UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

For the quarterly period ended ~~October 28, 2017~~April 30, 2022

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

For the transition period from to

Commission file number: 1-11893

GUESS?, INC.

(Exact name of registrant as specified in its charter)



Delaware		95-3679695
(State or other jurisdiction of		~~(I.R.S. Employer~~
incorporation or organization)	(I.R.S. Employer Identification No.)

~~1444 South Alameda Street~~			Strada Regina 44
~~Los Angeles, California~~			~~90021~~Bioggio, Switzerland CH-6934
(Address of principal executive ~~offices)~~			~~(Zip Code)~~offices and zip code)

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

(Registrant’s telephone number, including area code)

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

Title of each class

Trading symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.01 per share

GES

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

~~Large accelerated filer~~ x

~~Accelerated filer~~ o

~~Non-accelerated filer~~ o ~~(Do not check if a smaller reporting company)~~

~~Smaller reporting company~~ o

Emerging growth companyo

☐



If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.		o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o☐ No x

As of ~~November 28, 2017,~~May 27, 2022, the registrant had ~~82,274,105~~59,594,901 shares of Common Stock, $.01 par value per share, outstanding.

Table of Contents

GUESS?, INC.

FORM 10-Q

TABLE OF CONTENTS


PART I. FINANCIAL INFORMATION

~~PART I. FINANCIAL INFORMATION~~
Item 1.	Financial Statements (unaudited)		1

		Condensed Consolidated Balance Sheets as of ~~October 28, 2017~~April 30, 202 2 and January ~~28, 2017~~29 , 20 2 2		1

		Condensed Consolidated Statements of Income ~~(Loss)~~ — Three ~~and Nine~~ Months Ended ~~October 28, 2017~~April 30 , 202 2 and ~~October 29, 2016~~May 1 , 202 1		2

		Condensed Consolidated Statements of Comprehensive Income (Loss) — Three ~~and Nine~~ Months Ended ~~October 28, 2017~~April 30, 2022 and ~~October 29, 2016~~May 1, 2021		3

		Condensed Consolidated Statements of Cash Flows — ~~Nine~~Three Months Ended ~~October 28, 2017~~April 30, 202 2 and ~~October 29, 2016~~May 1, 20 21		4

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

		Notes to Condensed Consolidated Financial Statements		57

Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations		3034

Item 3.		Quantitative and Qualitative Disclosures About Market Risk		5451

Item 4.		Controls and Procedures		5754

PART II. OTHER INFORMATION
Item 1.		Legal Proceedings		5755

Item 1A.		Risk Factors		5855

Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds		5956

Item 5.		Other Information		57

Item 6.		Exhibits		6058

Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. Financial Statements.

GUESS?, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
Oct 28,
2017 Jan 28,
2017
(unaudited)
ASSETS

Current assets:

Cash and cash equivalents $ 233,089
$ 396,129
Accounts receivable, net 236,659
225,537
Inventories 477,177
367,381
Other current assets 59,658
54,965
Total current assets 1,006,583
1,044,012
Property and equipment, net 283,197
243,005
Goodwill 36,609
34,100
Other intangible assets, net 5,912
6,504
Deferred tax assets 83,620
82,793
Restricted cash 225
1,521
Other assets 137,366
122,550
$ 1,553,512
$ 1,534,485
LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Current portion of capital lease obligations and borrowings $ 2,121
$ 566
Accounts payable 241,909
209,616
Accrued expenses 145,912
135,271
Total current liabilities 389,942
345,453
Long-term debt and capital lease obligations 38,781
23,482
Deferred rent and lease incentives 80,689
80,209
Other long-term liabilities 98,531
99,895
607,943
549,039
Redeemable noncontrolling interests 5,475
4,452

Commitments and contingencies (Note 12)

Stockholders’ equity:

Preferred stock, $.01 par value. Authorized 10,000,000 shares; no shares issued and outstanding —
—
Common stock, $.01 par value. Authorized 150,000,000 shares; issued 141,161,026 and 140,509,974 shares, outstanding 82,843,115 and 84,069,492 shares, as of October 28, 2017 and January 28, 2017, respectively
828
841
Paid-in capital 492,542
480,435
Retained earnings 1,149,023
1,215,079
Accumulated other comprehensive loss
(125,924 ) (161,389 )
Treasury stock, 58,317,911 and 56,440,482 shares as of October 28, 2017 and January 28, 2017, respectively
(590,128 ) (565,744 )
Guess?, Inc. stockholders’ equity 926,341
969,222
Nonredeemable noncontrolling interests 13,753
11,772
Total stockholders’ equity 940,094
980,994
$ 1,553,512
$ 1,534,485
GUESS?, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)


	Apr 30, 2022		Jan 29, 2022
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	147,897	$	415,565

Accounts receivable, net	295,430		328,856
Inventories	483,927		462,295
Other current assets	96,128		77,378
Total current assets	1,023,382		1,284,094
Property and equipment, net	232,763		228,765
Goodwill	33,628		34,885
Deferred income tax assets	160,685		165,120

Operating lease right-of-use assets	653,611		685,799

Other assets	145,937		156,965
	$	2,250,006	$	2,555,628

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of borrowings and finance lease obligations	$	77,929	$	43,379
Accounts payable	288,070		325,797
Accrued expenses and other current liabilities	214,022		253,182
Current portion of operating lease liabilities	178,470		195,516
Total current liabilities	758,491		817,874
Convertible senior notes, net	298,307		270,595
Long-term debt and finance lease obligations	51,560		60,970

Long-term operating lease liabilities	549,293		582,757
Other long-term liabilities	151,262		160,289
Total liabilities	1,808,913		1,892,485
Redeemable noncontrolling interests	9,854		9,500

Commitments and contingencies (Note 13)	0		0

Stockholders’ equity:
Preferred stock, $.01 par value. Authorized 10,000,000 shares; no shares issued and outstanding	—		—
Common stock, $.01 par value. Authorized 150,000,000 shares; issued 142,771,946 shares; outstanding 59,330,217 and 62,697,032 shares, as of April 30, 2022 and January 29, 2022, respectively	593		627
Paid-in capital	417,448		565,024
Retained earnings	1,174,379		1,158,664
Accumulated other comprehensive loss	(146,713)		(135,549)
Treasury stock, 83,441,729 and 80,074,914 shares as of April 30, 2022 and January 29, 2022, respectively	(1,042,644)		(966,108)
Guess?, Inc. stockholders’ equity	403,063		622,658
Nonredeemable noncontrolling interests	28,176		30,985
Total stockholders’ equity	431,239		653,643
	$	2,250,006	$	2,555,628

See accompanying notes to condensed consolidated financial statements.

GUESS?, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(in thousands, except per share data)
(unaudited)
Three Months Ended Nine Months Ended
Oct 28,
2017 Oct 29,
2016 Oct 28,
2017 Oct 29,
2016
Product sales $ 528,209
$ 512,553
$ 1,518,323
$ 1,462,029
Net royalties 25,929
23,768
68,088
68,066
Net revenue 554,138
536,321
1,586,411
1,530,095
Cost of product sales 363,029
356,079
1,052,633
1,021,462
Gross profit 191,109
180,242
533,778
508,633
Selling, general and administrative expenses 178,552
164,317
519,497
500,066
Net (gains) losses on lease terminations 11,494
—
11,494
(695 )
Asset impairment charges 2,018
802
6,013
1,457
Restructuring charges —
—
—
6,083
Earnings (loss) from operations (955 ) 15,123
(3,226 ) 1,722
Other income (expense):

Interest expense (684 ) (500 ) (1,642 ) (1,478 )
Interest income 891
861
3,022
1,763
Other income, net 2,759
125
3,561
26,417
2,966
486
4,941
26,702

Earnings before income tax expense 2,011
15,609
1,715
28,424
Income tax expense 3,673
5,880
8,723
11,682
Net earnings (loss) (1,662 ) 9,729
(7,008 ) 16,742
Net earnings attributable to noncontrolling interests 1,198
626
1,926
548
Net earnings (loss) attributable to Guess?, Inc. $ (2,860 ) $ 9,103
$ (8,934 ) $ 16,194

Net earnings (loss) per common share attributable to common stockholders (Note 2):
Basic $ (0.04 ) $ 0.11
$ (0.12 ) $ 0.19
Diluted $ (0.04 ) $ 0.11
$ (0.12 ) $ 0.19

Weighted average common shares outstanding attributable to common stockholders (Note 2):
Basic 82,390
83,758
82,599
83,631
Diluted 82,390
83,917
82,599
83,813

Dividends declared per common share $ 0.225
$ 0.225
$ 0.675
$ 0.675

Table of Contents

GUESS?, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except per share data)

(unaudited)


	Three Months Ended
	Apr 30, 2022		May 1, 2021
Product sales	$	567,073	$	498,477
Net royalties	26,400		21,525
Net revenue	593,473		520,002
Cost of product sales	346,324		308,444
Gross profit	247,149		211,558
Selling, general and administrative expenses	209,831		186,684


Asset impairment charges	1,544		441
Net gains on lease modifications	(601)		(2,145)
Earnings from operations	36,375		26,578
Other income (expense):
Interest expense	(3,093)		(5,926)
Interest income	574		374
Other, net	(16,452)		(2,701)
Total other expense	(18,971)		(8,253)

Earnings before income tax expense	17,404		18,325
Income tax expense	6,950		5,455
Net earnings	10,454		12,870
Net earnings attributable to noncontrolling interests	2,484		864
Net earnings attributable to Guess?, Inc.	$	7,970	$	12,006

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

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

See accompanying notes to condensed consolidated financial statements.

GUESS?, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(in thousands)
(unaudited)
Three Months Ended Nine Months Ended
Oct 28,
2017 Oct 29,
2016 Oct 28,
2017 Oct 29,
2016
Net earnings (loss) $ (1,662 ) $ 9,729
$ (7,008 ) $ 16,742
Other comprehensive income (loss) (“OCI”):

Foreign currency translation adjustment
Gains (losses) arising during the period (9,102 ) (12,900 ) 47,770
14,530
Derivative financial instruments designated as cash flow hedges

Gains (losses) arising during the period 3,387
4,181
(11,702 ) (2,642 )
Less income tax effect (638 ) (876 ) 1,482
684
Reclassification to net earnings (loss) for (gains) losses realized
313
(727 ) (997 ) (3,274 )
Less income tax effect (78 ) 134
50
655
Marketable securities

Losses arising during the period —
—
—
(4 )
Less income tax effect —
—
—
3
Reclassification to net earnings for losses realized —
25
—
25
Less income tax effect —
(9 ) —
(9 )
Defined benefit plans

Foreign currency and other adjustments 106
47
2
(89 )
Less income tax effect (9 ) (5 ) —
8
Net actuarial loss amortization 116
86
344
257
Prior service credit amortization
(7 ) (7 ) (20 ) (21 )
Less income tax effect (21 ) (18 ) (62 ) (56 )
Total comprehensive income (loss) (7,595 ) (340 ) 29,859
26,809
Less comprehensive income (loss) attributable to noncontrolling interests:

Net earnings 1,198
626
1,926
548
Foreign currency translation adjustment (918 ) (300 ) 1,402
(1,004 )
Amounts attributable to noncontrolling interests 280
326
3,328
(456 )
Comprehensive income (loss) attributable to Guess?, Inc. $ (7,875 ) $ (666 ) $ 26,531
$ 27,265

Table of Contents

GUESS?, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF

COMPREHENSIVE INCOME (LOSS)

(in thousands)

(unaudited)


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



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





Defined benefit plans

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

See accompanying notes to condensed consolidated financial statements.

GUESS?, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Nine Months Ended
Oct 28,
2017 Oct 29,
2016
Cash flows from operating activities:

Net earnings (loss) $ (7,008 ) $ 16,742
Adjustments to reconcile net earnings (loss) to net cash used in operating activities:

Depreciation and amortization of property and equipment 45,614
49,787
Amortization of intangible assets 1,155
1,407
Share-based compensation expense 12,410
12,768
Unrealized forward contract (gains) losses 1,532
(1,455 )
Net (gain) loss on disposition of property and equipment and long-term assets 4,548
(20,231 )
Other items, net (5,278 ) 4,675
Changes in operating assets and liabilities:

Accounts receivable 2,527
(808 )
Inventories (93,337 ) (114,783 )
Prepaid expenses and other assets (11,817 ) (10,047 )
Accounts payable and accrued expenses 21,411
32,449
Deferred rent and lease incentives 1,354
2,830
Other long-term liabilities (7,313 ) (3,567 )
Net cash used in operating activities (34,202 ) (30,233 )
Cash flows from investing activities:

Purchases of property and equipment (65,345 ) (66,849 )
Proceeds from sale of long-term assets 1,052
43,399
Changes in other assets (553 ) —
Acquisition of businesses, net of cash acquired (2,929 ) (1,635 )
Net cash settlement of forward contracts (354 ) (298 )
Purchases of investments (497 ) —
Net cash used in investing activities (68,626 ) (25,383 )
Cash flows from financing activities:

Payment of debt issuance costs —
(111 )
Proceeds from borrowings 166
21,500
Repayment of borrowings and capital lease obligations (665 ) (4,608 )
Dividends paid (56,527 ) (57,369 )
Purchase of redeemable noncontrolling interest —
(4,445 )
Noncontrolling interest capital contribution 962
2,157
Noncontrolling interest capital distribution (1,358 ) (2,759 )
Issuance of common stock, net of tax withholdings on vesting of stock awards (82 ) 411
Purchase of treasury stock (24,812 ) —
Net cash used in financing activities (82,316 ) (45,224 )
Effect of exchange rates on cash, cash equivalents and restricted cash 20,808
4,766
Net change in cash, cash equivalents and restricted cash (164,336 ) (96,074 )
Cash, cash equivalents and restricted cash at the beginning of the year 397,650
445,999
Cash, cash equivalents and restricted cash at the end of the period $ 233,314
$ 349,925

Supplemental cash flow data:

Interest paid $ 849
$ 923
Income taxes paid $ 18,124
$ 15,619

Non-cash investing and financing activity:
Assets acquired under capital lease obligations $ 18,042
$ —

Table of Contents

GUESS?, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)


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

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

Net cash settlement of forward contract	118		(283)

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




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

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

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

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

See accompanying notes to condensed consolidated financial statements.

Table of Contents

GUESS?, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands, except share data)

(unaudited)


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



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

See accompanying notes to condensed consolidated financial statements.

Table of Contents

GUESS?, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands, except share data)

(unaudited)


	For the three months ended May 1, 2021
	Guess?, Inc. Stockholders’ Equity
	Common Stock									Treasury Stock
	Shares	Amount		Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Shares	Amount		Nonredeemable Noncontrolling Interests		Total
Balance at January 30, 2021	64,230,162	$	642	$	553,111	$	1,034,823	$	(120,675)	78,563,517	$	(924,238)	$	21,917	$	565,580

Net earnings	—	—		—		12,006		—		—	—		864		12,870
Other comprehensive income (loss), net of income tax of ($190)	—	—		—		—		(227)		—	—		217		(10)


Issuance of common stock under stock compensation plans	689,653	7		(6,417)		—		—		(690,492)	8,123		—		1,713
Issuance of stock under Employee Stock Purchase Plan	12,798	—		81		—		—		(12,798)	151		—		232
Share-based compensation	—	—		4,056		4		—		—	—		—		4,060
Dividends, net of forfeitures on non-participating securities	—	—		—		(7,252)		—		—	—		—		(7,252)





Balance at May 1, 2021	64,932,613	$	649	$	550,831	$	1,039,581	$	(120,902)	77,860,227	$	(915,964)	$	22,998	$	577,193

See accompanying notes to condensed consolidated financial statements.

Table of Contents

GUESS?, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~October 28, 2017~~April 30, 2022

(unaudited)


~~(1)~~	~~Basis of Presentation~~

(1)Basis of Presentation

Description of the Business

Guess?, Inc. (the “Company” or “GUESS?”) designs, markets, distributes and licenses a leading lifestyle collection of contemporary apparel and accessories for men, women and children that reflect the American lifestyle and European fashion sensibilities. The Company’s designs are sold in GUESS? owned stores, to a network of wholesale accounts that includes better department stores, selected specialty retailers and upscale boutiques and through the Internet. GUESS? branded products, some of which are produced under license, are also sold internationally through a series of retail store licensees and wholesale distributors.

Interim Financial Statements

In the opinion of management, the accompanying unaudited condensed consolidated financial statements of ~~Guess?, Inc. and its subsidiaries (the “Company”)~~the Company contain all adjustments, consisting of normal recurring adjustments, considered necessary for a fair presentation of the condensed consolidated balance sheets as of ~~October 28, 2017~~April 30, 2022 and January ~~28, 2017,~~29, 2022, and the condensed consolidated statements of income, ~~(loss) and~~ comprehensive income (loss), cash flows and stockholders’ equity for the three ~~and nine~~ months ended ~~October 28, 2017~~April 30, 2022 and ~~October 29, 2016 and the condensed consolidated statements of cash flows for the nine months ended October 28, 2017 and October 29, 2016.~~May 1, 2021. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with ~~accounting principles generally accepted in the~~ U.S. Generally Accepted Accounting Principles (“GAAP”) for interim financial information and the instructions to Rule 10-01 of Regulation S-X of the Securities and Exchange ~~Commission.~~Commission (the “SEC”). Accordingly, they have been condensed and do not include all of the information and footnotes required by GAAP for complete financial statements. The results of operations and cash flows for the three ~~and nine~~ months ended ~~October 28, 2017~~April 30, 2022 are not necessarily indicative of the results of operations to be expected for the full fiscal year.

These financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended January ~~28, 2017.~~29, 2022.

Fiscal Periods

The three ~~and nine~~ months ended ~~October 28, 2017~~April 30, 2022 had the same number of days as the three ~~and nine~~ months ended ~~October 29, 2016.~~May 1, 2021. All references herein to “fiscal ~~2018,” “fiscal 2017”~~2022” and “fiscal ~~2016”~~2021” represent the results of the ~~53-week~~52-week fiscal year ended January 29, 2022 and January 30, 2021, respectively. All references herein to “fiscal 2023” represent the 52-week fiscal year ending ~~February 3, 2018 and the 52-week fiscal years ended~~ January 28, ~~2017~~2023.

COVID-19 Business Update

The COVID-19 pandemic is continuing to negatively impact certain regions of the Company’s business, especially in Asia where the Company’s operations for the quarter ended April 30, 2022 were impacted by capacity restrictions and ~~January 31, 2016, respectively.~~ temporary store closures. Overall, this resulted in the closure of a limited number of its directly operated stores as of April 30, 2022, mostly in China, the impact of which was minimal to the Company’s first quarter results.

~~Reclassifications~~

The COVID-19 crisis has also contributed to disruptions in the overall global supply chain, leading to industry-wide product delays and higher product and freight costs. The Company has ~~made certain reclassifications~~been working actively to ~~current year-to-date and prior year amounts to conform~~mitigate these headwinds to the ~~current period presentation within~~extent possible through a number of global supply chain initiatives.

In light of the fluid nature of the pandemic, the Company continues to carefully monitor global and regional developments and respond appropriately. The Company also continues to strategically manage expenses in order to protect profitability and to mitigate, to the extent possible, the effect of the supply chain disruptions.

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Summary of Significant Accounting Policies

The accounting policies of the Company are set forth in further detail in Note 1 to the Company's Consolidated Financial Statements contained in the Company’s fiscal 2022 Annual Report on Form 10-K. The Company includes herein certain updates to those policies.

Use of Estimates

The preparation of the financial statements in conformity with accounting principles generally accepted in the U.S. requires management to make estimates and assumptions that affect the amounts reported in the financial statements and disclosed in the accompanying ~~notes~~notes. Significant areas requiring the use of management estimates relate to the ~~condensed consolidated~~allowances for doubtful accounts, sales return and markdown allowances, gift card and loyalty accruals, valuation of inventories, share-based compensation, income taxes, recoverability of deferred taxes, unrecognized tax benefits, the useful life of assets for depreciation and amortization, evaluation of asset impairment (including goodwill and long-lived assets, such as property and equipment and operating lease right-of-use (“ROU”) assets), pension obligations, workers’ compensation and medical self-insurance expense and accruals, litigation reserves and restructuring expense and accruals. Actual results could differ from those estimates. Revisions in estimates could materially impact the results of operations and financial ~~statements.~~position.

~~Net Gains (Losses) on Lease Terminations~~

~~During~~As discussed above, the ~~third quarter of fiscal 2018,~~COVID-19 pandemic negatively impacted the Company recorded net losses on lease terminations related primarily to the modification of certain lease agreements held with a common landlord in North America. In connection with this modification, the Company made up-front payments of approximately $22 million, of which $12 million was recognized as net losses on lease terminations and $10 million was recorded as advance rent payments. During the third quarter of fiscal 2018, the Company also recorded net gains on lease terminations of approximately $1 million related primarily to the early termination of certain lease agreements in Europe.

During the nine months ended October 29, 2016, the Company recorded net gains on lease terminations of $0.7 million related primarily to the early termination of certain lease agreements in Europe. The net gains on lease terminations were recorded during the first and second quarters of fiscal 2017.

~~Sale of Other Assets~~

During the nine months ended October 29, 2016, the Company sold its minority interest equity holding in a privately-held boutique apparel company for net proceeds of approximately $34.8 million, which resulted in a gain of approximately $22.3 million which was recorded in other income. The gain was recorded in other incomeCompany’s results during the three months ended ~~July~~April 30, ~~2016.~~2022 and May 1, 2021. The Company’s operations could continue to be impacted in ways the Company is not able to predict today due to the evolving situation. While the Company believes it has made reasonable accounting estimates based on the facts and circumstances that were available as of the reporting date, to the extent there are differences between these estimates and actual results, the Company’s results of operations and financial position could be materially impacted.

~~New~~Revenue Recognition

The Company recognizes the majority of its revenue from its direct-to-consumer (brick-and-mortar retail stores and concessions as well as e-commerce) and wholesale distribution channels at a point in time when it satisfies a performance obligation and transfers control of the product to the respective customer.

The Company also recognizes royalty revenue from its trademark license agreements. The Company’s trademark license agreements represent symbolic licenses that are dependent on the Company’s continued support over the term of the license agreement. The amount of revenue that is recognized from the licensing arrangements is based on sales-based royalty and advertising fund contributions as well as specific fixed payments, where applicable. The Company’s trademark license agreements customarily provide for a multi-year initial term ranging from three to ten years and may contain options to renew prior to expiration for an additional multi-year period. The unrecognized portion of upfront payments is included in deferred royalties in accrued expenses and other long-term liabilities depending on the short or long-term nature of the payments to be recognized. As of April 30, 2022, the Company had $5.1 million and $13.5 million of deferred royalties related to these upfront payments included in accrued expenses and other current liabilities and other long-term liabilities, respectively. This compares to $5.1 million and $14.3 million of deferred royalties related to these upfront payments included in accrued expenses and other current liabilities and other long-term liabilities, respectively, at January 29, 2022. During the three months ended April 30, 2022 and May 1, 2021, the Company recognized $3.4 million and $3.5 million in net royalties related to the amortization of deferred royalties, respectively.

Refer to Note 8 for further information on disaggregation of revenue by segment and country.

Allowance for Doubtful Accounts

In the normal course of business, the Company grants credit directly to certain wholesale customers after a credit analysis is performed based on financial and other criteria. Accounts receivable are recorded net of an allowance for doubtful accounts. The Company maintains allowances for doubtful accounts for estimated losses that may result from the inability of its wholesale customers and licensing partners to make their

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required payments. The Company bases its allowances on analysis of the aging of accounts receivable at the date of the financial statements, assessments of historical and current collection trends, evaluation of the impact of current and future forecasted economic conditions and whether the Company has obtained credit insurance or other guarantees. Management performs regular evaluations concerning the ability of its customers and records a provision for doubtful accounts based on these evaluations.

As of April 30, 2022, approximately 45% of the Company’s total net trade accounts receivable and 61% of its European net trade receivables were subject to credit insurance coverage, certain bank guarantees or letters of credit for collection purposes. The Company’s credit insurance coverage contains certain terms and conditions specifying deductibles and annual claim limits. Management evaluates the creditworthiness of the counterparties to the credit insurance, bank guarantees, and letters of credit and records a provision for the risk of loss on these instruments based on these evaluations as considered necessary.

The Company’s credit losses for the periods presented were not significant compared to sales and did not significantly exceed management’s estimates. Refer to Note 5 for further information on the Company’s allowance for doubtful accounts.

Recently Adopted Accounting Guidance

~~Changes~~Convertible Instruments and Contracts in ~~Accounting Policies~~an Entity’s Own Equity

~~In July 2015,~~The Company adopted guidance to simplify the accounting for convertible instruments and contracts in an entity’s own equity and the diluted earnings per share computations for these instruments on January 30, 2022, using the modified retrospective transition method. The cumulative effect of the accounting change increased the carrying amount of the 2.00% convertible senior notes due 2024 (the “Notes”) by $27.5 million, reduced deferred income tax liabilities by $5.8 million, reduced additional paid-in capital by $43.1 million and increased retained earnings by $21.4 million, with no restatement of prior periods. Refer to Note 3 for the impact on the earnings per share calculation and Note 10 for the impact on the Notes.

Modifications or Exchanges of Freestanding Equity-Classified Written Call Options

The Financial Accounting Standards Board (“FASB”) issued authoritative guidance as to ~~simplify~~how an issuer should account for a modification of the ~~subsequent measurement~~terms or conditions or an exchange of ~~inventories by replacing~~a freestanding equity-classified written call option (i.e., a warrant) that remains classified in equity after modification or exchange of the ~~lower~~original instrument for a new instrument. An issuer should measure the effect of ~~cost~~a modification or ~~market test with~~exchange as the difference between the fair value of the modified or exchanged warrant and the fair value of that warrant immediately before modification or exchange and then apply a ~~lower~~recognition model that comprises four categories of ~~cost~~transactions and the corresponding accounting treatment for each category (equity issuance, debt origination, debt modification, and modifications unrelated to equity issuance and debt origination or

~~net realizable value test.~~ modification). The Company adopted this guidance ~~effective~~on January ~~29, 2017~~30, 2022 which had no impact on ~~a prospective basis.~~ the Company’s consolidated financial statement presentation or disclosures.

Recently Issued Accounting Guidance

Reference Rate Reform

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

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

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Credit Facilities, and Interest Rate Swap Agreements are impacted by this guidance. The Company does not expect this guidance ~~did not~~to have a material impact on ~~the Company’s condensed~~its consolidated financial ~~statements~~position, results of operations or ~~related disclosures.~~cash flows.

Government Assistance

In ~~March 2016,~~November 2021, the FASB issued authoritative guidance to ~~simplify~~increase the ~~accounting for certain aspects~~transparency of ~~share-based compensation.~~government assistance. This guidance addresses the accounting for income tax effects at award settlement, the use of an expected forfeiture rate to estimate award cancellations prior to the vesting date and the presentation of excess tax benefits and shares surrendered for tax withholdings on the statement of cash flows. The Company adopted this guidance effective January 29, 2017. This guidance requires all income tax effects of awards (resulting from an increase or decrease in the fair value of an award from grant date to the vesting date) to be recognized in the income statement when the awards vest or are settled. This is a change from previous guidance that required such activity to be recorded in paid-in capital within stockholders’ equity. The Company adopted this provision prospectively and accordingly recorded tax shortfalls of approximately $0.7 million as an increase to the Company’s income tax expense in its condensed consolidated statement of income (loss) during the nine months ended October 28, 2017. This resulted in a negative impact on net loss attributable to Guess?, Inc. of approximately $0.7 million, or an unfavorable $0.01 per share impact during the nine months ended October 28, 2017. The Company recorded minimal tax shortfalls related to the adoption of this guidance during the three months ended October 28, 2017. Under this guidance, excess tax benefits are also excluded from the assumed proceeds available to repurchase shares in the computation of diluted earnings (loss) per share. This was adopted prospectively and did not have an impact on the Company’s diluted loss per share for the three or nine months ended October 28, 2017. This guidance also eliminates the requirement to estimate forfeitures, but rather provides for an election that would allow entities to account for forfeitures as they occur. The Company adopted this election beginning in the first quarter of fiscal 2018 using the modified retrospective method and recorded a cumulative adjustment to reduce retained earnings by approximately $0.3 million. This guidance also changes the presentation of excess tax benefits from a financing activity to an operating activity in the statement of cash flows. This presentation was adopted on a retrospective basis and, as a result, net cash used in operating activities improved by $0.2 million with a corresponding offset to net cash used in financing activities during the nine months ended October 29, 2016.

In August 2016, the FASB issued authoritative guidance related to the classification of certain cash receipts and cash payments in the statement of cash flows. The Company adopted this guidance effective January 29, 2017 on a retrospective basis. The adoption of this guidance did not have a material impact on the Company’s condensed consolidated financial statements or related disclosures.

In October 2016, the FASB issued authoritative guidance that requires an entity to include indirect interests held through related parties that are under common control on a proportionate basis when evaluating if a reporting entity is the primary beneficiary of a variable interest entity. The Company adopted this guidance effective January 29, 2017. The adoption of this guidance did not have an impact on the Company’s condensed consolidated financial statements or related disclosures.

In November 2016, the FASB issued authoritative guidance related to the presentation of restricted cash in the statement of cash flows. This guidance requires that the statement of cash flows reconcile the change during the period in total cash, cash equivalents and restricted cash. The Company’s restricted cash is generally held as collateral for certain transactions. The Company adopted this guidance effective January 29, 2017 on a retrospective basis. As a result, the Company updated its condensed consolidated statements of cash flows for the nine months ended October 28, 2017 and October 29, 2016 to include restricted cash with cash and cash equivalents when reconciling the beginning and end of period balances and to eliminate changes in restricted cash that have historically been included within operating and investing activities.

In January 2017, the FASB issued authoritative guidance which clarifies the definition of a business to assist entities when evaluating whether transactions should be accounted for as acquisitions or disposals of assets or businesses. The Company early adopted this guidance effective January 29, 2017 on a prospective basis. The adoption of this guidance did not have a material impact on the Company’s condensed consolidated financial statements or related disclosures.

~~Recently Issued Accounting Guidance~~

In May 2014, the FASB issued a comprehensive new revenue recognition standard which will supersede previous existing revenue recognition guidance. The standard is intended to clarify the principles of recognizing revenue and create common revenue recognition guidance between GAAP and International Financial Reporting Standards. The standard also requires expanded disclosures surrounding revenue recognition. During fiscal 2017, the FASB issued additional clarification guidance on the new revenue recognition standard which also included certain scope improvements and practical expedients. The standard (including clarification guidance issued) is effective for ~~fiscal~~financial statements issued for annual periods beginning after December 15, 2017, which will be the Company’s first quarter of fiscal 2019, and allows for either full retrospective or modified retrospective adoption, with early adoption permitted. The Company plans to adopt this guidance using the modified retrospective method beginning in the first quarter of fiscal 2019. The Company’s assessment efforts to date have included reviewing current revenue processes, arrangements and accounting policies to identify potential differences that could arise from the application of this standard on its consolidated financial statements and related disclosures. The Company expects the differences to relate primarily to the classification and timing of when revenue and certain expenses are recognized from its licensing business, loyalty programs and gift card breakage. The Company also expects revenue related to its e-commerce operations to be recognized when merchandise is transferred to a common carrier rather than upon receipt by the customer. The Company is continuing to evaluate the financial impact of the adoption of this standard on its consolidated financial statements and related disclosures.

In January 2016, the FASB issued authoritative guidance which requires equity investments not accounted for under the equity method of accounting or consolidation accounting to be measured at fair value, with subsequent changes in fair value recognized in net income. This guidance also addresses other recognition, measurement, presentation and disclosure requirements for financial instruments. This guidance is effective for fiscal years beginning after December 15, 2017, which will be the Company’s first quarter of fiscal 2019, and requires a cumulative-effect adjustment to the balance sheet as of the beginning of the fiscal year of adoption. The adoption of this guidance is not expected to have a material impact on the Company’s consolidated financial statements or related disclosures unless the Company acquires new equity investments.

In February 2016, the FASB issued a comprehensive new lease standard which will supersede previous lease guidance. The standard requires a lessee to recognize assets and liabilities related to long-term leases that were classified as operating leases under previous guidance in its balance sheet. An asset would be recognized related to the right to use the underlying asset and a liability would be recognized related to the obligation to make lease payments over the term of the lease. The standard also requires expanded disclosures surrounding leases. The standard is effective for fiscal periods beginning after December 15, 2018, which will be the Company’s first quarter of fiscal 2020, and requires modified retrospective adoption,2021 with early adoption permitted. The Company is currently evaluating ~~the impact of~~this guidance and does not expect the adoption of this ~~standard on its consolidated financial statements and related disclosures, but expects there will be a material increase in its long-term assets and liabilities resulting from the adoption.~~

~~In June 2016, the FASB issued authoritative~~ guidance related to the measurement of credit losses on financial instruments. This guidance is effective for fiscal years beginning after December 15, 2019, which will be the Company’s first quarter of fiscal 2021. Early adoption is permitted for fiscal periods beginning after December 15, 2018, which will be the Company’s first quarter of fiscal 2020. The Company is currently evaluating the impact of the adoption of this standard on its consolidated financial statements and related disclosures.

In October 2016, the FASB issued authoritative guidance which amends the accounting for income taxes on intra-entity transfers of assets other than inventory. This guidance requires that entities recognize the income tax consequences of an intra-entity transfer of an asset, other than inventory, when the transfer occurs. The income tax consequences on intra-entity transfers of inventory will continue to be deferred until the inventory has been sold to a third party. This guidance is effective for fiscal years beginning after December 15, 2017, which will be the Company’s first quarter of fiscal 2019, and requires a cumulative-effect adjustment to the balance sheet as of the beginning of the fiscal year of adoption. Early adoption is permitted at the beginning of a fiscal year. The

~~adoption of this guidance is not expected~~ to have a material impact on its consolidated financial statements.

(2) Lease Accounting

The Company primarily leases its showrooms, advertising, licensing, sales and merchandising offices, remote distribution and warehousing facilities and retail and factory outlet store locations under operating lease agreements expiring on various dates through January 2039. The Company also leases some of its equipment, as well as computer hardware and software, under operating and finance lease agreements expiring on various dates through May 2027.

The Company’s lease agreements primarily provide for lease payments based on a minimum annual rental amount, a percentage of annual sales volume, periodic adjustments related to inflation or a combination of such lease payments. Certain retail store leases provide for lease payments based upon the minimum annual rental amount and a percentage of annual sales volume, generally ranging from 3% to 28%, when specific sales volumes are exceeded. The Company’s retail concession leases also provide for lease payments primarily based upon a percentage of annual sales volume, which averages approximately 32%.

In addition to the amounts as disclosed below, the Company has estimated additional operating lease commitments of approximately $25.4 million for leases where the Company has not yet taken possession of the underlying asset as of April 30, 2022. As such, the related operating lease ROU assets and operating lease liabilities have not been recognized in the Company’s condensed consolidated ~~financial statements or~~balance sheet as of April 30, 2022.

The components of leases are (in thousands):


		Apr 30, 2022		Jan 29, 2022
Assets	Balance Sheet Location
Operating	Operating lease right-of-use assets	$	653,611	$	685,799
Finance	Property and equipment, net	20,557		21,898
Total lease assets		$	674,168	$	707,697

Liabilities	Balance Sheet Location
Current:
Operating	Current portion of operating lease liabilities	$	178,470	$	195,516
Finance	Current portion of borrowings and finance lease obligations	5,729		5,806
Noncurrent:
Operating	Long-term operating lease liabilities	549,293		582,757
Finance	Long-term debt and finance lease obligations	16,050		17,137
Total lease liabilities		$	749,542	$	801,216

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The components of lease costs are (in thousands):


		Three Months Ended
	Income Statement Location	Apr 30, 2022		May 1, 2021
Operating lease costs	Cost of product sales	$	44,372	$	46,684
Operating lease costs	Selling, general and administrative expenses	6,301		6,357
Operating lease costs1	Net gains on lease modifications	(601)		(2,145)
Finance lease costs
Amortization of leased assets	Cost of product sales	19		11
Amortization of leased assets	Selling, general and administrative expenses	1,502		1,361
Interest on lease liabilities	Interest expense	287		366
Variable lease costs2	Cost of product sales	21,996		15,739
Variable lease costs2	Selling, general and administrative expenses	956		574
Short-term lease costs	Cost of product sales	96		105
Short-term lease costs	Selling, general and administrative expenses	1,558		1,171
Total lease costs		$	76,486	$	70,223

Notes:

1During the three months ended April 30, 2022 and May 1, 2021, net gains on lease modifications related ~~disclosures.~~ primarily to the early termination of lease agreements for certain of the Company’s retail locations. Operating lease costs for these retail locations prior to the early termination were included in cost of product sales.

~~In January 2017,~~2During the ~~FASB issued authoritative guidance to simplify~~three months ended April 30, 2022, and May 1, 2021, variable lease costs included certain rent concessions of approximately $1.3 million and $6.1 million, respectively, received by the ~~testing for goodwill~~Company, primarily in Europe.

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


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

Other supplemental information is (in thousands):

Lease Term and Discount Rate

Apr 30, 2022

Weighted-average remaining lease term

Operating leases

6.0 years

Finance leases

4.1 years

Weighted-average discount rate

Operating leases

3.4%

Finance leases

5.2%

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


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

Impairment

During the three months ended April 30, 2022 there were no ROU asset impairment ~~by removing step two from~~charges. During the ~~goodwill testing. Under current guidance, if~~three months ended May 1, 2021 there were immaterial ROU asset impairment charges recorded. The asset impairment charges were determined based on the ~~fair~~excess of carrying value of a reporting unit is lower than its carrying amount (step one), an entity would calculate an impairment charge by comparing the implied fair value of goodwill with its carrying amount (step two). The implied fair value of goodwill was calculated by deductingover the fair value of the ~~assets and liabilities~~ROU assets. The Company uses estimates of market participant rents to calculate fair value of the ~~respective reporting unit from~~ROU assets. Refer to Note 15 for more information on the ~~reporting unit’s fair value as determined under step one. This~~Company’s impairment testing.

(3)Earnings per Share

On January 30, 2022, the Company adopted new authoritative guidance ~~instead provides that~~which simplifies the accounting for convertible instruments and contracts in an ~~impairment charge should be recognized~~entity’s own equity using the modified retrospective method. Following adoption, diluted EPS related to the Notes is calculated using the if-converted method. The number of dilutive shares is based on the ~~difference between a reporting unit’s fair value and its carrying value. This guidance also does not require a qualitative test~~initial conversion rate associated with the Notes.

Prior to ~~be performed on reporting units with zero or negative carrying amounts. However, entities need~~adoption, the Company applied the treasury stock method when calculating the potential dilutive effect of the Notes, if any. As the Company expects to ~~disclose any reporting units with zero or negative carrying amounts that have goodwill and~~settle the principal amount of ~~goodwill allocated to each. This guidance is effective for fiscal years beginning after December 15, 2019, which will be~~its outstanding Notes in cash and any excess in shares, only the Company’s first quarter of fiscal 2021, with early adoption permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The adoption of this guidance is not expected to have a material impact on the Company’s consolidated financial statements or related disclosures.

~~In March 2017, the FASB issued authoritative guidance related to the presentation of net periodic pension cost~~amounts in the income statement. This guidance requires that the service cost component of net periodic pension cost is presented in the same line as other compensation costs arising from services rendered by the employees during the period. The other non-service components of net periodic pension cost are required to be presented in the income statement separately from the service cost component and outside of earnings from operations. This guidance also allows for the service cost component to be eligible for capitalization when applicable. This guidance is effective for fiscal years beginning after December 15, 2017, which will be the Company’s first quarter of fiscal 2019, and requires retrospective adoption for the presentationexcess of the ~~service cost component and other non-service components of net periodic pension cost~~principal amount were considered in the income statement and prospective adoption for capitalization of the service cost component. Early adoption is permitted at the beginning of a fiscal year. Other than the change in presentation of other non-service components of net periodic pension cost within the Company’s consolidated statements of income, the adoption of this guidance is not expected to have an impact on the Company’s consolidated financial statements and related disclosures.

In May 2017, the FASB issued authoritative guidance that provides clarification on accounting for modifications in share-based payment awards. This guidance is effective for fiscal years beginning after December 15, 2017, which will be the Company’s first quarter of fiscal 2019, with early adoption permitted. The adoption of this guidance is not expected to have an impact on the Company’s consolidated financial statements or related disclosures unless there are modifications to the Company’s share-based payment awards.

In August 2017, the FASB issued authoritative guidance to better align the results of hedge accounting with an entity’s risk management activities. This guidance updates the designation and measurement guidance for qualifying hedging relationships and the presentation of hedge results in the financial statements. This guidance is effective for fiscal years beginning after December 15, 2018, which will be the Company’s first quarter of fiscal 2020, and requires a cumulative-effect adjustment to the balance sheet as of the beginning of the fiscal year of adoption, with early adoption permitted. The updated presentation and disclosure guidance is required only on a prospective basis. The Company is currently evaluating the impact of the adoption of this standard on its consolidated financial statements and related disclosures.


~~(2)~~	~~Earnings (Loss) Per Share~~

~~Basic~~diluted earnings ~~(loss)~~ per share, ~~represents net earnings (loss) attributable~~if applicable. Refer to ~~common stockholders divided by~~Note 1 and Note 10 for more information regarding the weighted average number of common shares outstanding during the period. The Company considers any restricted stock units with forfeitable dividend rights that are issued and outstanding, but considered contingently returnable if certain service conditions are not met, as common equivalent shares outstanding. These restricted stock units are excluded from the weighted average number of common shares outstanding and basic earnings (loss) per share calculation until the respective service conditions have been met. Diluted earnings per share

represents net earnings attributable to common stockholders divided by the weighted average number of common shares outstanding, inclusive of the dilutive impact of common equivalent shares outstanding during the period. The potentially dilutive impact of common equivalent shares outstanding are not included in the computation of diluted net loss per share as the impact of the shares would be antidilutive due to the net loss incurred for the period. Nonvested restricted stock awards (referred to as participating securities) are excluded from the dilutive impact of common equivalent shares outstanding in accordance with authoritative guidance under the two-class method since the nonvested restricted stockholders are entitled to participate in dividends declared on common stock as if the shares were fully vested and hence are deemed to be participating securities. Under the two-class method, distributed and undistributed earnings attributable to nonvested restricted stockholders are excluded from net earnings (loss) attributable to common stockholders for purposes of calculating basic and diluted earnings (loss) per common share. However, net losses are not allocated to nonvested restricted stockholders because they are not contractually obligated to share in the losses of the Company.Notes.

In addition, the Company ~~has~~ granted certain nonvested stock units, ~~that are~~ subject to certain performance-based or market-based vesting conditions, as well as continued service requirements through the respective vesting periods. These nonvested stock units are included in the computation of diluted net earnings per common share attributable to common stockholders only to the extent ~~that~~ the underlying performance-based or market-based vesting conditions are satisfied as of the end of the reporting period, or would be considered satisfied if the end of the reporting period ~~were~~was the end of the related contingency period, and the results would be dilutive under the treasury stock method.

The computation of basic and diluted net earnings ~~(loss)~~ per common share attributable to common stockholders is ~~as follows~~ (in thousands, except per share data):


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

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

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

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

Three Months Ended Nine Months Ended
Oct 28, 2017 Oct 29, 2016 Oct 28, 2017 Oct 29, 2016
Net earnings (loss) attributable to Guess?, Inc. $ (2,860 ) $ 9,103
$ (8,934 ) $ 16,194
Less net earnings attributable to nonvested restricted stockholders 186
126
581
411
Net earnings (loss) attributable to common stockholders $ (3,046 ) $ 8,977
$ (9,515 ) $ 15,783

Weighted average common shares used in basic computations 82,390
83,758
82,599
83,631
Effect of dilutive securities:

Stock options and restricted stock units (1) —
159
—
182
Weighted average common shares used in diluted computations 82,390
83,917
82,599
83,813

Net earnings (loss) per common share attributable to common stockholders:
Basic $ (0.04 ) $ 0.11
$ (0.12 ) $ 0.19
Diluted $ (0.04 ) $ 0.11
$ (0.12 ) $ 0.19


~~(1)~~	For the three and nine months ended October 28, 2017, there were 916,683 and 391,040, respectively, potentially dilutive shares that were not included in the computation of diluted weighted average common shares and common equivalent shares outstanding because their effect would have been antidilutive given the Company’s net loss.

~~For~~

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During the three months ended ~~October 28, 2017~~April 30, 2022 and ~~October 29, 2016,~~May 1, 2021, equity awards granted for ~~2,901,025~~1,183,823 and ~~3,463,100, respectively, of the Company’s common shares and for the nine months ended October 28, 2017 and October 29, 2016, equity awards granted for 3,104,027 and 3,239,163,~~390,243, respectively, of the Company’s common shares were outstanding but were excluded from the computation of diluted weighted average common shares and common equivalent shares outstanding because the assumed proceeds, as calculated under the treasury stock method, resulted in these awards being antidilutive. For the three ~~and nine~~ months ended October 28, 2017, the Company also excluded 1,145,080 nonvested stock units which are subject to the achievement of performance-based conditions from the computation of diluted weighted average common shares and common equivalent

~~shares outstanding because these conditions were not achieved as of October 28, 2017. For the three and nine months ended October 29, 2016,~~April 30, 2022, the Company excluded ~~602,816~~300,000 nonvested stock units which were subject to the achievement of ~~performance-based or~~ market-based vesting conditions from the computation of diluted weighted average common shares and common equivalent shares outstanding because these conditions were not achieved as of ~~October 29, 2016.~~April 30, 2022. For the three months ended May 1, 2021, there were no nonvested stock units subject to the achievement of performance-based or market-based vesting conditions that were excluded from the computation of diluted weighted average common shares and common equivalent shares outstanding as the respective conditions were achieved as of May 1, 2021.

Warrants to purchase approximately 11.6 million shares of the Company’s common shares at an initial strike price of $46.88 per share were outstanding as of April 30, 2022 and May 1, 2021. These warrants were excluded from the computation of diluted earnings per share since the warrants’ adjusted strike price was greater than the average market price of the Company’s common stock during the three months ended April 30, 2022 and May 1, 2021.

(4)Stockholders' Equity

Share Repurchase Program

~~On June 26, 2012,~~During fiscal 2022, the ~~Company’s~~ Board of Directors terminated its previous 2012 $500 million share repurchase program (the “2012 Share Repurchase Program”) and authorized a new $200 million share repurchase program to(the “2021 Share Repurchase Program”). On March 14, 2022, the Board of Directors expanded its repurchase ~~from time-to-time and as market and business conditions warrant, up to $500 million of the Company’s common stock. Repurchases~~authorization under the ~~program~~2021 Share Repurchase Program by $100 million. Repurchases may be made on the open market or in privately negotiated transactions, pursuant to Rule 10b5-1 trading plans or other available means. There is no minimum or maximum number of shares to be repurchased under the program ~~which~~and the program may be discontinued at any time, without prior notice.

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

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

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During the ~~nine~~three months ended ~~October 28, 2017,~~April 30, 2022, the Company repurchased ~~1,919,967~~3,789,576 shares under the ~~program~~Company’s 2021 Share Repurchase Program at an aggregate cost of ~~$24.8 million. The Company~~$81.7 million, which is inclusive of the shares repurchased ~~1,485,195 at an aggregate cost of $17.8 million~~under the 2022 ASR Contract. There were no shares repurchased under the 2012 Share Repurchase Program during the three months ended April 29, 2017 and an additional 434,772 shares at an aggregate cost of $7.0 million during the three months ended October 28, 2017. There were no share repurchases during the three and nine months ended October 29, 2016.May 1, 2021. As of ~~October 28, 2017,~~April 30, 2022, the Company had remaining authority under the ~~program~~2021 Share Repurchase Program to purchase ~~$423.5~~$62.3 million of its common stock.

Dividends


~~(3)~~	~~Stockholders’ Equity and Redeemable Noncontrolling Interests~~

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


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

In accordance with the terms of ~~common stock outstanding, treasury stock~~the indenture governing the Notes, the Company has adjusted the conversion rate and the ~~total carrying amount~~conversion price of ~~total stockholders’ equity, Guess?, Inc. stockholders’ equity~~the Notes for quarterly dividends exceeding $0.1125 per share.

For each of the periods presented, dividends paid also included the impact from vesting of restricted stock units that are considered non-participating securities and ~~stockholders’ equity attributable~~are only entitled to ~~nonredeemable~~dividend payments once the respective awards vest.

Decisions on whether, when and ~~redeemable noncontrolling interests~~in what amounts to continue making any future dividend distributions will remain at all times entirely at the discretion of the Company’s Board of Directors, which reserves the right to change or terminate the Company’s dividend practices at any time and for any reason without prior notice. The payment of cash dividends in the ~~fiscal year ended~~ ~~January 28, 2017~~future will be based upon a number of business, legal and ~~nine months ended October 28, 2017~~ ~~is as follows (in thousands, except~~other considerations, including the Company’s cash flow from operations, capital expenditures, debt service and covenant requirements, cash paid for income taxes, earnings, share ~~data):~~

Shares Stockholders’ Equity
Common Stock Treasury Stock
Guess?, Inc.
Stockholders’
Equity

Nonredeemable
Noncontrolling
Interests
Total
Redeemable
Noncontrolling
Interests
Balance at January 30, 2016 83,833,937
56,195,000
$ 1,018,475
$ 12,818
$ 1,031,293
$ 5,252
Net earnings —
—
22,761
2,637
25,398
—
Foreign currency translation adjustment —
—
(575 ) (2,057 ) (2,632 ) 818
Loss on derivative financial instruments designated as cash flow hedges, net of income tax of $864 —
—
(1,852 ) —
(1,852 ) —
Other-than-temporary-impairment and unrealized loss on marketable securities, net of income tax of ($6) —
—
15
—
15
—
Actuarial valuation loss and related amortization, prior service credit amortization and foreign currency and other adjustments on defined benefit plans, net of income tax of $21 —
—
(923 ) —
(923 ) —
Issuance of common stock under stock compensation plans, net of tax effect 481,037
—
(3,813 ) —
(3,813 ) —
Issuance of stock under Employee Stock Purchase Plan 44,486
(44,486 ) 558
—
558
—
Share-based compensation —
—
16,908
—
16,908
—
Dividends —
—
(76,997 ) —
(76,997 ) —
Share repurchases (289,968 ) 289,968
(3,532 ) —
(3,532 ) —
Purchase of redeemable noncontrolling interest —
—
(1,133 ) 1,133
—
(4,445 )
Noncontrolling interest capital contribution —
—
—
—
—
2,157
Noncontrolling interest capital distribution —
—
—
(2,759 ) (2,759 ) —
Redeemable noncontrolling interest redemption value adjustment —
—
(670 ) —
(670 ) 670
Balance at January 28, 2017 84,069,492
56,440,482
$ 969,222
$ 11,772
$ 980,994
$ 4,452
Net earnings (loss) —
—
(8,934 ) 1,926
(7,008 ) —
Foreign currency translation adjustment —
—
46,368
1,402
47,770
72
Loss on derivative financial instruments designated as cash flow hedges, net of income tax of $1,532 —
—
(11,167 ) —
(11,167 ) —
Actuarial valuation and prior service credit amortization and foreign currency and other adjustments on defined benefit plans, net of income tax of ($62) —
—
264
—
264
—
Issuance of common stock under stock compensation plans, net of tax effect 651,052
—
(483 ) —
(483 ) —
Issuance of stock under Employee Stock Purchase Plan 42,538
(42,538 ) 401
—
401
—
Share-based compensation —
—
12,410
—
12,410
—
Dividends —
—
(56,928 ) —
(56,928 ) —
Share repurchases (1,919,967 ) 1,919,967
(24,812 ) —
(24,812 ) —
Noncontrolling interest capital contribution —
—
—
11
11
951
Noncontrolling interest capital distribution —
—
—
(1,358 ) (1,358 ) —
Balance at October 28, 2017 82,843,115
58,317,911
$ 926,341
$ 13,753
$ 940,094
$ 5,475

repurchases, economic conditions and U.S. and global liquidity.

Accumulated Other Comprehensive Income (Loss)

The changes in accumulated other comprehensive income (loss), net of related income taxes, ~~for the three and nine months ended October 28, 2017 and October 29, 2016~~ are ~~as follows~~ (in thousands):

Three Months Ended Oct 28, 2017
Foreign Currency Translation Adjustment Derivative Financial Instruments Designated as Cash Flow Hedges Defined Benefit Plans Total
Balance at July 29, 2017 $ (103,675 ) $ (8,751 ) $ (8,483 ) $ (120,909 )
Gains (losses) arising during the period (8,184 ) 2,749
97
(5,338 )
Reclassification to net loss for losses realized —
235
88
323
Net other comprehensive income (loss) (8,184 ) 2,984
185
(5,015 )
Balance at October 28, 2017 $ (111,859 ) $ (5,767 ) $ (8,298 ) $ (125,924 )



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

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


	Three Months Ended May 1, 2021

Balance at January 30, 2021	$	(105,970)	$	(4,876)	$	(9,829)	$	(120,675)

Gains (losses) arising during the period	(2,433)		1,553		116		(764)
Reclassification to net earnings for losses realized	—		460		77		537
Net other comprehensive income (loss)	(2,433)		2,013		193		(227)
Balance at May 1, 2021	$	(108,403)	$	(2,863)	$	(9,636)	$	(120,902)

Nine Months Ended Oct 28, 2017
Foreign Currency Translation Adjustment Derivative Financial Instruments Designated as Cash Flow Hedges Defined Benefit Plans Total
Balance at January 28, 2017 $ (158,227 ) $ 5,400
$ (8,562 ) $ (161,389 )
Gains (losses) arising during the period 46,368
(10,220 ) 2
36,150
Reclassification to net loss for (gains) losses realized —
(947 ) 262
(685 )
Net other comprehensive income (loss) 46,368
(11,167 ) 264
35,465
Balance at October 28, 2017 $ (111,859 ) $ (5,767 ) $ (8,298 ) $ (125,924 )

Table of Contents

Three Months Ended Oct 29, 2016
Foreign Currency Translation Adjustment Derivative Financial Instruments Designated as Cash Flow Hedges Marketable Securities Defined Benefit Plans Total
Balance at July 30, 2016 $ (129,518 ) $ (37 ) $ (16 ) $ (7,643 ) $ (137,214 )
Gains (losses) arising during the period (12,600 ) 3,305
—
42
(9,253 )
Reclassification to net earnings for (gains) losses realized —
(593 ) 16
61
(516 )
Net other comprehensive income (loss) (12,600 ) 2,712
16
103
(9,769 )
Balance at October 29, 2016 $ (142,118 ) $ 2,675
$ —
$ (7,540 ) $ (146,983 )

Nine Months Ended Oct 29, 2016
Foreign Currency Translation Adjustment Derivative Financial Instruments Designated as Cash Flow Hedges Marketable Securities Defined Benefit Plans Total
Balance at January 30, 2016 $ (157,652 ) $ 7,252
$ (15 ) $ (7,639 ) $ (158,054 )
Gains (losses) arising during the period 15,534
(1,958 ) (1 ) (81 ) 13,494
Reclassification to net earnings for (gains) losses realized —
(2,619 ) 16
180
(2,423 )
Net other comprehensive income (loss) 15,534
(4,577 ) 15
99
11,071
Balance at October 29, 2016 $ (142,118 ) $ 2,675
$ —
$ (7,540 ) $ (146,983 )

Details on reclassifications out of accumulated other comprehensive income (loss) to net earnings ~~(loss) during the three and nine months ended October 28, 2017 and October 29, 2016~~ are ~~as follows~~ (in thousands):

Three Months Ended Nine Months Ended
Location of
(Gain) Loss
Reclassified from
Accumulated OCI
into Earnings (Loss)
Oct 28, 2017 Oct 29, 2016 Oct 28, 2017 Oct 29, 2016
Derivative financial instruments designated as cash flow hedges:
   Foreign exchange currency contracts $ (81 ) $ (739 ) $ (1,360 ) $ (3,315 ) Cost of product sales
   Foreign exchange currency contracts 337
(45 ) 244
(126 ) Other income/expense
   Interest rate swap 57
57
119
167
Interest expense
      Less income tax effect (78 ) 134
50
655
Income tax expense
235
(593 ) (947 ) (2,619 )
Marketable securities:
   Available-for-sale securities —
25
—
25
Other income/expense
      Less income tax effect —
(9 ) —
(9 ) Income tax expense
—
16
—
16

Defined benefit plans:
   Actuarial loss amortization 116
86
344
257

₍₁₎
   Prior service credit amortization (7 ) (7 ) (20 ) (21 )
₍₁₎
      Less income tax effect (21 ) (18 ) (62 ) (56 ) Income tax expense
88
61
262
180

Total reclassifications during the period $ 323
$ (516 ) $ (685 ) $ (2,423 )


~~(1)~~	~~These accumulated other comprehensive income (loss) components are included in the computation of net periodic defined benefit pension cost. Refer to Note 13 for further information.~~

~~Redeemable Noncontrolling Interests~~


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



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

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




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

The Company is party to a put arrangement with respect to the common securities that represent the remaining noncontrolling interest for its majority-owned subsidiary, Guess Brasil Comércio e Distribuição S.A. (“Guess Brazil”), which was established through a majority-owned joint venture during fiscal 2014. The put arrangement for Guess Brazil, representing 40% of the total outstanding equity interest of that subsidiary, may be exercised at the discretion of the noncontrolling interest holder by providing written notice to the Company beginning in the sixth year of the agreement, or sooner in certain limited circumstances, and every third anniversary from the end of the sixth year thereafter subject to certain time restrictions. The redemption value of the Guess Brazil put arrangement is based on a multiple of Guess Brazil’s earnings before interest, taxes, depreciation and amortization subject to certain adjustments and is classified as a redeemable noncontrolling interest outside of permanent equity in the Company’s condensed consolidated balance sheet. During fiscal 2017, the Company and the noncontrolling interest holder increased their capital contributions by $1.7 million, of which $1.0 million was paid by the Company and the remaining amount was paid by the noncontrolling interest holder to retain the same pro-rata interest in Guess Brazil. The carrying value of the redeemable noncontrolling interest related to Guess Brazil was ~~$1.6 million~~ ~~and $1.7 million as of~~ ~~October 28, 2017~~ ~~and January 28, 2017, respectively.~~

The Company is party to a put arrangement with respect to the common securities that represent the remaining noncontrolling interest for its majority-owned subsidiary, Guess? CIS, LLC (“Guess CIS”), which was established through a majority-owned joint venture during fiscal 2016. The put arrangement for Guess CIS, representing 30% of the total outstanding equity interest of that subsidiary, may be exercised at the discretion of the noncontrolling interest holder by providing written notice to the Company during the period beginning after the fifth anniversary of the agreement through December 31, 2025, or sooner in certain limited circumstances. The redemption value of the Guess CIS put arrangement is based on a multiple of Guess CIS’s earnings before interest, taxes, depreciation and amortization subject to certain adjustments and is classified as a redeemable noncontrolling interest outside of permanent equity in the Company’s condensed consolidated balance sheet. During fiscal 2017, the Company and the noncontrolling interest holder increased their capital contributions by $5.0 million, of which $3.5 million was paid by the Company and the remaining amount was paid by the noncontrolling interest holder to retain the same pro-rata interest in Guess CIS. During the nine months ended October 28, 2017, the Company and the(5)Accounts Receivable

noncontrolling interest holder made an additional capital contribution totaling $3.2 million, of which $2.2 million was paid by the Company and the remaining amount was paid by the noncontrolling interest holder to retain the same pro-rata interest in Guess CIS. The carrying value of the redeemable noncontrolling interest related to Guess CIS was $3.9 million and $2.8 million as of October 28, 2017 and January 28, 2017, respectively.

~~The Company was previously party to a put arrangement in connection with its now wholly-owned subsidiary, Guess Sud SAS (“Guess Sud”). Under the terms of this put arrangement, which represented~~ ~~40%~~ of the total outstanding interest of that subsidiary, the noncontrolling interest holder had the option to exercise the put arrangement at its discretion by providing written notice to the Company any time after January 30, 2012. The redemption value of the put arrangement was determined based on a method which approximated fair value. During fiscal 2017, the Company acquired the remaining 40% interest in Guess Sud for $4.4 million.


~~(4)~~	~~Accounts Receivable~~

Accounts receivable is summarized as follows (in thousands):


	Oct 28, 2017		Jan 28, 2017			Apr 30, 2022		Jan 29, 2022
Trade	$	241,776	$	234,690	Trade	$	262,770	$	299,160
Royalty	22,970		19,881		Royalty	32,539		33,790
Other	11,545		5,888		Other	10,313		6,945
	276,291		260,459			305,622		339,895
Less allowances	39,632		34,922		Less allowances	10,192		11,039
	$	236,659	$	225,537		$	295,430	$	328,856

Accounts receivable consists of trade receivables relating primarily to the Company’s wholesale business in Europe and, to a lesser extent, to its wholesale businesses in the Americas and Asia, royalty receivables relating to its licensing operations, credit card and retail concession receivables related to its retail businesses and certain other receivables. Other receivables generally relate to amounts due to the Company that result from activities that are not related to the direct sale of the Company’s products or collection of royalties. ~~The accounts receivable allowance includes allowances for doubtful accounts, wholesale sales returns and wholesale markdowns. Retail sales returns allowances are included in accrued expenses.~~


~~(5)~~	~~Inventories~~

(6)Inventories

Inventories consist of the following (in thousands):


	Apr 30, 2022		Jan 29, 2022
Raw materials	$	1,951	$	1,228
Work in progress	3		3
Finished goods	481,973		461,064
	$	483,927	$	462,295

Oct 28, 2017 Jan 28, 2017
Raw materials $ 509
$ 799
Work in progress —
78
Finished goods 476,668
366,504
$ 477,177
$ 367,381

The ~~above~~ balances include an allowance to write down inventories to the lower of cost or net realizable value of $~~26.9~~$29.0 million and $~~19.4~~$31.8 million as of ~~October 28, 2017~~April 30, 2022 and January ~~28, 2017,~~29, 2022, respectively.


~~(6)~~	~~Restructuring Charges~~

During the first quarter of fiscal 2017, the Company implemented a global cost reduction and restructuring plan to better align its global cost and organizational structure with its current strategic initiatives. This plan included the consolidation and streamlining of the Company’s business processes and a reduction in its global workforce and other expenses. These actions resulted in restructuring charges related primarily to cash-based severance costs of $6.1 million during the nine months ended October 29, 2016. The restructuring charges were incurred during the three months ended April 30, 2016. There were no restructuring charges incurred during the three or nine months ended October 28, 2017 related to this plan. The Company does not expect significant future cash-based severance charges to be incurred under this plan as the actions were completed during the first quarter of fiscal 2017. As of October 28, 2017, there were no amounts included in accrued expenses related to these restructuring activities as the Company completed payments for the remaining anticipated costs during the nine

~~months ended October 28, 2017. At~~ ~~January 28, 2017, the Company had a balance of approximately $0.2 million in accrued expenses related to these restructuring activities.~~

~~The following table summarizes restructuring activities related primarily to severance during the fiscal year ended~~ ~~January 28, 2017~~ ~~and nine months ended October 28, 2017 (in thousands):~~

Total
Balance at January 30, 2016 $ —
Charges to operations 6,083
Cash payments (6,003 )
Foreign currency and other adjustments 100
Balance at January 28, 2017 $ 180
Cash payments (124 )
Foreign currency and other adjustments (56 )
Balance at October 28, 2017 $ —

Table of Contents

During the nine months ended October 29, 2016, the Company also incurred an estimated exit tax charge of approximately $1.9 million related to its reorganization in Europe as a result of the global cost reduction and restructuring plan. The estimated exit tax charge was recorded during the three months ended April 30, 2016. The exit tax charge has not been finalized with the local authorities and actual amounts could differ significantly from these estimates as negotiations are completed.(7)Income Taxes

Effective Income Tax Rate


~~(7)~~	~~Income Taxes~~

Income tax expense for the interim periods was computed using the income tax rate estimated to be applicable for the full fiscal year, adjusted for discrete items. The Company’s effective income tax rate was ~~508.6%~~an expense of 39.9% for the ~~nine~~three months ended ~~October 28, 2017,~~April 30, 2022 compared to ~~41.1%~~29.8% for the ~~nine~~three months ended ~~October 29, 2016.~~May 1, 2021. The ~~increase~~change in the effective income tax rate ~~during the nine months ended October 28, 2017 compared to the same prior-year period~~ was primarily due ~~primarily to more losses incurred in certain foreign jurisdictions where the Company has valuation allowances,~~to: (1) a shift in the distribution of earnings among the Company’s tax jurisdictions ~~within the quarters of the current fiscal year and a lower tax rate on the gain from the sale of a minority interest investment during~~compared to the same prior-year ~~period.~~period; and (2) losses during the current quarter in certain tax jurisdictions for which the Company did not recognize an income tax benefit.

Intra-Entity Transaction

During the ~~nine months ended October 28, 2017,~~third quarter of fiscal 2022, the Company ~~adopted authoritative guidance which requires all~~completed an intra-entity transfer of intellectual property rights from a U.S. entity to a wholly-owned Swiss subsidiary, more closely aligning the Company’s intellectual property rights with its business operations. This transaction resulted in a taxable gain in the U.S. The U.S. taxable gain generated by this intercompany transfer of intellectual property was primarily offset by the recognition of a deferred income tax ~~effects of stock awards (resulting from an increase or decrease~~asset in the fair value of an award from grant date to the vesting date) to be recognized in the income statement when the awards vest or are settled. This is a change from previous guidance that required such activity to be recorded in paid-in capital within stockholders’ equity. As a result, the Company recorded tax shortfalls of approximately $0.7 million as an increase to the Company’s income tax expense in its condensed consolidated statement of income (loss) during the nine months ended October 28, 2017.Swiss subsidiary.

Unrecognized Income Tax Benefit

From time-to-time, the Company is subject to routine income and other income tax audits on various income tax matters around the world in the ordinary course of business. As of ~~October 28, 2017, several~~April 30, 2022, no major income tax audits were ~~underway~~ongoing.

As of April 30, 2022 and January 29, 2022, the Company had $59.2 million and $57.5 million, respectively, of aggregate accruals for ~~various periods in multiple jurisdictions. The Company accrues an amount for its estimate of additional~~uncertain income tax ~~liability which~~positions, including penalties and interest. This includes an accrual of $19.9 million for the ~~Company, more likely than not, will incur as a result~~estimated transition tax (excluding interest) related to the 2017 Tax Cuts and Jobs Act (the “Tax Reform”) and $20.6 million for the intra-entity transfer of intellectual property rights, substantially offset by the ~~ultimate resolution of~~related deferred income tax ~~audits (“uncertain tax positions”).~~benefit from a U.S. entity to a wholly-owned Swiss subsidiary. The Company reviews and updates the estimates used in the accrual for uncertain income tax positions, as appropriate, as more definitive information ~~becomes~~or interpretations become available from income taxing authorities, ~~upon~~and on the completion of income tax audits, ~~upon~~the receipt of assessments, expiration of statutes of ~~limitation,~~limitations, or ~~upon~~ occurrence of other events.

During the second quarter of fiscal 2021, the Company became aware of a foreign withholding income tax regulation that could be interpreted to apply to certain of its previous transactions. The Company currently does not expect its exposure, if any, will have a material impact on its condensed consolidated financial position, results of operations or cash flows.

Indefinite Reinvestment Assertion

The Company has historically considered the undistributed earnings of its foreign subsidiaries to be indefinitely reinvested. As a result of the Tax Reform, the Company had ~~aggregate accruals~~a substantial amount of previously taxed earnings that could be distributed to the U.S. without additional U.S. taxation. The Company continues to evaluate its plans for ~~uncertain~~reinvestment or repatriation of unremitted foreign earnings and regularly reviews its cash positions and determination of indefinite reinvestment of foreign earnings. If the Company determines that all or a portion of such foreign earnings are no longer indefinitely reinvested, the Company may be subject to additional foreign withholding taxes and U.S. state income taxes, beyond the one-time transition tax. As of April 30, 2022, the Company determined that approximately $12.7 million of such foreign earnings are no longer indefinitely reinvested. The incremental tax ~~positions, including penalties and interest,~~cost to repatriate these earnings to the U.S. is immaterial. The Company intends to indefinitely reinvest the remaining earnings from the Company’s foreign subsidiaries for which a deferred income tax liability has not already been recorded. It is not practicable to estimate the amount of ~~$15.3 million and $14.6 million as~~tax that might be payable if these earnings were repatriated due to the complexities associated with the hypothetical calculation.

Table of October 28, 2017 and January 28, 2017, respectively. The change in the accrual balance from January 28, 2017 to October 28, 2017 resulted from additional accruals and interest and penalties during the nine months ended October 28, 2017.Contents

(8)Segment Information


~~(8)~~	~~Segment Information~~

The Company’s businesses are grouped into ~~five~~5 reportable segments for management and internal financial reporting purposes: Americas Retail, Americas Wholesale, Europe, Asia, ~~Americas Wholesale~~ and Licensing. The Company’s Americas Retail, ~~Europe,~~ Americas Wholesale, Europe and Licensing reportable segments are the same as their respective operating segments. Certain components of the Company’s Asia operating segment are separate operating segments based on region, which have been aggregated into the Asia reportable segment for disclosure purposes. During the first quarter of fiscal 2018, net revenue and related costs and expenses for certain globally serviced customers were reclassified into the segment primarily responsible for the relationship. During the third quarter of fiscal 2018, segment results were also adjusted to exclude corporate performance-based compensation costs, net gains (losses) on lease terminations and asset impairment charges due to the fact that these items are no longer included in the segment results provided to the Company’s chief operating decision maker in order to allocate resources and assess performance. Accordingly, segment results have been adjusted for the nine months ended October 28, 2017 as well as the three and nine months ended October 29, 2016 to conform to the current period presentation.

Management evaluates segment performance based primarily on revenues and earnings (loss) from operations before corporate performance-based compensation costs, asset impairment charges, net gains (losses) ~~from~~on lease ~~terminations, asset impairment~~modifications, restructuring charges and ~~restructuring charges,~~certain non-recurring credits (charges), if any. The Company believes this segment reporting reflects how its business segments are managed and how each segment’s performance is evaluated by the Company’s chief operating decision maker to assess performance and make resource allocation decisions. The Americas Retail segment includes the Company’s retail and e-commerce operations in North and Central America and its retail operations in South America. The Europe segment includes the Company’s retail, e-commerce and wholesale operations in Europe and the Middle East. The Asia segment includes the Company’s retail, e-commerce and wholesale operations in Asia and the Pacific. The Americas Wholesale segment includes the Company’s wholesale operations in the Americas. The Licensing segment includes the worldwide licensing operations of the Company. The business segment operating results exclude corporate overhead costs, which consist of shared costs of the organization, net gains (losses) on lease terminations, asset impairment charges and restructuring charges. Corporate overhead costs are presented separately and generally include, among other things, the following unallocated corporate costs: accounting and finance, executive compensation, corporate performance-based compensation, facilities, global advertising and marketing, human resources, information technology and legal.

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


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

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

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

______________________________________________________________________

Notes:

1During the three ~~and nine~~ months ended ~~October 28, 2017~~April 30, 2022, the Company recognized asset impairment charges related primarily to property and ~~October 29, 2016~~equipment of certain retail locations resulting from under-performance and expected store closures. During the three months ended May 1, 2021, the Company recognized asset impairment charges related primarily to property and equipment and certain operating lease ROU assets of certain retail stores resulting from lower revenue and future cash flow projections from the ongoing effects of the COVID-19 pandemic and expected store closures. Refer to Note 2 and Note 15 for more information regarding these asset impairment charges.

2 During the three months ended April 30, 2022 and May 1, 2021, the Company recorded net gains on lease modifications related primarily to the early termination of certain lease agreements.

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The below presents information regarding geographic areas in which the Company operated. Net revenue is classified primarily based on the country where the Company’s customer is located (in thousands):

Three Months Ended Nine Months Ended
Oct 28, 2017 Oct 29, 2016 Oct 28, 2017 Oct 29, 2016
Net revenue:

Americas Retail $ 187,021
$ 215,862
$ 561,903
$ 646,573
Europe (1) 221,230
186,289
641,833
532,847
Asia (1) 74,322
63,617
200,436
171,255
Americas Wholesale (1) 45,636
46,785
114,151
111,354
Licensing 25,929
23,768
68,088
68,066
Total net revenue $ 554,138
$ 536,321
$ 1,586,411
$ 1,530,095
Earnings (loss) from operations:

Americas Retail (1) $ (4,670 ) $ (10,505 ) $ (33,654 ) $ (22,279 )
Europe (1) 6,678
11,597
30,749
16,221
Asia (1) 2,718
(1,962 ) 5,055
(5,251 )
Americas Wholesale (1) 8,241
8,142
20,011
18,211
Licensing (1) 23,532
20,119
61,019
60,325
Total segment earnings from operations 36,499

27,391

83,180
67,227
Corporate overhead (1) (23,942 ) (11,466 ) (68,899 ) (58,660 )
Net gains (losses) on lease terminations (1) (2) (11,494 ) —
(11,494 ) 695
Asset impairment charges (1) (3) (2,018 ) (802 ) (6,013 ) �� (1,457 )
Restructuring charges (4) —
—
—
(6,083 )
Total earnings (loss) from operations $ (955 )
$ 15,123

$ (3,226 ) $ 1,722


	Three Months Ended
	Apr 30, 2022		May 1, 2021
Net revenue:
U.S.	$	169,127	$	157,066
Italy	56,366		47,553
Canada	40,578		26,640
South Korea	35,884		27,809
Germany	35,841		34,678
Spain	30,113		25,507
Other countries	199,164		179,224
Total product sales	567,073		498,477
Net royalties	26,400		21,525
Net revenue	$	593,473	$	520,002

~~(1)~~

During the first quarter of fiscal 2018, net revenue and related costs and expenses for certain globally serviced customers were reclassified into the segment primarily responsible for the relationship. During the third quarter of fiscal 2018, segment results were also adjusted to exclude corporate performance-based compensation costs, net gains (losses) on lease terminations and asset impairment charges due to the fact that these items are no longer included in the segment results provided to the Company’s chief operating decision maker in order to allocate resources and assess performance. Accordingly, segment results have been adjusted for the nine months ended October 28, 2017 as well as the three and nine months ended October 29, 2016 to conform to the current period presentation.

~~(2)~~

During the three and nine months ended October 28, 2017, the Company recorded net losses on lease terminations related primarily to the modification of certain lease agreements held with a common landlord in North America. During the nine months ended October 29, 2016, the Company recorded net gains on lease terminations related primarily to the early termination of certain lease agreements in Europe. The net gains on lease terminations were recorded during the first and second quarters of fiscal 2017. Refer to Note 1 for more information regarding the net gains (losses) on lease terminations.


~~(3)~~	During each of the periods presented, the Company recognized asset impairment charges for certain retail locations resulting from under-performance and expected store closures. Refer to Note 14 for more information regarding these asset impairment charges.


~~(4)~~	Restructuring charges incurred during the nine months ended October 29, 2016 related to plans to better align the Company’s global cost and organizational structure with its current strategic initiatives. Refer to Note 6 for more information regarding these restructuring charges.

Due to the seasonal nature of the Company’s business segments, the above net revenue and operating results are not necessarily indicative of the results that may be expected for the full fiscal year.


~~(9)~~	~~Borrowings and Capital Lease Obligations~~

(9)Borrowings and Finance Lease Obligations

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


	Apr 30, 2022		Jan 29, 2022
Term loans	$	43,832	$	48,253
Finance lease obligations	21,779		22,943
Mortgage debt	17,693		17,860
Borrowings under credit facilities	42,662		12,201
Other	3,523		3,092
	129,489		104,349
Less current installments	77,929		43,379
Long-term debt and finance lease obligations	$	51,560	$	60,970

Term Loans

As a precautionary measure to ensure financial flexibility and maintain maximum liquidity in response to the COVID-19 pandemic, the Company entered into term loans with certain banks primarily in Europe during fiscal 2021. These loans are primarily unsecured, have remaining terms ranging from one-to-three years and incur interest at annual rates ranging between 1.3% to 2.2%. As of April 30, 2022 and January 29, 2022, the Company had outstanding borrowings of $43.8 million and $48.3 million under these borrowing arrangements, respectively.

Finance Lease Obligations

During fiscal 2018, the Company began the relocation of its European distribution center to the Netherlands. The finance lease primarily provides for monthly minimum lease payments through May 2027 with an effective interest rate of approximately 6%. The Company has also entered into finance leases for equipment used in its European distribution centers. These finance lease obligations totaled $17.7 million and $19.6 million as of April 30, 2022 and January 29, 2022, respectively.

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

Oct 28, 2017 Jan 28, 2017
Mortgage debt, maturing monthly through January 2026 $ 20,465
$ 20,889
Capital lease obligations 17,325
—
Other 3,112
3,159
40,902
24,048
Less current installments 2,121
566
Long-term debt and capital lease obligations $ 38,781
$ 23,482

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Mortgage Debt

~~On February 16, 2016,~~During fiscal 2017, the Company entered into a ten-year $21.5 million real estate secured loan (the “Mortgage Debt”)~~. The Mortgage Debt~~ which is secured by the Company’s U.S. distribution center based in Louisville, Kentucky and provides for monthly principal and interest payments based on a 25-year amortization schedule, with the remaining principal balance and any accrued and unpaid interest due at maturity. Outstanding principal balances under the Mortgage Debt bear interest at the one-month LIBOR rate plus 1.5%. As of October 28, 2017, outstanding borrowings under the Mortgage Debt, net of debt issuance costs of $0.1 million, were $20.5 million. At January 28, 2017, outstanding borrowings under the Mortgage Debt, net of debt issuance costs of $0.1 million, were $20.9 million.

Kentucky. The Mortgage Debt requires the Company to comply with a fixed charge coverage ratio on a trailing four-quarter basis if consolidated cash, cash equivalents, ~~and short term~~short-term investment balances and availability under borrowing arrangements fall below certain levels. In addition, the Mortgage Debt contains customary covenants, including covenants that limit or restrict the Company’s ability to incur liens on the mortgaged property and enter into certain contractual obligations. Upon the occurrence of an event of default under the Mortgage Debt, the lender may terminate the Mortgage Debt and declare all amounts outstanding to be immediately due and payable. The Mortgage Debt specifies a number of events of default (some of which are subject to applicable grace or cure periods), including, among other things, non-payment defaults, covenant defaults, cross-defaults to other material indebtedness, bankruptcy and insolvency defaults and material judgment defaults.

matures in January 2026 and converts the nature of the Mortgage Debt from LIBOR floating-rate debt to fixed-rate debt. The fair value of the interest rate swap asset as of October 28, 2017 and January 28, 2017 was approximately $0.8 million and $0.9 million, respectively.

~~Capital Lease Obligations~~

During ~~the nine months ended October 28, 2017, the Company began the relocation of its European distribution center to the Netherlands. As a result,~~fiscal 2021, the Company entered into ~~a capital lease~~an amendment of $16.5 million for equipment used in the new facility. The capital lease provides for monthly minimum lease payments through May 2027 and has an effective interest rate of approximately 6%. As of October 28, 2017, the capital lease obligation was $15.9 million.

During the nine months ended October 28, 2017, the Company also entered into a capital lease for $1.5 million related primarily to computer hardware and software. As of October 28, 2017, this capital lease obligation was $1.4 million.

The Company previously leased a building in Florence, Italy under a capital lease which provided for minimum lease payments through May 1, 2016. Upon termination of the capital lease, the title of the building was transferred to the Company. The Company had a separate interest rate swap agreement designated as a non-hedging instrument that converted the nature of the capital lease obligation from Euribor floating-rate debt to fixed-rate debt and resulted in a swap fixed rate of 3.55%. This interest rate swap agreement matured on February 1, 2016.

~~Credit Facilities~~

~~On June 23, 2015, the Company entered into a five-year~~its senior secured asset-based revolving credit facility with Bank of America, N.A. and ~~the~~ other lenders ~~party thereto (the~~(as amended, the “Credit Facility”). The Credit Facility provides for a borrowing capacity in an amount up to ~~$150~~$120 million, including a Canadian sub-facility up to ~~$50~~$20 million, subject to a borrowing base. Based on applicable accounts receivable and inventory ~~eligible cash~~ balances ~~and relevant covenant restrictions~~ as of ~~October 28, 2017,~~April 30, 2022, the Company could have borrowed up to ~~$123~~$110 million under the Credit Facility. The Credit Facility has an option to expand the borrowing capacity by up to ~~$150~~$180 million subject to certain terms and conditions, including the willingness of existing or new lenders to assume such increased amount. The Credit Facility is available for direct borrowings and the issuance of letters of credit, subject to certain letters of credit sublimits, and may be used for working capital and other general corporate purposes.

~~All obligations under the Credit Facility are unconditionally guaranteed by~~ As of April 30, 2022, the Company had $9.6 million in outstanding standby letters of credit, 0 outstanding documentary letters of credit and the Company’s existing and future domestic and Canadian subsidiaries, subject to certain exceptions, and are secured by a first priority lien on substantially all of the assets of the Company and such domestic and Canadian subsidiaries, as applicable.

~~Direct~~$40.0 million outstanding borrowings under the Credit Facility made by the Company and its domestic subsidiaries shall bear interest at the U.S. base rate plus an applicable margin (varying from 0.25% to 0.75%) or at LIBOR plus an applicable margin (varying from 1.25% to 1.75%). The U.S. base rate is based on the greater of (i) the U.S. prime rate, (ii) the federal funds rate, plus 0.5%, and (iii) LIBOR for a 30 day interest period, plus 1.0%. Direct borrowings under the Credit Facility made by the Company’s Canadian subsidiaries shall bear interest at the Canadian prime rate plus an applicable margin (varying from 0.25% to 0.75%) or at the Canadian BA rate plus an applicable margin (varying from 1.25% to 1.75%). The Canadian prime rate is based on the greater of (i) the Canadian prime rate, (ii) the Bank of Canada overnight rate, plus 0.5%, and (iii) the Canadian BA rate for a one month interest period, plus 1.0%. The applicable margins are calculated quarterly and vary based on the average daily availability of the aggregate borrowing base. The Company is also obligated to pay certain commitment, letter of credit and other fees customary for a credit facility of this size and type.Facility. As of ~~October 28, 2017,~~January 29, 2022, the Company had ~~$1.0~~$10.1 million in outstanding standby letters of credit, no outstanding documentary letters of credit and no outstanding borrowings under the Credit Facility.

that limit or restrict the Company and certain of its subsidiaries’ ability to: incur liens, incur indebtedness, make investments, dispose of assets, make certain restricted payments, merge or consolidate and enter into certain transactions with affiliates. Upon the occurrence of an event of default under the Credit Facility, the lenders may cease making loans, terminate the Credit Facility and declare all amounts outstanding to be immediately due and payable. The Credit Facility specifies a number of events of default (some of which are subject to applicable grace or cure periods), including, among other things, non-payment defaults, covenant defaults, cross-defaults to other material indebtedness, bankruptcy and insolvency defaults, and material judgment defaults. The Credit Facility allows for both secured and unsecured borrowings outside of the Credit Facility up to specified amounts.

The Company, through its European subsidiaries, maintains short-term ~~uncommitted~~committed borrowing agreements, primarily for working capital purposes, with various banks in Europe. ~~The majority~~Some of ~~the borrowings under~~ these agreements are secured by specific accounts receivable balances. Based on the applicable accounts receivable balances as of October 28, 2017, the Company could have borrowed up to $69.2 million under these agreements.include certain equity-based financial covenants. As of ~~October 28, 2017,~~April 30, 2022 and January 29, 2022, the Company had no outstanding borrowings, orno outstanding documentary letters of credit, and $119.6 million and $126.9 million available for future borrowings under these ~~agreements.~~agreements, respectively. The agreements are denominated primarily in euros and ~~provide for~~incur interest at annual ~~interest~~ rates ranging ~~from 0.5%~~between 0.9% to ~~4.6%~~1.1%. On May 5, 2022, the Company entered into a €250 million revolving credit facility through a European subsidiary, which replaced the European short-term borrowing arrangements referenced above. Refer to Note 17 for further information.

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The ~~maturities of any~~Company, through its China subsidiary, maintains a short-term uncommitted bank borrowing agreement that provides for a borrowing capacity up to $30 million, primarily for working capital purposes. The Company had $1.9 million in outstanding borrowings under ~~these arrangements are generally linked to the credit terms~~this agreement as of ~~the underlying accounts receivable~~April 30, 2022 and $12.2 million in outstanding borrowings under this agreement as of January 29, 2022.

The Company, through its Japan subsidiary, maintains a short-term uncommitted bank borrowing agreement that ~~secure the borrowings. With the exception of one facility~~provides for a borrowing capacity up to ~~$40.6~~$3.9 million, ~~that has a minimum net equity requirement, there are~~primarily for working capital purposes. The Company had $0.8 million outstanding borrowings under this agreement as of April 30, 2022 and no ~~other financial ratio covenants.~~outstanding borrowings as of January 29, 2022.

Other

From time-to-time, the Company will obtain other financing in foreign countries for working capital to finance its local operations.

(10)Convertible Senior Notes and Related Transactions

2.00% Convertible Senior Notes due 2024

In April 2019, the Company issued $300 million principal amount of the Notes in a private offering. In connection with the issuance of the Notes, the Company entered into an indenture (the “Indenture”) with respect to the Notes with U.S. Bank N.A., as trustee (the “Trustee”). The Notes are senior unsecured obligations of the Company and bear interest at an annual rate of 2.00% payable semi-annually in arrears on April 15 and October 15 of each year. The Notes will mature on April 15, 2024, unless earlier repurchased or converted in accordance with their terms.

The Notes are convertible in certain circumstances into cash, shares of the Company’s common stock, or a combination of cash and shares of the Company’s common stock, at the Company’s election, at an initial conversion rate of 38.7879 shares of common stock per $1,000 principal amount of Notes, which is equivalent to an initial conversion price of approximately $25.78 per share, subject to adjustment upon the occurrence of certain events. In accordance with the terms of the indenture governing the Notes, the Company has adjusted the conversion rate and the conversion price of the Notes for quarterly dividends exceeding $0.1125 per share (currently $25.53). Prior to November 15, 2023, the Notes are convertible only upon the occurrence of certain events and during certain periods, and thereafter, at any time until the close of business on the second scheduled trading day immediately preceding the maturity date of the Notes.

Following certain corporate events described in the Indenture that occur prior to the maturity date, the conversion rate will be increased for a holder who elects to convert its Notes in connection with such corporate event in certain circumstances. The Notes are not redeemable prior to maturity, and no sinking fund is provided for the Notes. As of April 30, 2022, none of the conditions allowing holders of the Notes to convert had been met. The Company expects to settle the principal amount of the Notes in 2024 in cash and any excess in shares.

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

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~~(10)~~	~~Share-Based Compensation~~

Debt issuance costs were comprised of $3.8 million of discounts and commissions payable to the initial purchasers and third-party offering costs of approximately $1.5 million. Debt issuance costs were recorded as a contra-liability and are presented net against the Notes balance on the Company’s condensed consolidated balance sheets. These costs are being amortized to interest expense over the term of the Notes.

The Notes consist of the following (in thousands):


	Apr 30, 2022		Jan 29, 2022
Liability component:
Principal	$	300,000	$	300,000
Unamortized debt discount1	—		(27,498)
Unamortized issuance costs	(1,693)		(1,907)
Net carrying amount	$	298,307	$	270,595

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

Notes:

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

2As a result of adoption of new authoritative guidance on January 30, 2022, the equity component was eliminated and recorded as an adjustment to retained earnings. As of April 30, 2022, the balance is associated with convertible bond hedge issuance costs and deferred taxes, which are not impacted by the adoption. As of January 29, 2022, the balance was included in paid-in capital within stockholders’ equity on the condensed consolidated balance sheets and is net of debt issuance costs and deferred taxes.

As of April 30, 2022 and January 29, 2022, the fair value of the Notes, net of unamortized debt discount and debt issuance costs, was approximately $331.7 million and $303.1 million, respectively. The fair value of the Notes is determined based on inputs that are observable in the market and have been classified as Level 2 in the fair value hierarchy.

Convertible Bond Hedge and Warrant Transactions

In connection with the offering of the Notes, the Company entered into convertible note hedge transactions whereby the Company had the option to purchase a total of approximately 11.6 million shares of its common stock at an initial strike price of approximately $25.78 per share, in each case subject to adjustment in certain circumstances. The total cost of the convertible note hedge transactions was $61.0 million. In addition, the Company sold warrants whereby the holders of the warrants had the option to purchase a total of approximately 11.6 millionshares of the Company’s common stock at an initial strike price of $46.88per share. The Company received $28.1 million in cash proceeds from the sale of these warrants. Both the number of shares underlying the convertible note hedges and warrants and the strike price of the instruments are subject to customary adjustments. In accordance with the terms of the convertible note hedge confirmations and warrant confirmations, respectively, the Company has adjusted the strike prices with respect to the convertible note hedges and the warrants for quarterly dividends exceeding $0.1125 per share (currently $46.42). Taken together, the purchase of the convertible note hedges and sale of the warrants are intended to offset dilution from the conversion of the Notes to the extent the market price per share of the Company’s common stock exceeds the adjusted strike price of the convertible note hedges. The warrant transaction may have a dilutive effect with respect to the Company’s common stock to the extent the market price per share of the Company’s common stock exceeds the adjusted strike price of the warrants. The convertible note hedges and warrants are recorded in stockholders’ equity, are not accounted for as derivatives and are not remeasured each reporting period.

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

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(11)Share-Based Compensation

The following ~~table~~ summarizes the share-based compensation expense recognized under all of the Company’s stock plans ~~during the three and nine months ended October 28, 2017 and~~ ~~October 29, 2016~~(in thousands):

Three Months Ended Nine Months Ended
Oct 28, 2017 Oct 29, 2016 Oct 28, 2017 Oct 29, 2016
Stock options $ 571
$ 520
$ 1,761
$ 1,654
Stock awards/units 3,658
3,176
10,539
11,000
Employee Stock Purchase Plan 31
23
110
114
Total share-based compensation expense $ 4,260
$ 3,719
$ 12,410
$ 12,768

During the first quarter of fiscal 2018, the Company adopted authoritative guidance which eliminates the requirement to estimate forfeitures, but rather provides for an election that would allow entities to account for forfeitures as they occur. The Company adopted this election using the modified retrospective method and recorded a cumulative adjustment to reduce retained earnings by approximately $0.3 million as of the beginning of the period of adoption.


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

Unrecognized compensation cost related to nonvested stock options and nonvested stock awards/units totaled approximately ~~$4.3~~$2.9 million and ~~$33.4~~$20.3 million, respectively, as of ~~October 28, 2017.~~April 30, 2022. This cost is expected to be recognized over a weighted average period of ~~1.7~~1.5 years. ~~The weighted average grant date fair value of stock options granted was $1.57 and $3.53 during the nine months ended October 28, 2017 and October 29, 2016, respectively.~~

~~Grants~~

On April 28, 2017, the Company granted select key management 1,056,042 nonvested stock units which are subject to certain performance-based vesting or market-based vesting conditions. On April 29, 2016, the Company granted select key management 602,816 nonvested stock units which are subject to certain performance-based vesting or market-based vesting conditions.

~~Annual Grants~~

On March 29, 2017, the Company made an annual grant of 1,283,175 stock options and 707,675 nonvested stock awards/units to its employees. On March 30, 2016, the Company made an annual grant of 616,450 stock options and 442,000 nonvested stock awards/units to its employees.

Performance-Based Awards

The Company has granted certain nonvested stock units subject to performance-based vesting conditions to select executive officers. Each award of nonvested stock units generally has an initial vesting period from the date of the grant through either (i) the end of the first fiscal year or (ii) the first anniversary of the date of grant, followed by annual vesting periods which may range from ~~two-to-three~~two-to-three years. ~~The nonvested stock units are subject to the achievement of certain performance-based vesting conditions.~~

The Company has also granted a target number of nonvested stock units to select key management, including certain executive officers. The number of shares that may ultimately vest with respect to each award may range from 0% up to 200% of the target number of shares, subject to the achievement of certain performance-based vesting conditions. Any shares that are ultimately issued are scheduled to vest at the end of the third fiscal year following the grant date.

The following ~~table~~ summarizes the activity for nonvested performance-based units during the ~~nine~~three months ended ~~October 28, 2017:~~April 30, 2022:


						Number of Units	Weighted Average Grant Date Fair Value
	Number of Units		Weighted Average Grant Date Fair Value
Nonvested at January 28, 2017	787,849		$	19.17
Nonvested at January 29, 2022					Nonvested at January 29, 2022	643,813	$	18.78
Granted	818,416		11.17		Granted	—	—
Vested	(193,240	)	20.57		Vested	(314,239)	17.31
Forfeited	(6,757	)	18.35		Forfeited	(11,718)	26.40
Nonvested at October 28, 2017	1,406,268		$	14.32
Nonvested at April 30, 2022					Nonvested at April 30, 2022	317,856	$	19.95

Market-Based Awards

The Company has granted certain nonvested stock units subject to market-based vesting conditions to select executive officers. ~~The~~These market-based awards include (i) units where the number of shares that may ultimately vest will equal 0% to 150% of the target number of shares, subject to the performance of the Company’s total stockholder return (“TSR”) relative to the TSR of a select group of peer companies over a three-year period and (ii) units scheduled to vest based on the attainment of certain absolute stock price levels over a four-year period. Vesting is also subject to continued service requirements through the vesting date.

The following ~~table~~ summarizes the activity for nonvested market-based units during the ~~nine~~three months ended ~~October 28, 2017:~~April 30, 2022:


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

Number of
Units
Weighted
Average
Grant Date
Fair Value
Nonvested at January 28, 2017 323,825
$ 16.63
Granted 248,020
10.62
Vested —
—
Forfeited —
—
Nonvested at October 28, 2017 571,845
$ 14.02

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(12)Related Party Transactions


~~(11)~~	~~Related Party Transactions~~

The Company and its subsidiaries periodically enter into transactions with other entities or individuals that are considered related parties, including certain transactions with entities owned by, affiliated with, ~~trusts~~or for the respective benefit of, Paul Marciano, who is an executive and member of the Board of the Company, and Maurice Marciano, ~~Chairman Emeritus and~~who is also a member of the Board, and certain of their children (the “Marciano ~~Trusts”~~Entities”).

Leases

The Company leases warehouse and administrative facilities, including the Company’s North American corporate headquarters in Los Angeles, California, from partnerships affiliated with the Marciano ~~Trusts~~Entities and certain of their affiliates. There were ~~four~~4 of these leases in effect as of ~~October 28, 2017~~April 30, 2022 with expiration or option exercise dates ranging from calendar years ~~2018~~2023 to ~~2020~~.

The Company, through a wholly-owned Canadian subsidiary, leases warehouse and administrative facilities in Montreal, Quebec from a partnership affiliated with the Marciano Trusts. During the third quarter of fiscal 2018, the Company exercised an option to extend the lease term for an additional one-year period ending in December 2018. ~~All other terms of the existing lease remain in full force and effect.~~

The Company, through a French subsidiary, leases a showroom and office space located in Paris, France from an entity that is owned in part by an affiliate of the Marciano Trusts. Due to excess capacity, the lease was amended to reduce the square footage by approximately 5,100 square feet to 16,000 square feet during the nine months ended October 28, 2017. The amendment also provided for a corresponding reduction in aggregate rent, common area maintenance charges and property tax expense due to the lower square footage. All other terms of the existing lease remain in full force and effect.

In January 2016, the Company sold an approximately 140,000 square foot parking lot located adjacent to the Company’s corporate headquarters to a partnership affiliated with the Marciano Trusts for a sales price of $7.5 million, which was subsequently collected during the nine months ended October 29, 2016. Concurrent with the sale, the Company entered into a lease agreement to lease back the parking lot from the purchaser.2030.

Aggregate ~~rent, common area maintenance charges and property tax expense~~lease costs recorded under these ~~four~~4 related party leases were approximately ~~$3.6~~$2.3 million and ~~$3.8~~$2.2 million for the ~~nine~~three months ended ~~October 28, 2017~~April 30, 2022 and ~~October 29, 2016,~~May 1, 2021, respectively. The Company believes ~~that~~ the terms of the related party leases ~~and parking lot sale~~ have not been significantly affected by the fact ~~that~~ the Company and the lessors are related.

Aircraft Arrangements

The Company periodically charters aircraft owned by ~~MPM Financial, LLC (“MPM Financial”), an entity affiliated with~~ the Marciano ~~Trusts,~~Entities through informal arrangements with ~~MPM Financial~~the Marciano Entities and independent ~~third party~~third-party management companies contracted by ~~MPM Financial~~such Marciano Entities to manage ~~its~~their aircraft. The total fees paid under these arrangements for the ~~nine~~three months ended ~~October 28, 2017~~April 30, 2022 and ~~October 29, 2016~~May 1, 2021 were approximately ~~$0.7~~$0.6 million and ~~$0.8~~$0.9 million, respectively.

~~These related party disclosures should be read in conjunction with the disclosure concerning related party transactions in the Company’s Annual Report on Form 10-K for the year ended~~ ~~January 28, 2017~~.


~~(12)~~	~~Commitments and Contingencies~~

~~Leases~~Minority Investment

The Company ~~leases~~owns a 30% interest in a privately held men’s footwear company (the “Footwear Company”) in which the Marciano Entities also own a 45% interest. In December 2020, the Company provided the Footwear Company with a revolving credit facility for $2.0 million, which provides for an annual interest rate of 2.75% and matures in November 2023. As of both April 30, 2022 and January 29, 2022, the Company had a note receivable of $0.2 million included in other assets in its ~~showrooms, advertising, licensing, sales~~condensed consolidated balance sheets related to outstanding borrowings by the Footwear Company under this revolving credit facility.

Vendor Purchases

The Company purchases faux fur products from a privately-held fashion accessories company (the “Fashion Company”). Mr. Maurice Marciano, Mr. Paul Marciano and ~~merchandising offices, remote distribution~~Mr. Carlos Alberini own on a combined basis 20% of the outstanding common equity interests in the Fashion Company (with the Marcianos jointly owning 16% and ~~warehousing facilities and retail and factory outlet store locations under operating lease agreements expiring on various dates through November 2036. Some of these leases require~~Mr. Alberini owning 4%). The total payments made by the Company to ~~make periodic payments~~the Fashion Company were approximately $1.2 million and $0.2 million for ~~property taxes, utilities~~the three months ended April 30, 2022 and common area operating expenses. Certain retail store leases provide for rents based upon the minimum annual rental amount and a percentage of annual sales volume, generally ranging from 4% to 20%, when specific sales volumes are exceeded. The Company’s concession leases also provide for rents primarily based upon a percentage of annual sales volume which average approximately 35% of annual sales volume. Some leases include lease incentives, rent abatements and fixed rent escalations,

~~which are amortized and recorded over the initial lease term on a straight-line basis.~~May 1, 2021, respectively. The Company ~~also leases some of its equipment under operating lease agreements expiring at various dates through August 2022.~~

~~As discussed in further detail in Note 9,~~believes that the price paid by the Company ~~leases equipment as well as computer hardware~~for the Fashion Company’s products and ~~software under capital lease obligations.~~the terms of the transactions between the Company and the Fashion Company have not been affected by this passive investment of Messrs. Marcianos and Mr. Alberini in the Fashion Company.

(13) Commitments and Contingencies

Investment Commitments

As of ~~October 28, 2017~~,April 30, 2022, the Company had an unfunded commitment to invest ~~€4.5~~€1.0 million ($~~5.3~~1.0 million) in a private equity fund. Refer to Note 1415 for further information. On May 4, 2022, the Company committed an additional €10.0 million to the private equity fund.

Legal and Other Proceedings

~~On May 6, 2009, Gucci America, Inc. filed a complaint~~The Company is involved in legal proceedings, arising both in the ~~U.S. District Court for~~ordinary course of business and otherwise, including the ~~Southern District of New York against Guess?, Inc. and certain third party licensees for the Company asserting, among~~proceedings described below as well as various other things, trademark and trade dress law violations and unfair competition. The complaint sought injunctive relief, compensatory damages, including treble damages, and certain other relief. Complaints similar to those in the above action have also been filed by Gucci entities against the Company and certain of its subsidiaries in the Court of Milan, Italy, the Intermediate People’s Court of Nanjing, China and the Court of Paris, France. The three-week bench trial in the U.S. matter concluded on April 19, 2012, with the court issuing a preliminary ruling on May 21, 2012 and a final ruling on July 19, 2012. Although the plaintiff was seeking compensation in the U.S. matter in the form of damages of $26 million and an accounting of profits of $99 million, the final ruling provided for monetary damages of $2.3 million against the Company and $2.3 million against certain of its licensees. The court also granted narrow injunctions in favor of the plaintiff for certain of the claimed infringements. On August 20, 2012, the appeal period expired without any party having filed an appeal, rendering the judgment final. On May 2, 2013, the Court of Milan ruled in favor of the Company in the Milan, Italy matter. In the ruling, the Court rejected all of the plaintiff’s claims and ordered the cancellation of three of the plaintiff’s Italian and four of the plaintiff’s European Community trademark registrations. On June 10, 2013, the plaintiff appealed the Court’s ruling in the Milan matter. On September 15, 2014, the Court of Appeal of Milan affirmed the majority of the lower Court’s ruling in favor of the Company, but overturned the lower Court’s finding with respect to an unfair competition claim. That portion of the matter is now in a damages phase based on the ruling. On October 16, 2015, the plaintiff appealed the remainder of the Court of Appeal of Milan’s ruling in favor of the Companyother matters incidental to the ~~Italian Supreme Court~~Company’s business. Unless otherwise stated, the resolution of Cassation. In the China matter, the Intermediate People’s Court of Nanjing, China issued a ruling on November 8, 2013 granting an injunction in favor of the plaintiff for certain of the claimed infringements on handbags and small leather goods and awarding the plaintiff statutory damages in the amount of approximately $80,000. The Company strongly disagreed with the Court’s decision and appealed the ruling. On August 31, 2016, the Court of Appeal for the China matter issued a decision in favor of the Company, rejecting all of the plaintiff’s claims. In March 2017, the plaintiff petitioned the China Supreme Court for a retrial of the matter. On January 30, 2015, the Court of Paris ruled in favor of the Company in the France matter, rejecting all of the plaintiff’s claims and partially canceling two of the plaintiff’s community trademark registrations and one of the plaintiff’s international trademark registrations. On February 17, 2015, the plaintiff appealed the Court of Paris’ ruling. Although the Company believes that it has a strong position and will continueany particular proceeding is not currently expected to ~~vigorously defend each of the remaining matters, it is unable to predict with certainty whether or not these efforts will ultimately be successful or whether the outcomes will~~ have a material adverse impact on the Company’s financial position, or results of ~~operations.~~

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operations or cash flows. Even if such an impact could be material, the Company may not be able to estimate the reasonably possible loss or range of loss until developments in the proceedings have provided sufficient information to support an assessment.

The Company has received customs tax assessment notices from the Italian Customs Agency (“ICA”) regarding its customs tax audit of ~~one~~1 of the Company’s European subsidiaries for the period from July 2010 through December 2012. Such assessments totaled €9.8 million ($~~11.4~~10.3 million), including potential penalties and interest. The Company strongly ~~disagrees~~disagreed with the ICA’s positions ~~that the Italian Customs Agency has taken~~ and therefore filed appeals with the Milan First Degree Tax Court (“MFDTC”). ~~In May 2015, the MFDTC issued~~Those appeals were split into a ~~judgment in favor~~number of different cases that were then heard by different sections of the ~~Company in relation to the first set of appeals (covering the period through September 2010) and canceled the related assessments totaling €1.7 million ($1.9 million). In November 2015, the Italian Customs Agency notified the Company of its intent to appeal this first~~MFDTC. The MFDTC ~~judgment. During fiscal 2017, the Appeals Court~~ ruled in favor of the Company ~~and rejected~~on all of these appeals. The ICA subsequently appealed €9.7 million ($10.2 million) of these favorable MFDTC judgments with the ~~appeal by the Italian Customs Agency on the first MFDTC~~

~~judgment. During fiscal 2017, the MFDTC also issued judgments~~Appeals Court. To date, €8.5 million ($9.0 million) have been decided in favor of the Company ~~in relation to the second through seventh set of appeals (covering the period from October 2010~~ ~~through December 2012)~~ and ~~canceled the related assessments totaling €8.1~~€1.2 million ($~~9.5~~1.3 million)~~. Subsequently,~~ have been decided in favor of the ~~Italian Customs Agency~~ICA. The Company believes that the unfavorable Appeals Court ruling is incorrect and inconsistent with the prior rulings on similar matters by both the MFDTC and other judges within the Appeals Court, and has appealed the ~~majority of these favorable MFDTC judgments, as well as certain~~decision to the Supreme Court. The ICA has appealed most of the favorable Appeals Court ~~judgments. While these MFDTC judgments~~rulings to the Supreme Court. To date, of the cases that have been ~~favorable~~appealed to the Supreme Court, €0.4 million ($0.4 million) have been decided in favor of the Company~~, there~~ based on the merits of the case and €1.1 million ($1.2 million) have been remanded back to the lower court for further consideration. There can be no assurances ~~that~~ the ~~Italian Customs Agency~~Company will ~~not~~ be successful in ~~its~~the remaining appeals. It also continues to be possible that the Company will receive similar or even larger assessments for periods subsequent to December 2012 or other claims or charges related to the matter in the future. Although the Company believes that it has a strong position and will continue to vigorously defend this matter, it is unable to predict with certainty whether or not these efforts will ultimately be successful or whether the outcome will have a material impact on the Company’s financial position, or results of ~~operations.~~operations or cash flows.

On ~~June 6, 2017, the European Commission notified~~January 19, 2021, a former model for the Company ~~that it has initiated proceedings to investigate whether certain of~~filed an action against the Company’s ~~practices~~Chief Creative Officer and ~~agreements concerning~~ the ~~distribution of apparel and accessories within~~Company in the ~~European Union breach European Union competition rules related to cross-border transactions, internet sales limitations and resale price restrictions.~~California Superior Court in Los Angeles (Jane Doe v. Paul Marciano, et al.). The ~~initiation of the proceedings does not mean~~complaint asserts several claims based on allegations that the ~~European Commission~~former model was treated improperly by Mr. Paul Marciano and retaliated against by the Company. The complaint seeks an unspecified amount of general damages, medical expenses, lost earnings, punitive damages and attorneys’ fees. The case has ~~made a definitive conclusion regarding whether~~been moved to arbitration and is currently in the discovery stage. Mr. Paul Marciano and the Company ~~breached any rules. The~~dispute these claims fully and intend to contest them vigorously. In March and April 2021, the Company ~~has cooperated~~received separate communications from two other individuals containing similar allegations against Mr. Paul Marciano and ~~plans to continue to cooperate~~the Company. Each individual who contacted the Company in March 2021 and April 2021 is represented by the same attorney who represents the plaintiff in the January 2021 action. Though no complaint was filed with the European Commission, including through responses to requests for information and through changes to certain business practices and agreements, as appropriate. If a violation is ultimately found, a broad range of remedies is potentially availablerespect to the ~~European Commission, including imposing a fine and/~~allegations in the March 2021 letter and Mr. Paul Marciano and the Company disputed each of those allegations fully, in order to avoid the cost of litigation and without admitting liability or ~~injunctive relief prohibiting or restricting certain business practices. As of November 6, 2017,~~fault, the Company and ~~the European Commission agreed to begin~~Mr. Paul Marciano entered into a settlement ~~discussion process~~agreement with the individual who sent the March 2021 letter, resolving the claims for an aggregate total amount of $300,000 in July 2021.

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

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

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

Redeemable Noncontrolling Interests

The Company is party to a put arrangement with respect to the common securities that represent the remaining noncontrolling interest for its majority-owned subsidiary, Guess Brasil Comércio e Distribuição S.A. (“Guess Brazil”). The put arrangement for Guess Brazil, representing 40% of the ~~proceedings. Those discussions are still in a preliminary stage. At this point,~~total outstanding equity interest of that subsidiary, may be exercised at the discretion of the noncontrolling interest holder by providing written notice to the Company every third anniversary beginning in March 2019, subject to certain time restrictions. The redemption value of the Guess Brazil put arrangement is ~~unable~~based on a multiple of Guess Brazil’s earnings before interest, taxes, depreciation and amortization subject to ~~predict~~certain adjustments and is classified as a redeemable noncontrolling interest outside of permanent equity in the ~~timing or outcome~~Company’s condensed consolidated balance sheet. The carrying value of ~~these proceedings, including~~ the ~~magnitude~~redeemable noncontrolling interest related to Guess Brazil was $0.5 million and $0.4 million as of any potential fine. However, the Company does not currently believe that any changes to its business practices or agreements made in connection with this proceeding will have a material impact on its ongoing business operations within the European Union.April 30, 2022 and January 29, 2022, respectively.

The Company is also ~~involved in various other claims and other matters incidental~~party to a put arrangement with respect to the ~~Company’s business,~~common securities that represent the ~~resolutions~~remaining noncontrolling interest for its majority-owned Russian subsidiary, Guess? CIS, LLC (“Guess CIS”), which was established through a majority-owned joint venture during fiscal 2016. The put arrangement for Guess CIS, representing 30% of ~~which are not expected~~the total outstanding equity interest of that subsidiary, may be exercised at the discretion of the noncontrolling interest holder by providing written notice to ~~have~~the Company during the period beginning after the fifth anniversary of the agreement through December 31, 2025, or sooner in certain limited circumstances. The redemption value of the Guess CIS put arrangement is based on a ~~material adverse effect on~~multiple of Guess CIS’s earnings before interest, taxes, depreciation and amortization subject to certain adjustments and is classified as a redeemable noncontrolling interest outside of permanent equity in the Company’s ~~financial position~~condensed consolidated balance sheet. The carrying value of the redeemable noncontrolling interest related to Guess CIS was $9.4 million and $9.1 million as of April 30, 2022 and January 29, 2022, respectively. The parties are evaluating the potential purchase by the Company of the 30% interest held by the noncontrolling interest holder in light of the various sanctions recently imposed by the United States and European governments with respect to Russia.

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

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


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

Foreign currency translation adjustment	354		29




Ending balance	$	9,854	$	3,949


~~(13)~~	~~Defined Benefit Plans~~

(14)Defined Benefit Plans

Supplemental Executive Retirement Plan

~~On August 23, 2005, the Board of Directors of the Company adopted a~~The Company’s Supplemental Executive Retirement Plan (“SERP”) ~~which became effective January 1, 2006. The SERP~~ provides select employees who satisfy certain eligibility requirements with certain benefits upon retirement, termination of employment, death, disability or a change in control of the Company, in certain prescribed circumstances.

As a ~~non-qualified~~non-

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qualified pension plan, no dedicated funding of the SERP is required; however, the Company has made periodic payments into insurance policies held in a rabbi trust to fund the expected obligations arising under the non-qualified SERP. The ~~amount of any future payments into the insurance policies, if any, may vary depending on investment performance of the trust. The~~ cash surrender values of the insurance policies were ~~$62.8~~$67.1 million and ~~$58.6~~$70.9 million as of ~~October 28, 2017~~April 30, 2022 and January ~~28, 2017,~~29, 2022, respectively, and were included in other assets in the Company’s condensed consolidated balance sheets. As a result of changes in the value of the insurance policy investments, the Company recorded unrealized ~~gains~~losses of ~~$1.6~~$3.3 million ~~and $5.5 million in other income~~ during the three ~~and nine~~ months ended ~~October 28, 2017, respectively,~~April 30, 2022 and immaterial unrealized ~~gains (losses) of $(0.5) million and $4.6 million~~losses in other ~~income and~~ expense during the three ~~and nine~~ months ended ~~October 29, 2016, respectively.~~May 1, 2021. The projected benefit obligation was ~~$53.6~~$49.3 million and ~~$53.5~~$49.4 million as of ~~October 28, 2017~~April 30, 2022 and January ~~28, 2017,~~29, 2022, respectively, and was included in accrued expenses and other current liabilities and other long-term liabilities in the Company’s condensed consolidated balance sheets depending on the expected timing of payments. SERP benefit payments of ~~$0.4 million and $1.3~~$0.5 million were made during each of the three ~~and nine~~ months ended ~~October 28, 2017, respectively. SERP benefit payments of $0.4 million~~April 30, 2022 and ~~$1.3 million were made during~~May 1, 2021.

Foreign Pension Plans

In certain foreign jurisdictions, primarily in Switzerland, the ~~three and nine months ended October 29, 2016, respectively.~~

~~Swiss Pension Plan~~

InCompany is required to guarantee the returns on Company-sponsored defined contribution plans in accordance with local regulations, the Company also maintains a pension plan in Switzerland for certain of its employees. The plan is a government-mandated defined contribution plan that provides employees with a minimum investment return determined annually by the Swiss government, and as such, is treated under pension accounting in accordance with authoritative guidance. Under the plan, both the Company and certain of its employees with annual earnings in excess of government determined amounts are required to make contributions into a fund managed by an independent investment fiduciary.regulations. The Company’s contributions must be made in an amount at least equal to the employee’s contribution. Minimum employee contributions are based on the respective employee’s age, salary and gender.

As of ~~October 28, 2017~~April 30, 2022 and January ~~28, 2017,~~29, 2022, the ~~plan~~foreign pension plans had a total projected benefit obligation of ~~$18.9~~$40.8 million and ~~$17.6~~$42.7 million, respectively, and plan assets held ~~at the~~in independent investment ~~fiduciary~~fiduciaries of ~~$15.4~~$36.3 million and ~~$14.1~~$38.0 million, respectively. The net liability of ~~$3.5~~$4.5 million and $4.7 million was included in other long-term liabilities in the Company’s condensed consolidated balance sheets as of ~~October 28, 2017~~April 30, 2022 and January ~~28, 2017.~~29, 2022, respectively.

The components of net periodic defined benefit pension cost ~~for the three and nine months ended October 28, 2017 and October 29, 2016~~ related to the Company’s defined benefit plans are ~~as follows~~ (in thousands):

Three Months Ended October 28, 2017
SERP Swiss Pension Plan Total
Service cost $ —
$ 492
$ 492
Interest cost 461
22
483
Expected return on plan assets —
(48 ) (48 )
Net amortization of unrecognized prior service credit —
(7 ) (7 )
Net amortization of actuarial losses 38
78
116
Net periodic defined benefit pension cost $ 499
$ 537
$ 1,036

Nine Months Ended October 28, 2017
SERP Swiss Pension Plan Total
Service cost $ —
$ 1,452
$ 1,452
Interest cost 1,382
64
1,446
Expected return on plan assets —
(143 ) (143 )
Net amortization of unrecognized prior service credit —
(20 ) (20 )
Net amortization of actuarial losses 114
230
344
Net periodic defined benefit pension cost $ 1,496
$ 1,583
$ 3,079

Three Months Ended October 29, 2016
SERP Swiss Pension Plan Total
Service cost $ —
$ 381
$ 381
Interest cost 460
22
482
Expected return on plan assets —
(46 ) (46 )
Net amortization of unrecognized prior service credit —
(7 ) (7 )
Net amortization of actuarial losses 39
47
86
Net periodic defined benefit pension cost $ 499
$ 397
$ 896

Nine Months Ended October 29, 2016
SERP Swiss Pension Plan Total
Service cost $ —
$ 1,152
$ 1,152
Interest cost 1,380
66
1,446
Expected return on plan assets —
(139 ) (139 )
Net amortization of unrecognized prior service credit —
(21 ) (21 )
Net amortization of actuarial losses 116
141
257
Net periodic defined benefit pension cost $ 1,496
$ 1,199
$ 2,695



	SERP		Foreign Pension Plans		Total

	Three Months Ended Apr 30, 2022
Service cost	$	—	$	775	$	775
Interest cost	333		57		390
Expected return on plan assets	—		(70)		(70)
Net amortization of unrecognized prior service credit	—		(23)		(23)
Net amortization of actuarial losses	17		13		30
Net periodic defined benefit pension cost	$	350	$	752	$	1,102

~~(14)~~

~~Fair Value Measurements~~


	Three Months Ended May 1, 2021
Service cost	$	—	$	790	$	790
Interest cost	289		19		308
Expected return on plan assets	—		(52)		(52)
Net amortization of unrecognized prior service credit	—		(17)		(17)
Net amortization of actuarial losses	20		85		105
Net periodic defined benefit pension cost	$	309	$	825	$	1,134

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(15)Fair Value Measurements

Authoritative guidance defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The guidance establishes a fair value hierarchy, which prioritizes the inputs used in measuring fair value into three broad levels as follows:

Level 1—Inputs are unadjusted quoted prices in active markets for identical assets or liabilities that can be accessed at the measurement date.

Level 2—Inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (i.e. interest rates, yield curves, etc.) and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market corroborated inputs).

Level 3—Unobservable inputs that reflect assumptions about what market participants would use in pricing the asset or liability. These inputs ~~would be~~are based on the best information available, including the Company’s own data.

The following ~~table~~ presents the fair value hierarchy for those assets and liabilities measured at fair value on a recurring basis ~~as of~~ ~~October 28, 2017~~ ~~and~~ ~~January 28, 2017~~(in thousands):


																		Fair Value Measurements								Fair Value Measurements
	Fair Value Measurements at Oct 28, 2017								Fair Value Measurements at Jan 28, 2017									at Apr 30, 2022								at Jan 29, 2022
Recurring Fair Value Measures	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total		Recurring Fair Value Measures	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets:																	Assets:
Foreign exchange currency contracts	$	—	$	1,820	$	—	$	1,820	$	—	$	9,868	$	—	$	9,868	Foreign exchange currency contracts	$	—	$	14,286	$	—	$	14,286	$	—	$	7,133	$	—	$	7,133
Interest rate swap	—		812		—		812		—		876		—		876		Interest rate swap	—		764		—		764		—		—		—		—

Total	$	—	$	2,632	$	—	$	2,632	$	—	$	10,744	$	—	$	10,744	Total	$	—	$	15,050	$	—	$	15,050	$	—	$	7,133	$	—	$	7,133
Liabilities:																	Liabilities:
Foreign exchange currency contracts	$	—	$	6,594	$	—	$	6,594	$	—	$	1,424	$	—	$	1,424

Interest rate swap																	Interest rate swap	—		—		—		—		—		74		—		74
Deferred compensation obligations	—		12,729		—		12,729		—		11,184		—		11,184		Deferred compensation obligations	—		15,326		—		15,326		—		15,794		—		15,794
Total	$	—	$	19,323	$	—	$	19,323	$	—	$	12,608	$	—	$	12,608	Total	$	—	$	15,326	$	—	$	15,326	$	—	$	15,868	$	—	$	15,868

~~There were~~ no ~~transfers of financial instruments between the three levels of fair value hierarchy during the~~ ~~nine months ended October 28, 2017~~ ~~or during the year ended~~ ~~January 28, 2017~~.

Foreign exchange currency contracts ~~are~~may be entered into by the Company ~~principally~~ to hedge the future payment of inventory and intercompany transactions by non-U.S. subsidiaries. Periodically, the Company may also use foreign exchange currency contracts to hedge the translation and economic exposures related to its net investments in certain of its international subsidiaries. The fair values of the Company’s foreign exchange currency contracts are based on quoted foreign exchange forward rates at the reporting date. ~~Fair~~The fair values of the Company’s interest rate swaps are based upon inputs corroborated by observable market data. Deferred compensation obligations to employees are adjusted based on changes in the fair value of the underlying employee-directed investments. Fair value of these obligations is based upon inputs corroborated by observable market data.

~~During the nine months ended~~ ~~October 28, 2017, the~~The Company ~~invested €0.5~~included €3.7 million ($~~0.5~~3.9 million) ~~in a private equity fund, which was included~~and €3.6 million ($4.0 million) in other assets in the Company’s condensed consolidated balance ~~sheet~~sheets related to its investment in a private equity fund as of ~~October 28, 2017. As permitted in accordance with authoritative guidance, the~~April 30, 2022 and January 29, 2022, respectively. The Company uses net asset value

per share as a practical expedient to measure the fair value of this investment and has not included this investment in the fair value hierarchy as disclosed above. As of ~~October 28, 2017~~,April 30, 2022, the Company had an unfunded commitment to invest an additional ~~€4.5~~€1.0 million ($~~5.3~~1.0 million) in the private equity fund. On May 4, 2022, the Company committed an additional €10.0 million to the private equity fund.

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

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interest rates on the Company’s debt approximated rates currently available to the Company. The fair value of the Company’s Notes (see Note 10) is determined based on inputs that are observable in the market and have been classified as Level 2 in the fair value hierarchy.

The carrying amount of the Company’s remaining financial instruments, which principally include cash and cash equivalents, trade receivables, accounts payable and accrued expenses, approximates fair value due to the relatively short maturity of such instruments. The fair values of the Company’s debt instruments (see Note 9) are based on the amount of future cash flows associated with each instrument discounted using the Company’s incremental borrowing rate. As of ~~October 28, 2017~~ ~~and~~ ~~January 28, 2017, the carrying value of all financial instruments was not materially different from fair value, as the interest rates on the Company’s debt approximated rates currently available to the Company.~~

Long-Lived Assets

Long-lived assets, such as property and equipment and ~~purchased intangibles subject to amortization,~~operating lease ROU assets, are reviewed for impairment quarterly or whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The majority of the Company’s long-lived assets relate to its retail operations, which consist primarily of regular retail and flagship locations. The Company considers each individual regular retail location as an asset group for impairment testing, which is the lowest level at which individual cash flows can be identified. The asset group includes leasehold improvements, furniture, fixtures and equipment, computer hardware and software and certain long-term security deposits and lease acquisition costs. The Company reviews regular retail locations in penetrated markets for impairment risk once the locations have been opened for at least ~~one~~ year in their current condition, or sooner as changes in circumstances require. The Company believes that waiting at least one year allows a location to reach a maturity level where a more comprehensive analysis of financial performance can be performed. The Company evaluates impairment risk for regular retail locations in new markets, where the Company is in the early stages of establishing its presence, once brand awareness has been established. The Company also evaluates impairment risk for retail locations that are expected to be closed in the foreseeable future. The Company has flagship locations ~~which~~that are used as a regional marketing tool to build brand awareness and promote the Company’s current product. ~~Impairment~~Provided the flagship locations continue to meet the appropriate criteria, impairment for these locations is tested at a reporting unit level similar to goodwill since they do not have separately identifiable cash flows.

An asset is considered to be impaired if the Company determines that the carrying value may not be recoverable based upon its assessment of the asset’s ability to continue to generate earnings from operations and positive cash flow in future periods or if significant changes in the Company’s strategic business objectives and utilization of the assets occurred. If the carrying amount of an asset exceeds its estimated undiscounted future cash flows adjusted for lease payments, an impairment charge is recognized in the amount by which the carrying amount of the asset exceeds the estimated fair value. The Company uses estimates of market participant rents to calculate fair value ~~which is determined based on~~of ROU assets and discounted future cash ~~flows.~~flows of the asset group to quantify fair value for other long-lived assets. These nonrecurring fair value measurements are considered Level 3 inputs as defined above. The impairment loss calculations require management to apply judgment in estimating future cash flows and the discount rates that reflect the risk inherent in future cash flows. Future expected cash flows for assets in regular retail locations are based on management’s estimates of future cash flows over the remaining lease period or expected life, if shorter. For expected location closures, the Company will evaluate whether it is necessary to shorten the useful life for any of the assets within the respective asset group. The Company will use this revised useful life when estimating the asset group’s future cash flows. The Company considers historical trends, expected future business trends and other factors when estimating the future cash flow for each regular retail location. The Company also considers factors such ~~as:~~as the following: the local environment for each regular retail location, including mall traffic and competition; the Company’s ability to successfully implement strategic initiatives; and the ability to control variable costs such as cost of sales and payroll and, in some cases, renegotiate lease costs. As discussed further in Note 1, the COVID-19 pandemic negatively impacted the Company’s financial results during the three months ended April 30, 2022 and May 1, 2021, and could continue to impact the Company’s operations in ways the Company is not able to predict today due to the evolving situation. The ~~estimated cash flows used for this nonrecurring~~Company has made reasonable assumptions and judgments to determine the fair value ~~measurement are considered a Level 3 input~~of the assets tested based on the facts and circumstances that were available as ~~defined above.~~of the reporting date. If actual results are not consistent with the assumptions and judgments used in estimating future cash flows and asset fair values, there may be additional exposure to future impairment losses that could be material to the Company’s results of operations.

The Company recorded asset impairment charges of ~~$2.0~~$1.5 million and ~~$6.0~~$0.4 million during the three ~~and nine~~ months ended ~~October 28, 2017, respectively,~~April 30, 2022 and ~~$0.8~~May 1, 2021, respectively. The Company recognized no impairment charges on ROU assets in the three months ended April 30, 2022 and immaterial impairment charges on ROU assets in the three months ended May 1, 2021. The Company recognized $1.5 million and ~~$1.5~~$0.4 million ~~during the three~~in impairment of property and ~~nine months~~

~~ended October 29, 2016, respectively. The asset impairment charges~~equipment related ~~primarily~~ to ~~the impairment of~~ certain retail locations primarily in ~~North America resulting from~~Europe and Asia driven by under-performance and expected store closures during ~~each~~the three months ended April 30, 2022 and May 1, 2021,

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respectively. Refer to Note 2 for further information on impairment charges recognized on operating lease ROU assets.

Goodwill

Goodwill is tested annually for impairment or more frequently if events and circumstances indicate that the ~~respective periods.~~asset might be impaired. An impairment loss is recognized to the extent that the carrying amount exceeds the asset’s fair value. This determination is made at the reporting unit level which may be either an operating segment or one level below an operating segment if discrete financial information is available. Two or more reporting units within an operating segment may be aggregated for impairment testing if they have similar economic characteristics.

The COVID-19 pandemic continued to impact the Company’s businesses during the first three months of fiscal 2023. During the three months ended April 30, 2022, the Company assessed qualitative factors and determined that it is not more likely than not that the fair values of its reporting units are less than their carrying amounts.


~~(15)~~	~~Derivative Financial Instruments~~

(16)Derivative Financial Instruments

Hedging Strategy

Foreign Exchange Currency Contracts

The Company operates in foreign countries, which exposes it to market risk associated with foreign currency exchange rate fluctuations. The Company has entered into certain forward contracts to hedge the risk of foreign currency rate fluctuations. The Company has elected to apply the hedge accounting rules in accordance with authoritative guidance for certain of these hedges.

The Company’s primary objective is to hedge the variability in forecasted cash flows due to the foreign currency risk. Various transactions that occur primarily in Europe, Canada, South Korea, China, Hong Kong and Mexico are denominated in U.S. dollars, British pounds and Russian roubles and thus are exposed to earnings risk as a result of exchange rate fluctuations when converted to their functional currencies. These types of transactions include U.S. ~~dollar denominated~~dollar-denominated purchases of merchandise and U.S. ~~dollar~~dollar- and British ~~pound denominated~~pound-denominated intercompany liabilities. In addition, certain operating expenses, tax liabilities and pension-related liabilities are denominated in Swiss francs and are exposed to earnings risk as a result of exchange rate fluctuations when converted to the functional currency. Further, there are certain real estate leases that are denominated in a currency other than the functional currency of the respective entity that entered into the agreement (primarily Swiss francs, Russian roubles and Polish zloty). As a result, the Company may be exposed to volatility related to unrealized gains or losses on the translation of present value of future lease payment obligations when translated at the exchange rate as of a reporting period-end. The Company enters into derivative financial instruments,, including forward exchange currency contracts, to offset some, but not all, of the exchange riskon certain of these anticipated foreign currency ~~transactions~~.transactions.

Periodically, the Company may also use foreign exchange currency contracts to hedge the translation and economic exposures related to its net investments in certain of its international subsidiaries.

Interest Rate Swap Agreements

The Company is exposed to interest rate risk on its floating-rate debt. The Company has entered into interest rate swap agreements for certain of these agreements to effectively convert its floating-rate debt to a fixed-rate basis. The principal objective of these contracts is to eliminate or reduce the variability of the cash flows in interest payments associated with the Company’s floating-rate debt, thus reducing the impact of interest rate changes on future interest payment cash flows. The Company has elected to apply the hedge accounting rules in accordance with authoritative guidance for certain of these contracts. Refer to Note 9 for further information.

The impact of the credit risk of the counterparties to the derivative contracts is considered in determining the fair value of the foreign exchange currency contracts and interest rate swap agreements. As of ~~October 28, 2017,~~April 30,

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2022, credit risk has not had a significant effect on the fair value of the Company’s foreign exchange currency contracts and interest rate swap agreements.

Hedge Accounting Policy

Foreign Exchange Currency Contracts

U.S. dollar forward contracts are used to hedge forecasted merchandise purchases over specific months. Changes in the fair value of these U.S. dollar forward contracts, designated as cash flow hedges, are recorded as a component of accumulated other comprehensive income (loss) within stockholders’ equity and are recognized in cost of product sales in the period ~~which~~that approximates the time the hedged merchandise inventory is ~~sold. The Company also hedges forecasted intercompany royalties over specific months. Changes in the fair value of these U.S. dollar forward contracts, designated as cash flow hedges,~~ are recorded as a component of accumulated other comprehensive income (loss) within stockholders’ equity and are recognized in other income and expense in the period in which the royalty expense is incurred.sold.

The Company has also used U.S. dollar forward contracts to hedge the net investments of certain of the Company’s international subsidiaries over specific months. Changes in the fair value of these U.S. dollar forward contracts, designated as net investment hedges, are recorded in foreign currency translation adjustment as a

component of accumulated other comprehensive income (loss) within stockholders’ equity and are not recognized in earnings (loss) until the sale or liquidation of the hedged net investment.

The Company also has foreign exchange currency contracts that are not designated as hedging instruments for accounting purposes. Changes in fair value of foreign exchange currency contracts not designated as hedging instruments are reported in net earnings (loss) as part of other income ~~and expense.~~(expense).

Interest Rate Swap Agreements

Interest rate swap agreements are used to hedge the variability of the cash flows in interest payments associated with the Company’s floating-rate debt. Changes in the fair value of interest rate swap agreements designated as cash flow hedges are recorded as a component of accumulated other comprehensive income (loss) within stockholders’ equity and are amortized to interest expense over the term of the related debt.

Periodically, the Company may also enter into interest rate swap agreements that are not designated as hedging instruments for accounting purposes. Changes in the fair value of interest rate swap agreements not designated as hedging instruments are reported in net earnings (loss) as part of other income ~~and expense.~~(expense).

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Summary of Derivative Instruments

The fair value of derivative instruments in the condensed consolidated balance sheets ~~as of~~ ~~October 28, 2017~~ ~~and~~ ~~January 28, 2017~~is ~~as follows~~ (in thousands):


	Fair Value at Apr 30, 2022		Fair Value at Jan 29, 2022		Derivative Balance Sheet Location
ASSETS:
Derivatives designated as hedging instruments:
Cash flow hedges:
Foreign exchange currency contracts	$	11,912	$	5,999	Other current assets/ Other assets
Interest rate swap	764		—		Other assets
Total derivatives designated as hedging instruments	12,676		5,999
Derivatives not designated as hedging instruments:
Foreign exchange currency contracts	2,374		1,134		Other current assets
Total	$	15,050	$	7,133
LIABILITIES:
Derivatives designated as hedging instruments:
Cash flow hedges:

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


Total	$	—	$	74

Derivative
Balance Sheet
Location
Fair Value at
Oct 28, 2017 Fair Value at
Jan 28, 2017
ASSETS:

Derivatives designated as hedging instruments:

Cash flow hedges:
   Foreign exchange currency contracts
Other current assets/
Other assets
$ 1,042
$ 6,072
   Interest rate swap Other assets 812
876
Total derivatives designated as hedging instruments 1,854
6,948
Derivatives not designated as hedging instruments:
Foreign exchange currency contracts
Other current assets/
Other assets
778
3,796
Total $ 2,632
$ 10,744
LIABILITIES:

Derivatives designated as hedging instruments:

Cash flow hedges:
   Foreign exchange currency contracts
Accrued expenses/
Other long-term liabilities
$ 4,744
$ 1,250
Derivatives not designated as hedging instruments:

Foreign exchange currency contracts Accrued expenses 1,850
174
Total $ 6,594
$ 1,424

Derivatives Designated as Hedging Instruments

Foreign Exchange Currency Contracts Designated as Cash Flow Hedges

During the ~~nine~~three months ended ~~October 28, 2017~~,April 30, 2022, the Company purchased U.S. dollar forward contracts in Europe ~~and Canada~~ totaling US$~~108.7~~40.0 million ~~and US$20.8 million, respectively,~~ that were designated as cash flow hedges. As of~~October 28, 2017,~~ April 30, 2022, the Company had forward contracts outstanding for its European ~~and Canadian~~ operations of US$~~140.6~~149.0 million ~~and US$44.4 million, respectively,~~ to hedge forecasted merchandise purchases, ~~and intercompany royalties,~~ which are expected to mature over the next 15 months.

As of ~~October 28, 2017,~~April 30, 2022, accumulated other comprehensive income (loss) related to foreign exchange currency contracts included a $12.8 million net unrealized ~~loss of approximately $6.3 million,~~gain, net of tax, of which ~~$4.7~~$8.6 million will be recognized in cost of product sales orover the following 12 months, at the then current values on a pre-tax basis, which can be different than the current quarter-end values.

At January 29, 2022, the Company had forward contracts outstanding for its European operations of US$146.0 million that were designated as cash flow hedges.

Interest Rate Swap Agreement Designated as Cash Flow Hedge

As of April 30, 2022, accumulated other comprehensive income (loss) related to the interest rate swap agreement included a net unrealized gain of $0.6 million, net of tax, which will be recognized in interest expense over the following 12 months, at the then current values on a pre-tax basis, which can be different than the current quarter-end values.

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At January 28, 2017, the Company had forward contracts outstanding for its European and Canadian operations of US$104.2 million and US$66.9 million, respectively, that were designated as cash flow hedges.

~~Interest Rate Swap Agreement Designated as Cash Flow Hedge~~

As of October 28, 2017, accumulated other comprehensive income (loss) related to the interest rate swap agreement included a net unrealized gain of approximately $0.5 million, net of tax, which will be recognized in interest expense after the following 12 months, at the then current values on a pre-tax basis, which can be different than the current quarter-end values.

The following ~~table~~ summarizes the gains (losses) before income taxes recognized on ~~the~~ derivative instruments designated as cash flow hedges in OCI and net earnings ~~(loss) for the three and nine months ended October 28, 2017 and~~ ~~October 29, 2016~~(in thousands):


	Gains Recognized in OCI				Location of Gains (Losses) Reclassified from Accumulated OCI into Earnings	Gains (Losses) Reclassified from Accumulated OCI into Earnings

	Apr 30, 2022		May 1, 2021			Apr 30, 2022		May 1, 2021
	Three Months Ended
Derivatives designated as cash flow hedges:
Foreign exchange currency contracts	$	7,826	$	1,511	Cost of product sales	$	1,674	$	(462)


Interest rate swap	777		270		Interest expense	(61)		64

Gain
Recognized in
OCI

Location of
Gain (Loss)
Reclassified from
Accumulated OCI
into Earnings (Loss) (1)

Gain (Loss)
Reclassified from
Accumulated OCI into
Earnings (Loss)
Three Months Ended Three Months Ended
Oct 28, 2017 Oct 29, 2016 Oct 28, 2017 Oct 29, 2016
Derivatives designated as cash flow hedges:

Foreign exchange currency contracts $ 3,215
$ 3,421
Cost of product sales $ 81
$ 739
Foreign exchange currency contracts $ 38
$ 260
Other income/expense $ (337 ) $ 45
Interest rate swap $ 134
$ 500
Interest expense $ (57 ) $ (57 )

Loss
Recognized in
OCI

Location of
Gain (Loss)
Reclassified from
Accumulated OCI
into Earnings (Loss) (1)

Gain (Loss)
Reclassified from
Accumulated OCI into
Earnings (Loss)
Nine Months Ended Nine Months Ended
Oct 28, 2017 Oct 29, 2016 Oct 28, 2017 Oct 29, 2016
Derivatives designated as cash flow hedges:

Foreign exchange currency contracts $ (10,601 ) $ (2,229 ) Cost of product sales $ 1,360
$ 3,315
Foreign exchange currency contracts $ (958 ) $ (96 ) Other income/expense $ (244 ) $ 126
Interest rate swap $ (143 ) $ (317 ) Interest expense $ (119 ) $ (167 )

~~(1)~~

The Company recognized gains of $0.5 million and $2.0 million resulting from the ineffective portion related to foreign exchange currency contracts in interest income during the three and nine months ended October 28, 2017, respectively. The Company recognized gains of $0.3 million and $0.8 million resulting from the ineffective portion related to foreign exchange currency contracts in interest income during the three and nine months ended October 29, 2016, respectively. There was no ineffectiveness recognized related to the interest rate swap during the three and nine months ended October 28, 2017 and October 29, 2016.

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


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

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

Three Months Ended Nine Months Ended
Oct 28, 2017 Oct 29, 2016 Oct 28, 2017 Oct 29, 2016
Beginning balance gain (loss) $ (8,751 ) $ (37 ) $ 5,400
$ 7,252
Net gains (losses) from changes in cash flow hedges 2,749
3,305
(10,220 ) (1,958 )
Net (gains) losses reclassified to earnings (loss)
235
(593 ) (947 ) (2,619 )
Ending balance gain (loss) $ (5,767 ) $ 2,675
$ (5,767 ) $ 2,675

~~Derivatives~~Foreign Exchange Currency Contracts Not Designated as Hedging Instruments

As of ~~October 28, 2017~~,April 30, 2022, the Company had euro foreign exchange currency contracts to purchase US$~~70.8~~23.0 million ~~and Canadian dollar~~ expected to mature over the next two months. As of January 29, 2022, the Company had euro foreign exchange currency contracts to purchase US$~~16.6 million expected to mature over the next 11 months.~~19.0 million.

The following ~~table~~ summarizes the gains ~~(losses)~~ before income taxes recognized on ~~the~~ derivative instruments not designated as hedging instruments in other income ~~and expense for the three and nine months ended October 28, 2017 and~~ ~~October 29, 2016~~(expense) (in thousands):

Location of Gains Recognized in Earnings

Gains Recognized in Earnings

Three Months Ended

Apr 30, 2022

May 1, 2021

Derivatives not designated as hedging instruments:

Foreign exchange currency contracts

Other expense

1,580

(17)Subsequent Events

Location of
Gain (Loss)
Recognized in
Earnings (Loss)

Gain
Recognized in Earnings (Loss)

Gain (Loss)
Recognized in Earnings (Loss)
Three Months Ended Nine Months Ended
Oct 28, 2017 Oct 29, 2016 Oct 28, 2017 Oct 29, 2016
Derivatives not designated as hedging instruments:

Foreign exchange currency contracts Other income/expense $ 1,645
$ 2,440
$ (5,688 ) $ (704 )
Interest rate swap Other income/expense $ —
$ —
$ —
$ 38
Credit Agreement

At ~~January 28, 2017~~,On May 5, 2022, Guess Europe Sagl, a wholly owned subsidiary of the Company, ~~had euro foreign exchange currency contracts~~entered into a credit agreement (the “Credit Agreement”) for a €250 million revolving credit facility (the “Facility”) with an initial five-year term. The Company has an option to ~~purchase US$81.4~~extend the maturity date by up to two years and an option to expand the Facility by up to €100 million, ~~and Canadian dollar foreign exchange currency contracts~~ subject to ~~purchase US$13.9~~certain conditions. At closing, there were no direct borrowings under the Facility. The Company terminated certain European short-term borrowing arrangements totaling €120 million. with various banks in Europe concurrently with the closing of the Credit Agreement. Refer to Note 9 about the replaced short term arrangements.


~~(16)~~	~~Subsequent Events~~

~~Share Repurchases~~

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

Table of ~~fiscal 2018,~~Contents

capacity multiplied by 35% of an applicable margin (varying from 0.85% to 1.20%). The Company is also required to pay a utilization fee on the ~~Company repurchased approximately 0.6 million shares~~total amount of the loans outstanding under the Facility at rates varying from 0.10% to 0.20%, depending on the balance outstanding. The applicable margins are calculated quarterly and vary based on the leverage ratio of the guarantor and its ~~share repurchase program at~~subsidiaries as set forth in the Credit Agreement.

The Credit Agreement contains various annual sustainability key performance targets, the achievement of which would result in an ~~aggregate cost~~adjustment to the interest margin ranging from a plus 5 basis points to a minus 5 basis points per year. The Credit Agreement includes a financial covenant requiring a maximum leverage ratio of ~~$9.1 million.~~the Guarantor and its subsidiaries. In addition, the Credit Agreement includes customary representations and warranties, affirmative and negative covenants and events of default.

Dividends

On ~~November 21, 2017,~~May 25, 2022, the Company announced a regular quarterly cash dividend of $0.225 per share on the Company’s common stock. The cash dividend will be paid on ~~January 3, 2018~~June 24, 2022 to shareholders of record as of the close of business on ~~December 13, 2017.~~June 8, 2022. As of a result of this dividend declaration and in accordance with the terms of the indenture governing the Notes, the Company will adjust the conversion rate (which is expected to increase) and the conversion price (which is expected to decrease) of the Notes effective as of June 7, 2022. A corresponding adjustment is expected to be made to the strike prices with respect to the convertible note hedges and the warrants entered into by the Company in connection with the offering of the Notes, each of which will be decreased in accordance with the terms of the convertible note hedge confirmations and warrant confirmations, respectively.

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~~ITEM 2.~~	~~Management’s Discussion and Analysis of Financial Condition and Results of Operations.~~

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

General

Unless the context indicates otherwise, when we refer to “we,” “us,” “our” or the “Company” in this Form ~~10-Q,~~10‑Q, we are referring to Guess?, Inc. (“GUESS?”) and its subsidiaries on a consolidated basis.

~~Important Factors Regarding~~ Forward-Looking Statements

This Quarterly Report on Form 10-Q ~~including documents incorporated by reference herein,~~ contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements may also be contained in ~~the Company’s~~our other reports filed under the Securities Exchange Act of 1934, as amended, in ~~its~~our press releases and in other documents. ~~In addition, from time-to-time,~~

Except for historical information contained herein, certain matters discussed in this Quarterly Report, including statements concerning the ~~Company through its management may make oral forward-looking statements. These~~potential actions and impacts related to the COVID-19 pandemic; results of the accelerated share repurchase and cash needs; statements ~~relate~~concerning the our future outlook, including with respect to ~~expectations,~~

~~analyses~~the second quarter and ~~other information based on current plans, forecasts~~full year of ~~future results and estimates of amounts not yet determinable. These~~fiscal 2023; statements ~~also relate to~~concerning share repurchase plans; statements concerning our expectations, goals, future prospects, ~~global cost reduction and profitability efforts, capital allocation plans, cash needs~~ and current business strategies and strategic ~~initiatives. These~~initiatives; and statements expressing optimism or pessimism about future operating results and growth opportunities are forward-looking statements that are ~~identified~~made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements, which are frequently indicated by ~~their use of~~ terms ~~and phrases~~ such as ~~“anticipate,~~“expect,” “could,” “will,” “should,” “goal,” “strategy,” “believe,” ~~“continue,” “could,”~~ “estimate,” ~~“expect,” “goal,” “intend,” “may,~~“continue,” “outlook,” ~~“pending,”~~ “plan,” ~~“predict,~~“create,” ~~“project,” “should,” “strategy,” “will,” “would,~~“see,” and ~~other~~ similar terms, are only expectations, and ~~phrases, including references to assumptions.~~

Although we believe that the expectations reflected in any of our forward-looking statements are reasonable, actual results could differ materially from those projected or assumed. These forward-looking statements may include, among other things, statements or assumptions relating to: our expected results of operations; the accuracy of data relating to,involve known and anticipated levels of, future inventory and gross margins; anticipated cash requirements and sources; cost containment efforts; estimated charges; plans regarding store openings, closings, remodels and lease negotiations; plans regarding the relocation of the Company’s European distribution center to a new facility in the Netherlands; plans regarding business growth, international expansion and capital allocation; plans regarding supply chain efficiencies and global planning and allocation; e-commerce, digital and omni-channel initiatives; business seasonality; results and risks of current and future legal proceedings, including the investigation by the European Commission regarding the potential breach of certain European Union competition rules by the Company; industry trends; consumer demands and preferences; competition; currency fluctuations and related impacts; estimated tax rates, results of tax audits and other regulatory proceedings; raw material and other inflationary cost pressures; consumer confidence; and general economic conditions. We do not intend, and undertake no obligation, to update our forward-looking statements to reflect future events or circumstances. Such statements involveunknown risks and uncertainties, which may cause actual results in future periods to differ materially from ~~those set forth~~what is currently anticipated. Factors which may cause actual results in ~~these statements. Important factors~~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 ~~cause~~negatively impact consumer confidence and discretionary consumer spending; recent sanctions and export controls targeting Russia and other impacts related to the war in Ukraine; the continuation or ~~contribute~~worsening of impacts related to the COVID-19 pandemic; risks relating to our indebtedness; changes to estimates related to impairments, inventory and other reserves, which were made using the best information available at the time; changes in the competitive marketplace and in our commercial relationships; our ability to anticipate and adapt to changing consumer preferences and trends; our ability to manage our inventory commensurate with customer demand; the high concentration of our Americas Wholesale business; risks related to the costs and timely delivery of merchandise to our distribution facilities, stores and 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 enhance our global omni-channel capabilities; our ability to expand internationally and operate in regions where we have less experience, including through joint ventures; risks relating to our $300 million 2.00% convertible senior notes due 2024 (the “Notes”), including our ability to settle the liability in cash; disruptions at our distribution facilities; our ability to attract and retain management and other key personnel; obligations or changes in estimates arising from new or existing litigation, income tax and other regulatory proceedings; risks related to the income 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 occurrence of unforeseen epidemics, such ~~differences include those discussed under~~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; violations of, or changes to, domestic or international laws and regulations; risks associated with the acts or omissions of our licensees and third party vendors, including a failure to comply with our vendor code of conduct or other policies; risks associated with cyber-attacks and other cyber security risks; risks associated with our ability to

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properly collect, use, manage and secure consumer and employee data; risks associated with our vendors’ ability to maintain the strength and security of information technology systems; 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; impacts of inflation and further inflationary pressures; wages; risks relating to activist investor activity; and the significant voting power of our family founders. In addition to these factors, the economic, technological, managerial, and other risks identified in “Part I, Item 1A. Risk Factors” ~~contained in the Company’s~~of our most recent Annual Report on Form 10-K, ~~for the fiscal year ended January 28, 2017~~“Part II, Item 1A. Risk Factors” herein and ~~in our~~ other filings ~~made from time-to-time~~ with the Securities and Exchange Commission, ~~(“SEC”) after~~including but not limited to the ~~date~~risk factors discussed therein, could cause actual results to differ materially from current expectations. The current global economic climate, length and severity of the COVID-19 pandemic, and uncertainty surrounding potential changes in U.S. policies and regulations may amplify many of these risks. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

COVID-19 Business Update

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

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

In light of the fluid nature of the pandemic, we continue to carefully monitor global and regional developments and respond appropriately. We also continue to strategically manage expenses in order to protect profitability and to mitigate, to the extent possible, the effect of supply chain disruptions.

Business Segments

~~The Company’s~~Our businesses are grouped into five reportable segments for management and internal financial reporting purposes: Americas Retail, Americas Wholesale, Europe, Asia, and Licensing. Our Americas Retail, Americas Wholesale, Europe and ~~Licensing. During~~Licensing reportable segments are the ~~first quarter~~same as their respective operating segments. Certain components of ~~fiscal 2018, net revenue and related costs and expenses for certain globally serviced customers were reclassified~~our Asia operating segment are separate operating segments based on region, which have been aggregated into the Asia reportable segment ~~primarily responsible~~ for the relationship. During the third quarter of fiscal 2018, segment results were also adjusted to exclude corporate performance-based compensation costs, net gains (losses) on lease terminations and asset impairment charges due to the fact that these items are no longer included in the segment results provided to the Company’s chief operating decision maker in order to allocate resources and assess performance. Accordingly, segment results have been adjusted for the nine months ended October 28, 2017 as well as the three and nine months ended October 29, 2016 to conform to the current period presentation. disclosure purposes.

Management evaluates segment performance based primarily on revenues and earnings (loss) from operations before corporate performance-based compensation costs, ~~net gains (losses) from lease terminations,~~ asset impairment charges, and restructuring charges, if any. The Americas Retail segment includes the Company’s retail and e-commerce operations in North and Central America and its retail operations in South America. The Europe segment includes the Company’s retail, e-commerce and wholesale operations in Europe and the Middle East. The Asia segment includes the Company’s retail, e-commerce and wholesale operations in Asia and the Pacific. The Americas Wholesale segment includes the Company’s wholesale operations in the Americas. The Licensing segment includes the worldwide licensing operations of the Company. The business segment operating results exclude corporate overhead costs, which consist of shared costs of the organization, net gains (losses) on lease ~~terminations, asset impairment~~modifications, restructuring charges and ~~restructuring charges. Corporate overhead costs~~certain non-recurring credits (charges), if any. We believe this segment reporting reflects how our business segments are ~~presented separately~~managed and ~~generally include, among other things, the following unallocated corporate costs: accounting~~how each segment’s performance is evaluated by our chief operating decision maker to assess performance and ~~finance, executive compensation, corporate performance-based compensation, facilities, global advertising and marketing, human resources, information technology and legal.~~make resource allocation decisions. Information regarding these segments is summarized in “Part I, Item 1. Financial Statements – Note 8 ~~to the Condensed Consolidated Financial Statements.~~

– Segment Information.”

Products

We derive our net revenue from the sale of GUESS?, G by GUESS (GbG), GUESS Kids and MARCIANO apparel and our licensees’ products through our worldwide network of directly-operated and licensed retail stores, wholesale customers and distributors, as well as our online sites. We also derive royalty revenue from worldwide licensing activities. During fiscal 2021, we made the decision to integrate our G by GUESS brand into our Factory business over time in order to drive further efficiencies.

Foreign Currency Volatility

Since the majority of our international operations are conducted in currencies other than the U.S. dollar (primarily the ~~euro,~~British pound, Canadian dollar, Chinese yuan, euro, Japanese yen, Korean won, ~~Chinese yuan~~Mexican peso,

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Polish zloty, Russian rouble and ~~Mexican peso)~~Turkish lira), currency fluctuations can have a significant impact on the translation of our international revenues and earnings (loss) into U.S. ~~dollar amounts.~~dollars.

~~In addition, some~~Some of our transactions that occur primarily in Europe, Canada, South Korea, China, Hong Kong and Mexico are denominated in U.S. dollars, Swiss francs, British pounds and Russian roubles, exposing them to exchange rate fluctuations when these transactions (such as inventory ~~purchases)~~purchases or periodic lease payments) are converted to their functional currencies. As a result, fluctuations in exchange rates can impact the operating margins of our foreign operations and reported earnings (loss), and are largely dependent on the transaction timing and magnitude during the period that the currency fluctuates. When these foreign exchange rates weaken versus the U.S. dollar at the time the respective U.S. dollar denominated ~~inventory~~payment is ~~purchased~~made relative to the ~~purchases of~~payments made in the comparable period, our product margins could be unfavorably ~~impacted if~~impacted.

In addition, there are certain real estate leases denominated in a currency other than the ~~relative sales prices do not change. Such~~functional currency of the respective entity that entered into the agreement (primarily Swiss francs, Russian roubles and Polish zloty). As a result, we may be exposed to volatility related to unrealized gains or losses on the translation of present value of future lease payment obligations when translated at the exchange rate ~~fluctuations had~~as of a ~~negative impact on our product margins in Europe during the nine months ended October 28, 2017 compared to the same prior-year period.~~reporting period-end.

During the first ~~nine~~three months of fiscal ~~2018,~~2023, the average U.S. dollar rate was weaker against the ~~Canadian dollar, euro, Korean won and the Russian rouble~~Chinese yuan, and stronger against the ~~Chinese yuan~~euro, British pound, Turkish lira, Polish Slotzy, Canadian dollar, Russian rouble, Japanese yen, Korean won, and Mexican peso, compared to the average rate in the same prior-year period. This had an overall ~~favorable~~unfavorable impact on the translation of our international revenues and ~~loss~~on earnings from operations for the ~~nine~~three months ended ~~October 28, 2017~~April 30, 2022 compared to the same prior-year period.

If the U.S. dollar strengthens in fiscal 2023 relative to the respective fiscal ~~2017~~2022 foreign exchange rates, foreign exchange could negatively impact our revenues and operating results, as well as our international cash and other balance sheet items, particularly in Canada, Europe (primarily the euro, Turkish lira, British Pound and Russian rouble) and Mexico. Alternatively, if the U.S. dollar weakens relative to the respective fiscal 2022 foreign exchange rates, our revenues and operating results, as well as our other cash balance sheet items, could be positively impacted by foreign currency fluctuations during the remainder of fiscal ~~2018,~~2023, particularly in ~~Canada, Europe~~these regions.

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

~~The Company enters~~We enter into derivative financial instruments to offset some, but not all, of the exchange risk on foreign currency transactions. For additional discussion regarding our exposure to foreign currency risk, forward contracts designated as hedging instruments and forward contracts not designated as hedging instruments, refer to “Item 3. Quantitative and Qualitative Disclosures About Market Risk.”

Strategy

~~The Company continues~~In December 2019 and updated in March 2021, Carlos Alberini, our Chief Executive Officer, shared his strategic vision and implementation plan for execution which included the identification of several key priorities to ~~remain focused on its five top strategic initiatives aimed at driving shareholder value, including:~~drive revenue and operating profit growth. These priorities are: (i) ~~elevating~~brand relevancy and brand elevation; (ii) product excellence; (iii) customer centricity; (iv) global footprint; and (v) functional capabilities; each as further described below:

Brand Relevancy and Brand Elevation. We will continue to optimize our brand architecture to be relevant with our three target consumer groups: Heritage, Millennials, and Generation Z. We have developed and launched one global line of product for all categories. We have also elevated our brand and improved the quality of our products, allowing us to realize more full-priced sales ~~organization~~ and ~~merchandising strategy~~rely less on promotional activity. We will continue to ~~match~~use unique go-to-market strategies and execute celebrity and influencer partnerships and collaborations as we believe that they are critical to engage more effectively with a younger and broader audience.

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Product Excellence. We believe product is a key factor of success in our business. We strive to design and make great products and will extend our product offering to provide our customers with products for the ~~quality~~different occasions of their lifestyles. We will seek to better address local product needs.

Customer Centricity. We will continue to place the customer at the center of everything we do. We plan to implement processes and platforms to provide our customers with a seamless omni-channel experience and expand our digital business.

Global Footprint. We will continue to expand the reach of our ~~product~~brands by optimizing the productivity and ~~marketing; (ii) building a major~~profitability of our current footprint and expanding our distribution channels.

Functional Capabilities. We will continue to drive operational improvements to leverage and support our global business ~~in Asia by unlocking the potential of the GUESS? brand~~more effectively, primarily in the ~~region; (iii) creating a culture~~areas of ~~purpose~~logistics, sourcing, product development and ~~accountability throughout the entire Company by implementing a more centralized organizational structure that reinforces our focus on sales~~production, inventory management, and profitability; (iv) improving our cost structure (including supply chain and overhead); and (v) stabilizing and revitalizing our wholesale business. The following provides further details on the progress of these initiatives:overall infrastructure.

~~Sales Organization and Merchandising Strategy.~~ We are executing on our plan to elevate the quality of our sales organization and merchandising strategy which includes: (1) elevating the product knowledge of our sales force; (2) building a more strategic and operational online organization in order to increase millennials’ engagement with our brand through digital marketing and social media; (3) taking steps such as investing in key stores and developing stronger replenishment, visual, stockroom and cost-control standards in order to improve our overall field and store structure; (4) implementing a more effective yearly retail calendar to better enable each store to fully capture local opportunities; (5) using feedback from our sales force to improve our collections and increaseCapital Allocation

~~the number and effectiveness of our SKU’s; and (6) implementing a global pricing system with greater clarity and simplicity.~~

~~Building our Asia Business.~~ We ~~believe there continues to be significant potential in this region, particularly in mainland China, and~~ plan to continue to ~~allocate sufficient resources to fuel future growth.~~

~~Transforming our Company’s Culture.~~ ~~In order to generate global synergies, major decisions (including supply chain, technology, finance, stock~~prioritize capital allocation toward investments that support growth and ~~communications) are becoming more centralized~~infrastructure, while remaining highly disciplined in the ~~Company’s management team in Los Angeles. This centralized approach reinforces our~~way we allocate capital across projects, including new store development, store remodels, technology and logistics investments and others. When we prioritize investments, we will focus on ~~sales~~their strategic significance and ~~profitability and fosters an environment of accountability and execution measured through key performance metrics.~~

~~Improving our Cost Structure.~~ their return on invested capital expectations. We also plan to ~~continue improving our cost structure by identifying synergies among departments~~manage product buys and strengthening our supply chain. We are executing on the following supply chain initiatives to drive improvements in product costs: (i) developing a sourcing network in new territories that can offer better costs; (ii) consolidatinginventory ownership rigorously and building strategic partnerships with high-quality suppliers to gain scale efficiencies; and (iii) implementing a fabric platforming process to develop and utilize common fabrics across multiple styles. We are also working to shorten our lead times through partnering with our suppliers, exercising agility in the production process and continuously searching for new suppliers and sourcing opportunities in reaction to the latest trends.

We are also focused on improving the profitability of our retail business in the Americas. As more than half of our leases in Americas Retail are up for renewal or have lease exit options over the next three years, we continue to have the flexibility to further optimize our retail footprint, as appropriate, in the coming years. However, we are not restricting ourselves to waiting for these dates to close stores or renegotiate rents. For example, during the third quarter of fiscal 2018, we modified certain of our leases held with a common landlord that had original lease end dates from fiscal 2018 to fiscal 2026 to now end in fiscal 2018 through fiscal 2020, in order to accelerate the reduction of our retail store footprint in North America.

~~Stabilizing our Wholesale Business.~~ We are partnering with our wholesale customers to emphasize a retail-oriented mindset and encourage the adoption of best practices, including high quality visual merchandising, frequent rotation of products and maximization of inventory turns.

~~Capital Allocation~~

~~The Company plans to allocate capital, including capital expenditures and~~overall working capital ~~investments, to fund the growth of its retail and e-commerce businesses in Europe and Asia, while reducing its allocation of capital to its retail business in the Americas.~~management consistently. In ~~the U.S. and Canada, we plan to close approximately 70 stores and limit future store openings during fiscal 2018. Additionally,~~addition, we plan to continue to ~~invest capital in technology~~return value to ~~improve our global structure~~shareholders through dividends and ~~support our long-term growth plans. The Company’s investments in capital for the full fiscal year 2018 are planned between $85 million and $95 million.~~ share repurchases.

During fiscal ~~2018,~~2022, the Board of Directors terminated our previous 2012 $500 million share repurchase program (which had $47.8 million capacity remaining) and authorized a new $200 million share repurchase program. On March 14, 2022, the Board of Directors expanded the repurchase authorization by $100.0 million, leaving an available capacity of $249.0 million at that time. On March 18, 2022, in connection with this expanded authorization, we entered into an accelerated share repurchase agreement (the "2022 ASR Contract) with a financial institution (in such capacity, the "2022 ASR Counterparty") to repurchase an aggregate $175.0 million of our common stock. Under the 2022 ASR Contract, we made a payment of $175.0 million to the 2022 ASR Counterparty and received an initial delivery of approximately 3.3 million shares of our common stock on March 21, 2022, representing approximately 40% ($70.0 million) of the total value expected to be repurchased under the 2022 ASR Contract. Refer to “Part I, Item 1. Financial Statements – Note 4 – Stockholders' Equity” for further information on the 2022 ASR Contract. During the three months ended April 30, 2022, we also ~~expect that working capital will grow~~repurchased approximately 0.5 million shares of our common stock in ~~Europe and Asia, while contracting in the Americas.~~open market transactions totaling $11.7 million.

Comparable Store Sales

~~The Company reports~~We report National Retail Federation calendar comparable store sales on a quarterly basis for our retail businesses which include the combined results from our brick-and-mortar retail stores and our e-commerce sites. We also separately report the impact of e-commerce sales on our comparable store sales metric. As a result of our omni-channel strategy, our e-commerce business has become strongly intertwined with our brick-and-mortar retail store business. Therefore, we believe that the inclusion of e-commerce sales in our comparable store sales metric provides a more meaningful representation of our retail results.

Sales from our brick-and-mortar retail stores include purchases that are initiated, paid for and fulfilled at our retail stores and ~~directly operated~~directly-operated concessions as well as merchandise that is reserved online but paid for and ~~picked-up~~picked up at our retail stores. Sales from our e-commerce sites include purchases that are initiated and paid for online and shipped from either our distribution centers or our retail stores as well as purchases that are initiated

in a retail store, but due to inventory availability at the retail store, are ordered and paid for online and shipped from our distribution centers or ~~picked-up~~picked up from a different retail store.

Store sales are considered comparable after the store has been open for 13 full fiscal months. If a store remodel results in a square footage change of more than 15%, or involves a relocation or a change in store

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concept, the store sales are removed from the comparable store base until the store has been opened at its new size, in its new location or under its new concept for 13 full fiscal months. Stores that are permanently closed or temporarily closed (including as a result of pandemic-related closures) for more than seven days in any fiscal month are excluded from the calculation in the fiscal month that they are closed. E-commerce sales are considered comparable after the online site has been operational in a country for 13 full fiscal months and exclude any related revenue from shipping fees.

These criteria are consistent with the metric used by management for internal reporting and analysis to measure performance of the store or online sites. Definitions and calculations of comparable store sales used by ~~the Company~~us may differ from similarly titled measures reported by other companies.

Other

~~The Company operates~~We operate on a 52/53-week fiscal year calendar which ends on the Saturday nearest to January 31 of each year. The three ~~and nine~~ months ended ~~October 28, 2017~~April 30, 2022 had the same number of days as the three ~~and nine~~ months ended ~~October 29, 2016.~~May 1, 2021.

Executive Summary

Overview

Net ~~loss~~earnings attributable to Guess?, Inc. ~~was $2.9~~decreased 33.6% to $8.0 million, or diluted ~~loss~~earnings per share (“EPS”) of ~~$0.04~~$0.12 per common share, for the quarter ended ~~October 28, 2017,~~April 30, 2022, compared to ~~net earnings attributable to Guess?, Inc. of $9.1~~$12.0 million, or diluted ~~earnings~~EPS of ~~$0.11~~$0.18 per common share, for the quarter ended ~~October 29, 2016.~~May 1, 2021.

During the quarter ended ~~October 28, 2017, the Company~~April 30, 2022, we recognized $1.5 million in asset impairment charges; $0.6 million in net ~~losses~~gains on lease ~~terminations of $11.5~~modifications; $4.4 million for certain professional service and ~~asset impairment charges of $2.0~~legal fees and related credits (costs); and $3.2 million in additional income tax expense from certain discrete income tax adjustments (or a combined ~~$13.3~~$7.3 million, or $0.12 per share, negative impact after considering the related tax benefit of ~~$0.3~~$1.3 million)~~, or an unfavorable $0.16 per share impact.~~. Excluding the impact of these items, adjusted net earnings attributable to Guess?, Inc. ~~were $10.4~~was $15.2 million and adjusted diluted earnings ~~were $0.12~~was $0.24 per common share for the quarter ended ~~October 28, 2017.~~ April 30, 2022.

During the quarter ended ~~October 29, 2016, the Company~~May 1, 2021, we recognized $0.4 million in asset impairment ~~charges~~charges; $2.1 million in net gains on lease modifications; $1.1 million for certain professional services and legal fees and related credits (costs); $2.8 million of ~~$0.8~~amortization of debt discount related to our Notes; and $0.1 million in additional income tax expense from certain discrete income tax adjustments (or ~~$0.5~~a combined $1.9 million, or $0.03 per share, negative impact after considering the related income tax benefit of ~~$0.3~~these adjustments of $0.4 million)~~, or a minimal per share impact.~~. Excluding the impact of ~~the asset impairment charges and the related tax impact,~~these items, adjusted net earnings attributable to Guess?, Inc. ~~were $9.6~~was $13.9 million and adjusted diluted earnings ~~were $0.11~~was $0.21 per common share for the quarter ended ~~October 29, 2016.~~May 1, 2021. References to financial results excluding the impact of these items are non-GAAP measures and are addressed below under “Non-GAAP Measures.”

Highlights of ~~the Company’s~~our performance for the quarter ended ~~October 28, 2017~~April 30, 2022 compared to the same prior-year ~~period~~quarter are presented below, followed by a more comprehensive discussion under “Results of Operations”:

Operations

• Total net revenue increased ~~3.3%~~14.1% to ~~$554.1~~$593.5 million for the quarter ended ~~October 28, 2017,~~April 30, 2022, compared to ~~$536.3~~$520.0 million in the same prior-year ~~period.~~quarter. In constant currency, net revenue increased by ~~0.6%~~20.6%.

• Gross margin (gross profit as a percentage of total net revenue) increased 90 basis points to ~~34.5%~~41.6% for the quarter ended ~~October 28, 2017,~~April 30, 2022, compared to ~~33.6%~~40.7% in the same prior-year ~~period.~~quarter.

• Selling, general and administrative (“SG&A”) expenses as a percentage of total net revenue (“SG&A rate”) ~~increased 160~~decreased 60 basis points to ~~32.2%~~35.3% for the quarter ended ~~October 28, 2017,~~April 30, 2022, compared to ~~30.6%~~35.9% in the same prior-year ~~period.~~quarter. SG&A expenses increased ~~8.7%~~12.4% to ~~$178.6~~$209.8 million for the quarter ended ~~October 28, 2017,~~April 30, 2022, compared to ~~$164.3~~$186.7 million in the same prior-year ~~period.~~quarter.

~~During the quarter ending October 28, 2017, the Company recognized net losses on lease terminations~~

Table of ~~$11.5 million.~~Contents

• During the quarter ended ~~October 28, 2017, the Company~~April 30, 2022, we recognized $1.5 million of asset impairment charges, ~~of $2.0 million,~~ compared to ~~$0.8~~$0.4 million in the same prior-year ~~period.~~quarter.

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

• Operating margin ~~decreased 300~~improved 100 basis points to ~~negative 0.2%~~6.1% for the quarter ended ~~October 28, 2017, from 2.8%~~April 30, 2022, compared to 5.1% in the same prior-year ~~period. Net losses on lease terminations~~quarter. The improvement in operating margin was mainly driven by 410 basis points resulting from expense leverage due to higher sales. This was partially offset by higher store labor costs in Americas Retail and an unfavorable currency impact which negatively impacted operating margin by ~~210~~120 basis points and 100 basis points, respectively. Higher expenses related to certain professional service and legal fees and related costs unfavorably impacted operating margin by 50 basis points. Lower net gains from lease modifications and higher asset impairment charges negatively impacted operating margin by 2050 basis ~~points during the quarter ended October 28, 2017 compared to the same prior-year period. Loss~~points. Earnings from operations ~~was $1.0~~increased 36.9% to $36.4 million for the quarter ended ~~October 28, 2017,~~April 30, 2022, compared to ~~earnings from operations of $15.1~~$26.6 million in the same prior-year ~~period.~~quarter.

• Other ~~income,~~expense, net, ~~(including interest income and expense)~~ totaled ~~$3.0~~$16.5 million for the quarter ended ~~October 28, 2017,~~April 30, 2022, compared to ~~$0.5~~$2.7 million in the same prior-year ~~period.~~quarter.

• The effective income tax rate increased by ~~144.9%~~10.1% to ~~182.6%~~39.9% for the quarter ended ~~October 28, 2017,~~April 30, 2022, compared to ~~37.7%~~29.8% in the same prior-year ~~period.~~

quarter.

Key Balance Sheet Accounts

~~The Company~~•We had ~~$233.1~~$147.9 million in cash and cash equivalents as of April 30, 2022 compared to $395.1 million in cash and cash equivalents and $0.2 million in restricted cash at May 1, 2021.

◦As of April 30, 2022, we had $43.8 million in outstanding borrowings under our term loans and $42.7 million in outstanding borrowings under our credit facilities compared to $56.0 million in outstanding borrowings under our term loans and $5.1 million in outstanding borrowings under our credit facilities as of ~~October 28, 2017, compared~~May 1, 2021.

◦During the quarter ended April 30, 2022, we made a payment of $175.0 million related to ~~$349.1~~the 2022 ASR Contract and also repurchased 0.5 million shares of our common stock for $11.7 million in ~~cash and cash equivalents and $0.8 million in restricted cash at October 29, 2016.~~open market transactions. During the quarter ended May 1, 2021, there were no share repurchases.


◦	~~The Company invested $24.8 million to repurchase 1,919,967 of its common shares during the nine months ended October 28, 2017.~~


◦	During the third quarter of fiscal 2018, the Company made up-front payments of approximately $22 million related to the modification of certain lease agreements held with a common landlord in North America.

•Accounts receivable ~~which~~ consists of trade receivables relating primarily to ~~the Company’s~~our wholesale business in Europe and, to a lesser extent, to ~~its~~our wholesale businesses in the Americas and Asia, royalty receivables relating to ~~its~~our licensing operations, credit card and retail concession receivables related to ~~its~~our retail businesses and certain other ~~receivables, increased~~receivables. Accounts receivable decreased by ~~$18.5~~$10.9 million, or ~~8.5%~~3.5%, to ~~$236.7~~$295.4 million as of ~~October 28, 2017,~~April 30, 2022 compared to ~~$218.2~~$306.3 million at ~~October 29, 2016.~~May 1, 2021. On a constant currency basis, accounts receivable increased by ~~$10.1~~$23.8 million, or ~~4.6%~~7.8%, when compared to ~~October 29, 2016.~~May 1, 2021.

•Inventory increased by ~~$49.1~~$79.1 million, or ~~11.5%~~19.5%, to ~~$477.2~~$483.9 million as of ~~October 28, 2017, compared to $428.1~~April 30, 2022, from $404.9 million at ~~October 29, 2016.~~May 1, 2021. On a constant currency basis, inventory increased by ~~$34.7~~$124.1 million, or ~~8.1%~~30.7%, when compared to ~~October 29, 2016.~~

During the nine months ended October 28, 2017, the Company entered into capital lease obligations totaling $18.0 million related primarily to equipment used in its new European third party distribution center.May 1, 2021.

Global Store Count

InDuring the ~~third~~ quarter ~~of fiscal 2018,~~ended April 30, 2022, together with our partners, we opened 5334 new stores worldwide, consisting of 2625 stores in Europe and the Middle East, 20six stores in Asia and the Pacific, ~~five~~and three stores in ~~Central and South America, one store in~~ the U.S. ~~and one store in Canada.~~ Together with our partners, we closed 4427 stores worldwide, consisting of 1812 stores in Asia and the Pacific, 11nine stores in Europe and the Middle East, ~~nine stores in Canada, four~~and six stores in the ~~U.S. and two stores in Central and South America.~~Americas.

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We ended the ~~third~~first quarter of fiscal ~~2018~~2023 with ~~1,653~~ stores and concessions worldwide comprised as follows:


					Stores			Concessions
Region	Total Stores	Directly Operated Stores	Licensee Stores	Region	Total	Directly-Operated	Partner Operated	Total	Directly-Operated	Partner Operated
United States	317	315	2	United States	244	244	—	1	—	1
Canada	96	96	—	Canada	74	74	—	—	—	—
Central and South America	97	54	43	Central and South America	101	67	34	29	29	—
Total Americas	510	465	45	Total Americas	419	385	34	30	29	1
Europe and the Middle East	661	385	276	Europe and the Middle East	795	564	231	51	51	—
Asia and the Pacific	482	132	350	Asia and the Pacific	424	124	300	253	111	142
Total	1,653	982	671	Total	1,638	1,073	565	334	191	143

This store count does not include 432 concessions located primarily in South Korea and Greater China, which have been excluded because of their smaller store size in relation to our standard international store size. Of the total ~~1,653~~ stores, ~~1,112 were full-priced GUESS? retail stores, 408~~1,355 were GUESS? ~~factory outlet~~ stores, 72186 were GUESS? Accessories stores, 60 were G by GUESS (GbG) stores and 6137 were MARCIANO stores.

Results of Operations

Three Months Ended ~~October 28, 2017~~April 30, 2022 and ~~October 29, 2016~~May 1, 2021

Consolidated Results

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


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

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

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

Effective income tax rate	39.9		%			29.8		%

Net Revenue. Net revenue in~~creased~~increased by ~~$17.8~~$73.5 million, or ~~3.3%, to $554.1 million~~ ~~for the quarter ended~~ ~~October 28, 2017~~14%, compared to ~~$536.3 million for~~ the ~~quarter ended~~ ~~October 29, 2016~~.same prior-year quarter. In constant currency, net revenue increased by ~~0.6% as currency~~20.6%. Almost 60% of the increase was driven by the operation of stores this quarter that had been temporarily closed in the same prior-year quarter and slightly over 25% from higher wholesale shipments. The remaining increase was driven by new stores and higher licensing revenue,

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partially offset by permanent store closures. Currency translation fluctuations relating to our ~~foreign~~non-U.S. operations ~~favorably~~unfavorably impacted net revenue by ~~$14.7~~$33.5 million compared to the same prior-year ~~period. The increase in net revenue driven primarily by retail expansion in our international markets was mostly offset by negative comparable sales in Americas Retail.~~quarter.

Gross Margin. Gross margin increased ~~90 basis points to 34.5%~~0.9% for the quarter ended ~~October 28, 2017,~~April 30, 2022 compared to ~~33.6%~~the same prior-year quarter, driven entirely by a lower occupancy rate. The lower occupancy rate was due to a 180 basis point favorable impact from leveraging of expenses as a result of higher revenues and business mix, partially offset by 70 basis points due to rent relief in the same prior-year ~~period, of which 120 basis points was due~~quarter. Product margin remained flat to ~~higher overall product margins, partially~~the same prior-year quarter as favorable business mix and lower markdowns were offset by ~~30 basis points due to a higher occupancy rate. The higher product margins were driven primarily by higher overall~~unfavorable currency translation fluctuations and lower initial markups. The higher occupancy rate was driven primarily by higher retail distribution costs resulting from the relocation of the Company’s European distribution center and, to a lesser extent, the negative impact on the fixed cost structure resulting from negative comparable sales in Americas Retail, partially offset by the favorable impact from negotiated rent reductions and store closures in Americas Retail.

Gross Profit.Gross profit increased ~~by $10.9 million, or 6.0%, to $191.1~~$35.6 million for the quarter ended ~~October 28, 2017~~,April 30, 2022 compared to ~~$180.2 million in~~ the same prior-year ~~period.~~quarter. The increase in gross profit, which included ~~the favorable~~an unfavorable impact offrom currency translation, was driven by $43 million due ~~primarily~~ to higher ~~overall product margins.~~net revenue, partially offset by $9 million due to rent relief in the same prior-year quarter and lower initial markups. Currency translation fluctuations relating to our foreign operations ~~favorably~~unfavorably impacted gross profit by ~~$5.2~~$16.7 million.

~~The Company includes~~We include inbound freight charges, purchasing costs and related overhead, retail store occupancy costs, including ~~rent~~lease costs and depreciation and amortization, and a portion of ~~the Company’s~~our distribution costs related to ~~its~~our retail business in cost of product sales. ~~The Company’s~~We also include net royalties received on our inventory purchases of licensed product as a reduction to cost of product sales. Our gross margin may not be comparable to that of other entities since some entities include all of the costs related to their distribution in cost of product sales and others, like ~~the Company,~~us, generally exclude wholesale-related distribution costs from gross margin, including them instead in SG&A expenses. Additionally, some entities include retail store occupancy costs in SG&A expenses and others, like ~~the Company,~~us, include retail store occupancy costs in cost of product sales.

SG&A Rate. ~~The Company’s~~ Our SG&A rate ~~increased 160 basis points to 32.2%~~decreased 0.6% for the quarter ended ~~October 28, 2017, compared to 30.6% in~~April 30, 2022 from the same prior-year ~~period, due primarily~~quarter. The favorable change in SG&A rate was driven by a 240 basis point favorable impact resulting from an overall leveraging of expenses, partially offset by 120 basis points from higher store labor costs in Americas Retail and 50 basis points from higher expenses related to ~~higher performance-based compensation~~certain professional service and legal fees and related (credits) costs.

SG&A Expenses. SG&A expenses increased ~~by $14.3 million, or 8.7%, to $178.6~~$23.1 million for the quarter ended ~~October 28, 2017, compared to $164.3 million in~~April 30, 2022 from the same prior-year ~~period.~~quarter, mainly driven by approximately $18 million of higher store expenses as stores were fully open compared to last year and store labor costs were higher in Americas Retail. Currency translation fluctuations relating to our foreign operations favorably impacted SG&A expenses by $10.3 million.

Asset Impairment Charges. During the quarters ended April 30, 2022 and May 1, 2021, we recognized $1.5 million and $0.4 million of property and equipment impairment charges related to certain retail locations resulting from under-performance and expected store closures, respectively.

Net Gains on Lease Modifications. During the quarters ended April 30, 2022 and May 1, 2021, we recorded net gains on lease modifications of $0.6 million and $2.1 million related primarily to the early termination of lease agreements for certain retail locations, respectively.

Operating Margin. Operating margin increased 1.0% for the quarter ended April 30, 2022 compared to the same prior-year quarter. The ~~increase,~~improvement in operating margin was mainly driven by 410 basis points resulting from expense leverage due to higher sales. This was partially offset by higher store labor costs in Americas Retail and an unfavorable currency impact which ~~included~~negatively impacted operating margin by 120 basis points and 100 basis points, respectively. Higher expenses related to certain professional service and legal fees and related (credits) costs unfavorably impacted operating margin by 50 basis points. Excluding the

~~unfavorable~~ impact of ~~currency translation, was driven primarily~~higher asset impairment charges and lower net gains on lease modifications, our operating margin would have increased 2.0% compared to the same prior-year quarter.

Earnings from Operations. Earnings from operations increased by ~~higher performance-based compensation costs.~~$9.8 million for the quarter ended April 30, 2022 compared to the same prior-year quarter. Currency translation fluctuations relating to our foreign operations unfavorably impacted ~~SG&A expenses~~earnings from operations by ~~$4.6~~$6.4 million.

~~Net Losses on Lease Terminations.~~ ~~During~~

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Other Expense, Net. Other expense, net for the quarter ended October 28, 2017, the Company incurred net losses on lease terminations of $11.5 million related primarily to the modification of certain lease agreements held with a common landlord in North America. There were no net losses on lease terminations recorded during the same prior-year period. Currency translation fluctuations relating to our foreign operations unfavorably impacted net losses on lease terminations by $0.3 million.

~~Asset Impairment Charges.~~ ~~During the quarter ended October 28, 2017, the Company recognized asset impairment charges of $2.0~~April 30, 2022 was $16.5 million compared to ~~$0.8~~$2.7 million in the same prior-year ~~period.~~quarter. The change was primarily due to higher ~~asset impairment charges during the quarter ended October 28, 2017 related primarily to the impairment of certain retail locations in North America resulting~~net unrealized and realized losses from ~~under-performance~~foreign currency exposures and ~~expected store closures. Currency translation fluctuations relating to our foreign operations unfavorably impacted asset impairment charges by $0.1 million.~~

~~Operating Margin.~~ ~~Operating margin decreased 300 basis points to negative 0.2% for the quarter ended October 28, 2017, from 2.8% in the same prior-year period. Net~~higher net unrealized losses on ~~lease terminations negatively impacted operating margin by 210 basis points and higher asset impairment charges negatively impacted operating margin by 20 basis points during the quarter ended~~ ~~October 28, 2017~~our Supplemental Executive Retirement Plan (“SERP”) related assets compared to the same prior-year period. Excluding the impact of these items, operating margin decreased by 70 basis points compared to the same prior-year period. Currency exchange rate fluctuations negatively impacted operating margin by approximately 10 basis points.quarter.

~~Earnings (Loss) from Operations.~~ ~~Loss from operations was $1.0 million~~ ~~for the quarter ended~~ ~~October 28, 2017~~, compared to earnings from operations of $15.1 million in the same prior-year period. Currency translation fluctuations relating to our foreign operations favorably impacted loss from operations by $0.2 million.

~~Interest Income, Net.~~ Interest income, net was $0.2 million for the quarter ended October 28, 2017, compared to $0.4 million for the quarter ended October 29, 2016 and includes the impact of hedge ineffectiveness of foreign exchange currency contracts designated as cash flow hedges.

~~Other Income, Net~~. Other income, net was $2.8 million for the quarter ended October 28, 2017, compared to $0.1 million in the same prior-year period. Other income, net in the quarter ended October 28, 2017 consisted primarily of unrealized gains on non-operating assets and net unrealized and realized mark-to-market revaluation gains on foreign exchange currency contracts. Other income, net in the quarter ended October 29, 2016 consisted primarily of net unrealized and realized mark-to-market revaluation gains on foreign exchange currency contracts, partially offset by net unrealized mark-to-market revaluation losses on foreign currency balances.

Income Tax Expense. Income tax expense for the quarter ended ~~October 28, 2017~~April 30, 2022 was ~~$3.7~~$7.0 million, or a ~~182.6%~~39.9% effective income tax rate, compared to ~~$5.9~~$5.5 million, or a ~~37.7%~~29.8% effective income tax rate in the same prior-year ~~period.~~quarter. Generally, income taxes for the interim periods are computed using the income tax rate estimated to be applicable for the full fiscal year, adjusted for discrete items, which is subject to ongoing review and evaluation by management. The ~~increase~~change in the effective income tax rate ~~during~~was primarily due to: (1) a shift in the ~~quarter ended October 28, 2017~~distribution of earnings among our tax jurisdictions compared to the same prior-year ~~period was due primarily to more~~quarter; and (2) losses ~~incurred~~during the current quarter in certain ~~foreign~~tax jurisdictions ~~where the Company has valuation allowances.~~for which we did not recognize an income tax benefit.

Net Earnings Attributable to ~~Noncontrolling Interests.~~ Net earnings attributable to noncontrolling interests were $1.2 million, net of taxes, for the quarter ended October 28, 2017, compared to $0.6 million, net of taxes, for the quarter ended October 29, 2016.

~~Net Earnings (Loss) Attributable to~~ Guess?, Inc. Net ~~loss attributable to Guess?, Inc. was $2.9 million for the quarter ended October 28, 2017, compared to net~~ earnings attributable to Guess?, Inc. ~~of $9.1~~decreased $4.0 million ~~in the same prior-year period. Diluted loss per share was $0.04~~ for the quarter ended ~~October 28, 2017,~~April 30, 2022 compared to ~~diluted~~

~~earnings per share of $0.11~~the same prior-year quarter. Diluted EPS decreased $0.06 for the quarter ended ~~October 29, 2016. During~~April 30, 2022 compared to the same prior-year quarter. We estimate a net positive impact of $0.04 from our adoption of new accounting guidance related to our Notes and share buybacks and a negative impact from currency of $0.14 on diluted EPS in the quarter ended ~~October 28, 2017,~~April 30, 2022 when compared to the ~~Company recognized net losses on lease terminations~~same prior-year quarter.

Refer to “Non-GAAP Measures” for an overview of ~~$11.5 million~~our non-GAAP, or adjusted, financial results for the quarters ended April 30, 2022 and ~~asset impairment charges of $2.0 million (or a combined $13.3 million after considering the related tax benefit of $0.3 million), or an unfavorable $0.16 per share impact.~~May 1, 2021. Excluding the impact of these non-GAAP items, adjusted net earnings attributable to Guess?, Inc. ~~were $10.4~~increased $1.4 million and adjusted diluted ~~earnings were $0.12 per common share~~EPS increased $0.03 for the quarter ended ~~October 28, 2017.~~April 30, 2022 compared to the same prior-year quarter. We estimate ~~that~~a net positive impact from our share buybacks of $0.01 and a net negative impact from currency ~~had a minimal impact~~of $0.14 on adjusted diluted ~~loss per share for~~EPS in the quarter ended ~~October 28, 2017. During~~April 30, 2022 when compared to the ~~quarter ended October 29, 2016, the Company recognized asset impairment charges~~same prior-year quarter.

Table of $0.8 million (or $0.5 million after considering the related tax benefit of $0.3 million), or a minimal per share impact. Excluding the impact of the asset impairment charges and the related tax impact, adjusted net earnings attributable to Guess?, Inc. were $9.6 million and adjusted diluted earnings were $0.11 per common share for the quarter ended October 29, 2016. References to financial results excluding the impact of these items are non-GAAP measures and are addressed below under “Non-GAAP Measures.”Contents

Information by Business Segment

The following ~~table~~ presents our net revenue and earnings ~~(loss)~~ from operations by segment ~~for the three months ended~~ ~~October 28, 2017~~ ~~and~~ ~~October 29, 2016~~ ~~(dollars in~~(in thousands):


	Three Months Ended
	Apr 30, 2022			May 1, 2021			$ change		% change
Net revenue:
Americas Retail	$	166,485		$	155,535		$	10,950	7.0	%
Americas Wholesale	68,357			45,430			22,927		50.5	%
Europe	276,009			241,852			34,157		14.1	%
Asia	56,222			55,660			562		1.0	%
Licensing	26,400			21,525			4,875		22.6	%
Total net revenue	$	593,473		$	520,002		73,471		14.1	%
Earnings (loss) from operations:
Americas Retail	$	14,266		$	20,274		(6,008)		(29.6	%)
Americas Wholesale	17,397			11,555			5,842		50.6	%
Europe	17,890			4,198			13,692		326.2	%
Asia	(3,487)			(1,808)			(1,679)		92.9	%
Licensing	24,444			19,431			5,013		25.8	%
Total segment earnings from operations	70,510			53,650			16,860		31.4	%
Corporate overhead	(33,192)			(28,776)			(4,416)		15.3	%

Asset impairment charges	(1,544)			(441)			(1,103)		250.1	%
Net gains on lease modifications	601			2,145			(1,544)		(72.0	%)
Total earnings from operations	$	36,375		$	26,578		9,797		36.9	%

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

Three Months Ended
Oct 28, 2017 Oct 29, 2016 Change % Change
Net revenue:
Americas Retail $ 187,021
$ 215,862
$ (28,841 ) (13.4 %)
Europe (1) 221,230
186,289
34,941
18.8
Asia (1) 74,322
63,617
10,705
16.8
Americas Wholesale (1) 45,636
46,785
(1,149 ) (2.5 )
Licensing 25,929
23,768
2,161
9.1
Total net revenue $ 554,138
$ 536,321
$ 17,817
3.3 %
Earnings (loss) from operations:
Americas Retail (1) $ (4,670 ) $ (10,505 ) $ 5,835
55.5 %
Europe (1) 6,678
11,597
(4,919 ) (42.4 )
Asia (1) 2,718
(1,962 ) 4,680
238.5
Americas Wholesale (1) 8,241
8,142
99
1.2
Licensing (1) 23,532
20,119
3,413
17.0
Total segment earnings from operations 36,499
27,391
9,108
33.3
Corporate overhead (1) (23,942 ) (11,466 ) (12,476 ) 108.8
Net gains (losses) on lease terminations (1) (11,494 ) —
(11,494 )
Asset impairments (1) (2,018 ) (802 ) (1,216 )
Total earnings (loss) from operations $ (955 ) $ 15,123
$ (16,078 ) (106.3 %)
Operating margins:
Americas Retail (1) (2.5 %) (4.9 %)
Europe (1) 3.0 % 6.2 %
Asia (1) 3.7 % (3.1 %)
Americas Wholesale (1) 18.1 % 17.4 %
Licensing (1) 90.8 % 84.6 %
Total Company (0.2 %) 2.8 %

~~(1)~~

During the first quarter of fiscal 2018, net revenue and related costs and expenses for certain globally serviced customers were reclassified into the segment primarily responsible for the relationship. During the third quarter of fiscal 2018, segment results were also adjusted to exclude corporate performance-based compensation costs, net gains (losses) on lease terminations and asset impairment charges due to the fact that these items are no longer included in the segment results provided to the Company’s chief operating decision maker in order to allocate resources and assess performance. Accordingly, segment results have been adjusted for the three months ended October 29, 2016 to conform to the current period presentation.

Americas Retail

Net revenue from our Americas Retail segment ~~decreased~~increased by ~~$28.8~~$11.0 million, or ~~13.4%, to $187.0 million~~7.0% for the quarter ended ~~October 28, 2017,~~April 30, 2022 from ~~$215.9 million in~~ the same prior-year ~~period.~~quarter. In constant currency, net revenue ~~decreased~~increased by ~~14.3%,~~7.1% compared to the same prior-year quarter. Over 80% of the increase was driven ~~primarily~~ by the ~~unfavorable impact from negative~~operation of stores this quarter that had been temporarily closed in the same prior-year quarter and 40% of the increase was driven by positive comparable store sales, ~~and, to a lesser extent,~~partially offset by permanent store closures. Comparable sales (including e-commerce) ~~decreased 10%~~increased 3% in U.S. dollars and ~~11% in~~ constant ~~currency.~~currency compared to the same prior-year quarter. The inclusion of our e-commerce sales ~~had a minimal impact on~~decreased the comparable sales percentage by 1% in U.S. dollars and constant currency. ~~The store base for~~As of April 30, 2022, we directly operated 385 stores in the ~~U.S. and Canada decreased by an average of 35 net~~Americas compared to 388 stores ~~during the quarter ended October 28, 2017 compared to~~at May 1, 2021, excluding concessions, which represents a 0.8% decrease from the same prior-year ~~period, resulting in a 6.9% net decrease in average square footage.~~quarter. Currency translation fluctuations relating to our non-U.S. retail stores and e-commerce sites ~~favorably impacted~~had an immaterial impact on net ~~revenue by $2.1 million.~~revenue.

Operating margin ~~improved 240 basis points to negative 2.5%~~decreased 4.4% for the quarter ended ~~October 28, 2017, compared to negative 4.9%~~April 30, 2022 from the same prior-year quarter. Approximately 320 basis points of the decrease was driven by higher store labor costs, and approximately 150 basis points for both higher markdowns and higher government subsidies received in the same prior-year ~~period, driven primarily~~quarter. This was partially offset by ~~higher gross margins due to higher product margins and, to a lesser extent, a lower occupancy rate. The higher product margins were due primarily to lower markdowns and, to a lesser extent,~~280 basis points of favorable impact from higher initial markups. The lower occupancy rate was driven primarily by the favorable impact from negotiated rent reductions and, to a lesser extent, store closures, partially offset by the negative impact on the fixed cost structure resulting from negative comparable sales.

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

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

Americas Wholesale

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

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

Earnings from operations from our Americas Wholesale segment increased by $5.8 million, or ~~55.5%, to $4.7 million~~50.6% for the quarter ended ~~October 28, 2017, compared to $10.5 million in~~April 30, 2022 from the same prior-year ~~period. The improvement reflects the favorable impact on earnings from lower occupancy costs and lower store selling expenses~~quarter, mainly driven ~~primarily~~ by ~~store closures and, to a lesser extent, negotiated rent reductions, partially offset by the unfavorable impact from lower revenue.~~higher revenues.

As of October 28, 2017, we directly operated 411 stores in the U.S. and Canada, of which 315 stores were in the U.S. and 96 stores were in Canada. As of October 28, 2017, the total 411 directly operated stores were comprised of 186 GUESS? factory outlet stores, 125 full-priced GUESS? retail stores, 71 G by GUESS stores and 29 MARCIANO stores. As of October 29, 2016, we directly operated 452 stores in the U.S. and Canada, of which 341 stores were in the U.S. and 111 stores were in Canada.

Europe

Net revenue from our Europe segment increased by ~~$34.9~~$34.2 million, or ~~18.8%, to $221.2 million~~14.1% for the quarter ended ~~October 28, 2017,~~April 30, 2022 compared to ~~$186.3 million in~~ the same prior-year ~~period.~~quarter. In constant currency, net revenue increased by ~~11.9%,~~26.4%. The increase in constant currency was driven ~~primarily~~over 60% by the ~~favorable~~operation of stores this quarter that had been temporarily closed in the same prior-year quarter, nearly 20% by higher wholesale revenues, 10% by net new store impact ~~from retail expansion~~ and ~~to a lesser extent, higher shipments in our European wholesale business and~~almost 5% by positive comparable store sales. As of October 28, 2017, we directly operated 385 stores in Europe compared to 321 stores at October 29, 2016, excluding concessions, which represents a 19.9% increase over the prior-year third quarter end. Comparable sales (including e-commerce) ~~increased 10%~~decreased 6% in U.S. dollars and 4%increased 3% in constant currency compared to the same prior-year ~~period.~~quarter. The inclusion of our e-commerce sales ~~increased~~decreased the comparable sales percentage by 3%2% in U.S. dollars and decreased 4% in constant currency. As of April 30, 2022, we directly operated 564 stores in Europe compared to 511 stores at May 1, 2021, excluding concessions, which represents a 10.4% increase from the same prior-year quarter. Currency translation fluctuations relating to our European operations ~~favorably~~unfavorably impacted net revenue by ~~$12.7~~$29.7 million.

Operating margin ~~decreased 320 basis points to 3.0%~~increased 4.8% for the quarter ended ~~October 28, 2017, from 6.2% in~~April 30, 2022 compared to the same prior-year ~~period,~~quarter. The increase was mainly driven by a 730 basis point improvement due to expense leverage resulting from higher sales and a 190 basis point improvement due to lower ~~gross margins driven primarily by higher distribution costs resulting from the relocation of the Company’s European distribution center,~~markdowns, partially offset by a 390 basis point unfavorable impact from lower initial markups due to higher ~~initial markups.~~freight costs and a 200 basis point unfavorable impact from currency exchange rate.

Earnings from operations from our Europe segment ~~decreased~~increased by ~~$4.9~~$13.7 million, or ~~42.4%, to $6.7 million~~326.2% for the quarter ended ~~October 28, 2017, from $11.6 million in~~April 30, 2022 compared to the same prior-year ~~period, driven primarily~~quarter. Higher revenue, including the benefits from lower markdowns, was the main driver for the increase in earnings from operations and resulted in an increase of $25.0 million compared to the same prior-year quarter. This was partially offset by ~~higher distribution costs resulting from the relocation of the Company’s European distribution center.~~$11.7 million increase in freight expenses. Currency translation fluctuations relating to our European operations ~~favorably~~unfavorably impacted earnings from operations by ~~$0.4~~$6.4 million.

Asia

Net revenue from our Asia segment increased by ~~$10.7~~$0.6 million, or ~~16.8%, to $74.3 million~~1.0% for the quarter ended ~~October 28, 2017, compared to $63.6 million in~~April 30, 2022 from the same prior-year ~~period.~~quarter. In constant currency, net revenue increased by ~~18.5%,~~7.7% driven ~~primarily~~ by ~~retail expansion and, to a lesser extent, positive comparable sales. As~~the impact of ~~October 28, 2017,~~the direct operation of some of our stores in South Korea, which we ~~and~~acquired from one of our wholesale partners, ~~operated 482 stores and 371 concessions~~which was slightly offset by the impact of the COVID-19 pandemic in ~~Asia, compared to 493 stores and 395 concessions at October 29, 2016. As of October 28, 2017, we directly operated 132 stores, compared to 95 directly operated stores at October 29, 2016.~~China. Comparable sales (including e-commerce) ~~increased 3%~~decreased 11% in U.S. dollars and 5% in constant ~~currency.~~currency compared to the same prior-year quarter. The inclusion of our e-commerce sales ~~increased~~negatively impacted the comparable sales percentage by 2%1% in U.S. dollars and constant currency. Currency translation fluctuations relating to our Asian operations unfavorably impacted net revenue by ~~$1.0~~$3.7 million.

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Operating margin ~~increased 680 basis points to 3.7%~~decreased 3.0% for the quarter ended ~~October 28, 2017, compared to negative 3.1% in~~April 30, 2022 from the same prior-year ~~period,~~quarter. Approximately 800 basis points of margin decrease were driven by the lower profitability in our China business mainly due to ~~higher gross margins and,~~the impact of the COVID-19 pandemic in that market. This was partially offset by 400 basis points of impact driven by the profitability improvement in South Korea mainly due to ~~a lesser extent, a lower SG&A rate driven primarily by overall leveraging~~the direct operation of ~~expenses.~~some of our stores.

Earnings from operations from our Asia segment ~~was $2.7~~decreased by $1.7 million, or 92.9% for the quarter ended ~~October 28, 2017,~~April 30, 2022 compared to ~~loss from operations of $2.0 million in~~ the same prior-year ~~period. This improvement~~quarter. Approximately $4.0 million was driven ~~primarily~~ by the ~~favorable~~lower profit in China due to the impact ~~on earnings from~~of the COVID-19 pandemic, partially offset by $1.7 million of higher ~~revenue.~~profit in South Korea. Currency translation fluctuations relating to our ~~Asian~~Asia operations unfavorably impacted ~~earnings from operations by $0.3 million.~~

~~Americas Wholesale~~

~~Net revenue from our Americas Wholesale segment decreased by $1.1 million, or 2.5%, to~~ ~~$45.6 million~~ ~~for~~ the quarter ended October 28, 2017, from $46.8 million in the same prior-year period. In constant currency, net revenue decreased by 4.5%, driven primarily by lower shipments in our U.S. wholesale business. Currency translation fluctuations relating to our non-U.S. wholesale businesses ~~favorably~~ ~~impacted net revenue by $0.9 million.~~

Operating margin increased 70 basis points to 18.1% for the quarter ended October 28, 2017, compared to 17.4% in the same prior-year period, due to a lower SG&A rate driven primarily by slightly lower expenses and, to a lesser extent, higher gross margins.

Earnings from operations from our Americas Wholesale segment increased by $0.1 million, or 1.2%, to $8.2 million for the quarter ended October 28, 2017, compared to $8.1 million in the same prior-year period. Currency translation fluctuations relating to our non-U.S. wholesale businesses favorably impacted earningsloss from operations by $0.2 million.

Licensing

Net royalty revenue from our Licensing segment in~~creased~~increased by ~~$2.2~~$4.9 million,, or ~~9.1%, to~~ ~~$25.9 million~~22.6% for the quarter ended ~~October 28, 2017, compared to $23.8 million in~~April 30, 2022 from the same prior-year ~~period. The increase was~~quarter mainly driven ~~primarily~~ by higher ~~sales~~royalties in our ~~eyewear and~~ handbag ~~categories.~~

~~Earnings from operations from our Licensing segment~~ in~~creased by~~ ~~$3.4 million, or~~ ~~17.0%, to~~ ~~$23.5 million~~ ~~for the quarter ended~~ ~~October 28, 2017, compared to $20.1 million in the same prior-year period. The increase was driven primarily by the favorable impact to earnings from higher revenue and, to a lesser extent, lower expenses.~~

~~Corporate Overhead~~

Unallocated corporate overhead increased by $12.5 million to $23.9 million for the quarter ended October 28, 2017, compared to $11.5 million in the same prior-year period, driven primarily by higher performance-based compensation costs.

~~Nine Months Ended~~ ~~October 28, 2017~~ ~~and~~ ~~October 29, 2016~~

~~Consolidated Results~~

~~Net Revenue~~. Net revenue increased by $56.3 million, or 3.7%, to $1.59 billion for the nine months ended October 28, 2017, compared to $1.53 billion for the nine months ended October 29, 2016. In constant currency, net revenue increased by 3.1% as currency translation fluctuations relating to our foreign operations favorably impacted net revenue by $8.6 million compared to the same prior-year period. The increase was driven primarily by retail expansion in our international markets and, to a lesser extent, from higher European wholesale shipments, partially offset by negative comparable sales in Americas Retail.

~~Gross Margin.~~ Gross margin increased 40 basis points to 33.6% for the nine months ended October 28, 2017, compared to 33.2% in the same prior-year period, of which 30 basis points was due to higher overall product margins driven primarily by higher overall initial markups.

~~Gross Profit.~~Gross profit increased by $25.2 million, or 4.9%, to $533.8 million for the nine months ended October 28, 2017, compared to $508.6 million in the same prior-year period. The increase in gross profit, which included the favorable impact of currency translation, was due primarily to the favorable impact on gross profit from higher revenue. Currency translation fluctuations relating to our foreign operations favorably impacted gross profit by $2.9 million.

~~SG&A Rate.~~ ~~The Company’s SG&A rate increased 10 basis points to 32.7% for the nine months ended October 28, 2017, compared to 32.6% in the same prior-year period.~~

~~SG&A Expenses.~~ SG&A expenses increased by $19.4 million, or 3.9%, to $519.5 million for the nine months ended October 28, 2017, compared to $500.1 million in the same prior-year period. The increase, which included the unfavorable impact of currency translation, was driven primarily by higher performance-based compensation costs. Currency translation fluctuations relating to our foreign operations unfavorably impacted SG&A expenses by $1.7 million.

~~Net Gains (Losses) on Lease Terminations.~~ During the nine months ended October 28, 2017, the Company recognized net losses on lease terminations of $11.5 million, compared to net gains on lease terminations of $0.7 million in the same prior-year period. The net losses on lease terminations during the nine months ended October 28, 2017 related primarily to the modification of certain lease agreements held with a common landlord in North America. Currency translation fluctuations relating to our foreign operations unfavorably impacted net losses on lease terminations by $0.3 million.

~~Asset Impairment Charges.~~ During the nine months ended October 28, 2017, the Company recognized asset impairment charges of $6.0 million, compared to $1.5 million in the same prior-year period. The higher asset impairment charges during the nine months ended October 28, 2017 related primarily to the impairment of certain retail locations in North America resulting from under-performance and expected store closures.

~~Restructuring Charges.~~ ~~There were no restructuring charges incurred during the nine months ended October 28, 2017. During the nine months ended October 29, 2016, the Company incurred restructuring charges of $6.1 million.~~

~~Operating Margin.~~ Operating margin decreased 30 basis points to negative 0.2% for the nine months ended October 28, 2017, compared to 0.1% in the same prior-year period. Higher net losses on lease terminations unfavorably impacted operating margin by 70 basis points during the nine months ended October 28, 2017 compared to the same prior-year period. Higher asset impairment charges recorded unfavorably impacted operating margin by 30 basis points during the nine months ended October 28, 2017 compared to the same prior-year period. Restructuring charges incurred during the prior year negatively impacted operating margin by 40 basis points during the nine months ended October 29, 2016. Excluding the impact of these items, operating margin increased by 30 basis points compared to the same prior-year period. Currency exchange rate fluctuations negatively impacted operating margin by approximately 10 basis points.

~~Earnings (Loss) from Operations.~~ Loss from operations was $3.2 million for the nine months ended October 28, 2017, compared to earnings from operations of $1.7 million in the same prior-year period. Currency translation fluctuations relating to our foreign operations favorably impacted loss from operations by $0.9 million.

~~Interest Income, Net.~~ Interest income, net was $1.4 million for the nine months ended October 28, 2017, compared to $0.3 million for the nine months ended October 29, 2016 and includes the impact of hedge ineffectiveness of foreign exchange currency contracts designated as cash flow hedges.

~~Other Income, Net~~. Other income, net was $3.6 million for the nine months ended October 28, 2017, compared to $26.4 million in the same prior-year period. Other income, net in the nine months ended October 28, 2017 consisted primarily of unrealized gains on non-operating assets and net unrealized mark-to-market revaluation gains on foreign currency balances, partially offset by net realized and unrealized mark-to-market revaluation losses on foreign exchange currency contracts. Other income, net in the nine months ended October 29, 2016 consisted primarily of a realized gain of $22.3 million from the sale of a minority interest investment.

~~Income Tax Expense.~~ Income tax expense for the nine months ended October 28, 2017 was $8.7 million, or a 508.6% effective tax rate, compared to $11.7 million, or a 41.1% effective tax rate, in the same prior-year period. Generally, income taxes for the interim periods are computed using the tax rate estimated to be applicable for the full fiscal year, adjusted for discrete items, which is subject to ongoing review and evaluation by management. The increase in the effective income tax rate during the nine months ended October 28, 2017 compared to the same prior-year period was due primarily to more losses incurred in certain foreign jurisdictions where the Company has valuation allowances, a shift in the distribution of earnings among the Company’s tax jurisdictions within the quarters of the current fiscal year and a lower tax rate on the gain from the sale of a minority interest investment during the same prior-year period. During the nine months ended October 28, 2017, the Company adopted authoritative guidance which requires all income tax effects of stock awards (resulting from an increase or decrease in the fair value of an award from grant date to the vesting date) to be recognized in the income statement when the awards vest or are settled. This is a change from previous guidance that required such activity to be recorded in paid-in capital within stockholders’ equity. As a result, the Company recorded tax shortfalls of approximately $0.7 million as an increase to the Company’s income tax expense during the nine months ended October 28, 2017.

~~Net Earnings Attributable to Noncontrolling Interests.~~ Net earnings attributable to noncontrolling interests were $1.9 million, net of taxes, for the nine months ended October 28, 2017, compared to $0.5 million, net of taxes, for the nine months ended October 29, 2016.

~~Net Earnings (Loss) Attributable to Guess?, Inc.~~ Net loss attributable to Guess?, Inc. was $8.9 million for the nine months ended October 28, 2017, compared to net earnings attributable to Guess?, Inc. of $16.2 million in the same prior-year period. Diluted loss per share was $0.12 for the nine months ended October 28, 2017, compared to diluted earnings per share of $0.19 for the nine months ended October 29, 2016. During the nine months ended October 28, 2017, the Company recognized net losses on lease terminations of $11.5 million and asset impairment charges of $6.0 million (or a combined $16.0 million after considering the related tax benefit of $1.5 million), or an unfavorable $0.20 per share impact. Excluding the impact of these items, adjusted net earnings attributable to Guess?, Inc. were $7.1 million and adjusted diluted earnings were $0.08 per common share for the nine months ended October 28, 2017. We estimate that the negative impact of currency on diluted loss per share for the nine months ended October 28, 2017 was approximately $0.02 per share. During the nine months ended October 29, 2016, the Company recognized a gain related to the sale of a minority interest investment of approximately $22.3 million and net gains on lease terminations of $0.7 million, partially offset by restructuring charges of $6.1 million, a restructuring related estimated exit tax charge of $1.9 million and asset impairment charges of $1.5 million (or a combined $14.0 million after considering the net $0.5 million related tax benefit resulting from the restructuring charges, asset impairment charges, sale of the minority interest investment and net gains on lease terminations), or a favorable $0.17 per share impact. Excluding the impact of these items, adjusted net earnings attributable to Guess?, Inc. were $2.2 million and adjusted diluted earnings were $0.02 per common share for the nine months

~~ended October 29, 2016. References to financial results excluding the impact of these items are non-GAAP measures and are addressed below under “Non-GAAP Measures.”~~

~~Information by Business Segment~~

~~The following table presents our net revenue and earnings (loss) from operations by segment for the nine months ended October 28, 2017 and~~ ~~October 29, 2016~~ ~~(dollars in thousands):~~

Nine Months Ended
Oct 28, 2017 Oct 29, 2016 Change % Change
Net revenue:
Americas Retail $ 561,903
$ 646,573
$ (84,670 ) (13.1 %)
Europe (1) 641,833
532,847
108,986
20.5
Asia (1) 200,436
171,255
29,181
17.0
Americas Wholesale (1) 114,151
111,354
2,797
2.5
Licensing 68,088
68,066
22
0.0
Total net revenue $ 1,586,411
$ 1,530,095
$ 56,316
3.7 %
Earnings (loss) from operations:
Americas Retail (1) $ (33,654 ) $ (22,279 ) $ (11,375 ) (51.1 %)
Europe (1) 30,749
16,221
14,528
89.6
Asia (1) 5,055
(5,251 ) 10,306
196.3
Americas Wholesale (1) 20,011
18,211
1,800
9.9
Licensing (1) 61,019
60,325
694
1.2
Total segment earnings from operations 83,180
67,227
15,953
23.7
Corporate overhead (1) (68,899 ) (58,660 ) (10,239 ) 17.5
Net gains (losses) on lease terminations (1) (11,494 ) 695
(12,189 )
Asset impairments (1) (6,013 ) (1,457 ) (4,556 )
Restructuring charges —
(6,083 ) 6,083

Total earnings (loss) from operations $ (3,226 ) $ 1,722
$ (4,948 ) 287.3 %
Operating margins:
Americas Retail (1) (6.0 %) (3.4 %)
Europe (1) 4.8 % 3.0 %
Asia (1) 2.5 % (3.1 %)
Americas Wholesale (1) 17.5 % 16.4 %
Licensing (1) 89.6 % 88.6 %
Total Company (0.2 %) 0.1 %

~~(1)~~

During the first quarter of fiscal 2018, net revenue and related costs and expenses for certain globally serviced customers were reclassified into the segment primarily responsible for the relationship. During the third quarter of fiscal 2018, segment results were also adjusted to exclude corporate performance-based compensation costs, net gains (losses) on lease terminations and asset impairment charges due to the fact that these items are no longer included in the segment results provided to the Company’s chief operating decision maker in order to allocate resources and assess performance. Accordingly, segment results have been adjusted for the nine months ended October 28, 2017 and October 29, 2016 to conform to the current period presentation.

~~Americas Retail~~

Net revenue from our Americas Retail segment decreased by $84.7 million, or 13.1%, to $561.9 million for the nine months ended October 28, 2017, from $646.6 million in the same prior-year period. In constant currency, net revenue decreased by 13.2%, driven primarily by the unfavorable impact from negative comparable sales and, to a lesser extent, store closures. Comparable sales (including e-commerce) decreased 12% in U.S. dollars and constant currency. The inclusion of our e-commerce sales had a minimal impact on the comparable sales percentage in U.S. dollars and constant currency. The store base for the U.S. and Canada decreased by an average of 22 net stores during the nine months ended October 28, 2017 compared to the same prior-year period, resulting in a 4.1% net decrease in average square footage. Currency translation fluctuations relating to our non-U.S. retail stores and e-commerce sites favorably impacted net revenue by $0.8 million.

Operating margin deteriorated 260 basis points to negative 6.0% for the nine months ended October 28, 2017, from negative 3.4% in the same prior-year period. This deterioration was due to lower gross margins and, to a lesser extent, a higher SG&A rate driven primarily by the negative impact on the fixed cost structure resulting from negative comparable sales.

Loss from operations from our Americas Retail segment deteriorated by $11.4 million, or 51.1%, to $33.7 million for the nine months ended October 28, 2017, from $22.3 million in the same prior-year period. The deterioration reflects the unfavorable impact on earnings from negative comparable sales.

~~Europe~~

Net revenue from our Europe segment increased by $109.0 million, or 20.5%, to $641.8 million for the nine months ended October 28, 2017, compared to $532.8 million in the same prior-year period. In constant currency, net revenue increased by 19.0%, driven primarily by the favorable impact from retail expansion and, to a lesser extent, from higher shipments in our European wholesale business and positive comparable sales. Comparable sales (including e-commerce) increased 7% in U.S. dollars and 6% in constant currency compared to the same prior-year period. The inclusion of our e-commerce sales increased the comparable sales percentage by 3% in U.S. dollars and constant currency. Currency translation fluctuations relating to our European operations favorably impacted net revenue by $7.7 million.

Operating margin increased 180 basis points to 4.8% for the nine months ended October 28, 2017, compared to 3.0% in the same prior-year period, due to a lower SG&A rate, partially offset by lower gross margins. The lower SG&A rate was driven primarily by the favorable impact on the fixed cost structure resulting from overall leveraging of expenses. The lower gross margins were driven primarily by higher distribution costs resulting from the relocation of the Company’s European distribution center, partially offset by higher initial markups.

Earnings from operations from our Europe segment increased by $14.5 million, or 89.6%, to $30.7 million for the nine months ended October 28, 2017, compared to $16.2 million in the same prior-year period. The increase was driven primarily by the favorable impact on earnings from higher revenue, partially offset by higher occupancy costs due to retail expansion and, to a lesser extent, higher distribution costs resulting from the relocation of the Company’s European distribution center. Currency translation fluctuations relating to our European operations favorably impacted earnings from operations by $1.2 million.

~~Asia~~

Net revenue from our Asia segment increased by $29.2 million, or 17.0%, to $200.4 million for the nine months ended October 28, 2017, compared to $171.3 million in the same prior-year period. In constant currency, net revenue increased by 17.1%, driven primarily by retail expansion and, to a lesser extent, positive comparable sales. Comparable sales (including e-commerce) increased 4% in U.S. dollars and constant currency compared to the same prior-year period. The inclusion of our e-commerce sales increased the comparable sales percentage by 1% in U.S. dollars and 2% in constant currency. Currency translation fluctuations relating to our Asian operations unfavorably impacted net revenue by $0.1 million.

Operating margin increased 560 basis points to 2.5% for the nine months ended October 28, 2017, compared to negative 3.1% in the same prior-year period. The improvement in operating margin was driven primarily by higher gross margins and, to a lesser extent, a lower SG&A rate driven primarily by overall leveraging of expenses.

Earnings from operations from our Asia segment were $5.1 million for the nine months ended October 28, 2017, compared to loss from operations of $5.3 million in the same prior-year period, driven primarily by the favorable impact on earnings from higher revenue.

~~Americas Wholesale~~

Net revenue from our Americas Wholesale segment increased by $2.8 million, or 2.5%, to $114.2 million for the nine months ended October 28, 2017, compared to $111.4 million in the same prior-year period. In constant currency, net revenue increased by 2.3%, driven primarily by higher shipments in our Mexico wholesale business. Currency translation fluctuations relating to our non-U.S. wholesale businesses favorably impacted net revenue by $0.2 million.

~~Operating margin increased 110 basis points to 17.5% for the nine months ended October 28, 2017, compared to 16.4% in the same prior-year period, due to higher gross margins.~~

Earnings from operations from our Americas Wholesale segment increased by $1.8 million, or 9.9%, to $20.0 million for the nine months ended October 28, 2017, compared to $18.2 million in the same prior-year period, driven primarily by the favorable impact on earnings from higher gross margins and higher revenue.

~~Licensing~~

~~Net royalty revenue from our Licensing segment was relatively flat at $68.1 million for each of the nine months ended October 28, 2017 and October 29, 2016.~~category.

Earnings from operations from our Licensing segment increased by ~~$0.7~~$5.0 million, or ~~1.2%, to $61.0 million~~25.8% for the ~~nine months~~quarter ended ~~October 28, 2017, compared to $60.3 million in~~April 30, 2022 from the same prior-year ~~period.~~quarter. The increase was driven by the favorable impact to earnings from ~~lower expenses.~~higher revenues.

Corporate Overhead

Unallocated corporate overhead increased by ~~$10.2~~$4.4 million, ~~to $68.9 million~~or 15.3% for the ~~nine months~~quarter ended ~~October 28, 2017,~~April 30, 2022 compared to ~~$58.7 million in~~ the same prior-year ~~period, driven~~quarter primarily bydue to higher ~~performance-based compensation~~expenses related to certain professional service and legal fees and related (credits) costs.

Non-GAAP Measures

The ~~Company’s reported~~ financial ~~results are~~information presented in ~~accordance with GAAP. The reported net loss attributable to Guess?, Inc.~~this Quarterly Report includes non-GAAP financial measures, such as adjusted results and ~~diluted loss per share for~~constant currency financial information. For the three ~~and nine~~ months ended ~~October 28, 2017 reflect~~April 30, 2022 and May 1, 2021, the adjusted results exclude the impact of ~~net losses on lease terminations,~~certain professional service and legal fees and related (credits) costs, asset impairment charges, and the related tax impacts. The reported net earnings attributable to Guess?, Inc. and diluted earnings per share for the three and nine months ended October 29, 2016 reflect the impact of a gain related to the sale of a minority interest investment, net gains on lease ~~terminations, restructuring charges, a restructuring~~modifications, non-cash amortization of debt discount on our Notes, the related ~~estimated exit~~income tax ~~charge, asset impairment charges and the tax effects~~impacts of these adjustments as well as certain discrete income tax adjustments related primarily to an intra-entity transfer of intellectual property rights to a wholly-owned Swiss subsidiary, in each case where applicable. These non-GAAP measures are provided in addition to, and not as alternatives for, our reported GAAP results.

These items affect the comparability of ~~the Company’s~~our reported results. The financial results are also presented on a non-GAAP basis, as defined in Section 10(e) of Regulation S-K of the SEC, to exclude the effect of these items. ~~The Company believes that~~We have excluded these ~~“non-GAAP” or “adjusted”~~items from our adjusted financial measures primarily because we believe these items are not indicative of the underlying performance of our business and the adjusted financial information provided is useful for investors to evaluate the comparability of ~~the Company’s~~our operating results and ~~its~~our future outlook ~~when~~(when reviewed in conjunction with ~~the Company’s~~our GAAP financial ~~statements. The non-GAAP measures are provided in addition to, and not as alternatives for, the Company’s~~statements).

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

~~The adjusted measures for the three months ended October 28, 2017 exclude the impact~~


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

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

______________________________________________________________________

Notes:

1 Amounts recorded represent certain professional service and legal fees and related (credits) costs which we otherwise would not have incurred as part of net losses on lease terminations of $11.5 million and asset impairment charges of $2.0 million. The net losses on lease terminations related primarily to the modification of certain lease agreements held with a common landlord in North America. Theour business.

2 Amounts represent asset impairment charges related primarily to ~~the~~ impairment of operating lease right-of-use assets and property and equipment related to certain retail locations ~~in North America~~ resulting from under-performance and expected store closures. These items resulted in a combined $13.3 million impact (after considering the related tax benefit of $0.3 million), or an unfavorable $0.16 per share impact during the three months ended October 28, 2017. Net loss attributable to Guess?, Inc. was $2.9 million and diluted loss was $0.04 per common share for the three months ended October 28, 2017. Excluding the impact of these items, adjusted net earnings attributable to Guess?, Inc. were $10.4 million and adjusted diluted earnings were $0.12 per common share for the three months ended October 28, 2017.

The adjusted measures for the nine months ended October 28, 2017 exclude the impact of net losses on lease terminations of $11.5 million and asset impairment charges of $6.0 million. The asset impairment charges related primarily to the impairment of certain retail locations in North America resulting from under-performance and expected store closures. These items resulted in a combined $16.0 million impact (after considering the related tax benefit of $1.5 million), or an unfavorable $0.20 per share impact during the nine months ended October 28, 2017. Net loss attributable to Guess?, Inc. was $8.9 million and diluted loss was $0.12 per common share for the nine months ended October 28, 2017. Excluding the impact of these items, adjusted net earnings attributable to

~~Guess?, Inc. were $7.1 million and adjusted diluted earnings were $0.08 per common share for the nine months ended October 28, 2017.~~

The adjusted measures for the three months ended October 29, 2016 exclude the impact of asset impairment charges of $0.8 million related primarily to the impairment of certain retail locations in North America resulting from under-performance and expected store closures. During the three months ended October 29, 2016, asset impairment charges resulted in a $0.5 million impact (after considering the related tax benefit of $0.3 million), or a minimal per share impact. Net earnings attributable to Guess?, Inc. were $9.1 million and diluted earnings were $0.11 per share for the three months ended October 29, 2016. Excluding the impact of the asset impairment charges and the related tax impact, adjusted net earnings attributable to Guess?, Inc. were $9.6 million and adjusted diluted earnings were $0.11 per common share for the three months ended October 29, 2016.

~~The adjusted measures for the nine months ended October 29, 2016 exclude the impact of a gain related to the sale of a minority interest investment of $22.3 million,~~3 Amounts recorded represent net gains on lease terminations of $0.7 million, restructuring charges of $6.1 million, a restructuring related estimated exit tax charge of $1.9 million and asset impairment charges of $1.5 million. The net gains on lease terminationsmodifications related primarily to the early termination of certain lease agreements in Europe. During the first quarter of fiscal 2017, the Company implemented a global cost reduction and restructuring plan to better align its global cost and organizational structure with its current strategic initiatives. This plan included the consolidation and streamliningagreements.

4 In April 2019, we issued $300 million principal amount of the ~~Company’s business processes~~Notes in a private offering. Prior to adoption of ASU 2020-06, we separated the Notes into liability (debt) and ~~a reduction~~equity (conversion option) components. The debt discount, which represented an amount equal to the fair value of the equity component, was amortized as non-cash interest expense over the term of the Notes. We adopted ASU 2020-06 under the modified retrospective method as of January 30, 2022. Upon adoption, the equity component was eliminated in ~~its global workforce~~the current period and ~~other expenses. During the nine months ended October 29, 2016, the Company also recognized impairment charges~~recorded as an adjustment to retained earnings. Prior periods are not affected.

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

6 The income tax effect of certain ~~retail locations in North America resulting from under-performance~~professional service and ~~expected store closures. These items resulted in a combined $14.0 million impact (after considering the net $0.5 million tax benefit resulting from the restructuring charges,~~legal fees and related (credits) costs, asset impairment charges, ~~sale of the minority interest investment and~~ net gains on lease ~~terminations)~~modifications and the amortization of debt discount was based on the our assessment of deductibility using the statutory income tax rate (inclusive of the impact of valuation allowances) of the tax jurisdiction in which the charges were incurred.

7 Prior to adoption of ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40), ~~or a favorable $0.17 per share impact during~~for GAAP purposes, we incurred dilution above the ~~nine~~initial strike price of our Notes of $25.78. At May 1, 2021, there was no dilution related to the Notes for the period.

We adopted ASU 2020-06 under the modified retrospective method as of January 30, 2022. Upon adoption, we prospectively utilize the if-converted method to calculate GAAP diluted EPS. For GAAP purposes, we incur dilution of our Notes based on the initial conversion rate associated with the Notes. For the three months ended ~~October 29, 2016. Net earnings attributable~~April 30, 2022, shares used in computing diluted EPS increased by 11.8 million shares due to ~~Guess?, Inc. were $16.2 million and diluted earnings were $0.19~~the change from the treasury stock method to the if-converted method. Diluted net income per ~~common~~ share for the ~~nine~~three months ended ~~October 29, 2016. Excluding~~April 30, 2022 is calculated based on GAAP net income and diluted weighted-average shares of 74.5 million, which also includes the potentially dilutive effect of our stock options, restricted stock units and the Notes.

For adjusted diluted shares, we exclude the dilutive impact of ~~these items, adjusted net earnings attributable~~the Notes at stock prices below $46.88, based on the bond hedge contracts in place that will deliver shares to ~~Guess?, Inc. were $2.2 million and adjusted diluted earnings were $0.02 per common share for~~offset dilution. At stock prices in excess of $46.88, we would have an obligation to deliver additional shares in excess of the ~~nine months ended October 29, 2016.~~dilution protection provided by the bond hedges.

Our discussion and analysis herein also includes certain constant currency financial information. Foreign currency exchange rate fluctuations affect the amount reported from translating ~~the Company’s~~our foreign revenue, expenses and balance sheet amounts into U.S. dollars. These rate fluctuations can have a significant effect on reported operating results under GAAP. ~~The Company provides~~We provide constant currency information to enhance the visibility of underlying business trends, excluding the effects of changes in foreign currency translation rates. To calculate net revenue ~~comparable sales~~ and earnings (loss)from operations on a constant currency basis, operating results for the current-year period are translated into U.S. dollars at the average exchange rates in effect during the comparable period of the prior year. To calculate balance sheet amounts on a constant currency basis, the current period balance

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sheet amount is translated into U.S. dollars at the exchange rate in effect at the comparable prior-year period end. The constant currency calculations do not adjust for the impact of revaluing specific transactions denominated in a currency that is different tofrom the functional currency of that entity when exchange rates fluctuate. The constant currency information presented may not be comparable to similarly titled measures reported by other companies.

In calculating the estimated impact of currency fluctuations (including translational and transactional impacts) on other measures such as earnings (loss) per share, ~~the Company estimates~~we estimate gross margin (including the impact of foreign exchange currency contracts designated as cash flow hedges for anticipated merchandise purchases) and expenses using the appropriate prior-year rates, ~~translates~~translate the estimated foreign earnings (loss) at the comparable prior-year rates and ~~excludes~~exclude the year-over-year earnings impact of gains or losses arising from balance sheet remeasurement and foreign exchange currency contracts not designated as cash flow hedges for merchandise purchases.

Liquidity and Capital Resources

We need liquidity globally primarily to fund our working capital, occupancy costs, ~~the expansion,~~interest payments on our debt, remodeling and rationalization of our retail stores, shop-in-shop programs, concessions, systems, infrastructure, compensation expenses, other existing operations, expansion plans, international growth and potential acquisitions and investments. ~~In addition,~~If we experience a sustained decrease in ~~the U.S.~~consumer demand, we ~~need liquidity~~may require access to ~~fund share repurchases and payment of dividends~~additional credit, which may not be available to ~~our stockholders.~~us on commercially acceptable terms, or at all. Generally, our working capital needs are highest during the late summer and fall as our inventories increase before the holiday selling period. In addition, in the U.S., we need liquidity to fund share repurchases and payment of dividends to our stockholders.

During the ~~nine~~three months ended ~~October 28, 2017, the Company~~April 30, 2022, we relied primarily on trade credit, available cash, real estate and other operating leases, ~~capital~~finance leases, proceeds from ~~short-term lines of~~our credit facilities and term loans and internally generated funds to finance our ~~operations, payment of dividends, share repurchases and expansion. The Company anticipates that~~operations. We anticipate we will be able to satisfy our ongoing cash requirements ~~during~~for at least the next ~~twelve~~12 months for working capital, capital expenditures, payments on our debt, ~~capital~~finance leases and operating leases, as well as lease ~~termination~~modification payments, potential acquisitions and investments, expected income tax payments, and share repurchases and dividend payments to stockholders, primarily with cash flow from operations and existing cash balances as supplemented by borrowings under our existing Credit ~~Facility~~Facilities and proceeds from our term loans, as needed. (Such arrangements are described further in “Part I, Item 1. Financial Statements – Note 9 – Borrowings and Finance Lease Obligations” in the ~~U.S.~~Form 10-Q.) Due to the seasonality of our business and ~~Canada as well as bank~~cash needs, we may increase borrowings under our established credit facilities from time-to-time during the next 12 months and beyond. On May 5, 2022, we entered into a €250 million revolving credit facility through a European subsidiary, which replaced certain European short-term borrowing arrangements. Refer to “Part I, Item 1. Financial Statements – Note 17 - Subsequent Events” for further information. If we experience a sustained decrease in ~~Europe,~~consumer demand related to the COVID-19 pandemic or to economic, political or other conditions or events, we may require access to additional credit, which may not be available to us on commercially acceptable terms or at all.

We expect to settle the principal amount of our outstanding Notes in 2024 in cash and any excess in shares. Our outstanding Notes may be converted at the option of the holders as described ~~below under “—Borrowings~~in “Part I, Item 1. Financial Statements – Note 10 – Convertible Senior Notes and ~~Capital Lease Obligations.”~~

Related Transactions” of this Form 10-Q and in “Note 10 – Convertible Senior Notes and Related Transactions” of the Consolidated Financial Statements included in our Annual Report on Form 10-K. As of ~~October 28, 2017,~~April 30, 2022, none of the ~~Company~~conditions allowing holders of the Notes to convert had been met. Pursuant to one of these conditions, if our stock trading price exceeds 130% of the conversion price of the Notes (currently $25.53) for at least 20 trading days during the 30 consecutive trading-day period ending on, and including, the last trading day of any calendar quarter, holders of the Notes would have the right to convert their convertible notes during the next calendar quarter. In accordance with the terms of the indenture governing the Notes, we have adjusted the conversion rate and the conversion price of the Notes for quarterly dividends exceeding $0.1125 per share. Upon conversion, we will pay or deliver, as the case may be, cash, shares of our common stock or a combination of cash and ~~cash equivalents~~shares of ~~$233.1 million,~~our common stock, at

Table of ~~which approximately $37.5 million was held~~Contents

our election, in the ~~U.S. As~~manner and subject to the terms and conditions provided in the indenture governing the Notes. The convertible note hedge transaction we entered into in connection with our issuance of ~~October 28, 2017,~~the Notes is expected generally to reduce the potential dilution upon conversion of the Notes and/or offset any cash payments we are required to make in excess of the principal amount of the Notes that are converted, as the case may be.

We have ~~not provided for U.S. federal and state income taxes on~~historically considered the undistributed earnings of our foreign subsidiaries ~~since~~to be indefinitely reinvested. As a result of the Tax Reform, we had a substantial amount of previously taxed earnings that could be distributed to the U.S. without additional U.S. taxation. We continue to evaluate our plans for reinvestment or repatriation of unremitted foreign earnings and regularly review our cash positions and determination of indefinite reinvestment of foreign earnings. If we determine that all or a portion of such foreign earnings are ~~considered~~no longer indefinitely reinvested, ~~outside the~~we may be subject to additional foreign withholding taxes and U.S. ~~If in the future we decide to repatriate such earnings, we would incur incremental U.S. federal and~~ state income taxes, ~~reduced by allowable~~beyond the one-time transition tax. As of April 30, 2022, we determined that approximately $12.7 million of such foreign earnings are no longer indefinitely reinvested. The incremental tax ~~credits. However, our intent is~~cost to ~~keep~~repatriate these ~~funds indefinitely reinvested outside of~~earnings to the U.S. ~~and~~is immaterial. We intend to indefinitely reinvest the remaining earnings from the our ~~current plans do~~foreign subsidiaries for which a deferred income tax liability has not ~~indicate a need~~already been recorded. It is not practicable to ~~repatriate them to fund our U.S. cash requirements. Due~~estimate the amount of income tax that might be payable if these earnings were repatriated due to the complexities associated with the hypothetical ~~calculation, including~~calculation. As of April 30, 2022, we had cash and cash equivalents of $147.9 million, of which approximately $16.5 million was held in the ~~availability of foreign tax credits, it is not practicable to determine the unrecognized deferred tax liability related to the undistributed earnings.~~U.S.

Excess cash and cash equivalents, which represent the majority of our outstanding cash and cash equivalents balance, are held primarily in overnight deposit and short-term time deposit accounts and money market accounts. Please ~~see “—Important Factors Regarding Forward-Looking~~refer to “Forward-Looking Statements” discussed above and “Part I, Item 1A. Risk Factors” contained in ~~the Company’s~~our most recent Annual Report on Form 10-K for the fiscal year ended January ~~28, 2017~~29, 2022 for a discussion of risk factors which could reasonably be likely to result in a decrease of internally generated funds available to finance capital expenditures and working capital requirements.

~~The Company has presented below~~COVID-19 Impact on Liquidity

Refer to the ~~cash flow performance comparison~~“COVID-19 Business Update” section and in “Part 1, Item 1. Financial Statements - Note 1 - Basis of Presentation” for a discussion of the ~~nine months ended October 28, 2017, versus~~impact from the ~~nine months ended October 29, 2016. As~~COVID-19 pandemic on our financial performance and our liquidity.

In light of store closures and reduced traffic in stores, we have taken certain actions with respect to certain of our existing leases, including engaging with landlords to discuss rent deferrals as well as other rent concessions. We suspended rental payments and/or paid reduced rental amounts with respect to certain of our retail stores that were closed or experiencing drastically reduced customer traffic as a result of the ~~adoption~~COVID-19 pandemic. We also have successfully negotiated with several landlords, including some of ~~new authoritative guidance during the first quarter of fiscal 2018, which impacted the classification of certain cash receipts~~our larger landlords and ~~cash payments in the statement of cash flows, the amounts related to cash flows from operating and financing activities~~received rent abatement benefits as well as new lease terms for some of our affected leases. In some instances, where negotiations with landlords proved unsuccessful, we were engaged in litigation related to rent obligations both during the ~~effect~~COVID-19 pandemic and through the term of ~~exchange rates on cash, cash equivalents~~the lease.

Three Months Ended April 30, 2022 and ~~restricted cash have been updated for the nine months ended October 29, 2016 to conform to the current period presentation. Refer to Note~~May 1, ~~to the Condensed Consolidated Financial Statements for further description of these changes.~~

2021

Operating Activities

Net cash ~~used in~~provided by operating activities was ~~$34.2~~$54.6 million for the ~~nine~~three months ended ~~October 28, 2017,~~April 30, 2022, compared to ~~$30.2~~$53.6 million for the ~~nine~~three months ended ~~October 29, 2016,~~May 1, 2021, or a deterioration of ~~$4.0~~$0.9 million. This deterioration was driven primarily by ~~lower~~unfavorable changes in working capital partially offset by higher cash flows generated from net ~~earnings, partially offset by the favorable impact of~~earnings. The unfavorable changes in working capital ~~for~~were due primarily to higher inventory levels as we placed orders earlier in order to mitigate some of the nine months ended October 28, 2017 compared to the same prior-year period. Net cash used in operating activities for the nine months ended October 28, 2017 includes the impact from up-front payments of approximately $22 million related to the modification of certain lease agreements held with a common landlord in North America during the third quarter of fiscal 2018.supply chain disruptions.

Investing Activities

Net cash used in investing activities was ~~$68.6~~$29.2 million for the ~~nine~~three months ended ~~October 28, 2017,~~April 30, 2022 compared to ~~$25.4~~$7.8 million for the ~~nine~~three months ended ~~October 29, 2016.~~May 1, 2021. Net cash used in investing activities for the

Table of Contents

three months ended April 30, 2022 related primarily to ~~capital expenditures incurred on retail expansion,~~ investments in ~~technology infrastructure and~~ existing store remodeling ~~programs. In addition, the cost of any business acquisitions, purchases of~~programs and retail expansion and, to a lesser extent, technology and other ~~assets and investments, settlement of forward exchange currency contracts and proceeds from disposition of long-term assets are also included in cash flows used in investing activities.~~infrastructure.

The increase in cash used in investing activities was driven primarily by higher retail remodel and expansion costs and higher investments in technology and other infrastructure during the three months ended April 30, 2022 compared to the same prior-year ~~proceeds from the sale of long-term assets.~~period. During the ~~nine~~three months ended ~~October 28, 2017, the Company~~April 30, 2022, we opened ~~92 directly operated~~20 directly-operated stores compared to ~~87 directly operated~~11 directly-operated stores that were opened in the ~~comparable~~same prior-year period.

Financing Activities

Net cash used in financing activities was ~~$82.3~~$176.8 million for the ~~nine~~three months ended ~~October 28, 2017,~~April 30, 2022 compared to ~~$45.2~~$9.7 million for the ~~nine~~three months ended ~~October 29, 2016.~~May 1, 2021. Net cash used in financing activities for the three months ended April 30, 2022 related primarily to our entrance into the ~~payment~~2022 ASR Contract to repurchase an aggregate of ~~dividends and repurchases of shares~~$175.0 million of the ~~Company’s~~our common stock during the nine months ended October 28, 2017. In addition, payments related to capital distributions to noncontrolling interests, borrowings, capital lease obligations, issuance of common stock under our equity plan and debt issuance costs, purchase of redeemable noncontrolling interest and proceeds from borrowings and capital contributions from noncontrolling interests are also included in cash flows used in financing activities.

The increase in cash used in financing activities was driven primarily by repurchases of shares of the Company’s common stock during the nine months ended October 28, 2017 and prior-year proceeds from the Company’s ten-year $21.5 million real estate secured loan entered into during the nine months ended October 29, 2016.stock.

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

During the ~~nine~~three months ended ~~October 28, 2017, changes~~April 30, 2022, the change in foreign currency translation rates ~~increased~~decreased our reported cash, cash equivalents and restricted cash balance by ~~$20.8 million. This compares~~$7.1 million compared to ~~an increase~~a decrease of ~~$4.8~~$2.8 million ~~in cash, cash equivalents and restricted cash driven by changes in foreign currency translation rates~~ during the ~~nine~~three months ended ~~October 29, 2016.~~May 1, 2021. Refer to “Foreign Currency Volatility” for further information on fluctuations in exchange rates.

Working Capital

As of ~~October 28, 2017, the Company~~April 30, 2022, we had net working capital (including cash and cash equivalents) of ~~$616.6~~$264.9 million compared to ~~$698.6~~$466.2 million at January ~~28, 2017~~29, 2022 and ~~$691.0~~$497.5 million at ~~October 29, 2016. The Company’s~~May 1, 2021.

Our primary working capital needs are for the current portion of lease liabilities, accounts receivable and inventory. ~~Accounts receivable increased by $18.5 million, or 8.5%, to $236.7 million as of October 28, 2017, compared to $218.2 million at October 29, 2016.~~ The accounts receivable balance consists of trade receivables relating primarily to ~~the Company’s~~our wholesale business in Europe and, to a lesser extent, to ~~its~~our wholesale businesses in the Americas and Asia, royalty receivables relating to ~~its~~our licensing operations, credit card and retail concession receivables related to ~~its~~our retail businesses and certain other receivables. Accounts receivable decreased by $10.9 million, or 3.5%, to $295.4 million as of April 30, 2022, from $306.3 million at May 1, 2021. On a constant currency basis, accounts receivable increased by ~~$10.1~~$23.8 million, or ~~4.6%~~7.8%, when compared to ~~October 29, 2016. The increase was driven primarily by higher European wholesale shipments during the nine months ended October 28, 2017 compared to the same prior-year period.~~May 1, 2021. As of ~~October 28, 2017,~~April 30, 2022, approximately ~~54%~~45% of our total net trade receivables and ~~76%~~61% of our European

net trade receivables were subject to credit insurance coverage, certain bank guarantees or letters of credit for collection purposes. Our credit insurance coverage contains certain terms and conditions specifying deductibles and annual claim limits. Inventory increased by ~~$49.1~~$79.1 million, or ~~11.5%~~19.5%, to ~~$477.2~~$483.9 million as of ~~October 28, 2017, compared to $428.1~~April 30, 2022, from $404.9 million at ~~October 29, 2016.~~May 1, 2021. On a constant currency basis, inventory increased by ~~$34.7~~$124.1 million, or ~~8.1%~~30.7%, when compared to ~~October 29, 2016,~~May 1, 2021, driven primarily by ~~retail expansion in~~management initiatives to mitigate supply chain disruptions, including accelerating product orders.

Capital Expenditures

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

We will periodically evaluate strategic acquisitions and alliances and pursue those we believe will support and contribute to our ~~international markets, partially offset by lower inventory in Americas Retail.~~overall growth initiatives.

Dividends

During the first quarter of fiscal 2008, the Company announced the initiation of a quarterly cash dividend of $0.06 per share of the Company’s common stock. Since that time, the Company has continued to pay a quarterly cash dividend, which has subsequently increased to $0.225 per common share.

On ~~November 21, 2017, the Company~~May 25, 2022, we announced a regular quarterly cash dividend of $0.225 per share on ~~the Company’s~~our common stock. The cash dividend will be paid on ~~January 3, 2018~~June 24, 2022 to shareholders of record as of the close of business on ~~December 13, 2017.~~June 8, 2022. In accordance with the terms of the indenture governing the Notes, we will adjust the conversion rate (which is expected to increase) and the conversion price (which is expected to decrease) of the Notes effective as of June 7, 2022.

~~The payment~~

Table of ~~cash dividends~~Contents

Decisions on whether, when and in ~~the~~what amounts to continue making any future dividend distributions will beremain at all times entirely at the discretion of our Board of Directors, which reserves the right to change or terminate our dividend practices at any time and for any reason without prior notice. The payment of cash dividends in the future will be based upon a number of business, legal and other considerations, including our cash flow from operations, capital expenditures, debt service and covenant requirements, cash paid for income taxes, earnings, share repurchases, economic conditions and U.S. and global liquidity.

Share Repurchases

~~On June 26, 2012,~~During fiscal 2022, the ~~Company’s~~ Board of Directors terminated its previous 2012 $500 million share repurchase program and authorized a ~~program to~~new $200 million share repurchase ~~from time-to-time and as market and business conditions warrant, up to $500 million~~program. On March 14, 2022, the Board of ~~the Company’s common stock.~~Directors expanded its repurchase authorization by $100.0 million. Repurchases ~~under the program~~ may be made on the open market or in privately negotiated transactions, pursuant to Rule 10b5-1 trading plans or other available means. There is no minimum or maximum number of shares to be repurchased under the program ~~which~~and the program may be discontinued at any time, without prior notice.

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

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

During the ~~nine~~three months ended ~~October 28, 2017, the Company~~April 30, 2022, we repurchased ~~1,919,967~~3,789,576 shares under ~~the~~our share repurchase program at an aggregate cost of ~~$24.8 million. The Company~~$81.7 million, which is inclusive of the shares repurchased ~~1,485,195 at an aggregate cost~~under the 2022 ASR Contract. As of ~~$17.8~~April 30, 2022, we had remaining authority under the share repurchase program to purchase $62.3 million of our common stock. There were no shares repurchased during the three months ended April 29, 2017 and an additional 434,772 shares at an aggregate cost of $7.0 million during the three months ended October 28, 2017. There were no share repurchases during the three and nine months ended October 29, 2016. As of October 28, 2017, the Company had remaining authority under the program to purchase $423.5 million of its common stock.

~~Capital Expenditures~~

Gross capital expenditures totaled $65.3 million, before deducting lease incentives of $6.0 million, for the nine months ended October 28, 2017. The Company also acquired assets under capital leases totaling $18.0 million during the nine months ended October 28, 2017. For the nine months ended October 29, 2016, gross capital expenditures totaled $66.8 million, before deducting lease incentives of $5.1 million.

The Company plans to allocate capital, including capital expenditures and working capital investments, to fund the growth of its retail and e-commerce businesses in Europe and Asia, while reducing its allocation of capital to its retail business in the Americas. Additionally, we plan to continue to invest capital in technology to improve our global structure and support our long-term growth plans. The Company’s investments in capital for the full fiscal year 2018 are planned between $85 million and $95 million. During fiscal 2018, we also expect that working capital will grow in Europe and Asia, while contracting in the Americas.

~~We will periodically evaluate strategic acquisitions and alliances and pursue those that we believe will support and contribute to our overall growth initiatives.~~May 1, 2021.

Borrowings and ~~Capital~~Finance Lease Obligations and Convertible Senior Notes

~~Credit Facilities~~

~~On June 23, 2015, the Company entered into a five-year senior secured asset-based revolving credit facility with Bank of America, N.A.~~Refer to “Part I, Item 1. Financial Statements – Note 9 – Borrowings and ~~the other lenders party thereto (the “Credit Facility”). The Credit Facility provides~~

Finance Lease Obligations,” “Part I, Item 1. Financial Statements – Note 10 – Convertible Senior Notes and Related Transactions” and “Part I, Item 1. Financial Statements – Note 17 – Subsequent Events” in this Form 10-Q for a borrowing capacity in an amount up to $150 million, including a Canadian sub-facility up to $50 million, subject to a borrowing base. Based on applicable accounts receivable, inventory, eligible cash balances and relevant covenant restrictions as of October 28, 2017, the Company could have borrowed up to $123 million under the Credit Facility. The Credit Facility has an option to expand the borrowing capacity by up to $150 million ~~subject to certain terms and conditions, including the willingness of existing or new lenders to assume such increased amount. The Credit Facility is available for direct~~disclosures about our borrowings and ~~the issuance of letters of credit, subject to certain letters of credit sublimits,~~finance lease obligations and ~~may be used for working capital and other general corporate purposes.~~

All obligations under the Credit Facility are unconditionally guaranteed by the Company and the Company’s existing and future domestic and Canadian subsidiaries, subject to certain exceptions, and are secured by a first priority lien on substantially all of the assets of the Company and such domestic and Canadian subsidiaries, as applicable.

Direct borrowings under the Credit Facility made by the Company and its domestic subsidiaries shall bear interest at the U.S. base rate plus an applicable margin (varying from 0.25% to 0.75%) or at LIBOR plus an applicable margin (varying from 1.25% to 1.75%). The U.S. base rate is based on the greater of (i) the U.S. prime rate, (ii) the federal funds rate, plus 0.5%, and (iii) LIBOR for a 30 day interest period, plus 1.0%. Direct borrowings under the Credit Facility made by the Company’s Canadian subsidiaries shall bear interest at the Canadian prime rate plus an applicable margin (varying from 0.25% to 0.75%) or at the Canadian BA rate plus an applicable margin (varying from 1.25% to 1.75%). The Canadian prime rate is based on the greater of (i) the Canadian prime rate, (ii) the Bank of Canada overnight rate, plus 0.5%, and (iii) the Canadian BA rate for a one month interest period, plus 1.0%. The applicable margins are calculated quarterly and vary based on the average daily availability of the aggregate borrowing base. The Company is also obligated to pay certain commitment, letter of credit and other fees customary for a credit facility of this size and type. As of October 28, 2017, the Company had $1.0 million in outstanding standby letters of credit, no outstanding documentary letters of credit and no outstanding borrowings under the Credit Facility.

The Credit Facility requires the Company to comply with a fixed charge coverage ratio on a trailing four-quarter basis if a default or an event of default occurs under the Credit Facility or generally if borrowings exceed 80% of the borrowing base. In addition, the Credit Facility contains customary covenants, including covenants that limit or restrict the Company and certain of its subsidiaries’ ability to: incur liens, incur indebtedness, make investments, dispose of assets, make certain restricted payments, merge or consolidate and enter into certain transactions with affiliates. Upon the occurrence of an event of default under the Credit Facility, the lenders may cease making loans, terminate the Credit Facility and declare all amounts outstanding to be immediately due and payable. The Credit Facility specifies a number of events of default (some of which are subject to applicable grace or cure periods), including, among other things, non-payment defaults, covenant defaults, cross-defaults to other material indebtedness, bankruptcy and insolvency defaults and material judgment defaults. The Credit Facility allows for both secured and unsecured borrowings outside of the Credit Facility up to specified amounts.

The Company, through its European subsidiaries, maintains short-term uncommitted borrowing agreements, primarily for working capital purposes, with various banks in Europe. The majority of the borrowings under these agreements are secured by specific accounts receivable balances. Based on the applicable accounts receivable balances as of October 28, 2017, the Company could have borrowed up to $69.2 million under these agreements. As of October 28, 2017, the Company had no outstanding borrowings or outstanding documentary letters of credit under these agreements. The agreements are denominated primarily in euros and provide for annual interest rates ranging from 0.5% to 4.6%. The maturities of any short-term borrowings under these arrangements are generally linked to the credit terms of the underlying accounts receivable that secure the borrowings. With the exception of one facility for up to $40.6 million that has a minimum net equity requirement, there are no other financial ratio covenants.

~~Mortgage Debt~~

On February 16, 2016, the Company entered into a ten-year $21.5 million real estate secured loan (the “Mortgage Debt”). The Mortgage Debt is secured by the Company’s U.S. distribution center based in Louisville, Kentucky and provides for monthly principal and interest payments based on a 25-year amortization schedule, with the remaining principal balance and any accrued and unpaid interest due at maturity. Outstanding principal balances under the Mortgage Debt bear interest at the one-month LIBOR rate plus 1.5%. As of October 28, 2017, outstanding borrowings under the Mortgage Debt, net of debt issuance costs of $0.1 million, were $20.5 million. At January 28, 2017, outstanding borrowings under the Mortgage Debt, net of debt issuance costs of $0.1 million, were $20.9 million.

The Mortgage Debt requires the Company to comply with a fixed charge coverage ratio on a trailing four-quarter basis if consolidated cash, cash equivalents and short term investment balances fall below certain levels. In addition, the Mortgage Debt contains customary covenants, including covenants that limit or restrict the Company’s ability to incur liens on the mortgaged property and enter into certain contractual obligations. Upon the occurrence of an event of default under the Mortgage Debt, the lender may terminate the Mortgage Debt and declare all amounts outstanding to be immediately due and payable. The Mortgage Debt specifies a number of events of default (some of which are subject to applicable grace or cure periods), including, among other things, non-payment defaults, covenant defaults, cross-defaults to other material indebtedness, bankruptcy and insolvency defaults and material judgment defaults.

On February 16, 2016, the Company also entered into a separate interest rate swap agreement, designated as a cash flow hedge, that resulted in a swap fixed rate of approximately 3.06%. This interest rate swap agreement matures in January 2026 and converts the nature of the Mortgage Debt from LIBOR floating-rate debt to fixed-rate debt. The fair value of the interest rate swap asset as of October 28, 2017 and January 28, 2017 was approximately $0.8 million and $0.9 million, respectively.

~~Capital Lease Obligations~~

During the nine months ended October 28, 2017, the Company began the relocation of its European distribution center to the Netherlands. As a result, the Company entered into a capital lease of $16.5 million for equipment used in the new facility. The capital lease provides for monthly minimum lease payments through May 2027 and has an effective interest rate of approximately 6%. As of October 28, 2017, the capital lease obligation was $15.9 million.

~~Other~~

~~From time-to-time, the Company will obtain other financing in foreign countries for working capital to finance its local operations.~~convertible senior notes.

Supplemental Executive Retirement Plan

On August 23, 2005, the Board of Directors of the Company adopted a Supplemental Executive Retirement Plan (“SERP”) which became effective January 1, 2006. The SERP provides select employees who satisfy certain eligibility requirements with certain benefits upon retirement, termination of employment, death, disability or a change in control of the Company, in certain prescribed circumstances.

As a non-qualified pension plan, no dedicated funding of ~~the~~our SERP is required; however, ~~the Company has~~we have made periodic payments into insurance policies held in a rabbi trust to fund the expected obligations arising under the non-qualified SERP. ~~The amount~~

Table of ~~any future payments into the insurance policies, if any, may vary depending on investment performance of the trust.~~ Contents

The cash surrender values of the insurance policies were ~~$62.8~~$67.1 million and ~~$58.6~~$70.9 million as of ~~October 28, 2017~~April 30, 2022 and January ~~28, 2017,~~29, 2022, respectively, and were included in other assets in ~~the Company’s~~our condensed consolidated balance sheets. As a result of changes in the value of the insurance policy investments, ~~the Company~~we recorded unrealized ~~gains~~losses of ~~$1.6~~$3.3 million and ~~$5.5 million~~minimal unrealized losses in other ~~income~~

~~during the three and nine months ended October 28, 2017, respectively, and unrealized gains (losses) of $(0.5) million and $4.6 million in other income and~~ expense during the three ~~and nine~~ months ended ~~October 29, 2016,~~April 30, 2022 and May 1, 2021, respectively. The projected benefit obligation was ~~$53.6~~$49.3 million and ~~$53.5~~$49.4 million as of ~~October 28, 2017~~April 30, 2022 and January ~~28, 2017,~~29, 2022, respectively, and was included in accrued expenses and other long-term liabilities in ~~the Company’s~~our condensed consolidated balance sheets depending on the expected timing of payments. SERP benefit payments of ~~$0.4 million and $1.3~~$0.5 million were made during each of the three ~~and nine~~ months ended ~~October 28, 2017, respectively. SERP benefit payments~~April 30, 2022 and May 1, 2021.

Material Cash Requirements

As of ~~$0.4 million~~April 30, 2022, there were no material changes to our material cash requirements from known contractual and ~~$1.3 million were made during~~other obligations, including commitments for capital expenditures, outside the ~~three~~ordinary course of business compared to the disclosures included under “Liquidity and ~~nine months ended October 29, 2016, respectively.~~

~~Inflation~~

~~The Company does not believe that inflation trends~~Capital Resources - Material Cash Requirements” in ~~the U.S. and internationally over the last three years have had a significant effect on net revenue or profitability.~~

~~Seasonality~~

~~The Company’s business is impacted by the general seasonal trends characteristic of the apparel and retail industries. The retail operations~~Item Part II, Item 7 in ~~the Americas and Europe are generally stronger during the second half of~~our Form 10-K for the fiscal year ended January 29, 2022. Refer to “Part I, Item 1. Financial Statements – Note 9 – Borrowings and the wholesale operations in the Americas generally experience stronger performance from July through November. The European wholesale businesses operate with two primary selling seasons: the Spring/Summer season, which ships from November to AprilFinance Lease Obligations” and ~~the Fall/Winter season, which ships from May to October. The Company may take advantage of early-season demand~~“Part I, Item 1. Financial Statements – Note 10 – Convertible Senior Notes and potential reorders in its European wholesale business by offering a pre-collection assortment which ships at the beginning of each season. Customers retain the ability to request early shipment of backlog orders or delay shipment of orders dependingRelated Transactions” for further information on ~~their needs.~~

~~Wholesale Backlog~~

We generally receive orders for fashion apparel three to six months prior to the time the products are delivered to our customers’ stores. The backlog of wholesale orders at any given time is affected by various factors, including seasonality, cancellations, the scheduling of market weeks, the timing of the receipt of orders and the timing of the shipment of orders and may include orders for multiple seasons. Accordingly, a comparison of backlogs of wholesale orders from period-to-period is not necessarily meaningful and may not be indicative of eventual actual shipments.

~~U.S. and Canada Backlog.~~Our U.S. and Canadian wholesale backlog as of November 27, 2017, consisting primarily of orders for fashion apparel, was $36.9 million in constant currency, compared to $38.5 million at November 28, 2016, a decrease of 4.3%.

~~Europe Backlog.~~ As of November 26, 2017, the European wholesale backlog was €206.0 million, compared to €172.8 million at November 27, 2016, an increase of 19.2%. The backlog as of November 26, 2017 is comprised of sales orders for the Fall/Winter 2017, Spring/Summer 2018 and Fall/Winter 2018 seasons.

these arrangements.

Application of Critical Accounting Policies and Estimates

Our critical accounting policies reflecting our estimates and judgments are described in “Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in our Annual Report on Form 10-K for the fiscal year ended January ~~28, 2017~~29, 2022 filed with the SEC on March ~~27, 2017.~~24, 2022. There have been no significant changes to our critical accounting policies ~~during~~other than the ~~nine months ended October 28, 2017~~.

January 30, 2022 adoption of ASU 2020-06 which impacted the accounting and financial statement presentation of our Notes and our calculation of diluted earnings per common share. Refer to “Part I, Item 1. Financial Statements – Note 3 - Earnings per Share” and “Part I, Item 1. Financial Statements – Note 10 -Convertible Senior Notes and Related Transactions” for further information.

Recently Issued Accounting Guidance

~~In May 2014, the~~Refer to “Part I, Item 1. Financial ~~Accounting Standards Board (“FASB”)~~Statements – Note 1 – Basis of Presentation” for disclosures about recently issued ~~a comprehensive new revenue recognition standard which will supersede previous existing revenue recognition~~accounting guidance. The standard is intended to clarify the principles of recognizing revenue and create common revenue recognition guidance between GAAP and International Financial Reporting Standards. The standard also requires expanded disclosures surrounding revenue recognition. During fiscal 2017, the FASB issued additional clarification guidance on the new revenue recognition standard which also included certain scope improvements and practical expedients. The

standard (including clarification guidance issued) is effective for fiscal periods beginning after December 15, 2017, which will be the Company’s first quarter of fiscal 2019, and allows for either full retrospective or modified retrospective adoption, with early adoption permitted. The Company plans to adopt this guidance using the modified retrospective method beginning in the first quarter of fiscal 2019. The Company’s assessment efforts to date have included reviewing current revenue processes, arrangements and accounting policies to identify potential differences that could arise from the application of this standard on its consolidated financial statements and related disclosures. The Company expects the differences to relate primarily to the classification and timing of when revenue and certain expenses are recognized from its licensing business, loyalty programs and gift card breakage. The Company also expects revenue related to its e-commerce operations to be recognized when merchandise is transferred to a common carrier rather than upon receipt by the customer. The Company is continuing to evaluate the financial impact of the adoption of this standard on its consolidated financial statements and related disclosures.

In February 2016, the FASB issued a comprehensive new lease standard which will supersede previous lease guidance. The standard requires a lessee to recognize assets and liabilities related to long-term leases that were classified as operating leases under previous guidance in its balance sheet. An asset would be recognized related to the right to use the underlying asset and a liability would be recognized related to the obligation to make lease payments over the term of the lease. The standard also requires expanded disclosures surrounding leases. The standard is effective for fiscal periods beginning after December 15, 2018, which will be the Company’s first quarter of fiscal 2020, and requires modified retrospective adoption, with early adoption permitted. The Company is currently evaluating the impact of the adoption of this standard on its consolidated financial statements and related disclosures, but expects there will be a material increase in its long-term assets and liabilities resulting from the adoption.

In June 2016, the FASB issued authoritative guidance related to the measurement of credit losses on financial instruments. This guidance is effective for fiscal years beginning after December 15, 2019, which will be the Company’s first quarter of fiscal 2021. Early adoption is permitted for fiscal periods beginning after December 15, 2018, which will be the Company’s first quarter of fiscal 2020. The Company is currently evaluating the impact of the adoption of this standard on its consolidated financial statements and related disclosures.

In January 2017, the FASB issued authoritative guidance to simplify the testing for goodwill impairment by removing step two from the goodwill testing. Under current guidance, if the fair value of a reporting unit is lower than its carrying amount (step one), an entity would calculate an impairment charge by comparing the implied fair value of goodwill with its carrying amount (step two). The implied fair value of goodwill was calculated by deducting the fair value of the assets and liabilities of the respective reporting unit from the reporting unit’s fair

value as determined under step one. This guidance instead provides that an impairment charge should be recognized based on the difference between a reporting unit’s fair value and its carrying value. This guidance also does not require a qualitative test to be performed on reporting units with zero or negative carrying amounts. However, entities need to disclose any reporting units with zero or negative carrying amounts that have goodwill and the amount of goodwill allocated to each. This guidance is effective for fiscal years beginning after December 15, 2019, which will be the Company’s first quarter of fiscal 2021, with early adoption permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The adoption of this guidance is not expected to have a material impact on the Company’s consolidated financial statements or related disclosures.

In March 2017, the FASB issued authoritative guidance related to the presentation of net periodic pension cost in the income statement. This guidance requires that the service cost component of net periodic pension cost is presented in the same line as other compensation costs arising from services rendered by the employees during the period. The other non-service components of net periodic pension cost are required to be presented in the income statement separately from the service cost component and outside of earnings from operations. This guidance also allows for the service cost component to be eligible for capitalization when applicable. This guidance is effective for fiscal years beginning after December 15, 2017, which will be the Company’s first quarter of fiscal 2019, and requires retrospective adoption for the presentation of the service cost component and other non-service components of net periodic pension cost in the income statement and prospective adoption for capitalization of the service cost component. Early adoption is permitted at the beginning of a fiscal year. Other than the change in presentation of other non-service components of net periodic pension cost within the Company’s consolidated statements of income, the adoption of this guidance is not expected to have an impact on the Company’s consolidated financial statements and related disclosures.


~~ITEM 3.~~	~~Quantitative and Qualitative Disclosures About Market Risk.~~

ITEM 3.Quantitative and Qualitative Disclosures About Market Risk.

Exchange Rate Risk

More than ~~half~~two-thirds of product sales ~~and licensing revenue~~ recorded for the ~~nine~~three months ended ~~October 28, 2017~~April 30, 2022 were denominated in currencies other than the U.S. dollar. ~~The Company’s~~Our primary exchange rate risk relates to operations in Europe, Canada, South Korea, China, Hong Kong and Mexico. Changes in currencies affect our earnings in various ways. For further discussion on currency-related risk, please refer to our risk factors under “Part I, Item 1A. Risk Factors” contained in ~~the Company’s~~our most recent Annual Report on Form 10-K for the fiscal year ended January ~~28, 2017~~.29, 2022.

Foreign Currency Translation Adjustment

The local selling currency is typically the functional currency for all of our significant international operations. In accordance with authoritative guidance, assets and liabilities of our foreign operations are translated from foreign currencies into U.S. dollars at period-end rates, while income and expenses are translated at the weighted average exchange rates for the period. The related translation adjustments are reflected as a foreign currency translation adjustment in accumulated other comprehensive income (loss) within stockholders’ equity. In addition, we record foreign currency translation adjustments related to our noncontrolling interests within stockholders’ equity. Accordingly, our reported other comprehensive income (loss) could be unfavorably impacted if the U.S. dollar strengthens, particularly against the British pound,

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Canadian dollar, Chinese yuan, euro, Japanese yen, Korean won, Mexican peso, Polish zloty, Russian rouble and Turkish lira. Alternatively, if the U.S. dollar weakens relative to those currencies, our reported other comprehensive income (loss) could be favorably impacted. Our foreign currency translation adjustments recorded in other comprehensive income (loss) are significantly impacted by net assets denominated in euros.

Periodically, we may also use foreign exchange currency contracts to hedge the translation and economic exposures related to our net investments in certain of our international subsidiaries. Changes in the fair values of these foreign exchange currency contracts, designated as net investment hedges, are recorded in foreign currency translation adjustment as a component of accumulated other comprehensive income (loss) within stockholders’ equity.

During the three months ended April 30, 2022, the total foreign currency translation adjustment decreased stockholders’ equity by $17.9 million, driven primarily by the strengthening of the U.S. dollar against the euro.

Foreign Currency Transaction Gains and Losses

Transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency, including gains and losses on foreign exchange currency contracts (see below), are included in the condensed consolidated statements of income (loss). Net foreign currency transaction losses of $10.6 million and $4.1 million were included in the determination of net earnings for the three months ended April 30, 2022 and May 1, 2021, respectively.

Foreign Exchange Currency Contracts

We operate in foreign countries, which exposes us to market risk associated with foreign currency exchange rate fluctuations. Various transactions that occur primarily in Europe, Canada, South Korea, China, Hong Kong and Mexico are denominated in U.S. dollars, British pounds and Russian roubles and thus are exposed to earnings risk as a result of exchange rate fluctuations when converted to their functional currencies. These types of transactions include U.S. ~~dollar denominated~~dollar-denominated purchases of merchandise and U.S. ~~dollar~~dollar- and British ~~pound denominated~~pound-denominated intercompany liabilities. In addition, certain operating expenses, tax liabilities and pension-related liabilities are denominated in Swiss francs and are exposed to earnings risk as a result of exchange rate fluctuations when converted to the functional

currency. ~~The Company is~~ Further, there are certain real estate leases that are denominated in a currency other than the functional currency of the respective entity that entered into the agreement (primarily Swiss francs, Russian roubles and Polish zloty). As a result, we may be exposed to volatility related to unrealized gains or losses on the translation of present value of future lease payment obligations when translated at the exchange rate as of a reporting period-end. We are also subject to certain translation and economic exposures related to ~~its~~our net investment in certain of ~~its~~our international subsidiaries. ~~The Company enters~~We enter into derivative financial instruments to offset some, but not all, of ~~its~~our exchange risk. In addition, some of the derivative contracts in place will create volatility during the fiscal year as they are marked-to-market according to the accounting rules and may result in revaluation gains or losses in different periods from when the currency impact on the underlying transactions are realized.

Foreign Exchange Currency Contracts Designated as Cash Flow Hedges

During the ~~nine~~three months ended ~~October 28, 2017, the Company~~April 30, 2022, we purchased U.S. dollar forward contracts in Europe ~~and Canada~~ totaling US$~~108.7~~40.0 million ~~and US$20.8 million, respectively,~~ that were designated as cash flow hedges. As of ~~October 28, 2017, the Company~~April 30, 2022, we had forward contracts outstanding for ~~its~~our European ~~and Canadian~~ operations of US$~~140.6~~149.0 million ~~and US$44.4 million, respectively,~~ to hedge forecasted merchandise purchases, ~~and intercompany royalties,~~ which are expected to mature over the next 15 months. ~~The Company’s~~Our foreign exchange currency contracts are recorded in ~~its~~our condensed consolidated balance sheet at fair value based on quoted market rates. Changes in the fair value of the U.S. dollar forward contracts, designated as cash flow hedges for forecasted merchandise purchases, are recorded as a component of accumulated other comprehensive income (loss) within stockholders’ equity and are recognized in cost of product sales in the period ~~which~~that approximates the time the hedged merchandise inventory is sold. Changes in the fair value of the U.S. dollar forward contracts, designated as cash flow hedges for forecasted intercompany royalties, are recorded as a component of accumulated other comprehensive income (loss) within stockholders’ equity and are recognized in other income and expense in the period in which the royalty expense is incurred.

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recognized in cost of product sales ~~or other expense~~ over the following 12 months, at the then current values on a pre-tax basis, which can be different than the current quarter-end values.

As of ~~October 28, 2017,~~April 30, 2022, the net unrealized ~~loss~~gain of the remaining open forward contracts recorded in ~~the Company’s~~our condensed consolidated balance sheet was approximately ~~$3.7~~$11.9 million.

At January ~~28, 2017, the Company~~29, 2022, we had forward contracts outstanding for ~~its~~our European ~~and Canadian~~ operations of US$~~104.2~~146.0 million ~~and US$66.9 million, respectively,~~ that were designated as cash flow hedges. At January ~~28, 2017,~~29, 2022, the net unrealized gain of these open forward contracts recorded in ~~the Company’s~~our condensed consolidated balance sheet was approximately ~~$4.8~~$6.0 million.

~~Derivatives~~Foreign Exchange Currency Contracts Not Designated as Hedging Instruments

~~The Company~~We also ~~has~~have foreign exchange currency contracts that are not designated as hedging instruments for accounting purposes. Changes in fair value of foreign exchange currency contracts not designated as hedging instruments are reported in net earnings (loss) as part of other income ~~and expense.~~(expense). For the ~~nine~~three months ended ~~October 28, 2017, the Company~~April 30, 2022, we recorded a net ~~loss~~gain of ~~$5.7~~$1.6 million for ~~its~~our euro ~~and Canadian~~ dollar foreign exchange currency contracts not designated as hedges, which has been included in other ~~expense.~~income (expense). As of ~~October 28, 2017, the Company~~April 30, 2022, we had euro foreign exchange currency contracts to purchase US$~~70.8 million and Canadian dollar foreign exchange currency contracts to purchase US$16.6~~23.0 million expected to mature over the next 11two months. As of ~~October 28, 2017, the net unrealized loss of these open forward contracts recorded in the Company’s condensed consolidated balance sheet was approximately $1.1 million.~~

At January 28, 2017, the Company had euro foreign exchange currency contracts to purchase US$81.4 million and Canadian dollar foreign exchange currency contracts to purchase US$13.9 million. At January 28, 2017,April 30, 2022, the net unrealized gain of these open forward contracts recorded in ~~the Company’s~~our condensed consolidated balance sheet was approximately ~~$3.6~~$2.4 million.

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

Sensitivity Analysis

As of ~~October 28, 2017,~~April 30, 2022, a sensitivity analysis of changes in foreign currencies when measured against the U.S. dollar indicates that, if the U.S. dollar had uniformly weakened by 10% against all of the U.S. dollar denominated foreign exchange derivatives totaling US$~~272.4~~172.0 million, the fair value of the instruments would have decreasedby ~~$30.3~~$19.1 million. Conversely, if the U.S. dollar uniformly strengthened by 10% against all of the

U.S. dollar denominated foreign exchange derivatives, the fair value of these instruments would have increased by ~~$24.8~~$15.6 million. Any resulting changes in the fair value of the hedged instruments may be partially offset by changes in the fair value of certain balance sheet positions (primarily U.S. dollar denominated liabilities in our foreign operations) impacted by the change in the foreign currency rate. The ability to reduce the exposure of currencies on earnings depends on the magnitude of the derivatives compared to the balance sheet positions during each reporting cycle.

Interest Rate Risk

~~The Company is~~We are exposed to interest rate risk on ~~its~~our floating-rate debt. ~~The Company has~~We have entered into interest rate swap agreements for certain of these agreements to effectively convert ~~its~~our floating-rate debt to a fixed-rate basis. The principal objective of these contracts is to eliminate or reduce the variability of the cash flows in interest payments associated with ~~the Company’s~~our floating-rate debt, thus reducing the impact of interest rate changes on future interest payment cash flows. ~~The Company has~~We have elected to apply the hedge accounting rules in accordance with authoritative guidance for certain of these contracts.

In April 2019, we issued $300 million principal amount of the Notes in a private offering. The fair value of the Notes is subject to interest rate risk, market risk and other factors due to a conversion feature. The fair value of the Notes will generally increase as our common stock price increases and will generally decrease as our common stock price declines. The interest and market value changes affect the fair value of the Notes but do not impact our financial position, cash flows or results of operations due to the fixed nature of the debt obligation. Additionally, we carry the Notes at face value, less any unamortized discount of debt issuance costs on our balance sheet and we present the fair value for disclosure purposes only.

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Interest Rate Swap Agreement Designated as Cash Flow Hedge

During fiscal 2017, the Company entered into an interest rate swap agreement with a notional amount of $21.5 million, designated as a cash flow hedge, to hedge the variability of cash flows in interest payments associated with the Company’s floating-rate debt. This interest rate swap agreement matures in January 2026 and converts the nature of the Company’s real estate secured term loan from LIBOR floating-rate debt to fixed-rate debt, resulting in a swap fixed rate of approximately 3.06%. The fair value of the interest rate swap agreement is based upon inputs corroborated by observable market data. Changes in the fair value of the interest rate swap agreement, designated as a cash flow hedge to hedge the variability of cash flows in interest payments associated with ~~the Company’s~~our floating-rate ~~debt,~~real estate secured loan (the “Mortgage Debt”), are recorded as a component of accumulated other comprehensive income (loss) within stockholders’ equity and are amortized to interest expense over the term of the related debt.

As of ~~October 28, 2017,~~April 30, 2022, accumulated other comprehensive income (loss) related to the interest rate swap agreement included a net unrealized gain of ~~approximately $0.5~~$0.6 million net of tax, which will be recognized in interest expense ~~after~~over the following 12 months, at the then current values on a pre-tax basis, which can be different than the current quarter-end values. As of ~~October 28, 2017,~~April 30, 2022, the net unrealized gain of the interest rate swap recorded in ~~the Company’s~~our condensed consolidated balance sheet was approximately $0.8 million.

At As of January ~~28, 2017,~~29, 2022, the net unrealized ~~gain~~loss of the interest rate swap recorded in ~~the Company’s~~our condensed consolidated balance sheet was approximately ~~$0.9~~$0.1 million.

Sensitivity Analysis

As of ~~October 28, 2017, approximately 92% of the Company’s total~~April 30, 2022, we had indebtedness related to ~~a real estate secured~~ term ~~loan~~loans of $43.8 million, finance lease obligations of $21.8 million and ~~capital~~the Mortgage Debt of $17.7 million. The term loans provide for annual interest rates ranging between 1.3% to 2.2%. The finance lease ~~obligations.~~obligations are based on fixed interest rates derived from the respective agreements. The ~~real estate secured term loan~~Mortgage Debt is covered by a separate interest rate swap agreement with a swap fixed interest rate of approximately 3.06% that matures in January 2026. The interest rate swap agreement is designated as a cash flow hedge and converts the nature of ~~the Company’s real estate secured term loan~~our Mortgage Debt from LIBOR floating-rate debt to fixed-rate debt. ~~The capital lease obligations are based on fixed interest rates derived from the respective agreements.~~

The Company’s remaining indebtedness is at variable rates of interest. Accordingly, changes in interest rates would impact the Company’s results of operations in future periods. A 100 basis point increase in interest rates would have had an insignificant effect on interest expense for the nine months ended October 28, 2017.

The fair ~~value~~values of ~~the Company’s~~our debt instruments are based on the amount of future cash flows associated with each instrument discounted using ~~the Company’s~~our incremental borrowing rate. As of ~~October 28, 2017~~April 30, 2022 and January ~~28, 2017,~~29, 2022, the carrying value ~~of all financial instruments~~ was not materially different from fair value, as the interest rates on ~~the Company’s~~our debt approximated rates currently available to us. The fair value of our Notes is determined based on inputs that are observable in the ~~Company.~~market and have been classified as Level 2 in the fair value hierarchy.

ITEM 4. Controls and Procedures.

Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended. Based on this evaluation, our principal executive officer and our principal financial officer concluded that our disclosure controls and procedures were effective as of the end of the quarterly period covered by this report.

There was no change in our internal control over financial reporting during the ~~third~~first quarter of fiscal ~~2018~~2023 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION


~~ITEM 1.~~	~~Legal Proceedings.~~

~~On May 6, 2009, Gucci America, Inc. filed a complaint~~ITEM 1.Legal Proceedings.

Refer to “Part I, Item 1. Financial Statements – Note 13 – Commitments and Contingencies” in ~~the U.S. District Court~~this Form 10-Q for the Southern District of New York against Guess?, Inc. and certain third party licensees for the Company asserting, among other things, trademark and trade dress law violations and unfair competition. The complaint sought injunctive relief, compensatory damages, including treble damages, and certain other relief. Complaints similar to those in the above action have also been filed by Gucci entities against the Company and certain of its subsidiaries in the Court of Milan, Italy, the Intermediate People’s Court of Nanjing, China and the Court of Paris, France. The three-week bench trial in the U.S. matter concluded on April 19, 2012, with the court issuing a preliminary ruling on May 21, 2012 and a final ruling on July 19, 2012. Although the plaintiff was seeking compensation in the U.S. matter in the form of damages of $26 million and an accounting of profits of $99 million, the final ruling provided for monetary damages of $2.3 million against the Company and $2.3 million against certain of its licensees. The court also granted narrow injunctions in favor of the plaintiff for certain of the claimed infringements. On August 20, 2012, the appeal period expired without any party having filed an appeal, rendering the judgment final.On May 2, 2013, the Court of Milan ruled in favor of the Company in the Milan, Italy matter. In the ruling, the Court rejected all of the plaintiff’s claims and ordered the cancellation of three of the plaintiff’s Italian and four of the plaintiff’s European Community trademark registrations. On June 10, 2013, the plaintiff appealed the Court’s ruling in the Milan matter. On September 15, 2014, the Court of Appeal of Milan affirmed the majority of the lower Court’s ruling in favor of the Company, but overturned the lower Court’s finding with respect to an unfair competition claim. That portion of the matter is now in a damages phase based on the ruling. On October 16, 2015, the plaintiff appealed the remainder of the Court of Appeal of Milan’s ruling in favor of the Company to the Italian Supreme Court of Cassation. In the China matter, the Intermediate People’s Court of Nanjing, China issued a ruling on November 8, 2013 granting an injunction in favor of the plaintiff for certain of the claimed infringements on handbags and small leather goods and awarding the plaintiff statutory damages in the amount of approximately $80,000. The Company strongly disagreed with the Court’s decision and appealed the ruling. On August 31, 2016, the Court of Appeal for the China matter issued a decision in favor of the Company, rejecting all of the plaintiff’s claims. In March 2017, the plaintiff petitioned the China Supreme Court for a retrial of the matter. On January 30, 2015, the Court of Paris ruled in favor of the Company in the France matter, rejecting all of the plaintiff’s claims and partially canceling two of the plaintiff’s community trademark registrations and one of the plaintiff’s international trademark registrations. On February 17, 2015, the plaintiff appealed the Court of Paris’ ruling. Although the Company believes that it has a strong position and will continue to vigorously defend each of the remaining matters, it is unable to predict with certainty whether or not these efforts will ultimately be successful or whether the outcomes will have a material impact on the Company’s financial position or results of operations.

The Company has received customs tax assessment notices from the Italian Customs Agency regarding its customs tax audit of one of the Company’s European subsidiaries for the period from July 2010 through December 2012. Such assessments totaled €9.8 million ($11.4 million), including potential penalties and interest. The Company strongly disagrees with the positions that the Italian Customs Agency has taken and therefore filed appeals with the Milan First Degree Tax Court (“MFDTC”). In May 2015, the MFDTC issued a judgment in favor of the Company in relation to the first set of appeals (covering the period through September 2010) and

~~canceled the related assessments totaling €1.7 million ($1.9 million~~). In November 2015, the Italian Customs Agency notified the Company of its intent to appeal this first MFDTC judgment. During fiscal 2017, the Appeals Court ruled in favor of the Company and rejected the appeal by the Italian Customs Agency on the first MFDTC judgment. During fiscal 2017, the MFDTC also issued judgments in favor of the Company in relation to the second through seventh set of appeals (covering the period from October 2010 through December 2012) and canceled the related assessments totaling €8.1 million ($9.5 million). Subsequently, the Italian Customs Agency has appealed the majority of these favorable MFDTC judgments, as well as certain of the Appeals Court judgments. While these MFDTC judgments have been favorable to the Company, there can be no assurances that the Italian Customs Agency will not be successful in its remaining appeals. It also continues to be possible that the Company will receive similar or even larger assessments for periods subsequent to December 2012 or other claims or charges related to the matter in the future.Although the Company believes that it has a strong position and will continue to vigorously defend this matter, it is unable to predict with certainty whether or not these efforts will ultimately be successful or whether the outcome will have a material impact on the Company’s financial position or results of operations.

On June 6, 2017, the European Commission notified the Company that it has initiated proceedings to investigate whether certain of the Company’s practices and agreements concerning the distribution of apparel and accessories within the European Union breach European Union competition rules related to cross-border transactions, internet sales limitations and resale price restrictions. The initiation of the proceedings does not mean that the European Commission has made a definitive conclusion regarding whether the Company breached any rules. The Company has cooperated and plans to continue to cooperate with the European Commission, including through responses to requests for information and through changes to certain business practices and agreements, as appropriate. If a violation is ultimately found, a broad range of remedies is potentially available to the European Commission, including imposing a fine and/or injunctive relief prohibiting or restricting certain business practices. As of November 6, 2017, the Company and the European Commission agreed to begin a settlement discussion process to determine if the parties can mutually agree on an outcome of the proceedings. Those discussions are still in a preliminary stage. At this point, the Company is unable to predict the timing or outcome of these proceedings, including the magnitude of any potential fine. However, the Company does not currently believe that any changes to its business practices or agreements made in connection with this proceeding will have a material impact on its ongoing business operations within the European Union.

~~The Company is also involved in various other claims~~disclosures about our legal and other ~~matters incidental to the Company’s business, the resolutions of which are not expected to have a material adverse effect on the Company’s financial position or results of operations.~~proceedings.

ITEM 1A. Risk Factors.

~~There~~Other than the risk factor noted below, there have not been any material changes ~~from~~in the Risk Factors as previously disclosed in our Annual Report on Form 10-K for the year ended January ~~28, 2017,~~29, 2022 filed with the SEC on March ~~27, 2017.~~24, 2022.

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

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

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~~ITEM 2.~~	~~Unregistered Sales of Equity Securities and Use of Proceeds.~~

ITEM 2.Unregistered Sales of Equity Securities and Use of Proceeds.

Items (a) and (b) are not applicable.

Item (c). Issuer Purchases of Equity Securities

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

Period
Total
Number
of Shares
Purchased

Average
Price
Paid
per Share

Total Number of
Shares
Purchased as Part of
Publicly
Announced
Plans or Programs

Maximum Number
(or Approximate
Dollar Value)
of Shares That May
Yet Be Purchased
Under the Plans
or Programs
July 30, 2017 to August 26, 2017
Repurchase program (1) —
—
—
$ 430,468,702
Employee transactions (2) 2,232
$ 13.73
—

August 27, 2017 to September 30, 2017
Repurchase program (1) —
—
—
$ 430,468,702
Employee transactions (2) 610
$ 15.99
—

October 1, 2017 to October 28, 2017
Repurchase program (1) 434,772
$ 16.04
434,772
$ 423,494,687
Employee transactions (2) 466
$ 16.86
—

Total
Repurchase program (1) 434,772
$ 16.04
434,772

Employee transactions (2) 3,308
$ 14.59
—


Period	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number (or Approximate Dollar Value) of Shares That May Yet Be Purchased Under the Plans or Programs
January 30, 2022 to February 26, 2022
Repurchase program1	—	—		—	$	149,004,273
Employee transactions2	—	—		—
February 27, 2022 to April 2, 2022
Repurchase program1	3,531,646	$	21.49	3,531,646	$	68,096,855
Employee transactions2	512	$	23.32	—
April 3, 2022 to April 30, 2022
Repurchase program1	257,930	$	22.60	257,930	$	62,267,634
Employee transactions2	—	—		—
Total
Repurchase program1	3,789,576	$	21.57	3,789,576
Employee transactions2	512	$	23.32	—

~~(1)~~

On June 26, 2012, the Company’s Board of Directors authorized a program to repurchase, from time-to-time and as market and business conditions warrant, up to $500 million of the Company’s common stock. Repurchases under the program may be made on the open market or in privately negotiated transactions, pursuant to Rule 10b5-1 trading plans or other available means. There is no minimum or maximum number of shares to be repurchased under the program, which may be discontinued at any time, without prior notice.


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

Notes:

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

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

Repurchases may be made on the open market or in privately negotiated transactions, pursuant to Rule 10b5-1 trading plans or other available means. There is no minimum or maximum number of shares to be repurchased under the program and the program may be discontinued at any time, without prior notice.

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

Table of Contents

ITEM 5.Other Information.

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

Table of Contents

ITEM 6.Exhibits.


~~ITEM 6.~~	~~Exhibits.~~



Exhibit Number						Description
~~3.1~~3.1..						Restated Certificate of Incorporation of the Registrant (incorporated by reference from Amendment No. 3 to the Registrant’s Registration Statement on Form S-1 (Registration No. 333-4419) filed July 30, 1996).
~~3.2~~3.2..						~~Second~~Certificate of Amendment, dated June 24, 2021, to the Restated Certificate of Incorporation of Guess?, Inc. (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on June 30, 2021).
3.3.						Fourth Amended and Restated Bylaws of the Registrant (incorporated by reference from the Registrant’s Current Report on Form 8-K filed ~~December 4, 2007)~~with the SEC on June 30, 2021).
*†~~4.1~~10.1.						~~Specimen~~2004 Equity Incentive Plan (amended and restated as of March 26, 2022)
*†10.2.						2002 Employee Stock ~~Certificate~~Purchase Plan (amended and restated as of March 26, 2022)
10.3.						Revolving Credit Facility Agreement dated as of May 5, 2022, among Guess Europe Sagl, as borrower, Guess? Europe B.V., as guarantor, UBS Switzerland AG (“UBS”) and Credit Suisse (Switzerland) Ltd (“Credit Suis s e”), as lead arrangers and joint bookrunners, UBS, as agent, and the lenders party thereto (incorporated by reference ~~from Amendment No. 3~~to Exhibit 10.1 to the Registrant’s ~~Registration Statement~~Current Report on Form ~~S-1 (Registration No. 333-4419)~~8-K filed ~~July 30, 1996)~~with the SEC on May 9, 2022).
†~~31.1~~31.1..						Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
†~~31.2~~31.2..						Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
††~~32.1~~32.1..						Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
††~~32.2~~32.2..						Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
†101.INS						XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
†101.SCH						XBRL Taxonomy Extension Schema Document
†101.CAL						XBRL Taxonomy Extension Calculation Linkbase Document
†101.DEF						XBRL Taxonomy Extension Definition Linkbase Document
†101.LAB						XBRL Taxonomy Extension Label Linkbase Document
†101.PRE						XBRL Taxonomy Extension Presentation Linkbase Document
†104						Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)



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

Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



		Guess?, Inc.

Date:	~~December 1, 2017~~June 2, 2022	By:	/s/ ~~VICTOR HERRERO~~CARLOS ALBERINI
			~~Victor Herrero~~Carlos Alberini
			Chief Executive Officer

Date:	~~December 1, 2017~~June 2, 2022	By:	/s/ ~~SANDEEP REDDY~~DENNIS SECOR
			~~Sandeep Reddy~~Dennis Secor
			Interim Chief Financial Officer
			(Principal Financial Officer)

GUESS?, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except share data)

	Oct 28, 2017			Jan 28, 2017
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	233,089		$	396,129
Accounts receivable, net	236,659			225,537
Inventories	477,177			367,381
Other current assets	59,658			54,965
Total current assets	1,006,583			1,044,012
Property and equipment, net	283,197			243,005
Goodwill	36,609			34,100
Other intangible assets, net	5,912			6,504
Deferred tax assets	83,620			82,793
Restricted cash	225			1,521
Other assets	137,366			122,550
	$	1,553,512		$	1,534,485
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of capital lease obligations and borrowings	$	2,121		$	566
Accounts payable	241,909			209,616
Accrued expenses	145,912			135,271
Total current liabilities	389,942			345,453
Long-term debt and capital lease obligations	38,781			23,482
Deferred rent and lease incentives	80,689			80,209
Other long-term liabilities	98,531			99,895
	607,943			549,039
Redeemable noncontrolling interests	5,475			4,452

Commitments and contingencies (Note 12)

Stockholders’ equity:
Preferred stock, $.01 par value. Authorized 10,000,000 shares; no shares issued and outstanding	—			—
Common stock, $.01 par value. Authorized 150,000,000 shares; issued 141,161,026 and 140,509,974 shares, outstanding 82,843,115 and 84,069,492 shares, as of October 28, 2017 and January 28, 2017, respectively	828			841
Paid-in capital	492,542			480,435
Retained earnings	1,149,023			1,215,079
Accumulated other comprehensive loss	(125,924		)	(161,389		)
Treasury stock, 58,317,911 and 56,440,482 shares as of October 28, 2017 and January 28, 2017, respectively	(590,128		)	(565,744		)
Guess?, Inc. stockholders’ equity	926,341			969,222
Nonredeemable noncontrolling interests	13,753			11,772
Total stockholders’ equity	940,094			980,994
	$	1,553,512		$	1,534,485

GUESS?, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS) (in thousands, except per share data) (unaudited)

	Three Months Ended						Nine Months Ended
	Oct 28, 2017			Oct 29, 2016			Oct 28, 2017			Oct 29, 2016
Product sales	$	528,209		$	512,553		$	1,518,323		$	1,462,029
Net royalties	25,929			23,768			68,088			68,066
Net revenue	554,138			536,321			1,586,411			1,530,095
Cost of product sales	363,029			356,079			1,052,633			1,021,462
Gross profit	191,109			180,242			533,778			508,633
Selling, general and administrative expenses	178,552			164,317			519,497			500,066
Net (gains) losses on lease terminations	11,494			—			11,494			(695		)
Asset impairment charges	2,018			802			6,013			1,457
Restructuring charges	—			—			—			6,083
Earnings (loss) from operations	(955		)	15,123			(3,226		)	1,722
Other income (expense):
Interest expense	(684		)	(500		)	(1,642		)	(1,478		)
Interest income	891			861			3,022			1,763
Other income, net	2,759			125			3,561			26,417
	2,966			486			4,941			26,702

Earnings before income tax expense	2,011			15,609			1,715			28,424
Income tax expense	3,673			5,880			8,723			11,682
Net earnings (loss)	(1,662		)	9,729			(7,008		)	16,742
Net earnings attributable to noncontrolling interests	1,198			626			1,926			548
Net earnings (loss) attributable to Guess?, Inc.	$	(2,860	)	$	9,103		$	(8,934	)	$	16,194

Net earnings (loss) per common share attributable to common stockholders (Note 2):
Basic	$	(0.04	)	$	0.11		$	(0.12	)	$	0.19
Diluted	$	(0.04	)	$	0.11		$	(0.12	)	$	0.19

Weighted average common shares outstanding attributable to common stockholders (Note 2):
Basic	82,390			83,758			82,599			83,631
Diluted	82,390			83,917			82,599			83,813

Dividends declared per common share	$	0.225		$	0.225		$	0.675		$	0.675



	Shares				Stockholders’ Equity
	Common Stock		Treasury Stock		Guess?, Inc. Stockholders’ Equity			Nonredeemable Noncontrolling Interests			Total			Redeemable Noncontrolling Interests
Balance at January 30, 2016	83,833,937		56,195,000		$	1,018,475		$	12,818		$	1,031,293		$	5,252
Net earnings	—		—		22,761			2,637			25,398			—
Foreign currency translation adjustment	—		—		(575		)	(2,057		)	(2,632		)	818
Loss on derivative financial instruments designated as cash flow hedges, net of income tax of $864	—		—		(1,852		)	—			(1,852		)	—
Other-than-temporary-impairment and unrealized loss on marketable securities, net of income tax of ($6)	—		—		15			—			15			—
Actuarial valuation loss and related amortization, prior service credit amortization and foreign currency and other adjustments on defined benefit plans, net of income tax of $21	—		—		(923		)	—			(923		)	—
Issuance of common stock under stock compensation plans, net of tax effect	481,037		—		(3,813		)	—			(3,813		)	—
Issuance of stock under Employee Stock Purchase Plan	44,486		(44,486	)	558			—			558			—
Share-based compensation	—		—		16,908			—			16,908			—
Dividends	—		—		(76,997		)	—			(76,997		)	—
Share repurchases	(289,968	)	289,968		(3,532		)	—			(3,532		)	—
Purchase of redeemable noncontrolling interest	—		—		(1,133		)	1,133			—			(4,445		)
Noncontrolling interest capital contribution	—		—		—			—			—			2,157
Noncontrolling interest capital distribution	—		—		—			(2,759		)	(2,759		)	—
Redeemable noncontrolling interest redemption value adjustment	—		—		(670		)	—			(670		)	670
Balance at January 28, 2017	84,069,492		56,440,482		$	969,222		$	11,772		$	980,994		$	4,452
Net earnings (loss)	—		—		(8,934		)	1,926			(7,008		)	—
Foreign currency translation adjustment	—		—		46,368			1,402			47,770			72
Loss on derivative financial instruments designated as cash flow hedges, net of income tax of $1,532	—		—		(11,167		)	—			(11,167		)	—
Actuarial valuation and prior service credit amortization and foreign currency and other adjustments on defined benefit plans, net of income tax of ($62)	—		—		264			—			264			—
Issuance of common stock under stock compensation plans, net of tax effect	651,052		—		(483		)	—			(483		)	—
Issuance of stock under Employee Stock Purchase Plan	42,538		(42,538	)	401			—			401			—
Share-based compensation	—		—		12,410			—			12,410			—
Dividends	—		—		(56,928		)	—			(56,928		)	—
Share repurchases	(1,919,967	)	1,919,967		(24,812		)	—			(24,812		)	—
Noncontrolling interest capital contribution	—		—		—			11			11			951
Noncontrolling interest capital distribution	—		—		—			(1,358		)	(1,358		)	—
Balance at October 28, 2017	82,843,115		58,317,911		$	926,341		$	13,753		$	940,094		$	5,475



	Three Months Ended Oct 28, 2017
	Foreign Currency Translation Adjustment			Derivative Financial Instruments Designated as Cash Flow Hedges			Defined Benefit Plans			Total
Balance at July 29, 2017	$	(103,675	)	$	(8,751	)	$	(8,483	)	$	(120,909	)
Gains (losses) arising during the period	(8,184		)	2,749			97			(5,338		)
Reclassification to net loss for losses realized	—			235			88			323
Net other comprehensive income (loss)	(8,184		)	2,984			185			(5,015		)
Balance at October 28, 2017	$	(111,859	)	$	(5,767	)	$	(8,298	)	$	(125,924	)



	Nine Months Ended Oct 28, 2017
	Foreign Currency Translation Adjustment			Derivative Financial Instruments Designated as Cash Flow Hedges			Defined Benefit Plans			Total
Balance at January 28, 2017	$	(158,227	)	$	5,400		$	(8,562	)	$	(161,389	)
Gains (losses) arising during the period	46,368			(10,220		)	2			36,150
Reclassification to net loss for (gains) losses realized	—			(947		)	262			(685		)
Net other comprehensive income (loss)	46,368			(11,167		)	264			35,465
Balance at October 28, 2017	$	(111,859	)	$	(5,767	)	$	(8,298	)	$	(125,924	)



	Three Months Ended Oct 29, 2016
	Foreign Currency Translation Adjustment			Derivative Financial Instruments Designated as Cash Flow Hedges			Marketable Securities			Defined Benefit Plans			Total
Balance at July 30, 2016	$	(129,518	)	$	(37	)	$	(16	)	$	(7,643	)	$	(137,214	)
Gains (losses) arising during the period	(12,600		)	3,305			—			42			(9,253		)
Reclassification to net earnings for (gains) losses realized	—			(593		)	16			61			(516		)
Net other comprehensive income (loss)	(12,600		)	2,712			16			103			(9,769		)
Balance at October 29, 2016	$	(142,118	)	$	2,675		$	—		$	(7,540	)	$	(146,983	)



	Nine Months Ended Oct 29, 2016
	Foreign Currency Translation Adjustment			Derivative Financial Instruments Designated as Cash Flow Hedges			Marketable Securities			Defined Benefit Plans			Total
Balance at January 30, 2016	$	(157,652	)	$	7,252		$	(15	)	$	(7,639	)	$	(158,054	)
Gains (losses) arising during the period	15,534			(1,958		)	(1		)	(81		)	13,494
Reclassification to net earnings for (gains) losses realized	—			(2,619		)	16			180			(2,423		)
Net other comprehensive income (loss)	15,534			(4,577		)	15			99			11,071
Balance at October 29, 2016	$	(142,118	)	$	2,675		$	—		$	(7,540	)	$	(146,983	)



	Three Months Ended						Nine Months Ended						Location of (Gain) Loss Reclassified from Accumulated OCI into Earnings (Loss)
	Oct 28, 2017			Oct 29, 2016			Oct 28, 2017			Oct 29, 2016
Derivative financial instruments designated as cash flow hedges:
Foreign exchange currency contracts	$	(81	)	$	(739	)	$	(1,360	)	$	(3,315	)	Cost of product sales
Foreign exchange currency contracts	337			(45		)	244			(126		)	Other income/expense
Interest rate swap	57			57			119			167			Interest expense
Less income tax effect	(78		)	134			50			655			Income tax expense
	235			(593		)	(947		)	(2,619		)
Marketable securities:
Available-for-sale securities	—			25			—			25			Other income/expense
Less income tax effect	—			(9		)	—			(9		)	Income tax expense
	—			16			—			16
Defined benefit plans:
Actuarial loss amortization	116			86			344			257			₍₁₎
Prior service credit amortization	(7		)	(7		)	(20		)	(21		)	₍₁₎
Less income tax effect	(21		)	(18		)	(62		)	(56		)	Income tax expense
	88			61			262			180
Total reclassifications during the period	$	323		$	(516	)	$	(685	)	$	(2,423	)



	Total
Balance at January 30, 2016	$	—
Charges to operations	6,083
Cash payments	(6,003		)
Foreign currency and other adjustments	100
Balance at January 28, 2017	$	180
Cash payments	(124		)
Foreign currency and other adjustments	(56		)
Balance at October 28, 2017	$	—



	Oct 28, 2017		Jan 28, 2017
Mortgage debt, maturing monthly through January 2026	$	20,465	$	20,889
Capital lease obligations	17,325		—
Other	3,112		3,159
	40,902		24,048
Less current installments	2,121		566
Long-term debt and capital lease obligations	$	38,781	$	23,482



	Three Months Ended October 28, 2017
	SERP		Swiss Pension Plan			Total
Service cost	$	—	$	492		$	492
Interest cost	461		22			483
Expected return on plan assets	—		(48		)	(48		)
Net amortization of unrecognized prior service credit	—		(7		)	(7		)
Net amortization of actuarial losses	38		78			116
Net periodic defined benefit pension cost	$	499	$	537		$	1,036



	Nine Months Ended October 28, 2017
	SERP		Swiss Pension Plan			Total
Service cost	$	—	$	1,452		$	1,452
Interest cost	1,382		64			1,446
Expected return on plan assets	—		(143		)	(143		)
Net amortization of unrecognized prior service credit	—		(20		)	(20		)
Net amortization of actuarial losses	114		230			344
Net periodic defined benefit pension cost	$	1,496	$	1,583		$	3,079



	Three Months Ended October 29, 2016
	SERP		Swiss Pension Plan			Total
Service cost	$	—	$	381		$	381
Interest cost	460		22			482
Expected return on plan assets	—		(46		)	(46		)
Net amortization of unrecognized prior service credit	—		(7		)	(7		)
Net amortization of actuarial losses	39		47			86
Net periodic defined benefit pension cost	$	499	$	397		$	896



	Nine Months Ended October 29, 2016
	SERP		Swiss Pension Plan			Total
Service cost	$	—	$	1,152		$	1,152
Interest cost	1,380		66			1,446
Expected return on plan assets	—		(139		)	(139		)
Net amortization of unrecognized prior service credit	—		(21		)	(21		)
Net amortization of actuarial losses	116		141			257
Net periodic defined benefit pension cost	$	1,496	$	1,199		$	2,695



	Derivative Balance Sheet Location	Fair Value at Oct 28, 2017		Fair Value at Jan 28, 2017
ASSETS:
Derivatives designated as hedging instruments:
Cash flow hedges:
Foreign exchange currency contracts	Other current assets/ Other assets	$	1,042	$	6,072
Interest rate swap	Other assets	812		876
Total derivatives designated as hedging instruments		1,854		6,948
Derivatives not designated as hedging instruments:
Foreign exchange currency contracts	Other current assets/ Other assets	778		3,796
Total		$	2,632	$	10,744
LIABILITIES:
Derivatives designated as hedging instruments:
Cash flow hedges:
Foreign exchange currency contracts	Accrued expenses/ Other long-term liabilities	$	4,744	$	1,250
Derivatives not designated as hedging instruments:
Foreign exchange currency contracts	Accrued expenses	1,850		174
Total		$	6,594	$	1,424



	Gain Recognized in OCI				Location of Gain (Loss) Reclassified from Accumulated OCI into Earnings (Loss) (1)	Gain (Loss) Reclassified from Accumulated OCI into Earnings (Loss)
	Three Months Ended					Three Months Ended
	Oct 28, 2017		Oct 29, 2016			Oct 28, 2017			Oct 29, 2016
Derivatives designated as cash flow hedges:
Foreign exchange currency contracts	$	3,215	$	3,421	Cost of product sales	$	81		$	739
Foreign exchange currency contracts	$	38	$	260	Other income/expense	$	(337	)	$	45
Interest rate swap	$	134	$	500	Interest expense	$	(57	)	$	(57	)



	Loss Recognized in OCI						Location of Gain (Loss) Reclassified from Accumulated OCI into Earnings (Loss) (1)	Gain (Loss) Reclassified from Accumulated OCI into Earnings (Loss)
	Nine Months Ended							Nine Months Ended
	Oct 28, 2017			Oct 29, 2016				Oct 28, 2017			Oct 29, 2016
Derivatives designated as cash flow hedges:
Foreign exchange currency contracts	$	(10,601	)	$	(2,229	)	Cost of product sales	$	1,360		$	3,315
Foreign exchange currency contracts	$	(958	)	$	(96	)	Other income/expense	$	(244	)	$	126
Interest rate swap	$	(143	)	$	(317	)	Interest expense	$	(119	)	$	(167	)



	Location of Gain (Loss) Recognized in Earnings (Loss)	Gain Recognized in Earnings (Loss)				Gain (Loss) Recognized in Earnings (Loss)
		Three Months Ended				Nine Months Ended
		Oct 28, 2017		Oct 29, 2016		Oct 28, 2017			Oct 29, 2016
Derivatives not designated as hedging instruments:
Foreign exchange currency contracts	Other income/expense	$	1,645	$	2,440	$	(5,688	)	$	(704	)
Interest rate swap	Other income/expense	$	—	$	—	$	—		$	38



Period	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number (or Approximate Dollar Value) of Shares That May Yet Be Purchased Under the Plans or Programs
July 30, 2017 to August 26, 2017
Repurchase program (1)	—	—		—	$	430,468,702
Employee transactions (2)	2,232	$	13.73	—
August 27, 2017 to September 30, 2017
Repurchase program (1)	—	—		—	$	430,468,702
Employee transactions (2)	610	$	15.99	—
October 1, 2017 to October 28, 2017
Repurchase program (1)	434,772	$	16.04	434,772	$	423,494,687
Employee transactions (2)	466	$	16.86	—
Total
Repurchase program (1)	434,772	$	16.04	434,772
Employee transactions (2)	3,308	$	14.59	—