SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the Fiscal Year Ended December 31, 2000
Commission File Number 1-11893

GUESS?, INC.

(Exact name of registrant as specified in its charter)

Delaware 95-3679695
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(State or other jurisdiction (I.R.S. Employer Identification
of incorporation or organization) Number)

1444 South Alameda Street
Los Angeles, California 90021
(213) 765-3100
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(Address, including zip code, and telephone number, including area code)

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

Name of Each Exchange on
Title of Each Class Which Registered
------------------------------------- -------------------------
Common Stock, par value $0.01 per share New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None

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 [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]

As of the close of business on March 12, 2001, the aggregate market value of the
voting and non-voting common equity stock held by non-affiliates of the
registrant was $50,220,989.

As of the close of business on March 12, 2001, the registrant had 43,623,827
shares of Common Stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the proxy statement for the registrant's 2001 Annual Meeting of
Stockholders are incorporated by reference into Part III herein.

TABLE OF CONTENTS

PART I

Item Description Page
- ---- ----------- ----

1 Business 1
2 Properties 11
3 Legal Proceedings 12
4 Submission of Matters to a Vote of Security Holders 13

PART II
5 Market for Registrant's Common Equity and Related Stockholder Matters 13
6 Selected Financial Data 14
7 Management's Discussion and Analysis of Financial Condition and
Results of Operations 15
7A Quantitative and Qualitative Disclosures About Market Risks 22
8 Financial Statements and Supplementary Data 23
9 Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure 23

PART III
10 Directors and Executive Officers of the Registrant 23
11 Executive Compensation 23
12 Security Ownership of Certain Beneficial Owners and Management 23
13 Certain Relationships and Related Transactions 23

PART IV
14 Exhibits, Consolidated Financial Statement Schedules and Reports on Form 8-K 23

PART I

ITEM 1. BUSINESS

IMPORTANT FACTORS REGARDING FORWARD-LOOKING STATEMENTS

Various forward-looking statements have been made in this Form 10-K.
Forward-looking statements may also be in the Company's other reports filed
under the Securities Exchange Act of 1934, in its press releases and in other
documents. In addition, from time to time, the Company, through its management,
may make oral forward-looking statements.

Forward-looking statements are only expectations, and involve known and
unknown risks and uncertainties, which may cause actual results in future
periods and other future events to differ materially from what is currently
anticipated. Certain statements in this Form 10-K, including those relating to
the Company's expected results and operations, the accuracy of data relating to,
and anticipated levels of, its future inventory and gross margins, its
anticipated cash requirements and sources, its cost containment efforts,
estimated charges, its plans regarding store openings and closings, e-commerce
and its business seasonality, are forward-looking statements. Such statements
involve risks and uncertainties, which may cause actual results to differ
materially from those set forth in these statements. Factors which may cause
actual results in future periods to differ from its current expectations
include, among other things, the continued availability of sufficient working
capital, the successful integration of new stores into existing operations, the
continued desirability and customer acceptance of existing and future product
lines, possible cancellations of wholesale orders, the success of competitive
products, the success of the Company's programs to strengthen its inventory cost
accounting controls and procedures and the availability of adequate sources of
capital. In addition to these factors, the economic and other factors identified
in this Form 10-K, including but not limited to the risk factors discussed
herein and in the Company's previously filed public documents, could affect the
forward-looking statements contained in herein and therein.

Forward-looking statements generally refer to future plans and
performance, and are identified by the words "believe," "expect," "anticipate,"
"optimistic," "intend," "aim," "will" or the negative thereof and similar
expressions. Readers are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date of which they are
made. The Company undertakes no obligation to update publicly or revise any
forward-looking statements.

For additional information regarding forward-looking statements, refer
to "Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations" contained herein.

GENERAL

Unless the context indicates otherwise, when we refer to "we," "us" or
the "Company" in this Form 10-K, we are referring to Guess?, Inc. ("Guess?") and
its subsidiaries on a consolidated basis.

We design, market, distribute and license one of the world's leading
lifestyle collections of casual apparel and accessories for men, women and
children that reflect the American lifestyle and European fashion sensibilities.
Our apparel is marketed under numerous trademarks including GUESS, GUESS?, GUESS
U.S.A., GUESS Jeans, GUESS? and Triangle Design, Question Mark and Triangle
Design, GUESS Kids, and GUESS Collection. The lines include full collections of
denim and cotton clothing, including jeans, pants, overalls, skirts, dresses,
shorts, blouses, shirts, jackets and knitwear. We also selectively grant
licenses to manufacture and distribute a broad range of products that complement
our apparel lines, including eyewear, watches, footwear, infant apparel and
other fashion accessories.

Our products are sold through three primary distribution channels: in
our own stores, to a network of wholesale accounts and through the internet.
GUESS? branded products, some of which are produced under license, are also sold
internationally through a series of licensees and distributors. Our core
customer is a style-conscious consumer between the ages of 15 and 25. These
consumers are part of a highly desirable demographic group that we believe is
growing rapidly and has significant disposable income. We also appeal to
customers outside this group through specialty product lines that include GUESS
Collection, a more sophisticated fashion line targeted to women, and GUESS Kids,
targeted to boys and girls ages 6 to 12.

We were founded in 1981 and currently operate as a Delaware
corporation.

BUSINESS SEGMENTS

Our business consists of three reportable business segments: retail
operations, wholesale operations and licensing operations. Financial information
about each segment for the fiscal years ended December 31, 2000, 1999 and 1998
are included under Note 13 to the Consolidated Financial Statements contained
herein.

In 2000, 50.4% of our net revenue was generated from retail
operations, 44.8% from wholesale operations and 4.8% from licensing
operations. Our total net revenue in 2000 was $779.2 million and net earnings
were $16.5 million.

BUSINESS STRENGTHS

We believe we have several business strengths which are necessary for
the execution of our strategies. These business strengths include:

BRAND EQUITY. We believe that our name has become one of the most
familiar in fashion and is one of our most valuable assets. We believe the
enduring strength of the GUESS? brand name and image is due mainly to our
consistent emphasis on innovative and distinctive product designs that stand for
exceptional styling and quality. Our industry is highly competitive and subject
to rapidly changing consumer preferences and tastes. The success of our brand
depends on our ability to anticipate the fashion preferences of our customers.
We have a team of designers who, under the direction of Maurice Marciano, seek
to identify global fashion trends and interpret them for the style-conscious
consumer while retaining the distinctive GUESS? image. Through our award-winning
advertising, under the creative leadership and vision of Paul Marciano, we have
achieved worldwide recognition of the GUESS? brand name. By retaining control
over advertising and marketing activities from our headquarters in Los Angeles,
we maintain the integrity, consistency and direction of the GUESS? brand image
worldwide, while realizing substantial cost savings when compared to the use of
outside advertising agencies.

We have developed the "GUESS? signature image" and "GUESS? lifestyle
concept," through the use of our strong and distinctive images, merchandising
display themes, logos, and trademarks which are registered in over 171
countries.

ADVERTISING AND MARKETING. All worldwide advertising, marketing
activities and promotional materials are controlled from our headquarters in Los
Angeles. GUESS Jeans, GUESS U.S.A. and Guess?, Inc. images have been showcased
in dozens of major publications, and outdoor and broadcast media throughout the
United States and worldwide. Our advertising campaigns promote the GUESS? image
with our award winning advertising and a consistent emphasis on innovative and
distinctive designs.

We communicate this message through the use of our signature black and
white print advertisements, as well as color print advertisements, designed by
our in-house Advertising Department. Led by Paul Marciano, this team has won
numerous awards and contributed to making the GUESS? brand one of the most
recognizable fashion brands. We have maintained a high degree of consistency in
our advertisements, by using similar themes and images. We require our licensees
and distributors to invest a percentage of their net sales of licensed products
and net purchases of GUESS? products, respectively, in Company-approved
advertising, promotion and marketing.

RETAIL DISTRIBUTION. At December 31, 2000, we operated 108 full-price
retail stores, 11 kids stores and 60 factory outlet stores in the United
States and a retail store in Florence, Italy that is an integral part of our
European design activities. At December 31, 2000, our 60% owned subsidiary,
GUESS Canada, operated 26 full-price retail stores and seven factory outlet
stores in Canada. Our retail network creates an upscale and inviting shopping
environment and enhances our image. Distribution through our retail stores
allows us to influence the merchandising and presentation of our products,
build brand equity and test market new product design concepts. Our retail
stores carry a full assortment of men's and women's merchandise, including
most of the GUESS? licensed products. Our kids stores offer product for boys
and girls and infants ages 3 months to 12 years. These stores are smaller
than the adult stores and are child friendly including special visual
presentation and fixtures. Our factory outlet stores are primarily located in
outlet malls, generally operating outside the shopping radius of our
wholesale customers and our own retail stores. They appeal to value-conscious
customers with a product line that is approximately 70% unique to that venue.

LICENSEE STORES. Our licensees and distributors also operate 248
international GUESS? stores. These stores carry apparel and accessories that are
similar to those sold in the United States, including some that are tailored for
local fashion sensibilities. We work closely with international licensees and
distributors to ensure that their store designs and merchandise programs protect
the reputation of the GUESS? trademarks. Our international licenses and
distribution agreements also allow for the sale of GUESS? brand products in
better department stores and upscale specialty retail stores.

WHOLESALE DISTRIBUTION. We have both domestic and international
wholesale distribution channels. Domestic wholesale customers consist primarily
of better department stores and select specialty retailers and upscale
boutiques, which have the image and merchandising expertise that we require for
the effective presentation of our products. Leading domestic wholesale customers
include Federated Department Stores, Inc., The May Department Stores Company,
Dillard's, Inc. and Dayton Hudson Corporation. During 2000, our products were
sold directly to consumers from approximately 2,800 retail store locations in
the United States. These locations include approximately 1,470 shop-in-shops, an
exclusive selling area within a department store that offers a wide array of our
products and incorporates GUESS? signage and fixture designs. These
shop-in-shops allow us to reinforce our GUESS? brand image with our customers.
Many department stores have more than one shop-in-shop, with each one featuring
women's, men's, boys' or girls' apparel. Through our foreign subsidiaries and
our network of international distributors, our products are also found in major
cities throughout Asia, Europe, South America and the Middle East.

LICENSING OPERATIONS. The desirability of the GUESS? brand name among
consumers has allowed us to selectively expand our product offerings and global
markets through trademark licensing arrangements, with minimal capital
investment or on-going operating expenses. We carefully select our trademark
licensees and approve in advance all product design, advertising and packaging
materials of all licensed products in order to maintain a consistent GUESS?
image. We currently have 25 domestic and international licenses that include
watches, eyewear, shoes, handbags, leather apparel, jewelry and related
accessories. We have granted licenses for the manufacture and sale of GUESS?
branded products in markets which include Europe, Asia, South America, Australia
and Africa.

BUSINESS GROWTH STRATEGIES

We regularly evaluate and implement initiatives that we believe will
build brand equity, grow our business and enhance profitability. Our key growth
strategies are as follows:

LEVERAGING THE GUESS? BRAND. We believe the GUESS? brand is an integral
part of our business, a significant strategic asset and a primary source of
sustainable competitive advantage. It communicates a distinctive image that is
fun, fashionable and sexy. Brand loyalty, name awareness, perceived quality,
strong

brand images, public relations, publicity, promotional events and trademarks all
contribute to brand integrity. Our design teams visit the world's premier
fashion locations in order to identify important style trends and to discover
new fabrics. We will continue this practice while promoting our innovative
designs through stylish advertising campaigns that advance the GUESS? image. Our
marketing programs are designed to convey a uniform style image for the brand
and are aimed at increasing the desire of the target group to join our GUESS?
customer group.

RETAIL STORE STRATEGY AND EXPANSION PLANS. Our retail growth strategy
is to increase retail sales and profitability by expanding our network of retail
stores and improving the performance of existing stores. During 2000, we opened
16 new full-price retail stores, 11 kids stores, nine factory outlet stores and
closed 3 factory outlet under-performing stores in the United States. In 2000,
our Canadian licensee, Guess Canada, opened 14 new full-price retail stores and
6 factory outlet stores in Canada. We currently own 60% of Guess? Canada and
have an option to acquire the remaining 40% of our Canadian subsidiary
commencing December 31, 2001.

Our retail locations build brand awareness and contribute to the growth
of our wholesale operations. Accordingly, we have expanded our retail square
footage in the United States and Canada. We increased square footage in 2000 by
29% in the United States and Canada, including Guess? Kids stores. For 2001,
while we plan to increase our square footage, and remodel a few existing
locations, the growth rate will be significantly lower than in 2000. We plan to
be very selective with new store locations and expect to open up to 25 new
stores, including stores in Canada and Guess? Kids stores.

In 2000, our retail stores open for at least one year realized
comparable sales gains averaging 5.8% over 1999 and includes our factory
outlet stores which realized net gains averaging 4% over 1999. We believe this
growth reflects the effect of several ongoing initiatives, including:

- leadership in new product development,

- a more fashion-focused product mix,

- improvements in merchandising and visual presentation,

- the remodeling of select stores to promote a consistent brand
message, and

- the development of a motivated team of sales professionals to
service our customers and provide a favorable shopping
experience.

The look and feel of GUESS? retail and factory outlet stores play an
important role in building our brand equity. To enhance the quality of our
presentation, we remodeled 19 stores during 2000 and plan to remodel an
additional six stores during 2001.

EXPAND SHOP-IN-SHOP PROGRAMS. We continue to selectively expand our use
of "shop-in-shops," which are exclusive selling areas within wholesale
customers' department stores that use GUESS? signage and fixture designs. The
GUESS? "shop-in-shop" concept is designed to enhance the presence and brand
awareness of GUESS? products in department stores. The strategic product
presentation, theme-based fixtures, displays, strong and distinctive images and
point-of-sale materials in these premium department store locations are designed
to reinforce and capitalize on the "GUESS? lifestyle" concept. These shops also
facilitate consumer shopping by featuring a comprehensive presentation of our
merchandise. During the last three years, we focused on the department stores
with the greatest sales potential and increased our shop-in-shop presence in
those stores. In 2000 we increased the number of shop-in shops by 270, adding
122,000 square feet in department stores. At the end of 2000, we had
approximately 1,470 GUESS? shop-in-shops in the United States.

REPOSITION LICENSEE PORTFOLIO. A primary objective of our company is to
maintain the quality and reputation of the GUESS? brand. In order to accomplish
this goal, we will continue to strategically reposition our licensing portfolio
by constantly monitoring and evaluating the performance of our licensees
worldwide and their strength and capabilities to represent our brand
appropriately. As part of this process, we will consider bringing in-house
apparel licenses, where appropriate. If we determine that licensees are
performing inadequately, we sometimes discontinue the existing relationship and
seek out a stronger replacement licensee. Over the past few years, we have
converted our Women's Knits, Girls' and Boys' product lines from licensees to
our own products.

Our girls' and boys' apparel lines are prominently featured in our new GUESS
Kids stores and in girls' and boys' shop-in-shops. We have a new licensee
producing the Baby GUESS line.

IMPROVED PRODUCT SOURCING. Over the past several years, we have
refocused our product sourcing strategies to increase efficiencies, reduce
costs and improve quality. We currently purchase approximately 79% of our
finished products from international vendors. This is a significant change
from years ago when we purchased the majority of our goods from domestic
sources. We have increased our utilization of lower-cost, offshore "packaged
purchases" in which we supply the product design and fabric selection, and
the vendor manufactures and delivers the finished product. We have
strategically aligned ourselves with sourcing vendors worldwide, who will
take full responsibility for delivering quality, finished products in a
timely manner. We have substantially reduced our average cost per unit and we
have lowered the price to the consumer of many of our items. By continuing to
use packaged programs, we believe we can improve product gross margins,
reduce carrying costs of raw materials and improve the timing of our
deliveries and product quality. We also retain a close relationship with a
number of domestic vendors located primarily in Los Angeles as it is
important to react to last minute trends, as well as to respond to rush
reorders.

RELOCATION OF THE DISTRIBUTION CENTER. We have opened a new,
automated distribution center in Louisville, Kentucky, to replace our
distribution center in Los Angeles. Our new, 500,000 square-foot facility is
near United Parcel Service's national transit hub and has contributed to the
reduction of our shipping time to our stores and wholesale accounts that are
east of the Mississippi River. Operating expenses in the new distribution
facility were higher than normal in 2000 due primarily to start-up costs.
Depending on processing volumes and productivity improvements, we expect that
the new facility will reduce operating cost per unit by reducing shipping
costs and will provide better service to our customers by faster shipping and
response times.

E-COMMERCE. We are pursuing both business-to-consumer and
business-to-business initiatives. Our web site, www.guess.com, a virtual
storefront that promotes the GUESS? brand, became fully operational in April
1999. Designed as a customer center, the site showcases GUESS? products in an
easy-to-navigate format, allowing customers to see and purchase our collections
of casual apparel and accessories. This virtual store has become a successful
additional retail distribution channel, has improved customer service and is a
fun and entertaining alternative-shopping environment. The site also provides
fashion information, provides a mechanism for customer feedback, promotes
customer loyalty and enhances our brand identity through interactive content. In
2000 the site generated net sales consistent with the top retail GUESS? stores
in the chain. In addition, the Company added a Guess Kids and Baby Guess site in
2000 to create a complete product offering for our customers.

During 2000, we introduced a business-to-business concept that
facilitates our interaction with wholesale customers, licensees and
suppliers. The site, which utilizes Commerce One's MarketSite with
PeopleSoft's eProcurement software, is designed to permit the purchase of
both direct items such as trim, fabric, and finished goods and indirect items
such as office and maintenance supplies. In addition, the site was created as
a vehicle for our specialty customers to purchase Guess? and licensee
products. Our site has the potential to become an electronic marketplace that
facilitates various levels of interaction between buyers and sellers in the
textile and apparel industries, and reduce our operating costs, increase our
sourcing efficiencies and improve customer service.

GUESS? PRODUCTS

We derive net revenue from four primary sources:

- the sale of GUESS? men's, women's, girls' and boys' apparel,
- the sale of our licensees' products through our network of
retail and factory outlet stores primarily in the United
States,
- the sale of GUESS? men's, women's, girls' and boys' apparel
worldwide to wholesale customers and distributors, and
- net royalties from worldwide licensing activities.

The following table sets forth our net revenue from our channels of
distribution:

Year Ended December 31,
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2000 1999 1998
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(dollars in thousands)

Net Revenue:
Retail operations $392,539 50.4% $299,384 50.0% $222,624 47.2%
Wholesale operations 348,873 44.8 260,628 43.4 212,504 45.0
-------- ---- -------- ----- -------- ----
Net revenue from product sales 741,412 95.2 560,012 93.4 435,128 92.2
Net royalties 37,805 4.8 39,638 6.6 36,803 7.8
-------- ---- -------- ----- -------- ----
Total net revenue $779,217 100.0% $599,650 100.0% $471,931 100.0%
======== ===== ======== ===== ======== =====

PRODUCTS. Our product line is organized into four primary categories: men's,
women's, girls' and boys' apparel. Since 1998, we reacquired our boys' and
girls' apparel line from former licensees and now produce the line in-house.
The product assortment was refocused with a more narrow and deep buying
strategy using fewer stock keeping units ("SKUs") to be able to give our
customers more depth of the styles they want. To take advantage of the
contemporary trends, we complement our core basic styles with more
fashion-oriented items. Within our basic denim assortment, we have added new
denim fabrics and washes. In addition, we have also added "immediates" to our
merchandise assortment; these are fashion forward styles that complement our
current product line.

Our line of women's apparel also includes the GUESS Collection product line, a
better collection of women's skirts, dresses, tops, jackets, blazers and blouses
incorporating a sophisticated, high fashion combination of colors and styles.
These products are currently sold exclusively through our retail stores and the
Internet. This line is primarily designed to appeal to the contemporary segment
of the apparel market.

LICENSED PRODUCTS. The high level of desirability of the GUESS? brand among
consumers has allowed us to selectively expand our product offerings and
distribution channels worldwide through trademark licensing arrangements. We
currently have 25 trademark licenses. Worldwide sales of licensed products (as
reported to us by our licensees) were approximately $550.0 million in 2000. Our
net royalties from these sales, including fees from new licensees, were $37.8
million in 2000. Approximately 62.3% of our net royalties were derived from our
top 7 licensed product lines in 2000.

DESIGN

Under the direction of Maurice Marciano, GUESS? apparel is designed by
an in-house staff of five design teams (men's, women's, girls', boys' and GUESS
Collection) located in Los Angeles, California. GUESS? design teams travel
throughout the world in order to monitor fashion trends and discover new
fabrics. Fabric shows in Europe, Asia and the United States provide additional
opportunities to discover and sample new fabrics. These fabrics, together with
the trends observed by our designers, serve as the primary source of inspiration
for our lines and collections. We also maintain a fashion library consisting of
antique and contemporary garments as another source of creative concepts. In
addition, our design teams regularly meet with members of the sales,
merchandising and retail operations to further refine our products to meet the
particular needs of our markets.

DOMESTIC RETAIL OPERATIONS

At December 31, 2000, our domestic retail operations consisted of 108
full-price retail stores, 11 kids and 60 factory outlet stores in the United
States that we owned and operated directly which sell GUESS?-label products.
Since the beginning of 1998 through December 31, 2000, we have opened a total
of 26 retail stores, 11 kids stores and 21 factory outlet stores and have
closed or consolidated five retail stores and 10 factory outlet stores in the
United States.

RETAIL STORES. Our 108 domestic retail stores occupy 597,000 square
feet and range in size from approximately 3,000 to 12,500 square feet. Our
retail stores carry a full assortment of men's and women's GUESS?
merchandise, including most of our licensed products. During 2000, we opened
16 new full-price retail stores and remodeled 8 retail stores. During 2000 we
also launched our Guess Kids' store strategy, and opened in the United States
11 kids stores, which sell our girls' and boys' lines, as well as infant's
clothing, which is supplied by one of our licensees.

In 2000, our domestic full-price retail stores achieved a 6.7%
comparable store increase in net revenue. Our domestic retail stores which
were open at the beginning of 1999 increased sales per square foot from $431
in 1999 to $452 in 2000.

FACTORY OUTLET STORES. Our 60 domestic factory outlet stores occupy
approximately 328,000 square feet and range in size from approximately 3,500 to
8,900 square feet. They are primarily located in outlet malls generally
operating outside the shopping radius of our wholesale customers and our retail
stores. These stores sell selected styles of GUESS? apparel and licensed
products at a discount to value-conscious customers. We also use the factory
outlet stores to assist us to distribute excess inventory effectively, thereby
protecting the GUESS? image. Approximately 70% of the products sold in our
factory outlet stores are unique to those stores. During 2000, we opened 9 new
factory stores and closed 3 under-performing stores. In 2000, our domestic
factory outlet stores achieved a 4.0% comparable store sales increase in net
revenue over 1999. Our domestic factory outlet stores which were open at the
beginning of 1999 increased sales per square foot from $352 in 1999 to $368 in
2000.

DOMESTIC WHOLESALE CUSTOMERS

Our domestic wholesale customers consist primarily of better department
stores and select upscale specialty stores, which have the image and
merchandising expertise that we require for the effective presentation of our
products. Leading wholesale customers include Federated Department Stores, Inc.,
The May Department Stores Company and Dillard's, Inc., among others. During
2000, we sold our products directly to approximately 2,800 retail doors in the
United States.

A key element of our merchandising strategy is the shop-in-shop
merchandising format, an exclusive selling area within a department store that
presents a full array of GUESS? products using GUESS? signage and fixture
designs. At December 31, 2000, there were approximately 1,470 shop-in-shops
(excluding shop-in-shops installed by licensees and distributors) that feature
GUESS? products (other than the GUESS Collection). We added or remodeled
approximately 270 shop-in-shops in 2000.

We have sales representatives in our showrooms in New York, Los
Angeles, Dallas, Chicago and Atlanta. They coordinate with customers to
determine the inventory level and product mix that should be carried in each
store to maximize retail sell-throughs and enhance the customers' profit
margins. The inventory level and product mix are then used as the basis for
developing sales projections and product needs for each wholesale customer
and for scheduling production. Additionally, we use merchandise coordinators,
who work with the store to ensure that our products are appropriately
displayed.

A few of our domestic wholesale customers, including some under common
ownership, have accounted for significant portions of our net revenue. During
2000, Bloomingdale's, Macy's and other affiliated stores owned by Federated
Department Stores, Inc. together accounted for approximately 11.8% of our net
revenue.

INTERNATIONAL BUSINESS

We derive net revenue and earnings outside the United States from two
principal sources:

- sales of GUESS? brand apparel directly to 6 foreign
distributors who distribute it to better department stores,
upscale specialty retail stores and GUESS?-licensed retail
stores operated by our international distributors, and

- royalties from licensees who manufacture and distribute GUESS?
brand products outside the United States. We sell products
through distributors and licensees throughout Asia, South
America, Europe, South Africa, Australia and the Middle East.

At December 31, 2000, 248 GUESS? retail and outlet stores were owned
and operated internationally by licensees and distributors, including 26
retail and seven factory outlet stores located in Canada which are operated
by our 60% owned subsidiary. We have an option to acquire the remaining 40%
of our Canadian subsidiary commencing December 31, 2001. Our retail store
license agreements generally provide detailed guidelines for store fixtures
and merchandising programs. The appearance, merchandising and service
standards of these stores are closely monitored to ensure that our image and
brand integrity are maintained. We have been advised by our distributors and
licensees that in 2001 they plan to open 17 new retail stores and to remodel
19 existing locations. We also own and operate a flagship GUESS retail store
in Florence, Italy.

LICENSE AGREEMENTS AND TERMS

Our trademark license agreements customarily provide for a three- to
five-year initial term with a possible option to renew prior to expiration
for an additional multi-year period. In addition to licensing trademarks for
products which complement our apparel products, we have granted trademark
licenses for the manufacture and sale of GUESS? branded products similar to
ours, including men's and women's denim and knitwear, in markets such as the
Philippines, Canada, Mexico, Chile, South Africa, South Korea, Europe and
Japan. Licenses granted to certain licensees that have produced high-quality
products and have demonstrated solid operating performance, such as GUESS?
Watches and GUESS? Eyewear, have been renewed and in some cases expanded to
include new products or markets. In other cases, products that were formerly
licensed, such as our women's knits, girls' and boys' lines, are now being
produced in-house. The typical license agreement requires that the licensee
pay us the greater of a royalty based on a percentage of the licensee's net
sales of licensed products or a guaranteed annual minimum royalty that
typically increases over the term of the license agreement. Generally,
licensees are required to spend a percentage of the net sales of licensed
products for advertising and promotion of the licensed products. In addition,
certain licensees are required to contribute toward the protection of our
trademarks within the territories granted to such licensees, thereby
assisting us in our efforts to prevent counterfeiting and other trademark
infringement in those territories.

To protect the GUESS? trademark and brand, our Licensing Department
meets regularly with licensees to ensure consistency with our overall
merchandising and design strategies and to ensure uniformity and quality
control. The Licensing Department approves in advance all GUESS? licensed
products, advertising, promotional and packaging materials.

ADVERTISING AND MARKETING

Our advertising, public relations and marketing strategy is designed to
promote a consistent high impact image which endures regardless of changing
consumer trends. Since our inception, Paul Marciano has had principal
responsibility for the GUESS? brand image and creative vision. All worldwide
advertising and promotional material is controlled through our Advertising
Department based in Los Angeles. GUESS Jeans, GUESS U.S.A. and Guess?, Inc.
images have been showcased in dozens of major publications and outdoor and
broadcast media throughout the United States and the world.

Our advertising strategy promotes the GUESS? image and products, with
an emphasis on brand image. Our signature black and white print advertisements,
as well as color print advertisements, have garnered prestigious awards,
including Clio, Belding and Mobius awards for creativity and excellence. These
awards, which we have received on numerous occasions, are generally given based
on the judgment of prominent members of the advertising industry. We have
maintained a high degree of consistency in our advertisements, using similar
themes and images. We require our licensees and distributors to invest a
percentage of their net sales of licensed products and net purchases of GUESS?
products in approved advertising, promotion and marketing.

Our Advertising Department is responsible for media placement of all
advertising worldwide, which includes approval of all advertising campaigns from
our licensees and distributors. We use a variety of media which emphasizes print
and outdoor advertising. We have focused advertisement placement in national and
international contemporary fashion/beauty and lifestyle magazines including
Vanity Fair, Harpers Bazaar, Elle, W and Details. By retaining control over our
advertising programs, we are able to maintain the integrity of the GUESS? brand
image while realizing substantial cost savings when compared to the use of
outside agencies.

We further strengthen communications with customers through our Web
site (www.guess.com). This global medium enables us to provide timely
information in an entertaining fashion to consumers about our history, GUESS?
products and store locations and allows us to receive and respond directly to
customer feedback.

SOURCING AND PRODUCT DEVELOPMENT

We source products through numerous suppliers, many of whom have
established long-term relationships with us. We seek to achieve the most
efficient means for timely delivery of our high quality products. Our fabric
specialists work with fabric mills in the United States, Mexico, Europe and Asia
to develop woven and knitted fabrics that enhance the products' comfort, design
and appearance. For a substantial portion of our apparel products, production
planning takes place generally four to five months prior to the corresponding
selling season. Delivery of certain basic products is accomplished through our
Quick Response EDI (Electronic Data Interchange) replenishment system which
ensures shipment of such products generally within 48 hours of receipt of
customer orders.

We do not own any production equipment other than cutting machinery. To
remain competitive, in recent years we have increasingly been sourcing our
finished products globally. During 2000, we sourced approximately 79% of our
finished products from third-party suppliers located outside the United States.
Most of these finished products are acquired as package purchases where we
supply the design and fabric selection and the vendor supplies the finished
product. Although we have long-term relationships with many of our vendors, we
do not have long-term written agreements with them. Our production and sourcing
staff in Los Angeles oversees aspects of apparel manufacturing, quality control
and production, and researches and develops new sources of supply.

SOURCES AND AVAILABILITY OF RAW MATERIALS

Our products use a variety of raw materials, principally consisting of
woven denim, woven cotton and knitted fabrics and yarns. Historically, we have
had to make commitments for a significant portion of our fabric well in advance
of sales. During the last few years we have been able to reduce our raw
materials inventory by increasing the use of packaged purchases.

QUALITY CONTROL

Our quality control program is designed to ensure that products meet
our high quality standards. We monitor the quality of our fabrics prior to the
production of garments and inspect prototypes of each product before production
runs commence. We also perform random in-line quality control checks during and
after production before the garments leave the contractor. Final random
inspections occur when the garments are received in our distribution centers. We
believe that our policy of inspecting our products at our distribution centers
and at the vendors' facilities is important to maintain the quality, consistency
and reputation of our products.

DISTRIBUTION CENTER

We utilize distribution centers at strategically located sites. Until
1999, distribution of our products in the United States was centralized in our
facility in Los Angeles, California, which we operate and lease from a related
party. In January 2000, we opened a new, automated distribution center in
Louisville, Kentucky, to replace the distribution center in Los Angeles. This
facility was fully operational in the second quarter of fiscal year 2000. We
also own ten percent of a licensee which operates a distribution center in
Florence, Italy and services Europe. Additionally, we utilize a contract
warehouse in Hong Kong which services the Pacific Rim.

At our distribution center in Kentucky, we use fully integrated and
automated distribution systems. The bar code scanning of merchandise, picking
tickets and distribution cartons, together with radio frequency communications,
provide timely, controlled, accurate and instantaneous updates to the
distribution information systems. We continue to monitor our distribution
center integration as our business grows and the center matures.

COMPETITION

The apparel industry is highly competitive and fragmented, and is
subject to rapidly changing consumer demands and preferences. We believe that
our success depends in large part upon our ability to anticipate, gauge and
respond to changing consumer demands and fashion trends in a timely manner and
upon the continued appeal to consumers of the GUESS? brand image. We compete
with numerous apparel manufacturers and distributors and several well-known
designers which have recently entered or re-entered the designer denim market.
Our retail and factory outlet stores face competition from other retailers,
including some of our major wholesale customers. Our licensed apparel and
accessories also compete with a substantial number of designer and non-designer
lines and various other well-known brands. Many of our competitors have greater
financial resources than we do. Although the level and nature of competition
differ among our product categories, we believe that we compete on the basis of
our brand image, quality of design, workmanship and product assortment.

TRADEMARKS

We own numerous trademarks, including GUESS?, GUESS, GUESS? and
Triangle Design, Question Mark and Triangle Design, Baby GUESS, GUESS Kids,
GUESS U.S.A. and GUESS Collection. At December 31, 2000, we had more than
2,200 U.S. and international registered trademarks or trademark applications
pending with the trademark offices of the United States and in over 171
countries around the world. From time to time, we adopt new trademarks in
connection with the marketing of new product lines. We consider our
trademarks to have significant value in the marketing of our products and act
aggressively to register and protect our trademarks worldwide.

Like many well-known brands, our trademarks are subject to
infringement. We have staff devoted to the monitoring and aggressive protection
of our trademarks worldwide.

WHOLESALE BACKLOG

We maintain a model stock program in our basic denim products which
allows us generally to replenish a customer's inventory within 48 hours. We
typically receive orders for our fashion apparel 90 to 120 days prior to the
time the products are delivered to stores. At February 28, 2001, we had unfilled
wholesale orders, consisting primarily of orders for fashion apparel, of
approximately $131.2 million, compared to $167.7 million for such orders at
February 29, 2000. We expect to fill substantially all of these orders in 2001.
The backlog of wholesale orders at any given time is affected by various
factors, including seasonality and the scheduling of manufacturing and shipment
of products. Accordingly, a comparison of backlogs of wholesale orders from
period to period is not necessarily meaningful and may not be indicative of
eventual actual shipments.

EMPLOYEES

We strongly believe that our employees ("associates") are one of our
most valuable resources. At December 31, 2000, there were approximately 4,100
associates, including corporate personnel. Associates include approximately
1,000 in our wholesale operations and 3,100 in our retail operations.

We are not a party to any labor agreements and none of our associates
is represented by a labor union. We consider our relationship with our
associates to be good. In addition, we were among the first in the apparel
industry to implement a program to monitor the compliance of subcontractors with
Federal minimum wage and overtime pay requirements.

ENVIRONMENTAL MATTERS

We are subject to federal, state and local laws, regulations and
ordinances that govern activities or operations that may have adverse
environmental effects (such as emissions to air, discharges to water, and the
generation, handling, storage and disposal of solid and hazardous wastes). We
are also subject to laws, regulations and ordinances that impose liability for
the costs of clean up or other remediation of contaminated property, including
damages from spills, disposals or other releases of hazardous substances or
wastes, in certain circumstances without regard to fault. Certain of our
operations routinely involve the handling of chemicals and wastes, some of which
are or may become regulated as hazardous substances. We have not incurred, and
do not expect to incur, any significant expenditures or liabilities for
environmental matters. As a result, we believe that

our environmental obligations will not have a material adverse effect on our
financial condition or results of operations.

FINANCIAL INFORMATION ABOUT GEOGRAPHIC AREAS

See Note 13 to the Notes to the Consolidated Financial Statements for a
discussion regarding our domestic and foreign operations.

ITEM 2. PROPERTIES

Certain information concerning our principal facilities, all of which are leased
at December 31, 2000, is set forth below:

APPROXIMATE
AREA IN
LOCATION USE SQUARE FEET
- ------------------------ ----------------------------------------------------------------- -----------

1444 South Alameda Street Principal executive and administrative offices, design 492,000
Los Angeles, California facilities, sales offices, distribution and warehouse facilities,
production control, and sourcing

1610 Freeport Drive Distribution and warehousing facility 500,000
Louisville, Kentucky

1385 Broadway Administrative offices, public relations, and showrooms 36,000
New York, New York

Montreal, Canada Administrative offices, and retail store 97,000

Kowloon, Hong Kong Distribution and licensing coordination control 5,200

Florence, Italy Administrative office and retail store 4,100

Our corporate, wholesale and retail headquarters and certain
production and warehousing facilities are located in Los Angeles, California
and consist of six adjacent buildings totaling approximately 492,000 square
feet. All of these properties are leased by us, and certain of these facilities
are leased from limited partnerships in which the sole partners are trusts
controlled by and for the benefit of Maurice Marciano, Paul Marciano and Armand
Marciano and their families (the "Principal Stockholders") pursuant to leases
that expire in July 2008. The total lease payments to these limited partnerships
are $237,000 per month with aggregate minimum lease commitments to these
partnerships at December 31, 2000 totaling approximately $21.5 million. See
"Item 13. Certain Relationships and Related Transactions."

During 1999, distribution of our products in the United States was
centralized in our Los Angeles, California facility. In 2000, we leased a new,
automated distribution center in Louisville, Kentucky, to replace the
distribution center in Los Angeles. We also own ten-percent of a licensee, which
leases and operates a distribution center in Florence, Italy and services
Europe. Additionally, we lease a contract warehouse in Hong Kong, China which
services the Pacific Rim.

We lease our showrooms, advertising, licensing, sales and merchandising
offices, remote distribution and warehousing facility and retail and factory
outlet store locations under non-cancelable operating lease agreements expiring
on various dates through March 2016. These facilities are located principally
in the United States, with aggregate minimum lease commitments, at December
31, 2000, totaling approximately $340.4 million.

The current terms of our store leases, excluding renewal options,
expire as follows:

YEARS LEASE TERMS EXPIRE NUMBER OF STORES
- ------------------------ -----------------

2001-2003 35
2004-2006 89
2007-2009 45
2010-2012 42
Thereafter 1

We believe our existing facilities are well maintained, in good
operating condition and are adequate to support our present level of operations.
See Notes 9 and 10 of the Notes to Consolidated Financial Statements for further
information regarding current lease obligations.

ITEM 3. LEGAL PROCEEDINGS

On approximately January 15, 1999, UNITE filed an unfair labor practice charge
against us, alleging that attorney Dennis Hershewe violated Section 8(a)(1) of
the National Labor Relations Act ("the Act") by questioning our employee Maria
Perez about her union activities at the deposition he conducted in her workers'
compensation case. Mr. Hershewe represents Fireman's Fund Insurance Company, our
workers' compensation insurance carrier. GUESS? investigated the charge and
responded to it on March 10, 1999. The NLRB issued a complaint on part of the
charge on October 14, 1999, and we filed an answer on October 21, 1999. On July
6, 2000, the complaint was dismissed in its entirety. The NLRB appealed the
decision and both sides submitted briefs in September of 2000. We are awaiting a
decision on the appeal.

On May 21, 1999, we filed a demand for arbitration against Pour le Bebe, Inc.
and Pour la Maison, Inc. (collectively, "PLB") seeking damages and injunctive
relief in connection with four written license agreements between the parties.
We alleged that PLB defaulted under the license agreements, that the license
agreements properly were terminated and that PLB breached the license
agreements. On July 19, 1999, PLB filed a counterdemand for arbitration against
us. PLB sought damages and injunctive relief against us alleging breach of
contract, violation of the California Franchise Relations Act, interference with
prospective economic advantage, unlawful business practices, statutory unfair
competition and fraud. The arbitration was conducted before the American
Arbitration Association pursuant to arbitration clauses in the license
agreements.

On June 9, 2000, the arbitrators issued a final award in our favor and
rejected each of PLB's counterclaims. The amount of this award was
$7,659,677. Thereafter, the Company filed a petition to confirm the
arbitration award and PLB filed a petition to vacate the award. On September
29, 2000, the court confirmed the final award and denied PLB's petition to
vacate. On October 23, 2000, the court entered judgment confirming the final
arbitration award and the case has been resolved. Because of the uncertainty
of the ultimate realization of the award, no recognition has been given to it
in our consolidated financial statements.

On June 9, 1999, we commenced a lawsuit in the Los Angeles County Superior Court
against Kyle Kirkland, Kirkland Messina LLC, and CKM Securities (collectively
"Kirkland") for tortious interference, unfair competition, fraud and related
claims. This action arises out of alleged misrepresentations and omissions of
material fact made by Kirkland in connection with the operations and financial
performance of PLB. On March 29, 2000, the California Court of Appeal determined
that the action will proceed in court. Kirkland's petition for review to the
California Supreme Court was denied on July 12, 2000. No trial date has been
set.

On March 28, 2000 a complaint was filed against us in San Diego County Superior
Court entitled Snodgrass v. Guess?, Inc. and GUESS? Retail, Inc. The complaint
purports to be a class action filed on behalf of current and former store
management employees in California. Plaintiffs seek overtime wages and a
preliminary and permanent injunction. The parties have stipulated that a limited
class composed only of visual co-managers and co-managers should be certified.
The Court certified this limited class on March 16, 2001. The trial date has
been set for November 9, 2001.

unspecified punitive damages. Defendants moved to compel arbitration of this
matter, or alternatively, to strike the action under the state's anti-SLAPP
(Strategic Litigation Against Public Participation) statute. The motion to
compel arbitration was denied and the decision has been appealed. Pending
resolution on appeal, this matter has been stayed. No trial date has been set.

On January 30, 2001, Guess?, Inc. Maurice Marciano, Armand Marciano, Paul
Marciano, and Brian Fleming were named as defendants in a securities class
action entitled David Osher v. Guess?, Inc., et al., filed in the United
States District Court for the Central District of California. Seven
additional class actions have been filed in the Central District, naming the
same defendants: Robert M. Nuckols v. Guess?, Inc. et al., Brett Dreyfuss v.
Guess?, Inc. et al., both filed February 1, 2001; Jerry Sloan v. Guess?,
Inc., et al., filed February 6, 2001; Jerry Byrd v. Guess?, Inc., et al;
filed February 13, 2001; Patrick and Kristine Liska v. Guess?, Inc., et al,
filed February 14, 2001; Darrin Wegman v. Guess?, Inc., et al., filed
February 22, 2001; and Rosie Gindie v. Guess?, Inc., et al., filed February
22, 2001. All eight complaints purport to state claims under Section 10(b)
and 20(a) and Rule 10b-5 of the Securities Exchange Act of 1934 and allege
that defendants made materially false and misleading statements relating to
the Company's inventory and financial condition during the class period. In
Osher, Nuckols, Byrd, Wegman and Sloan, the class period is February 14, 2000
through January 26, 2001; in Dreyfuss, Liska and Gindie the class period is
February 14, 2000 through November 9, 2000. We are awaiting Court approval of
a stipulation to extend our time to respond until 45 days after a lead
plaintiff has been appointed and has filed a consolidated amended complaint.

On March 15, 2001, a complaint was filed by Susan Goldman, derivatively on
behalf of nominal defendant Guess?, Inc. against Bryan Isaacs, Alice Kane,
Robert Davis, Armand Marciano, Paul Marciano, Maurice Marciano, Howard Socol and
Guess?, Inc. in the Court of Chancery for the State of Delaware. The complaint
alleges misappropriation of corporate information, insider trading and other
purported breaches of fiduciary duty by the Company and its Board of Directors.
Our response is due April 10, 2001.

We cannot predict the outcome of these matters. We believe the outcome of one or
more of the above cases could have a material adverse effect on our results of
operations or financial condition.

Most major corporations, particularly those operating retail businesses, become
involved from time to time in a variety of employment-related claims and other
matters incidental to their business in addition to those described above. In
the opinion of our management, the resolution of any of these pending incidental
matters is not expected to have a material adverse effect on our results of
operations or financial condition.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote during the fourth quarter of fiscal year
2000.

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS

Since August 8, 1996, the Company's Common Stock has been listed on the
New York Stock Exchange under the symbol 'GES.' The following table sets forth,
for the periods indicated, the high and low sales prices of the Company's Common
Stock, as reported on the New York Stock Exchange Composite Tape:

HIGH LOW
------ ------

YEAR ENDED DECEMBER 31, 2000
First Quarter 2000 $33.00 $18.63
Second Quarter 2000 32.44 11.13
Third Quarter 2000 23.13 9.25
Fourth Quarter 2000 11.50 3.50

YEAR ENDED DECEMBER 31, 1999
First Quarter 1999 9.50 4.88
Second Quarter 1999 14.25 6.13
Third Quarter 1999 16.63 10.38
Fourth Quarter 1999 22.94 11.13

On March 12, 2001, the closing sales price per share of the Company's common
Stock, as reported on the New York Stock Exchange Composite Tape, was $6.16.
On March 12, 2001, there were 194 holders of record of the Company's Common
Stock.

DIVIDEND POLICY

We intend to use our cash flow from operations in 2001 principally to
finance the expansion and remodel of our retail stores, shop-in-shop programs
and operations. Any future determination as to the payment of dividends will be
at the discretion of the Company's Board of Directors and will depend upon our
results of operations, financial condition, contractual restrictions and other
factors deemed relevant by the Board of Directors. The agreement governing our
revolving credit facility and the indenture pursuant to which the Company's
Senior Subordinated Notes, due 2003, were issued restrict the payment of
dividends by the Company.

Since our IPO on August 8, 1996, we have not declared any dividends on our
Common Stock.

ITEM 6. SELECTED FINANCIAL DATA

The selected financial data set forth below have been derived from the
audited consolidated financial statements of the Company and the related notes
thereto. The following selected financial data should be read in conjunction
with the Company's Consolidated Financial Statements and the related Notes
contained herein and with "Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations."

Year Ended December 31,

2000 1999 1998 1997 1996
-------- -------- -------- -------- --------
(in thousands, except per share data)

STATEMENT OF EARNINGS DATA:
Net revenue $779,217 $599,650 $471,931 $515,372 $551,162
Earnings from operations 43,349 93,776 57,046 70,646 98,095
Earnings before interest and income taxes 43,349 96,485 56,183 68,605 97,106
Net earnings 16,493 51,900 25,111 37,511 66,741

SUPPLEMENTAL STATEMENTS OF EARNINGS DATA: ( 1)
Earnings before income taxes and change
in accounting principle (2) 29,593 87,100 43,291 54,887 82,567
Income taxes 13,100 35,200 18,180 21,337 33,241
Net earnings 16,493 51,900 25,111 37,511 49,326
EARNINGS PER SHARE(3):
Basic 0.38 1.21 0.59 0.87 1.18
Diluted 0.38 1.20 0.59 0.87 1.18
Weighted number of shares outstanding --
basic (3) 43,464 43,005 42,904 42,898 41,906
Weighted number of shares outstanding --
diluted (3) 43,819 43,366 42,919 42,902 41,908

December 31,
------------------------------------------------------------
2000 1999 1998 1997 1996
-------- -------- -------- -------- --------

BALANCE SHEET DATA:
Working capital $ 96,289 $ 97,944 $101,310 $106,670 $ 76,821
Total assets 419,683 369,036 263,772 287,814 239,306
Notes payable and long-term debt 103,781 83,363 99,000 141,517 127,316
Net stockholders' equity 175,156 167,355 100,409 75,330 34,928

(1) Reflects pro forma adjustments for 1996 for Federal and state income
taxes as if the Company had been taxed as a C corporation rather than
an S corporation. Prior to the Company's IPO in August 1996, the
Company had elected to be taxed as an S corporation for Federal income
tax purposes. In certain states, the Company was taxed as an S
corporation; in other states, the Company was taxed as a C corporation.
Effective January 1, 1991, the Company elected to be treated as an S
corporation for California tax purposes. As a result of the Company's
IPO, all S corporation elections were terminated.

(2) Effective January 1, 1997, the Company changed its method of accounting
for product display fixtures located in its wholesale customers' retail
stores, whereby the costs for such fixtures are capitalized and
amortized over five years using the straight-line method. In prior
years, these costs had been expensed as incurred. The Company believes
that this new method more closely matches the long-term benefit that the
product display fixtures provide with the expected future revenue from
such fixtures. The cumulative effect of the change in accounting
principle, recorded in the first quarter of 1997, is calculated based
upon the retroactive effect of applying the new accounting method to
prior year fixture acquisitions. The cumulative effect of the change in
accounting principle of $4.0 million ($0.09 per share) (after reduction
for income tax expense of $2.7 million) is included in earnings for the
year ended December 31, 1997. Excluding the cumulative effect of the
change in accounting principle, the effect of the change during 1997 was
to increase net earnings by approximately $6.2 million or $0.14 per
share.

(3) The weighted number of shares outstanding at December 31, 1996
reflects (i) 32,681,819 shares of Common Stock outstanding prior to
the IPO and the assumed issuance of 8,730,000 shares of Common Stock
at the IPO price ($18.00 per share) to generate sufficient cash to
pay a distribution of retained earnings to its then existing
stockholders as part of the termination of its S corporation status
in an amount equal to retained earnings as of the IPO date and (ii)
an average of 42,682,000 shares outstanding subsequent to the IPO,
representing the actual shares outstanding.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION

GENERAL

We derive our net revenue from the sale of GUESS men's, women's, boys'
and girls' apparel and our licensees' products through our network of retail and
factory outlet stores primarily in the United States, from the sale of GUESS
men's, women's, boys' and girls' apparel worldwide to wholesale customers and
distributors, from net royalties from worldwide licensing activities, from the
sale of GUESS apparel through the retail and wholesale channels of our 60% owned
Canadian subsidiary, GUESS? Canada Corporation ("Guess Canada"), and from the
sale of GUESS men's, women's, boys' and girls' apparel and our licensee products
through our on-line store at www.guess.com.

The business segments of the Company are wholesale, retail and
licensing operations. Management evaluates segment performance based
primarily on revenue and earnings from operations.

RESULTS OF OPERATIONS

The following table sets forth actual operating results for the 2000, 1999 and
1998 fiscal years as a percentage of net revenue:

Year Ended December 31,
-------------------------------------
2000 1999 1998
-------- -------- --------

Product sales 95.2% 93.4% 92.2%
Net royalties 4.8 6.6 7.8
-------- -------- --------
Total net revenue 100.0 100.0 100.0
Cost of sales 63.6 55.3 57.7
-------- -------- --------
Gross profit 36.4 44.7 42.3
Selling, general and administrative expenses 29.9 28.5 30.2
Severance (recovery) related to distribution facility relocation (0.2) 0.5 --
Restructuring and impairment charges 1.1 -- --
-------- -------- --------
Earnings from operations 5.6 15.7 12.1
Gain on disposition of property and equipment -- 0.6 --
Interest, net 1.8 1.6 2.7
Other net -- 0.2 0.2
-------- -------- --------
Earnings before income taxes 3.8 14.5 9.2
Income taxes 1.7 5.9 3.9
-------- -------- --------
Net earnings 2.1% 8.6% 5.3%
======== ======== =========

YEAR ENDED DECEMBER 31, 2000 COMPARED TO YEAR ENDED DECEMBER 31, 1999.

NET REVENUE. Net revenue increased $179.5 million or 29.9% to $779.2
million for the year ended December 31, 2000 from $599.7 million for the year
ended December 31, 1999.

Net revenue from retail operations increased $93.1 million or 31.1% to $392.5
million for the year ended December 31, 2000 from $299.4 million for the year
ended December 31, 1999. The increase in net revenues was attributable to the
volume generated by 56 new stores coupled with a 5.8% increase in comparable
store sales. While comparable store sales were strong during the first six
months of 2000, increasing 14.2%, our sales trends decelerated in the third
quarter, and comparable store sales declined 3.7% in the fourth quarter of
2000, partly due to a challenging retail environment. These lower than
expected sales trends also impacted our new stores, including the new stores
in Canada and the Guess? Kids' stores.

Net revenue from wholesale operations increased $88.3 million or 33.9% to
$348.9 million for the year ended December 31, 2000, from $260.6 million for
the year ended December 31, 1999. Domestic and international wholesale
operations net revenue increased, for the year ended December 31, 2000, by
$61.0 million to $289.9 million and by $27.3 million to $59.0 million,
respectively. Our domestic wholesale net revenue increased primarily as a
result of the increased demand for fashion products in both our women's and
men's lines. International wholesale operations net revenue increased
primarily as a result of higher sales in Asia and the full-year inclusion of
Guess Canada's operations which contributed $20.4 million in international
wholesale net revenue for the 2000 year.

Net royalties decreased by $1.8 million or 4.6% to $37.8 million for the year
ended December 31, 2000 from $39.6 million for the year ended December 31, 1999.
The decrease in net royalties was related to the discontinuation of certain
licenses and the impact of currency devaluation in European and Asian markets.
Net revenue from international operations comprised 1.7% and 6.7% of net product
royalties during 2000 and 1999, respectively.

GROSS PROFIT. Gross profit increased 5.8% to $283.6 million for the
year ended December 31, 2000 from $268.0 million for the year ended December 31,
1999. The increase in gross profit resulted from higher net revenue from product
sales. Gross profit from product sales increased 7.6% to $245.8 million for the
2000 fiscal year from $228.4 million for the 1999 fiscal year.

Gross margin (gross profit as a percentage of total net revenue) decreased to
36.4% for the year ended December 31, 2000 from 44.7% for the year ended
December 31, 1999. Gross margin from product sales decreased to 33.2% for the
year ended December 31, 2000 from 40.8% for the year ended December 31, 1999.

The decrease in gross margin from product sales was experienced in both our
retail and wholesale operations. Gross margin in our retail operation in
fiscal year 2000 was negatively impacted by increased promotional markdowns
to reduce excess inventory, inventory write-downs, higher shrinkage results
and higher occupancy costs due to the lower sales productivity of new stores
and rent expenses for stores not opened. Royalty revenues as a percentage of
total net revenue decreased from 6.6% in 1999 to 4.8% in 2000. This reduced
overall gross margins as royalty revenue has no associated cost of sales.

Gross margin in our wholesale domestic and international operations in fiscal
year 2000 was negatively impacted by higher markdown and return allowances to
department and specialty stores and sales to the off-price channels at prices
below cost, or reduced margin in an effort to reduce excess inventory. In
addition, the Company recorded special charges of approximately $10.3 million
to reduce inventories to the lower of cost or market.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative ("SG&A") expenses increased to $233.2 million, or 29.9% of net
revenues for the year ended December 31, 2000, from $171.0 million, or 28.5% of
net revenues for the year ended December 31, 1999.

SG&A expenses increased 36.4% in 2000 compared to 1999 as a result of
expenses necessary to operate new stores, higher costs at the new
distribution facility, including start-up expenses and higher payroll due to
lower productivity and higher unit volume, increased expenses incurred by
Guess Canada, higher advertising expenses and consulting fees. During the
first six months of 2000, we incurred start-up and other non-recurring
pre-tax costs of $5.3 million relating to the relocation of our distribution
operation to Kentucky. Additionally, at the beginning of the first quarter
2000, we revised our vacation pay policies to enhance employee benefits,
which resulted in a one-time pre-tax charge of $1.3 million.

SEVERANCE RECOVERY RELATED TO DISTRIBUTION FACILITY RELOCATION. In
accordance with the requirements of EITF 94-3, "Liability Recognition for
Certain Employee Termination Benefits and Other Costs to Exit an Activity
(including Certain Costs Incurred in a Restructuring)," the Company recorded
a $3.2 million charge, in the second quarter ended June 26, 1999, for future
severance costs of 460 employees related to the relocation of its
distribution operations from Los Angeles to Louisville, Kentucky. As a result
of employee transfers and attrition of 228 employees the severance costs
actually incurred for Los Angeles-based employees was $1.7 million which has
resulted in a recovery of $1.5 million of the severance charge in the second
quarter of 2000. The Company successfully completed the transition of all
product lines to the new distribution center during the second quarter of
2000. Because distribution operations were transferred to Kentucky, the
Company does not expect to experience significant reduced employee expenses.

RESTRUCTURING AND IMPAIRMENT CHARGES. During the fourth quarter
ended December 31, 2000, the Company recorded restructuring charges including
store closure costs primarily related to rent paid and esimated rent to be
paid on idle lease facilities, lease exit costs and construction costs of
stores abandoned during construction in the amount of $4.5 million. This is
inclusive of charges of $0.8 million of asset impairments for
under-performing stores that the Company plans to close. Cash payments of
approximately $1.7 million consisting primarily of estimated rent to be paid
on idle lease facilities and lease exit costs are anticipated to be paid
during 2001. Annual rental savings from these closures should approximate
$1.7 million per year. Annual depreciation expense savings from these
closures is not expected to be significant.

The Company also recorded an additional $4.1 million of charges to
write-down the value of certain impaired assets, including fixed assets related
to unprofitable stores and an investment the Company has in an internet company.
Related annual depreciation is expected to be reduced by approximatley $0.3
million.

EARNINGS FROM OPERATIONS. Earnings from operations were $43.3 million
in 2000 as compared to $93.8 million in 1999, a decrease of $50.5 million or
53.8%. The decrease in earnings from operations for the retail operating
segment to $3.4 million in 2000, from $37.1 million in 1999 resulted
principally from store restructuring and impairment charges of $6.2 million
as discussed above, higher occupancy costs and higher new store expenses. The
decrease in earnings from operations for the wholesale operating segment to
$9.2 million in 2000 from $25.1 million in 1999 resulted principally from
increased markdown and return allowances, start-up and other non-recurring
costs related to the relocation of our distribution operation and increased
SG&A expenses. Earnings from operations for the licensing operating segment
decreased to $30.8 million in 2000, from $31.6 million in 1999 principally
due to fewer licenses in 2000.

INTEREST EXPENSE, NET. Interest expense, net, increased to $13.8
million for the year ended December 31, 2000 from $9.4 million for the year
ended December 31, 1999. This increase resulted from higher outstanding average
debt, due to higher inventory levels throughout the year and significant capital
expenditures during 2000. For the year ended December 31, 2000, the average debt
balance was $131.6 million, with an average effective interest rate of 9.0%. For
the year ended December 31, 1999, the average debt balance was $93.1 million,
with an average effective interest rate of 9.5%.

INCOME TAXES. The income tax provision for the year ended December 31,
2000 was $13.1 million, or a 44.3% effective tax rate. The income tax provision
for the year ended December 31, 1999 was $35.2 million, or a

40.4% effective tax rate. The effective tax rate for 2000 was negatively
impacted by a foreign subsidiary loss and potential income tax liabilities as a
result of federal and certain state income tax audits.

NET EARNINGS. Net earnings decreased to $16.5 million for the year
ended December 31, 2000 from $51.9 million for the year ended December 31, 1999.

YEAR ENDED DECEMBER 31, 1999 COMPARED TO YEAR ENDED DECEMBER 31, 1998.

NET REVENUE. Net revenue increased $127.7 million or 27.1% to $599.7
million for the year ended December 31, 1999 from $471.9 million for the year
ended December 31, 1998. Net revenue from retail operations increased $76.7
million or 34.5% to $299.4 million for the year ended December 31, 1999 from
$222.6 million for the year ended December 31, 1998, from a 26.8% increase in
comparable store net revenue and from the volume generated by our new store
openings. The strong increase in comparable store net revenue was primarily
attributable to our improved merchandising and our fashioned-focused product
mix. The retail segment is benefiting from our improved customer service levels
resulting from our enhanced personnel training and incentive programs that have
been offered to our associates.

Net revenue from wholesale operations increased $48.1 million or 22.6% to $260.6
million for the year ended December 31, 1999 from $212.5 million for the year
ended December 31, 1998. Domestic and international wholesale operations net
revenue increased, for the year ended December 31, 1999, by $40.6 million to
$228.7 million and by $7.4 million to $31.9 million, respectively. Our domestic
wholesale net revenue increased primarily as a result of the increased demand
for fashion products in both of our women's and men's lines. International
wholesale operations net revenue increased due primarily to increased sales from
the European market, partially offset by soft performance in the Asian and South
American markets. GUESS Canada contributed $12.1 million in international net
revenues during the second half for the year ended December 31, 1999. Net
royalties increased $2.8 million or 7.7%, to $39.6 million for the year ended
December 31, 1999 from $36.8 million for the year ended December 31, 1998. The
increase in net royalties was primarily due to settlements and adjustments
related to us terminating licensees, partially offset by us discontinuing
certain licenses that were brought back in-house and the continuing economic
turmoil and currency devaluation in Asian markets. Net revenue from
international operations comprised 6.7% and 5.6% of net product revenue during
1999 and 1998, respectively.

GROSS PROFIT. Gross profit increased 34.1% to $268.0 million for the
year ended December 31, 1999 from $199.9 million for the year ended December 31,
1998. The increase in gross profit resulted from higher net revenue from product
sales. Gross profit from product sales increased 40.1% to $228.4 million for the
year ended December 31, 1999 from $163.0 million for the year ended December 31,
1998. Gross margin (gross profit as a percentage of total net revenue) increased
to 44.7% for the year ended December 31, 1999 as compared to 42.3% for the year
ended December 31, 1998. Gross margin from product sales increased to 40.8% for
the year ended December 31, 1999 compared to 37.5% for the year ended December
31, 1998.

The increase in our gross margin from product sales was primarily the result of
fixed store occupancy costs being spread over a larger comparable store revenue
base, a favorable mix in retail net revenue, which generally carries a higher
gross margin rate, lower off-price sales and a decrease in wholesale markdowns
and allowances as a percentage of wholesale net revenues.

Furthermore, during the fourth quarter of 1999, we enhanced our ability to
estimate reserves through improved processes and more current and accurate data.
As a result, we revised our estimate of certain reserves. This resulted in a
reduction of cost of sales of $2.3 million and an increase in gross margin of
$2.3 million or 2.4%.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative ("SG&A") expenses of $171.0 million for the year ended December
31, 1999 decreased to 28.5% of net revenue, from 30.3% of net revenue or $142.8
million, in the year ended December 31, 1998. The decrease in SG&A expenses as a
percentage of net revenue was due to our ability to leverage certain expenses
against a higher revenue base, as well as the success of our ongoing cost
containment programs.

GAIN ON DISPOSITION OF PROPERTY AND EQUIPMENT. We realized a
non-recurring pre-tax gain of $3.8 million on the disposition of property and
equipment.

SEVERANCE (RECOVERY) RELATED TO DISTRIBUTION FACILITY RELOCATION. In
accordance with the requirements of EITF 94-3, "Liability for Certain
Employee Termination Benefits and Other Costs to Exit an Activity (including
Certain Costs Incurred in a Restructuring)," we recorded a $3.2 million
charge for future severance costs related to the relocation of our
distribution operations from Los Angeles, California to Louisville, Kentucky.

EARNINGS FROM OPERATIONS . Earnings from operations increased 64.4% to
$93.8 million, or 15.6% of net revenue, for the year ended December 31, 1999
from $57.0 million, or 12.1% of net revenue, for the year ended December 31,
1998. The increase was primarily due to higher revenue.

INTEREST EXPENSE, NET. Net interest expense decreased 27.1% to $9.4
million for the year ended December 31, 1999 from $12.9 million for the year
ended December 31, 1998. This decrease resulted primarily from a lower
outstanding average debt. For the year ended December 31, 1999, the average debt
balance was $93.1 million, with an average effective interest rate of 9.5%. For
the year ended December 31, 1998, the average debt balance was $135.5 million,
with an average effective interest rate of 9.0%.

INCOME TAXES. The income tax provision for the year ended December 31,
1999 was $35.2 million, or a 40.4% effective tax rate. The income tax provision
for the year ended December 31, 1998 was $18.2 million, or a 42.0% effective tax
rate. The effective tax for 1998 was adversely impacted by Federal and state
income taxes related to a dividend declared to us by one of our foreign
subsidiaries.

NET EARNINGS. Net earnings increased to $51.9 million for the year
ended December 31, 1999, from $25.1 million for the year ended December 31,
1998.

LIQUIDITY AND CAPITAL RESOURCES

During our fiscal year 2000, we relied primarily on borrowings under
our $125.0 million Credit Agreement ("Credit Facility"), trade credit and
internally generated funds to finance our operations and expansion. Net cash
provided by operating activities decreased $57.1 million to $30.2 million for
the year ended December 31, 2000, from $87.3 million for the year ended
December 31, 1999. The decrease in the current year was primarily due to
lower earnings. At December 31, 2000, we had working capital of $96.3 million
compared to $97.9 million at December 31, 1999. The net decrease in working
capital was primarily attributable to decreases in short-term investments and
receivables, increases in inventories and other current assets, partially
offset by increases in accounts payable and an increase in current
installments of notes payable and long-term debt. The most significant
changes were represented by short-term investments, which decreased by $26.2
million due to the sale of investments to fund the business expansion,
inventories, which increased $37.6 million due to new stores and growth in
the wholesale business and accounts payable, which increased $22.3 million as
a result of increased inventories.

On December 3, 1999, we entered into a Credit Facility with Chase
Manhattan Bank that replaced our $100.0 million revolving credit facility
entered into in March 1997. The Credit Facility provides us with a $125.0
million revolving credit facility subject to a borrowing base calculation and
is secured by inventory and accounts receivable including a $50.0 million
sub-limit for letters of credit. The Credit Facility bears interest at the
London Interbank Offered Rate ("LIBOR") plus a range as defined or the
greater of the Prime rate, the base CD rate plus 100 basis points or the
Federal Funds Effective Rate (collectively "ABR") plus a range as defined
depending on the duration and type of loan facility. The Credit Facility
expires on October 31, 2002. Borrowing under the Credit Facility primarily
funded capital projects and growth in inventories. At December 31, 2000, we
had $22.4 million outstanding borrowings under the Credit Facility, $17.6
million in outstanding documentary letters of credit and $4.0 million in
standby letters of credit. At December 31, 2000, we had $81.0 million
available for future borrowings under the Credit Facility. The Credit
Facility contains restrictive covenants requiring, among other things, the
maintenance of certain financial ratios. As a result of lower than expected
financial results in the fourth quarter and fiscal year 2000, the Company was
in non-compliance with the terms of the Credit Facility regarding the fixed
charge coverage ratio required for the twelve-month period ended December 31,
2000. On March 27, 2001 the Company's bank lenders agreed to amend the Credit
Facility Agreement to cure all past non-compliance and revise certain terms,
including modifications to the financial covenants, the addition of a
liquidity ratio and an amendment to the range of interest rates based on the
leverage ratio as follows: LIBOR plus 100 basis points to LIBOR plus 225
basis points, ABR to ABR plus 125 basis points and commitment fees of 25
basis points to 62.5 basis points. Accordingly, the Company is presently in
full compliance with all the terms of the Credit Facility, as amended.

The Company has also agreed to provide long-term financing of up to
$13.4 million to Guess Canada to expand its retail operations, of which $12.3
million was outstanding as of December 31, 2000. The remaining funding is
being provided on an as-needed basis.

Capital expenditures, net of lease incentives granted, totaled $79.1
million for 2000 and $62.0 million for 1999. The increase in capital
expenditures was due primarily to our increase in store openings and
remodels, the retail expansion of Guess Canada, our expansion of shop-in
shops in department stores and investments in our systems infrastructure.
Capital expenditures by our retail operating segment increased to $57.3
million in 2000 from $26.5 million in 1999 primarily due to retail store
expansion and store remodels. Capital expenditures by our wholesale operating
segment decreased to $21.8 million in 2000 from $35.5 million in 1999 as the
distribution facility construction costs were primarily incurred in 1999. Our
capital expenditures planned for 2001 are approximately $40.0 million,
primarily for retail store expansion, including our expansion in Canada,
store remodelings, investments in systems and shop-in-shop expansion and
enhancements.

We anticipate we will be able to satisfy our ongoing cash requirements
through 2001, including retail expansion plans and interest payments on our
senior subordinated notes due 2003 (such interest payments paid by us during
2000 amounted to $7.6 million), primarily with cash flow from operations,
supplemented by borrowings under our Credit Facility.

IMPORTANT FACTORS REGARDING FORWARD-LOOKING STATEMENTS

Various forward-looking statements have been made in this Form 10-K.
Forward-looking statements may also be in our other reports filed under the
Securities Exchange Act of 1934, in our press releases and in other documents.
In addition, from time to time, we, through our management, may make oral
forward-looking statements.

Forward-looking statements generally refer to future plans and
performance, and are identified by the words "believe," "expect," "anticipate,"
"optimistic," "intend," "aim," "will" or the negative thereof and similar
expressions. Readers are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date of which they are
made. We undertake no obligation to update publicly or revise any
forward-looking statements.

Important factors which could have a material adverse effect on our financial
condition and results of operations and could cause actual results in future
periods to differ materially from our forward-looking statements, as well as
affect our ability to achieve our financial and other goals, include, but are
not limited to, the following:

- - The lack of continued availability of sufficient working capital.

- - Our inability to integrate new stores into existing operations.

- - The decline in continued desirability and customer acceptance of our
existing and future products.

- - Possible cancellation of wholesale orders.

- - The success of our competitive products.

- - Our inability to strengthen our inventory cost accounting
controls and procedures.

- - Our inability to identify and respond appropriately to changing consumer
demands and fashion trends.

- - A decision by the controlling owner of a group of department stores or any
other significant customer to decrease the amount purchased from us or to
cease carrying GUESS products.

- - Our inability to control the quality, focus, image, financial stability or
distribution of our licensed products, which could impact consumer
receptivity to our products.

- - Our failure to continue to enhance operating control systems.

- - The outcomes of pending and future litigation.

- - Factors beyond our control, such as which could have a material adverse
effect on our ability to expand our network of retail stores. Our general
failure to maintain and control our existing distribution and licensing
arrangements or to procure additional distribution and licensing
relationships.

- - Changes in the economy.

- - The extended loss of the services of one or more of our principal executive
officers.

- - Political instability resulting in the disruption of trade with the
countries in which our contractors, suppliers or customers are located, the
imposition of additional regulations relating to imports, the imposition of
additional duties, taxes and other charges on imports, significant
fluctuations in the value of the dollar against foreign currencies or
restrictions on the transfer of funds. Also, a substantial increase in
customs duties, which could have an adverse effect on our financial
condition or results of operations. These factors may be exacerbated by
our increasing use of packaged purchase sourcing from non-United States
vendors.

- - The inability of a manufacturer to ship our products in a timely manner or
to meet our quality standards.

- - No assurance can be given that others will not assert rights in, or
ownership of, trademarks and other proprietary rights of GUESS?. In
addition, the laws of certain foreign countries do not protect proprietary
rights to the same extent as do the laws of the United States.

SEASONALITY

Our business is impacted by general seasonal trends characteristic of
the apparel and retail industries. Our retail operations are generally stronger
in the third and fourth quarters, while our wholesale operations generally
experience stronger performance in the first and third quarters. As the timing
of the shipment of products may vary from year to year, the result for any
particular quarter may not be indicative of results for the full year. We have
not had significant overhead and other costs generally associated with large
seasonal variations.

INFLATION

We do not believe the relatively moderate rates of inflation
experienced in the United States over the last three years have had a
significant effect on our net revenue or profitability. Although higher rates of
inflation have been experienced in a number of foreign countries in which our
products are manufactured, we do not believe they have had a material adverse
effect on our net revenue or profitability.

IMPACT OF RECENT ACCOUNTING PRONOUNCEMENTS

In June 1998, Statement of Financial Accounting Standards No. 133,
"Accounting for Derivative Instruments and Hedging Activities" ("SFAS 133") was
issued and subsequently amended by SFAS 137. SFAS 133 establishes accounting and
reporting standards for derivative instruments and for hedging activities. It is
effective for fiscal years beginning after June 15, 2000. We believe the
adoption of SFAS 133 will not have a material impact on our financial reporting.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

We receive United States dollars for substantially all of our product
sales and our licensing revenues. Inventory purchases from offshore contract
manufacturers are primarily denominated in United States dollars; however,
purchase prices for our products may be impacted by fluctuations in the exchange
rate between the United States dollar and the local currencies of the contract
manufacturers, which may have the effect of increasing our cost of goods in the
future. In addition, royalties received from our international licensees are
subject to foreign currency translation fluctuations as a result of the net
sales of the licensee being denominated in local currency and royalties being
paid to us in United States dollars. During the last three fiscal years,
exchange rate fluctuations have not had a material impact on our inventory
costs.

We may enter into derivative financial instruments, including forward
exchange contracts, to manage foreign exchange risk on foreign currency
transactions. These financial instruments can be used to protect us from the
risk that the eventual net cash inflows from the foreign currency transactions
will be adversely affected by changes in exchange rates. Unrealized gains and
losses on outstanding foreign currency exchange contracts, used to hedge future
revenues and purchases, are not recorded in the financial statements but are
included in the measurement of the related hedged transaction when realized.
The Company will adopt SFAS 133 effective January 1, 2001. This could impact
the Company's accounting of derivatives.

FORWARD EXCHANGE U.S. DOLLAR FAIR VALUE IN U.S. $
CONTRACTS EQUIVALENT MATURITY DATE AT DECEMBER 31, 2000
---------------- ----------- ------------- --------------------

Canadian dollars $ 750,000 December 15, 2000 to January 16, 2001 $ 764,161
Canadian dollars 1,000,000 January 3, 2001 to January 31, 2001 1,017,948
Canadian dollars 1,000,000 January 16, 2001 to February 16, 2001 1,016,547
Canadian dollars 750,000 February 1, 2001 to February 28,2001 763,911

Based upon the rates at December 31, 2000, the cost to buy the equivalent
U.S. dollars discussed above was approximately $5.3 million Canadian currency.

At December 31, 2000, 76% of the Company's indebtedness contained a fixed
interest rate of 9.5%. Substantially all of the Company's remaining
indebtedness, including borrowings under its $125 million credit facility is at

variable rates of interest. Accordingly, changes in interest rates would
impact the Company's results of operations in future periods. A 10% change in
interest rate is not expected to significantly impact the Company's operating
results.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The information required by this Item is incorporated herein by reference to the
Consolidated Financial Statements and Supplementary Data listed in Item 14 of
Part IV of this report.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

None.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS

The information required by this item can be found under the caption
"Directors and Executive Officers" of the Company's Proxy Statement (the
"Proxy Statement") to be distributed April 9, 2001, for the 2001 Annual
Meeting of Stockholders to be held on May 14, 2001. Such information is
incorporated herein by reference.

ITEM 11. EXECUTIVE COMPENSATION AND OTHER INFORMATION

The information in the Proxy Statement set forth under the caption "Executive
Compensation" is incorporated herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The information set forth under the caption "Security Ownership and Certain
Beneficial Owners and Management" in the Proxy Statement is incorporated herein
by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information set forth under the caption "Certain Relationships and Related
Transactions" in the Proxy Statement is incorporated herein by reference.

PART IV

ITEM 14. EXHIBITS, CONSOLIDATED FINANCIAL STATEMENT SCHEDULE, AND REPORTS
ON FORM 8-K

(a) Documents Filed with Report

(1) Consolidated Financial Statements

The financial statements listed on the accompanying Index to
Consolidated Financial Statements and Financial Statement
Schedule is filed as part of this report.

(2) Consolidated Financial Statement Schedule

The financial statement schedule listed on the accompanying
Index to Consolidated Financial Statements and Financial
Statement Schedule are filed as part of this report.

(3) Exhibits

The exhibits listed on the accompanying Index to Exhibits is
filed as part of this report.

(b) Reports on Form 8-K

Our current report on Form 8-K dated May 8, 2000.

GUESS?, INC.

FORM 10-K

ITEMS 8, AND 14(a) AND 14(d)

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE

1 Independent Auditors' Report F-2
2 Audited Consolidated Financial Statements
Consolidated Balance Sheets at December 31, 2000 and 1999 F-3
Consolidated Statements of Earnings for the Years Ended December 31, 2000, 1999 and 1998 F-4
Consolidated Statements of Stockholders' Equity and Comprehensive Income for the
Years Ended December 31, 2000, 1999 and 1998 F-5
Consolidated Statements of Cash Flows for the Years Ended December 31, 2000, 1999 and
1998 F-6
Notes to Consolidated Financial Statements F-7
3 Consolidated Financial Statement Schedule Valuation and Qualifying Accounts F-23

F-1

INDEPENDENT AUDITORS' REPORT

The Board of Directors and Stockholders
Guess?, Inc.:

We have audited the accompanying consolidated financial statements of Guess?,
Inc. and Subsidiaries as of December 31, 2000 and 1999 as listed in the
accompanying index. In connection with our audits of the consolidated
financial statements, we also have audited the consolidated financial
statement schedule, as listed in the accompanying index. These consolidated
financial statements and financial statement schedule are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these consolidated financial statements and financial statement schedule
based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the consolidated
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the consolidated financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall consolidated financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Guess?,
Inc. and Subsidiaries as of December 31, 2000 and 1999 and the results of
their operations and their cash flows for each of the years in the three-year
period ended December 31, 2000 in conformity with accounting principles
generally accepted in the United States of America. Also in our opinion, the
related consolidated financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a whole,
presents fairly, in all material respects, the information set forth therein.

KPMG LLP

Los Angeles, California
March 7, 2001, except for the penultimate
paragraph of Note 10 and the second paragraph
of Note 7, which are as of March 15, 2001
and March 27, 2001,respectively

F-2

GUESS?, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2000 AND 1999
(IN THOUSANDS, EXCEPT SHARE DATA)

ASSETS

2000 1999
------------ ------------

Current assets:
Cash $ 13,332 $ 6,139
Investments 898 27,059
Receivables, net of reserves 34,383 39,673
Inventories, net 144,220 106,624
Prepaid expenses and other current assets 9,671 8,861
Prepaid income taxes 9,118 3,004
Deferred tax assets 14,470 9,619
------------ ------------
Total current assets 226,092 200,979

Property and equipment, at cost, net of accumulated depreciation and amortization 168,299 125,688
Other assets, at cost, net of accumulated amortization 25,292 42,369
------------ ------------
$ 419,683 $ 369,036
============ ============

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current installments of notes payable and long-term debt $ 13,801 $ 7,475
Accounts payable 84,043 61,736
Accrued expenses 31,959 33,824
------------ ------------
Total current liabilities 129,803 103,035

Notes payable and long-term debt, excluding current installments 103,781 83,363
Other liabilities 10,943 14,236
------------ ------------
244,527 200,634
Minority interest -- 1,047
Commitments and contingencies

Stockholders' equity:
Preferred stock, $0.01 par value. Authorized 10,000,000 shares; no shares issued
and outstanding -- --
Common stock, $0.01 par value. Authorized 150,000,000 shares; issued 63,594,219
and 63,335,743 shares at 2000 and 1999, outstanding 43,563,427 and 43,304,951
shares at 2000 and 1999, respectively 146 141
Paid-in capital 167,833 163,300
Deferred compensation (950) --
Retained earnings 160,936 144,443
Accumulated other comprehensive income (loss) (2,033) 10,247
Treasury stock, 20,030,792 shares repurchased (150,776) (150,776)
------------ ------------
Net stockholders' equity 175,156 167,355
------------ ------------
$ 419,683 $ 369,036
============ ============

See accompanying notes to consolidated financial statements

F-3

GUESS?, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
(IN THOUSANDS, EXCEPT PER SHARE DATA)

2000 1999 1998
------------ ------------ ------------

Net revenue
Product sales $ 741,412 $ 560,012 $ 435,128
Net royalties 37,805 39,638 36,803
------------ ------------ ------------
779,217 599,650 471,931
Cost of sales 495,604 331,660 272,079
------------ ------------ ------------

Gross profit 283,613 267,990 199,852
Selling, general and administrative expenses 233,186 171,014 142,806
Severance (recovery) related to distribution facility relocation (1,545) 3,200 --
Restructuring and impairment charges 8,623 -- --
------------ ------------ ------------

Earnings from operations 43,349 93,776 57,046

Other (income) expense:
Gain on disposition of property and equipment -- (3,849) --
Interest, net 13,756 9,385 12,892
Other, net -- 1,140 863
------------ ------------ ------------
13,756 6,676 13,755

Earnings before income taxes 29,593 87,100 43,291

Income taxes 13,100 35,200 18,180
------------ ------------ ------------

Net earnings $ 16,493 $ 51,900 $ 25,111
============ ============ ============

EARNINGS PER SHARE:
Basic $ 0.38 $ 1.21 $ 0.59
Diluted $ 0.38 $ 1.20 $ 0.59
WEIGHTED NUMBER OF SHARES OUTSTANDING
Basic 43,464 43,005 42,904
Diluted 43,819 43,366 42,919

See accompanying notes to consolidated financial statements

F-4

GUESS?, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
AND COMPREHENSIVE INCOME
YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
(IN THOUSANDS)

Accumulated
Compre- Other
hensive Common Paid-in Deferred Retained Comprehensive Treasury
Income Stock Capital Compensation Earnings Income (Loss) Stock Total
--------- --------- --------- --------- --------- ------------ --------- ---------

Balance at December 31, 1997 $ 137 $ 158,589 -- $ 67,432 $ (52) $(150,776) $ 75,330
Comprehensive income:
Net earnings $ 25,111 -- -- -- 25,111 -- -- 25,111
Foreign currency translation
adjustment (32) -- -- -- -- (32) -- (32)
---------
Total comprehensive income $ 25,079 --
========= --------- --------- --------- --------- ------------ --------- ---------

Balance at December 31, 1998 137 158,589 -- 92,543 (84) (150,776) 100,409
Comprehensive income:
Net earnings $ 51,900 -- -- -- 51,900 -- -- 51,900
Foreign currency translation
adjustment (114) -- -- -- -- (114) -- (114)
Unrealized gain on
investments, net of
tax effect 10,445 -- -- -- -- 10,445 -- 10,445
---------
Total comprehensive income $ 62,231
=========

Issuance of common stock under
stock option plan, net of
tax effect 4 4,711 -- -- -- -- 4,715
--------- --------- --------- --------- ------------ --------- ---------

Balance at December 31, 1999 141 163,300 -- 144,443 10,247 (150,776) 167,355
Comprehensive income:
Net earnings $ 16,493 -- -- -- 16,493 -- -- 16,493
Foreign currency translation
adjustment 38 -- -- -- -- 38 -- 38
Unrealized loss on
investments, net of tax
effect (12,318) -- -- -- -- (12,318) -- (12,318)
---------
Total comprehensive income $ 4,213
=========
Issuance of common stock under
stock option plan, net of
tax effect 3 3,585 -- -- -- 3,588

Deferred compensation 2 948 (950) -- -- -- --
--------- --------- --------- --------- ------------ --------- ---------

Balance at December 31, 2000 $ 146 $ 167,833 $ (950) $ 160,936 $ (2,033) $(150,776) $175,156
========= ========= ========= ========= =========== ========= ========

See accompanying notes to consolidated financial statements

F-5

GUESS?, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
(IN THOUSANDS)

2000 1999 1998
------------ ------------ ------------

Cash flows from operating activities:
Net earnings $ 16,493 $ 51,900 $ 25,111
Adjustments to reconcile net earnings to net cash provided
by operating activities:
Depreciation and amortization of property and equipment 33,311 25,589 22,571
Amortization of other assets 881 1,296 931
Deferred income taxes (6,729) (2,150) (834)
Loss (gain) on disposition of property and equipment 3,340 (5,037) 1,483
Other items, net 1,039 869 (2)
Changes in operating assets and liabilities:
Accounts receivable 5,290 558 3,637
Inventories (37,596) (9,155) 2,582
Prepaid expenses and other assets (4,307) (6,369) 15,370
Accounts payable 22,308 19,393 (5,520)
Accrued expenses and other liabilities (3,858) 10,410 (129)
------------ ------------ ------------
Net cash provided by operating activities 30,172 87,304 65,200

Cash flows from investing activities:
Purchases of property and equipment, net of lease incentives (79,134) (61,957) (13,306)
Proceeds from the disposition of property and equipment 3,133 7,106 14
Net proceeds (purchases) from the sale of short-term investments 22,850 (14,711) (11,900)
Acquisition of interest in Guess? Canada -- (2,027) --
Increase in long-term investments -- (2,357) 842
Acquisition of license (82) (1,443) (741)
------------ ------------ ------------
Net cash used by investing activities (53,233) (75,389) (25,091)

Cash flows from financing activities:
Proceeds from notes payable and long-term debt 204,661 5,529 102,300
Repayment of notes payable and long-term debt (177,916) (20,658) (144,817)
Issuance of common stock 3,588 3,534 --
------------ ------------ ------------
Net cash provided by (used in) financing activities 30,333 (11,595) (42,517)

Effect of exchange rates on cash (79) (34) 57
Net increase (decrease) in cash 7,193 286 (2,351)
Cash at beginning of year 6,139 5,853 8,204
------------ ------------ ------------
Cash at end of year $ 13,332 $ 6,139 $ 5,853
============ ============ ============

Supplemental disclosures
Cash paid during the year for:
Interest $ 11,951 $ 10,358 $ 15,095
Income taxes $ 24,604 $ 37,236 $ 3,704

See accompanying notes to consolidated financial statements

F-6

GUESS?, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES

Guess?, Inc. (the "Company" or "Guess") designs, markets, distributes and
licenses leading lifestyle collections of casual apparel and accessories for
men, women and children that reflect the American lifestyle and European
fashions sensibilities. The Company designs are sold in Guess' owned stores, to
a network of wholesale accounts that includes primarily 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 licensees and distributors.

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of Guess?, Inc. and
its wholly-owned foreign subsidiary, Guess Europe, B.V., a Netherlands
corporation ("GEBV"), and its majority-owned subsidiary GUESS? Canada
Corporation ("Guess Canada," formerly named Strandel Inc.), a Canadian
corporation. GEBV holds three wholly-owned subsidiaries: Ranche, Limited, a Hong
Kong corporation ("Ranche"), Guess Asia, a Hong Kong corporation, and Guess
Italia, S.r.l., an Italian corporation ("Guess Italia"). Guess holds a 60%
interest in Guess Canada. Accordingly, all references herein to "Guess?, Inc."
include the consolidated results of the Company and its subsidiaries. All
intercompany accounts and transactions are eliminated during the consolidation
process.

USE OF ESTIMATES

The preparation of the financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the amounts reported in
the financial statements and accompanying notes. Actual results could differ
from those estimates.

INVESTMENT SECURITIES

The Company accounts for its investment securities in accordance with Financial
Accounting Standards Board ("FASB") Statement of Financial Accounting Standards
("SFAS") No. 115, "Accounting for Certain Investments in Debt and Equity
Securities" ("SFAS 115"). SFAS 115 requires investments to be classified into
one of three categories based on management's intent: held-to-maturity
securities, available-for-sale securities and trading securities.
Held-to-maturity securities are recorded at amortized cost. Available-for-sale
securities are recorded at fair value with unrealized gains and losses reported
as a separate component of stockholders' equity. Trading securities are recorded
at market value with unrealized gains and losses reported in operations. The
Company accounts for its short-term investment securities as available-for-sale.

EARNINGS PER SHARE

Basic earnings per share represents net earnings divided by the weighted-average
number of shares of common stock, par value $0.01 per share (the "Common
Stock"), outstanding for the period. Diluted earnings per share represents net
earnings divided by the weighted-average number of shares outstanding, inclusive
of the dilutive impact of Common Stock equivalents.

The reconciliation of basic to diluted weighted average shares is as follows (in
thousands):

2000 1999 1998
-------- -------- --------

Weighted average shares used in basic computations 43,464 43,005 42,904
Dilutive stock options 355 361 15
-------- -------- --------

Weighted average shares used in diluted computation 43,819 43,366 42,919
======== ======== ========

F-7

Options to purchase 550,000, 467,000 and 1,036,000 shares of Common Stock at
prices ranges from $17.64 to $27.31, $10.88 to $16.38 and $5.50 to $11.00 were
outstanding during 2000, 1999 and 1998, respectively, but were not included in
the computation of diluted earnings per share because the options exercise
prices were greater than the average market price of the shares of Common Stock.

CONCENTRATION OF CREDIT RISK

The Company's financial instruments that are exposed to concentrations of credit
risk consist primarily of accounts receivable. The Company maintains cash with
various major financial institutions and performs evaluations of the relative
credit standing of these financial institutions in order to limit the amount of
credit exposure with any institution. The Company extends credit to corporate
customers based upon an evaluation of the customer's financial condition and
credit history and generally requires no collateral. The Company's customers are
principally located throughout North America, and their ability to pay amounts
due to the Company may be dependent on the prevailing economic conditions of
their geographic region. However, such credit risk is considered limited due to
the Company's large customer base. Management performs regular evaluations
concerning the ability of its customers to satisfy their obligations and records
a provision for doubtful accounts based on these evaluations. The Company's
credit losses for the periods presented are insignificant and have not
significantly exceeded management's estimates. A few of the Company's domestic
wholesale customers, including some under common ownership, have accounted for
significant portions of its net revenue. Bloomingdale's, Macy's and other
affiliated stores owned by Federated Department Stores, Inc. together accounted
for approximately 11.8% and 12.4% of the Company's net revenue in 2000 and 1999,
respectively.

INVENTORIES

Inventories are stated at the lower of cost (first-in, first-out and weighted
average) or market.

REVENUE RECOGNITION

The Company recognizes retail operations revenue at the point of sale, and
wholesale operations revenue from the sale of merchandise upon shipment. Royalty
income is based upon a percentage, as defined in the underlying agreement, of
the licensees' net revenue. The Company accrues for estimated sales returns and
allowances in the period in which the related revenue is recognized.

DEPRECIATION AND AMORTIZATION

Depreciation and amortization of property and equipment are provided using the
straight-line and declining balance methods over the following useful lives:

Building and building improvements 10 to 31 years
Land improvements 5 years
Machinery and equipment 3 to 5 years
Corporate aircraft 10 years
Corporate vehicles 3 years
Shop fixtures 5 years

Leasehold improvements are amortized over the lesser of the estimated
useful life of the asset or the term of the lease. Construction in progress is
not depreciated until the related asset is completed.

F-8

Goodwill, which represents the excess of purchase price over fair value of net
assets acquired, is amortized on a straight-line basis over the expected periods
to be benefited, generally 10 to 15 years. Accumulated amortization totaled
$4,470,000 and $3,589,000 at December 31, 2000 and 1999, respectively.

FOREIGN CURRENCY TRANSLATION

In accordance with SFAS No. 52, "Foreign Currency Translation," assets and
liabilities of the Company's foreign operations are translated from foreign
currencies into U.S. dollars at year-end rates, while income and expenses are
translated at the weighted-average exchange rates for the year. The related
translation adjustments are reflected as a foreign currency translation
adjustment in other comprehensive income as a separate component of
stockholders' equity.

HEDGING ACTIVITIES

At December 31, 2000, the Company had forward exchange contracts to purchase
$3.5 million U.S. currency for approximately $5.3 million Canadian currency.

Unrealized gains and losses on outstanding foreign currency exchange contracts,
used to hedge future revenues and purchases, are not recorded in the financial
statements but are included in the measurement of the related hedged transaction
when realized.

INCOME TAXES

The Company uses the asset and liability method of accounting for income taxes.
Under this method, deferred income taxes are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to be applied to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred
taxes of a change in tax rates is recognized in income in the period that
includes the enactment date.

COMPREHENSIVE INCOME

Comprehensive income consists of net earnings, unrealized gains or losses on
investments and foreign currency translation adjustments and is presented in the
consolidated statements of stockholders' equity and comprehensive income.

BUSINESS SEGMENT REPORTING

The Company reports information about business segments and related disclosures
about products and services, geographic areas and major customers. The business
segments of the Company are wholesale, retail and licensing operations.
Information regarding these segments is summarized in Note 13.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying amount of the Company's financial instruments, which principally
include cash, short-term investments, trade receivables, accounts
payable and accrued expenses, approximates fair value due to the relatively
short maturity of such instruments. Long-term investments are recorded at
fair value.

The fair value of the Company's debt instruments are based on the amount of
future cash flows associated with each instrument discounted using the Company's
borrowing rate. At December 31, 2000 and 1999, the carrying value of all
financial instruments was not materially different from fair value, as the
fixed rate debt approximates rates currently available to the Company.

F-9

LONG-LIVED ASSETS

The Company reports long-lived assets, including intangibles, at amortized
cost. Long-lived assets and intangibles, including goodwill, are reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. If this assessment
indicates that the assets will not be recoverable, as determined by the
non-discounted cash flow generated by the asset, the carrying value of the
Company's long-lived assets would be reduced to its estimated fair market
value based on the discounted cash flows.

ADVERTISING COSTS

The Company expenses the cost of advertising as incurred. Advertising expenses
charged to operations for the years ended December 31, 2000, 1999 and 1998 were
$29.7 million, $24.5 million, and $18.0 million, respectively.

RECLASSIFICATIONS

Certain reclassifications have been made to the 1999 and 1998 consolidated
financial statements to conform with the 2000 presentation.

(2) INVESTMENTS

At December 31, 2000, short-term investments consist $0.9 million of
marketable securities available for sale. At December 31, 1999, short-term
investments of $27.1 million consist mostly of overnight interest-bearing
deposit accounts.

Long-term investments consist of certain marketable equity securities
aggregating $447,000 and $21.8 million at December 31, 2000 and 1999,
respectively and are included in other assets in the accompanying consolidated
balance sheets. Unrealized gains (losses) related to marketable equity
securities at December 31, 2000 and 1999 amounted to ($1.9) million and $11.2
million, respectively, net of deferred tax assets (liabilities) of $1.3 million
and ($7.6) million, respectively, and are included as a component of
stockholders' equity. During 2000, the Company recorded an impairment charge
related to a certain long-term marketable equity security. See Note 16.

(3) ACCOUNTS RECEIVABLE

Accounts receivable consists of trade receivables, less reserves aggregating
$15,811,000 and $8,863,000, and royalty receivables, less allowance for
doubtful accounts of $841,000 and $1,258,000 at December 31, 2000 and 1999,
respectively.

(4) INVENTORIES

Inventories are summarized as follows (in thousands):

2000 1999
-------- --------

Raw materials $ 9,986 $ 8,514
Work in process 6,727 6,740
Finished goods - retail 57,702 45,750
Finished goods - wholesale 69,805 45,620
-------- --------

$144,220 $106,624
======== ========

As of December 31, 2000, 1999 and 1998 the Company reduced inventories for
lower of cost or market by $12.9 million, $2.9 million and $3.9 million,
respectively, by charging cost of sales in each respective year.

F-10

(5) PROPERTY AND EQUIPMENT

Property and equipment is summarized as follows (in thousands):

2000 1999
-------- --------

Land and land improvements $ 4,586 $ 5,734
Building and building improvements 7,306 8,462
Leasehold improvements 95,491 67,821
Machinery and equipment 131,024 86,790
Corporate aircraft 6,601 6,601
Shop fixtures 38,929 31,347
Construction in progress 10,573 23,842
-------- --------
294,510 230,597
Less accumulated depreciation and amortization 126,211 104,909
-------- --------
$168,299 $125,688
======== ========

Construction in progress at December 31, 2000 and 1999 represents the costs
associated with the construction of buildings and improvements used in the
Company's operations and other capitalizable expenses in progress. During the
years ended December 31, 2000, and 1999, $0.4 million of interest costs were
capitalized in construction in progress. No interest costs were capitalized
for the year ended December 31, 1998.

(6) OTHER ASSETS

Other assets is summarized as follows (in thousands):

2000 1999
-------- --------

Goodwill, net of accumulated amortization $11,279 $12,352
Deferred tax assets 6,132 --
Long-term investments 447 21,771
Artwork 3,712 3,712
Other 3,722 4,534
------- -------
$25,292 $42,369
======= =======

F-11

(7) NOTES PAYABLE AND LONG-TERM DEBT

Notes payable and long-term debt are summarized as follows (in thousands):

2000 1999
-------- --------

9 1/2% Senior Subordinated Notes due 2003 $ 79,562 $ 79,562
$125 million revolving credit line 22,400 --
Revolving bank loan bearing interest at 1.75% above the Canadian prime
rate plus an amount equal to 0.5% per month of the average
outstanding balance, payable on demand, but commencing
January 1, 2001 by way of 24 equal consecutive minimum payments 3,322 2,770
Advances under a demand line of credit of $17,347 with advances thereon
bearing interest at the Canadian prime rate plus 1% 11,786 6,818

Other obligations, maturing in varying amounts through 2004 512 1,688
-------- --------
117,582 90,838
Less current installments 13,801 7,475
-------- --------
Long-term debt, excluding current installments $103,781 $ 83,363
======== ========

In December 1999, the Company entered into a $125 million Credit Agreement
("Credit Facility"), subject to a borrowing base calculation. The Credit
Facility provides the Company with a revolving credit line, which includes a
$50 million sub-limit for letters of credit. Outstanding borrowings are
secured by inventory and accounts receivable. The Credit Facility bears
interest at the London Interbank Offered Rate ("LIBOR") plus a range as
defined or the greater of the Prime rate, the base CD rate plus 100 basis
points or the Federal Funds rate (collectively "ABR") plus a range as defined
depending on the duration and type of loan facility. The credit facility
expires on October 31, 2002. At December 31, 2000, the Company had $22.4
million of outstanding borrowings under the Credit Facility, $4.0 million in
outstanding standby letters of credit and $17.6 million in outstanding
documentary letters of credit. At December 31, 2000, the Company had $81.0
million available for future borrowings under such facility. At December 31,
2000, the weighted average interest rate on the outstanding borrowings was
9.4%. The Credit Facility contains various restrictive covenants requiring,
among other things, the maintenance of certain financial fixed charge ratios.
At December 31, 2000, the Company was in technical non-compliance with the
fixed charge ratio covenant. On March 27, 2001, the Company's bank lenders
agreed to amend the Credit Facility Agreement to cure non-compliance and
revise certain terms, including modifications to the financial covenants, the
addition of a liquidity ratio and an amendment to the range of interest rates
based on the leverage ratio as follows: LIBOR plus 100 basis points to LIBOR
plus 225 basis points, ABR to ABR plus 125 basis points and commitment fees
of 25 basis points to 62.5 basis points. Accordingly, the Company is
presently in compliance with all terms of the Credit Facility, as amended.

Maturities of long-term debt at December 31, 2000 are as follows:

2001 $ 13,801
2002 24,042
2003 79,581
2004 158
--------
$117,582
========

The Senior Subordinated Notes are redeemable at the option of the Company, in
whole or in part, at any time at various redemption prices. During 1999, the
Company repurchased $19.4 million of its Senior Subordinated Notes.

F-12

(8) INCOME TAXES

Income taxes are summarized as follows (in thousands):

Year ended December 31,
-----------------------
2000 1999 1998
-------- -------- --------

Federal:
Current $ 17,276 $ 32,508 $ 14,477
Deferred (5,602) (2,464) 793
State:
Current 3,594 5,202 2,459
Deferred (1,127) 314 41
Foreign:
Current (1,041) (360) 410
-------- -------- --------
$ 13,100 $ 35,200 $ 18,180
======== ======== ========

Actual income taxes differ from expected income taxes obtained by applying the
statutory Federal income tax rate to earnings before income taxes as follows (in
thousands):

Year ended December 31,
-----------------------
2000 1999 1998
-------- -------- --------

Computed "expected" tax expense $ 10,357 $ 30,485 $ 15,152
State taxes, net of Federal benefit 2,210 3,586 1,625
Foreign taxes (benefit) 239 (273) (14)
U.S. tax and foreign withholding tax on
Foreign distributions -- -- 739
Other 294 1,402 678
-------- -------- --------
$ 13,100 $ 35,200 $ 18,180
======== ======== ========

Total income taxes were allocated as follows (in thousands):

Year ended December 31,
-----------------------
2000 1999 1998
-------- -------- --------

Operations $ 13,100 $ 35,200 $ 18,180
Stockholders' equity (10,769) 6,451 --

-------- -------- --------
Total income taxes $ 2,331 $ 41,651 $ 18,180
======== ======== ========

F-13

The tax effects of temporary differences that give rise to significant portions
of current and non-current deferred tax assets and deferred tax liabilities at
December 31, 2000 and 1999 are presented below (in thousands):

2000 1999
-------- --------

Deferred tax assets:
Retail store closure reserves $ 1,128 $ 269
Deferred lease incentives 1,991 1,718
Rent expense 2,114 2,161
Uniform capitalization adjustment 3,008 2,194
State income taxes 367 1,471
Bad debt and other reserves 4,810 2,904
Severance reserve -- 1,378
Unrealized loss on investments 2,269 --
Other 6,640 2,602
-------- --------
Total deferred assets 22,327 14,697
Deferred tax liabilities 1,725 9,640
-------- --------
Net deferred tax assets $ 20,602 $ 5,057
======== ========

Included above at December 31, 2000 and 1999 are $14.5 million and $9.6 million
for current deferred tax assets, respectively, and $6.1 million non-current
deferred tax assets, included in other assets, and $4.5 million non-current
deferred tax liabilities at December 31, 2000 and 1999, respectively.

Prepaid income taxes of $9.1 million and $3.0 million at December 31, 2000 and
1999, respectively, arise from the overpayment of estimated income taxes. The
Company filed a federal quick tax refund and received an $8.0 million refund in
February 2001.

Based on the historical earnings of the Company, management believes it is more
likely than not that the results of operations will generate sufficient taxable
earnings to realize net deferred tax assets.

(9) RELATED PARTY TRANSACTIONS

The Company is engaged in various transactions with entities affiliated with
trusts for the respective benefit of Maurice, Paul and Armand Marciano (the
"Marciano Trusts").

LICENSE AGREEMENTS AND LICENSEE TRANSACTIONS

On September 28, 1990, the Company entered into a license agreement with Charles
David of California ("Charles David"). Charles David is controlled by the
father-in-law of Maurice Marciano. The Marciano Trusts and Nathalie Marciano
(the spouse of Maurice Marciano) together own 50% of Charles David, and the
remaining 50% is owned by the father-in-law of Maurice Marciano. The license
agreement grants Charles David the rights to manufacture worldwide and
distribute worldwide (except Japan and certain European countries) for men,
women and some children, leather and rubber footwear which bear the Guess
trademark. The license also includes related shoe care products and accessories.

F-14

Gross royalties earned by the Company under such license agreement for the
fiscal years ended December 31, 2000, 1999 and 1998 were $2.1 million, $1.9
million and $1.4 million, respectively. Additionally, the Company purchased $8.7
million, $8.4 million and $6.1 million of products from Charles David for resale
in the Company's retail stores during the same periods.

In May 1997, the Company sold substantially all of the assets and liabilities of
Guess? Italia to Maco Apparel, S.p.a. ("Maco"). The effect of the net asset
disposal was immaterial to the Company's results of operations. In connection
with this sale, the Company also purchased a 10% ownership interest in Maco and
entered into an approximate 10-year license agreement with Maco granting it the
right to manufacture and distribute certain men's and women's jeanswear apparel,
which bear the Guess trademark, in certain parts of Europe. In addition to
royalty fees, the Company will also receive $14.1 million over a four-year
period in consideration of the grant of the license rights for men's and women's
jeanswear apparel. During 2000, 1999 and 1998 the Company recorded $2.8 million
in revenue in connection with the grant of such license rights. Additionally,
the Company also recorded $3.0 million, $3.2 million and $2.3 million in royalty
fees related to product sales in 2000, 1999 and 1998, respectively. Effective
March 1, 1998, the Company also entered into an approximate nine-year license
agreement with Maco granting it the right to manufacture and distribute kid's
jeanswear, which bear the Guess trademark, in certain parts of Europe. No
significant revenue was recorded related to the grant of this license
agreement.

On August 4, 1999, the Company completed its purchase of an additional 40% of
Guess? Canada whereby the Company's ownership has been increased to 60%. As
part of the transaction, the Company paid $2.0 million and will provide
long-term debt financing of up to $13.4 million to Guess Canada to expand its
Canadian retail operations of which $12.3 million was outstanding as of
December 31, 2000. The remaining funding is being provided on an as-needed
basis. The Company has an option to acquire the remaining 40% of Guess Canada
that becomes exercisable commencing December 31, 2001. The acquisition was
accounted for as a purchase and the results of Guess Canada are included in
the Company's consolidated financial statements from the date of acquisition.
The excess of the purchase price over the fair value of net assets acquired
amounting to $1.1 million is allocated to goodwill and is being amortized
over 15 years. The operating results of Guess? Canada are immaterial to the
Company's consolidated financial statements.

LEASES

The Company leases manufacturing, warehouse and administrative facilities from
partnerships affiliated with the Marciano Trusts and certain of its affiliates.
There are two leases in effect at December 31, 2000, both of which expire in
July 2008. The total lease payments to these limited partnerships are currently
$237,000 per month. Additionally, the Company is also on a month to month lease
for another storage facility. Aggregate lease payments under leases in effect
for the fiscal years ended December 31, 2000, 1999 and 1998 were $2.8 million,
$2.7 million, and $2.7 million, respectively.

F-15

(10) COMMITMENTS AND CONTINGENCIES

LEASES

The Company leases its showrooms and retail store locations under operating
lease agreements expiring on various dates through 2016. Some of these leases
require the Company to make periodic payments for property taxes and common area
operating expenses. Certain leases include rent abatements and scheduled rent
escalations, for which the effects are being amortized and recorded over the
lease term. The Company also leases some of its equipment under operating lease
agreements expiring at various dates through 2003.

Future minimum rental payments under non-cancelable operating leases at December
31, 2000 are as follows:

Year ending December 31, (in thousands):

Non
Related Related
Parties Parties Total
-------- -------- --------

2001 $ 45,088 $ 2,839 $ 47,927
2002 46,004 2,839 48,843
2003 44,991 2,839 47,830
2004 42,058 2,839 44,897
2005 37,542 2,839 40,381
Thereafter 124,729 7,331 132,060
-------- -------- --------
$340,412 $ 21,526 $361,938
======== ======== ========

Rental expense for all operating leases during the years ended December 31,
2000, 1999, and 1998 aggregated $36.1 million, $34.9 million, and $27.1 million,
respectively.

INCENTIVE BONUSES

Certain officers and key employees of the Company are entitled to incentive
bonuses, primarily based on the Company's profits.

LITIGATION

F-16

On May 4, 2000, a complaint was filed against the Company and Mr. Paul Marciano
in the Los Angeles Superior Court - Michel Benasra v. Paul Marciano and Guess?,
Inc. The complaint grows out of the arbitration between the Company and PLB,
discussed above. The plaintiff, the President of PLB, alleges that defendants
made defamatory statements about him during the arbitration. Plaintiff seeks
general damages of $50,000,000 and unspecified punitive damages. Defendants
moved to compel arbitration of this matter, or alternatively, to strike the
action under the state's anti-SLAPP (Strategic Litigation Against Public
Participation) statute. The motion to compel arbitration was denied and the
decision has been appealed. Pending resolution on appeal, this matter has been
stayed. No trial date has been set.

F-17

We cannot predict the outcome of these matters. We believe the outcome of one or
more of the above cases could have a material adverse effect on our results of
operations or financial condition. Most major corporations, particularly those
operating retail businesses, become involved from time to time in a variety of
employment-related claims and other matters incidental to their business in
addition to those described above. In the opinion of our management, the
resolution of any of these pending incidental matters is not expected to have a
material adverse effect on our results of operations or financial condition.

(11) SAVINGS PLAN

The Company established the Guess?, Inc. Savings Plan (the "Savings Plan") under
Section 401(k) of the Internal Revenue Code. Under the Savings Plan, employees
("associates") may contribute up to 15% of their compensation per year subject
to the elective limits as defined by IRS guidelines and the Company may make
matching contributions in amounts not to exceed 1.5% of the associates' annual
compensation. The Company's contributions to the Savings Plan for the year
ended December 31, 2000, amounted to $0.4 million, and was $0.3 million for
each of the years ended December 31, 1999 and 1998.

F-18

(12) QUARTERLY INFORMATION (UNAUDITED)

The following is a summary of the unaudited quarterly financial information
for the years ended December 31, 2000 and 1999 (in thousands, except per
share data):

First Second Third Fourth
Quarter Quarter Quarter Quarter
--------- --------- --------- ---------

Year ended December 31, 2000
- ----------------------------
Net revenue $ 188,844 $ 177,681 $ 216,363 $ 196,329
Gross profit 79,146 69,379 77,157 57,931
Net earnings (loss) 14,408 6,811 8,363 (13,089)
Earnings (loss) per share:
Basic $ 0.33 $ 0.16 $ 0.19 $ (0.30)
Diluted $ 0.33 $ 0.16 $ 0.19 $ (0.30)

First Second Third Fourth
Quarter Quarter Quarter Quarter
--------- --------- --------- ---------

Year ended December 31, 1999
- ----------------------------
Net revenue $ 129,052 $ 119,557 $ 155,547 $ 195,494
Gross profit 54,028 55,035 65,261 93,666
Net earnings 11,486 7,017 14,235 19,162
Earnings per share:
Basic $ 0.27 $ 0.16 $ 0.33 $ 0.45
Diluted $ 0.27 $ 0.16 $ 0.33 $ 0.44

The quarterly information presented herein for the quarters ended April 1,
July 1, and September 30, 2000, presents information as amended in the Forms
10-Q/A to be filed on April 2, 2001.

During the fourth quarter of 2000, the Company recorded special charges of $15.6
million principally related to $5.7 million of inventory write-downs to value
its inventory at the lower of cost or market; $4.5 million of restructuring
charges related to underperforming stores that the Company plans to close and
for new stores that the Company has decided not to open; $4.1 million to
write-down permanently impaired assets, including fixed assets related to
unprofitable stores and an investment in an internet company; and $1.3 million
of other charges. The inventory provisions have been included in cost of sales.

During the fourth quarter of 1999, the Company enhanced its ability to estimate
reserves through improved processes and more current and accurate data. As a
result, the Company revised its estimate of certain reserves. This resulted in a
reduction of cost of sales of $2.3 million. During the second quarter of 1999,
in accordance with the requirements of EITF 94-3, "Liability Recognition for
Certain Employee Termination Benefits and Other Costs to Exit an Activity
(including Certain Costs Incurred in a Restructuring"), the Company recorded a
$3.2 million charge for future severance costs related to the relocation of
distribution operations to Louisville. In the third quarter of 1999, the Company
realized a non-recurring pretax gain of $3.8 million on the disposition of
property and equipment.

(13) SEGMENT INFORMATION

In accordance with the requirements of SFAS 131, "Disclosures about Segments of
and Enterprise and Related Information," the Company's reportable business
segments and respective accounting policies of the segments are the same as
those described in Note 1. Management evaluates segment performance based
primarily on revenue and earnings from operations. Interest income and expense
is evaluated on a consolidated basis and not allocated to the Company's business
segments.

F-19

Segment information is summarized as follows for the years ended December 31,
2000, 1999 and 1998 (in thousands):

Year ended December 31,
-----------------------
2000 1999 1998
-------- -------- --------

Net revenue:
Retail operations $392,539 $299,384 $222,624
Wholesale operations 348,873 260,628 212,504
Licensing operations 37,805 39,638 36,803
-------- -------- --------
$779,217 $599,650 $471,931
======== ======== ========

Earnings from operations:
Retail operations $ 3,372 $ 37,072 $ 19,943
Wholesale operations 9,170 25,101 7,971
Licensing operations 30,807 31,603 29,132
-------- -------- --------

$ 43,349 $ 93,776 $ 57,046
======== ======== ========

Capital expenditures:
Retail operations $ 57,336 $ 26,486 $ 5,170
Wholesale operations 21,798 35,471 8,136
Licensing operations -- -- --
-------- -------- --------
$ 79,134 $ 61,957 $ 13,306
======== ======== ========

Total assets
Retail operations $183,255 $114,152 $ 93,140
Wholesale operations 229,446 245,162 159,069
Licensing operations 6,982 9,722 11,563
-------- -------- --------
$419,683 $369,036 $263,772
======== ======== ========

The table below presents information related to geographic areas in which the
Company operated during 2000, 1999 and 1998 (in thousands):

Year ended December 31,
-----------------------
2000 1999 1998
-------- -------- --------

Net revenue:
United States $680,341 $548,179 $434,207
Asia 23,303 13,279 13,859
Europe 18,764 13,464 10,600
Canada 47,339 12,073 1,644
South America 6,403 3,973 5,066
Mexico 1,895 3,337 2,406
Other 1,172 5,345 4,149
-------- -------- --------
$779,217 $599,650 $471,931
-------- -------- --------

F-20

(14) STOCK OPTION PLAN AND NON-VESTED STOCK

On July 30, 1996, the Board of Directors adopted the Guess?, Inc. 1996
Non-Employee Directors' Stock Option Plan pursuant to which the Board of
Directors may grant stock options to non-employee directors. This plan
authorizes grants of options to purchase up to 500,000 authorized but unissued
shares of Common Stock. At December 31, 2000, 1999 and 1998, there were 147,611,
109,082 and 70,451 options issued under this plan, respectively. Stock options
are granted with an exercise price equal to the stock's fair market value at the
date of grant. Stock options have ten-year terms and vest and become fully
exercisable in increments of one-fourth of the shares granted on each
anniversary from the date of grant.

On July 30, 1996, the Board of Directors adopted the Guess?, Inc. 1996 Equity
Incentive Plan (the "Plan") pursuant to which the Board of Directors may grant
stock options to officers, key employees and consultants. The Plan authorizes
grants of options to purchase up to 4,500,000 authorized but unissued shares of
Common Stock. Stock options are granted with an exercise price equal to the
stock's fair market value at the date of grant. Stock options have ten-year
terms (five years in the case of an incentive stock option granted to a
ten-percent stockholder) and vest and become fully exercisable after varying
time periods from the date of grant based on length of service or specified
performance goals.

At December 31, 2000, 1999 and 1998, there were 1,883,056, 2,763,397 and
2,841,825 additional shares available for grant under the plan, respectively.
Using the Black Scholes option pricing model, the weighted-average per share
fair value of stock options granted during 2000, 1999 and 1998 was $10.09,
$12.46 and $4.24, respectively. The fair value for these options was estimated
at the date of grant using a Black-Scholes option pricing model with the
following weighted-average assumptions for 2000, 1999 and 1998, respectively:
risk-free interest rates of 5.35%, 6.51% and 4.87%; volatility factors of the
expected market price of the Company's common stock of 80%, 65% and 63%; no
expected dividend yield; and a weighted-average expected life of the option of
four years.

The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded options which have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of highly
subjective assumptions including the expected stock price volatility. Because
options under the Company's stock option plan have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of the options under the Company's stock option plan.

The Company applies APB Opinion No. 25 in accounting for its Plan and,
accordingly, no compensation cost has been recognized for its stock options in
the accompanying consolidated financial statements. Had the Company determined
compensation based on the fair value at the grant date for its stock options
under SFAS No. 123 ("SFAS 123"), the Company's pro forma net earnings and net
earnings per share for the years ended December 31, 2000, 1999 and 1998 would
have been the pro forma amounts indicated below (in thousands, except per share
data):

2000 1999 1998
---------- ---------- ----------

Pro forma net earnings $ 14,279 $ 51,300 $ 24,574
Pro forma earnings per share - basic $ 0.33 $ 1.19 $ 0.57
Pro forma earnings per share - diluted $ 0.33 $ 1.18 $ 0.57

In December 2000, the Company granted 205,680 shares of non-vested Common Stock
to a key employee which vest through January 2004. Upon granting of the stock,
unearned compensation equivalent to the market value of the stock at the date of
issuance ($4.63 per share) was charged to stockholders' equity and will be
amortized to operations over four years.

F-21

Stock option activity during the period indicated is as follows:

Number of Weighted-Average
Share Exercise Price
----------- ---------------

Balance at December 31, 1997 1,291,355 $ 11.05
Granted 1,035,600 4.24
Forfeited (668,780) (10.92)
---------- ----------

Balance at December 31, 1998 1,658,175 $ 6.86
Granted 343,650 12.46
Exercised (373,090) (8.56)
Forfeited (265,222) (7.68)
---------- ----------

Balance at December 31, 1999 1,363,513 $ 7.64
Granted 1,400,130 13.77
Exercised (250,976) (6.69)
Forfeited (519,789) (12.96)
---------- ----------

Balance of December 31, 2000 1,992,878 $ 10.68
========== ==========

At December 31, 2000, 1999 and 1998, the weighted-average exercise price was
$10.68, $7.64 and $6.86, respectively, and the weighted-average remaining
contractual lives of outstanding options were 8.74, 8.53 and 9.0 years,
respectively.

The following table summarizes information about stock options outstanding and
exercisable at December 31, 2000.

Options Outstanding Options Exercisable
----------------------------------------------------- ----------------------------------
Weighted Weighted Weighted
Number Average Average Number Average
Range of Exercise Outstanding Remaining Exercise Exercisable at Exercise
Price December 31, 2000 Contractual life Price December 31, 2000 Price
--------------- ----------------- -------------- ---------- ----------------- ---------

$ 0.01 to $5.50 1,051,536 8.51 years $3.56 137,626 $ 4.20
$ 7.06 to $19.38 71,325 7.66 years 8.38 46,450 8.77
$10.50 to $12.50 265,642 7.22 years 11.08 202,442 10.90
$16.38 to $18.31 250,000 9.28 year 17.74 20,378 16.83
$21.06 to $27.31 354,375 9.04 year 26.99 77,800 26.93
--------- ---------- ------ ------- ------
1,992,878 8.74 years $10.68 484,696 $11.62
========= ====== =======

At December 31, 2000 and 1999, the number of options exercisable for each year
was 484,696 and 338,284, respectively. The weighted-average exercise price of
those options was $11.62 and $8.14, respectively.

F-22

(15) SEVERANCE (RECOVERY) RELATED TO DISTRIBUTION FACILITY RELOCATION

In accordance with the requirements of EITF 94-3, "Liability for Certain
Employee Termination Benefits and Other Costs to Exit an Activity (including
Certain Costs Incurred in a Restructuring)," during 1999, the Company
recorded a $3.2 million charge for future severance costs related to the
relocation of its distribution operations from Los Angeles, California to
Louisville, Kentucky. The Company originally expected to terminate 460
employees. As a result of attrition, relocating and redeploying 228
employees, the Company recorded a $1.5 million recovery during 2000.

(16) RESTRUCTURING AND IMPAIRMENT CHARGES

In the fourth quarter of 2000, the Company recorded restructuring and
impairment charges of $8.6 million. Of these charges $2.4 million
(impairment) and $6.2 million (restructuring and impairment) were recorded to
the wholesale and retail segments, respectively. These charges consisted of
the following:

In connection with its ongoing review of its portfolio of marketable equity
securities, the Company recorded a non-cash impairment charge against earnings
from operations of $2.4 million to write down the cost basis of a certain
marketable equity security investment in an internet company as the decline was
determined to be other than temporary.

Additionally, in accordance with SFAS N0. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" an
impairment charge of $1.7 million was recorded in the fourth quarter of 2000
to write down the net book value of property and equipment related to certain
stores. These assets became impaired as the Company's new kid's line had some
unprofitable stores that performed below expectation. Estimated future cash
flows related to these stores indicated that an impairment of the full value
had occurred.

In December 2000, Company management approved a plan to close certain
under-performing stores in 2001 and cease construction on certain stores that
the Company has decided not to open. Included in the Company's operating
results for the year ended December 31, 2000, are restructuring charges of
$4.5 million consisting of lease exit costs, rent paid and to be paid on idle
locations and construction costs of stores abandoned during construction.
This is inclusive of $0.8 million of asset impairments for under-performing
stores that the Company plans to close in 2001. Estimated future cash flows
related to these stores indicated that an impairment of the full value had
occured. As of December 31, 2000, a liability recorded in accordance with the
requirements of EITF 94-3, "Liability for Certain Employee Termination
Benefits and Other Costs to Exit an Activity (including Certain Costs
Incurred in a Restructuring)" of $1.7 million remains, consisting primarily
of estimated rent to be paid on idle leased facilities and lease exit costs.
The Company anticipates paying the $1.7 million and the completion of these
activities during 2001.

F-23

SCHEDULE II
GUESS?, INC. & SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED DECEMBER 31, 2000, 1999, AND 1998
(IN THOUSANDS)

Balance at Charged to Deductions Balance at
beginning costs and and end
of period expenses write-offs of period
--------- -------- ---------- ---------

Description
- -----------
As of December 31, 2000
Accounts receivable $ 8,863 $ 28,811 $ (21,863) $15,811
Royalties 1,258 903 (1,320) 841

As of December 31, 1999
Accounts receivable $ 7,837 $ 1,398 $ (372) $ 8,863
Royalties 3,667 1,657 (4,066) 1,258

As of December 31, 1998
Accounts receivable $11,196 $ 8,542 $(11,901) $ 7,837
Royalties -- 3,667 -- 3,667

F-24

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized, in the City of Los Angeles, State of
California, on April 2, 2001.

GUESS?, INC.

By: /s/ Maurice Marciano
--------------------
Maurice Marciano
CO-CHAIRMAN OF THE BOARD, CO-CHIEF
EXECUTIVE OFFICER AND DIRECTOR

Pursuant to the requirements of the Securities Act of 1934, this report has been
signed by the following persons on behalf of the Registrant and in the
capacities and on the dates indicated.

/s/ Maurice Marciano Co-Chairman of the Board, Co-Chief April 2, 2001
- -------------------- Executive Officer and Director
Maurice Marciano (Principal Executive Officer)

/s/ Paul Marciano Co-Chairman of the Board, Co-Chief April 2, 2001
- -------------------- Executive Officer and Director
Paul Marciano

/s/ Armand Marciano Senior Executive Vice President, April 2, 2001
- -------------------- Assistant Secretary and Director
Armand Marciano

/s/ Carlos Alberini President, Chief Operating Officer April 2, 2001
- -------------------- and Director
Carlos Alberini (Principal Financial Officer)

/s/ Robert Davis Director April 2, 2001
- --------------------
Robert Davis

/s/ Alice Kane Director April 2, 2001
- --------------------
Alice Kane

/s/ Howard Socol Director April 2, 2001
- --------------------
Howard Socol

/s/ Bryan Isaacs Director April 2, 2001
- --------------------
Bryan Isaacs

Exhibit Index
-------------
Exhibit
Number Description
- --------- ---------------------------------------------------------------------
3.1. Restated Certificate of Incorporation of the Registrant. (1)
3.2. Bylaws of the Registrant. (1)
4.3. Specimen stock certificate. (1)
10.1. Amended and Restated Stockholders' Agreement. (2)
10.20. Amended and Restated Revolving Credit Agreement, dated as of March 28,
1997. (2)
10.22. 1996 Equity Incentive Plan. (1)
10.23. 1996 Non-Employee Directors' Stock Option Plan. (1)
10.24. Annual Incentive Plan. (1)
10.25. Employment Agreement between the Registrant and Maurice Marciano. (2)
10.26. Employment Agreement between the Registrant and Paul Marciano. (2)
10.27. Employment Agreement between the Registrant and Armand Marciano. (2)
10.28. Registration Rights Agreement among the Registrant and certain
stockholders of the Registrant. (2)
10.29. Indemnification Agreement among the Registrant and certain
stockholders of the Registrant. (2)
10.30. Indemnification Agreements between the Registrant and certain
executives and directors. (2)
10.31. First Amendment to Amended and Restated Shareholders' Agreement.(3)
10.32. First Amendment and Waiver to Amended and Restated Revolving Credit
Agreement by and between the Registrant and BankBoston, NA, F/K/A The
First National Bank of Boston, Sanwa Bank California and the Financial
Institutions Party hereto. (4)
10.33. Amended and Restated 1996 Non-Employee Directors' Stock Option Plan,
as amended through March 3, 1997. (5)
18.0. Letter regarding change in accounting principles. (5)
10.34. Second Amendment and Consent to the Amended and Restated Revolving
Credit Agreement by and between Guess?, Inc. And BankBoston,
N.A.,F/K/A The First National Bank of Boston, Sanwa Bank California
and the Financial Institutions Party Hereto. (6)
10.35. Third Amendment and Consent to the Amended and Restated Revolving
Credit Agreement by and between Guess?, Inc. And BankBoston, N.A.,
F/K/A The First National Bank of Boston, Sanwa Bank California and the
Financial Institutions Party Hereto. (6)
10.36 Amendment No. 1 to The Guess?, Inc. Amended and Restated 1996 Non-
Employee Directors' Stock Option Plan (7)
10.37. Employment Agreement dated July 6, 1998 between Guess?, Inc. and Brian
L. Fleming. (7)
10.38. Fourth Amendment and Consent to the Amended and Restated Revolving
Credit Agreement by and between Guess?, Inc. And BankBoston, N.A.,
F/K/A The First National Bank of Boston, Sanwa Bank California and the
Financial Institutions Party Hereto. (8)
10.39. Credit Agreement by and between Guess?, Inc., Sanwa Bank of
California, and The Chase Manhattan Bank.
10.40. Lease Agreement between Guess?, Inc. and Robert Pattillo Properties,
Inc.
10.41. Subscription Agreement between Freemark Entertainment Corporation and
Guess?, Inc.
*10.42. Employment Agreement between the Registrant and Carlos Alberini
*10.43. First Amendment to Credit Agreement among the Registrant, the Lenders
and the Chase Manhattan Bank.
*21.1. List of Subsidiaries.
*23.1 Independent Accountants' Consent

- ----------------
* Filed herewith

(b) Financial Statement Schedule: Description Schedule II Valuation and
Qualifying Accounts
- ---------------

(1) Incorporated by reference from the Registration Statement on Form S-1
(Registration No. 333-4419) filed by the Company on June 24, 1996, as amended.
(2) Incorporated by reference from the Company's Annual Report on Form
10-K for the year ended December 31, 1996.

(3) Incorporated by reference from the Company's Quarterly Report on Form
10-Q for the quarter ended March 30, 1997.
(4) Incorporated by reference from the Company's Quarterly Report on Form
10-Q for the quarter ended June 29, 1997.
(5) Incorporated by reference from the Company's Annual Report on Form
10-K for the year ended December 31, 1997.
(6) Incorporated by reference from the Company's Quarterly Report on Form
10-Q for the quarter ended March 29, 1998.
(7) Incorporated by reference from the Company's Quarterly Report on Form
10-Q for the quarter ended June 28, 1998.
(8) Incorporated by reference from the Company's Quarterly Report on Form
10-Q for the quarter ended September 27, 1998.