Guess?, Inc. Reports Fiscal Year 2022 Third Quarter Results

Q3 Fiscal 2022 Revenues Reached $643 Million, Up 13% Compared to Q3 Fiscal 2021, Up 4% Compared to Q3 Fiscal 2020

Delivered Operating Margin in Excess of 10.0%

Q3 EPS of $0.45 and Adjusted EPS of $0.62

Raises Full-Year Outlook for Operating Margin to 11.0%

Doubles Quarterly Cash Dividend from $0.1125 to $0.225 per Share on the Company’s Common Stock

Guess?, Inc. (NYSE: GES) today reported financial results for its third quarter ended October 30, 2021.

Carlos Alberini, Chief Executive Officer, commented, “We are very pleased with our performance this quarter, which exceeded our expectations for revenues and earnings. Our revenues for the quarter increased 13% versus last year and were up 4% compared to the third quarter of fiscal year 2020, pre-pandemic. The better performance than expected was driven by our European Wholesale, Americas Retail and Licensing businesses, which posted strong top and bottom line results across the board. All in all, we delivered a 10% operating margin in the period, driven by strong gross margin expansion, as a result of lower promotional activity and improved IMUs in spite of increased freight costs related to the supply chain disruptions experienced in the market.”

Paul Marciano, Co-Founder and Chief Creative Officer, added, “I am very pleased with the progress we have made during the last few months with our brand elevation strategy. For the first time in our Company’s history we have one global line of products across all categories and our products are highly elevated, with a strong focus on quality and sustainability. The Guess brand is enjoying strong momentum worldwide, and we see a big opportunity to gain market share and grow in multiple markets and product categories.”

Mr. Alberini concluded, “We are confident in our plans for the holiday business. Our inventory position is strong, and our customers are responding well to our assortments. Based on our progress, we now expect to deliver an operating margin of 11.0% in the current year, double that of fiscal 2020, pre-pandemic. I am very pleased with our performance for the current year but I am even more excited with what lies ahead for us. I believe that we are at an inflection point at Guess and I am very confident our business is well positioned to generate superior returns in the future. We will continue to prioritize returning value to our shareholders and announced today that our Board has approved to double our quarterly cash dividend from $0.1125 to $0.225.”

Adjusted Amounts

This press release contains certain non-GAAP, or adjusted, financial measures. References to “adjusted” results exclude the impact of (i) asset impairment charges, (ii) net (gains) losses on lease modifications, (iii) certain professional service and legal fees and related (credits) costs, (iv) certain separation charges, (v) non-cash debt discount amortization on our convertible senior notes, (vi) the related income tax effects of the foregoing items, as well as the impact from changes in the income tax law on deferred income taxes in certain tax jurisdictions, net income tax settlements and adjustments to specific uncertain income tax positions, and (vii) certain discrete income tax adjustments related primarily to an intra-entity transfer of intellectual property rights to a wholly-owned Swiss subsidiary, in each case where applicable. A reconciliation of reported GAAP results to comparable non-GAAP results is provided in the accompanying tables and discussed under the heading “Presentation of Non-GAAP Information” below.

Third Quarter Fiscal 2022 Results Compared to Third Quarter Fiscal 2020

For the third quarter of fiscal 2022, the Company recorded GAAP net earnings of $29.9 million, a 140.5% increase from $12.4 million for the third quarter of fiscal 2020. GAAP diluted EPS increased 150.0% to $0.45 for the third quarter of fiscal 2022, compared to $0.18 for the third quarter of fiscal 2020. The Company estimates a net positive impact from its share buybacks and its convertible notes transaction of $0.04 and a negative impact from currency of $0.12 on GAAP diluted EPS in the third quarter of fiscal 2022 when compared to the third quarter of fiscal 2020.

For the third quarter of fiscal 2022, the Company’s adjusted net earnings were $41.6 million, a 178.8% increase from $14.9 million for the third quarter of fiscal 2020. Adjusted diluted EPS increased 181.8% to $0.62, compared to $0.22 for the third quarter of fiscal 2020. The Company estimates a net positive impact from its share buybacks and its convertible notes transaction of $0.05 and a negative impact from currency of $0.12 on adjusted diluted EPS in the third quarter of fiscal 2022 when compared to the third quarter of fiscal 2020.

Net Revenue. Total net revenue for the third quarter of fiscal 2022 increased 4.4% to $643.1 million, from $615.9 million in the third quarter of fiscal 2020. In constant currency, net revenue increased by 2.1%.

Earnings from Operations. GAAP earnings from operations for the third quarter of fiscal 2022 increased 190.0% to $65.7 million (including $3.0 million net losses on lease modifications, $1.2 million in non-cash impairment charges taken on certain long-lived store related assets and a $2.0 million unfavorable currency translation impact), from $22.6 million (including $1.8 million in non-cash impairment charges taken on certain long-lived store related assets) in the third quarter of fiscal 2020. GAAP operating margin in the third quarter of fiscal 2022 increased 6.5% to 10.2%, from 3.7% in the third quarter of fiscal 2020, driven primarily by lower markdowns, higher initial markups, overall leveraging of expenses and lower occupancy costs, partially offset by higher performance-based compensation. The negative impact of currency on operating margin for the quarter was approximately 40 basis points.

For the third quarter of fiscal 2022, adjusted earnings from operations increased 204.9% to $70.4 million, from $23.1 million in the third quarter of fiscal 2020. Adjusted operating margin increased 7.2% to 10.9%, from 3.7% in the third quarter of fiscal 2020, driven primarily by lower markdowns, higher initial markups, overall leveraging of expenses and lower occupancy costs, partially offset by higher performance-based compensation.

Third Quarter Fiscal 2022 Results Compared to Third Quarter Fiscal 2021

For the third quarter of fiscal 2022, the Company recorded GAAP net earnings of $29.9 million, a 13.3% increase from $26.4 million for the third quarter of fiscal 2021. GAAP diluted EPS increased 9.8% to $0.45 for the third quarter of fiscal 2022, compared to $0.41 for the same prior-year quarter. The Company estimates a minimal impact from its share buybacks and its convertible notes transaction and a positive impact from currency of $0.02 on GAAP diluted EPS in the third quarter of fiscal 2022 when compared to the same prior-year quarter.

For the third quarter of fiscal 2022, the Company’s adjusted net earnings were $41.6 million, an 11.2% increase from $37.4 million for the third quarter of fiscal 2021. Adjusted diluted EPS increased 6.9% to $0.62, compared to $0.58 for the same prior-year quarter. The Company estimates a minimal impact from its share buybacks and its convertible notes transaction and a positive impact from currency of $0.02 on adjusted diluted EPS in the third quarter of fiscal 2022 when compared to the same prior-year quarter.

Net Revenue. Total net revenue for the third quarter of fiscal 2022 increased 13.0% to $643.1 million, from $569.3 million in the same prior-year quarter. In constant currency, net revenue increased by 12.8%.

Earnings from Operations. GAAP earnings from operations for the third quarter of fiscal 2022 increased 47.7% to $65.7 million (including $3.0 million net losses on lease modifications, $1.2 million in non-cash impairment charges taken on certain long-lived store related assets and a $0.2 million favorable currency translation impact), from $44.5 million (including $10.3 million in non-cash impairment charges taken on certain long-lived store related assets and minimal net gains on lease modifications) in the same prior-year quarter. GAAP operating margin in the third quarter of fiscal 2022 increased 2.4% to 10.2%, from 7.8% in the same prior-year quarter, driven primarily by lower non-cash impairment charges, lower markdowns, higher initial markups and overall leveraging of expenses, partially offset by higher performance-based compensation. The positive impact of currency on operating margin for the quarter was approximately 60 basis points.

For the third quarter of fiscal 2022, adjusted earnings from operations increased 27.3% to $70.4 million, from $55.3 million in the same prior-year quarter. Adjusted operating margin increased 1.2% to 10.9%, from 9.7% in the same prior-year quarter, driven primarily by lower markdowns, higher initial markups and overall leveraging of expenses, partially offset by higher performance-based compensation.

Nine-Month Period Fiscal 2022 Results Compared to Nine-Month Period Fiscal 2020

For the nine months ended October 30, 2021, the Company recorded GAAP net earnings of $102.9 million, compared to $16.4 million for the nine months ended November 2, 2019. GAAP diluted EPS was $1.55 for the nine months ended October 30, 2021, compared to $0.22 for the nine months ended November 2, 2019. The Company estimates a net positive impact from its share buybacks and its convertible notes transaction of $0.19 and a negative currency impact of $0.18 on GAAP diluted EPS for the nine months ended October 30, 2021 when compared to the nine months ended November 2, 2019.

For the nine months ended October 30, 2021, the Company recorded adjusted net earnings of $119.5 million, compared to $22.7 million for the nine months ended November 2, 2019. Adjusted diluted EPS was $1.79, compared to $0.31 for the nine months ended November 2, 2019. The Company estimates its share buybacks and its convertible notes transaction had a net positive impact of $0.25, and currency had a negative impact of $0.18 on adjusted diluted EPS during the nine months ended October 30, 2021 when compared to the nine months ended November 2, 2019.

Net Revenue. Total net revenue for the first nine months of fiscal 2022 decreased 2.4% to $1.79 billion, from $1.84 billion for the nine months ended November 2, 2019. In constant currency, net revenue decreased by 4.8%.

Earnings from Operations. GAAP earnings from operations for the first nine months of fiscal 2022 were $179.6 million (including $0.4 million net losses on lease modifications, $3.1 million in non-cash impairment charges taken on certain long-lived store related assets and a $3.9 million unfavorable currency translation impact), compared to $44.2 million (including $5.1 million in non-cash impairment charges taken on certain long-lived store related assets) for the nine months ended November 2, 2019. GAAP operating margin for the first nine months of fiscal 2022 increased 7.6% to 10.0%, from 2.4% for the nine months ended November 2, 2019, driven primarily by higher initial markups, lower occupancy costs and lower markdowns. The negative impact of currency on operating margin for the first nine months of fiscal 2022 was approximately 50 basis points.

For the nine months ended October 30, 2021, adjusted earnings from operations were $184.9 million, compared to $48.6 million for the nine months ended November 2, 2019. Adjusted operating margin improved 7.7% to 10.3% for the nine months ended October 30, 2021, from 2.6% for the nine months ended November 2, 2019, driven primarily by higher initial markups, lower occupancy costs and lower markdowns.

Nine-Month Period Fiscal 2022 Results Compared to Nine-Month Period Fiscal 2021

For the nine months ended October 30, 2021, the Company recorded GAAP net earnings of $102.9 million, compared to a GAAP net loss of $151.6 million for the nine months ended October 31, 2020. GAAP diluted EPS was $1.55 for the nine months ended October 30, 2021, compared to GAAP diluted loss per share of $2.35 during the same prior-year period. The Company estimates a net positive impact from its share buybacks and its convertible notes transaction and currency of $0.05 and $0.12, respectively, on GAAP diluted EPS for the nine months ended October 30, 2021 when compared to the same prior-year period.

For the nine months ended October 30, 2021, the Company recorded adjusted net earnings of $119.5 million, compared to an adjusted net loss of $82.2 million for the nine months ended October 31, 2020. Adjusted diluted EPS was $1.79, compared to adjusted loss per share of $1.27 during the same prior-year period. The Company estimates its share buybacks and its convertible notes transaction and currency had a net positive impact of $0.05 and $0.11, respectively, on adjusted diluted EPS during the nine months ended October 30, 2021 when compared to the same prior-year period.

Net Revenue. Total net revenue for the first nine months of fiscal 2022 increased 45.9% to $1.79 billion, from $1.23 billion in the same prior-year period. In constant currency, net revenue increased by 41.7%.

Earnings (Loss) from Operations. GAAP earnings from operations for the first nine months of fiscal 2022 were $179.6 million (including $0.4 million net losses on lease modifications, $3.1 million in non-cash impairment charges taken on certain long-lived store related assets and a $1.8 million favorable currency translation impact), compared to a GAAP loss from operations of $132.4 million (including $0.5 million net gains on lease modifications and $75.3 million in non-cash impairment charges taken on certain long-lived store related assets) in the same prior-year period. GAAP operating margin in fiscal 2022 increased 20.8% to 10.0%, from negative 10.8% in the same prior-year period, driven primarily by overall leveraging of expenses, lower non-cash impairment charges and lower markdowns. The positive impact of currency on operating margin for the nine months ended October 30, 2021 was approximately 20 basis points.

For the nine months ended October 30, 2021, adjusted earnings from operations were $184.9 million, compared to adjusted loss from operations of $54.2 million for the nine months ended October 31, 2020. Adjusted operating margin improved 14.7% to 10.3% for the nine months ended October 30, 2021, from negative 4.4% in the same prior-year period, driven primarily by overall leveraging of expenses and lower markdowns.

Outlook

Given the current circumstances regarding the coronavirus (or “COVID-19”) crisis and its uncertain impact on our operations, we are not providing detailed guidance for the fourth quarter or the full fiscal year ending January 29, 2022. We expect revenues in the fourth quarter of fiscal 2022 to be down mid-single digits versus the fourth quarter of fiscal 2020 as the impact of permanent store closures and an unfavorable shift of European wholesale shipments from the fourth quarter into the first quarter of next year are partially offset by continued momentum in our global e-commerce business.

For the full fiscal year 2022, assuming no increased COVID-related shutdowns from current levels (approximately 1% of our directly operated stores), we expect revenues to be down low-single digits versus fiscal 2020 and operating margin to reach approximately 11.0%. These comparisons are versus the pre-pandemic periods from two fiscal years prior in order to provide a more normalized comparison.

A reconciliation of the Company’s outlook for GAAP operating margin to adjusted operating margin for the fourth quarter and fiscal year ending January 29, 2022 is as follows:

Reconciliation of GAAP Outlook to Adjusted Outlook

Fourth Quarter of

Fiscal 2022

Fiscal Year 2022

GAAP operating margin

13.1%

11.0%

Certain professional service and legal fees and related (credits) cost1

—%

0.1%

Asset impairment charges2

—%

0.1%

Net (gains) losses on lease modifications3

—%

Adjusted operating margin

13.1%

11.2%

________________________________________________

See pages 21 and 22 for footnotes

COVID-19 Third Quarter Business Update

The COVID-19 pandemic is continuing to negatively impact the Company’s businesses. Although we achieved slightly higher net revenue during the third quarter of fiscal 2022 compared to the third quarter of fiscal 2020, we remained challenged by lower traffic and capacity restrictions. In addition, while we began the third quarter of fiscal 2022 with 100% of our directly operated stores open for business, we started to incur a new round of government-mandated temporary store closures toward the end of the quarter. This resulted in the closure of less than 5% of our directly operated stores as of October 30, 2021, mostly in Europe, the impact of which was minimal to our third quarter results.

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

Dividend

The Company’s Board of Directors has approved an increase to our quarterly cash dividend payment, from $0.1125 to $0.225 per share, realigning the per-share dividend amount to the level prior to the issuance of our Convertible Senior Notes in April 2019. The dividend will be payable on December 24, 2021 to shareholders of record as of the close of business on December 8, 2021.

Presentation of Non-GAAP Information

The financial information presented in this release includes non-GAAP financial measures, such as adjusted results, constant currency financial information, free cash flows and return on invested capital. For the three months and nine months ended October 30, 2021, October 31, 2020 and November 2, 2019, the adjusted results exclude the impact of certain professional service and legal fees and related (credits) costs, certain separation charges, asset impairment charges, net (gains) losses on lease modifications, non-cash amortization of debt discount on the Company’s convertible senior notes, the related income tax effects of the foregoing items, the impact from changes in the income tax law on deferred income taxes in certain tax jurisdictions, net income tax settlements and adjustments to specific uncertain income tax positions, as well as certain discrete income tax adjustments related primarily to an intra-entity transfer of intellectual property rights to a wholly-owned Swiss subsidiary, in each case where applicable. These non-GAAP measures are provided in addition to, and not as alternatives for, the Company’s reported GAAP results.

The Company has excluded these items from its adjusted financial measures primarily because it believes these items are not indicative of the underlying performance of its business and the adjusted financial information provided is useful for investors to evaluate the comparability of the Company’s operating results and its future outlook (when reviewed in conjunction with the Company’s GAAP financial statements). A reconciliation of reported GAAP results to comparable non-GAAP results is provided.

This release also includes certain constant currency financial information. Foreign currency exchange rate fluctuations affect the amount reported from translating the Company’s foreign revenue, expenses and balance sheet amounts into U.S. dollars. These rate fluctuations can have a significant effect on reported operating results under GAAP. The Company provides constant currency information to enhance the visibility of underlying business trends, excluding the effects of changes in foreign currency translation rates. To calculate net revenue and earnings (loss) from operations on a constant currency basis, actual or forecasted results for the current-year period are translated into U.S. dollars at the average exchange rates in effect during the comparable period of the prior year. The constant currency calculations do not adjust for the impact of revaluing specific transactions denominated in a currency different from the functional currency of that entity when exchange rates fluctuate. However, in calculating the estimated impact of currency on our earnings (loss) per share for our actual or forecasted results, the Company estimates gross margin (including the impact of merchandise-related hedges) and expenses using the appropriate prior-year rates, translates the estimated foreign earnings at the comparable prior-year rates, and excludes the year-over-year earnings impact of gains or losses arising from balance sheet remeasurement and foreign currency contracts not designated as merchandise hedges. The constant currency information presented may not be comparable to similarly titled measures reported by other companies.

The Company also includes information regarding its free cash flows in this release. The Company calculates free cash flows as cash flows from operating activities less (i) purchases of property and equipment and (ii) payments for property and equipment under finance leases. Free cash flows are not intended to be an alternative to cash flows from operating activities as a measure of liquidity, but rather to provide additional visibility to investors regarding how much cash is generated for discretionary and non-discretionary items after deducting purchases of property and equipment and payments for property and equipment under finance leases. Free cash flow information presented may not be comparable to similarly titled measures reported by other companies. A reconciliation of reported GAAP cash flows from operating activities to the comparable non-GAAP free cash flow measure is provided.

The Company also includes information regarding its return on invested capital (or “ROIC”) in this release. The Company defines ROIC as adjusted net operating profit after income taxes divided by two-year average invested capital. The Company believes ROIC is a useful financial measure for investors in evaluating how efficiently the Company deploys its capital. The Company’s method of calculating ROIC may differ from other companies’ methods and, therefore, might not be comparable.

Investor Conference Call

The Company will hold a conference call at 4:15 pm (ET) on November 23, 2021 to discuss the news announced in this press release. A live webcast of the conference call will be accessible at www.guess.com via the “Investor Relations” link. The webcast will be archived on the website for 30 days.

About Guess?

Guess?, Inc. designs, markets, distributes and licenses a lifestyle collection of contemporary apparel, denim, handbags, watches, eyewear, footwear and other related consumer products. Guess? products are distributed through branded Guess? stores as well as better department and specialty stores around the world. As of October 30, 2021, the Company directly operated 1,052 retail stores in the Americas, Europe and Asia. The Company’s partners and distributors operated 558 additional retail stores worldwide. As of October 30, 2021, the Company and its partners and distributors operated in approximately 100 countries worldwide. For more information about the Company, please visit www.guess.com.

Forward-Looking Statements

Except for historical information contained herein, certain matters discussed in this press release or the related conference call and webcast, including statements concerning the potential actions and impacts related to the COVID-19 pandemic; statements concerning the Company’s future outlook including with respect to the fourth quarter and full year of fiscal 2022 as well as fiscal 2024; statements concerning the Company’s expectations, goals, future prospects, longer-term operating margin, revenue, EPS and ROIC expectations and current business strategies and strategic initiatives; and statements expressing optimism or pessimism about future operating results and growth opportunities are forward-looking statements that are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements, which are frequently indicated by terms such as “expect,” “could,” “will,” “should,” “goal,” “strategy,” “believe,” “estimate,” “continue,” “outlook,” “plan,” “create,” “see,” and similar terms, are only expectations, and involve known and unknown risks and uncertainties, which may cause actual results in future periods to differ materially from what is currently anticipated. Factors which may cause actual results in future periods to differ materially from current expectations include, among others: our ability to maintain our brand image and reputation; domestic and international economic or political conditions, including economic and other events that could negatively impact consumer confidence and discretionary consumer spending; the continuation or worsening of impacts related to the COVID-19 pandemic, including business, financial, human capital, litigation and other impacts to the Company and its partners; our ability to successfully negotiate rent relief or other lease-related terms with our landlords; our ability to maintain adequate levels of liquidity; changes to estimates related to impairments, inventory and other reserves, including the impact of the CARES Act, which were made using the best information available at the time; changes in the competitive marketplace and in our commercial relationships; our ability to anticipate and adapt to changing consumer preferences and trends; our ability to manage our inventory commensurate with customer demand; risks related to the timing and costs of delivering merchandise to our stores and our wholesale customers; unexpected or unseasonable weather conditions; our ability to effectively operate our various retail concepts, including securing, renewing, modifying or terminating leases for store locations; our ability to successfully and/or timely implement our growth strategies and other strategic initiatives; our ability to successfully implement or update information technology systems, including enhancing our global omni-channel capabilities; our ability to expand internationally and operate in regions where we have less experience, including through joint ventures; risks related to our convertible senior notes issued in April 2019, including our ability to settle the liability in cash; our ability to successfully or timely implement plans for cost reductions; our ability to effectively and efficiently manage the volume and costs associated with our European distribution centers without incurring shipment delays; our ability to attract and retain key personnel; obligations or changes in estimates arising from new or existing litigation, income tax and other regulatory proceedings; risks related to the complexity of the Tax Reform, future clarifications and legislative amendments thereto, as well as our ability to accurately interpret and predict its impact on our cash flows and financial condition; risks related to the tax treatment of our third quarter fiscal 2022 intra-entity transfer of intellectual property rights from certain U.S entities to a wholly-owned Swiss subsidiary; the risk of economic uncertainty associated with the United Kingdom’s departure from the European Union (“Brexit”) or any other similar referendums that may be held; the occurrence of unforeseen epidemics, such as the COVID-19 pandemic; other catastrophic events; changes in U.S. or foreign income tax or tariff policy, including changes to tariffs on imports into the U.S.; accounting adjustments to our unaudited financial statements identified during the completion of our annual independent audit of financial statements and financial controls or from subsequent events arising after issuance of this release; risk of future non-cash asset impairments, including goodwill, right-of-use lease assets and/or other store asset impairments; restructuring charges; our ability to adapt to new regulatory compliance and disclosure obligations; risks associated with our foreign operations, such as violations of laws prohibiting improper payments and the burdens of complying with a variety of foreign laws and regulations (including global data privacy regulations); risks associated with the acts or omissions of our third party vendors, including a failure to comply with our vendor code of conduct or other policies; risks associated with cyber-attacks and other cyber security risks; risks associated with our ability to properly collect, use, manage and secure consumer and employee data; risks associated with our vendors’ ability to maintain the strength and security of information technology systems; and changes in economic, political, social and other conditions affecting our foreign operations and sourcing, including the impact of currency fluctuations, global income tax rates and economic and market conditions in the various countries in which we operate. In addition to these factors, the economic, technological, managerial, and other risks identified in the Company’s most recent annual report on Form 10-K and other filings with the Securities and Exchange Commission, including but not limited to the risk factors discussed therein, could cause actual results to differ materially from current expectations. The current global economic climate, length and severity of the COVID-19 pandemic, and uncertainty surrounding potential changes in U.S. policies and regulations may amplify many of these risks. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Guess?, Inc. and Subsidiaries

Condensed Consolidated Statements of Income

(amounts in thousands, except per share data)

Three Months Ended

October 30, 2021

October 31, 2020

November 2, 2019

Product sales

616,489

95.9

549,851

96.6

593,736

96.4

Net royalties

26,581

4.1

19,433

3.4

22,208

3.6

Net revenue

643,070

100.0

569,284

100.0

615,944

100.0

Cost of product sales

349,466

54.3

329,764

57.9

386,445

62.7

Gross profit

293,604

45.7

239,520

42.1

229,499

37.3

Selling, general and administrative expenses

223,775

34.8

184,739

32.5

205,003

33.3

Asset impairment charges

1,152

0.2

10,335

1.8

1,847

0.3

Net (gains) losses on lease modifications

3,006

0.5

(21

)

(0.0

—

Earnings from operations

65,671

10.2

44,467

7.8

22,649

3.7

Other income (expense):

Interest expense

(5,550

)

(0.9

(5,809

)

(1.0

(4,946

)

(0.8

Interest income

487

0.1

562

0.1

492

0.1

Other expense, net

(7,800

)

(1.2

(6,521

)

(1.2

(62

)

(0.1

Earnings before income tax expense

52,808

8.2

32,699

5.7

18,133

2.9

Income tax expense

20,441

3.2

5,145

0.9

4,548

0.7

Net earnings

32,367

5.0

27,554

4.8

13,585

2.2

Net earnings attributable to noncontrolling interests

2,487

0.4

1,178

0.2

1,162

0.2

Net earnings attributable to Guess?, Inc.

29,880

4.6

26,376

4.6

12,423

2.0

Net earnings per common share attributable to common stockholders:

Basic

0.46

0.41

0.19

Diluted4

0.45

0.41

0.18

Weighted average common shares outstanding attributable to common stockholders:

Basic

64,373

62,789

66,393

Diluted4

65,852

63,579

67,314

Effective income tax rate

38.7

15.7

25.1

Adjusted selling, general and administrative expenses5:

223,225

34.7

184,231

32.4

206,417

33.6

Adjusted earnings from operations5:

70,379

10.9

55,289

9.7

23,082

3.7

Adjusted net earnings attributable to Guess?, Inc.5:

41,553

6.5

37,363

6.6

14,902

2.4

Adjusted diluted earnings per common share attributable to common stockholders5:

0.62

0.58

0.22

Adjusted effective income tax rate5:

27.0

16.4

23.6

________________________________________________

See pages 21 and 22 for footnotes.

Guess?, Inc. and Subsidiaries

Condensed Consolidated Statements of Income (Loss)

(amounts in thousands, except per share data)

Nine Months Ended

October 30, 2021

October 31, 2020

November 2, 2019

Product sales

1,721,657

96.1

1,183,560

96.4

1,776,287

96.8

Net royalties

70,039

3.9

44,514

3.6

59,568

3.2

Net revenue

1,791,696

100.0

1,228,074

100.0

1,835,855

100.0

Cost of product sales

992,448

55.4

807,297

65.7

1,158,741

63.1

Gross profit

799,248

44.6

420,777

34.3

677,114

36.9

Selling, general and administrative expenses

616,076

34.4

478,320

39.0

627,823

34.2

Asset impairment charges

3,094

0.2

75,276

6.1

5,126

0.3

Net (gains) losses on lease modifications

441

0.0

(450

)

(0.0

—

Earnings (loss) from operations

179,637

10.0

(132,369

)

(10.8

44,165

2.4

Other income (expense):

Interest expense

(17,485

)

(1.0

(17,212

)

(1.4

(11,156

)

(0.6

Interest income

1,322

0.1

1,608

0.1

1,166

0.1

Other expense, net

(11,502

)

(0.6

(20,553

)

(1.6

(4,346

)

(0.3

Earnings (loss) before income tax expense (benefit)

151,972

8.5

(168,526

)

(13.7

29,829

1.6

Income tax expense (benefit)

43,588

2.4

(14,850

)

(1.2

10,649

0.6

Net earnings (loss)

108,384

6.1

(153,676

)

(12.5

19,180

1.0

Net earnings (loss) attributable to noncontrolling interests

5,436

0.3

(2,028

)

(0.2

2,809

0.1

Net earnings (loss) attributable to Guess?, Inc.

102,948

5.8

(151,648

)

(12.3

16,371

0.9

Net earnings (loss) per common share attributable to common stockholders:

Basic

1.58

(2.35

)

0.22

Diluted4

1.55

(2.35

)

0.22

Weighted average common shares outstanding attributable to common stockholders:

Basic

64,248

64,561

72,275

Diluted4

65,893

64,561

73,211

Effective income tax rate

28.7

8.8

35.7

Adjusted selling, general and administrative expenses5:

614,339

34.3

474,993

38.7

628,560

34.3

Adjusted earnings (loss) from operations5:

184,909

10.3

(54,216

)

(4.4

48,554

2.6

Adjusted net earnings (loss) attributable to Guess?, Inc.5:

119,504

6.7

(82,189

)

(6.7

22,700

1.2

Adjusted diluted earnings (loss) per common share attributable to common stockholders5:

1.79

(1.27

)

0.31

Adjusted effective income tax rate5:

24.5

(2.0

35.1

________________________________________________

See pages 21 and 22 for footnotes.

Guess?, Inc. and Subsidiaries

Reconciliation of GAAP Results to Adjusted Results

(dollars in thousands)

The reconciliations of reported GAAP selling, general and administrative expenses to adjusted selling, general and administrative expenses, reported GAAP earnings (loss) from operations to adjusted earnings (loss) from operations, reported GAAP net earnings (loss) attributable to Guess?, Inc. to adjusted net earnings (loss) attributable to Guess?, Inc. and reported GAAP income tax expense (benefit) to adjusted income tax expense (benefit) follows:

Three Months Ended

October 30,

2021

October 31,

2020

November 2,

2019

Reported GAAP selling, general and administrative expenses

223,775

184,739

205,003

Certain professional service and legal fees and related credits (costs)6

(550

)

195

1,414

Separation charges7

—

(703

)

—

Adjusted selling, general and administrative expenses5

223,225

184,231

206,417

Reported GAAP earnings from operations

65,671

44,467

22,649

Certain professional service and legal fees and related (credits) costs6

550

(195

)

(1,414

)

Separation charges7

—

703

—

Asset impairment charges8

1,152

10,335

1,847

Net (gains) losses on lease modifications9

3,006

(21

)

—

Adjusted earnings from operations5

70,379

55,289

23,082

Reported GAAP net earnings attributable to Guess?, Inc.

29,880

26,376

12,423

Certain professional service and legal fees and related (credits) costs6

550

(195

)

(1,414

)

Separation charges7

—

703

—

Asset impairment charges8

1,152

10,335

1,847

Net (gains) losses on lease modifications9

3,006

(21

)

—

Amortization of debt discount10

2,782

2,599

2,447

Discrete income tax adjustments11

5,912

635

—

Income tax impact from adjustments12

(1,729

)

(3,069

)

(401

)

Total adjustments affecting net earnings attributable to Guess?, Inc.

11,673

10,987

2,479

Adjusted net earnings attributable to Guess?, Inc.5

41,553

37,363

14,902

Reported GAAP income tax expense

20,441

5,145

4,548

Discrete income tax adjustments11

(5,912

)

(635

)

—

Income tax impact from adjustments12

1,729

3,069

401

Adjusted income tax expense5

16,258

7,579

4,949

Adjusted effective income tax rate5

27.0

16.4

23.6

________________________________________________

See pages 21 and 22 for footnotes.

Guess?, Inc. and Subsidiaries

Reconciliation of GAAP Results to Adjusted Results (Continued)

(dollars in thousands)

Nine Months Ended

October 30,

2021

October 31,

2020

November 2,

2019

Reported GAAP selling, general and administrative expenses

616,076

478,320

627,823

Certain professional service and legal fees and related credits (costs)6

(1,737

)

737

Separation charges7

—

(3,383

)

—

Adjusted selling, general and administrative expenses5

614,339

474,993

628,560

Reported GAAP earnings (loss) from operations

179,637

(132,369

)

44,165

Certain professional service and legal fees and related (credits) costs6

1,737

(56

)

(737

)

Separation charges7

—

3,383

—

Asset impairment charges8

3,094

75,276

5,126

Net (gains) losses on lease modifications9

441

(450

)

—

Adjusted earnings (loss) from operations5

184,909

(54,216

)

48,554

Reported GAAP net earnings (loss) attributable to Guess?, Inc.

102,948

(151,648

)

16,371

Certain professional service and legal fees and related (credits) costs6

1,737

(56

)

(737

)

Separation charges7

—

3,383

—

Asset impairment charges8

3,094

75,276

5,126

Net (gains) losses on lease modifications9

441

(450

)

—

Amortization of debt discount10

8,344

7,796

5,109

Discrete income tax adjustments11

6,140

805

—

Income tax impact from adjustments12

(3,200

)

(17,295

)

(3,169

)

Total adjustments affecting net earnings (loss) attributable to Guess?, Inc.

16,556

69,459

6,329

Adjusted net earnings (loss) attributable to Guess?, Inc.5

119,504

(82,189

)

22,700

Reported GAAP income tax expense (benefit)

43,588

(14,850

)

10,649

Discrete income tax adjustments11

(6,140

)

(805

)

—

Income tax impact from adjustments12

3,200

17,295

3,169

Adjusted income tax expense5

40,648

1,640

13,818

Adjusted effective income tax rate5

24.5

(2.0

35.1

________________________________________________

See pages 21 and 22 for footnotes.

Guess?, Inc. and Subsidiaries

Consolidated Segment Data

(dollars in thousands)

Three Months Ended

% change

October 30,

2021

October 31,

2020

November 2,

2019

October 31,

2020

November 2,

2019

Net revenue:

Americas Retail

169,617

130,328

177,824

30%

(5%)

Americas Wholesale

58,999

35,971

56,398

64%

Europe

330,736

321,574

277,253

19%

Asia

57,137

61,978

82,261

(8%)

(31%)

Licensing

26,581

19,433

22,208

37%

20%

Total net revenue

643,070

569,284

615,944

13%

Earnings (loss) from operations:

Americas Retail

24,070

473

1,601

4,989%

1,403%

Americas Wholesale

17,316

8,247

11,216

110%

54%

Europe

44,509

51,476

19,475

(14%)

129%

Asia

(2,399

)

1,415

(2,432

)

(270%)

(1%)

Licensing

24,402

18,228

19,372

34%

26%

Total segment earnings from operations

107,898

79,839

49,232

35%

119%

Corporate overhead

(38,069

)

(25,058

)

(24,736

)

52%

54%

Asset impairment charges

(1,152

)

(10,335

)

(1,847

)

(89%)

(38%)

Net gains (losses) on lease modifications

(3,006

)

—

(14,414%)

Total earnings from operations

65,671

44,467

22,649

48%

190%

Operating margins:

Americas Retail

14.2

0.4

0.9

Americas Wholesale

29.3

22.9

19.9

Europe

13.5

16.0

7.0

Asia

(4.2

2.3

(3.0

Licensing

91.8

93.8

87.2

GAAP operating margin for total Company

10.2

7.8

3.7

Certain professional service and legal fees and related (credits) costs5, 6

0.1

(0.0

(0.3

Separation charges5, 7

—

0.1

—

Asset impairment charges5, 8

0.2

1.8

0.3

Net (gains) losses on lease modifications5, 9

0.4

(0.0

—

Adjusted operating margin for total Company5

10.9

9.7

3.7

________________________________________________

See pages 21 and 22 for footnotes.

Guess?, Inc. and Subsidiaries

Consolidated Segment Data

(dollars in thousands)

Nine Months Ended

% change

October 30,

2021

October 31,

2020

November 2,

2019

October 31,

2020

November 2,

2019

Net revenue:

Americas Retail

511,449

314,977

553,213

62%

(8%)

Americas Wholesale

154,287

82,131

144,505

88%

Europe

895,311

633,898

827,817

41%

Asia

160,610

152,554

250,752

(36%)

Licensing

70,039

44,514

59,568

57%

18%

Total net revenue

1,791,696

1,228,074

1,835,855

46%

(2%)

Earnings (loss) from operations:

Americas Retail

82,260

(40,904

)

5,746

(301%)

1,332%

Americas Wholesale

41,815

11,559

27,452

262%

52%

Europe

100,124

27,865

54,742

259%

83%

Asia

(9,054

)

(24,729

)

(10,435

)

(63%)

(13%)

Licensing

63,987

39,833

51,563

61%

24%

Total segment earnings from operations

279,132

13,624

129,068

1,949%

116%

Corporate overhead

(95,960

)

(71,167

)

(79,777

)

35%

20%

Asset impairment charges

(3,094

)

(75,276

)

(5,126

)

(96%)

(40%)

Net gains (losses) on lease modifications

(441

)

450

—

(198%)

Total earnings (loss) from operations

179,637

(132,369

)

44,165

(236%)

307%

Operating margins:

Americas Retail

16.1

(13.0

1.0

Americas Wholesale

27.1

14.1

19.0

Europe

11.2

4.4

6.6

Asia

(5.6

(16.2

(4.2

Licensing

91.4

89.5

86.6

GAAP operating margin for total Company

10.0

(10.8

2.4

Certain professional service and legal fees and related (credits) costs5, 6

0.1

(0.0

(0.1

Separation charges5, 7

—

0.3

—

Asset impairment charges5, 8

0.2

6.1

0.3

Net (gains) losses on lease modifications5, 9

0.0

(0.0

—

Adjusted operating margin for total Company5

10.3

(4.4

2.6

________________________________________________

See pages 21 and 22 for footnotes.

Guess?, Inc. and Subsidiaries

Constant Currency Financial Measures

(dollars in thousands)

As Reported

Foreign

Currency

Impact

Constant

Currency

As Reported

Reported

Constant

Currency

Three Months Ended

% change

October 30, 2021

October 31, 2020

Net revenue:

Americas Retail

169,617

(2,090

)

167,527

130,328

30%

29%

Americas Wholesale

58,999

(1,103

)

57,896

35,971

64%

61%

Europe

330,736

2,394

333,130

321,574

Asia

57,137

(169

)

56,968

61,978

(8%)

Licensing

26,581

—

26,581

19,433

37%

Total net revenue

643,070

(968

)

642,102

569,284

13%

October 30, 2021

November 2, 2019

Net revenue:

Americas Retail

169,617

(841

)

168,776

177,824

(5%)

Americas Wholesale

58,999

59,066

56,398

Europe

330,736

(11,680

)

319,056

277,253

19%

15%

Asia

57,137

(1,677

)

55,460

82,261

(31%)

(33%)

Licensing

26,581

—

26,581

22,208

20%

Total net revenue

643,070

(14,131

)

628,939

615,944

Nine Months Ended

October 30, 2021

October 31, 2020

Net revenue:

Americas Retail

511,449

(7,527

)

503,922

314,977

62%

60%

Americas Wholesale

154,287

(4,016

)

150,271

82,131

88%

83%

Europe

895,311

(34,193

)

861,118

633,898

41%

36%

Asia

160,610

(6,303

)

154,307

152,554

Licensing

70,039

—

70,039

44,514

57%

Total net revenue

1,791,696

(52,039

)

1,739,657

1,228,074

46%

42%

October 30, 2021

November 2, 2019

Net revenue:

Americas Retail

511,449

(2,148

)

509,301

553,213

(8%)

Americas Wholesale

154,287

361

154,648

144,505

Europe

895,311

(37,425

)

857,886

827,817

Asia

160,610

(4,755

)

155,855

250,752

(36%)

(38%)

Licensing

70,039

—

70,039

59,568

18%

Total net revenue

1,791,696

(43,967

)

1,747,729

1,835,855

(2%)

(5%)

Guess?, Inc. and Subsidiaries

Selected Condensed Consolidated Balance Sheet Data

(in thousands)

October 30, 2021

January 30, 2021

October 31, 2020

November 2, 2019

ASSETS

Cash and cash equivalents

391,065

469,110

365,259

110,095

Receivables, net

321,296

314,147

300,432

300,197

Inventories

482,475

389,144

393,162

519,875

Other current assets

76,414

60,123

74,063

67,425

Property and equipment, net

212,126

216,196

220,996

298,036

Restricted cash

224

235

226

522

Operating lease right-of-use assets

706,161

764,804

789,742

874,945

Other assets

353,606

252,109

236,126

219,805

Total assets

2,543,367

2,465,868

2,380,006

2,390,900

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current portion of borrowings and finance lease obligations

32,960

38,710

34,079

37,484

Current operating lease liabilities

209,072

222,800

227,209

189,582

Other current liabilities

562,606

501,029

474,085

429,701

Long-term debt and finance lease obligations

67,456

68,554

70,069

34,712

Convertible senior notes, net

267,599

258,614

255,801

244,696

Long-term operating lease liabilities

599,472

662,657

689,251

740,484

Other long-term liabilities

140,746

144,004

147,065

123,638

Redeemable and nonredeemable noncontrolling interests

38,119

25,837

22,644

23,543

Guess?, Inc. stockholders’ equity

625,337

543,663

459,803

567,060

Total liabilities and stockholders’ equity

2,543,367

2,465,868

2,380,006

2,390,900

Guess?, Inc. and Subsidiaries

Condensed Consolidated Cash Flow Data

(in thousands)

Nine Months Ended

October 30, 2021

October 31, 2020

November 2, 2019

Net cash provided by (used in) operating activities13

4,581

98,351

(28,005

)

Net cash used in investing activities

(40,375

)

(14,578

)

(47,950

)

Net cash used in financing activities

(28,494

)

(4,548

)

(21,691

)

Effect of exchange rates on cash, cash equivalents and restricted cash

(13,768

)

1,432

(2,732

)

Net change in cash, cash equivalents and restricted cash

(78,056

)

80,657

(100,378

)

Cash, cash equivalents and restricted cash at the beginning of the year

469,345

284,828

210,995

Cash, cash equivalents and restricted cash at the end of the period

391,289

365,485

110,617

Supplemental information:

Depreciation and amortization

41,613

48,009

53,989

Total lease costs (excluding finance lease cost)

213,712

219,820

268,900

Guess?, Inc. and Subsidiaries

Reconciliation of Net Cash Provided By (Used In) Operating Activities to Free Cash Flow

(in thousands)

Nine Months Ended

October 30, 2021

October 31, 2020

November 2, 2019

Net cash provided by (used in) operating activities13

4,581

98,351

(28,005

)

Less: Purchases of property and equipment

(40,598

)

(12,364

)

(49,020

)

Less: Payments for property and equipment under finance leases

(4,583

)

(2,924

)

(2,081

)

Free cash flow

(40,600

)

83,063

(79,106

)

________________________________________________

See pages 21 and 22 for footnotes

Guess?, Inc. and Subsidiaries

Retail Store Data

Global Store and Concession Count

Stores

Concessions

Region

Total

Directly

Operated

Partner

Operated

Total

Directly

Operated

Partner

Operated

As of October 30, 2021

United States

244

243

—

Canada

—

Central and South America

105

—

Total Americas

423

387

Europe and the Middle East

760

540

220

—

Asia and the Pacific

427

125

302

268

103

165

Total

1,610

1,052

558

344

178

166

As of October 31, 2020

United States

254

252

—

Canada

—

Central and South America

107

—

Total Americas

439

402

Europe and the Middle East

742

511

231

—

Asia and the Pacific

423

155

268

297

109

188

Total

1,604

1,068

536

368

179

189

As of November 2, 2019

United States

287

285

—

Canada

—

Central and South America

112

—

Total Americas

481

439

Europe and the Middle East

743

516

227

—

Asia and the Pacific

519

219

300

327

154

173

Total

1,743

1,174

569

395

221

174

Guess?, Inc. and Subsidiaries

Adjusted Earnings Per Share for the Fiscal Year

(in thousands)

FY2020

FY2024E*,15

Reported GAAP net earnings attributable to Guess?, Inc.

95,975

Certain professional service and legal fees and related (credits) costs6

(857

)

Separation charges7

438

Asset impairment charges8

9,977

Amortization of debt discount10

7,558

Income tax impact from adjustments12, 14

(8,055

)

Total adjustments affecting net earnings attributable to Guess?, Inc.

9,061

Adjusted net earnings attributable to Guess?, Inc.5

105,036

GAAP earnings per share4

1.33

3.36

Certain professional service and legal fees and related (credits) costs6

(0.01

)

—

Separation charges7

—

Asset impairment charges8

0.12

—

Amortization of debt discount10

0.08

0.14

Income tax impact from adjustments12, 14

(0.07

)

—

Adjusted earnings per share5

1.45

3.50

________________________________________________

* Amounts represent estimates for future fiscal years.

See pages 21 and 22 for footnotes

Guess?, Inc. and Subsidiaries

Return on Invested Capital for the Fiscal Year

(in thousands)

FY2019

FY2020

2-Year

Average

FY2023E

FY2024E

2-Year

Average

Total assets16

1,649,205

2,428,962

2,039,084

2,747,000

2,953,000

2,850,000

Less: Cash and cash equivalents

(210,460

)

(284,613

)

(247,537

)

(634,000

)

(806,000

)

(720,000

)

Less: Operating right-of-use assets16

—

(851,990

)

(425,995

)

(760,000

)

(764,000

)

(762,000

)

Less: Accounts payable

(286,657

)

(232,761

)

(259,709

)

(333,000

)

(346,000

)

(339,500

)

Less: Accrued expenses

(252,392

)

(204,096

)

(228,244

)

(208,000

)

(209,000

)

(208,500

)

Add: Accrual for European Commission fine17

45,619

—

22,809

—

Average invested capital

945,315

855,502

900,408

812,000

828,000

820,000

FY2020

FY2024E

Reported GAAP earnings from operations

140,671

335,000

Less: Certain professional service and legal fees and related (credits) costs6

(857

)

—

Add: Asset impairment charges8

9,977

—

Add: Separation charges7

438

—

Adjusted earnings from operations18

150,229

335,000

Less: Asset impairments8

(9,977

)

—

Less: Other income (expense), net

(2,529

)

(1,400

)

Less: Income tax expense19

(29,886

)

(83,400

)

Adjusted net operating profit after taxes5

107,837

250,200

Non-GAAP return on invested capital20

________________________________________________

See pages 21 and 22 for footnotes

Guess?, Inc. and Subsidiaries

Footnotes to Condensed Consolidated Financial Data

Footnotes:

Amounts for the full fiscal year include certain professional service and legal fees and related (credits) costs recognized during the nine months ended October 30, 2021 which the Company otherwise would not have incurred as part of its business operations. The Company is unable to predict future amounts as these expenditures are inconsistent in amount and frequency and certain elements used to estimate such items have not yet occurred or are out of the Company’s control. As such, the Company has not considered any future charges in the accompanying GAAP outlook.

Amounts for the full fiscal year include asset impairment charges related primarily to impairment of operating lease right-of-use assets and property and equipment related to certain retail locations recognized during the nine months ended October 30, 2021 that resulted from lower revenue and future cash flow projections from the ongoing effects of the COVID-19 pandemic and expected store closures. The adjusted results do not assume any additional future asset impairment charges because of the uncertainty and variability of the nature and amount. As such, the Company has not considered any future asset impairment charges and recorded amounts currently determined under GAAP.

Amounts for the full fiscal year represent net (gains) losses on lease modifications related primarily to the early termination of certain lease agreements recognized during the nine months ended October 30, 2021. The Company is unable to predict future amounts as these (gains) losses are inconsistent in amount and frequency and certain elements used to estimate such items have not yet occurred or are out of the Company’s control. As such, the Company has not considered any future (gains) losses in the accompanying GAAP outlook.

For GAAP purposes, the Company incurs dilution above the strike price of the Company’s convertible senior notes of $25.78. However, the Company excludes from its adjusted diluted shares outstanding calculation the dilutive impact of the convertible notes between $25.78 and $46.88, based on the bond hedge contracts in place that will deliver shares to offset dilution in these ranges. At stock prices in excess of $46.88, the Company incurs dilution related to the notes, and it would have an obligation to deliver additional shares in excess of the dilution protection provided by the bond hedges. Diluted net income per share for the three and nine months ended October 30, 2021 is calculated based on GAAP net income and diluted weighted-average shares of 65,852,024 and 65,892,772, respectively. There was no dilution related to the convertible notes for either period.

The adjusted results reflect the exclusion of certain professional service and legal fees and related (credits) costs, certain separation charges, asset impairment charges, net (gains) losses on lease modifications, non-cash amortization of debt discount on the Company’s convertible senior notes, the related income tax impacts of these adjustments, as well as certain discrete income tax adjustments related primarily to an intra-entity transfer of intellectual property rights to a wholly-owned Swiss subsidiary, in each case where applicable. A complete reconciliation of actual results to adjusted results is presented in the “Reconciliation of GAAP Results to Adjusted Results.”

Amounts recorded represent certain professional service and legal fees and related (credits) costs which the Company otherwise would not have incurred as part of its business operations.

Amounts represent certain separation-related charges due to headcount reduction in response to the pandemic and due to the separation of our former Chief Executive Officer.

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

Amounts recorded represent net (gains) losses on lease modifications related primarily to the early termination of certain lease agreements.

In April 2019, the Company issued $300 million principal amount of 2.00% convertible senior notes due 2024 (the “Notes”) in a private offering. The Company has separated the Notes into liability (debt) and equity (conversion option) components. The debt discount, which represents an amount equal to the fair value of the equity component, is amortized as non-cash interest expense over the term of the Notes. Estimates of adjusted earnings per share for the full fiscal year 2024 exclude the amortization anticipated to be recorded in those years as such amounts are known. The Company has not assumed any potential share dilution related to the convert or related warrants.

Amounts represent discrete income tax adjustments related primarily to the impacts from an intra-entity transfer of intellectual property rights to a wholly-owned Swiss subsidiary during the quarter ended October 30, 2021, impacts from cumulative valuation allowances and the income tax benefits from an income tax rate change due to net operating loss carrybacks.

The income tax effect of certain professional service and legal fees and related (credits) costs, separation charges, asset impairment charges, net (gains) losses on lease modifications and the amortization of debt discount was based on the Company’s assessment of deductibility using the statutory income tax rate (inclusive of the impact of valuation allowances) of the tax jurisdiction in which the charges were incurred.

The Company made a U.S. income tax payment of $80.4 million in the three months ended October 30, 2021, with a remaining estimated $27.0 million currently expected to be paid in January 2022 due to an intra-entity transfer of intellectual property rights to a wholly-owned Swiss subsidiary.

During fiscal year 2020, the Company recorded the impact from changes in the income tax law on deferred income taxes in certain tax jurisdictions, net income tax settlements and adjustments to specific uncertain income tax positions.

The Company is unable to predict future amounts for items excluded for non-GAAP for fiscal year 2024, with the exception of amounts related to the amortization of debt discount, as these expenditures and credits are inconsistent in amount and frequency and certain elements used to estimate such items have not yet occurred or are out of the Company's control. As such, the Company has not considered any future charges in the accompanying GAAP outlook.

During fiscal year 2020, the Company adopted a comprehensive new lease standard which superseded previous lease guidance. The standard requires a lessee to recognize an asset related to the right to use the underlying asset and a liability that approximates the present value of the lease payments over the term of contracts that qualify as leases under the new guidance. The adoption of the standard resulted in the recording of operating lease right-of-use assets and operating lease liabilities.

During fiscal year 2019, the Company recognized a charge of €39.8 million ($45.6 million) related to a fine by the European Commission related to its inquiry concerning potential violations of European Union competition rules by the Company.

The adjusted earnings from operations for fiscal year 2020 reflect the exclusion of certain items which the Company believes are not indicative of the underlying performance of its business.

Income taxes are calculated using the adjusted effective income tax rate for fiscal year 2020 of 21.7% and a projection of 25% for the fiscal 2024 effective income tax rate.

The Company defines return on invested capital (or "ROIC") as adjusted net operating profit after taxes divided by two-year average invested capital.

View source version on businesswire.com: https://www.businesswire.com/news/home/20211123006104/en/

Guess?, Inc. Fabrice Benarouche VP, Finance and Investor Relations (213) 765-5578

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