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 ~~May 1, 2021~~April 30, 2022

☐ 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)

Delaware

95-3679695

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

~~1444 South Alameda Street~~Strada Regina 44

~~Los Angeles,~~

~~California~~

~~90021~~Bioggio, Switzerland CH-6934

(Address of principal executive offices and zip code)

~~(213) 765-3100~~+41 91 809 5000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.01 per share

GES

New 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

☐

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 May ~~28, 2021,~~27, 2022, the registrant had ~~64,923,786~~59,594,901 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

Item 1.	Financial Statements (unaudited)	1

	Condensed Consolidated Balance Sheets as of ~~May 1, 2021~~April 30, 202 2 and January ~~30, 2021~~29 , 20 2 2	1

	Condensed Consolidated Statements of Income ~~(Loss)~~ — Three Months Ended ~~May~~April 30 , 202 ~~1, 2021~~2 and May ~~2, 2020~~1 , 202 1	2

	Condensed Consolidated Statements of Comprehensive Income (Loss) — Three Months Ended April 30, 2022 and May 1, 2021 ~~and May 2, 2020~~	3

	Condensed Consolidated Statements of Cash Flows — Three Months Ended April 30, 202 2 and May 1, ~~2021 and May 2, 2020~~20 21	4

	Condensed Consolidated Statements of Stockholders’ Equity — Three Months Ended ~~May~~ 1April ~~, 2021 and May~~ 30, 202 2 ~~, 2020~~ and May 1, 202 1	5

	Notes to Condensed Consolidated Financial Statements	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3234

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	4751

Item 4.	Controls and Procedures	5054

PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	5155

Item 1A.	Risk Factors	5155

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	5156

Item 5.	Other Information	57

Item 6.	Exhibits	5258

Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. Financial Statements.

GUESS?, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)


		May 1, 2021		Jan 30, 2021			Apr 30, 2022		Jan 29, 2022
		(unaudited)					(unaudited)
ASSETS	ASSETS					ASSETS
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	395,128	$	469,110	Cash and cash equivalents	$	147,897	$	415,565

Accounts receivable, net	Accounts receivable, net	306,297		314,147		Accounts receivable, net	295,430		328,856
Inventories	Inventories	404,851		389,144		Inventories	483,927		462,295
Other current assets	Other current assets	67,907		60,123		Other current assets	96,128		77,378
Total current assets	Total current assets	1,174,183		1,232,524		Total current assets	1,023,382		1,284,094
Property and equipment, net	Property and equipment, net	211,354		216,196		Property and equipment, net	232,763		228,765
Goodwill	Goodwill	36,516		36,736		Goodwill	33,628		34,885
Deferred tax assets		71,979		72,417
Restricted cash		233		235
Deferred income tax assets						Deferred income tax assets	160,685		165,120

Operating lease right-of-use assets	Operating lease right-of-use assets	738,544		764,804		Operating lease right-of-use assets	653,611		685,799

Other assets	Other assets	145,200		142,956		Other assets	145,937		156,965
		$	2,378,009	$	2,465,868		$	2,250,006	$	2,555,628

LIABILITIES AND STOCKHOLDERS’ EQUITY	LIABILITIES AND STOCKHOLDERS’ EQUITY					LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:	Current liabilities:					Current liabilities:
Current portion of borrowings and finance lease obligations	Current portion of borrowings and finance lease obligations	$	17,917	$	38,710	Current portion of borrowings and finance lease obligations	$	77,929	$	43,379
Accounts payable	Accounts payable	257,926		300,427		Accounts payable	288,070		325,797
Accrued expenses and other current liabilities	Accrued expenses and other current liabilities	176,156		200,602		Accrued expenses and other current liabilities	214,022		253,182
Current portion of operating lease liabilities	Current portion of operating lease liabilities	224,676		222,800		Current portion of operating lease liabilities	178,470		195,516
Total current liabilities	Total current liabilities	676,675		762,539		Total current liabilities	758,491		817,874
Convertible senior notes, net	Convertible senior notes, net	261,609		258,614		Convertible senior notes, net	298,307		270,595
Long-term debt and finance lease obligations	Long-term debt and finance lease obligations	86,724		68,554		Long-term debt and finance lease obligations	51,560		60,970

Long-term operating lease liabilities	Long-term operating lease liabilities	632,574		662,657		Long-term operating lease liabilities	549,293		582,757
Other long-term liabilities	Other long-term liabilities	139,285		144,004		Other long-term liabilities	151,262		160,289
		1,796,867		1,896,368
Total liabilities						Total liabilities	1,808,913		1,892,485
Redeemable noncontrolling interests	Redeemable noncontrolling interests	3,949		3,920		Redeemable noncontrolling interests	9,854		9,500

Commitments and contingencies (Note 13)	Commitments and contingencies (Note 13)	0		0		Commitments and contingencies (Note 13)	0		0

Stockholders’ equity:	Stockholders’ equity:					Stockholders’ equity:
Preferred stock, $.01 par value. Authorized 10,000,000 shares; 0 shares issued and outstanding		0		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, respectively		649		642
Preferred stock, $.01 par value. Authorized 10,000,000 shares; no shares issued and outstanding						Preferred stock, $.01 par value. Authorized 10,000,000 shares; no shares issued and outstanding	—		—
Common stock, $.01 par value. Authorized 150,000,000 shares; issued 142,771,946 shares; outstanding 59,330,217 and 62,697,032 shares, as of April 30, 2022 and January 29, 2022, respectively						Common stock, $.01 par value. Authorized 150,000,000 shares; issued 142,771,946 shares; outstanding 59,330,217 and 62,697,032 shares, as of April 30, 2022 and January 29, 2022, respectively	593		627
Paid-in capital	Paid-in capital	550,831		553,111		Paid-in capital	417,448		565,024
Retained earnings	Retained earnings	1,039,581		1,034,823		Retained earnings	1,174,379		1,158,664
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(120,902)		(120,675)		Accumulated other comprehensive loss	(146,713)		(135,549)
Treasury stock, 77,860,227 and 78,563,517 shares as of May 1, 2021 and January 30, 2021, respectively		(915,964)		(924,238)
Treasury stock, 83,441,729 and 80,074,914 shares as of April 30, 2022 and January 29, 2022, respectively						Treasury stock, 83,441,729 and 80,074,914 shares as of April 30, 2022 and January 29, 2022, respectively	(1,042,644)		(966,108)
Guess?, Inc. stockholders’ equity	Guess?, Inc. stockholders’ equity	554,195		543,663		Guess?, Inc. stockholders’ equity	403,063		622,658
Nonredeemable noncontrolling interests	Nonredeemable noncontrolling interests	22,998		21,917		Nonredeemable noncontrolling interests	28,176		30,985
Total stockholders’ equity	Total stockholders’ equity	577,193		565,580		Total stockholders’ equity	431,239		653,643
		$	2,378,009	$	2,465,868		$	2,250,006	$	2,555,628

See accompanying notes to condensed consolidated financial statements.

Table of Contents

GUESS?, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME ~~(LOSS)~~

(in thousands, except per share data)

(unaudited)


		Three Months Ended				Three Months Ended
		May 1, 2021		May 2, 2020				Apr 30, 2022		May 1, 2021
Product sales	Product sales	$	498,477	$	247,317		Product sales	$	567,073	$	498,477
Net royalties	Net royalties	21,525		12,934			Net royalties	26,400		21,525
Net revenue	Net revenue	520,002		260,251			Net revenue	593,473		520,002
Cost of product sales	Cost of product sales	308,444		226,022			Cost of product sales	346,324		308,444
Gross profit	Gross profit	211,558		34,229			Gross profit	247,149		211,558
Selling, general and administrative expenses	Selling, general and administrative expenses	186,684		143,288			Selling, general and administrative expenses	209,831		186,684

Asset impairment charges	Asset impairment charges	441		52,972			Asset impairment charges	1,544		441
Net (gains) losses on lease modifications		(2,145)		456
Earnings (loss) from operations		26,578		(162,487)
Net gains on lease modifications							Net gains on lease modifications	(601)		(2,145)
Earnings from operations							Earnings from operations	36,375		26,578
Other income (expense):	Other income (expense):						Other income (expense):
Interest expense	Interest expense	(5,926)		(5,462)			Interest expense	(3,093)		(5,926)
Interest income	Interest income	374		610			Interest income	574		374
Other expense, net		(2,701)		(19,580)
Other, net							Other, net	(16,452)		(2,701)
Total other expense							Total other expense	(18,971)		(8,253)
		(8,253)		(24,432)
Earnings before income tax expense							Earnings before income tax expense	17,404		18,325
Income tax expense							Income tax expense	6,950		5,455
Net earnings							Net earnings	10,454		12,870
Net earnings attributable to noncontrolling interests							Net earnings attributable to noncontrolling interests	2,484		864
Net earnings attributable to Guess?, Inc.							Net earnings attributable to Guess?, Inc.	$	7,970	$	12,006

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 interests		864		(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):
Net earnings per common share attributable to common stockholders:							Net earnings per common share attributable to common stockholders:
Basic	Basic	$	0.19	$	(2.40)		Basic	$	0.13	$	0.19
Diluted	Diluted	$	0.18	$	(2.40)		Diluted	$	0.12	$	0.18

Weighted average common shares outstanding attributable to common stockholders (Note 3):
Weighted average common shares outstanding attributable to common stockholders:							Weighted average common shares outstanding attributable to common stockholders:
Basic	Basic	64,035		65,715			Basic	61,052		64,035
Diluted	Diluted	65,940		65,715			Diluted	74,469		65,940

See accompanying notes to condensed consolidated financial statements.

Table of Contents

GUESS?, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF

COMPREHENSIVE INCOME (LOSS)

(in thousands)

(unaudited)


		Three Months Ended				Three Months Ended
		May 1, 2021		May 2, 2020				Apr 30, 2022		May 1, 2021
Net earnings (loss)		$	12,870	$	(160,538)
Net earnings							Net earnings	$	10,454	$	12,870
Other comprehensive income (loss) (“OCI”):	Other comprehensive income (loss) (“OCI”):						Other comprehensive income (loss) (“OCI”):
Foreign currency translation adjustment	Foreign currency translation adjustment						Foreign currency translation adjustment
Losses arising during the period	Losses arising during the period	(2,216)		(18,499)			Losses arising during the period	(17,916)		(2,216)

Derivative financial instruments designated as cash flow hedges	Derivative financial instruments designated as cash flow hedges						Derivative financial instruments designated as cash flow hedges
Gains arising during the period	Gains arising during the period	1,781		3,536			Gains arising during the period	8,603		1,781
Less income tax effect	Less income tax effect	(228)		(356)			Less income tax effect	(1,040)		(228)
Reclassification to net earnings (loss) for (gains) losses realized		398		(1,988)
Reclassification to net earnings for (gains) losses realized							Reclassification to net earnings for (gains) losses realized	(1,613)		398
Less income tax effect	Less income tax effect	62		219			Less income tax effect	170		62

Defined benefit plans	Defined benefit plans						Defined benefit plans

Foreign currency and other adjustments	Foreign currency and other adjustments	129		0			Foreign currency and other adjustments	168		129
Less income tax effect	Less income tax effect	(13)		(1)			Less income tax effect	(16)		(13)
Net actuarial loss amortization	Net actuarial loss amortization	105		96			Net actuarial loss amortization	30		105
Prior service credit amortization	Prior service credit amortization	(17)		(16)			Prior service credit amortization	(23)		(17)
Less income tax effect	Less income tax effect	(11)		(9)			Less income tax effect	(3)		(11)
Total comprehensive income (loss)	Total comprehensive income (loss)	12,860		(177,556)			Total comprehensive income (loss)	(1,186)		12,860
Less comprehensive income (loss) attributable to noncontrolling interests:
Net earnings (loss)		864		(2,872)
Less comprehensive income attributable noncontrolling interests:							Less comprehensive income attributable noncontrolling interests:
Net earnings							Net earnings	2,484		864
Foreign currency translation adjustment	Foreign currency translation adjustment	217		(3,626)			Foreign currency translation adjustment	(476)		217
Amounts attributable to noncontrolling interests	Amounts attributable to noncontrolling interests	1,081		(6,498)			Amounts attributable to noncontrolling interests	2,008		1,081
Comprehensive income (loss) attributable to Guess?, Inc.	Comprehensive income (loss) attributable to Guess?, Inc.	$	11,779	$	(171,058)		Comprehensive income (loss) attributable to Guess?, Inc.	$	(3,194)	$	11,779

See accompanying notes to condensed consolidated financial statements.

Table of Contents

GUESS?, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)


		Three Months Ended					Three Months Ended
		May 1, 2021		May 2, 2020			Apr 30, 2022		May 1, 2021
Cash flows from operating activities:	Cash flows from operating activities:					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:
Net earnings						Net earnings	$	10,454	$	12,870
Adjustments to reconcile net earnings to net cash used in operating activities:						Adjustments to reconcile net earnings to net cash used in operating activities:
Depreciation and amortization	Depreciation and amortization	14,188		17,024		Depreciation and amortization	15,304		14,188
Amortization of debt discount	Amortization of debt discount	2,781		2,599		Amortization of debt discount	—		2,781
Amortization of debt issuance costs	Amortization of debt issuance costs	362		307		Amortization of debt issuance costs	354		362
Share-based compensation expense	Share-based compensation expense	4,060		5,786		Share-based compensation expense	4,052		4,060
Forward contract gains	Forward contract gains	(101)		(1,102)		Forward contract gains	(1,462)		(101)

Net loss from impairment and disposition of long-term assets	Net loss from impairment and disposition of long-term assets	1,011		53,483		Net loss from impairment and disposition of long-term assets	1,668		1,011
Other items, net	Other items, net	2,315		9,951		Other items, net	21,942		2,315
Changes in operating assets and liabilities:	Changes in operating assets and liabilities:					Changes in operating assets and liabilities:
Accounts receivable	Accounts receivable	4,373		84,667		Accounts receivable	20,317		4,373
Inventories	Inventories	(9,574)		(7,894)		Inventories	(37,698)		(9,574)
Prepaid expenses and other assets	Prepaid expenses and other assets	(15,328)		1,059		Prepaid expenses and other assets	(14,178)		(15,328)
Operating lease assets and liabilities, net	Operating lease assets and liabilities, net	(1,953)		27,704		Operating lease assets and liabilities, net	(16,434)		(1,953)
Accounts payable and accrued expenses	Accounts payable and accrued expenses	(67,724)		(93,294)		Accounts payable and accrued expenses	(59,351)		(67,724)
Other long-term liabilities	Other long-term liabilities	(923)		(1,305)		Other long-term liabilities	462		(923)
Net cash used in operating activities	Net cash used in operating activities	(53,643)		(61,553)		Net cash used in operating activities	(54,570)		(53,643)
Cash flows from investing activities:	Cash flows from investing activities:					Cash flows from investing activities:
Purchases of property and equipment	Purchases of property and equipment	(9,139)		(5,973)		Purchases of property and equipment	(28,742)		(9,139)
Proceeds from sale of business and long-term assets	Proceeds from sale of business and long-term assets	1,648		257		Proceeds from sale of business and long-term assets	147		1,648

Net cash settlement of forward contracts		(283)		0
Net cash settlement of forward contract						Net cash settlement of forward contract	118		(283)

Other investing activities	Other investing activities	(14)		0		Other investing activities	(719)		(14)
Net cash used in investing activities	Net cash used in investing activities	(7,788)		(5,716)		Net cash used in investing activities	(29,196)		(7,788)
Cash flows from financing activities:	Cash flows from financing activities:					Cash flows from financing activities:
Proceeds from borrowings	Proceeds from borrowings	5,651		245,961		Proceeds from borrowings	45,507		5,651
Repayments on borrowings and finance lease obligations	Repayments on borrowings and finance lease obligations	(9,804)		(31,884)		Repayments on borrowings and finance lease obligations	(18,736)		(9,804)

Purchase of equity forward contract						Purchase of equity forward contract	(105,000)		—
Dividends paid	Dividends paid	(7,511)		(958)		Dividends paid	(13,676)		(7,511)

Issuance of common stock, net of tax withholdings on vesting of stock awards		1,945		(3,036)

Net cash provided by (used in) financing activities		(9,719)		210,083
Noncontrolling interest capital distribution						Noncontrolling interest capital distribution	(4,817)		—
Issuance of common stock, net of income tax withholdings on vesting of stock awards						Issuance of common stock, net of income tax withholdings on vesting of stock awards	1,675		1,945
Purchase of treasury stock						Purchase of treasury stock	(81,747)		—
Net cash used in financing activities						Net cash used in financing activities	(176,794)		(9,719)
Effect of exchange rates on cash, cash equivalents and restricted cash	Effect of exchange rates on cash, cash equivalents and restricted cash	(2,834)		(8,014)		Effect of exchange rates on cash, cash equivalents and restricted cash	(7,108)		(2,834)
Net change in cash, cash equivalents and restricted cash	Net change in cash, cash equivalents and restricted cash	(73,984)		134,800		Net change in cash, cash equivalents and restricted cash	(267,668)		(73,984)
Cash, cash equivalents and restricted cash at the beginning of the year	Cash, cash equivalents and restricted cash at the beginning of the year	469,345		284,828		Cash, cash equivalents and restricted cash at the beginning of the year	415,565		469,345
Cash, cash equivalents and restricted cash at the end of the period	Cash, cash equivalents and restricted cash at the end of the period	$	395,361	$	419,628	Cash, cash equivalents and restricted cash at the end of the period	$	147,897	$	395,361

Supplemental cash flow data:	Supplemental cash flow data:					Supplemental cash flow data:
Interest paid	Interest paid	$	3,977	$	3,960	Interest paid	$	4,030	$	3,977
Income taxes paid, net of refunds	Income taxes paid, net of refunds	$	5,346	$	590	Income taxes paid, net of refunds	$	7,214	$	5,346

Non-cash investing and financing activity:	Non-cash investing and financing activity:					Non-cash investing and financing activity:
Change in accrual of property and equipment						Change in accrual of property and equipment	$	2,005	$	66
Assets acquired under finance lease obligations	Assets acquired under finance lease obligations	$	2,323	$	86	Assets acquired under finance lease obligations	$	1,182	$	2,323

See accompanying notes to condensed consolidated financial statements.

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 Stock Treasury Stock
Shares Amount Paid-in
Capital Retained Earnings Accumulated Other Comprehensive Loss Shares Amount Nonredeemable
Noncontrolling
Interests Total
Balance at January 30, 2021 64,230,162 $ 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 plans 689,653 7 (6,417) — — (690,492) 8,123 — 1,713
Issuance of stock under Employee Stock Purchase Plan 12,798 — 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, 2021 64,932,613 $ 649 $ 550,831 $ 1,039,581 $ (120,902) 77,860,227 $ (915,964) $ 22,998 $ 577,193
(unaudited)


	For the three months ended April 30, 2022
	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 January 29, 2022	62,697,032	$	627	$	565,024	$	1,158,664	$	(135,549)	80,074,914	$	(966,108)	$	30,985	$	653,643
Cumulative adjustment from adoption of new accounting guidance	—	—		(43,078)		21,355		—		—	—		—		(21,723)
Net earnings	—	—		—		7,970		—		—	—		2,484		10,454
Other comprehensive loss, net of income tax of ($889)	—	—		—		—		(11,164)		—	—		(476)		(11,640)
Issuance of common stock under stock compensation plans	411,785	4		(3,608)		—		—		(411,785)	5,074		—		1,470
Issuance of stock under Employee Stock Purchase Plan	10,976	—		69		—		—		(10,976)	137		—		206
Share-based compensation	—	—		4,003		49		—		—	—		—		4,052
Dividends, net of forfeitures on non-participating securities	—	—		—		(13,659)		—		—	—		—		(13,659)
Share repurchases	(3,789,576)	(38)		38		—		—		3,789,576	(81,747)		—		(81,747)
Noncontrolling interest capital distribution	—	—		—		—		—		—	—		(4,817)		(4,817)



Equity forward contract issuance	—	—		(105,000)		—		—		—	—		—		(105,000)
Balance at April 30, 2022	59,330,217	$	593	$	417,448	$	1,174,379	$	(146,713)	83,441,729	$	(1,042,644)	$	28,176	$	431,239

See accompanying notes to condensed consolidated financial statements.

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 Stock Treasury Stock
Shares Amount Paid-in
Capital Retained Earnings Accumulated Other Comprehensive Loss Shares Amount Nonredeemable
Noncontrolling
Interests Total
Balance at February 1, 2020 65,848,510 $ 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 effect 1,763,311 18 (24,264) — — (1,770,223) 21,017 — (3,229)
Issuance of stock under Employee Stock Purchase Plan 32,427 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, 2020 67,644,248 $ 676 $ 544,319 $ 973,006 $ (153,302) 75,216,787 $ (893,045) $ 15,135 $ 486,789
(unaudited)


	For the three months ended May 1, 2021
	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 January 30, 2021	64,230,162	$	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 plans	689,653	7		(6,417)		—		—		(690,492)	8,123		—		1,713
Issuance of stock under Employee Stock Purchase Plan	12,798	—		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, 2021	64,932,613	$	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.

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GUESS?, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~May 1, 2021~~April 30, 2022

(unaudited)

(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.

Interim 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 ~~May 1, 2021~~April 30, 2022 and January ~~30, 2021,~~29, 2022, and the condensed consolidated statements of income, ~~(loss),~~ comprehensive income (loss), cash flows and stockholders’ equity for the three months ended April 30, 2022 and May 1, ~~2021 and May 2, 2020.~~2021. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with 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 months ended ~~May 1, 2021~~April 30, 2022 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 January ~~30, 2021.~~29, 2022.

Fiscal Periods

The three months ended ~~May 1, 2021~~April 30, 2022 had the same number of days as the three months ended May ~~2, 2020.~~1, 2021. All references herein to “fiscal ~~2022,”~~2022” and “fiscal 2021” ~~and “fiscal 2020”~~ represent the results of the 52-week fiscal ~~years ending~~year ended January 29, 2022 and January 30, 2021, ~~and February 1, 2020,~~ respectively. All references herein to “fiscal 2023” represent the 52-week fiscal year ending January 28, 2023.

COVID-19 Business Update

The ~~coronavirus (or “COVID-19”)~~COVID-19 pandemic is continuing to negatively impact certain regions of the Company’s ~~businesses. During~~business, especially in Asia where the Company’s operations for the quarter ended April 30, 2022 were impacted by capacity restrictions and temporary store closures. Overall, this resulted in the closure of a limited number of its directly operated stores as of April 30, 2022, mostly in China, the impact of which was minimal to the Company’s first quarter ~~of fiscal 2022,~~results.

The COVID-19 crisis has also contributed to disruptions in the overall global supply chain, leading to industry-wide product delays and higher product and freight costs. The Company ~~experienced significantly higher net revenue compared~~has been working actively to mitigate these headwinds to the ~~first quarter~~extent possible through a number 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. global supply chain initiatives.

In light of the ~~current environment,~~fluid nature of the pandemic, the Company continues to carefully monitor global and regional developments and respond appropriately. The Company also continues to strategically manage expenses in order to protect ~~profitability.~~

~~In late fiscal 2021,~~profitability and to mitigate, to the ~~Company incurred a new round~~extent possible, the effect 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.~~supply chain disruptions.

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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~~2022 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 above, the COVID-19 pandemic ~~has materially~~negatively impacted the Company’s results during the three months ended April 30, 2022 and May 1, ~~2021 and May 2, 2020.~~2021. The Company’s operations could continue to be impacted in ways the Company is not able to predict today due to the evolving 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.

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 15ten 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 ~~May 1, 2021,~~April 30, 2022, the Company had ~~$6.1~~$5.1 million and ~~$15.9~~$13.5 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 ~~$6.6~~$5.1 million and ~~$17.1~~$14.3 million of deferred royalties related to these upfront payments included in accrued expenses and other current liabilities and other long-term liabilities, respectively, at January ~~30, 2021.~~29, 2022. During the three months ended April 30, 2022 and May 1, 2021, ~~and May 2, 2020,~~ the Company recognized ~~$3.5~~$3.4 million and ~~$3.6~~$3.5 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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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

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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, 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 ~~May 1, 2021,~~April 30, 2022, approximately ~~48%~~45% of the Company’s total net trade accounts receivable and ~~60%~~61% 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.

Recently ~~Issued~~Adopted Accounting Guidance

~~In March 2020, the Financial Accounting Standards Board (“FASB”) issued authoritative guidance to provide temporary optional expedients~~Convertible Instruments 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 up to December 31, 2022. Contracts in an Entity’s Own Equity

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~~adopted 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.~~instruments on January 30, 2022, using the modified retrospective transition method. The cumulative effect of the accounting change increased the carrying amount of the 2.00% convertible senior notes due 2024 (the “Notes”) by $27.5 million, reduced deferred income tax liabilities by $5.8 million, reduced additional paid-in capital by $43.1 million and increased retained earnings by $21.4 million, with no restatement of prior periods. Refer to Note 3 for the impact on the earnings per share calculation and Note 10 for the impact on the Notes.

Modifications or Exchanges of Freestanding Equity-Classified Written Call Options

The Financial Accounting Standards Board (“FASB”) issued authoritative guidance as to how an issuer should account for a modification of the terms or conditions or an exchange of a freestanding equity-classified written call option (i.e., a warrant) that remains classified in equity after modification or exchange of the original instrument for a new instrument. An issuer should measure the effect of a modification or exchange as the difference between the fair value of the modified or exchanged warrant and the fair value of that warrant immediately before modification or exchange and then apply a recognition model that comprises four categories of transactions and the corresponding accounting treatment for each category (equity issuance, debt origination, debt modification, and modifications unrelated to equity issuance and debt origination or modification). The Company adopted this guidance on January 30, 2022 which had no impact on the Company’s consolidated financial statement presentation or disclosures.

Recently Issued Accounting Guidance

Reference Rate Reform

The FASB issued guidance to provide temporary optional expedients to ease the potential burden in accounting for reference rate reform. This guidance ~~removes major separation models required under current guidance which will enable more convertible debt instruments~~provides optional expedients and exceptions for applying generally accepted accounting principles to contract modifications and hedging relationships, subject to certain criteria, referencing LIBOR or another reference rate expected to be ~~reported~~discontinued. The FASB issued subsequent amendments to further clarify the scope of optional expedients and exceptions to derivatives affected by the transition. The guidance is intended to help stakeholders during the global market-wide reference rate transition period.

The Company identified and will modify, if necessary, its loans and other financial instruments with attributes directly or indirectly influenced by LIBOR. The Company determined, of its current LIBOR references as outlined in Note 9 Borrowings and Finance Lease Obligations, Note 15 Fair Value Measurements, and Note 16 Derivative Financial Instruments, only the obligations under Mortgage Debt,

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Credit Facilities, and Interest Rate Swap Agreements are impacted by this guidance. The Company does not expect this guidance to have a ~~single liability instrument with no separate accounting for embedded conversion features.~~material impact on its consolidated financial position, results of operations or cash flows.

Government Assistance

In November 2021, the FASB issued authoritative guidance to increase the transparency of government assistance. This guidance is effective for ~~fiscal years~~financial statements issued for annual periods beginning after December ~~31,~~15, 2021 ~~which will be the Company’s first quarter of fiscal 2023, on either a full or modified retrospective basis. Early~~with early adoption ~~is permitted for fiscal years beginning after December 31, 2020, which will be the Company’s first quarter of fiscal 2022.~~permitted. The Company is currently evaluating ~~the impact of~~this guidance and does not expect the adoption of this guidance to have a material impact on its consolidated financial ~~statements and related disclosures.~~statements.

(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 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 ~~33%~~32%.

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In addition to the amounts as disclosed below, the Company has estimated additional operating lease commitments of approximately ~~$5.0~~$25.4 million for leases where the Company has not yet taken possession of the underlying asset as of ~~May 1, 2021.~~April 30, 2022. 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 ~~May 1, 2021.~~April 30, 2022.

The components of leases are ~~as follows~~ (in thousands):


			May 1, 2021		Jan 30, 2021				Apr 30, 2022		Jan 29, 2022
Assets	Assets	Balance Sheet Location					Assets	Balance Sheet Location
Operating	Operating	Operating lease right-of-use assets	$	738,544	$	764,804	Operating	Operating lease right-of-use assets	$	653,611	$	685,799
Finance	Finance	Property and equipment, net	21,405		20,595		Finance	Property and equipment, net	20,557		21,898
Total lease assets	Total lease assets		$	759,949	$	785,399	Total lease assets		$	674,168	$	707,697

Liabilities	Liabilities	Balance Sheet Location					Liabilities	Balance Sheet Location
Current:	Current:						Current:
Operating	Operating	Current portion of operating lease liabilities	$	224,676	$	222,800	Operating	Current portion of operating lease liabilities	$	178,470	$	195,516
Finance	Finance	Current portion of borrowings and finance lease obligations	4,551		4,698		Finance	Current portion of borrowings and finance lease obligations	5,729		5,806
Noncurrent:	Noncurrent:						Noncurrent:
Operating	Operating	Long-term operating lease liabilities	632,574		662,657		Operating	Long-term operating lease liabilities	549,293		582,757
Finance	Finance	Long-term debt and finance lease obligations	17,870		17,365		Finance	Long-term debt and finance lease obligations	16,050		17,137
Total lease liabilities	Total lease liabilities		$	879,671	$	907,520	Total lease liabilities		$	749,542	$	801,216

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The components of lease costs are ~~as follows~~ (in thousands):


			Three Months Ended				Three Months Ended
		Income Statement Location	May 1, 2021		May 2, 2020				Income Statement Location	Apr 30, 2022		May 1, 2021
Operating lease costs	Operating lease costs	Cost of product sales	$	46,684	$	55,369		Operating lease costs	Cost of product sales	$	44,372	$	46,684
Operating lease costs	Operating lease costs	Selling, general and administrative expenses	6,357		5,176			Operating lease costs	Selling, general and administrative expenses	6,301		6,357
Operating lease costs1, 2		Net (gains) losses on lease modifications	(2,145)		456
Operating lease costs1								Operating lease costs1	Net gains on lease modifications	(601)		(2,145)
Finance lease costs	Finance lease costs							Finance lease costs
Amortization of leased assets1, 3		Cost of product sales	11		12
Amortization of leased assets1, 3		Selling, general and administrative expenses	1,361		864
Amortization of leased assets								Amortization of leased assets	Cost of product sales	19		11
Amortization of leased assets								Amortization of leased assets	Selling, general and administrative expenses	1,502		1,361
Interest on lease liabilities	Interest on lease liabilities	Interest expense	366		282			Interest on lease liabilities	Interest expense	287		366
Variable lease costs4		Cost of product sales	15,739		14,348
Variable lease costs4		Selling, general and administrative expenses	574		579
Variable lease costs2								Variable lease costs2	Cost of product sales	21,996		15,739
Variable lease costs2								Variable lease costs2	Selling, general and administrative expenses	956		574
Short-term lease costs	Short-term lease costs	Cost of product sales	105		239			Short-term lease costs	Cost of product sales	96		105
Short-term lease costs	Short-term lease costs	Selling, general and administrative expenses	1,171		1,789			Short-term lease costs	Selling, general and administrative expenses	1,558		1,171
Total lease costs1			$	70,223	$	79,114
Total lease costs								Total lease costs		$	76,486	$	70,223

Notes:

1~~The Company has made certain reclassifications to prior period amounts to conform to the current period presentation.~~

2During the three months ended April 30, 2022 and May 1, 2021, ~~and May 2, 2020,~~ net ~~(gains) losses~~gains 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).

42During the three months ended April 30, 2022, and May 1, 2021, ~~and May 2, 2020,~~ variable lease costs included certain rent concessions of approximately ~~$6.1~~$1.3 million and ~~$2.7~~$6.1 million, respectively, received by the Company, primarily in ~~Europe, related to the COVID-19 pandemic.~~Europe.

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Maturities of the Company’s operating and finance lease liabilities as of ~~May 1, 2021~~April 30, 2022 are ~~as follows~~ (in thousands):

Operating Leases
Maturity of Lease Liabilities Non-Related Parties Related Parties Finance Leases Total
20221
$ 193,515 $ 5,965 $ 4,294 $ 203,774
2023 181,879 7,260 5,974 195,113
2024 146,015 7,678 5,887 159,580
2025 103,560 7,321 3,946 114,827
2026 73,458 6,928 3,034 83,420
After 2026 170,672 36,410 3,158 210,240
Total lease payments 869,099 71,562 26,293 966,954
Less: Interest 71,415 11,996 3,872 87,283
Present value of lease liabilities $ 797,684 $ 59,566 $ 22,421 $ 879,671

~~Notes:~~


	Operating Leases
Maturity of Lease Liabilities	Non-Related Parties		Related Parties		Finance Leases		Total
Fiscal 2023	$	151,147	$	6,164	$	5,246	$	162,557
Fiscal 2024	161,805		7,826		6,711		176,342
Fiscal 2025	117,452		7,204		4,894		129,550
Fiscal 2026	86,607		6,811		4,142		97,560
Fiscal 2027	68,756		7,513		2,346		78,615
After fiscal 2027	154,161		28,431		705		183,297
Total lease payments	739,928		63,949		24,044		827,921
Less: Interest	66,182		9,932		2,265		78,379
Present value of lease liabilities	$	673,746	$	54,017	$	21,779	$	749,542

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.

Other supplemental information is ~~as follows (dollars in~~(in thousands):

Lease Term and Discount Rate

~~May 1, 2021~~Apr 30, 2022

Weighted-average remaining lease term

Operating leases

~~6.1 Years~~6.0 years

Finance leases

~~4.8 Years~~4.1 years

Weighted-average discount rate

Operating leases

~~3.5%~~3.4%

Finance leases

~~6.8%~~5.2%

Three Months Ended
Supplemental Cash Flow Information May 1, 2021 May 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

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	Three Months Ended
Supplemental Cash Flow Information	Apr 30, 2022		May 1, 2021
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	63,896	$	53,428


New operating ROU assets obtained in exchange for lease liabilities	$	35,378	$	22,596

Impairment

During the three months ended April 30, 2022 there were no ROU asset impairment charges. During the three months ended May 1, 2021 there ~~was minimal~~were immaterial ROU asset impairment charges recorded. During the three months ended May 2, 2020, the Company recorded ROU asset impairment charges of $28.2 million related primarily to 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. Refer to Note 15 for more information on the Company’s impairment testing.

(3)Earnings ~~(Loss)~~ per Share

On January 30, 2022, the Company adopted new authoritative guidance which simplifies the accounting for convertible instruments and contracts in an entity’s own equity using the modified retrospective method. Following adoption, diluted EPS related to the Notes is calculated using the if-converted method. The number of dilutive shares is based on the initial conversion rate associated with the Notes.

Prior to adoption, the Company applied the treasury stock method when calculating the potential dilutive effect of the Notes, if any. As the Company expects to settle the principal amount of its outstanding ~~convertible senior notes~~Notes in cash and any excess in ~~shares. As a result, upon conversion of the convertible senior notes,~~shares, only the amounts in excess of the principal amount ~~are~~were considered in diluted earnings per share, ~~under the treasury stock method,~~ if applicable. ~~See~~Refer to Note 1 and Note 10 for more information regarding the ~~Company’s convertible senior notes.~~

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Notes.

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				Three Months Ended
		May 1, 2021		May 2, 2020				Apr 30, 2022		May 1, 2021
Net earnings (loss) attributable to Guess?, Inc.		$	12,006	$	(157,666)
Net earnings attributable to Guess?, Inc.							Net earnings attributable to Guess?, Inc.	$	7,970	$	12,006
Less net earnings attributable to nonvested restricted stockholders	Less net earnings attributable to nonvested restricted stockholders	130		0			Less net earnings attributable to nonvested restricted stockholders	56		130
Net earnings (loss) attributable to common stockholders		$	11,876	$	(157,666)
Net earnings attributable to common stockholders							Net earnings attributable to common stockholders	7,914		11,876
Add interest expense related to the Notes							Add interest expense related to the Notes	902		—
Net earnings attributable to common stockholders used in diluted computations							Net earnings attributable to common stockholders used in diluted computations	$	8,816	$	11,876

Weighted average common shares used in basic computations	Weighted average common shares used in basic computations	64,035		65,715			Weighted average common shares used in basic computations	61,052		64,035

Effect of dilutive securities: Stock options and restricted stock units1		1,905		0
Effect of dilutive securities:							Effect of dilutive securities:
Stock options and restricted stock units							Stock options and restricted stock units	1,666		1,905
The Notes							The Notes	11,751		—
Weighted average common shares used in diluted computations	Weighted average common shares used in diluted computations	65,940		65,715			Weighted average common shares used in diluted computations	74,469		65,940

Net earnings (loss) per common share attributable to common stockholders:
Net earnings per common share attributable to common stockholders:							Net earnings per common share attributable to common stockholders:
Basic	Basic	$	0.19	$	(2.40)		Basic	$	0.13	$	0.19
Diluted	Diluted	$	0.18	$	(2.40)		Diluted	$	0.12	$	0.18

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~~Notes:~~

1For the three months ended May 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 April 30, 2022 and May 1, 2021, ~~and May 2, 2020,~~ equity awards granted for ~~390,243~~1,183,823 and ~~3,157,824,~~390,243, 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. ~~There~~For the three months ended April 30, 2022, the Company excluded 300,000 nonvested stock units which were 0subject to the achievement of market-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 April 30, 2022. For the three months ended May 1, 2021, there were no nonvested stock units 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 as the respective conditions were achieved as of May 1, 2021. The Company excluded 227,729 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 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 months ended May 1, 2021 and 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 approximately 11.6 million shares of the Company’s common shares at an initial strike price of $46.88 per share were outstanding as of April 30, 2022 and May 1, ~~2021 and May 2, 2020.~~2021. 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 months ended April 30, 2022 and May 1, 2021.

(4)Stockholders' Equity

Share Repurchase Program

During fiscal 2022, the Board of Directors terminated its previous 2012 $500 million share repurchase program (the “2012 Share Repurchase Program”) and authorized a new $200 million share repurchase program (the “2021 Share Repurchase Program”). On March 14, 2022, the Board of Directors expanded its repurchase authorization under the 2021 Share Repurchase Program by $100 million. Repurchases 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 and ~~May 2, 2020.~~the program may be discontinued at any time, without prior notice.

On March 18, 2022, pursuant to existing share repurchase authorizations, the Company entered into an accelerated share repurchase agreement (the “2022 ASR Contract”) with a financial institution (the “2022 ASR Counterparty”) to repurchase an aggregate of $175.0 million of the Company’s common stock. Under the 2022 ASR Contract, the Company made a payment of $175.0 million to the 2022 ASR Counterparty and received an initial delivery of approximately 3.3 million shares of common stock on March 21, 2022, representing approximately 40% ($70.0 million) of the total shares expected to be repurchased under the 2022 ASR Contract. The remaining balance of $105.0 million was classified as an equity forward contract and recorded in additional paid-in capital within shareholders’ equity.

The exact number of shares the Company will repurchase under the 2022 ASR Contract will be based generally upon the average daily volume weighted average price of the common stock during the repurchase period, less a discount. At settlement, under certain circumstances, the 2022 ASR Counterparty may be required to deliver additional shares of common stock to the Company, or under certain circumstances, the Company may be required either to deliver shares of common stock or to make a cash payment to the 2022 ASR Counterparty. Final settlement of the transactions under the 2022 ASR Contract is expected to be completed by the end of July 2022. The terms of the 2022 ASR Contract are subject to adjustment, including, but not limited to, adjustments arising if the Company were to enter into or announce certain types of transactions or to take certain corporate actions. The 2022 ASR Contract contains the principal terms and provisions governing the accelerated share repurchases, including, but not limited to, the mechanism used to determine the number of shares that will be delivered, the required timing of delivery of the shares, the circumstances under which the 2022 ASR Counterparty is permitted to make adjustments to valuation and calculation periods and various acknowledgments, representations and warranties made by the Company and the 2022 ASR Counterparty to one another.

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~~(4)Stockholders’ Equity~~

During the three months ended April 30, 2022, the Company repurchased 3,789,576 shares under the Company’s 2021 Share Repurchase Program

~~During~~ at an aggregate cost of $81.7 million, which is inclusive of the shares repurchased under the 2022 ASR Contract. There were no shares repurchased under the 2012 Share Repurchase Program during the three months ended May 1, ~~2021 and May 2, 2020, there were no shares repurchased under the Company’s Share Repurchase Program.~~2021. As of ~~May 1, 2021,~~April 30, 2022, the Company had remaining authority under the ~~program~~2021 Share Repurchase Program to purchase ~~$47.8~~$62.3 million of its common stock.

Dividends

The following ~~table~~ sets forth the cash dividend declared per share:

Three Months Ended
May 1, 2021 May 2, 2020
Cash dividend declared per share $ 0.1125 $ 0


	Three Months Ended
	Apr 30, 2022		May 1, 2021
Cash dividend declared per share	$	0.225	$	0.1125

~~During~~In accordance with the ~~first quarter~~terms of ~~fiscal 2021,~~the indenture governing the Notes, the Company ~~announced that its Board of Directors had deferred~~has adjusted the ~~decision with respect to~~conversion rate and the ~~payment of its quarterly cash dividend, in light~~conversion price of the ~~uncertainties related to the COVID-19 pandemic. The Company resumed paying its~~Notes for quarterly ~~cash dividend of~~dividends exceeding $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.~~share.

For each of the periods presented, dividends paid also included the impact from vesting of restricted stock units that are considered non-participating securities and are only entitled to dividend payments once the 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 the 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, are ~~as follows~~ (in thousands):

Three Months Ended May 1, 2021
Foreign Currency Translation Adjustment Derivative Financial Instruments Designated as Cash Flow Hedges Defined Benefit Plans Total
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)



	Foreign Currency Translation Adjustment		Derivative Financial Instruments Designated as Cash Flow Hedges		Defined Benefit Plans		Total

	Three Months Ended Apr 30, 2022
Balance at January 29, 2022	$	(135,861)	$	7,280	$	(6,968)	$	(135,549)
Gains (losses) arising during the period	(17,440)		7,563		152		(9,725)
Reclassification to net earnings for (gains) losses realized	—		(1,443)		4		(1,439)
Net other comprehensive income (loss)	(17,440)		6,120		156		(11,164)
Balance at April 30, 2022	$	(153,301)	$	13,400	$	(6,812)	$	(146,713)

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Three Months Ended May 2, 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 period (14,873) 3,180 (1) (11,694)
Reclassification to net earnings for (gains) losses realized 0 (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)


	Three Months Ended May 1, 2021

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	—		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)

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Details on reclassifications out of accumulated other comprehensive income (loss) to net earnings ~~(loss)~~ are ~~as follows~~ (in thousands):


		Three Months Ended				Location of (Gain) Loss Reclassified from Accumulated OCI into Earnings (Loss)		Three Months Ended									Location of (Gain) Loss Reclassified from Accumulated OCI into Earnings
		May 1, 2021		May 2, 2020						Apr 30, 2022				May 1, 2021				Location of (Gain) Loss Reclassified from Accumulated OCI into Earnings

Derivative financial instruments designated as cash flow hedges:	Derivative financial instruments designated as cash flow hedges:						Derivative financial instruments designated as cash flow hedges:
Foreign exchange currency contracts	Foreign exchange currency contracts	$	462	$	(1,991)				Cost of product sales		Foreign exchange currency contracts	$	(1,674)		$	462			Cost of product sales

Interest rate swap	Interest rate swap	(64)		3					Interest expense		Interest rate swap	61			(64)				Interest expense
Less income tax effect	Less income tax effect	62		219					Income tax expense (benefit)		Less income tax effect	170			62				Income tax expense
		460		(1,769)								(1,443)			460

Defined benefit plans:	Defined benefit plans:										Defined benefit plans:
Net actuarial loss amortization	Net actuarial loss amortization	105		96					Other income (expense)		Net actuarial loss amortization	30			105				Other expense
Prior service credit amortization	Prior service credit amortization	(17)		(16)					Other income (expense)		Prior service credit amortization	(23)			(17)				Other expense
Less income tax effect	Less income tax effect	(11)		(9)					Income tax expense (benefit)		Less income tax effect	(3)			(11)				Income tax expense
		77		71								4			77
Total reclassifications during the period	Total reclassifications during the period	$	537	$	(1,698)						Total reclassifications during the period	$	(1,439)		$	537

(5)Accounts Receivable

Accounts receivable is summarized as follows (in thousands):


		May 1, 2021		Jan 30, 2021			Apr 30, 2022		Jan 29, 2022
Trade	Trade	$	283,787	$	288,782	Trade	$	262,770	$	299,160
Royalty	Royalty	20,187		20,565		Royalty	32,539		33,790
Other	Other	16,929		19,000		Other	10,313		6,945
		320,903		328,347			305,622		339,895
Less allowances	Less allowances	14,606		14,200		Less allowances	10,192		11,039
		$	306,297	$	314,147		$	295,430	$	328,856

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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(6)Inventories

Inventories consist of the following (in thousands):


		May 1, 2021		Jan 30, 2021			Apr 30, 2022		Jan 29, 2022
Raw materials	Raw materials	$	217	$	53	Raw materials	$	1,951	$	1,228
Work in progress	Work in progress	24		43		Work in progress	3		3
Finished goods	Finished goods	404,610		389,048		Finished goods	481,973		461,064
		$	404,851	$	389,144		$	483,927	$	462,295

The ~~above~~ balances include an allowance to write down inventories to the lower of cost or net realizable value of ~~$36.9~~$29.0 million and ~~$35.5~~$31.8 million as of ~~May 1, 2021~~April 30, 2022 and January ~~30, 2021,~~29, 2022, respectively.

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(7)Income Taxes

Effective Income Tax Rate

Income tax expense for the interim periods was computed using the income 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 39.9% for the three months ended April 30, 2022 compared to 29.8% for the three months ended May 1, 2021, compared to a benefit of 14.1% for the three months ended May 2, 2020. During the three months ended May 2, 2020, the Company recognized a tax benefit of approximately $11.8 million from a tax rate2021. The change related to the ability to carryback net operating losses to tax years with a higher federal corporate tax rate as allowed under the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act enacted in March 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. Excluding the impact of these items, the increase in the effective income tax rate was primarily due ~~primarily to~~to: (1) a ~~change~~shift in the ~~mix~~distribution of ~~statutory~~ earnings ~~for~~among the ~~three months ended May 1, 2021,~~Company’s tax jurisdictions compared to the same prior-year ~~period.~~period; and (2) losses during the current quarter in certain tax jurisdictions for which the Company did not recognize an income tax benefit.

~~On March 27, 2020,~~Intra-Entity Transaction

During the third quarter of fiscal 2022, the Company completed an intra-entity transfer of intellectual property rights from a U.S. entity to a wholly-owned Swiss subsidiary, more closely aligning the Company’s intellectual property rights with its business operations. This transaction resulted in a taxable gain in the U.S. ~~government enacted~~The U.S. taxable gain generated by this intercompany transfer of intellectual property was primarily offset by the ~~CARES Act to provide economic relief from~~recognition of a deferred income tax asset in the COVID-19 pandemic. The CARES Act includes certain provisions that affect the 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.Swiss subsidiary.

Unrecognized Income Tax Benefit

From time-to-time, the Company is subject to routine income and other income tax audits on various income tax matters around the world in the ordinary course of business. As of ~~May 1, 2021, several~~April 30, 2022, no major income tax audits were ~~ongoing~~ongoing.

As of April 30, 2022 and January 29, 2022, the Company had $59.2 million and $57.5 million, respectively, of aggregate accruals for ~~various periods in multiple jurisdictions. These audits could conclude with~~uncertain income tax positions, including penalties and interest. This includes an ~~assessment~~accrual of ~~additional tax liability~~$19.9 million for the ~~Company. These assessments could arise as the result of timing or permanent differences and could be material~~estimated transition tax (excluding interest) related to the ~~Company’s net~~2017 Tax Cuts and Jobs Act (the “Tax Reform”) and $20.6 million for the intra-entity transfer of intellectual property rights, substantially offset by the related deferred income ~~or future cash flows. In the event the Company disagrees with an assessment~~tax benefit from a ~~taxing authority, the Company may elect~~U.S. entity 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”).~~wholly-owned Swiss subsidiary. The Company reviews and updates the estimates used in the accrual for uncertain income tax positions, as appropriate, as more definitive information or interpretations become available from income taxing authorities, ~~upon~~and on the completion of income tax audits, ~~upon~~the receipt of assessments, ~~upon~~ expiration of statutes of ~~limitation,~~limitations, or ~~upon~~ occurrence of other events.

During the second quarter of fiscal 2021, the Company became aware of a foreign withholding income 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.

Indefinite Reinvestment Assertion

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 indefinite reinvestment of foreign earnings. If the Company determines that all or a portion of such foreign earnings are no longer indefinitely reinvested, the Company may be subject to additional foreign withholding taxes and U.S. state income taxes, beyond the one-time transition tax. As of April 30, 2022, the Company determined that approximately $12.7 million of such foreign earnings are no longer indefinitely reinvested. The incremental tax cost to repatriate these earnings to the U.S. is immaterial. The Company intends to indefinitely reinvest the remaining earnings from the Company’s foreign subsidiaries for which a deferred income 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.

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The Company had aggregate accruals for uncertain tax positions, including penalties and interest, of $40.8 million and $40.0 million as of May 1, 2021 and 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 May 1, 2021 and January 30, 2021.

(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 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.

Net revenue and earnings (loss)from operations are summarized ~~as follows~~ (in thousands):


	Three Months Ended
	Apr 30, 2022		May 1, 2021
Net revenue:
Americas Retail	$	166,485	$	155,535
Americas Wholesale	68,357		45,430
Europe	276,009		241,852
Asia	56,222		55,660
Licensing	26,400		21,525
Total net revenue	$	593,473	$	520,002
Earnings (loss) from operations:
Americas Retail	$	14,266	$	20,274
Americas Wholesale	17,397		11,555
Europe	17,890		4,198
Asia	(3,487)		(1,808)
Licensing	24,444		19,431
Total segment earnings from operations	70,510		53,650
Corporate overhead	(33,192)		(28,776)

Asset impairment charges1	(1,544)		(441)
Net gains on lease modifications2	601		2,145

Total earnings from operations	$	36,375	$	26,578

______________________________________________________________________

Three Months Ended
May 1, 2021 May 2, 2020
Net revenue:
Americas Retail $ 155,535 $ 74,584
Americas Wholesale 45,430 25,875
Europe 241,852 106,473
Asia 55,660 40,385
Licensing 21,525 12,934
Total net revenue $ 520,002 $ 260,251
Earnings (loss) from operations:
Americas Retail $ 20,274 $ (36,673)
Americas Wholesale 11,555 1,624
Europe 4,198 (44,406)
Asia (1,808) (22,777)
Licensing 19,431 10,094
Total segment earnings (loss) from operations 53,650 (92,138)
Corporate overhead (28,776) (16,921)
Asset impairment charges1
(441) (52,972)
Net gains (losses) on lease modifications2
2,145 (456)
Total earnings (loss) from operations $ 26,578 $ (162,487)

Notes:

1During the three months ended ~~May 1, 2021 and May 2, 2020 ,~~April 30, 2022, the Company recognized asset impairment charges related primarily to property and equipment of certain retail locations resulting from under-performance and expected store closures. During the three months ended May 1, 2021, the Company recognized asset impairment ofcharges related primarily to property and equipment and certain operating lease ROU assets ~~and impairment~~ of ~~property and equipment related to~~ certain retail ~~locations~~stores resulting from lower revenue and future cash flow projections from the ongoing effects of the COVID-19 pandemic. and expected store closures. Refer to Note 2 and Note 15 for more information regarding these asset impairment charges.

2During the three months ended April 30, 2022 and May 1, 2021, ~~and May 2, 2020,~~ the Company recorded net gains ~~(losses)~~ on lease modifications related primarily to the early termination of certain lease ~~agreements for certain of the Company’s retail locations.~~agreements.

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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				Three Months Ended
		May 1, 2021		May 2, 2020				Apr 30, 2022		May 1, 2021
Net revenue:	Net revenue:						Net revenue:
U.S.	U.S.	$	157,066	$	69,465		U.S.	$	169,127	$	157,066
Italy	Italy	47,553		19,352			Italy	56,366		47,553
Canada							Canada	40,578		26,640
South Korea							South Korea	35,884		27,809
Germany	Germany	34,678		11,362			Germany	35,841		34,678
South Korea		27,809		21,224
Canada		26,640		16,677
Spain	Spain	25,507		12,996			Spain	30,113		25,507
Other foreign countries		179,224		96,241
Other countries							Other countries	199,164		179,224
Total product sales	Total product sales	498,477		247,317			Total product sales	567,073		498,477
Net royalties	Net royalties	21,525		12,934			Net royalties	26,400		21,525
Net revenue	Net revenue	$	520,002	$	260,251		Net revenue	$	593,473	$	520,002

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

Borrowings and finance lease obligations are summarized ~~as follows~~ (in thousands):


		May 1, 2021		Jan 30, 2021			Apr 30, 2022		Jan 29, 2022
Term loans	Term loans	$	55,951	$	56,765	Term loans	$	43,832	$	48,253
Finance lease obligations	Finance lease obligations	22,421		22,063		Finance lease obligations	21,779		22,943
Mortgage debt	Mortgage debt	18,346		18,507		Mortgage debt	17,693		17,860
Borrowings under credit facilities	Borrowings under credit facilities	5,097		7,332		Borrowings under credit facilities	42,662		12,201
Other	Other	2,826		2,597		Other	3,523		3,092
		104,641		107,264			129,489		104,349
Less current installments	Less current installments	17,917		38,710		Less current installments	77,929		43,379
Long-term debt and finance lease obligations	Long-term debt and finance lease obligations	$	86,724	$	68,554	Long-term debt and finance lease obligations	$	51,560	$	60,970

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~~ fiscal ~~year ended January 30,~~ 2021. These loans are primarily unsecured, have remaining terms ranging from ~~one-~~one~~to-five~~-to-three years and ~~provide~~incur interest at annual ~~interest~~ rates ranging between ~~0.5%~~1.3% to 2.2%. As of ~~May 1, 2021~~April 30, 2022 and January ~~30, 2021,~~29, 2022, the Company had outstanding borrowings of ~~$56.0~~$43.8 million and ~~$56.8~~$48.3 million under these borrowing arrangements, respectively.

Finance Lease Obligations

During fiscal 2018, the Company ~~entered into a finance lease related to equipment used in~~began the relocation of its European distribution center ~~located in~~to 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~~The Company has also entered into finance leases for equipment used in its European distribution ~~centers located in Italy.~~centers. These finance lease obligations totaled ~~$19.2~~$17.7 million and ~~$18.4~~$19.6 million as of ~~May 1, 2021~~April 30, 2022 and January ~~30, 2021,~~29, 2022, respectively.

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The Company also has smaller finance leases related primarily to computer hardware and software. As of ~~May 1, 2021~~April 30, 2022 and January ~~30, 2021,~~29, 2022, these finance lease obligations totaled ~~$3.2~~$4.1 million and ~~$3.7~~$3.4 million, respectively.

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Mortgage Debt

During fiscal 2017, the Company entered into a ~~ten-year~~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

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 other lenders (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 ~~May 1, 2021,~~April 30, 2022, the Company could have borrowed up to ~~$109~~$110 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. As of ~~May 1, 2021,~~April 30, 2022, the Company had ~~$2.1~~$9.6 million in outstanding standby letters of credit, 0 outstanding documentary letters of credit and 0$40.0 million outstanding borrowings under the Credit Facility. As of January 29, 2022, the Company had $10.1 million in outstanding standby letters of credit, no outstanding documentary letters of credit and no 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 ~~May 1, 2021,~~April 30, 2022 and January 29, 2022, the Company had 0no outstanding borrowings, 0no outstanding documentary letters of credit, and ~~$113.5~~$119.6 million and $126.9 million available for future borrowings under these ~~agreements.~~agreements, respectively. The agreements are denominated primarily in euros and ~~provide for~~incur interest at annual ~~interest~~ rates ranging ~~from 1.05%~~between 0.9% to 1.1%. On May 5, 2022, the Company entered into a €250 million revolving credit facility through a European subsidiary, which replaced the European short-term borrowing arrangements referenced above. Refer to Note 17 for further information.

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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.

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The Company had ~~$5.1 million and $7.3~~$1.9 million in outstanding borrowings under this agreement as of ~~May 1, 2021~~April 30, 2022 and $12.2 million in outstanding borrowings under this agreement as of January 29, 2022.

The Company, through its Japan subsidiary, maintains a short-term uncommitted bank borrowing agreement that provides for a borrowing capacity up to $3.9 million, primarily for working capital purposes. The Company had $0.8 million outstanding borrowings under this agreement as of April 30, ~~2021, respectively.~~2022 and no outstanding borrowings as of January 29, 2022.

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

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”)~~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.~~year. 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. In accordance with the terms of the indenture governing the Notes, the Company has adjusted the conversion rate and the conversion price of the Notes for quarterly dividends exceeding $0.1125 per share (currently $25.53). 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. As of ~~May 1, 2021,~~April 30, 2022, none of the conditions allowing holders of the Notes to convert had been met. The Company expects to settle the principal amount of the Notes in 2024 in cash and any excess in shares.

~~The~~On January 30, 2022, the Company adopted new authoritative guidance which simplifies the accounting for convertible instruments and contracts in an entity’s own equity using the modified retrospective method. Prior to adoption, the Company separated the Notes into liability and equity components. The liability component was recorded at fair value. The equity component represented the difference between the proceeds from the issuance of the Notes and the fair value of the liability component. The equity component was not subject to remeasurement as long as the equity component continued to meet the conditions for equity classification. The excess of the liability component over its carrying amount (“debt discount”) iswas being amortized to interest expense over the term of the Notes. ~~The equity component is not remeasured as long as it continues~~During the three months ended May 1, 2021, the Company recorded $2.8 million of interest expense related to ~~meet~~ the ~~conditions~~amortization of the debt discount. As a result of the adoption of the authoritative guidance on January 30, 2022, the Company derecognized the remaining unamortized debt discount on the Notes and recorded no interest expense related to the amortization of the debt discount during the three months ended April 30, 2022. Refer to Note 1 for ~~equity classification.~~further information regarding this recently adopted guidance.

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Debt issuance costs ~~related to the Notes~~ were comprised of $3.8 million of discounts and commissions payable to the initial purchasers ~~of $3.8 million~~ and third-party offering costs of approximately $1.5 million. ~~The 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~~Notes balance on the Company’s condensed consolidated balance sheets. These costs are being amortized to interest expense over the term of the Notes.

~~During the three months ended May 1, 2021 and May 2, 2020, the Company recorded $2.8 million and $2.6 million, respectively, of interest expense related to the amortization of the debt discount.~~

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The Notes consist of the following ~~components~~ (in thousands):


		May 1, 2021		Jan 30, 2021			Apr 30, 2022		Jan 29, 2022
Liability component:	Liability component:					Liability component:
Principal	Principal	$	300,000	$	300,000	Principal	$	300,000	$	300,000
Unamortized debt discount		(35,841)		(38,623)
Unamortized debt discount1						Unamortized debt discount1	—		(27,498)
Unamortized issuance costs	Unamortized issuance costs	(2,550)		(2,763)		Unamortized issuance costs	(1,693)		(1,907)
Net carrying amount	Net carrying amount	$	261,609	$	258,614	Net carrying amount	$	298,307	$	270,595

Equity component, net1		$	42,320	$	42,320
Equity component, net2						Equity component, net2	$	(759)	$	42,320

Notes:

1~~Included~~Due to adoption of new authoritative guidance, unamortized debt discount was derecognized on January 30, 2022.

2As a result of adoption of new authoritative guidance on January 30, 2022, the equity component was eliminated and recorded as an adjustment to retained earnings. As of April 30, 2022, the balance is associated with convertible bond hedge issuance costs and deferred taxes, which are not impacted by the adoption. As of January 29, 2022, the balance was 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 ~~May 1, 2021~~April 30, 2022 and January ~~30, 2021,~~29, 2022, the fair value of the Notes, net of unamortized debt discount and debt issuance costs, ~~of the Notes~~ was approximately ~~$339.5~~$331.7 million and ~~$303.5~~$303.1 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 million shares of the Company’s common stock at an initial strike price of $46.88 per share. The Company received $28.1 million in cash proceeds from the sale of these warrants. 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~~In accordance with the terms of the convertible note hedge confirmations and warrant confirmations, respectively, the Company ~~received $28.1 million in cash proceeds from~~has adjusted the ~~sale of these warrants.~~strike prices with respect to the convertible note hedges and the warrants for quarterly dividends exceeding $0.1125 per share (currently $46.42). 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. The convertible note hedges and warrants are recorded in stockholders’ equity, are not accounted for as derivatives and are not remeasured each reporting period.

~~The~~As of April 30, 2022, there was no deferred income tax liability in connection with the debt discount. As of January 29, 2022, the Company had a deferred tax liability of ~~$8.8~~$6.2 million in connection with the debt discount ~~associated with~~included in deferred income tax assets on the ~~Notes~~Company’s condensed consolidated balance sheet. As of both April 30, 2022 and January 29, 2022, the Company had a deferred income tax asset of ~~$9.7~~$6.9 million in connection with the convertible note hedge ~~transactions for each of the periods ended May 1, 2021 and January 30, 2021.~~transactions. The net deferred income tax impact was included in deferred income tax assets on the Company’s condensed consolidated balance sheets.

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(11)Share-Based Compensation

The following ~~table~~ summarizes the share-based compensation expense recognized under all of the Company’s stock plans (in thousands):

Three Months Ended
May 1, 2021 May 2, 2020
Stock options $ 907 $ 695
Stock awards/units 3,073 4,926
Employee Stock Purchase Plan 80 165
Total share-based compensation expense $ 4,060 $ 5,786

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	Three Months Ended
	Apr 30, 2022		May 1, 2021
Stock options	$	600	$	907
Stock awards/units	3,372		3,073
Employee Stock Purchase Plan	80		80
Total share-based compensation expense	$	4,052	$	4,060

Unrecognized compensation cost related to nonvested stock options and nonvested stock awards/units totaled approximately ~~$7.1~~$2.9 million and ~~$22.5~~$20.3 million, respectively, as of ~~May 1, 2021.~~April 30, 2022. This cost is expected to be recognized over a weighted average period of ~~1.7~~1.5 years.

~~Annual Grants~~

~~On April 13, 2021, the Company made an annual grant of 367,440 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-~~two~~to-three~~-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 three months ended ~~May 1, 2021:~~April 30, 2022:


		Number of Units	Weighted Average Grant Date Fair Value			Number of Units	Weighted Average Grant Date Fair Value
Nonvested at January 30, 2021		769,632	$	16.15
Nonvested at January 29, 2022					Nonvested at January 29, 2022	643,813	$	18.78
Granted	Granted	0	0		Granted	—	—
Vested	Vested	(166,547)	14.06		Vested	(314,239)	17.31
Forfeited	Forfeited	(186,714)	21.83		Forfeited	(11,718)	26.40
Nonvested at May 1, 2021		416,371	$	14.45
Nonvested at April 30, 2022					Nonvested at April 30, 2022	317,856	$	19.95

Market-Based Awards

The Company has granted certain nonvested stock units subject to market-based vesting conditions to select executive officers. ~~The~~These market-based awards include (i) units where 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 and (ii) units scheduled to vest based on the attainment of certain absolute stock price levels over a four-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 three months ended ~~May 1, 2021:~~April 30, 2022:

Number of Units Weighted Average Grant Date Fair Value
Nonvested at January 30, 2021 509,012 $ 8.67
Granted1
41,955 20.28
Vested1
(125,822) 20.28
Nonvested at May 1, 2021 425,145 $ 6.38

~~Notes:~~

1~~As 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.~~


	Number of Units	Weighted Average Grant Date Fair Value
Nonvested at January 29, 2022	877,813	$	14.22
Granted	—	—
Vested	—	—
Forfeited	(87,871)	9.39
Nonvested at April 30, 2022	789,942	$	14.76

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(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, or 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 Entities”).

Leases

The Company leases warehouse and administrative facilities, including the Company’s North American corporate headquarters in Los Angeles, California, from partnerships affiliated with the Marciano Entities and certain of their affiliates. There were 4 of these leases in effect as of ~~May 1, 2021~~April 30, 2022 with expiration or option exercise dates ranging from calendar years ~~2021~~2023 to 2030.

During the first quarter of fiscal 2022, the Company entered into a nine-year lease extension with the related party landlord for its 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 previously existing Paris lease remain the same.

Aggregate lease costs recorded under these 4 related party leases were approximately ~~$2.2~~$2.3 million and ~~$1.3~~$2.2 million for the three months ended April 30, 2022 and May 1, 2021, ~~and May 2, 2020,~~ respectively. The Company believes the terms of the related party leases have not been significantly affected by the fact the Company and the lessors are related.

Aircraft Arrangements

The Company periodically charters aircraft owned by the Marciano Entities through informal arrangements with the Marciano Entities and independent third-party management companies contracted by such Marciano Entities to manage their aircraft. The total fees paid under these arrangements for the three months ended April 30, 2022 and May 1, 2021 ~~and May 2, 2020~~ were approximately ~~$0.9~~$0.6 million and ~~$0.2~~$0.9 million, respectively.

Minority Investment

The Company owns a 30% interest in a privately held men’s footwear company (the “Footwear Company”) in which the 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~~April 30, 2022 and January ~~30, 2021,~~29, 2022, the Company had a note receivable of $0.2 million included in other assets in its condensed consolidated balance sheets related to outstanding borrowings by the Footwear Company under this revolving credit facility.

Vendor Purchases

The Company purchases faux fur products from a privately-held fashion accessories company (the “Fashion Company”). Mr. Maurice Marciano, Mr. Paul Marciano and Mr. Carlos Alberini own on a combined basis 20% of the outstanding common equity interests in the Fashion Company (with the Marcianos jointly owning 16% and Mr. Alberini owning 4%). The total payments made by the Company to the Fashion Company were approximately $1.2 million and $0.2 million for the three months ended April 30, 2022 and May 1, 2021, respectively. The Company believes that the price paid by the Company for the Fashion Company’s products and the terms of the transactions between the Company and the Fashion Company have not been affected by this passive investment of Messrs. Marcianos and Mr. Alberini in the Fashion Company.

(13) Commitments and Contingencies

Investment Commitments

As of ~~May 1, 2021,~~April 30, 2022, the Company had an unfunded commitment to invest ~~€2.3~~€1.0 million ($~~2.8~~1.0 million) in a private equity fund. Refer to Note 15 for further information. On May 4, 2022, the Company committed an additional €10.0 million to the private equity fund.

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

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operations or cash flows. Even if such an impact could be material, the 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 ($~~11.8~~10.3 million), including potential penalties and interest. The Company strongly disagreed with the ICA’s positions and therefore filed appeals with the Milan First Degree Tax Court (“MFDTC”). Those appeals were split into a number of different cases that were then heard by different sections of the MFDTC. The MFDTC ruled in favor of the Company on all of these appeals. The ICA subsequently appealed €9.7 million ($~~11.7~~10.2 million) of these favorable MFDTC judgments with the Appeals Court. To date, €8.5 million ($~~10.2~~9.0 million) have been decided in favor of the Company and €1.2 million ($~~1.4~~1.3 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 has 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 ($~~0.5~~0.4 million) have been decided in favor of the Company based on the merits of the case and €1.1 million ($~~1.3~~1.2 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~~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. Paul 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 has been moved to arbitration and is ~~still at an early~~currently in the discovery stage. Mr. Paul 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. Paul Marciano and the Company. ~~Mr. Marciano and the Company also dispute these allegations fully.~~ Each individual who contacted the Company in March 2021 and April 2021 is represented by the same attorney who represents the plaintiff in the January ~~lawsuit, though~~2021 action. Though no complaint ~~has been~~was filed with respect to ~~either~~the allegations in the March 2021 letter and Mr. Paul Marciano and the Company disputed each of those allegations fully, in order to avoid the cost of litigation and without admitting liability or fault, the Company and Mr. Paul Marciano entered into a settlement agreement with the individual who sent the March 2021 letter, resolving the claims for an aggregate total amount of $300,000 in July 2021.

On October 22, 2021, the individual who sent the April 2021 letter filed an action against Mr. Paul Marciano and the Company in the United States District Court for the Central District of California (Jane Doe 3 v. Paul Marciano, et al.). The complaint asserts a claim under the Trafficking Victims Protection Act based on allegations that the individual was treated improperly by Mr. Paul Marciano. The complaint seeks an unspecified amount of compensatory damages, punitive damages and attorneys’ fees. Though Mr. Paul Marciano and the Company also disputed these ~~allegations.~~claims fully, in order to avoid the cost of litigation and without admitting liability or fault, the Company and Mr. Paul Marciano entered into a settlement agreement with the individual who sent the April 2021 letter and filed the October 2021 action, resolving the claims for an aggregate total amount of $120,000 in March 2022.

On March 16, 2022, the plaintiff in the January 2021 action and another former model for the Company filed an action against those individuals who were on the Company’s Board of Directors in January 2019 (the “Defendants”) in the California Superior Court in Los Angeles (Jane Doe 1 and Jane Doe 2 v. Maurice

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Marciano, et al.). The complaint asserts that the Defendants aided and abetted the alleged improper behavior of Mr. Paul Marciano described in the January 2021 action and discomfort felt by the other individual during interactions with Mr. Paul Marciano described in the March 2022 action. The complaint seeks an unspecified amount of general damages and attorneys’ fees and seeks an order for the Defendants to remove Mr. Paul Marciano from the Board of Directors and relieve him of his day-to-day duties at the Company. The individual plaintiffs in the March 2022 action are represented by the same attorney who represents the plaintiffs in the January 2021 and October 2021 actions.

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”). 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 ~~$0.9~~$0.5 million and $0.4 million as of ~~May 1, 2021~~April 30, 2022 and January ~~30, 2021.~~29, 2022, respectively.

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 Russian 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~~$9.4 million and $9.1 million as of April 30, 2022 and January 29, 2022, respectively. The parties are evaluating the potential purchase by the Company of the 30% interest held by the noncontrolling interest holder in light of the various sanctions recently imposed by the United States and European governments with respect to Russia.

The redeemable noncontrolling interests of the Guess Brazil and Guess CIS put arrangements are recorded at the greater of their carrying values, adjusted for their share of the allocation of income or loss, dividends and foreign currency translation adjustments, or redemption values. During the three months ended April 30, 2022 and May 1, 2021, ~~and January 30, 2021.~~the Company had no redeemable noncontrolling interest redemption value adjustment.

A reconciliation of the total carrying amount of redeemable noncontrolling interests is ~~as follows~~ (in thousands):


		Three Months Ended					Three Months Ended
		May 1, 2021		May 2, 2020			Apr 30, 2022		May 1, 2021
Beginning balance	Beginning balance	$	3,920	$	4,731	Beginning balance	$	9,500	$	3,920

Foreign currency translation adjustment	Foreign currency translation adjustment	29		(797)		Foreign currency translation adjustment	354		29

Ending balance	Ending balance	$	3,949	$	3,934	Ending balance	$	9,854	$	3,949

(14)Defined Benefit Plans

Supplemental Executive Retirement Plan

The Company’s Supplemental Executive Retirement Plan (“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~~non-

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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 cash surrender values of the insurance policies were ~~$71.6~~$67.1 million and ~~$72.1~~$70.9 million as of ~~May 1, 2021~~April 30, 2022 and January ~~30, 2021,~~29, 2022, 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 (losses)~~losses of $3.3 million during the three months ended April 30, 2022 and immaterial unrealized losses in other expense during the three months ended May 1, ~~2021 and $(3.1) million in other income (expense) during the three months ended May 2, 2020.~~2021. The projected benefit obligation was ~~$52.1~~$49.3 million and ~~$52.3~~$49.4 million as of ~~May 1, 2021~~April 30, 2022 and January ~~30, 2021,~~29, 2022, respectively, and was included in accrued expenses and other current liabilities and other long-term liabilities in the Company’s condensed consolidated balance sheets depending on the expected timing of payments. SERP benefit payments of $0.5 million ~~and $0.6 million~~ were made during each of the three months ended April 30, 2022 and May 1, ~~2021 and May 2, 2020, respectively.~~2021.

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. 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 ~~May 1, 2021~~April 30, 2022 and January ~~30, 2021,~~29, 2022, the foreign pension plans had a total projected benefit obligation of ~~$40.6~~$40.8 million and ~~$41.5~~$42.7 million, respectively, and plan assets held in independent investment fiduciaries of ~~$34.3~~$36.3 million and ~~$35.0~~$38.0 million, respectively. The net liability of ~~$6.3~~$4.5 million and ~~$6.4~~$4.7 million was included in other long-term liabilities in the Company’s condensed consolidated balance sheets as of ~~May 1, 2021~~April 30, 2022 and January ~~30, 2021,~~29, 2022, respectively.

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The components of net periodic defined benefit pension cost related to the Company’s defined benefit plans are ~~as follows~~ (in thousands):


									SERP		Foreign Pension Plans		Total
		Three Months Ended May 1, 2021
		SERP		Foreign Pension Plans		Total			Three Months Ended Apr 30, 2022
Service cost	Service cost	$	0	$	790	$	790	Service cost	$	—	$	775	$	775
Interest cost	Interest cost	289		19		308		Interest cost	333		57		390
Expected return on plan assets	Expected return on plan assets	0		(52)		(52)		Expected return on plan assets	—		(70)		(70)
Net amortization of unrecognized prior service credit	Net amortization of unrecognized prior service credit	0		(17)		(17)		Net amortization of unrecognized prior service credit	—		(23)		(23)
Net amortization of actuarial losses	Net amortization of actuarial losses	20		85		105		Net amortization of actuarial losses	17		13		30
Net periodic defined benefit pension cost	Net periodic defined benefit pension cost	$	309	$	825	$	1,134	Net periodic defined benefit pension cost	$	350	$	752	$	1,102


		Three Months Ended May 2, 2020
		SERP		Foreign Pension Plans		Total			Three Months Ended May 1, 2021
Service cost	Service cost	$	0	$	764	$	764	Service cost	$	—	$	790	$	790
Interest cost	Interest cost	319		8		327		Interest cost	289		19		308
Expected return on plan assets	Expected return on plan assets	0		(45)		(45)		Expected return on plan assets	—		(52)		(52)
Net amortization of unrecognized prior service credit	Net amortization of unrecognized prior service credit	0		(16)		(16)		Net amortization of unrecognized prior service credit	—		(17)		(17)
Net amortization of actuarial losses	Net amortization of actuarial losses	10		86		96		Net amortization of actuarial losses	20		85		105
Net periodic defined benefit pension cost	Net periodic defined benefit pension cost	$	329	$	797	$	1,126	Net periodic defined benefit pension cost	$	309	$	825	$	1,134

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(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 are 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 (in thousands):


		Fair Value Measurements								Fair Value Measurements									Fair Value Measurements								Fair Value Measurements
		at May 1, 2021								at Jan 30, 2021									at Apr 30, 2022								at Jan 29, 2022
Recurring Fair Value Measures	Recurring Fair Value Measures	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total		Recurring Fair Value Measures	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets:	Assets:																	Assets:
Foreign exchange currency contracts	Foreign exchange currency contracts	$	0	$	353	$	0	$	353	$	0	$	0	$	0	$	0	Foreign exchange currency contracts	$	—	$	14,286	$	—	$	14,286	$	—	$	7,133	$	—	$	7,133

Interest rate swap																		Interest rate swap	—		764		—		764		—		—		—		—

Total	Total	$	0	$	353	$	0	$	353	$	0	$	0	$	0	$	0	Total	$	—	$	15,050	$	—	$	15,050	$	—	$	7,133	$	—	$	7,133
Liabilities:	Liabilities:																	Liabilities:
Foreign exchange currency contracts		$	0	$	2,580	$	0	$	2,580	$	0	$	4,481	$	0	$	4,481

Interest rate swap	Interest rate swap	0		665		0		665		0		999		0		999		Interest rate swap	—		—		—		—		—		74		—		74
Deferred compensation obligations	Deferred compensation obligations	0		16,845		0		16,845		0		15,612		0		15,612		Deferred compensation obligations	—		15,326		—		15,326		—		15,794		—		15,794
Total	Total	$	0	20,090		$	0	$	20,090	$	0	$	21,092	$	0	$	21,092	Total	$	—	$	15,326	$	—	$	15,326	$	—	$	15,868	$	—	$	15,868

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 ~~€2.5~~€3.7 million ($~~3.0~~3.9 million) and ~~€2.4~~€3.6 million ($~~3.0~~4.0 million) in other assets in the Company’s condensed consolidated balance sheets related to its investment in a private equity fund ~~for the periods ended May 1, 2021~~as of April 30, 2022 and January ~~30, 2021,~~29, 2022, 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. As of ~~May 1, 2021,~~April 30, 2022, the Company had an unfunded commitment to invest an additional ~~€2.3~~€1.0 million ($~~2.8~~1.0 million) in the private equity fund. On May 4, 2022, the Company committed an additional €10.0 million to the private equity fund.

The fair values of the Company’s debt instruments (see Note 9) are based on the amount of future cash flows associated with each instrument discounted using the Company’s incremental borrowing rate. As of ~~May 1, 2021~~April 30, 2022 and January ~~30, 2021,~~29, 2022, the carrying value was not materially different from fair value, as the

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interest rates on the Company’s debt approximated rates currently available to the Company. The fair value of the Company’s ~~convertible senior notes~~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 Company also evaluates impairment risk for retail locations that are expected to be closed in the foreseeable future. The Company has flagship locations that 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 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~~negatively impacted the Company’s financial results during the three months ended April 30, 2022 and May 1, 2021, ~~and May 2, 2020~~ and could continue to impact the Company’s operations in ways the Company is not able to predict today due to the evolving 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 ~~$0.4~~$1.5 million and ~~$53.0~~$0.4 million during the three months ended April 30, 2022 and May 1, 2021, ~~and May 2, 2020,~~ respectively. The Company recognized ~~minimal~~no impairment charges on ROU ~~asset~~assets in the three months ended April 30, 2022 and immaterial impairment charges on ROU assets in the three months ended May 1, ~~2021 and $28.2 million in impairment of certain operating lease ROU assets primarily in North America and, to a lesser extent, Europe during the three months ended May 2, 2020.~~2021. The Company ~~also~~ recognized ~~$0.4~~$1.5 million and ~~$24.8~~$0.4 million in impairment of property and equipment related to certain retail locations primarily in ~~North~~ ~~America,~~ Europe and Asia driven by ~~lower revenue~~under-performance and ~~future cash flow projections from the ongoing effects of the COVID-19 pandemic~~expected store closures during the three months ended April 30, 2022 and May 1, 2021, ~~and May 2, 2020,~~

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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 COVID-19 pandemic materially impacted the Company’s businesses beginning in the first quarter of fiscal 2021. As a result, the Company concluded that a triggering event had occurred resulting in the need to perform quantitative interim impairment testing on the Company’s goodwill and flagship assets as of May 2, 2020. The testing concluded that the fair values of the respective reporting units exceeded their carrying 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~~three months of fiscal ~~2022.~~2023. During the three months ended ~~May 1, 2021,~~April 30, 2022, 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.

(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 ~~May 1, 2021,~~April 30,

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2022, 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 also 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).

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Summary of Derivative Instruments

The fair value of derivative instruments in the condensed consolidated balance sheets is ~~as follows~~ (in thousands):


		Derivative Balance Sheet Location	Fair Value at May 1, 2021		Fair Value at Jan 30, 2021			Fair Value at Apr 30, 2022		Fair Value at Jan 29, 2022		Derivative Balance Sheet Location
ASSETS:	ASSETS:						ASSETS:
Derivatives designated as hedging instruments:
Cash flow hedges:
Foreign exchange currency contracts		Other current assets/Other assets	$	353	$	0

Total			$	353	$	0
LIABILITIES:
Derivatives designated as hedging instruments:	Derivatives designated as hedging instruments:						Derivatives designated as hedging instruments:
Cash flow hedges:	Cash flow hedges:						Cash flow hedges:
Foreign exchange currency contracts	Foreign exchange currency contracts	Accrued expenses	$	1,663	$	3,326	Foreign exchange currency contracts	$	11,912	$	5,999	Other current assets/ Other assets
Interest rate swap	Interest rate swap	Other long-term liabilities	665		999		Interest rate swap	764		—		Other assets
Total derivatives designated as hedging instruments	Total derivatives designated as hedging instruments		2,328		4,325		Total derivatives designated as hedging instruments	12,676		5,999
Derivatives not designated as hedging instruments:	Derivatives not designated as hedging instruments:						Derivatives not designated as hedging instruments:
Foreign exchange currency contracts	Foreign exchange currency contracts	Accrued expenses	917		1,155		Foreign exchange currency contracts	2,374		1,134		Other current assets
Total							Total	$	15,050	$	7,133
LIABILITIES:							LIABILITIES:
Derivatives designated as hedging instruments:							Derivatives designated as hedging instruments:
Cash flow hedges:							Cash flow hedges:

Interest rate swap							Interest rate swap	$	—	74		Other long-term liabilities
Total derivatives designated as hedging instruments							Total derivatives designated as hedging instruments	—		74
Derivatives not designated as hedging instruments:							Derivatives not designated as hedging instruments:
Foreign exchange currency contracts							Foreign exchange currency contracts	—		—		Accrued expenses and other current liabilities

Total	Total		$	3,245	$	5,480	Total	$	—	$	74

Derivatives Designated as Hedging Instruments

Foreign Exchange Currency Contracts Designated as Cash Flow Hedges

During the three months ended ~~May 1, 2021,~~April 30, 2022, the Company purchased U.S. dollar forward contracts in Europe totaling US$40.0 million that were designated as cash flow hedges. As of ~~May 1, 2021,~~April 30, 2022, the Company

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had forward contracts outstanding for its European operations of US$~~126.0~~149.0 million to hedge forecasted merchandise purchases, which are expected to mature over the next 15 months.

As of ~~May 1, 2021,~~April 30, 2022, accumulated other comprehensive income (loss) related to foreign exchange currency contracts included a $12.8 million net unrealized ~~loss of approximately $2.3 million,~~gain, net of tax, of which $8.6 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 January ~~30, 2021,~~29, 2022, the Company had forward contracts outstanding for its European operations of US$~~100.0~~146.0 million that were designated as cash flow hedges.

Interest Rate Swap Agreement Designated as Cash Flow Hedge

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The following ~~table~~ summarizes the gains (losses) before income taxes recognized on ~~the~~ derivative instruments designated as cash flow hedges in OCI and net earnings ~~(loss)for the three months ended May 1, 2021 and May 2, 2020~~ (in thousands):


															Gains Recognized in OCI							Location of Gains (Losses) Reclassified from Accumulated OCI into Earnings		Gains (Losses) Reclassified from Accumulated OCI into Earnings
		Gains (Losses) Recognized in OCI				Location of Gains (Losses) Reclassified from Accumulated OCI into Earnings		Gains (Losses) Reclassified from Accumulated OCI into Earnings
		Three Months Ended					Three Months Ended					Apr 30, 2022					May 1, 2021						Apr 30, 2022		May 1, 2021
		May 1, 2021		May 2, 2020			May 1, 2021		May 2, 2020			Three Months Ended
Derivatives designated as cash flow hedges:	Derivatives designated as cash flow hedges:															Derivatives designated as cash flow hedges:
Foreign exchange currency contracts	Foreign exchange currency contracts	$	1,511	$	4,410		Cost of product sales		$	(462)			$	1,991		Foreign exchange currency contracts	$	7,826		$	1,511		Cost of product sales		$	1,674		$	(462)

Interest rate swap	Interest rate swap	270		(874)		Interest expense		64			(3)		Interest rate swap		777				270			Interest expense		(61)			64

The following ~~table~~ summarizes net ~~after-tax~~after income tax derivative activity recorded in accumulated other comprehensive income (loss) (in thousands):

Three Months Ended
May 1, 2021 May 2, 2020
Beginning balance gain (loss) $ (4,876) $ 6,300
Net gains from changes in cash flow hedges 1,553 3,180
Net (gains) losses reclassified into earnings (loss) 460 (1,769)
Ending balance gain (loss) $ (2,863) $ 7,711


	Three Months Ended
	Apr 30, 2022		May 1, 2021
Beginning balance gain (loss)	$	7,280	$	(4,876)

Net gains from changes in cash flow hedges	7,563		1,553
Net (gains) losses reclassified into earnings	(1,443)		460
Ending balance gain (loss)	$	13,400	$	(2,863)

Foreign Exchange Currency Contracts Not Designated as Hedging Instruments

As of ~~May 1, 2021,~~April 30, 2022, the Company had euro foreign exchange currency contracts to purchase US$~~19.0~~23.0 million expected to mature over the next ~~one month.~~two months. As of January ~~30, 2021,~~29, 2022, 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 income taxes recognized on ~~the~~ derivative instruments not designated as hedging instruments in other income (expense) (in thousands):

Location of Gain Recognized in Earnings (Loss)

Gain Recognized in Earnings (Loss)

Location of Gains Recognized in Earnings

Gains Recognized in Earnings

Three Months Ended

Location of Gains Recognized in Earnings

Three Months Ended

May 1, 2021

May 2, 2020

Apr 30, 2022

May 1, 2021

Derivatives not designated as hedging instruments:

Foreign exchange currency contracts

Other income (expense)

1,088

Foreign exchange currency contracts

Other expense

1,580

(17)Subsequent Events

Credit Agreement

On May 5, 2022, Guess Europe Sagl, a wholly owned subsidiary of the Company, entered into a credit agreement (the “Credit Agreement”) for a €250 million revolving credit facility (the “Facility”) with an initial five-year term. The Company has an option to extend the maturity date by up to two years and an option to expand the Facility by up to €100 million, subject to certain conditions. At closing, there were no direct borrowings under the Facility. The Company terminated certain European short-term borrowing arrangements totaling €120 million with various banks in Europe concurrently with the closing of the Credit Agreement. Refer to Note 9 about the replaced short term arrangements.

Borrowings under the Facility bear interest based on the daily balance outstanding at the Euro Interbank Offered Rate (EURIBOR) plus an applicable margin (varying from 0.85% to 1.20%), provided that EURIBOR may not be less than 0.0%. The Facility carries a commitment fee equal to the available but unused borrowing

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capacity multiplied by 35% of an applicable margin (varying from 0.85% to 1.20%). The Company is also required to pay a utilization fee on the total amount of the loans outstanding under the Facility at rates varying from 0.10% to 0.20%, depending on the balance outstanding. The applicable margins are calculated quarterly and vary based on the leverage ratio of the guarantor and its subsidiaries as set forth in the Credit Agreement.

The Credit Agreement contains various annual sustainability key performance targets, the achievement of which would result in an adjustment to the interest margin ranging from a plus 5 basis points to a minus 5 basis points per year. The Credit Agreement includes a financial covenant requiring a maximum leverage ratio of the Guarantor and its subsidiaries. In addition, the Credit Agreement includes customary representations and warranties, affirmative and negative covenants and events of default.

Dividends

On May ~~27, 2021,~~25, 2022, the Company announced a regular quarterly cash dividend of ~~$0.1125~~$0.225 per share on the Company’s common stock. The cash dividend will be paid on June ~~25, 2021~~24, 2022 to shareholders of record as of the close of business on June ~~9, 2021.~~8, 2022. As of a result of this dividend declaration and in accordance with the terms of the indenture governing the Notes, the Company will adjust the conversion rate (which is expected to increase) and the conversion price (which is expected to decrease) of the Notes effective as of June 7, 2022. A corresponding adjustment is expected to be made to the strike prices with respect to the convertible note hedges and the warrants entered into by the Company in connection with the offering of the Notes, each of which will be decreased in accordance with the terms of the convertible note hedge confirmations and warrant confirmations, respectively.

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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.

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 our other reports filed under the Securities Exchange Act of 1934, as amended, in ~~its~~our press releases and in other documents.

Except for historical information contained herein, certain matters discussed in this Quarterly Report, including statements concerning the potential actions and impacts related to the COVID-19 pandemic; results of the accelerated share repurchase and cash needs; statements concerning the our future ~~outlook;~~outlook, including with respect to the second quarter and full year of fiscal 2023; statements concerning share repurchase plans; statements concerning our expectations, goals, future prospects, ~~global cost reduction opportunities, profitability efforts, capital allocation plans, cash needs~~ and current business strategies and strategic initiatives; and statements expressing optimism or pessimism about future operating results and growth opportunities are forward-looking statements that are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements, which are frequently indicated by terms such as “expect,” “could,” “will,” “should,” “goal,” “strategy,” “believe,” “estimate,” “continue,” “outlook,” “plan,” “create,” “see,” and similar terms, are only expectations, and involve known and unknown risks and uncertainties, which may cause actual results in future periods to differ materially from 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; recent sanctions and export controls targeting Russia and other impacts related to the war in Ukraine; the continuation or worsening of impacts related to the COVID-19 ~~pandemic, including business, financial, human capital, litigation and other impacts~~pandemic; risks relating to ~~us and its partners;~~ our ~~ability to successfully negotiate rent relief or other lease-related terms with our landlords; our ability to maintain adequate levels of liquidity;~~indebtedness; changes to estimates related to impairments, inventory and other reserves, ~~including the impact of the CARES Act,~~ 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; the high concentration of our Americas Wholesale business; risks related to the ~~timing~~costs and ~~costs~~timely delivery of ~~delivering~~ merchandise to our distribution facilities, 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~~enhance 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~~relating to our $300 million 2.00% convertible senior notes ~~issued in April 2019,~~due 2024 (the “Notes”), including our ability to settle the liability in cash; disruptions at 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;~~facilities; our ability to attract and retain management and other key personnel; obligations or changes in estimates arising from new or existing litigation, income tax and other regulatory proceedings; risks related to the ~~complexity~~income tax treatment of ~~the Tax Reform, future clarifications and legislative amendments thereto, as well as~~ our ~~ability~~third quarter fiscal 2022 intra-entity transfer of intellectual property rights from certain U.S. entities to accurately interpret and predict its impact on our cash flows and financial condition; the risk of economic uncertainty associated with the United Kingdom’s departure from the European Union (“Brexit”) or any other similar referendums that may be held;a wholly-owned Swiss subsidiary; 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-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~~or changes to, domestic or international laws and ~~regulations (including global data privacy regulations);~~regulations; risks associated with the acts or omissions of our licensees and 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

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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.~~operate; impacts of inflation and further inflationary pressures; wages; risks relating to activist investor activity; and the significant voting power of our family founders. In addition to these factors, the economic, technological, managerial, and other risks identified in “Part I, Item 1A. Risk Factors” of our most recent ~~annual report~~Annual Report on Form 10-K, ~~under~~ “Part II, Item 1A. Risk Factors” ~~contained~~ herein and other filings with the Securities and Exchange Commission, including but not limited to the risk factors discussed therein, could cause actual results to differ materially from current expectations. The current global economic climate, length and severity of the COVID-19 pandemic, and uncertainty surrounding potential changes in U.S. policies and regulations may amplify many of these risks. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

COVID-19 Business Update

The ~~coronavirus (or “COVID-19”)~~ COVID-19 pandemic is continuing to negatively impact certain regions of our business, especially in Asia where our operations were impacted by capacity restrictions and temporary store closures. Overall, this resulted in the ~~Company’s businesses. During~~closure of less than 2% of our directly operated stores as of April 30, 2022, mostly in China, the impact of which was minimal to our first quarter ~~of fiscal 2022,~~results.

The COVID-19 crisis has also contributed to disruptions in the ~~Company experienced significantly~~overall global supply chain, leading to industry-wide product delays and higher ~~net revenue compared~~product and freight costs. We have been working actively to mitigate these headwinds to the ~~first quarter~~extent possible through a number 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. global supply chain initiatives.

In light of the ~~current environment,~~fluid nature of the pandemic, we continue to carefully monitor global and regional developments and respond appropriately. We also continue to strategically manage expenses in order to protect ~~profitability.~~

~~In late fiscal 2021,~~profitability and to mitigate, to the ~~Company incurred a new round~~extent possible, the effect 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. The overall impact resulted in stores being closed for less than 20% of the total days during the first quarter of fiscal 2022, primarily in Europe and Canada. As of May 1, 2021 80% of our stores were open, with the majority of closed stores located primarily in Europe and Canada. As of May 19, 2021 nearly 95% of our stores were open.supply chain disruptions.

Business Segments

~~The Company’s~~Our 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~~Our Americas Retail, Americas Wholesale, Europe and Licensing reportable segments are the same as their respective operating segments. Certain components of ~~the Company’s~~our 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 modifications, restructuring charges and certain non-recurring credits (charges), if any. ~~The Company believes~~We believe this segment reporting reflects how ~~its~~our business segments are managed and how each segment’s performance is evaluated by ~~the Company’s~~our chief operating decision maker to assess performance and 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. During fiscal 2021, we made the decision to integrate our G by GUESS brand into our Factory business over time in order to drive further efficiencies.

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,

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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.~~dollars.

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 ~~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~~we 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.

During the first three months of fiscal ~~2022,~~2023, the average U.S. dollar rate was weaker against the ~~Euro, Canadian dollar,~~ Chinese yuan, ~~Mexican peso, Japanese Yen and Korean won,~~ and stronger against the ~~Russian Ruble and~~euro, British pound, Turkish lira, Polish Slotzy, Canadian dollar, Russian rouble, Japanese yen, Korean won, and Mexican peso, compared to the average rate in the same prior-year period. This had an overall ~~favorable~~unfavorable impact on the translation of our international revenues and ~~an unfavorable impact~~ on earnings from operations for the three months ended ~~May 1, 2021~~April 30, 2022 compared to the same prior-year period.

If the U.S. dollar strengthens in fiscal ~~2022~~2023 relative to the respective fiscal ~~2021~~2022 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 2022,~~ particularly in Canada, Europe (primarily ~~with respect to~~ the euro, Turkish lira, British Pound and Russian rouble) and Mexico. Alternatively, if the U.S. dollar weakens relative to the respective fiscal ~~2021~~2022 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 ~~2022,~~2023, particularly in these regions.

~~The Company enters~~We are currently operating in Russia through our wholesale and retail channels, including through our 70%-owned Russian joint venture. Please refer to “Part II, Item 1A. Risk Factors” herein for a discussion of risks we face relating to the ongoing conflict between Russia and Ukraine.

We enter 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~~our 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 several years.~~growth. These priorities are: (i) brand ~~relevancy;~~relevancy and brand elevation; (ii) product excellence; (iii) customer centricity; (iv) global footprint; and (v) functional capabilities; each as further described below:

Brand ~~Relevancy.~~Relevancy and Brand Elevation. We ~~plan~~will continue to optimize our brand architecture to be relevant with our three target consumer groups: Heritage, Millennials, and Generation Z. We have developed and launched one global line of product for all categories. We have also ~~plan to elevate~~elevated our brand and ~~improve~~improved the quality of our ~~products.~~products, allowing us to realize more full-priced sales and rely less on promotional activity. 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~~will continue 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.~~experience and expand our digital business.

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.

Functional Capabilities. We ~~expect~~will continue to drive ~~material~~ operational improvements ~~in the next four 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.

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. In addition, we plan to continue to return value to shareholders through dividends and share repurchases.

During fiscal 2022, the Board of Directors terminated our previous 2012 $500 million share repurchase program (which had $47.8 million capacity remaining) and authorized a new $200 million share repurchase program. On March 14, 2022, the Board of Directors expanded the repurchase authorization by $100.0 million, leaving an available capacity of $249.0 million at that time. On March 18, 2022, in connection with this expanded authorization, we entered into an accelerated share repurchase agreement (the "2022 ASR Contract) with a financial institution (in such capacity, the "2022 ASR Counterparty") to repurchase an aggregate $175.0 million of our common stock. Under the 2022 ASR Contract, we made a payment of $175.0 million to the 2022 ASR Counterparty and received an initial delivery of approximately 3.3 million shares of our common stock on March 21, 2022, representing approximately 40% ($70.0 million) of the total value expected to be repurchased under the 2022 ASR Contract. Refer to “Part I, Item 1. Financial Statements – Note 4 – Stockholders' Equity” for further information on the 2022 ASR Contract. During the three months ended April 30, 2022, we also repurchased approximately 0.5 million shares of our common stock in open market transactions totaling $11.7 million.

Comparable Store Sales

~~The Company reports~~We report 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

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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~~us may differ from similarly titled measures reported by other companies.

As a result of the significant and varying temporary store closures and various other restrictions during the COVID-19 pandemic, both in fiscal 2021 and 2022, the Company believes that comparable store sales during these periods are not as meaningful to the evaluation of the Company’s results as they would be during more normalized periods.

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Other

~~The Company operates~~We operate on a 52/53-week fiscal year calendar which ends on the Saturday nearest to January 31 of each year. The three months ended ~~May 1, 2021~~April 30, 2022 had the same number of days as the three months ended May ~~2, 2020.~~1, 2021.

Executive Summary

Overview

Net earnings attributable to Guess?, Inc. ~~increased 107.6%~~decreased 33.6% to $8.0 million, or diluted earnings per share (“EPS”) of $0.12 per common share, for the quarter ended April 30, 2022, compared to $12.0 million, or diluted ~~earnings~~EPS of $0.18 per common share, for the quarter ended May 1, ~~2021, compared to~~2021.

During the quarter ended April 30, 2022, we recognized $1.5 million in asset impairment charges; $0.6 million in net ~~loss~~gains on lease modifications; $4.4 million for certain professional service and legal fees and related credits (costs); and $3.2 million in additional income tax expense from certain discrete income tax adjustments (or a combined $7.3 million, or $0.12 per share, negative impact after considering the related tax benefit of $1.3 million). Excluding the impact of these items, adjusted net earnings attributable to Guess?, Inc. ~~of $157.7~~was $15.2 million orand adjusted diluted ~~loss of $2.40~~earnings was $0.24 per common share for the quarter ended ~~May 2, 2020.~~April 30, 2022.

During the quarter ended May 1, 2021, ~~the Company~~we recognized $0.4 million ofin asset impairment charges; $2.1 million in net gains on lease modifications; $1.1 million offor certain professional services and legal fees and related ~~net credits;~~credits (costs); $2.8 million of amortization of debt discount related to ~~the Company’s convertible senior notes;~~our Notes; and $0.1 million in additional income tax expense from certain discrete income tax adjustments (or a combined $1.9 million, or $0.03 per share, negative impact after considering the related income tax benefit of these adjustments of $0.4 million). Excluding the impact of these items, adjusted net earnings attributable to Guess?, Inc. ~~were~~was $13.9 million and adjusted diluted earnings ~~were~~was $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 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 $118.9 million and adjusted diluted loss was $1.81 per common share for the quarter ended May 2, 2020. 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~~our performance for the quarter ended ~~May 1, 2021~~April 30, 2022 compared to the same prior-year ~~period~~quarter are presented below, followed by a more comprehensive discussion under “Results of Operations”:

Operations

•Total net revenue increased ~~99.8%~~14.1% to ~~$520.0~~$593.5 million for the quarter ended ~~May 1, 2021, from $260.3~~April 30, 2022, compared to $520.0 million in the same prior-year quarter. In constant currency, net revenue increased by ~~90.3%~~20.6%.

•Gross margin (gross profit as a percentage of total net revenue) increased ~~27.5%~~90 basis points to ~~40.7%~~41.6% for the quarter ended ~~May 1, 2021, from 13.2%~~April 30, 2022, compared to 40.7% in the same prior-year ~~period.~~quarter.

•Selling, general and administrative (“SG&A”) expenses as a percentage of total net revenue (“SG&A rate”) decreased ~~19.1%~~60 basis points to ~~35.9%~~35.3% for the quarter ended ~~May 1, 2021,~~April 30, 2022, compared to ~~55.0%~~35.9% in the same prior-year ~~period.~~quarter. SG&A expenses increased ~~30.3%~~12.4% to ~~$186.7~~$209.8 million for the quarter ended ~~May 1, 2021, from $143.3~~April 30, 2022, compared to $186.7 million in the same prior-year ~~period.~~

•~~During the quarter ended May 1, 2021, the Company recognized asset impairment charges of $0.4 million, compared to $53.0 million in the same prior-year period.~~

•~~Operating margin increased 67.5% to 5.1% for the quarter ended May 1, 2021, compared to negative 62.4% in the same prior-year period, driven primarily by~~ ~~overall leveraging of expenses~~. Lower asset impairment charges favorably impacted operating margin by 20.3% during the quarter ended May 1, 2021 compared to the same prior-year period. Earnings from operations were $26.6 million for the quarter ended May 1, 2021, compared to losses from operations of $162.5 million in the same prior-year period.quarter.

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•~~Other~~ During the quarter ended April 30, 2022, we recognized $1.5 million of asset impairment charges, compared to $0.4 million in the same prior-year quarter.

• During the quarter ended April 30, 2022, we recorded $0.6 million net gains on lease modifications, compared to $2.1 million in the same prior-year quarter.

• Operating margin improved 100 basis points to 6.1% for the quarter ended April 30, 2022, compared to 5.1% in the same prior-year quarter. The improvement in operating margin was mainly driven by 410 basis points resulting from expense leverage due to higher sales. This was partially offset by higher store labor costs in Americas Retail and an unfavorable currency impact which negatively impacted operating margin by 120 basis points and 100 basis points, respectively. Higher expenses related to certain professional service and legal fees and related costs unfavorably impacted operating margin by 50 basis points. Lower net ~~(including interest income~~gains from lease modifications and ~~expense), was $8.3~~higher asset impairment charges negatively impacted operating margin by 50 basis points. Earnings from operations increased 36.9% to $36.4 million for the quarter ended ~~May 1, 2021,~~April 30, 2022, compared to ~~$24.4~~$26.6 million in the same prior-year ~~period.~~quarter.

• Other expense, net, totaled $16.5 million for the quarter ended April 30, 2022, compared to $2.7 million in the same prior-year quarter.

• The effective income tax rate ~~was an expense of 29.8%~~increased by 10.1% to 39.9% for the quarter ended ~~May 1, 2021,~~April 30, 2022, compared to ~~a benefit of 14.1%~~29.8% in the same prior-year ~~period. The Company’s effective income tax rate for the quarter ended May 2, 2020 included the favorable impact from certain discrete income tax adjustments totaling $7.9 million.~~quarter.

Key Balance Sheet Accounts

•~~The Company~~We had ~~$395.1~~$147.9 million in cash and cash equivalents ~~and $0.2 million in restricted cash~~ as of ~~May 1, 2021,~~April 30, 2022 compared to ~~$419.4~~$395.1 million in cash and cash equivalents and $0.2 million in restricted cash at May ~~2, 2020.~~1, 2021.

◦As of ~~May 1, 2021, the Company~~April 30, 2022, we had $43.8 million in outstanding borrowings under our term loans and $42.7 million in outstanding borrowings under our credit facilities compared to $56.0 million in outstanding borrowings under ~~its~~our term loans and $5.1 million in outstanding borrowings under ~~its~~our 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.~~1, 2021.

◦~~There were no share repurchases during~~During the ~~quarters~~quarter ended April 30, 2022, we made a payment of $175.0 million related to the 2022 ASR Contract and also repurchased 0.5 million shares of our common stock for $11.7 million in open market transactions. During the quarter ended May 1, 2021, ~~and May 2, 2020.~~there were no share repurchases.

•Accounts receivable consists of trade receivables relating primarily to ~~the Company’s~~our wholesale business in Europe and, to a lesser extent, to ~~its~~our wholesale businesses in the Americas and Asia, royalty receivables relating to ~~its~~our licensing operations, credit card and retail concession receivables related to ~~its~~our retail businesses and certain other receivables. Accounts receivable ~~increased~~decreased by ~~$66.8~~$10.9 million, or ~~27.9%~~3.5%, to $295.4 million as of April 30, 2022 compared to $306.3 million ~~as of~~at May 1, ~~2021 compared to $239.5 million at May 2, 2020.~~2021. On a constant currency basis, accounts receivable increased by ~~$45.7~~$23.8 million, or ~~19.1%~~7.8%, when compared to May ~~2, 2020.~~1, 2021.

•Inventory increased by ~~$12.4~~$79.1 million, or ~~3.1%~~19.5%, to ~~$404.9~~$483.9 million as of ~~May 1, 2021,~~April 30, 2022, from ~~$392.5~~$404.9 million at May ~~2, 2020.~~1, 2021. On a constant currency basis, inventory ~~decreased~~increased by ~~$15.7~~$124.1 million, or ~~4.0%~~30.7%, when compared to May ~~2, 2020.~~1, 2021.

Global Store Count

InDuring the ~~first~~ quarter ~~of fiscal~~ended April 30, 2022, together with our partners, we opened 34 new stores worldwide, consisting of ~~ten~~25 stores in Europe and the Middle East, six stores in Asia and the Pacific, and three stores in the U.S. Together with our partners, we closed 27 stores worldwide, consisting of 12 stores in Asia and the Pacific, nine stores in Europe and the Middle East, and ~~24 stores in Asia and the Pacific. Together with our partners, we closed 24 stores worldwide, consisting of ten stores in Asia and the Pacific, seven stores in Europe and the Middle East, five~~six stores in the ~~U.S., and two stores in Canada.~~Americas.

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We ended the first quarter of fiscal ~~2022~~2023 with ~~1,580~~ stores and ~~362~~ concessions worldwide comprised as follows:


		Stores			Concessions				Stores			Concessions
Region	Region	Total	Directly-Operated	Partner Operated	Total	Directly-Operated	Partner Operated	Region	Total	Directly-Operated	Partner Operated	Total	Directly-Operated	Partner Operated
United States	United States	246	244	2	1	—	1	United States	244	244	—	1	—	1
Canada	Canada	74	74	—	—	—	—	Canada	74	74	—	—	—	—
Central and South America	Central and South America	105	70	35	29	29	—	Central and South America	101	67	34	29	29	—
Total Americas	Total Americas	425	388	37	30	29	1	Total Americas	419	385	34	30	29	1
Europe and the Middle East	Europe and the Middle East	728	511	217	45	45	—	Europe and the Middle East	795	564	231	51	51	—
Asia and the Pacific	Asia and the Pacific	427	142	285	287	92	195	Asia and the Pacific	424	124	300	253	111	142
Total	Total	1,580	1,041	539	362	166	196	Total	1,638	1,073	565	334	191	143

Of the total ~~1,580~~ stores, ~~1,316~~1,355 were GUESS? stores, ~~171~~186 were GUESS? Accessories stores, 5860 were G by GUESS (GbG) stores and 3537 were MARCIANO stores.

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Results of Operations

Three Months Ended April 30, 2022 and May 1, 2021 ~~and May 2, 2020~~

Consolidated Results

The following presents our condensed consolidated statements of income (in thousands, except per share data):


	Three Months Ended
	Apr 30, 2022					May 1, 2021					$ change		% change
Net revenue	$	593,473		100.0	%	$	520,002		100.0	%	$	73,471	14.1	%
Cost of product sales	346,324			58.4	%	308,444			59.3	%	37,880		12.3	%
Gross profit	247,149			41.6	%	211,558			40.7	%	35,591		16.8	%

Selling, general and administrative expenses	209,831			35.3	%	186,684			35.9	%	23,147		12.4	%
Asset impairment charges	1,544			0.3	%	441			0.1	%	1,103		250.1	%
Net gains on lease modifications	(601)			(0.1	%)	(2,145)			(0.4	%)	1,544		(72.0	%)
Earnings from operations	36,375			6.1	%	26,578			5.1	%	9,797		36.9	%
Interest expense, net	(2,519)			(0.4	%)	(5,552)			(1.0	%)	3,033		(54.6	%)
Other expense, net	(16,452)			(2.8	%)	(2,701)			(0.6	%)	(13,751)		509.1	%
Earnings before income tax expense	17,404			2.9	%	18,325			3.5	%	(921)		(5.0	%)
Income tax expense	6,950			1.1	%	5,455			1.1	%	1,495		27.4	%
Net earnings	10,454			1.8	%	12,870			2.4	%	(2,416)		(18.8	%)
Net earnings attributable to noncontrolling interests	2,484			0.5	%	864			0.1	%	1,620		187.5	%
Net earnings attributable to Guess?, Inc.	$	7,970		1.3	%	$	12,006		2.3	%	(4,036)		(33.6	%)

Net earnings per common share attributable to common stockholders:
Basic	$	0.13				$	0.19				$	(0.06)
Diluted	$	0.12				$	0.18				$	(0.06)

Effective income tax rate	39.9		%			29.8		%

Net Revenue. Net revenue increased by ~~$259.8~~$73.5 million or ~~99.8%~~14%, compared to ~~$520.0 million for~~ the ~~quarter ended May 1, 2021, from $260.3 million for the quarter ended May 2, 2020.~~same prior-year quarter. In constant currency, net revenue increased by ~~90.3%,~~20.6%. Almost 60% of the increase was driven by ~~lower comparable sales driven by reduced store traffic and temporary store closures resulting from~~ the ~~COVID-19 pandemic~~operation of stores this quarter that had been temporarily closed in the same prior-year ~~period~~quarter and ~~to a lesser extent, a shift in European~~slightly over 25% from higher wholesale ~~shipments into fiscal 2022.~~shipments. The remaining increase was driven by new stores and higher licensing revenue,

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partially offset by permanent store closures. Currency translation fluctuations relating to our ~~foreign~~non-U.S. operations ~~favorably~~unfavorably impacted net revenue by ~~$24.8~~$33.5 million compared to the same prior-year ~~period.~~quarter.

Gross Margin. Gross margin increased ~~27.5% to 40.7%~~0.9% for the quarter ended ~~May 1, 2021,~~April 30, 2022 compared to ~~13.2%~~the same prior-year quarter, driven entirely by a lower occupancy rate. The lower occupancy rate was due to a 180 basis point favorable impact from leveraging of expenses as a result of higher revenues and business mix, partially offset by 70 basis points due to rent relief in the same prior-year ~~period, of which 21.0% was due to lower occupancy rate and 650 basis points was due to higher product margins. The lower occupancy rate resulted primarily from leveraging occupancy costs due mainly~~quarter. Product margin remained flat to the ~~impact of~~same prior-year ~~temporary store closures in Americas Retail~~quarter as favorable business mix and ~~to a lesser extent, a shift in European wholesale shipments into fiscal 2022. The product margins~~lower markdowns were ~~higher as the prior year’s quarter included significant inventory reserves.~~offset by unfavorable currency translation fluctuations and lower initial markups.

Gross Profit. Gross profit increased ~~by $177.3 million, or 518.1%, to $211.6~~$35.6 million for the quarter ended ~~May 1, 2021,~~April 30, 2022 compared to ~~$34.2 million in~~ the same prior-year ~~period.~~quarter. The increase in gross profit, which included ~~the favorable~~an unfavorable impact offrom currency translation, was driven by $43 million due ~~primarily~~ to higher net revenue, partially offset by $9 million due to rent relief in the ~~favorable impact on gross profit from higher revenue, as well as~~same prior-year quarter and lower ~~occupancy costs.~~initial markups. Currency translation fluctuations relating to our foreign operations ~~favorably~~unfavorably impacted gross profit by ~~$8.1~~$16.7 million.

~~The Company includes~~We include 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~~our distribution costs related to ~~its~~our retail business in cost of product sales. ~~The Company~~We also ~~includes~~include net royalties received on ~~the Company’s~~our inventory purchases of licensed product as a reduction to cost of product sales. ~~The Company’s~~Our 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,~~us, 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,~~us, include retail store occupancy costs in cost of product sales.

SG&A Rate. ~~The Company’s~~Our SG&A rate decreased ~~19.1% to 35.9%~~0.6% for the quarter ended ~~May 1, 2021,~~April 30, 2022 from ~~55.0% in~~ the same prior-year ~~period,~~quarter. The favorable change in SG&A rate was driven by a 240 basis point favorable impact resulting from an overall leveraging of expenses, ~~due to~~partially offset by 120 basis points from higher ~~European wholesale revenues and, to a lesser extent, temporary~~ store ~~closures~~labor costs in Americas Retail ~~in the same prior-year period.~~and 50 basis points from higher expenses related to certain professional service and legal fees and related (credits) costs.

SG&A Expenses. SG&A expenses increased ~~by $43.4 million, or 30.3%, to $186.7~~$23.1 million for the quarter ended ~~May 1, 2021,~~April 30, 2022 from ~~$143.3 million in~~ the same prior-year ~~period. The increase, which included the unfavorable impact~~quarter, mainly driven by approximately $18 million of ~~currency translation, was driven primarily by~~ higher ~~variable~~store expenses as stores were fully open compared to last year and store labor costs were higher in ~~the current year quarter as well as lower payroll and overall discretionary expenses due to significant COVID-19 impacts in the same prior-year period.~~Americas Retail. Currency translation fluctuations relating to our foreign operations ~~unfavorably~~favorably impacted SG&A expenses by ~~$9.0~~$10.3 million.

Asset Impairment Charges. During the ~~quarter~~quarters ended April 30, 2022 and May 1, 2021, ~~the Company~~we recognized ~~minimal impairment of certain operating lease right-of-use (“ROU”) assets~~$1.5 million and $0.4 million of ~~impairment charges of~~ property and equipment impairment charges 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~~under-performance and ~~future cash flow projections from~~expected store closures, respectively.

Net Gains on Lease Modifications. During the ~~ongoing effects~~quarters ended April 30, 2022 and May 1, 2021, we recorded net gains on lease modifications of $0.6 million and $2.1 million related primarily to the ~~COVID-19 pandemic. Currency translation fluctuations relating to our foreign operations had minimal unfavorable impact on asset impairment charges.~~early termination of lease agreements for certain retail locations, respectively.

Operating Margin. Operating margin increased ~~67.5% to 5.1%~~1.0% for the quarter ended ~~May 1, 2021, compared to negative 62.4% in the same prior-year period, driven primarily by overall leveraging of expenses and, to a~~

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~~lesser extent, lower asset impairment charges. Lower asset impairment charges favorably impacted operating margin by 20.3% during the quarter ended May 1, 2021~~April 30, 2022 compared to the same prior-year ~~period.~~quarter. The improvement in operating margin was mainly driven by 410 basis points resulting from expense leverage due to higher sales. This was partially offset by higher store labor costs in Americas Retail and an unfavorable currency impact which negatively impacted operating margin by 120 basis points and 100 basis points, respectively. Higher expenses related to certain professional service and legal fees and related (credits) costs unfavorably impacted operating margin by 50 basis points. Excluding the impact of ~~lower~~higher asset impairment charges and lower net gains on lease modifications, ~~compared to net losses on lease modifications, and increased expenses related to certain professional services and legal fees and related net credits, the Company’s~~our operating margin would have increased ~~46.7%~~2.0% compared to the same prior-year ~~period. The negative impact of currency on operating margin for the quarter was approximately 40 basis points.~~quarter.

Earnings from Operations. Earnings from operations increased by ~~$189.1 million, or 116.4%, to $26.6~~$9.8 million for the quarter ended ~~May 1, 2021,~~April 30, 2022 compared to ~~a loss from operations of $162.5 million in~~ the same prior-year ~~period.~~quarter. Currency translation fluctuations relating to our foreign operations unfavorably impacted earnings from operations by ~~$0.7~~$6.4 million.

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Other Expense, Net. ~~Interest~~Other expense, net ~~was $5.6 million~~ for the quarter ended ~~May 1, 2021,~~April 30, 2022 was $16.5 million compared to ~~$4.9 million for the quarter ended May 2, 2020.~~

~~Other Expense, Net~~. ~~Other expense, net, was~~ $2.7 ~~million for the quarter ended May 1, 2021, compared to $19.6~~ million in the same prior-year ~~period.~~quarter. The change was ~~driven~~ primarily ~~by market volatility which resulted in lower~~due to higher net unrealized and realized losses from foreign currency exposures and higher net unrealized losses on ~~the translation of foreign currency balances~~our Supplemental Executive Retirement Plan (“SERP”) related assets compared to ~~higher net unrealized losses in~~ the ~~quarter ended May 2, 2020.~~same prior-year quarter.

Income Tax ~~Expense (Benefit).~~Expense. Income tax expense for the quarter ended ~~May 1, 2021~~April 30, 2022 was $7.0 million, or a 39.9% effective income tax rate, compared to $5.5 million, or a 29.8% effective ~~tax rate, compared to~~ income ~~tax benefit of $26.4 million, or a 14.1% effective~~ tax rate in the same prior-year ~~period.~~quarter. Generally, income taxes for the interim periods are computed using the income 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 three months ended May 2, 2020, the Company recognized a tax benefit of approximately $11.8 million from a tax rate~~ The 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. 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. Excluding the impact of these items, the increase in the effective income tax rate was primarily due ~~primarily to~~to: (1) a ~~change~~shift in the ~~mix~~distribution of ~~statutory~~ earnings ~~for the three months ended May 1, 2021,~~among our tax jurisdictions compared to the same prior-year ~~period.~~

~~Net Earnings (Loss) Attributable to Noncontrolling Interests.~~ ~~Net earnings (loss) attributable to noncontrolling interests were $0.9 million~~quarter; and ~~$(2.9) million, net of taxes,~~(2) losses during the current quarter in certain tax jurisdictions for ~~the quarters ended May 1, 2021 and May 2, 2020, respectively.~~which we did not recognize an income tax benefit.

Net Earnings ~~(Loss)~~ Attributable to Guess?, Inc. Net earnings ~~(loss)~~ attributable to Guess?, Inc. ~~were $12.0~~decreased $4.0 million for the quarter ended ~~May 1, 2021,~~April 30, 2022 compared to ~~$(157.7) million in~~ the same prior-year ~~period.~~quarter. Diluted ~~earnings per share (“EPS”) were $0.18~~EPS decreased $0.06 for the quarter ended ~~May 1, 2021,~~April 30, 2022 compared to ~~diluted loss per share of~~ ~~$2.40~~ in the same prior-year ~~period. The Company estimates~~quarter. We estimate a net positive impact of $0.04 from ~~its~~our adoption of new accounting guidance related to our Notes and share buybacks and a negative impact from currency of ~~$0.01 and $0.09, respectively,~~$0.14 on diluted EPS in the ~~first quarter of fiscal 2022. During the~~ quarter ended April 30, 2022 when compared to the same prior-year quarter.

Refer to “Non-GAAP Measures” for an overview of our non-GAAP, or adjusted, financial results for the quarters ended April 30, 2022 and May 1, 2021, the Company recognized $0.4 million of asset impairment charges; $2.1 million net gains on lease modifications; $1.1 million of certain professional services and legal fees and related net 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).2021. Excluding the impact of these non-GAAP items, adjusted net earnings attributable to Guess?, Inc. ~~were $13.9~~increased $1.4 million and adjusted diluted ~~earnings were $0.21 per common share~~EPS increased $0.03 for the quarter ended ~~May 1, 2021. The Company estimates its~~April 30, 2022 compared to the same prior-year quarter. We estimate a net positive impact from our share buybacks ~~and currency had a positive impact~~ of $0.01 and ~~$0.09, respectively,~~a net negative impact from currency of $0.14 on adjusted diluted EPS in the ~~first quarter of fiscal 2022. During the~~ quarter ended ~~May 2, 2020,~~April 30, 2022 when compared to 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 amortizationsame prior-year quarter.

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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 $118.9 million and adjusted diluted loss was $1.81 per common share for the quarter ended May 2, 2020. 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 May 1, 2021 and May 2, 2020 (dollars in~~(in thousands):


		Three Months Ended											Three Months Ended
		May 1, 2021			May 2, 2020			$ Change		% Change			Apr 30, 2022			May 1, 2021			$ change		% change
Net revenue:	Net revenue:											Net revenue:
Americas Retail	Americas Retail	$	155,535		$	74,584		$	80,951	108.5	%	Americas Retail	$	166,485		$	155,535		$	10,950	7.0	%
Americas Wholesale	Americas Wholesale	45,430			25,875			19,555		75.6	%	Americas Wholesale	68,357			45,430			22,927		50.5	%
Europe	Europe	241,852			106,473			135,379		127.1	%	Europe	276,009			241,852			34,157		14.1	%
Asia	Asia	55,660			40,385			15,275		37.8	%	Asia	56,222			55,660			562		1.0	%
Licensing	Licensing	21,525			12,934			8,591		66.4	%	Licensing	26,400			21,525			4,875		22.6	%
Total net revenue	Total net revenue	$	520,002		$	260,251		$	259,751	99.8	%	Total net revenue	$	593,473		$	520,002		73,471		14.1	%
Earnings (loss) from operations:	Earnings (loss) from operations:											Earnings (loss) from operations:
Americas Retail	Americas Retail	$	20,274		$	(36,673)		$	56,947	(155.3	%)	Americas Retail	$	14,266		$	20,274		(6,008)		(29.6	%)
Americas Wholesale	Americas Wholesale	11,555			1,624			9,931		611.5	%	Americas Wholesale	17,397			11,555			5,842		50.6	%
Europe	Europe	4,198			(44,406)			48,604		(109.5	%)	Europe	17,890			4,198			13,692		326.2	%
Asia	Asia	(1,808)			(22,777)			20,969		(92.1	%)	Asia	(3,487)			(1,808)			(1,679)		92.9	%
Licensing	Licensing	19,431			10,094			9,337		92.5	%	Licensing	24,444			19,431			5,013		25.8	%
Total segment earnings (loss) from operations		53,650			(92,138)			145,788		(158.2	%)
Total segment earnings from operations												Total segment earnings from operations	70,510			53,650			16,860		31.4	%
Corporate overhead	Corporate overhead	(28,776)			(16,921)			(11,855)		70.1	%	Corporate overhead	(33,192)			(28,776)			(4,416)		15.3	%

Asset impairment charges	Asset impairment charges	(441)			(52,972)			52,531		(99.2	%)	Asset impairment charges	(1,544)			(441)			(1,103)		250.1	%
Net gains (losses) on lease modifications		2,145			(456)			2,601		(570.4	%)
Total earnings (loss) from operations		$	26,578		$	(162,487)		$	189,065	(116.4	%)
Net gains on lease modifications												Net gains on lease modifications	601			2,145			(1,544)		(72.0	%)
Total earnings from operations												Total earnings from operations	$	36,375		$	26,578		9,797		36.9	%

Operating margins:	Operating margins:											Operating margins:
Americas Retail	Americas Retail	13.0		%	(49.2		%)					Americas Retail	8.6		%	13.0		%
Americas Wholesale	Americas Wholesale	25.4		%	6.3		%					Americas Wholesale	25.5		%	25.4		%
Europe	Europe	1.7		%	(41.7		%)					Europe	6.5		%	1.7		%
Asia	Asia	(3.2		%)	(56.4		%)					Asia	(6.2		%)	(3.2		%)
Licensing	Licensing	90.3		%	78.0		%					Licensing	92.6		%	90.3		%
Total Company	Total Company	5.1		%	(62.4		%)					Total Company	6.1		%	5.1		%

Americas Retail

Net revenue from our Americas Retail segment increased by ~~$81.0~~$11.0 million, or ~~108.5%, to $155.5 million~~7.0% for the quarter ended ~~May 1, 2021,~~April 30, 2022 from ~~$74.6 million in~~ the same prior-year ~~period.~~quarter. In constant currency, net revenue increased by ~~105.9%,~~7.1% compared to the same prior-year quarter. Over 80% of the increase was driven by the operation of stores this quarter that had been temporarily closed in the same prior-year quarter and 40% of the increase was driven by positive comparable store sales, partially offset by permanent store closures. Comparable sales (including e-commerce) increased 3% in U.S. dollars and constant currency compared to the same prior-year quarter. The inclusion of our e-commerce sales decreased the comparable sales percentage by 1% in U.S. dollars and constant currency. As of April 30, 2022, we directly operated 385 stores in the Americas compared to 388 stores at May 1, 2021, excluding concessions, which represents a 0.8% decrease from the same prior-year quarter. Currency translation fluctuations relating to our non-U.S. retail stores and e-commerce sites had an immaterial impact on net revenue.

Operating margin decreased 4.4% for the quarter ended April 30, 2022 from the same prior-year quarter. Approximately 320 basis points of the decrease was driven by higher store labor costs, and approximately 150 basis points for both higher markdowns and higher government subsidies received in the same prior-year quarter. This was partially offset by 280 basis points of favorable impact from higher initial markups.

Earnings from operations from our Americas Retail segment decreased by $6.0 million, or 29.6% for the quarter ended April 30, 2022 from the same prior-year quarter. Higher store expenses drove $7.3 million of the decrease and approximately $2.5 million in decreases resulted from both higher markdowns and higher

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government subsidies received in the same prior-year quarter. This was partially offset by $6.8 million of favorable impact due ~~primarily~~to higher revenues and $4.7 million driven by higher initial markups.

Americas Wholesale

Net revenue from our Americas Wholesale segment increased by $22.9 million, or 50.5% for the quarter ended April 30, 2022 from the same prior-year quarter. In constant currency, net revenue increased by 50.4%. Approximately 65% of the increase was driven by our U.S. wholesale business, almost 20% from our Mexico wholesale business, and the remaining increase was driven by our Canada wholesale business. Overall, the growth compared to the same prior-year quarter was driven by a favorable timing of this year’s deliveries to some of our partners. Currency translation fluctuations relating to our non-U.S. wholesale businesses had an immaterial impact on net revenue.

Operating margin increased 0.1% for the quarter ended April 30, 2022 compared to the same prior-year quarter. The slight improvement was driven by expense leverage resulting from higher sales, offset by slightly lower product margins.

Earnings from operations from our Americas Wholesale segment increased by $5.8 million, or 50.6% for the quarter ended April 30, 2022 from the same prior-year quarter, mainly driven by higher revenues.

Europe

Net revenue from our Europe segment increased by $34.2 million, or 14.1% for the quarter ended April 30, 2022 compared to the same prior-year quarter. In constant currency, net revenue increased by 26.4%. The increase in constant currency was driven over 60% by the operation of stores this quarter that had been temporarily closed in the same prior-year quarter, nearly 20% by higher wholesale revenues, 10% by net new store impact and almost 5% by positive comparable store sales. Comparable sales (including e-commerce) decreased 6% in U.S. dollars and increased 3% in constant currency compared to the same prior-year quarter. The inclusion of our e-commerce sales decreased the comparable sales percentage by 2% in U.S. dollars and decreased 4% in constant currency. As of April 30, 2022, we directly operated 564 stores in Europe compared to 511 stores at May 1, 2021, excluding concessions, which represents a 10.4% increase from the same prior-year quarter. Currency translation fluctuations relating to our European operations unfavorably impacted net revenue by $29.7 million.

Operating margin increased 4.8% for the quarter ended April 30, 2022 compared to the same prior-year quarter. The increase was mainly driven by a 730 basis point improvement due to expense leverage resulting from higher sales and a 190 basis point improvement due to lower ~~comparable sales~~markdowns, partially offset by a 390 basis point unfavorable impact from lower initial markups due to higher freight costs and a 200 basis point unfavorable impact from currency exchange rate.

Earnings from operations from our Europe segment increased by $13.7 million, or 326.2% for the quarter ended April 30, 2022 compared to the same prior-year quarter. Higher revenue, including the benefits from lower markdowns, was the main driver for the increase in earnings from operations and resulted in an increase of $25.0 million compared to the same prior-year quarter. This was partially offset by $11.7 million increase in freight expenses. Currency translation fluctuations relating to our European operations unfavorably impacted earnings from operations by $6.4 million.

Asia

Net revenue from our Asia segment increased by $0.6 million, or 1.0% for the quarter ended April 30, 2022 from the same prior-year quarter. In constant currency, net revenue increased by 7.7% driven by ~~reduced store traffic and temporary store closures resulting~~the impact of the direct operation of some of our stores in South Korea, which we acquired from one of our wholesale partners, which was slightly offset by the impact of the COVID-19 pandemic in ~~the same prior-year period.~~China. Comparable ~~store~~ sales (including e-commerce) ~~increased 6%~~decreased 11% in U.S. dollars and 5% in constant currency compared to the same prior-year ~~period.~~quarter. The inclusion of our e-commerce sales ~~increased~~negatively impacted 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 37 net stores during the quarter ended May 1, 2021 compared to the same prior-year period, resulting in a 7.7% net decrease in average square footage. Currency translation fluctuations relating to our non-U.S. retail stores and e-commerce sites favorably impacted net revenue by $2.0 million.

~~Operating margin increased 62.2% to 13.0% for the quarter ended May 1, 2021, from negative 49.2% in the same prior-year quarter, driven primarily by leveraging of expenses as well as lower markdowns.~~

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~~Earnings from operations from our~~ ~~Americas Retail~~ segment increased by $56.9 million, or 155.3%, to $20.3 million for the quarter ended May 1, 2021, from loss from operations of $36.7 million in the same prior-year period. The increase is due primarily to the favorable impact on earnings from higher revenue and leveraging of expenses.

~~Americas Wholesale~~

~~Net revenue from our~~ ~~Americas Wholesale~~ segment increased by $19.6 million, or 75.6%, to $45.4 million for the quarter ended May 1, 2021, from $25.9 million in the same prior-year period. In constant currency, net revenue increased by 71.0%, driven primarily by increased demand in our U.S. wholesale business. Currency translation fluctuations relating to our non-U.S. wholesale businesses favorably impacted net revenue by $1.2 million.

~~Operating margin increased 19.1% to 25.4% for the quarter ended May 1, 2021, compared to 6.3% in the same prior-year quarter, due mainly to lower markdowns and leveraging of expenses.~~

~~Earnings from operations from our~~ ~~Americas Wholesale~~ segment increased by $9.9 million, or 611.5%, to $11.6 million for the quarter ended May 1, 2021, from $1.6 million in the same prior-year period. The increase reflects the favorable impact on earnings from higher revenue.

~~Europe~~

~~Net revenue from our~~ ~~Europe~~ segment increased by $135.4 million, or 127.1%, to $241.9 million for the quarter ended May 1, 2021, compared to $106.5 million in the same prior-year period. In constant currency, net revenue increased by 110.0%, driven primarily by a shift in wholesale shipments into fiscal 2022. Comparable store sales (including e-commerce) increased 44% in U.S. dollars and 32% in constant currency compared to the same 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 shift in wholesale shipments.

~~Earnings from 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 earnings from operations by $1.4 million.~~

~~Asia~~

~~Net revenue from our~~ ~~Asia~~ segment increased by $15.3 million, or 37.8%, to $55.7 million for the quarter ended May 1, 2021, from $40.4 million in the same prior-year period. In constant currency, net revenue increased by 29.3%, due primarily to lower comparable sales driven by reduced store traffic resulting from the COVID-19 pandemic in the same prior-year period. Comparable store sales (including e-commerce) increased 32% in U.S. dollars and 23% in constant currency. The inclusion of the Company’s e-commerce sales decreased the comparable sales percentage by 11%1% in U.S. dollars and constant currency. Currency translation fluctuations relating to our ~~Asia~~nAsian operations ~~favorably~~unfavorably impacted net revenue by ~~$3.4~~$3.7 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 of $22.8 million in the same prior-year period. The decrease was due to~~

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~~significant inventory reserves~~Operating margin decreased 3.0% for the quarter ended April 30, 2022 from the same prior-year quarter. Approximately 800 basis points of margin decrease were driven by the lower profitability in our China business mainly due to the ~~prior year~~impact of the COVID-19 pandemic in that market. This was partially offset by 400 basis points of impact driven by the profitability improvement in South Korea mainly due to the direct operation of some of our stores.

Earnings from operations from our Asia segment decreased by $1.7 million, or 92.9% for the quarter ~~and~~ended April 30, 2022 compared to the ~~leveraging~~same prior-year quarter. Approximately $4.0 million was driven by the lower profit in China due to the impact of ~~expenses~~the COVID-19 pandemic, partially offset by $1.7 million of higher profit in South Korea. Currency translation fluctuations relating to our Asia operations unfavorably impacted the ~~current year quarter.~~loss from operations by $0.2 million.

Licensing

Net royalty revenue from our Licensing segment increased by ~~$8.6~~$4.9 million, or ~~66.4%, to $21.5 million~~22.6% for the quarter ended ~~May 1, 2021,~~April 30, 2022 from ~~$12.9 million in~~ the same prior-year ~~period, due primarily to~~quarter mainly driven by higher ~~demand and strong performance~~royalties in ~~handbags, fragrance, and footwear.~~our handbag category.

Earnings from operations from our Licensing segment increased by ~~$9.3~~$5.0 million, or ~~92.5%, to $19.4 million~~25.8% for the quarter ended ~~May 1, 2021,~~April 30, 2022 from ~~$10.1 million in~~ the same prior-year ~~period.~~quarter. The increase was ~~mainly due~~driven by the favorable impact to ~~leveraging of expenses.~~earnings from higher revenues.

Corporate Overhead

Unallocated corporate overhead increased by ~~$11.9~~$4.4 million, ~~to $28.8 million~~or 15.3% for the quarter ended ~~May 1, 2021,~~April 30, 2022 compared to ~~$16.9 million in~~ the same prior-year ~~period. The increase was~~quarter primarily due to ~~lower~~higher expenses ~~in the prior year quarter mainly~~ related to ~~expense savings in response to the pandemic~~certain professional service and ~~lower performance-based compensation.~~legal fees and related (credits) costs.

Non-GAAP Measures

The financial information presented in this Quarterly Report includes non-GAAP financial measures, such as adjusted results and constant currency financial information. For the three months ended April 30, 2022 and May 1, 2021, ~~and May 2, 2020,~~ the adjusted results exclude the impact of certain professional service and legal fees and related ~~net credits, certain separation charges,~~(credits) costs, asset impairment charges, net ~~(gains) losses~~gains on lease modifications, non-cash amortization of debt discount on ~~the Company’s convertible senior notes,~~our Notes, the related income tax impacts of these adjustments as well as certain discrete income tax adjustments related primarily to an intra-entity transfer of intellectual property rights to a wholly-owned Swiss subsidiary, in each case where applicable. These non-GAAP measures are provided in addition to, and not as alternatives for, ~~the Company’s~~our reported GAAP results.

These items affect the comparability of ~~the Company’s~~our 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~~We have excluded these items from ~~its~~our adjusted financial measures primarily because ~~it believes~~we believe these items are not indicative of the underlying performance of ~~its~~our business and the adjusted financial information provided is useful for investors to evaluate the comparability of ~~the Company’s~~our operating results and ~~its~~our future outlook (when reviewed in conjunction with ~~the Company’s~~our GAAP financial statements).

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A reconciliation of reported GAAP results to comparable non-GAAP results ~~is provided in the accompanying tables.~~follows (in thousands, except per share data):


	Three Months Ended
	Apr 30, 2022		May 1, 2021
Reported GAAP net earnings attributable to Guess?, Inc.	$	7,970	$	12,006
Certain professional service and legal fees and related (credits) costs1	4,417		1,078
Asset impairment charges2	1,544		441
Net gains on lease modifications3	(601)		(2,145)
Amortization of debt discount4	—		2,781
Discrete tax adjustments5	3,188		147
Income tax impact from adjustments6	(1,281)		(435)
Total adjustments affecting net earnings attributable to Guess?, Inc.	7,267		1,867
Adjusted net earnings attributable to Guess?, Inc.	$	15,237	$	13,873

Net earnings per common share attributable to common stockholders:
GAAP diluted7	$	0.12	$	0.18
Adjusted diluted7	$	0.24	$	0.21

______________________________________________________________________

Notes:

~~The adjusted measures for the three months ended May~~ 1 ~~2021 exclude the impact of $0.4 million of asset impairment charges; $2.1 million net gains on lease modifications; $1.1 million of~~ Amounts recorded represent certain professional ~~services~~service and legal fees and related ~~net credits; $2.8 million~~(credits) costs which we otherwise would not have incurred as part of ~~amortization of debt discount on the Company’s convertible senior notes; and $0.1 million in additional tax expense from certain discrete tax adjustments. The~~our business.

2 Amounts represent asset impairment charges related primarily to impairment of operating lease right-of-use assets and property and equipment related to certain retail locations resulting from ~~lower revenue~~under-performance and ~~future cash flow projections from the ongoing effects of the COVID-19 pandemic. Certain professional service and legal fees and related~~expected store closures.

3 Amounts recorded represent 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 million~~and 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~~gains 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 due to the ongoing effects of the COVID-19 pandemic. The net losses on lease terminationsmodifications related primarily to the early termination of certain lease agreements. ~~Certain~~

4 In April 2019, we issued $300 million principal amount of the Notes in a private offering. Prior to adoption of ASU 2020-06, we separated the Notes into liability (debt) and equity (conversion option) components. The debt discount, which represented an amount equal to the fair value of the equity component, was amortized as non-cash interest expense over the term of the Notes. We adopted ASU 2020-06 under the modified retrospective method as of January 30, 2022. Upon adoption, the equity component was eliminated in the current period and recorded as an adjustment to retained earnings. Prior periods are not affected.

5 Amounts represent discrete income tax adjustments related primarily to the impacts from an intra-entity transfer of intellectual property rights to a wholly-owned Swiss subsidiary, impacts from cumulative valuation allowances and the income tax benefits from an income tax rate change due to net operating loss carrybacks.

6 The income tax effect of certain professional service and legal fees and related (credits) costs, asset impairment charges, net ~~credits were primarily due to amounts~~gains on lease modifications and the amortization of debt discount was based on the our assessment of deductibility using the statutory income tax rate (inclusive of the impact of valuation allowances) of the tax jurisdiction in which the ~~Company otherwise would not have~~charges were incurred.

7 Prior to adoption of ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40), for GAAP purposes, we incurred ~~as part~~dilution above the initial strike price of ~~its business operations. The separation-related charges mainly~~our Notes of $25.78. At May 1, 2021, there was no dilution related to ~~certain cash severance payments, partially offset by adjustments~~the Notes for the period.

We adopted ASU 2020-06 under the modified retrospective method as of January 30, 2022. Upon adoption, we prospectively utilize the if-converted method to ~~non-cash stock-based compensation expense related to~~calculate GAAP diluted EPS. For GAAP purposes, we incur dilution of 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. DuringNotes based on the initial conversion rate associated with the Notes. For the three months ended ~~May 2, 2020, the Company recognized a tax benefit of approximately $11.8~~April 30, 2022, shares used in computing diluted EPS increased by 11.8 million ~~from a tax rate change related~~shares due to the ~~ability~~change from the treasury stock method to ~~carryback~~the if-converted method. Diluted net operating losses to tax years with a higher federal corporate tax rate as allowed under the CARES Act enacted in March 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. These items resulted in a combined $38.8 million negative impact (after considering the related tax benefit of $9.8 million), or an unfavorable $0.59income per ~~share impact during the three months ended May 2, 2020. Net loss attributable to Guess?, Inc. was $157.7 million and diluted loss was $2.40 per common~~ share for the three months ended ~~May 2, 2020. Excluding~~April 30, 2022 is calculated based on GAAP net income and diluted weighted-average shares of 74.5 million, which also includes the potentially dilutive effect of our stock options, restricted stock units and the Notes.

For adjusted diluted shares, we exclude the dilutive impact of ~~these items, adjusted net loss attributable~~the Notes at stock prices below $46.88, based on the bond hedge contracts in place that will deliver shares to ~~Guess?, Inc. was $118.9 million and adjusted diluted loss was $1.81 per common share for~~offset dilution. At stock prices in excess of $46.88, we would have an obligation to deliver additional shares in excess of the ~~three months ended May 2, 2020.~~dilution protection provided by the bond hedges.

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~~our 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~~We provide 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

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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~~we estimate 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~~translate the estimated foreign earnings (loss) at the comparable prior-year rates and ~~excludes~~exclude 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, compensation expenses, other existing operations, expansion plans, international growth and potential acquisitions and investments. ~~In addition,~~If we experience a sustained decrease in ~~the U.S.~~consumer demand, we ~~need liquidity~~may require access to ~~fund share repurchases and payment of dividends~~additional credit, which may not be available to ~~our stockholders.~~us on commercially acceptable terms, or at all. Generally, our working capital needs are highest during the late summer and fall as our inventories increase before the holiday selling period. In addition, in the U.S., we need liquidity to fund share repurchases and payment of dividends to our stockholders.

During the three months ended ~~May 1, 2021,~~April 30, 2022, 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~~for at least the next 12 months for working capital, capital expenditures, payments on our debt, finance leases and operating leases, as well as lease modification payments, potential acquisitions and investments, expected income tax payments, 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~~Facilities and proceeds from our term loans, as needed. (Such arrangements are described further in “Part I, Item 1. Financial Statements – Note 9 – Borrowings and Finance Lease Obligations” in the 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.~~months and beyond. On May 5, 2022, we entered into a €250 million revolving credit facility through a European subsidiary, which replaced certain European short-term borrowing arrangements. Refer to “Part I, Item 1. Financial Statements – Note 17 - Subsequent Events” for further information. If we experience a sustained decrease in consumer demand related to the COVID-19 pandemic or to economic, political or other conditions or events, we may require access to additional credit, which may not be available to us on commercially acceptable terms or at all.

We expect to settle the principal amount of our outstanding Notes in 2024 in cash and any excess in shares. Our outstanding ~~convertible senior notes~~Notes may be converted at the option of the holders as described in “Part I, Item 1,1. 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,~~April 30, 2022, none of the conditions allowing holders of the ~~convertibles notes~~Notes to convert had been met. IfPursuant to one of these conditions, if our stock trading price exceeds 130% of the conversion price of the ~~convertible notes~~Notes (currently $25.53) for at least 20 trading days during the 30 consecutive trading-day period ending on, and including, ~~September 30, 2021,~~the last trading day of any calendar quarter, holders of the ~~convertible notes~~Notes would have the right to convert their convertible notes during the next calendar ~~quarter beginning October 1, 2021.~~quarter. In accordance with the terms of the indenture governing the Notes, we have adjusted the conversion rate and the conversion price of the Notes for quarterly dividends exceeding $0.1125 per share. 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

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our election, in the manner and subject to the terms and conditions provided in the indenture governing the ~~convertible notes.~~Notes. The convertible note hedge transaction we entered into in connection with our issuance of the ~~convertible notes~~Notes is expected generally to reduce the potential dilution upon conversion of the ~~convertible notes~~Notes and/or offset any cash payments we are required to make in excess of the principal amount of ~~convertible notes~~the 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.

~~The Company has~~have historically considered the undistributed earnings of ~~its~~our foreign subsidiaries to be indefinitely reinvested. As a result of the Tax Reform, ~~the Company~~we had a substantial amount of previously taxed earnings that could be distributed to the U.S. without additional U.S. taxation. ~~The Company continues~~We continue to evaluate ~~its~~our plans for reinvestment or repatriation of unremitted foreign earnings and regularly ~~reviews its~~review our cash positions and determination of ~~permanent~~indefinite reinvestment of foreign earnings. If ~~the Company determines~~we determine that all or a portion of such foreign earnings are no longer indefinitely reinvested, itwe may be subject to additional foreign withholding taxes and U.S. state income taxes, beyond the ~~Tax Reform’s~~ one-time transition tax. As of April 30, 2022, we determined that approximately $12.7 million of such foreign earnings are no longer indefinitely reinvested. The ~~Company intends~~incremental tax cost to repatriate these earnings to the U.S. is immaterial. We intend to indefinitely reinvest the remaining earnings from the ~~Company’s~~our foreign subsidiaries for which a deferred income tax liability has not already been recorded. It is not practicable to estimate the amount of income tax that might be payable if these earnings were repatriated due to the complexities associated with the hypothetical calculation. As of ~~May 1, 2021, the Company~~April 30, 2022, we had cash and cash equivalents of ~~$395.1~~$147.9 million, of which approximately ~~$101.0~~$16.5 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~~refer to “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~~our most recent Annual Report on Form 10-K for the fiscal year ended January ~~30, 2021~~29, 2022 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 Business Update” section ~~above~~and in “Part 1, Item 1. Financial Statements - Note 1 - Basis of Presentation” 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~~we have taken certain actions with respect to certain of ~~its~~our existing leases, including engaging with landlords to discuss rent deferrals as well as other rent concessions. ~~Throughout the COVID-19 pandemic, we have~~We suspended rental payments and/or paid reduced rental amounts with respect to certain of our retail stores that were closed or experiencing drastically reduced customer traffic as a result of the COVID-19 pandemic. ~~Over the last year, we~~We also 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 additional affected landlords in an effort to achieve appropriate rent relief and other lease concessions and, in some cases, to terminate existing leases. In some instances, where negotiations with landlords ~~have proven~~proved unsuccessful, ~~the Company is~~we were engaged in litigation related to rent obligations both during the COVID-19 pandemic and through the term of the lease.

Three Months Ended April 30, 2022 and May 1, 2021 ~~and May 2, 2020~~

~~The Company has presented below the cash flow performance comparison of the three months ended May 1, 2021, compared to the three months ended May 2, 2020.~~

Operating Activities

Net cash ~~used in~~provided by operating activities was $54.6 million for the three months ended April 30, 2022, compared to $53.6 million for the three months ended May 1, 2021, ~~compared to $61.6 million for the three months ended May 2, 2020,~~ or ~~an improvement~~a deterioration of ~~$7.9~~$0.9 million. This ~~improvement~~deterioration was driven primarily by unfavorable changes in working capital partially offset by higher cash flows generated from net ~~earnings, partially offset by~~earnings. The unfavorable changes in working ~~capital.~~capital were due primarily to higher inventory levels as we placed orders earlier in order to mitigate some of the supply chain disruptions.

Investing Activities

Net cash used in investing activities was $29.2 million for the three months ended April 30, 2022 compared to $7.8 million for the three months ended May 1, ~~2021, compared to $5.7 million for the three months ended May 2, 2020.~~2021. Net cash used in investing activities for the

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three months ended ~~May 1, 2021~~April 30, 2022 related primarily to ~~capital expenditures incurred on leasehold improvements,~~ investments in ~~technology infrastructure~~existing store remodeling programs and retail expansion and, to a lesser extent, ~~existing store remodeling programs~~technology and ~~international retail expansion.~~other infrastructure.

The increase in cash used in investing activities was driven primarily by higher ~~strategic~~retail remodel and expansion costs and higher investments in technology and ~~retail remodels~~other infrastructure during the three months ended ~~May 1, 2021~~April 30, 2022 compared to the same prior-year period. During the three months ended ~~May 1, 2021, the Company~~April 30, 2022, we opened 1120 directly-operated stores compared to ~~five~~11 directly-operated stores that were opened in the same prior-year period.

Financing Activities

Net cash used in financing activities was $176.8 million for the three months ended April 30, 2022 compared to $9.7 million for the three months ended May 1, ~~2021, compared to net cash provided by financing activities of $210.1 million for the three months ended May 2, 2020.~~2021. Net cash used in financing activities for the three months ended ~~May 1, 2021~~April 30, 2022 related primarily to ~~payment~~our entrance into the 2022 ASR Contract to repurchase an aggregate of ~~dividends and repayments on borrowings and finance lease obligations, partially offset by proceeds from borrowings.~~

~~The change in cash provided by (used in) financing activities was driven primarily by lower proceeds received from borrowings and higher payment~~$175.0 million of ~~dividends during~~ the ~~three months ended May 1, 2021 compared to the same prior-year period.~~our common stock.

Effect of Exchange Rates on Cash, Cash Equivalents and Restricted Cash

During the three months ended ~~May 1, 2021, changes~~April 30, 2022, the change in foreign currency translation rates decreased our reported cash, cash equivalents and restricted cash balance by ~~$2.8 million. This compares~~$7.1 million compared to a decrease of ~~$8.0~~$2.8 million ~~in cash, cash equivalents and restricted cash driven by changes in foreign currency translation rates~~ during the three months ended May ~~2, 2020.~~

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1, 2021. Refer to “Foreign Currency Volatility” for further information on fluctuations in exchange rates.

Working Capital

As of ~~May 1, 2021, the Company~~April 30, 2022, we had net working capital (including cash and cash equivalents) of ~~$497.5~~$264.9 million compared to ~~$470.0~~$466.2 million at January ~~30, 2021~~29, 2022 and ~~$388.2~~$497.5 million at May ~~2, 2020.~~1, 2021.

~~The Company’s~~Our 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~~our wholesale business in Europe and, to a lesser extent, to ~~its~~our wholesale businesses in the Americas and Asia, royalty receivables relating to ~~its~~our licensing operations, credit card and retail concession receivables related to ~~its~~our retail businesses and certain other receivables. Accounts receivable ~~increased~~decreased by ~~$66.8~~$10.9 million, or ~~27.9%~~3.5%, to ~~$306.3~~$295.4 million as of ~~May 1, 2021,~~April 30, 2022, from ~~$239.5~~$306.3 million at May ~~2, 2020.~~1, 2021. On a constant currency basis, accounts receivable increased by ~~$45.7~~$23.8 million, or ~~19.1%~~7.8%, when compared to May ~~2, 2020.~~1, 2021. As of ~~May 1, 2021,~~April 30, 2022, approximately ~~48%~~45% of our total net trade receivables and ~~60%~~61% 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 increased by ~~$12.4~~$79.1 million, or ~~3.1%~~19.5%, to ~~$404.9~~$483.9 million as of ~~May 1, 2021,~~April 30, 2022, from ~~$392.5~~$404.9 million at May ~~2, 2020.~~1, 2021. On a constant currency basis, inventory ~~decreased~~increased by ~~$15.7~~$124.1 million, or ~~4.0%~~30.7%, when compared to May ~~2, 2020,~~1, 2021, driven primarily by ~~improved inventory management.~~management initiatives to mitigate supply chain disruptions, including accelerating product orders.

Capital Expenditures

Gross capital expenditures totaled $28.7 million for the three months ended April 30, 2022. This compares to gross capital expenditures of $9.1 million, before deducting lease incentives of $1.1 million, for the three months ended May 1, 2021. ~~This compares to gross capital expenditures of $6.0 million, before deducting lease incentives of $0.4 million for the three months ended 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

On May ~~27, 2021, the Company~~25, 2022, we announced a regular quarterly cash dividend of ~~$0.1125~~$0.225 per share on ~~the Company’s~~our common stock. The cash dividend will be paid on June ~~25, 2021~~24, 2022 to shareholders of record as of the close of business on June ~~9, 2021.~~8, 2022. In accordance with the terms of the indenture governing the Notes, we will adjust the conversion rate (which is expected to increase) and the conversion price (which is expected to decrease) of the Notes effective as of June 7, 2022.

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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~~our Board of Directors, which reserves the right to change or terminate ~~the Company’s~~our 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 ~~the Company’s~~our 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

During fiscal 2022, the Board of Directors terminated its previous 2012 $500 million share repurchase program and authorized a new $200 million share repurchase program. On March 14, 2022, the Board of Directors expanded its repurchase authorization by $100.0 million. Repurchases 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 and the program may be discontinued at any time, without prior notice.

On March 18, 2022, pursuant to existing share repurchase authorizations, we entered into the 2022 ASR Contract with the 2022 ASR Counterparty to repurchase an aggregate of $175.0 million of our common stock. Under the 2022 ASR Contract, we made an initial payment of $175.0 million to the 2022 ASR Counterparty and received an initial delivery of approximately 3.3 million shares of common stock on March 21, 2022, representing approximately 40% ($70.0 million) of the total shares expected to be repurchased under the 2022 ASR Contract. The remaining balance of $105.0 million was classified as an equity forward contract and recorded in additional paid-in capital within shareholders’ equity as of March 21, 2022.

The exact number of shares we will repurchase under the 2022 ASR Contract will be based generally upon the average daily volume weighted average price of the common stock during the repurchase period, less a discount. At settlement, under certain circumstances, the 2022 ASR Counterparty may be required to deliver additional shares of common stock to us, or under certain circumstances, we may be required either to deliver shares of common stock or to make a cash payment to the 2022 ASR Counterparty. Final settlement of the transactions under the 2022 ASR Contract is expected to be completed by the end of July 2022. The terms of the 2022 ASR Contract are subject to adjustment, including, but not limited to, adjustments arising if we were to enter into or announce certain types of transactions or to take certain corporate actions. The 2022 ASR Contract contains the principal terms and provisions governing the accelerated share repurchases, including, but not limited to, the mechanism used to determine the number of shares that will be delivered, the required timing of delivery of the shares, the circumstances under which the 2022 ASR Counterparty is permitted to make adjustments to valuation and calculation periods and various acknowledgments, representations and warranties made by us and the 2022 ASR Counterparty to one another.

During the three months ended April 30, 2022, we repurchased 3,789,576 shares under our share repurchase program at an aggregate cost of $81.7 million, which is inclusive of the shares repurchased under the 2022 ASR Contract. As of April 30, 2022, we had remaining authority under the share repurchase program to purchase $62.3 million of our common stock. There were no shares repurchased ~~under the Company’s share repurchase program~~ during the three months ended May 1, 2021. ~~As of May 1, 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~~Refer to “Part I, Item 1. Financial Statements – Note 9 – Borrowings and Finance Lease ~~Obligations” and~~Obligations,” “Part I, Item 1. Financial Statements – Note 10 – Convertible Senior Notes and Related Transactions” and “Part I, Item 1. Financial Statements – Note 17 – Subsequent Events” in this Form 10-Q for disclosures about our borrowings and finance lease obligations and convertible senior notes.

Supplemental Executive Retirement Plan

As a non-qualified pension plan, no dedicated funding of ~~the Company’s Supplemental Executive Retirement Plan (“SERP”)~~our SERP is required; however, ~~the Company has~~we have made periodic payments into insurance policies held in a rabbi trust to fund the expected obligations arising under the non-qualified SERP.

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The cash surrender values of the insurance policies were ~~$71.6~~$67.1 million and ~~$72.1~~$70.9 million as of ~~May 1, 2021~~April 30, 2022 and January ~~30, 2021,~~29, 2022, respectively, and were included in other assets in ~~the Company’s~~our condensed consolidated balance sheets. As a result of changes in the value of the insurance policy investments, ~~the Company~~we recorded ~~minimal~~ unrealized losses of $3.3 million and ~~$3.1 million~~minimal unrealized losses in other expense during the three months ended April 30, 2022 and May 1, 2021, ~~and May 2, 2020,~~ respectively. The projected benefit obligation was ~~$52.1~~$49.3 million and ~~$52.3~~$49.4 million as of ~~May 1, 2021~~April 30, 2022 and January ~~30, 2021,~~29, 2022, respectively, and was included in accrued expenses and other long-term liabilities in ~~the Company’s~~our condensed consolidated balance sheets depending on the expected timing of payments. SERP benefit payments of $0.5 million ~~and $0.6 million~~ were made during each of the three months ended April 30, 2022 and May 1, ~~2021 and May 2, 2020, respectively.~~2021.

~~Contractual Obligations and Commitments~~Material Cash Requirements

As of ~~May 1, 2021,~~April 30, 2022, there were no material changes to our material cash requirements from known contractual and other obligations, ~~and~~including commitments for capital expenditures, outside the ordinary course of business compared to the disclosures included under “Liquidity and Capital Resources - Material Cash Requirements” in Item Part II, Item 7 in our Form 10-K for the fiscal year ended January ~~30, 2021. See~~29, 2022. Refer to “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 further information on 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 January ~~30, 2021~~29, 2022 filed with the SEC on ~~April 9, 2021.~~March 24, 2022. There have been no significant changes to our critical accounting policies ~~during~~other than the ~~three months ended May 1, 2021.~~January 30, 2022 adoption of ASU 2020-06 which impacted the accounting and financial statement presentation of our Notes and our calculation of diluted earnings per common share. Refer to “Part I, Item 1. Financial Statements – Note 3 - Earnings per Share” and “Part I, Item 1. Financial Statements – Note 10 -Convertible Senior Notes and Related Transactions” for further information.

Recently Issued Accounting Guidance

~~See~~Refer to “Part I, Item 1. Financial Statements – Note 1 – Basis of ~~Presentation and New Accounting Guidance”~~Presentation” for disclosures about recently issued accounting guidance.

ITEM 3.Quantitative and Qualitative Disclosures About Market Risk.

Exchange Rate Risk

More than two-thirds of product sales recorded for the three months ended ~~May 1, 2021~~April 30, 2022 were denominated in currencies other than the U.S. dollar. ~~The Company’s~~Our 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~~our most recent Annual Report on Form 10-K for the fiscal year ended January ~~30, 2021.~~29, 2022.

Foreign Currency Translation Adjustment

The local selling currency is typically the functional currency for all of ~~the Company’s~~our significant international operations. In accordance with authoritative guidance, assets and liabilities of ~~the Company’s~~our 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~~we record foreign currency translation adjustments related to ~~its~~our 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,

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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~~we may also use foreign exchange currency contracts to hedge the translation and economic exposures related to ~~its~~our net investments in certain of ~~its~~our international 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 three months ended ~~May 1, 2021,~~April 30, 2022, the total foreign currency translation adjustment decreased stockholders’ equity by ~~$2.2~~$17.9 million, driven primarily by the ~~weakening~~strengthening 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 ~~$4.1~~$10.6 million and ~~$10.5~~$4.1 million were included in the determination of net earnings ~~(loss)~~ for the three months ended April 30, 2022 and May 1, 2021, ~~and May 2, 2020,~~ respectively.

Foreign Exchange Currency Contracts

~~The Company operates~~We operate in foreign countries, which exposes itus 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~~we 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~~We are also subject to certain translation and economic exposures related to ~~its~~our net investment in certain of ~~its~~our international subsidiaries. ~~The Company enters~~We enter into derivative financial instruments to offset some, but not all, of ~~its~~our 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 three months ended ~~May 1, 2021, the Company~~April 30, 2022, we purchased U.S. dollar forward contracts in Europe totaling US$40.0 million that were designated as cash flow hedges. As of ~~May 1, 2021, the Company~~April 30, 2022, we had forward contracts outstanding for ~~its~~our European operations of US$~~126.0~~149.0 million to hedge forecasted merchandise purchases, which are expected to mature over the next 15 months. ~~The Company’s~~Our foreign exchange currency contracts are recorded in ~~its~~our 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.

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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 ~~May 1, 2021,~~April 30, 2022, the net unrealized ~~loss~~gain of the remaining open forward contracts recorded in ~~the Company’s~~our condensed consolidated balance sheet was approximately ~~$1.3~~$11.9 million.

At January ~~30, 2021, the Company~~29, 2022, we had forward contracts outstanding for ~~its~~our European operations of US$~~100.0~~146.0 million that were designated as cash flow hedges. At January ~~30, 2021,~~29, 2022, the net unrealized ~~loss~~gain of these open forward contracts recorded in ~~the Company’s~~our condensed consolidated balance sheet was approximately ~~$3.3~~$6.0 million.

Foreign Exchange Currency Contracts Not Designated as Hedging Instruments

~~The Company has~~We also have 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 three months ended ~~May 1, 2021, the Company~~April 30, 2022, we recorded a net gain of ~~$0.1~~$1.6 million for ~~its~~our euro dollar foreign exchange currency contracts not designated as hedges, which has been included in other income (expense). As of ~~May 1, 2021, the Company~~April 30, 2022, we had euro foreign exchange currency contracts to purchase US$~~19.0~~23.0 million expected to mature over the next ~~one month.~~two months. As of ~~May 1, 2021,~~April 30, 2022, the net unrealized ~~loss~~gain of these open forward contracts recorded in ~~the Company’s~~our condensed consolidated balance sheet was approximately ~~$0.9~~$2.4 million.

At January ~~30, 2021, the Company~~29, 2022, we had euro foreign exchange currency contracts to purchase US$19.0 million. At January ~~30, 2021,~~29, 2022, the net unrealized ~~loss~~gain of these open forward contracts recorded in ~~the Company’s~~our condensed consolidated balance sheet was approximately ~~$1.2~~$1.1 million.

Sensitivity Analysis

As of ~~May 1, 2021,~~April 30, 2022, 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$~~145.0~~172.0 million, the fair value of the instruments would have decreased by ~~$16.1~~$19.1 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 ~~$13.2~~$15.6 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~~We are exposed to interest rate risk on ~~its~~our floating-rate debt. ~~The Company has~~We have entered into interest rate swap agreements for certain of these agreements to effectively convert ~~its~~our 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~~our floating-rate debt, thus reducing the impact of interest rate changes on future interest payment cash flows. ~~The Company has~~We have elected to apply the hedge accounting rules in accordance with authoritative guidance for certain of these contracts.

In April 2019, ~~the Company~~we issued $300 million principal amount of ~~convertible senior notes~~the Notes in a private offering. The fair value of the ~~convertible senior notes~~Notes is subject to interest rate risk, market risk and other factors due to ~~its~~a conversion feature. The fair value of the ~~convertible senior notes~~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~~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~~Notes at face value, less any unamortized discount of debt issuance costs on our balance sheet and we present the fair value for disclosure purposes only.

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Interest Rate Swap Agreement Designated as Cash Flow Hedge

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~~our floating-rate ~~Mortgage Debt,~~real estate secured loan (the “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 ~~May 1, 2021,~~April 30, 2022, accumulated other comprehensive income (loss) related to the interest rate swap agreement included a net unrealized ~~loss~~gain of ~~$0.5~~$0.6 million net of tax, which will be recognized in interest expense 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. As of ~~May 1, 2021,~~April 30, 2022, the net unrealized gain of the interest rate swap recorded in our condensed consolidated balance sheet was approximately $0.8 million. As of January 29, 2022, the net unrealized loss of the interest rate swap recorded in ~~the Company’s~~our condensed consolidated balance sheet was approximately ~~$0.7 million. As of January 30, 2021, the net unrealized loss of the interest rate swap recorded in the Company’s condensed consolidated balance sheet was approximately $1.0~~$0.1 million.

Sensitivity Analysis

As of May 1, 2021, the Company had borrowings under its credit facility arrangements of $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 three months ended May 1, 2021.

~~As of May 1, 2021, the Company also~~April 30, 2022, we had indebtedness related to term loans of ~~$56.0~~$43.8 million, finance lease obligations of ~~$22.4~~$21.8 million and ~~its~~the Mortgage Debt of ~~$18.3~~$17.7 million. The term loans provide for annual interest rates ranging between ~~0.5%~~1.3% to 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~~our Mortgage Debt from LIBOR floating-rate debt to fixed-rate debt.

The fair values of ~~the Company’s~~our debt instruments are based on the amount of future cash flows associated with each instrument discounted using ~~the Company’s~~our incremental borrowing rate. As of ~~May 1, 2021~~April 30, 2022 and January ~~30, 2021,~~29, 2022, the carrying value was not materially different from fair value, as the interest rates on ~~the Company’s~~our debt approximated rates currently available to ~~the Company.~~us. The fair value of ~~the Company’s convertible senior notes~~our 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 first quarter of fiscal ~~2022~~2023 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.

~~See~~Refer to “Part I, Item 1. Financial Statements – Note 13 – Commitments and ~~Contingencies – Legal and Other Proceedings”~~Contingencies” in this Form 10-Q for disclosures about our legal and other proceedings.

ITEM 1A. Risk Factors.

~~There~~Other than the risk factor noted below, there have not been any material changes in the Risk Factors as previously disclosed in our Annual Report on Form 10-K for the year ended January ~~30, 2021~~29, 2022 filed with the SEC on ~~April 9, 2021.~~March 24, 2022.

Our business may also be affected by existing or future sanctions and export controls targeting Russia and other responses to Russia's invasion of Ukraine.

As a result of Russia's invasion of Ukraine, the United States, the United Kingdom and the European Union governments, among others, have developed coordinated sanctions and export-control measures. Based on the public statements to date, these measures include: (i) comprehensive financial sanctions against major Russian banks; (ii) additional designations of Russian individuals with significant business interests and government connections; (iii) designations of individuals and entities involved in Russian military activities; and (iv) enhanced export controls and trade sanctions targeting Russia's import of various goods. We are currently operating in Russia through our wholesale and retail channels, including through our 70%-owned Russian joint venture. While we have no direct presence in Ukraine, we operate with a local distributor in Ukraine. Slightly less than 3% of our revenues for fiscal 2022 were generated from sales in these regions. The imposition of the current or possible future enhanced export controls and economic sanctions on transactions with Russia and Russian entities could limit or prevent us from (i) operating all or a portion of our business in Russia, (ii) performing under existing contracts involving our Russia business (including with respect to our Russian joint venture and the potential purchase by us of the remaining 30% interest held by our joint venture partner) or (iii) pursuing new business opportunities or maintaining adequate insurance coverage to protect our products and facilities in Russia. Additionally, the conflict in Ukraine could disrupt the operations of our distributor in that region and surrounding regions. Any of the foregoing could adversely affect our business, supply chain, partners or customers. In addition, the conflict between Russia and Ukraine could lead to disruption, instability and volatility in global markets and industries that could negatively impact our operations. The scope of the impact of sanctions, export controls and the ongoing conflict in Ukraine is impossible to predict at this time, and could have an adverse impact on our business.

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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~~Our share repurchases during each fiscal month of the first quarter of fiscal ~~2022~~2023 were as follows:


Period	Period	Total 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 Programs		Period	Total 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 Programs
January 31, 2021 to February 27, 2021
January 30, 2022 to February 26, 2022								January 30, 2022 to February 26, 2022
Repurchase program1	Repurchase program1	—	—		—	$	47,834,956	Repurchase program1	—	—		—	$	149,004,273
Employee transactions2	Employee transactions2	—	—		—			Employee transactions2	—	—		—
February 28, 2021 to April 3, 2021
February 27, 2022 to April 2, 2022								February 27, 2022 to April 2, 2022
Repurchase program1	Repurchase program1	—	—		—	$	47,834,956	Repurchase program1	3,531,646	$	21.49	3,531,646	$	68,096,855
Employee transactions2	Employee transactions2	595	$	22.86	—			Employee transactions2	512	$	23.32	—
April 4, 2021 to May 1, 2021
April 3, 2022 to April 30, 2022								April 3, 2022 to April 30, 2022
Repurchase program1	Repurchase program1	—	—		—	$	47,834,956	Repurchase program1	257,930	$	22.60	257,930	$	62,267,634
Employee transactions2	Employee transactions2	82	27.85		—			Employee transactions2	—	—		—
Total	Total							Total
Repurchase program1	Repurchase program1	—	—		—			Repurchase program1	3,789,576	$	21.57	3,789,576
Employee transactions2	Employee transactions2	677	$	23.47	—			Employee transactions2	512	$	23.32	—

Notes:

1~~On June 26, 2012,~~ During fiscal 2022, the ~~Company’s~~ Board of Directors terminated our previous 2012 $500 million share repurchase program (which had $47.8 million capacity remaining) and authorized a ~~program~~new $200 million share repurchase program. On March 14, 2022, the Board of Directors expanded the repurchase authorization by $100 million, leaving an available capacity of $249.0 million at that time.

On March 18, 2022, pursuant to existing stock repurchase authorizations, we entered into an accelerated share repurchase agreement (the “2022 ASR Contract”) with a financial institution (the ”2022 ASR Counterparty”) to repurchase ~~from time-to-time and as market and business conditions warrant, up to $500~~an aggregate of $175.0 million of ~~the Company’s~~our common stock. ~~Repurchases~~Under the terms of the 2022 ASR Contract, we made a payment of $175.0 million and received an initial delivery of 3.3 million shares on March 21, 2022, representing approximately 40% ($70 million) of the total shares expected to be repurchased under the 2022 ASR Contract. The total number of shares to be repurchased will be based on the average of our daily volume-weighted average stock price, less a discount, during the repurchase period, which is expected to be completed by the end of July 2022. The number of shares purchased and average purchase price paid per share does not include the $105.0 million equity forward contract expected to settle by the end of July 2022. The maximum dollar value of shares that may yet be purchased under the program does reflect the full $175.0 million payment of the equity forward contract. Refer to “Part I, Item 1. Financial Statements – Note 4 – Stockholders' Equity” for further information.

Repurchases 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~~and the program may be discontinued at any time, without prior notice.

2Consists of shares surrendered to, or withheld by, ~~the Company~~us in satisfaction of employee tax withholding obligations that occur upon vesting of restricted stock awards granted under ~~the Company’s~~our 2004 Equity Incentive Plan, as amended.

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ITEM 5.Other Information.

On April 22, 2022, the Company’s stockholders approved an amendment and restatement of the Guess?, Inc. 2004 Equity Incentive Plan (the “2004 Plan”). The amendment and restatement of the 2004 Plan (a) increased the aggregate number of shares of the Company’s common stock available for award grants under the 2004 Plan by 680,000 shares (from 29,100,000 shares to 29,780,000 shares), (b) changed the ratio at which a “Full-Value Award” (any award granted under the 2004 Plan other than a stock option or stock appreciation right) counts against the total share limit under the 2004 Plan from 3.54 shares for every one share actually issued in connection with such award to 1.6 shares for every one share actually issued in connection with such award, (c) extended the Company’s ability to grant new awards under the 2004 Plan through March 26, 2032, and (d) made members of the Company’s Board of Directors who are not employees of the Company or any of its subsidiaries eligible to receive award grants under the 2004 Plan. The foregoing summary of the amendment of the 2004 Plan is qualified in its entirety by reference to the text of the amended and restated 2004 Plan, which is filed as Exhibit 10.1 hereto and incorporated herein by reference.

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ITEM 6.Exhibits.


Exhibit Number						Description
3.1.						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).
3.2.						~~Third~~Certificate of Amendment, dated June 24, 2021, to the Restated Certificate of Incorporation of Guess?, Inc. (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on June 30, 2021).
3.3.						Fourth Amended and Restated Bylaws of the Registrant (incorporated by reference from the Registrant’s ~~Annual~~Current Report on Form ~~10-K for~~8-K filed with the ~~year ended February 3, 2018)~~SEC on June 30, 2021).
*†10.1.						2004 Equity Incentive Plan (amended and restated as of March 26, 2022)
*†10.2.						2002 Employee Stock Purchase Plan (amended and restated as of March 26, 2022)
10.3.




						Revolving Credit Facility Agreement dated as of May 5, 2022, among Guess Europe Sagl, as borrower, Guess? Europe B.V., as guarantor, UBS Switzerland AG (“UBS”) and Credit Suisse (Switzerland) Ltd (“Credit Suis s e”), as lead arrangers and joint bookrunners, UBS, as agent, and the lenders party thereto (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on May 9, 2022).
†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.INS						XBRL 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.SCH						XBRL Taxonomy Extension Schema Document
†101.CAL						XBRL Taxonomy Extension Calculation Linkbase Document
†101.DEF						XBRL Taxonomy Extension Definition Linkbase Document
†101.LAB						XBRL Taxonomy Extension Label Linkbase Document
†101.PRE						XBRL Taxonomy Extension Presentation Linkbase Document
†104						Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)



*			Management Contract or Compensatory Plan
†			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:	June ~~4, 2021~~2, 2022	By:	/s/ CARLOS ALBERINI
			Carlos Alberini
			Chief Executive Officer

Date:	June ~~4, 2021~~2, 2022	By:	/s/ ~~KATHRYN ANDERSON~~DENNIS SECOR
			~~Kathryn Anderson~~Dennis Secor
			Interim Chief Financial Officer
			(Principal Financial Officer)

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	For the three months ended May 2, 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, 2020	65,848,510	$	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 effect	1,763,311	18		(24,264)		—		—		(1,770,223)	21,017		—		(3,229)
Issuance of stock under Employee Stock Purchase Plan	32,427	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, 2020	67,644,248	$	676	$	544,319	$	973,006	$	(153,302)	75,216,787	$	(893,045)	$	15,135	$	486,789