation costs, asset impairment charges, net gains (losses) on lease terminations,modifications, restructuring charges and certain non-recurring credits (charges), if any. The Americas RetailCompany believes this segment includesreporting reflects how its business segments are managed and how each segment’s performance is evaluated by the Company’s retailchief operating decision maker to assess performance and e-commerce operations in the Americas. The Americas Wholesale segment includes the Company’s wholesale operations in the Americas. The Europe segment includes the Company’s retail, e-commerce and wholesale operations in Europe and the Middle East. The Asia segment includes the Company’s retail, e‑commerce and wholesale operations in Asia and the Pacific. The Licensing segment includes the worldwide licensing operations of the Company. The business segment operating results exclude corporate overhead costs, which consist of shared costs of the organization, asset impairment charges, net gains (losses) on lease terminations, restructuring charges and certain non-recurring credits (charges), if any. Corporate overhead costs are presented separately and generally include, among other things, the following unallocated corporate costs: accounting and finance, executive compensation, corporate performance-based compensation, facilities, global advertising and marketing, human resources, information technology and legal.make resource allocation decisions. Information regarding these segments is summarized in “Part I, Item 1. Financial Statements – Note 8 – Segment Information.”
Products
We derive our net revenue from the sale of GUESS?, G by GUESS (GbG), GUESS Kids and MARCIANO apparel and our licensees’ products through our worldwide network of directly-operated and
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licensed retail stores, wholesale customers and distributors, as well as our online sites. We also derive royalty revenue from worldwide licensing activities.
Foreign Currency Volatility
Since the majority of our international operations are conducted in currencies other than the U.S. dollar (primarily the British pound, Canadian dollar, Chinese yuan, euro, Japanese yen, Korean won, Mexican peso, Polish zloty, Russian rouble and Turkish lira), currency fluctuations can have a significant impact on the translation of our international revenues and earnings (loss) into U.S. dollar amounts.
Some of our transactions that occur primarily in Europe, Canada, South Korea, China, Hong Kong and Mexico are denominated in U.S. dollars, Swiss francs, British pounds and Russian roubles, exposing them to exchange rate fluctuations when these transactions (such as inventory purchases or periodic lease payments) are converted to their functional currencies. As a result, fluctuations in exchange rates can impact the operating margins of our foreign operations and reported earnings (loss), and are largely dependent on the transaction timing and magnitude during the period that the currency fluctuates. When these foreign exchange rates weaken versus the U.S. dollar at the time the respective U.S. dollar denominated payment is made relative to the payments made in the comparable period, our product margins could be unfavorably impacted.
In addition, there are certain real estate leases whichthat are denominated in a currency other than the functional currency of the respective entity that entered into the agreement (primarily Swiss francs, Russian roubles and Polish zloty). As a result, the Company may be exposed to volatility related to unrealized gains or losses on the translation of present value of future lease payment obligations when translated at the exchange rate as of a reporting period-end. When these foreign exchange rates weaken versus the U.S. dollar at the time the respective U.S. dollar denominated payment is made relative to the payments made in the comparable period, our product margins could be unfavorably impacted.
During the first sixthree months of fiscal 2021,2022, the average U.S. dollar rate was strongerweaker against the Euro, Canadian dollar, Chinese yuan, euro,Mexican peso, Japanese Yen and Korean won, Mexican peso,and stronger against the Russian roubleRuble and Turkish lira and weaker against the Japanese yen compared to the average rate in the same prior-year period. This had an overall unfavorablefavorable impact

on the translation of our international revenues and a favorablean unfavorable impact on lossearnings from operations for the sixthree months ended AugustMay 1, 20202021 compared to the same prior-year period.
If the U.S. dollar strengthens in fiscal 2022 relative to the respective fiscal 20202021 foreign exchange rates, foreign exchange could negatively impact our revenues and operating results, as well as our international cash and other balance sheet items, during the remainder of fiscal 2021,2022, particularly in Canada, Europe (primarily with respect to the euro, Turkish lira and Russian rouble) and Mexico. Alternatively, if the U.S. dollar weakens relative to the respective fiscal 20202021 foreign exchange rates, our revenues and operating results, as well as our other cash balance sheet items, could be positively impacted by foreign currency fluctuations during the remainder of fiscal 2021,2022, particularly in these regions.
The Company enters into derivative financial instruments to offset some, but not all, of the exchange risk on foreign currency transactions. For additional discussion regarding our exposure to foreign currency risk, forward contracts designated as hedging instruments and forward contracts not designated as hedging instruments, refer to “Item 3. Quantitative and Qualitative Disclosures About Market Risk.”
Strategy
In December 2019 and updated in March 2021, Carlos Alberini, the Company’s Chief Executive Officer, shared his strategic vision and implementation plan for execution which included the identification of several key priorities to drive revenue and operating profit growth over the next fiveseveral years. These priorities are: (i) brand relevancy; (ii) product excellence; (iii) customer centricity; (iii)(iv) global footprint; (iv) product excellence; and (v) functional capabilities; each as further described below:
Brand Relevancy. We plan to optimize our brand architecture to be relevant with our three target consumer groups: Heritage, Millennials, and Generation Z. We also plan to elevate our brand and improve the quality of our products. We will continue to use unique go-to-market strategies and execute celebrity and influencer partnerships and collaborations as we believe that they are critical to engage more effectively with a younger and broader audience.
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Product Excellence. We believe product is a key factor of success in our business. We strive to design and make great products and will extend our product offering to provide our customers with products for the different occasions of their lifestyles. We will seek to better address local product needs.
Customer Centricity. We intend to place the customer at the center of everything we do. We plan to implement processes and platforms to provide our customers with a seamless omni-channel experience.
Global Footprint. We will continue to expand the reach of our brands by optimizing the productivity and profitability of our current footprint and expanding our distribution channels.
Product Excellence. We will extend our product offering to provide our customers with products for the different occasions of their lifestyles. We will seek to better address local product needs.
Functional Capabilities. We expect to drive material operational improvements in the next fivefour years to leverage and support our global business more effectively, primarily in the areas of logistics, sourcing, product development and production, inventory management, and overall infrastructure.
While we have been challenged with the extremely difficult situation presented by the COVID-19 pandemic, we believe that the opportunities identified above remain in place for the long-term and provide a solid roadmap to grow our business, increase profitability over time and create significant value for our shareholders. In the short-term, we remain focused on enhancing our omni-channel platform centered around our consumer and accelerating efforts to gain efficiencies across our global operations and rationalize our store portfolios, measures which we believe will also maximize our liquidity to address the current crisis.
Capital Allocation
We plan to continue to prioritize capital allocation toward investments that support growth and infrastructure, while remaining highly disciplined in the way we allocate capital across projects, including new store development, store remodels, technology and logistics investments and others. When we prioritize investments, we will focus on their strategic significance and their return on invested capital expectations. We also plan to manage product buys and inventory ownership rigorously and optimize overall working capital management consistently.
Comparable Store Sales
Except as described below in connection with the COVID-19 pandemic, theThe Company reports National Retail Federation calendar comparable store sales on a quarterly basis for our retail businesses which include the combined

results from our brick-and-mortar retail stores and our e-commerce sites. We also separately report the impact of e-commerce sales on our comparable store sales metric. As a result of our omni-channel strategy, our e-commerce business has become strongly intertwined with our brick-and-mortar retail store business. Therefore, we believe that the inclusion of e-commerce sales in our comparable store sales metric provides a more meaningful representation of our retail results.
Sales from our brick-and-mortar retail stores include purchases that are initiated, paid for and fulfilled at our retail stores and directly-operated concessions as well as merchandise that is reserved online but paid for and picked up at our retail stores. Sales from our e-commerce sites include purchases that are initiated and paid for online and shipped from either our distribution centers or our retail stores as well as purchases that are initiated in a retail store, but due to inventory availability at the retail store, are ordered and paid for online and shipped from our distribution centers or picked up from a different retail store.
Store sales are considered comparable after the store has been open for 13 full fiscal months. If a store remodel results in a square footage change of more than 15%, or involves a relocation or a change in store concept, the store sales are removed from the comparable store base until the store has been opened at its new size, in its new location or under its new concept for 13 full fiscal months. Stores that are permanently closed or temporarily closed (including as a result of pandemic-related closures) for more than seven days in any fiscal month are excluded from the calculation in the fiscal month that they are closed. E-commerce sales are considered comparable after the online site has been operational in a country for 13 full fiscal months and exclude any related revenue from shipping fees. These criteria are consistent with the metric used by management for internal reporting and analysis to measure performance of the store or online sites. Definitions and calculations of comparable store sales used by the Company may differ from similarly titled measures reported by other companies.
As a result of the significant and varying temporary store closures resulting fromand various other restrictions during the COVID-19 pandemic, both in fiscal 2021 and 2022, the Company has not disclosed any comparable store sales measures when discussing the results of operations for the three and six months ended August 1, 2020. We do not believebelieves that comparable store sales measures will beduring these periods are not as meaningful to the evaluation of the Company’s results until the impact from the temporary store closures resulting from the COVID-19 pandemic has normalized.as they would be during more normalized periods.     
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Other
The Company operates on a 52/53-week fiscal year calendar, which ends on the Saturday nearest to January 31 of each year. The sixthree months ended AugustMay 1, 20202021 had the same number of days as the sixthree months ended August 3, 2019.May 2, 2020.
Executive Summary
Overview 
Net lossearnings attributable to Guess?, Inc. was $20.4increased 107.6% to $12.0 million, or diluted lossearnings of $0.31$0.18 per common share, for the quarter ended AugustMay 1, 2020,2021, compared to net earningsloss attributable to Guess?, Inc. of $25.3$157.7 million, or diluted earningsloss of $0.35$2.40 per common share, for the quarter ended August 3, 2019.May 2, 2020.
During the quarter ended AugustMay 1, 2020,2021, the Company recognized $12.0$0.4 million of asset impairment charges; $0.9$2.1 million of net gains on lease terminations; a net credit of $0.2modifications; $1.1 million of certain professional services and legal fees and related costs; $2.5net credits; $2.8 million of amortization of debt discount related to the Company’s convertible senior notes; and $0.1 million in additional tax expense from certain discrete tax adjustments (or a combined $1.9 million, or $0.03 per share, negative impact after considering the related tax benefit of these adjustments of $0.4 million). Excluding the impact of these items, adjusted net earnings attributable to Guess?, Inc. were $13.9 million and adjusted diluted earnings were $0.21 per common share for the quarter ended May 1, 2021. During the quarter ended May 2, 2020, the Company recognized $53.0 million of asset impairment charges; $0.5 million of net losses on lease terminations; $0.3 million of certain professional services and legal fees and related net credits; $0.2 million of separation charges; $2.6 million of amortization of debt discount related to the Company’s convertible senior notesnotes; and $8.1a benefit of $7.9 million in additional tax expense from certain discrete tax adjustments (or a combined $19.7$38.8 million, or $0.30$0.59 per share, negative impact after considering the related tax benefit of these adjustments of $4.4$9.8 million). Excluding the impact of these items, adjusted net loss attributable to Guess?, Inc. was $0.6$118.9 million and adjusted diluted loss was $0.01$1.81 per common share for the quarter ended August 1,May 2, 2020. During the quarter ended August 3, 2019, the Company recognized $1.5 million of asset impairment charges; $0.4 million of certain professional services and legal fees and related costs and $2.4 million of amortization of debt discount related to the Company’s convertible senior notes (or a combined $2.1 million, or $0.03 per share, negative impact after considering the related tax benefit of these adjustments and adjustments to uncertain tax positions excluded from results in prior years totaling $2.3 million). Excluding the impact of

these items, adjusted net earnings attributable to Guess?, Inc. were $27.4 million and adjusted diluted earnings were $0.38 per common share for the quarter ended August 3, 2019. References to financial results excluding the impact of these items are non-GAAP measures and are addressed below under “Non-GAAP Measures.”
Highlights of the Company’s performance for the quarter ended AugustMay 1, 20202021 compared to the same prior-year period are presented below followed by a more comprehensive discussion under “Results of Operations”:
Operations
•Total net revenue decreased 41.7%increased 99.8% to $398.5$520.0 million for the quarter ended AugustMay 1, 2020,2021, from $683.2$260.3 million in the same prior-year quarter. In constant currency, net revenue decreasedincreased by 41.2%90.3%.
•Gross margin (gross profit as a percentage of total net revenue) decreased 200 basis pointsincreased 27.5% to 36.9%40.7% for the quarter ended AugustMay 1, 2020,2021, from 38.9%13.2% in the same prior-year period.
•Selling, general and administrative (“SG&A”) expenses as a percentage of total net revenue (“SG&A rate”) increased 570 basis pointsdecreased 19.1% to 37.7%35.9% for the quarter ended AugustMay 1, 2020,2021, compared to 32.0%55.0% in the same prior-year period. SG&A expenses decreased 31.1%increased 30.3% to $150.3$186.7 million for the quarter ended AugustMay 1, 2020,2021, from $218.2$143.3 million in the same prior-year period.
•During the quarter ended AugustMay 1, 2020,2021, the Company recognized asset impairment charges of $12.0$0.4 million, compared to $1.5$53.0 million in the same prior-year period.
During•Operating margin increased 67.5% to 5.1% for the quarter ended AugustMay 1, 2020,2021, compared to negative 62.4% in the Company recorded net gains on lease terminationssame prior-year period, driven primarily by overall leveraging of $0.9 million related primarilyexpenses. Lower asset impairment charges favorably impacted operating margin by 20.3% during the quarter ended May 1, 2021 compared to the early terminationsame prior-year period. Earnings from operations were $26.6 million for the quarter ended May 1, 2021, compared to losses from operations of certain lease agreements.$162.5 million in the same prior-year period.
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•
Operating margin decreased 10.3% to negative 3.6% for the quarter ended August 1, 2020, from 6.7% in the same prior-year period, driven primarily by overall deleveraging of expenses due to the negative impact from the COVID-19 pandemic on our global operations. Higher asset impairment charges unfavorably impacted operating margin by 280 basis points during the quarter ended August 1, 2020 compared to the same prior-year period. Separation charges unfavorably impacted operating margin by 60 basis points during the quarter ended August 1, 2020. Net gains on lease terminations favorably impacted operating margin by 20 basis points during the quarter ended August 1, 2020. Lower expenses related to certain professional service and legal fees and related costs favorably impacted operating margin by 10 basis points during the quarter ended August 1, 2020. Loss from operations was $14.3 million for the quarter ended August 1, 2020, compared to earnings from operations of $46.0 million in the same prior-year period.
Other income,expense, net (including interest income and expense), was minimal$8.3 million for the quarter ended AugustMay 1, 2020,2021, compared to other expense, net of $11.0$24.4 million in the same prior-year period.
•The effective income tax rate changed to negative 44.6%was an expense of 29.8% for the quarter ended AugustMay 1, 2020,2021, compared to 25.2%a benefit of 14.1% in the same prior-year period. The Company’s effective income tax rate for the quarter ended August 1,May 2, 2020 included the unfavorablefavorable impact from certain discrete income tax adjustments totaling $8.1$7.9 million.
Key Balance Sheet Accounts
•
The Company had $328.0 million in cash and cash equivalents and $0.2 million in restricted cash as of August 1, 2020, compared to $131.1 million in cash and cash equivalents and $0.5 million in restricted cash at August 3, 2019.
◦As of August 1, 2020, the Company had $51.8 million in outstanding borrowings under its term loans and $19.2 million in outstanding borrowings under its credit facilities to help ensure financial flexibility and liquidity in response to uncertainty surrounding the COVID-19 pandemic.
◦During the three and six months ended August 1, 2020, the Company repurchased 4.0 million shares of its common stock for $38.9 million (including commissions). During fiscal 2020, the Company used $170 million of proceeds from its offering of convertible senior notes to

enter into an accelerated share repurchase program (“ASR Contract”), pursuant to which it received a total of approximately 10.6 million shares. The Company also repurchased shareshad $395.1 million in cash and cash equivalents and $0.2 million in restricted cash as of May 1, 2021, compared to $419.4 million in cash and cash equivalents and $0.2 million in restricted cash at May 2, 2020.
◦As of May 1, 2021, the Company had $56.0 million in outstanding borrowings under its common stock for $118.1term loans and $5.1 million (including commissions)in outstanding borrowings under its credit facilities compared to $193.7 million in outstanding borrowings under its credit facilities and $24.7 million in outstanding borrowings under its term loans as of May 2, 2020.
◦There were no share repurchases during fiscalthe quarters ended May 1, 2021 and May 2, 2020.
•
Accounts receivable consists of trade receivables relating primarily to the Company’s wholesale business in Europe and, to a lesser extent, to its wholesale businesses in the Americas and Asia, royalty receivables relating to its licensing operations, credit card and retail concession receivables related to its retail businesses and certain other receivables. Accounts receivable decreased by $46.5 million, or 15.9%, to $246.5 million as of August 1, 2020, from $293.0 million at August 3, 2019. On a constant currency basis, accounts receivable decreased by $54.9 million, or 18.7%, when compared to August 3, 2019.
•Accounts receivable consists of trade receivables relating primarily to the Company’s wholesale business in Europe and, to a lesser extent, to its wholesale businesses in the Americas and Asia, royalty receivables relating to its licensing operations, credit card and retail concession receivables related to its retail businesses and certain other receivables. Accounts receivable increased by $66.8 million, or 27.9%, to $306.3 million as of May 1, 2021 compared to $239.5 million at May 2, 2020. On a constant currency basis, accounts receivable increased by $45.7 million, or 19.1%, when compared to May 2, 2020.
•Inventory increased by $12.4 million, or 3.1%, to $404.9 million as of May 1, 2021, from $392.5 million at May 2, 2020. On a constant currency basis, inventory decreased by $15.7 million, or 4.0%, when compared to May 2, 2020.
•
Inventory decreased by $64.8 million, or 13.4%, to $419.4 million as of August 1, 2020, from $484.2 million at August 3, 2019. On a constant currency basis, inventory decreased by $72.6 million, or 15.0%, when compared to August 3, 2019.
Global Store Count
In the secondfirst quarter of fiscal 2021,2022, together with our partners, we opened six34 new stores worldwide, consisting of fiveten stores in Europe and the Middle East and one store24 stores in Asia and the Pacific. Together with our partners, we closed 6524 stores worldwide, consisting of 35ten stores in Asia and the Pacific, 21 stores in the U.S., seven stores in Europe and the Middle East, one storefive stores in Canadathe U.S., and one storetwo stores in Central and South America.Canada.
We ended the secondfirst quarter of fiscal 20212022 with 1,6221,580 stores and 369362 concessions worldwide, comprised as follows:
 Stores ConcessionsStoresConcessions
Region Total Directly-Operated Partner Operated Total Directly-Operated Partner OperatedRegionTotalDirectly-OperatedPartner OperatedTotalDirectly-OperatedPartner Operated
United States 259
 257
 2
 1
 —
 1
United States246 244 2 1 — 1 
Canada 79
 79
 —
 —
 —
 —
Canada74 74 — — — — 
Central and South America 110
 72
 38
 27
 27
 —
Central and South America105 70 35 29 29 — 
Total Americas 448
 408
 40
 28
 27
 1
Total Americas425 388 37 30 29 1 
Europe and the Middle East 742
 515
 227
 38
 38
 —
Europe and the Middle East728 511 217 45 45 — 
Asia and the Pacific 432
 161
 271
 303
 115
 188
Asia and the Pacific427 142 285 287 92 195 
Total 1,622
 1,084
 538
 369
 180
 189
Total1,580 1,041 539 362 166 196 
Of the total 1,6221,580 stores, 1,3371,316 were GUESS? stores, 182171 were GUESS? Accessories stores, 6458 were G by GUESS (GbG) stores and 3935 were MARCIANO stores.
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Results of Operations
Three Months Ended AugustMay 1, 20202021 and August 3, 2019May 2, 2020
Consolidated Results
Net Revenue. Net revenue decreasedincreased by $284.7$259.8 million, or 41.7%99.8%, to $398.5$520.0 million for the quarter ended AugustMay 1, 2020,2021, from $683.2$260.3 million for the quarter ended August 3, 2019.May 2, 2020. In constant currency, net revenue decreasedincreased by 41.2%90.3%, driven primarily by the unfavorable impact on revenue due tolower comparable sales driven by reduced store traffic and temporary store closures and lower store trafficresulting from the COVID-19 pandemic in the same prior-year period and, to a lesser extent, lowera shift in European wholesale shipments resulting from lower demand as a result of the COVID-19 pandemic.into fiscal 2022. Currency translation fluctuations relating to our foreign operations unfavorablyfavorably impacted net revenue by $3.2$24.8 million, compared to the same prior-year period.
Gross Margin. Gross margin decreased 200 basis pointsincreased 27.5% to 36.9%40.7% for the quarter ended AugustMay 1, 2020, from 38.9%2021, compared to 13.2% in the same prior-year period, of which 41021.0% was due to lower occupancy rate and 650 basis points was due to a higher occupancy rate, partially offset by 210 basis points due to higher product margins. The higherlower occupancy rate was drivenresulted primarily by overall deleveraging offrom leveraging occupancy costs due mainly to lower revenue resulting from the impact of the COVID-19

pandemic.prior-year temporary store closures in Americas Retail and, to a lesser extent, a shift in European wholesale shipments into fiscal 2022. The higher product margins were driven primarily by higher initial markups in Europe duringas the prior year’s quarter ended August 1, 2020, compared to the same prior-year period.included significant inventory reserves.
Gross Profit. Gross profit decreasedincreased by $118.6$177.3 million, or 44.7%518.1%, to $147.0$211.6 million for the quarter ended AugustMay 1, 2020, from $265.72021, compared to $34.2 million in the same prior-year period. The decreaseincrease in gross profit, which included the unfavorablefavorable impact of currency translation, was due primarily to the unfavorablefavorable impact on gross profit from lowerhigher revenue, partially offset byas well as lower occupancy costs and, to a lesser extent, higher overall product margins.costs. Currency translation fluctuations relating to our foreign operations unfavorablyfavorably impacted gross profit by $0.4$8.1 million.
The Company includes inbound freight charges, purchasing costs and related overhead, retail store occupancy costs, including lease costs and depreciation and amortization, and a portion of the Company’s distribution costs related to its retail business in cost of product sales. The Company also includes net royalties received on the Company’s inventory purchases of licensed product as a reduction to cost of product sales. The Company’s gross margin may not be comparable to that of other entities since some entities include all of the costs related to their distribution in cost of product sales and others, like the Company, generally exclude wholesale-related distribution costs from gross margin, including them instead in SG&A expenses. Additionally, some entities include retail store occupancy costs in SG&A expenses and others, like the Company, include retail store occupancy costs in cost of product sales.
SG&A Rate. The Company’s SG&A rate increased 570 basis pointsdecreased 19.1% to 37.7%35.9% for the quarter ended AugustMay 1, 2020, compared to 32.0%2021, from 55.0% in the same prior-year period. The Company’s SG&A rate included the unfavorable impact of 60 basis points from separation charges and the favorable impact of 10 basis points from lower expenses related to certain professional service and legal fees and related costs which the Company otherwise would not have incurred as part of its business operations. Excluding these items, the SG&A rate would have increased by 520 basis points during the quarter ended August 1, 2020 compared to the same prior-year period, driven by overall deleveragingleveraging of expenses due mainly to lower revenue resulting fromhigher European wholesale revenues and, to a lesser extent, temporary store closures in Americas Retail in the impact of the COVID-19 pandemic, partially offset by expense savings.same prior-year period.
SG&A Expenses. SG&A expenses decreasedincreased by $67.9$43.4 million, or 31.1%30.3%, to $150.3$186.7 million for the quarter ended AugustMay 1, 2020,2021, from $218.2$143.3 million in the same prior-year period. The decrease,increase, which included the favorableunfavorable impact of currency translation, was driven primarily by higher variable expenses in the current year quarter as well as lower payroll costs and to a lesser extent, lower overall discretionary expenses. The lower payroll costs were driven primarily byexpenses due to significant COVID-19 impacts in the impact of furloughs and, to a lesser extent, government assistance programs related to the recovery of employee payroll costs, temporary tiered salary reductions for management level corporate employees that have since been restored and permanent headcount reductions.same prior-year period. Currency translation fluctuations relating to our foreign operations favorablyunfavorably impacted SG&A expenses by $1.2$9.0 million.
Asset Impairment Charges. During the quarter ended AugustMay 1, 2020,2021, the Company recognized $8.2 million inminimal impairment of certain operating lease right-of-use (“ROU”) assets and $3.7$0.4 million inof impairment charges of property and equipment related to certain retail locations compared to impairments of $28.2 million of certain operating lease ROU assets and $24.8 million of property and equipment during the quarter ended May 2, 2020, resulting from lower revenue and future cash flow projections from the ongoing effects of the COVID-19 pandemic. This compares to $1.5 million in impairment of property and equipment related to certain retail locations resulting from under-performance and expected store closures during the quarter ended August 3, 2019.pandemic. Currency translation fluctuations relating to our foreign operations unfavorably impactedhad minimal unfavorable impact on asset impairment charges by $0.2 million.
Net Gains on Lease Terminations. During the quarter ended August 1, 2020, the Company recorded net gains on lease terminations of $0.9 million related primarily to the early termination of certain lease agreements. There were no net gains on lease terminations during the quarter ended August 3, 2019.charges.
Operating Margin. Operating margin decreased 10.3%increased 67.5% to negative 3.6%5.1% for the quarter ended AugustMay 1, 2020, from 6.7%2021, compared to negative 62.4% in the same prior-year period, ddrivenriven primarily by overall deleveragingleveraging of expenses dueand, to the negative impact from the COVID-19 pandemic on our global operationsa
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lesser extent, lower asset impairment charges. HigherLower asset impairment charges unfavorably

favorably impacted operating margin by 280 basis points20.3% during the quarter ended AugustMay 1, 20202021 compared to the same prior-year period. SeparationExcluding the impact of lower asset impairment charges, unfavorably impacted operating margin by 60 basis points during the quarter ended August 1, 2020. Netnet gains on lease terminations favorably impacted operating margin by 20 basis points during the quarter ended August 1, 2020. Lowermodifications compared to net losses on lease modifications, and increased expenses related to certain professional serviceservices and legal fees and related costs favorably impacted operating margin by 10 basis points during the quarter ended August 1, 2020. Excluding the impact of these expenses,net credits, the Company’s operating margin would have decreased 720 basis pointsincreased 46.7% compared to the same prior-year period. The negative impact of currency on operating margin for the quarter was approximately 40 basis points.
Earnings (Loss) from Operations.  LossEarnings from operations was $14.3increased by $189.1 million, or 116.4%, to $26.6 million for the quarter ended AugustMay 1, 2020,2021, compared to earningsa loss from operations of $46.0$162.5 million in the same prior-year period. Currency translation fluctuations relating to our foreign operations favorablyunfavorably impacted lossearnings from operations by $0.5$0.7 million.
Interest Expense, Net. Interest expense, net, was $5.5$5.6 million for the quarter ended AugustMay 1, 2020,2021, compared to $4.6$4.9 million for the quarter ended August 3, 2019.May 2, 2020.
Other Income (Expense),Expense, Net. Other income,expense, net, was $5.5$2.7 million for the quarter ended AugustMay 1, 2020,2021, compared to other expense, net, of $6.4$19.6 million in the same prior-year period. The change was driven primarily by market volatility which resulted in lower net unrealized gainslosses on the translation of foreign currency balances and,compared to a lesser extent, net unrealized gains on our SERP-related assets, compared tohigher net unrealized losses in the same prior-year quarter. This was partially offset by net mark-to-market losses on the revaluation of foreign exchange currency contracts, compared to gains in the same prior-year quarter. ended May 2, 2020.
Income Tax Expense.Expense (Benefit).  Income tax expense for the quarter ended AugustMay 1, 20202021 was $6.4$5.5 million, or a negative 44.6%29.8% effective tax rate, compared to $8.8income tax benefit of $26.4 million, or a 25.2%14.1% effective tax rate, in the same prior-year period. Generally, income taxes for the interim periods are computed using the tax rate estimated to be applicable for the full fiscal year, adjusted for discrete items, which is subject to ongoing review and evaluation by management. During the quarter ended August 1, 2020, the Company recorded a discrete tax expense of $7.9 million related to improved forecasts for the current fiscal year which changes the estimate of the net operating losses that the Company can carryback to tax years with a higher federal corporate tax rate as allowed under the CARES Act. Excluding this impact, the change in the effective tax rate was due primarily to a shift in the distribution of earnings among the Company’s tax jurisdictions during the quarter ended August 1, 2020, compared to the same prior-year period.
Net Earnings (Loss) Attributable to Noncontrolling Interests. Net loss attributable to noncontrolling interests was $0.3 million, net of taxes, for the quarter ended August 1, 2020, compared to netearnings attributable to noncontrolling interests of $0.9 million, net of taxes, for the quarter ended August 3, 2019.
Net Earnings (Loss) Attributable to Guess?, Inc. Net lossattributable to Guess?, Inc. was $20.4 million for the quarter ended August 1, 2020, compared to net earnings attributable to Guess?, Inc. of $25.3 million in the same prior-year period. Diluted loss per share was $0.31 for the quarter ended August 1, 2020, compared to diluted earnings per share of $0.35 in the same prior-year period. We estimate that the unfavorable impact from the Company’s share repurchases had a negative impact of $0.03 on diluted loss per share for the quarter ended August 1, 2020. We also estimate that the positive impact of currency on diluted loss per share for the quarter ended August 1, 2020 was approximately $0.03 per share. During the quarter ended August 1, 2020, the Company recognized $12.0 million of asset impairment charges; $0.9 million of net gains on lease terminations; a net credit of $0.2 million of certain professional services and legal fees and related costs; $2.5 million of separation charges; $2.6 million of amortization of debt discount related to the Company’s convertible senior notes and $8.1 million in additional tax expense from certain discrete tax adjustments (or a combined $19.7 million, or $0.30 per share, negative impact after considering the related tax benefit of these adjustments of $4.4 million). Excluding the impact of these items, adjusted net loss attributable to Guess?, Inc. was $0.6 million and adjusted diluted loss was $0.01 per common share for the quarter ended August 1, 2020. We estimate that the unfavorable impact from the Company’s share repurchases had a minimal impact on adjusted diluted loss per share for the quarter ended

August 1, 2020. During the quarter ended August 3, 2019, the Company recognized $1.5 million of asset impairment charges; $0.4 million of certain professional services and legal fees and related costs and $2.4 million of amortization of debt discount related to the Company’s convertible senior notes (or a combined $2.1 million, or $0.03 per share, negative impact after considering the related tax benefit of these adjustments and adjustments to uncertain tax positions excluded from results in prior years totaling $2.3 million). Excluding the impact of these items, adjusted net earnings attributable to Guess?, Inc. were $27.4 million and adjusted diluted earnings were $0.38 per common share for the quarter ended August 3, 2019. References to financial results excluding the impact of these items are non-GAAP measures and are addressed below under “Non-GAAP Measures.”
Information by Business Segment
The following table presents our net revenue and earnings (loss) from operations by segment for the three months ended August 1, 2020 and August 3, 2019 (dollars in thousands):
 Three Months Ended    
 Aug 1, 2020 Aug 3, 2019 $ Change % Change
Net revenue:       
Americas Retail$110,065
 $198,966
 $(88,901) (44.7%)
Americas Wholesale20,285
 41,902
 (21,617) (51.6%)
Europe205,851
 340,509
 (134,658) (39.5%)
Asia50,191
 83,301
 (33,110) (39.7%)
Licensing12,147
 18,542
 (6,395) (34.5%)
Total net revenue$398,539
 $683,220
 $(284,681) (41.7%)
Earnings (loss) from operations:       
Americas Retail$(4,704) $5,957
 $(10,661) (179.0%)
Americas Wholesale1,688
 8,422
 (6,734) (80.0%)
Europe20,795
 51,594
 (30,799) (59.7%)
Asia(3,367) (4,800) 1,433
 29.9%
Licensing11,511
 15,547
 (4,036) (26.0%)
Total segment earnings from operations25,923
 76,720
 (50,797) (66.2%)
Corporate overhead(29,188) (29,229) 41
 (0.1%)
Asset impairment charges(11,969) (1,504) (10,465) 695.8%
Net gains on lease terminations885
 —
 885
 

Total earnings (loss) from operations$(14,349) $45,987
 $(60,336) (131.2%)
        
Operating margins:       
Americas Retail(4.3%) 3.0%    
Americas Wholesale8.3% 20.1%    
Europe10.1% 15.2%    
Asia(6.7%) (5.8%)    
Licensing94.8% 83.8%    
Total Company(3.6%) 6.7%    
Americas Retail
Net revenue from our Americas Retail segment decreased by $88.9 million, or 44.7%, to $110.1 million for the quarter ended August 1, 2020, from $199.0 million in the same prior-year period. In constant currency, net revenue decreased by 44.1%, driven primarily by temporary store closures and, to a lesser extent, lower store traffic resulting from the COVID-19 pandemic. Excluding the impact from the temporary store closures, the store base for the U.S. and Canada decreased by an average of 22 net stores during the quarter ended August 1, 2020 compared to the same prior-year period, resulting in a 3.9% net decrease in average square footage. Currency translation fluctuations relating to our non-U.S. retail stores and e-commerce sites unfavorably impacted net revenue by $1.2 million.
Operating margin decreased 730 basis points to negative 4.3% for the quarter ended August 1, 2020, from 3.0% in the same prior-year quarter, due to lower gross margins, partially offset by a lower SG&A rate. The lower

gross margins were driven primarily by overall deleveraging of occupancy costs due primarily to the negative impact from temporary store closures and lower store traffic. The lower SG&A rate was driven primarily by lower store selling expenses due to payroll savings resulting from the temporary furlough of the Company’s store associates in the U.S. and Canada, partially offset by overall deleveraging of expenses.
Loss from operations from our Americas Retail segment was $4.7 million for the quarter ended August 1, 2020, compared to earnings from operations of $6.0 million in the same prior-year period. The deterioration is primarily due to the unfavorable impact on earnings from lower revenue, partially offset by lower store selling expenses and lower occupancy costs.
Americas Wholesale
Net revenue from our Americas Wholesale segment decreased by $21.6 million, or 51.6%, to $20.3 million for the quarter ended August 1, 2020, from $41.9 million in the same prior-year period. In constant currency, net revenue decreased by 48.7%, driven primarily by our U.S. wholesale business due mainly to lower demand resulting from the COVID-19 pandemic. Currency translation fluctuations relating to our non-U.S. wholesale businesses unfavorably impacted net revenue by $1.2 million.
Operating margin decreased 11.8% to 8.3% for the quarter ended August 1, 2020, from 20.1% in the same prior-year quarter, due primarily to a higher SG&A rate driven primarily by overall deleveraging of expenses resulting from lower wholesale shipments.
Earnings from operations from our Americas Wholesale segment decreased by $6.7 million, or 80.0%, to $1.7 million for the quarter ended August 1, 2020, from $8.4 million in the same prior-year period. The decrease reflects the unfavorable impact on earnings from lower revenue.
Europe
Net revenue from our Europe segment decreased by $134.7 million, or 39.5%, to $205.9 million for the quarter ended August 1, 2020, from $340.5 million in the same prior-year period. In constant currency, net revenue decreased by 39.6%, driven primarily by lower wholesale shipments resulting from lower demand and, to a lesser extent, lower store traffic and temporary store closures resulting from the COVID-19 pandemic. As of August 1, 2020, we directly operated 515 stores in Europe compared to 510 stores at August 3, 2019, excluding concessions, which represents a 1.0% increase over the same prior-year period. Currency translation fluctuations relating to our European operations favorably impacted net revenue by $0.1 million.
Operating margin decreased 510 basis points to 10.1% for the quarter ended August 1, 2020, from 15.2% in the same prior-year quarter. The decrease was driven mainly by a higher SG&A rate due primarily to overall deleveraging of expenses resulting from lower revenue. Gross margins were relatively flat as the unfavorable impact from overall deleveraging of occupancy costs was mostly offset by the favorable impact from certain rent concessions granted related to the COVID-19 pandemic and, to a lesser extent, higher initial markups.
Earnings from operations from our Europe segment decreased by $30.8 million, or 59.7%, to $20.8 million for the quarter ended August 1, 2020, from $51.6 million in the same prior-year period, driven primarily by the unfavorable impact on earnings from lower revenue, partially offset by lower SG&A expenses and, to a lesser extent, lower occupancy costs. Currency translation fluctuations relating to our European operations favorably impacted earnings from operations by $0.8 million.
Asia
Net revenue from our Asia segment decreased by $33.1 million, or 39.7%, to $50.2 million for the quarter ended August 1, 2020, from $83.3 million in the same prior-year period. In constant currency, net revenue decreased by 38.7%, driven primarily by lower store traffic and temporary store closures resulting from the COVID-19 pandemic. As of August 1, 2020, we and our partners operated 432 stores and 303 concessions in Asia, compared to 520 stores and 337 concessions at August 3, 2019. As of August 1, 2020, we directly operated 161 stores and 115 concessions in Asia, compared to 216 directly-operated stores and 162 concessions at August 3, 2019. Currency translation fluctuations relating to our Asian operations unfavorably impacted net revenue by $0.8 million.

Operating margin decreased 90 basis points to negative 6.7% for the quarter ended August 1, 2020, from negative 5.8% in the same prior-year quarter, driven primarily by a higher SG&A rate. The higher SG&A rate was driven primarily by overall deleveraging of expenses, partially offset by the favorable impact from business mix.
Loss from operations from our Asia segment improved by $1.4 million, or 29.9%, to $3.4 million for the quarter ended August 1, 2020, compared to $4.8 million in the same prior-year period. The improvement was driven primarily by the favorable impact on earnings from lower SG&A expenses and, to a lesser extent, lower occupancy costs, partially offset by the unfavorable impact from lower revenue.
Licensing
Net royalty revenue from our Licensing segment decreased by $6.4 million, or 34.5%, to $12.1 million for the quarter ended August 1, 2020, from $18.5 million in the same prior-year period, due primarily to lower demand resulting from the COVID-19 pandemic.
Earnings from operations from our Licensing segment decreased by $4.0 million, or 26.0%, to $11.5 million for the quarter ended August 1, 2020, from $15.5 million in the same prior-year period. The decrease was driven by the unfavorable impact to earnings from lower revenue.
Corporate Overhead
Unallocated corporate overhead was relatively flat at $29.2 million for the quarter ended August 1, 2020, compared to the same prior-year period.
Six Months Ended August 1, 2020 and August 3, 2019
Consolidated Results
Net Revenue. Net revenue decreased by $561.1 million, or 46.0%, to $658.8 million for the six months ended August 1, 2020, compared to $1.22 billion for the six months ended August 3, 2019. In constant currency, net revenue decreased by 45.1%, driven primarily by the unfavorable impact on revenue due to temporary store closures and lower store traffic and, to a lesser extent, lower wholesale shipments resulting from lower demand as a result of the COVID-19 pandemic. Currency translation fluctuations relating to our foreign operations unfavorably impacted net revenue by $10.6 million, compared to the same prior-year period.
Gross Margin. Gross margin decreased 920 basis points to 27.5% for the six months ended August 1, 2020, compared to 36.7% in the same prior-year period, of which 800 basis points was due to a lower occupancy rate and 120 basis points was due to lower product margins. The higher occupancy rate was driven primarily by overall deleveraging of occupancy costs due mainly to lower revenue resulting from the impact of the COVID-19 pandemic. The lower product margins were driven primarily by higher inventory reserves during the six months ended August 1, 2020, compared to the same prior-year period.
Gross Profit.Gross profit decreased by $266.4 million, or 59.5%, to $181.3 million for the six months ended August 1, 2020, from $447.6 million in the same prior-year period. The decrease in gross profit, which included the unfavorable impact of currency translation, was due primarily to the unfavorable impact on gross profit from lower revenue, partially offset by lower occupancy costs.Currency translation fluctuations relating to our foreign operations unfavorably impacted gross profit by $1.4 million.
SG&A Rate. The Company’s SG&A rate increased 990 basis points to 44.5% for the six months ended August 1, 2020, compared to 34.6% in the same prior-year period. The Company’s SG&A rate included the unfavorable impact of 40 basis points from separation charges. Excluding these charges, the Company’s SG&A rate would have increased by 950 basis points during six months ended August 1, 2020 compared to the same prior-year period, driven by overall deleveraging of expenses due mainly to lower revenue resulting from the impact of the COVID-19 pandemic, partially offset by expense savings.
SG&A Expenses. SG&A expenses decreased by $129.2 million, or 30.6%, to $293.6 million for the six months ended August 1, 2020, from $422.8 million in the same prior-year period. The decrease, which included the favorable impact of currency translation, was driven primarily by lower payroll costs and, to a lesser extent, lower

overall discretionary expenses.The lower payroll costs were driven primarily by the impact of furloughs and, to a lesser extent, government assistance programs related to the recovery of employee payroll costs, temporary tiered salary reductions for management level corporate employees that have since been restored and permanent headcount reductions. Currency translation fluctuations relating to our foreign operations favorably impacted SG&A expenses by $4.8 million.
Asset Impairment Charges. During the six months ended August 1, 2020, the Company recognized $36.5 million in impairment of certain operating lease right-of-use assets and $28.5 million in impairment of property and equipment related to certain retail locations resulting from lower revenue and future cash flow projections from the ongoing effects of the COVID-19 pandemic. This compares to $3.3 million in impairment of property and equipment related to certain retail locations resulting from under-performance and expected store closures during the six months ended August 3, 2019. Currency translation fluctuations relating to our foreign operations favorably impacted asset impairment charges by $1.6 million.
Net Gains on Lease Terminations. During the six months ended August 1, 2020, the Company recorded net gains on lease terminations of $0.4 million related primarily to the early termination of certain lease agreements. There were no net gains on lease terminations recorded during the six months ended August 3, 2019.
Operating Margin. Operating margin decreased 28.6% to negative 26.8% for the six months ended August 1, 2020, compared to1.8% in the same prior-year period, driven primarily by overall deleveraging of expenses due to the negative impact from the COVID-19 pandemic on our global operations and higher asset impairment charges. Higher asset impairment charges negatively impacted operating margin by 960 basis points during the six months ended August 1, 2020 compared to the same prior-year period. Separation charges unfavorably impacted operating margin by 40 basis points during the six months ended August 1, 2020. Net gains on lease terminations favorably impacted operating margin by 10 basis points during the six months ended August 1, 2020. Excluding the impact of these items, the Company’s operating margin would have decreased 18.7% compared to the same prior-year period. The negative impact of currency on operating margin for the first six months of fiscal 2021 was approximately 10 basis points.
Earnings (Loss) from Operations. Loss from operations was $176.8 million for the six months ended August 1, 2020, compared to earnings from operations of $21.5 million in the same prior-year period. Currency translation fluctuations relating to our foreign operations favorably impacted earnings from operations by $5.1 million.
Interest Expense, Net. Interest expense, net, was $10.4 million for the six months ended August 1, 2020, compared to $5.5 million for the six months ended August 3, 2019. The increase in interest expense was due primarily to higher amortization of debt discount and higher interest expense related to the Company’s convertible senior notes during the six months ended August 1, 2020.
Other Expense, Net. Other expense, net, was $14.0 million for the six months ended August 1, 2020, compared to $4.3 million in the same prior-year period. The change was due primarily to net mark-to-market losses on revaluation of foreign exchange currency contracts, compared to gains in the same prior-year period. During the first six months of fiscal 2021,market volatility also resulted in higher unrealized losses on the translation of foreign currency balances andlower net unrealized gains on our SERP-related assets, compared to the same prior-year period.
Income Tax Expense (Benefit).  Income tax benefit for the six months ended August 1, 2020 was $20.0 million, or a 9.9% effective tax rate, compared to income tax expense of $6.1 million, or a 52.2% effective tax rate, in the same prior-year period. Generally, income taxes for the interim periods are computed using the tax rate estimated to be applicable for the full fiscal year, adjusted for discrete items, which is subject to ongoing review and evaluation by management. During the six months ended August 1,May 2, 2020, the Company recognized a tax benefit of approximately $3.9$11.8 million from a tax rate change related to the ability to carryback net operating losses to tax years with a higher federal corporate tax rate as allowed under the CARES Act enacted in March 2020.2020. This benefit was mostlypartially offset by a valuation allowance of $3.7 million resulting from jurisdictions where there have

been cumulative net operating losses, limiting the Company’s ability to consider other subjective evidence to continue to recognize the existing deferred tax assets.assets. Excluding the impact of these items, the changeincrease in the effective tax rate was due primarily to a shiftchange in the distributionmix of statutory earnings amongfor the Company’s tax jurisdictions during the sixthree months ended AugustMay 1, 2020,2021, compared to the same prior-year period.
Net Earnings (Loss) Attributable to Noncontrolling Interests. Net lossearnings (loss) attributable to noncontrolling interests was $3.2were $0.9 million and $(2.9) million, net of taxes, for the six monthsquarters ended AugustMay 1, 2021 and May 2, 2020, compared to net earnings attributable to noncontrolling interests of $1.6 million, net of taxes, for the six months ended August 3, 2019.respectively.
Net Earnings (Loss) Attributable to Guess?, Inc. Net lossearnings (loss) attributable to Guess?, Inc. was $178.0were $12.0 million for the six monthsquarter ended AugustMay 1, 2020,2021, compared to net earnings attributable to Guess?, Inc. of $3.9$(157.7) million in the same prior-year period. Diluted earnings per share (“EPS”) were $0.18 for the quarter ended May 1, 2021, compared to diluted loss per share was $2.72 for the six months ended August 1, 2020, compared to diluted earnings per share of $0.05$2.40 in the same prior-year period. We estimate that the unfavorableThe Company estimates a positive impact from the Company’sits share repurchasesbuybacks and additional interest expense recognized related to the offeringcurrency of convertible senior notes had a net negative impact$0.01 and $0.09, respectively, on diluted loss per shareEPS in the first quarter of $0.45 for the six months ended August 1, 2020. We also estimate that the negative impact of currency on diluted loss per share for the six months ended August 1, 2020 was approximately $0.06 per share.fiscal 2022. During the six monthsquarter ended AugustMay 1, 2020,2021, the Company recognized $64.9$0.4 million of asset impairment charges; $0.4$2.1 million of net gains on lease terminations; $0.1modifications; $1.1 million of certain professional services and legal fees and related costs; $2.7 million of separation charges; $5.2net credits; $2.8 million of amortization of debt discount related to the Company’s convertible senior notes; and $0.2$0.1 million in additional tax expense from certain discrete tax adjustments (or a combined $58.5$1.9 million, or $0.89$0.03 per share, negative impact after considering the related tax benefit of these adjustments of $14.2$0.4 million). Excluding the impact of these items, adjusted net earnings attributable to Guess?, Inc. were $13.9 million and adjusted diluted earnings were $0.21 per common share for the quarter ended May 1, 2021. The Company estimates its share buybacks and currency had a positive impact of $0.01 and $0.09, respectively, on adjusted diluted EPS in the first quarter of fiscal 2022. During the quarter ended May 2, 2020, the Company recognized $53.0 million of asset impairment charges; $0.5 million of net losses on lease terminations; $0.3 million of certain professional services and legal fees and related net credits; $0.2 million of separation charges; $2.6 million of amortization
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of debt discount related to the Company’s convertible senior notes; and a benefit of $7.9 million from certain discrete tax adjustments (or a combined $38.8 million, or $0.59 per share, negative impact after considering the related tax benefit of these adjustments of $9.8 million). Excluding the impact of these items, adjusted net loss attributable to Guess?, Inc. was $119.6$118.9 million and adjusted diluted loss was $1.83$1.81 per common share during the six months ended August 1, 2020. We estimate that the unfavorable impact from share repurchases and additional interest expense recognized related to the offering of convertible senior notes had a net negative impact of $0.29 on adjusted diluted loss per share for the six monthsquarter ended August 1,May 2, 2020. During the six months ended August 3, 2019, the Company recognized $3.3 million of asset impairment charges; $0.7 million of certain professional services and legal fees and related costs; and $2.7 million of amortization of debt discount related to the Company’s convertible senior notes (or a combined $3.9 million, or $0.05 per share, negative impact after considering the related tax benefit of these adjustments and adjustments to uncertain tax positions excluded from results in prior years totaling $2.8 million). Excluding the impact of these items, adjusted net earnings attributable to Guess?, Inc. were $7.8 million and adjusted diluted earnings per share were $0.10 per common share during the six months ended August 3, 2019. References to financial results excluding the impact of these items are non-GAAP measures and are addressed below under “Non-GAAP Measures.”

Information by Business Segment
The following table presents our net revenue and earnings (loss) from operations by segment for the sixthree months ended AugustMay 1, 20202021 and August 3, 2019May 2, 2020 (dollars in thousands):
Six Months Ended    Three Months Ended
Aug 1, 2020 Aug 3, 2019 $ Change % ChangeMay 1, 2021May 2, 2020$ Change% Change
Net revenue:       Net revenue:    
Americas Retail$184,649
 $375,389
 $(190,740) (50.8%)Americas Retail$155,535 $74,584 $80,951 108.5 %
Americas Wholesale46,160
 88,107
 (41,947) (47.6%)Americas Wholesale45,430 25,875 19,555 75.6 %
Europe312,324
 550,564
 (238,240) (43.3%)Europe241,852 106,473 135,379 127.1 %
Asia90,576
 168,491
 (77,915) (46.2%)Asia55,660 40,385 15,275 37.8 %
Licensing25,081
 37,360
 (12,279) (32.9%)Licensing21,525 12,934 8,591 66.4 %
Total net revenue$658,790
 $1,219,911
 $(561,121) (46.0%)Total net revenue$520,002 $260,251 $259,751 99.8 %
Earnings (loss) from operations:       Earnings (loss) from operations:  
Americas Retail$(41,377) $4,145
 $(45,522) (1,098.2%)Americas Retail$20,274 $(36,673)$56,947 (155.3 %)
Americas Wholesale3,312
 16,236
 (12,924) (79.6%)Americas Wholesale11,555 1,624 9,931 611.5 %
Europe(23,611) 35,267
 (58,878) (166.9%)Europe4,198 (44,406)48,604 (109.5 %)
Asia(26,144) (8,003) (18,141) (226.7%)Asia(1,808)(22,777)20,969 (92.1 %)
Licensing21,605
 32,191
 (10,586) (32.9%)Licensing19,431 10,094 9,337 92.5 %
Total segment earnings (loss) from operations(66,215) 79,836
 (146,051) (182.9%)Total segment earnings (loss) from operations53,650 (92,138)145,788 (158.2 %)
Corporate overhead(46,109) (55,041) 8,932
 (16.2%)Corporate overhead(28,776)(16,921)(11,855)70.1 %
Asset impairment charges(64,941) (3,279) (61,662) 1,880.5%Asset impairment charges(441)(52,972)52,531 (99.2 %)
Net gains on lease terminations429
 —
 429
 

Net gains (losses) on lease modificationsNet gains (losses) on lease modifications2,145 (456)2,601 (570.4 %)
Total earnings (loss) from operations$(176,836) $21,516
 $(198,352) (921.9%)Total earnings (loss) from operations$26,578 $(162,487)$189,065 (116.4 %)
Operating margins:       Operating margins:
Americas Retail(22.4%) 1.1%    Americas Retail13.0 %(49.2 %)
Americas Wholesale7.2% 18.4%    Americas Wholesale25.4 %6.3 %
Europe(7.6%) 6.4%    Europe1.7 %(41.7 %)
Asia(28.9%) (4.7%)    Asia(3.2 %)(56.4 %)
Licensing86.1% 86.2%    Licensing90.3 %78.0 %
Total Company(26.8%) 1.8%    Total Company5.1 %(62.4 %)
Americas Retail
Net revenue from our Americas Retail segment decreasedincreased by $190.7$81.0 million, or 50.8%108.5%, to $184.6$155.5 million for the six monthsquarter ended AugustMay 1, 2020, compared to $375.42021, from $74.6 million in the same prior-year period. In constant currency, net revenue decreasedincreased by 50.3%105.9%, due primarily to lower comparable sales driven primarily by reduced store traffic and temporary store closures and, to a lesser extent, lower store traffic resulting from the COVID-19 pandemic.pandemic in the same prior-year period. Comparable store sales (including e-commerce) increased 6% in U.S. dollars and 5% in constant currency compared to the same prior-year period. The inclusion of our e-commerce sales increased the comparable sales percentage by 16% in U.S. dollars and constant currency. Excluding the impact from the temporary store closures, the store base for the U.S. and Canada decreased by an average of 2137 net stores during the six monthsquarter ended AugustMay 1, 20202021 compared to the same prior-year period, resulting in a 3.4%7.7% net decrease in average square footage. Currency translation fluctuations relating to our non-U.S. retail stores and e-commerce sites unfavorablyfavorably impacted net revenue by $1.7$2.0 million.
Operating margin decreased 23.5%increased 62.2% to negative 22.4%13.0% for the six monthsquarter ended AugustMay 1, 2020, compared to 1.1%2021, from negative 49.2% in the same prior-year period, due to lower gross margins and, to a lesser extent, a higher SG&A rate. The lower gross margins werequarter, driven primarily by overall deleveraging of occupancy costs due primarily to the negative impact from temporary store closures and lower store traffic. The higher SG&A rate was driven primarily by overall deleveragingleveraging of expenses partially offset byas well as lower store selling expenses due to payroll savings resulting from the temporary furloughmarkdowns.
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Table of the Company’s store associates in the U.S. and Canada.Contents
LossEarnings from operations from our Americas Retail segment was $41.4increased by $56.9 million, or 155.3%, to $20.3 million for the six monthsquarter ended AugustMay 1, 2020, compared to earnings2021, from loss from operations of $4.1$36.7 million in the same prior-year period. The deteriorationincrease is due primarily due to the unfavorablefavorable impact on earnings from lowerhigher revenue partially offset by lower store selling expenses and lower occupancy costs.leveraging of expenses.

Americas Wholesale
Net revenue from our Americas Wholesale segment decreasedincreased by $41.9$19.6 million, or 47.6%75.6%, to $46.2$45.4 million for the six monthsquarter ended AugustMay 1, 2020, compared to $88.12021, from $25.9 million in the same prior-year period. In constant currency, net revenue decreasedincreased by 45.1%71.0%, driven primarily by increased demand in our U.S. wholesale business due mainly to lower demand resulting from the COVID-19 pandemic. Currencybusiness. Currency translation fluctuations relating to our non-U.S. wholesale businesses unfavorablyfavorably impacted net revenue by $2.3$1.2 million.
Operating margin decreased 11.2%increased 19.1% to 7.2%25.4% for the six monthsquarter ended AugustMay 1, 2020,2021, compared to 18.4%6.3% in the same prior-year period,quarter, due mainly to a higher SG&A ratelower markdowns and to a lesser extent, lower gross margins. The higher SG&A rate was due primarily to overall deleveragingleveraging of expenses resulting from lower wholesale shipments. The lower gross margins were driven primarily by the negative impacts from the COVID-19 pandemic which resulted in higher markdowns.expenses.
Earnings from operations from our Americas Wholesale segment decreasedincreased by $12.9$9.9 million, or 79.6%611.5%, to $3.3$11.6 million for the six monthsquarter ended AugustMay 1, 2020, compared to $16.22021, from $1.6 million in the same prior-year period. The decreaseincrease reflects the unfavorablefavorable impact on earnings from lowerhigher revenue.
Europe
Net revenue from our Europe segment decreasedincreased by $238.2$135.4 million, or 43.3%127.1%, to $312.3$241.9 million for the six monthsquarter ended AugustMay 1, 2020, from $550.62021, compared to $106.5 million in the same prior-year period. In constant currency, net revenue decreasedincreased by 42.5%110.0%, driven primarily by temporarya shift in wholesale shipments into fiscal 2022. Comparable store closuressales (including e-commerce) increased 44% in U.S. dollars and lower store traffic resulting from32% in constant currency compared to the COVID-19 pandemicsame prior-year period. The inclusion of our e-commerce sales increased the comparable sales percentage by 43% in U.S. dollars and 38% in constant currency. As of May 1, 2021, the Company directly operated 511 stores in Europe compared to 517 stores at May 2, 2020, excluding concessions, which represents a 1.2% decrease over the same prior-year period. Currency translation fluctuations relating to our European operations favorably impacted net revenue by $18.2 million.
Operating margin increased 43.4% to 1.7% for the quarter ended May 1, 2021, compared to negative 41.7% in the same prior-year quarter, driven by overall leveraging of expenses due to a lesser extent, lowershift in wholesale shipments resultingshipments.
Earnings from lower demand.operations from our Europe segment increased by $48.6 million, or 109.5%, to $4.2 million for the quarter ended May 1, 2021, compared to loss from operations of $44.4 million in the same prior-year period, driven primarily by the favorable impact on earnings from higher revenue and overall leveraging of expenses. Currency translation fluctuations relating to our European operations unfavorably impacted net revenue by $4.0 million.
Operating margin decreased 14.0% to negative 7.6% for the six months ended August 1, 2020, from 6.4% in the same prior-year period, driven by a higher SG&A rate and, to a lesser extent, lower gross margins due primarily to overall deleveraging of expenses resulting from lower revenue.
Loss from operations from our Europe segment was $23.6 million for the six months ended August 1, 2020, compared to earnings from operations of $35.3 million in the same prior-year period. The deterioration was driven primarily by the unfavorable impact on earnings from lower revenue, partially offset by lower SG&A expenses and, to a lesser extent, lower occupancy costs. Currency translation fluctuations relating to our European operations favorably impacted loss from operations by $2.3$1.4 million.
Asia
Net revenue from our Asia segment decreasedincreased by $77.9$15.3 million, or 46.2%37.8%, to $90.6$55.7 million for the six monthsquarter ended AugustMay 1, 2020, compared to $168.52021, from $40.4 million in the same prior-year period. In constant currency, net revenue decreasedincreased by 44.7%29.3%, due primarily to lower comparable sales driven primarily by lowerreduced store traffic and temporary store closures resulting from the COVID-19 pandemic. Currency translation fluctuations relating to our Asian operations unfavorably impacted net revenue by $2.5 million.
Operating margin decreased 24.2% to negative 28.9% for the six months ended August 1, 2020, compared to negative 4.7% in the same prior-year period, driven primarily by lower gross margins and, to a lesser extent, a higher SG&A rate. The lower gross margins were due primarily to the negative impacts from the COVID-19 pandemic which resulted in higher inventory reserves and, to a lesser extent, overall deleveraging of occupancy costs and higher markdowns. The higher SG&A rate was driven primarily by overall deleveraging of expenses, partially offset by the favorable impact from business mix.
Loss from operations from our Asia segment deteriorated by $18.1 million, or 226.7%, to $26.1 million for the six months ended August 1, 2020, from $8.0 million in the same prior-year period. Comparable store sales (including e-commerce) increased 32% in U.S. dollars and 23% in constant currency. The deterioration was driven primarilyinclusion of the Company’s e-commerce sales decreased the comparable sales percentage by the unfavorable impact on earnings from lower revenue11% in U.S. dollars and to a lesser extent, lower product margins, partially offset by lower SG&A expenses and, to a lesser extent, lower occupancy costs.constant currency. Currency translation fluctuations relating to our Asian operations favorably impacted net revenue by $3.4 million.
Operating margin increased 53.2% to negative 3.2% for the quarter ended May 1, 2021, from negative 56.4% in the same prior-year quarter, as the prior year’s quarter included significant inventory reserves and the current quarter benefited from leveraging of expenses.
Loss from operations from our Asia segment was $1.8 million for the quarter ended May 1, 2021, compared to loss from operations by $1.0 million.of $22.8 million in the same prior-year period. The decrease was due to

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significant inventory reserves in the prior year quarter and the leveraging of expenses in the current year quarter.
Licensing
Net royalty revenue from our Licensing segment decreasedincreased by $12.3$8.6 million, or 32.9%66.4%, to $25.1$21.5 million for the six monthsquarter ended AugustMay 1, 2020, compared to $37.42021, from $12.9 million in the same prior-year period, due primarily to lowerhigher demand resulting from the COVID-19 pandemic.and strong performance in handbags, fragrance, and footwear.
Earnings from operations from our Licensing segment decreasedincreased by $10.6$9.3 million, or 32.9%92.5%, to $21.6$19.4 million for the six monthsquarter ended AugustMay 1, 2020, compared to $32.22021, from $10.1 million in the same prior-year period. The decreaseincrease was driven primarily by the unfavorable impactmainly due to earnings from lower revenue.leveraging of expenses.
Corporate Overhead
Unallocated corporate overhead decreasedincreased by $8.9$11.9 million to $46.1$28.8 million for the six monthsquarter ended AugustMay 1, 2020,2021, compared to $55.0$16.9 million in the same prior-year period,period. The increase was due primarily to lower expenses in the prior year quarter mainly related to expense savings in response to the pandemic and lower performance-based compensation and, to a lesser extent, lower overall discretionary expenses.compensation.
Non-GAAP Measures
The Company’s reported financial results areinformation presented in accordance with GAAP. The reported net loss attributable to Guess?, Inc.this Quarterly Report includes non-GAAP financial measures, such as adjusted results and diluted loss per share forconstant currency financial information. For the three and six months ended AugustMay 1, 2021 and May 2, 2020, reflectthe adjusted results exclude the impact of certain professional service, legal fees and related net credits, certain separation charges, asset impairment charges, net gains(gains) losses on lease terminations, certain professional service and legal fees and related (credits) costs, certain separation charges,modifications, non-cash amortization of debt discount on the Company’s convertible senior notes, and the related income tax effectsimpacts of these adjustments as well as certain discrete income tax adjustments. The reported net earnings attributableadjustments, where applicable. These non-GAAP measures are provided in addition to, Guess?, Inc. and diluted earnings per sharenot as alternatives for, the three and six months ended August 3, 2019 reflect the impact of asset impairment charges, certain professional service and legal fees and related costs, amortization of debt discount on the Company’s convertible senior notes and the tax effects of these adjustments as well as adjustments to uncertain tax positions excluded from results in prior years. reported GAAP results.
These items affect the comparability of the Company’s reported results. The financial results are also presented on a non-GAAP basis, as defined in Section 10(e) of Regulation S-K of the SEC, to exclude the effect of these items. The Company has excluded these items from its adjusted financial measures primarily because it believes that these items are not indicative of the underlying performance of its business and that the “non-GAAP” or “adjusted”adjusted financial information provided is useful for investors to evaluate the comparability of the Company’s operating results and its future outlook when(when reviewed in conjunction with the Company’s GAAP financial statements. Thestatements). A reconciliation of reported GAAP results to comparable non-GAAP measures areresults is provided in addition to, and not as alternatives for, the Company’s reported GAAP results. accompanying tables.
The adjusted measures for the three months ended AugustMay 1, 20202021 exclude the impact of $12.0$0.4 million of asset impairment charges; $0.9$2.1 million of net gains on lease terminations; a net credit of $0.2modifications; $1.1 million of certain professional services and legal fees and related costs; $2.5 million of separation charges; $2.6net credits; $2.8 million of amortization of debt discount on the Company’s convertible senior notesnotes; and $8.1$0.1 million in additional tax expense from certain discrete tax adjustments. The asset impairment charges related primarily to impairment of property and equipment related to certain retail locations resulting from lower revenue and future cash flow projections from the ongoing effects of the COVID-19 pandemic. Certain professional service and legal fees and related net credits were primarily due to amounts which the Company otherwise would not have incurred as part of its business operations. These items resulted in a combined $1.9 million negative impact (after considering the related tax benefit of $0.4 million), or an unfavorable $0.03 per share impact during the three months ended May 1, 2021. Net earnings attributable to Guess?, Inc. were $12.0 million and diluted earnings were $0.18 per common share for the three months ended May 1, 2021. Excluding the impact of these items, adjusted net earnings attributable to Guess?, Inc. were $13.9 millionand adjusted diluted earnings were $0.21 per common share for the three months ended May 1, 2021.
The adjusted measures for the three months ended May 2, 2020 exclude the impact of $53.0 million of asset impairment charges; $0.5 million of net losses on lease terminations; $0.3 million of certain professional services and legal fees and related net credits; $0.2 million of separation charges; $2.6 million of amortization
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of debt discount on the Company’s convertible senior notes; and a benefit of $7.9 million from certain discrete tax adjustments. The asset impairment charges related to the impairment of certain operating lease right-of-use assets and, to a lesser extent, impairment of property and equipment related to certain retail locations resulting from lower revenue and future cash flow projections fromdue to the ongoing effects of the COVID-19 pandemic.pandemic. The net gainslosses on lease terminations related primarily to the early termination of certain lease agreements. Certain professional service and legal fees and related (credits) costsnet credits were primarily due to amounts which the Company otherwise would not have incurred as part of its business operations. The separation-related charges mainly related to cash severance payments as a result of headcount reductions in response to the pandemic. During the three months ended August 1, 2020, the Company recorded a discrete tax expense of $7.9 million related to improved forecasts for the current fiscal year which changes the estimate of the net operating losses that the Company can carryback to tax years with a higher federal corporate tax rate as allowed under the CARES Act. These items resulted in a combined $19.7 million negative impact (after considering the related tax benefit of $4.4 million), or an unfavorable $0.30 per share impact during the three months ended August 1, 2020. Net loss attributable to Guess?, Inc. was $20.4 million and diluted loss was $0.31 per common share for the three months ended August 1, 2020. Excluding the impact of these items, adjusted net loss attributable to Guess?, Inc. was $0.6 millionand adjusted diluted loss was $0.01 per common share for the three months ended August 1, 2020.

The adjusted measures for the six months ended August 1, 2020 exclude the impact of $64.9 million of asset impairment charges; $0.4 million of net gains on lease terminations; $0.1 million of certain professional services and legal fees and related costs; $2.7 million of separation charges; $5.2 million of amortization of debt discount related to the Company’s convertible senior notes; and $0.2 million in additional tax expense from certain discrete tax adjustments. The asset impairment charges related to the impairment of certain operating lease right-of-use assets and, to a lesser extent, impairment of property and equipment related to certain retail locations resulting from lower revenue and future cash flow projections from the ongoing effects of the COVID-19 pandemic. The net gains on lease terminations related primarily to the early termination of certain lease agreements. The separation-related charges mainly related to certain cash severance payments, partially offset by adjustments to non-cash stock-based compensation expense related to our former Chief Executive Officer resulting from changes in expected performance conditions of certain previously granted stock awards that were no longer subject to service vesting requirements after his departure. During the sixthree months ended August 1,May 2, 2020, the Company recognized a tax benefit of approximately $3.9$11.8 million from a tax rate change related to the ability to carryback net operating losses to tax years with a higher federal corporate tax rate as allowed under the CARES Act enacted in March 2020.2020. This benefit was partially offset by a valuation allowance of $3.7 million resulting from jurisdictions where there have been cumulative net operating losses, limiting the Company’s ability to consider other subjective evidence to continue to recognize the existing deferred tax assets. assets. These items resulted in a combined $58.5$38.8 million negative impact (after considering the related tax benefit of $14.2$9.8 million), or an unfavorable $0.89$0.59 per share impact during the sixthree months ended August 1,May 2, 2020. Net loss attributable to Guess?, Inc. was $178.0$157.7 million and diluted loss was $2.72$2.40 per common share for the sixthree months ended August 1,May 2, 2020. Excluding the impact of these items, adjusted net loss attributable to Guess?, Inc. was $119.6$118.9 millionand adjusted diluted loss was $1.83 per common share for the six months ended August 1, 2020.
The adjusted measures for the three months ended August 3, 2019 exclude the impact of $1.5 million of asset impairment charges; $0.4 million of certain professional services and legal fees and related costs and $2.4 million of amortization of debt discount on the Company’s convertible senior notes. The asset impairment charges related primarily to the impairment of property and equipment related to certain retail locations resulting from under-performance and expected store closures. These items resulted in a combined $2.1 million negative impact (after considering the related tax benefit of $2.3 million), or an unfavorable $0.03 per share impact during the three months ended August 3, 2019. Net earnings attributable to Guess?, Inc. were $25.3 million and diluted earnings were $0.35$1.81 per common share for the three months ended August 3, 2019. Excluding the impact of these items, adjusted net earnings attributable to Guess?, Inc. were $27.4 million and adjusted diluted earnings were $0.38 per common share for the three months ended August 3, 2019.
The adjusted measures for the six months ended August 3, 2019 exclude the impact of $3.3 million of asset impairment charges; $0.7 million of certain professional services and legal fees and related costs and $2.7 million of amortization of debt discount on the Company’s convertible senior notes. The asset impairment charges related primarily to the impairment of property and equipment related to certain retail locations resulting from under-performance and expected store closures. These items resulted in a combined $3.9 million negative impact (after considering the related tax benefit of $2.8 million), or an unfavorable $0.05 per share impact during the six months ended August 3, 2019. Net earnings attributable to Guess?, Inc. were $3.9 million and diluted earnings were $0.05 per common share for the six months ended August 3, 2019. Excluding the impact of these items, adjusted net earnings attributable to Guess?, Inc. were $7.8 million and adjusted diluted earnings were $0.10 per common share for the six months ended August 3, 2019.May 2, 2020.
Our discussion and analysis herein also includes certain constant currency financial information. Foreign currency exchange rate fluctuations affect the amount reported from translating the Company’s foreign revenue, expenses and balance sheet amounts into U.S. dollars. These rate fluctuations can have a significant effect on reported operating results under GAAP. The Company provides constant currency information to enhance the visibility of underlying business trends, excluding the effects of changes in foreign currency translation rates. To calculate net revenue and earnings (loss) from operations on a constant currency basis, operating results for the current-year period are translated into U.S. dollars at the average exchange rates in effect during the comparable period of the prior year. To calculate balance sheet amounts on a constant currency basis, the current period balance

sheet amount is translated into U.S. dollars at the exchange rate in effect at the comparable prior-year period end. The constant currency calculations do not adjust for the impact of revaluing specific transactions denominated in a currency that is different from the functional currency of that entity when exchange rates fluctuate. The constant currency information presented may not be comparable to similarly titled measures reported by other companies.
In calculating the estimated impact of currency fluctuations (including translational and transactional impacts) on other measures such as earnings (loss) per share, the Company estimates gross margin (including the impact of foreign exchange currency contracts designated as cash flow hedges for anticipated merchandise purchases) and expenses using the appropriate prior-year rates, translates the estimated foreign earnings (loss) at the comparable prior-year rates and excludes the year-over-year earnings impact of gains or losses arising from balance sheet remeasurement and foreign exchange currency contracts not designated as cash flow hedges for merchandise purchases.
Liquidity and Capital Resources
We need liquidity globally primarily to fund our working capital, occupancy costs, interest payments on our debt, remodeling and rationalization of our retail stores, shop-in-shop programs, concessions, systems, infrastructure, other existing operations, expansion plans, international growth and potential acquisitions and investments. In addition, in the U.S. we need liquidity to fund share repurchases and payment of dividends to our stockholders. Generally, our working capital needs are highest during the late summer and fall as our inventories increase before the holiday selling period. During the sixthree months ended AugustMay 1, 2020,2021, we relied primarily on trade credit, available cash, real estate and other operating leases, finance leases, proceeds from
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our credit facilities and term loans and internally generated funds to finance our operations. We anticipate that we will be able to satisfy our ongoing cash requirements during the next 12 months for working capital, capital expenditures, payments on our debt, finance leases and operating leases as well as lease terminationmodification payments, potential acquisitions and investments, and share repurchases and dividend payments to stockholders, primarily with cash flow from operations and existing cash balances as supplemented by borrowings under our existing Credit Facility in the U.S. and Canada as well as bank facilities in Europe and China and proceeds from our term loans, as needed. As further noted above under the “—COVID-19 Business Update” section, the Company has also implemented a number of other measures to help preserve liquidity in response to the COVID-19 pandemic. We expect to settle the principal amount of our outstanding convertible senior notes in 2024 in cash and any excess in shares. Such arrangements are described further in “Part I, Item 1. Financial Statements – Note 9 – Borrowings and Finance Lease Obligations” and “Part I, Item 1. Financial Statements – Note 10 – Convertible Senior Notes and Related Transactions” of this Form 10-Q. Due to the seasonality of our business and cash needs, we may increase borrowings under our established credit facilities from time-to-time during the next 12 months. If we experience a sustained decrease in consumer demand related to the COVID-19 pandemic, we may require access to additional credit, which may not be available to us on commercially acceptable terms or at all.
Our outstanding convertible senior notes may be converted at the option of the holders as described in “Part I, Item 1, Financial Statements – Note 10 – Convertible Senior Notes and Related Transactions” of this Form 10-Q and in “Note 10 – Convertible Senior Notes and Related Transactions” of the Consolidated Financial Statements included in our Annual Report on Form 10-K. As of May 1, 2021, none of the conditions allowing holders of the convertibles notes to convert had been met. If our trading price exceeds 130% of the conversion price of the convertible notes for at least 20 trading days during the 30 consecutive trading-day period ending on, and including, September 30, 2021, holders of the convertible notes would have the right to convert their convertible notes during the calendar quarter beginning October 1, 2021. Upon conversion, we will pay or deliver, as the case may be, cash, shares of our common stock or a combination of cash and shares of our common stock, at our election, in the manner and subject to the terms and conditions provided in the indenture governing the convertible notes. The convertible note hedge transaction we entered into in connection with our issuance of the convertible notes is expected generally to reduce the potential dilution upon conversion of the convertible notes and/or offset any cash payments we are required to make in excess of the principal amount of convertible notes that are converted, as the case may be. We expect to settle the principal amount of our outstanding convertible senior notes in 2024 in cash and any excess in shares.
On March 27, 2020, the U.S. government enacted the CARES Act to provide economic relief from the COVID-19 pandemic. Among other provisions, the CARES Act allows for a full offset of taxable income in a five-year carryback period for net operating losses, which will reduce current period tax expense and may result in a refund of previously paid income tax amounts at higher historical tax rates. During the six months ended August 1, 2020, the Company recognized a tax benefit of approximately $3.9 million related to this provision.
In December 2017, the U.S. government enacted the Tax Reform, which significantly changed the U.S. corporate income tax laws, including moving from a global taxation regime to a territorial regime and lowering the U.S. federal corporate income tax rate from 35% to 21%. The Tax Reform also required a one-time mandatory transition tax on accumulated foreign earnings. Any income tax payable related to the transition tax is due over an eight-year period beginning in calendar 2018. The balance related to this transition tax included in other long-term liabilities was $19.9 million (excluding related interest) for each of the periods ended August 1, 2020 and February 1, 2020.
The Company has historically considered the undistributed earnings of its foreign subsidiaries to be indefinitely reinvested. As a result of the Tax Reform, the Company had a substantial amount of previously taxed

earnings that could be distributed to the U.S. without additional U.S. taxation. The Company continues to evaluate its plans for reinvestment or repatriation of unremitted foreign earnings and regularly reviews its cash positions and determination of permanent reinvestment of foreign earnings. If the Company determines that all or a portion of such foreign earnings are no longer indefinitely reinvested, it may be subject to additional foreign withholding taxes and U.S. state income taxes, beyond the Tax Reform’s one-time transition tax. The Company intends to indefinitely reinvest the remaining earnings from the Company’s foreign subsidiaries for which a deferred tax liability has not already been recorded. It is not practicable to estimate the amount of tax that might be payable if these earnings were repatriated due to the complexities associated with the hypothetical calculation. As of AugustMay 1, 2020,2021, the Company had cash and cash equivalents of $328.0$395.1 million, of which approximately $72.7$101.0 million was held in the U.S.
Excess cash and cash equivalents, which represent the majority of our outstanding cash and cash equivalents balance, are held primarily in overnight deposit and short-term time deposit accounts and money market accounts. Please see “—Important Factors Regarding Forward-Looking Statements” discussed above, “Part II, Item 1A. Risk Factors” in this Form 10-Q and “Part I, Item 1A. Risk Factors” contained in the Company’s most recent Annual Report on Form 10-K for the fiscal year ended February 1, 2020January 30, 2021 for a discussion of risk factors which could reasonably be likely to result in a decrease of internally generated funds available to finance capital expenditures and working capital requirements.
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COVID-19 Impact on Liquidity
Refer to the “—COVID-19“COVID-19 Business Update” section above for a discussion of the impact from the COVID-19 pandemic on our financial performance and our liquidity.
In light of store closures and reduced traffic in stores, the Company has taken certain actions with respect to certain of its existing leases, including engaging with landlords to discuss rent deferrals as well as other rent concessions. Since April 2020, Throughout the COVID-19 pandemic, we have suspended rental payments and/or paid reduced rental amounts with respect to our retail stores that were closed or were experiencing drastically reduced customer traffic as a result of the COVID-19 pandemic. We are engagingOver the last year, we have successfully negotiated with several landlords, including some of our larger landlords and have received rent abatement benefits as well as new lease terms for some of our affected leases. The Company continues to engage in discussions with theadditional affected landlords in an effort to achieve appropriate rent relief and other lease concessions and, in some cases, to terminate existing leases. However, there can be no assurancesIn some instances, where negotiations with landlords have proven unsuccessful, the Company is engaged in litigation related to rent obligations both during the outcomeCOVID-19 pandemic and through the term of such negotiations.the lease.
SixThree Months Ended AugustMay 1, 20202021 and August 3, 2019May 2, 2020
The Company has presented below the cash flow performance comparison of the sixthree months ended AugustMay 1, 2020,2021, compared to the sixthree months ended August 3, 2019.May 2, 2020.
Operating Activities
Net cash provided by operating activities was $40.7 million for the six months ended August 1, 2020, compared to net cash used in operating activities of $23.0was $53.6 million for the sixthree months ended August 3, 2019,May 1, 2021, compared to $61.6 million for the three months ended May 2, 2020, or an improvement of $63.6$7.9 million. This improvement was driven primarily by favorablehigher cash flows generated from net earnings, partially offset by unfavorable changes in working capital, partially offset by lowercash flows generated fromnet earnings. The favorable changes in working capital were due primarily to the extension of vendor payment terms on our accounts payable balances and the suspension and/or reduction of our operating lease payments, which could be temporary, as well as overall lower expenditures. In addition, during the six months ended August 3, 2019, net cash used in operating activities included the payment of the European Commission fine of $45.6 million which was imposed and accrued in fiscal 2019.capital.
Investing Activities
Net cash used in investing activities was $12.0$7.8 million for the sixthree months ended AugustMay 1, 2020,2021, compared to $33.9$5.7 million for the sixthree months ended August 3, 2019.May 2, 2020. Net cash used in investing activities for the sixthree months ended AugustMay 1, 20202021 related primarily to capital expenditures incurred on leasehold improvements, investments in technology infrastructure and, to a lesser extent, existing store remodeling programs and international retail expansion. In addition, purchases of investments, settlements of forward exchange currency contracts and proceeds from the sale of long-term assets are also included in cash flows used in investing activities.
The decreaseincrease in cash used in investing activities was driven primarily by lower spending onhigher strategic investments in technology and retail expansionremodels during the sixthree months ended AugustMay 1, 20202021 compared to the same prior-year period. During the sixthree months ended

August May 1, 2020,2021, the Company opened seven11 directly-operated stores compared to 43five directly-operated stores that were opened in the same prior-year period.
Financing Activities
Net cash used in financing activities was $9.7 million for the three months ended May 1, 2021, compared to net cash provided by financing activities was $13.6of $210.1 million for the sixthree months ended August 1, 2020, compared to netMay 2, 2020. Net cash used in financing activities of $18.5 million for the sixthree months ended August 3, 2019. NetMay 1, 2021 related primarily to payment of dividends and repayments on borrowings and finance lease obligations, partially offset by proceeds from borrowings.
The change in cash provided by financing activities for the six months ended August 1, 2020 related primarily to net proceeds from borrowings. In addition, repurchases of shares of the Company’s common stock, cash activity from the issuance of common stock under our equity plans, payment of dividends, payments related to finance lease obligations and net proceeds related to issuance of convertible senior notes and related warrants are also included in cash flows from financing activities.
The increase in cash provided by(used in) financing activities was driven primarily by the lower investments made in share repurchases and, to a lesser extent, higher net proceeds received from borrowings and lowerhigher payment of dividends during the sixthree months ended AugustMay 1, 20202021 compared to the same prior-year period. This was partially offset by net proceeds from the issuance of convertible senior notes and related warrants during the six months ended August 3, 2019.
Effect of Exchange Rates on Cash, Cash Equivalents and Restricted Cash
During the sixthree months ended AugustMay 1, 2020,2021, changes in foreign currency translation rates increaseddecreased our reported cash, cash equivalents and restricted cash balance by $1.1$2.8 million. This compares to a decrease of $4.0$8.0 million in cash, cash equivalents and restricted cash driven by changes in foreign currency translation rates during the sixthree months ended August 3, 2019.May 2, 2020.
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Working Capital
As of AugustMay 1, 2020,2021, the Company had net working capital (including cash and cash equivalents) of $343.5$497.5 million, compared to $425.8$470.0 million at February 1, 2020January 30, 2021 and $294.2$388.2 million at August 3, 2019.May 2, 2020.
The Company’s primary working capital needs are for the current portion of lease liabilities, accounts receivable and inventory. The accounts receivable balance consists of trade receivables relating primarily to the Company’s wholesale business in Europe and, to a lesser extent, to its wholesale businesses in the Americas and Asia, royalty receivables relating to its licensing operations, credit card and retail concession receivables related to its retail businesses and certain other receivables. Accounts receivable decreasedincreased by $46.5$66.8 million, or 15.9%27.9%, to $246.5$306.3 million as of AugustMay 1, 2020,2021, from $293.0$239.5 million at August 3, 2019.May 2, 2020. On a constant currency basis, accounts receivable decreasedincreased by $54.9$45.7 million, or 18.7%19.1%, when compared to August 3, 2019, driven primarily by lower wholesale shipments compared to the same prior-year period.May 2, 2020. As of AugustMay 1, 2020,2021, approximately 58%48% of our total net trade receivables and 68%60% of our European net trade receivables were subject to credit insurance coverage, certain bank guarantees or letters of credit for collection purposes. Our credit insurance coverage contains certain terms and conditions specifying deductibles and annual claim limits. Inventory decreasedincreased by $64.8$12.4 million, or 13.4%3.1%, to $419.4$404.9 million as of AugustMay 1, 2020,2021, from $484.2$392.5 million at August 3, 2019.May 2, 2020. On a constant currency basis, inventory decreased by $72.6$15.7 million, or 15.0%4.0%, when compared to August 3, 2019,May 2, 2020, driven primarily by improved inventory management compared to the same prior-year period.management.
Capital Expenditures
Gross capital expenditures totaled $10.1$9.1 million, before deducting lease incentives of $0.5$1.1 million, for the sixthree months ended AugustMay 1, 2020.2021. This compares to gross capital expenditures of $34.6$6.0 million, before deducting lease incentives of $4.0$0.4 million for the sixthree months ended August 3, 2019.May 2, 2020.
We will periodically evaluate strategic acquisitions and alliances and pursue those that we believe will support and contribute to our overall growth initiatives.
Dividends
During the first quarter of fiscalOn May 27, 2021, the Company announced that its Board of Directors had deferred the decision with respect to the payment of its quarterly cash dividend. The Board of Directors decided to continue

to postpone its decision with respect to the payment of its quarterly cash dividend during the second quarter of fiscal 2021 in order to preserve the Company’s cash position and provide continued financial flexibility in light of the uncertainties related to the COVID-19 pandemic.
On September 2, 2020, the Company announced that it was resuming its quarterly cash dividend program and declared a regular quarterly cash dividend of $0.1125 per share on the Company’s common stock. The Company also decided not to declare any cash dividends for the first or second quarters of fiscal 2021. The cash dividend will be paid on October 2, 2020June 25, 2021 to shareholders of record as of the close of business on September 16, 2020.June 9, 2021.
Decisions on whether, when and in what amounts to continue making any future dividend distributions will remain at all times entirely at the discretion of the Company’s Board of Directors, which reserves the right to change or terminate the Company’s dividend practices at any time and for any reason without prior notice. The payment of cash dividends in the future will be based upon a number of business, legal and other considerations, including ourthe Company’s cash flow from operations, capital expenditures, debt service and covenant requirements, cash paid for income taxes, earnings, share repurchases, economic conditions and U.S. and global liquidity.
Share Repurchases
On June 26, 2012, the Company’s Board of Directors authorized a program to repurchase, from time-to-time and as market and business conditions warrant, up to $500 million of the Company’s common stock. Repurchases under the program may be made on the open market or in privately negotiated transactions, pursuant to Rule 10b5-1 trading plans or other available means. There is no minimum or maximum number of shares to be repurchased under the program, which may be discontinued at any time, without prior notice. There were 4,000,000 shares repurchased at an aggregate cost of $38.8 million under the program during the three and six months ended August 1, 2020. During the six months ended August 3, 2019, the Company repurchased 11,013,304 shares under the program at an aggregate cost of $212.5 million, which is inclusive of theno shares repurchased under the ASR Contract. The Company repurchased 10,264,052 shares at an aggregate cost of $201.5 millionCompany’s share repurchase program during the three months ended May 4, 2019 and an additional 749,252 shares at an aggregate cost of $11.0 million during the three months ended August 3, 2019.1, 2021. As of AugustMay 1, 2020,2021, the Company had remaining authority under the program to purchase $47.8 million of its common stock.
Borrowings and Finance Lease Obligations and Convertible Senior Notes
See “Part I, Item 1. Financial Statements – Note 9 – Borrowings and Finance Lease Obligations” and “Part I, Item 1. Financial Statements – Note 10 – Convertible Senior Notes and Related Transactions” in this Form 10-Q for disclosures about our borrowings and finance lease obligations and convertible senior notes.
Supplemental Executive Retirement Plan
On August 23, 2005, the Board of Directors of the Company adopted a Supplemental Executive Retirement Plan (“SERP”) which became effective January 1, 2006. The SERP provides select employees who satisfy certain eligibility requirements with certain benefits upon retirement, termination of employment, death, disability or a change in control of the Company, in certain prescribed circumstances.
As a non-qualified pension plan, no dedicated funding of the SERPCompany’s Supplemental Executive Retirement Plan (“SERP”) is required; however, the Company has made periodic payments into insurance policies held in a rabbi trust to fund the expected obligations arising under the non-qualified SERP. The amount
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The cash surrender values of the insurance policies were $68.8$71.6 million and $67.7$72.1 million as of AugustMay 1, 20202021 and February 1, 2020,January 30, 2021, respectively, and were included in other assets in the Company’s condensed consolidated balance sheets. As a result of changes in the value of the insurance policy investments, the Company recorded minimal unrealized gains of $5.1losses and $3.1 million and $2.0 millionunrealized losses in other income and expense during the three and six months ended AugustMay 1, 2020, respectively,2021 and unrealized gains (losses) of $(0.2) million and $3.0 million in other income and expense during the three and six months ended August 3, 2019,May 2, 2020, respectively. The projected benefit obligation was $51.7$52.1 million and $51.9$52.3 million as of AugustMay 1, 20202021 and February 1, 2020,January 30, 2021, respectively, and was included in accrued expenses and other long-term liabilities in the Company’s condensed

consolidated balance sheets depending on the expected timing of payments. SERP benefit payments of $0.3$0.5 million and $0.8$0.6 million were made during the three and six months ended AugustMay 1, 2021 and May 2, 2020, respectively. SERP benefit payments of $0.4 million and $0.8 million were made during the three and six months ended August 3, 2019, respectively.
Contractual Obligations and Commitments
During the six months ended August 1, 2020, the Company entered into certain term loans and drew down on certain of its credit facilities to ensure financial flexibility and maintain maximum liquidity in response to uncertainty surrounding the COVID-19 pandemic. See “Part I, Item 1. Financial Statements – Note 9 – Borrowings and Finance Lease Obligations” for further information on these arrangements. As of AugustMay 1, 2020,2021, there were no other material changes to our contractual obligations and commitments outside the ordinary course of business compared to the disclosures included in our Form 10-K for the fiscal year ended February 1, 2020.
Wholesale Backlog
We generally receive ordersJanuary 30, 2021. See “Part I, Item 1. Financial Statements – Note 9 – Borrowings and Finance Lease Obligations” and “Part I, Item 1. Financial Statements – Note 10 – Convertible Senior Notes and Related Transactions” for fashion apparel three to six months prior to the time the products are delivered to our customers’ stores. The backlog of wholesale orders at any given time is affected by various factors, including seasonality, cancellations, the scheduling of market weeks, the timing of the receipt of orders and the timing of the shipment of orders and may include orders for multiple seasons. Accordingly, a comparison of backlogs of wholesale orders from period-to-period is not necessarily meaningful and may not be indicative of eventual actual shipments. This is particularly true in light of recent events resulting from the COVID-19 pandemic, which we expect could continue to have a material impactfurther information on our wholesale orders and backlog.
U.S. and Canada Backlog.Our U.S. and Canadian wholesale backlog as of August 31, 2020, consisting primarily of orders for fashion apparel, was $32.3 million in constant currency, compared to $41.7 million at September 3, 2019, a decrease of 22.6%.
Europe Backlog. As of August 30, 2020, the European wholesale backlog was €305.7 million, compared to €281.7 million at September 2, 2019, an increase of 8.5%. The backlog as of August 30, 2020 is comprised primarily of sales orders for the Fall/Winter 2020 and Spring/Summer 2021 seasons.these arrangements.
Application of Critical Accounting Policies and Estimates
Our critical accounting policies reflecting our estimates and judgments are described in “Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in our Annual Report on Form 10-K for the fiscal year ended February 1, 2020January 30, 2021 filed with the SEC on April 1, 2020.9, 2021. There have been no significant changes to our critical accounting policies during the sixthree months ended AugustMay 1, 2020.2021.
Recently Issued Accounting Guidance
See “Part I, Item 1. Financial Statements – Note 1 – Basis of Presentation and New Accounting Guidance” for disclosures about recently issued accounting guidance.
ITEM 3.Quantitative and Qualitative Disclosures About Market Risk.
ITEM 3.Quantitative and Qualitative Disclosures About Market Risk.
Exchange Rate Risk
More than halftwo-thirds of product sales and licensing revenue recorded for the sixthree months ended AugustMay 1, 20202021 were denominated in currencies other than the U.S. dollar. The Company’s primary exchange rate risk relates to operations in Europe, Canada, South Korea, China, Hong Kong and Mexico. Changes in currencies affect our earnings in various ways. For further discussion on currency-related risk, please refer to our risk factors under “Part I, Item 1A. Risk Factors” contained in the Company’s most recent Annual Report on Form 10-K for the fiscal year ended February 1, 2020.

January 30, 2021.
Foreign Currency Translation Adjustment
The local selling currency is typically the functional currency for all of the Company’s significant international operations. In accordance with authoritative guidance, assets and liabilities of the Company’s foreign operations are translated from foreign currencies into U.S. dollars at period-end rates, while income and expenses are translated at the weighted average exchange rates for the period. The related translation adjustments are reflected as a foreign currency translation adjustment in accumulated other comprehensive income (loss) within stockholders’ equity. In addition, the Company records foreign currency translation adjustments related to its noncontrolling interests within stockholders’ equity. Accordingly, our reported other comprehensive income (loss) could be unfavorably impacted if the U.S. dollar strengthens, particularly against the British pound, Canadian dollar, Chinese yuan, euro, Japanese yen, Korean won, Mexican peso, Polish zloty, Russian rouble and Turkish lira. Alternatively, if the U.S. dollar weakens relative to those currencies, our reported other comprehensive income (loss) could be favorably impacted. Our foreign currency translation adjustments recorded in other comprehensive income (loss) are significantly impacted by net assets denominated in euros.
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Periodically, the Company may also use foreign exchange currency contracts to hedge the translation and economic exposures related to its net investments in certain of its international subsidiaries (see below).subsidiaries. Changes in the fair values of these foreign exchange currency contracts, designated as net investment hedges, are recorded in foreign currency translation adjustment as a component of accumulated other comprehensive income (loss) within stockholders’ equity.
During the sixthree months ended AugustMay 1, 2020,2021, the total foreign currency translation adjustment increaseddecreased stockholders’ equity by $14.3$2.2 million, driven primarily by the weakening of the U.S. dollar against the euro.
Foreign Currency Transaction Gains and Losses
Transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency, including gains and losses on foreign exchange currency contracts (see below), are included in the condensed consolidated statements of income (loss). Net foreign currency transaction losses of $6.7$4.1 million and $2.1$10.5 million were included in the determination of net earnings (loss) for the sixthree months ended AugustMay 1, 20202021 and August 3, 2019,May 2, 2020, respectively.
Foreign Exchange Currency Contracts
The Company operates in foreign countries, which exposes it to market risk associated with foreign currency exchange rate fluctuations. Various transactions that occur primarily in Europe, Canada, South Korea, China, Hong Kong and Mexico are denominated in U.S. dollars, British pounds and Russian roubles and thus are exposed to earnings risk as a result of exchange rate fluctuations when converted to their functional currencies. These types of transactions include U.S. dollar-denominated purchases of merchandise and U.S. dollar- and British pound-denominated intercompany liabilities. In addition, certain operating expenses, tax liabilities and pension-related liabilities are denominated in Swiss francs and are exposed to earnings risk as a result of exchange rate fluctuations when converted to the functional currency. Further, there are certain real estate leases that are denominated in a currency other than the functional currency of the respective entity that entered into the agreement (primarily Swiss francs, Russian roubles and Polish zloty). As a result, the Company may be exposed to volatility related to unrealized gains or losses on the translation of present value of future lease payment obligations when translated at the exchange rate as of a reporting period-end. The Company is also subject to certain translation and economic exposures related to its net investment in certain of its international subsidiaries. The Company enters into derivative financial instruments to offset some, but not all, of its exchange risk. In addition, some of the derivative contracts in place will create volatility during the fiscal year as they are marked-to-market according to the accounting rules and may result in revaluation gains or losses in different periods from when the currency impact on the underlying transactions are realized.
Foreign Exchange Currency Contracts Designated as Cash Flow Hedges
During the sixthree months ended AugustMay 1, 2020,2021, the Company purchased U.S. dollar forward contracts in Europe totaling US$81.040.0 million that were designated as cash flow hedges. As of AugustMay 1, 2020,2021, the Company had

forward contracts outstanding for its European operations of US$139.5126.0 million to hedge forecasted merchandise purchases, which are expected to mature over the next 1715 months. The Company’s foreign exchange currency contracts are recorded in its condensed consolidated balance sheet at fair value based on quoted market rates. Changes in the fair value of the U.S. dollar forward contracts, designated as cash flow hedges for forecasted merchandise purchases, are recorded as a component of accumulated other comprehensive income (loss) within stockholders’ equity and are recognized in cost of product sales in the period that approximates the time the hedged merchandise inventory is sold. Changes in the fair value of the U.S. dollar forward contracts, designated as cash flow hedges for forecasted intercompany royalties, are recorded as a component of accumulated other comprehensive income (loss) within stockholders’ equity and are recognized in other income (expense) in the period in which the royalty expense is incurred.
As of AugustMay 1, 2020,2021, accumulated other comprehensive income (loss) related to foreign exchange currency contracts included a net unrealized loss of approximately $0.4$2.3 million net of tax, of which a net gain of $0.8 million will be recognized in cost of product sales over the following 12 months, at the then current values on a pre-tax basis, which can be different than the current quarter-end values.
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As of AugustMay 1, 2020,2021, the net unrealized loss of the remaining open forward contracts recorded in the Company’s condensed consolidated balance sheet was approximately $4.1$1.3 million.
At February 1, 2020,January 30, 2021, the Company had forward contracts outstanding for its European operations of US$148.6100.0 million that were designated as cash flow hedges. At February 1, 2020,January 30, 2021, the net unrealized gainloss of these open forward contracts recorded in the Company’s condensed consolidated balance sheet was approximately $4.0$3.3 million.
Foreign Exchange Currency Contracts Not Designated as Hedging Instruments
The Company has also foreign exchange currency contracts that are not designated as hedging instruments for accounting purposes. Changes in fair value of foreign exchange currency contracts not designated as hedging instruments are reported in net earnings (loss) as part of other income (expense). For the sixthree months ended AugustMay 1, 2020,2021, the Company recorded a net lossgain of $3.6$0.1 million for its euro dollar foreign exchange currency contracts not designated as hedges, which has been included in other income (expense). As of AugustMay 1, 2020,2021, the Company had euro foreign exchange currency contracts to purchase US$62.519.0 million expected to mature over the next ten months.one month. As of AugustMay 1, 2020,2021, the net unrealized loss of these open forward contracts recorded in the Company’s condensed consolidated balance sheet was approximately $1.8$0.9 million.
At February 1, 2020,January 30, 2021, the Company had euro foreign exchange currency contracts to purchase US$46.119.0 million. At February 1, 2020,January 30, 2021, the net unrealized gainloss of these open forward contracts recorded in the Company’s condensed consolidated balance sheet was approximately $0.9$1.2 million.
Sensitivity Analysis
As of AugustMay 1, 2020,2021, a sensitivity analysis of changes in foreign currencies when measured against the U.S. dollar indicates that, if the U.S. dollar had uniformly weakened by 10% against all of the U.S. dollar denominated foreign exchange derivatives totaling US$202.0145.0 million, the fair value of the instruments would have decreased by $22.4$16.1 million. Conversely, if the U.S. dollar uniformly strengthened by 10% against all of the U.S. dollar denominated foreign exchange derivatives, the fair value of these instruments would have increased by $18.4$13.2 million. Any resulting changes in the fair value of the hedged instruments may be partially offset by changes in the fair value of certain balance sheet positions (primarily U.S. dollar denominated liabilities in our foreign operations) impacted by the change in the foreign currency rate. The ability to reduce the exposure of currencies on earnings depends on the magnitude of the derivatives compared to the balance sheet positions during each reporting cycle.
Interest Rate Risk
The Company is exposed to interest rate risk on its floating-rate debt. The Company has entered into interest rate swap agreements for certain of these agreements to effectively convert its floating-rate debt to a fixed-rate basis. The principal objective of these contracts is to eliminate or reduce the variability of the cash flows in interest

payments associated with the Company’s floating-rate debt, thus reducing the impact of interest rate changes on future interest payment cash flows. The Company has elected to apply the hedge accounting rules in accordance with authoritative guidance for certain of these contracts.
In April 2019, the Company issued $300 million principal amount of convertible senior notes in a private offering. The fair value of the convertible senior notes is subject to interest rate risk, market risk and other factors due to its conversion feature. The fair value of the convertible senior notes will generally increase as our common stock price increases and will generally decrease as our common stock price declines. The interest and market value changes affect the fair value of the convertible senior notes but do not impact our financial position, cash flows or results of operations due to the fixed nature of the debt obligation. Additionally, we carry the convertible senior notes at face value, less any unamortized discount on our balance sheet and we present the fair value for disclosure purposes only.
Interest Rate Swap Agreement Designated as Cash Flow Hedge
During fiscal 2017, the Company entered into an interest rate swap agreement with a notional amount of $21.5 million, designated as a cash flow hedge, to hedge the variability of cash flows in interest payments associated with the Company’s floating-rate real estate secured loan (the “Mortgage Debt”). This interest rate swap agreement matures in January 2026 and converts the nature of the Company’s Mortgage Debt from LIBOR floating-rate debt to fixed-rate debt, resulting in a swap fixed rate of approximately 3.06%. The fair value of the interest rate swap agreement is based upon inputs corroborated by observable market data. Changes in the fair value of the interest rate swap agreement, designated as a cash flow hedge to hedge
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the variability of cash flows in interest payments associated with the Company’s floating-rate Mortgage Debt, are recorded as a component of accumulated other comprehensive income (loss) within stockholders’ equity and are amortized to interest expense over the term of the related debt.
As of AugustMay 1, 2020,2021, accumulated other comprehensive income (loss) related to the interest rate swap agreement included a net unrealized loss of $1.0$0.5 million net of tax, which will be recognized in interest expense afterover the following 12 months, at the then current values on a pre-tax basis, which can be different than the current quarter-end values. As of AugustMay 1, 2020,2021, the net unrealized loss of the interest rate swap recorded in the Company’s condensed consolidated balance sheet was approximately $1.3$0.7 million. As of February 1, 2020,January 30, 2021, the net unrealized loss of the interest rate swap recorded in the Company’s condensed consolidated balance sheet was approximately $0.3$1.0 million.
Sensitivity Analysis
As of AugustMay 1, 2020,2021, the Company had borrowings under its credit facility arrangements of $19.2$5.1 million which are based on variable rates of interest. Accordingly, changes in interest rates would impact the Company’s results of operations in future periods. A 100 basis point increase in interest rates would not have had a significant effect on interest expense for the sixthree months ended AugustMay 1, 2020.2021.
As of AugustMay 1, 2020,2021, the Company also had indebtedness related to term loans of $51.8$56.0 million, finance lease obligations of $22.4 million and its Mortgage Debt of $18.8 million and finance lease obligations of $16.3$18.3 million. The term loans provide for annual interest rates ranging between 0.5% to 1.5%2.2%. The finance lease obligations are based on fixed interest rates derived from the respective agreements. The Mortgage Debt is covered by a separate interest rate swap agreement with a swap fixed interest rate of approximately 3.06% that matures in January 2026. The interest rate swap agreement is designated as a cash flow hedge and converts the nature of the Company’s Mortgage Debt from LIBOR floating-rate debt to fixed-rate debt. The finance lease obligations are based on fixed interest rates derived from the respective agreements.
The fair values of the Company’s debt instruments are based on the amount of future cash flows associated with each instrument discounted using the Company’s incremental borrowing rate. As of AugustMay 1, 20202021 and February 1, 2020,January 30, 2021, the carrying value was not materially different from fair value, as the interest rates on the Company’s debt approximated rates currently available to the Company. The fair value of the Company’s convertible senior notes is determined based on inputs that are observable in the market and have been classified as Level 2 in the fair value hierarchy.

ITEM 4. Controls and Procedures.
Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended. Based on this evaluation, our principal executive officer and our principal financial officer concluded that our disclosure controls and procedures were effective as of the end of the quarterly period covered by this report.
There was no change in our internal control over financial reporting during the secondfirst quarter of fiscal 20212022 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION
ITEM 1.Legal Proceedings.
ITEM 1.Legal Proceedings.
See “Part I, Item 1. Financial Statements – Note 13 – Commitments and Contingencies – Legal and Other Proceedings” in this Form 10-Q for disclosures about our legal and other proceedings.
ITEM 1A. Risk Factors.
Other than the risk factor noted below, thereThere have not been any material changes fromin the Risk Factors as previously disclosed in our Annual Report on Form 10-K for the year ended February 1, 2020,January 30, 2021 filed with the SEC on April 1, 2020.9, 2021.
Our inability to successfully negotiate rent deferrals or other rent concessions with respect to retail stores that were closed or significantly impacted by the COVID-19 pandemic could result in financial damages, unwanted store closures or other consequences that could negatively impact our financial position, results of operations and cash flows.
Since April 2020, we have suspended rental payments and/or paid reduced rental amounts with respect to our retail stores that were closed or were experiencing drastically reduced customer traffic as a result of the COVID-19 pandemic. We are engaging in discussions with the affected landlords in an effort to achieve appropriate rent relief and other lease concessions and, in some cases, to terminate existing leases. However, there can be no assurances that those discussions will result in satisfactory agreements between the parties. Some landlords of these existing leases have alleged, and others in the future may allege (through notices, lawsuits or other legal actions), that the Company is in default, seeking financial damages, eviction, termination, acceleration of future rent payments or other remedies. While we believe that we have strong legal grounds to support our position for non-payment or partial payment of rent associated with the COVID-19 pandemic, there can be no assurances that such arguments will prevail or that we will be able to reach mutually agreeable terms with our landlords.  In addition, any disputes that arise could be costly to litigate and may jeopardize our ability to continue operations at the impacted locations. If any of these scenarios occur and are significant they could negatively impact our future consolidated financial position, results of operations and cash flows.

ITEM 2.Unregistered Sales of Equity Securities and Use of Proceeds.
ITEM 2.Unregistered Sales of Equity Securities and Use of Proceeds.
Items (a) and (b) are not applicable.
Item (c). Issuer Purchases of Equity Securities
The Company’s share repurchases during each fiscal month of the first quarter of fiscal 2022 were as follows:
PeriodTotal Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Number (or Approximate Dollar Value) of Shares That May Yet Be Purchased Under the Plans or ProgramsPeriodTotal Number of Shares PurchasedAverage Price Paid per ShareTotal Number of Shares Purchased as Part of Publicly Announced Plans or ProgramsMaximum Number (or Approximate Dollar Value) of Shares That May Yet Be Purchased Under the Plans or Programs
May 3, 2020 to May 30, 2020       
January 31, 2021 to February 27, 2021January 31, 2021 to February 27, 2021
Repurchase program1
—
 —
 —
 $86,650,889
Repurchase program1
— — — $47,834,956 
Employee transactions2
—
 —
 —
  
Employee transactions2
— — — 
May 31, 2020 to July 4, 2020       
February 28, 2021 to April 3, 2021February 28, 2021 to April 3, 2021
Repurchase program1
3,000,000
 $9.83
 3,000,000
 $57,166,265
Repurchase program1
— — — $47,834,956 
Employee transactions2
1,529
 $12.06
 —
  
Employee transactions2
595 $22.86 — 
July 5, 2020 to August 1, 2020       
April 4, 2021 to May 1, 2021April 4, 2021 to May 1, 2021
Repurchase program1
1,000,000
 $9.33
 1,000,000
 $47,834,956
Repurchase program1
— — — $47,834,956 
Employee transactions2
—
 —
 —
  
Employee transactions2
82 27.85 — 
Total       Total
Repurchase program1
4,000,000
 $9.70
 4,000,000
  
Repurchase program1
— — — 
Employee transactions2
1,529
 $12.06
 —
  
Employee transactions2
677 $23.47 — 

Notes:
______________________________________________________________________1On June 26, 2012, the Company’s Board of Directors authorized a program to repurchase, from time-to-time and as market and business conditions warrant, up to $500 million of the Company’s common stock. Repurchases under the program may be made on the open market or in privately negotiated transactions, pursuant to Rule 10b5-1 trading plans or other available means. There is no minimum or maximum number of shares to be repurchased under the program, which may be discontinued at any time, without prior notice.
Notes:2Consists of shares surrendered to, or withheld by, the Company in satisfaction of employee tax withholding obligations that occur upon vesting of restricted stock awards granted under the Company’s 2004 Equity Incentive Plan, as amended.
1
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On June 26, 2012, the Company’s Board of Directors authorized a program to repurchase, from time-to-time and as market and business conditions warrant, up to $500 million of the Company’s common stock. Repurchases under the program may be made on the open market or in privately negotiated transactions, pursuant to Rule 10b5-1 trading plans or other available means. There is no minimum or maximum number of shares to be repurchased under the program, which may be discontinued at any time, without prior notice.
2
Consists of shares surrendered to, or withheld by, the Company in satisfaction of employee tax withholding obligations that occur upon vesting of restricted stock awards/units granted under the Company’s 2004 Equity Incentive Plan, as amended.

ITEM 6.Exhibits.
ITEM 6.Exhibits.
Exhibit

Number
Description
3.13.1..
Restated Certificate of Incorporation of the Registrant (incorporated by reference from Amendment No. 3 to the Registrant’s Registration Statement on Form S-1 (Registration No. 333-4419) filed July 30, 1996).
3.23.2..
Third Amended and Restated Bylaws of the Registrant (incorporated by reference from the Registrant’s Annual Report on Form 10-K for the year ended February 3, 2018).
4.1.
Specimen Stock Certificate (incorporated by reference from Amendment No. 3 to the Registrant’s Registration Statement on Form S-1 (Registration No. 333-4419) filed July 30, 1996).
4.2.
Indenture, dated as of April 26, 2019, between the Registrant and U.S. Bank National Association, as trustee (including form of 2.00% Convertible Senior Notes due 2024) (incorporated by reference from the Registrant’s Current Report on Form 8-K filed April 29, 2019).
*†10.1.
Non-Qualified Stock Option Agreement dated as of June 11, 2020 between the Registrant and Carlos Alberini.
*†10.2.
Non-Qualified Stock Option Agreement dated as of June 11, 2020 between the Registrant and Paul Marciano.
*†10.3.
Non-Qualified Stock Option Agreement dated as of June 11, 2020 between the Registrant and Kathryn Anderson.
*†10.4.
Performance Share Award Agreement (licensing and company earnings from operations) dated as of June 29, 2020 between the Registrant and Paul Marciano.
*†10.5.
Performance Share Award Agreement (total shareholder return) dated as of June 29, 2020 for Carlos Alberini and Kathryn Anderson.
*†10.6.
Letter Agreement dated July 9, 2020 regarding amendment to Employment Agreement between the Registrant and Carlos Alberini.
*†10.7.
Letter Agreement dated July 9, 2020 regarding amendment to Offer Letter between the Registrant and Kathryn Anderson.
†31.1.
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
†31.2.
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
††32.1.
Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
††32.2.
Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
†101.INSXBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
†101.SCHXBRL Taxonomy Extension Schema Document
†101.CALXBRL Taxonomy Extension Calculation Linkbase Document
†101.DEFXBRL Taxonomy Extension Definition Linkbase Document
†101.LABXBRL Taxonomy Extension Label Linkbase Document
†101.PREXBRL Taxonomy Extension Presentation Linkbase Document
†104Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
_______________________________________________________________________________

*†Management Contract or Compensatory PlanFiled herewith
††Filed herewith
††Furnished herewith


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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Guess?, Inc.
Date:SeptemberJune 4, 20202021By:/s/ CARLOS ALBERINI
Carlos Alberini
Chief Executive Officer
Date:SeptemberJune 4, 20202021By:/s/ KATHRYN ANDERSON
Kathryn Anderson
Chief Financial Officer
(Principal Financial Officer)


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