UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

For the quarterly period ended ~~October 31, 2020~~May 1, 2021

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

For the transition period from to

Commission file number: 1-11893

GUESS?, INC.

(Exact name of registrant as specified in its charter)


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

1444 South Alameda Street
Los Angeles,			California
90021
(Address of principal executive offices and zip code)

(213) 765-3100

(Registrant’s telephone number, including area code)

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

Title of each class

Trading symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.01 per share

GES

New York Stock Exchange

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

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

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

Large accelerated filer

☒☐

Accelerated filer

☐☒

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐


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

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

As of ~~November 30, 2020,~~May 28, 2021, the registrant had ~~63,624,879~~64,923,786 shares of Common Stock, $.01 par value per share, outstanding.

Table of Contents

GUESS?, INC.

FORM 10-Q

TABLE OF CONTENTS


PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements (unaudited)	1

	Condensed Consolidated Balance Sheets as of ~~October 31, 2020~~May 1, 2021 and ~~February 1, 2020~~January 30, 2021	1

	Condensed Consolidated Statements of Income (Loss) — Three Months Ended May 1, 2021 and ~~Nine Months Ended October 31,~~May 2, 2020 ~~and November 2, 2019~~	2

	Condensed Consolidated Statements of Comprehensive Income (Loss) — Three ~~and Nine~~ Months Ended ~~October 31,~~May 1, 2021 and May 2, 2020 ~~and November 2, 2019~~	3

	Condensed Consolidated Statements of Cash Flows — ~~Nine~~Three Months Ended ~~October 31,~~May 1, 2021 and May 2, 2020 ~~and November 2, 2019~~	4

	Condensed Consolidated Statements of Stockholders’ Equity — Three ~~and Nine~~ Months Ended ~~October 31,~~May 1 , 2021 and May 2 , 2020 ~~and November 2, 2019~~	5

	Notes to Condensed Consolidated Financial Statements	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	4132

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	6447

Item 4.	Controls and Procedures	6850

PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	6951

Item 1A.	Risk Factors	6951

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	7051

Item 6.	Exhibits	7152

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 31, 2020		Feb 1, 2020			May 1, 2021		Jan 30, 2021
		(unaudited)					(unaudited)
ASSETS	ASSETS					ASSETS
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	365,259	$	284,613	Cash and cash equivalents	$	395,128	$	469,110

Accounts receivable, net	Accounts receivable, net	300,432		327,281		Accounts receivable, net	306,297		314,147
Inventories	Inventories	393,162		393,129		Inventories	404,851		389,144
Other current assets	Other current assets	74,063		59,212		Other current assets	67,907		60,123
Total current assets	Total current assets	1,132,916		1,064,235		Total current assets	1,174,183		1,232,524
Property and equipment, net	Property and equipment, net	220,996		288,112		Property and equipment, net	211,354		216,196
Goodwill	Goodwill	35,957		34,777		Goodwill	36,516		36,736
Deferred tax assets	Deferred tax assets	64,214		63,555		Deferred tax assets	71,979		72,417
Restricted cash	Restricted cash	226		215		Restricted cash	233		235
Operating lease right-of-use assets	Operating lease right-of-use assets	789,742		851,990		Operating lease right-of-use assets	738,544		764,804

Other assets	Other assets	135,955		126,078		Other assets	145,200		142,956
		$	2,380,006	$	2,428,962		$	2,378,009	$	2,465,868

LIABILITIES AND STOCKHOLDERS’ EQUITY	LIABILITIES AND STOCKHOLDERS’ EQUITY					LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:	Current liabilities:					Current liabilities:
Current portion of borrowings and finance lease obligations	Current portion of borrowings and finance lease obligations	$	34,079	$	9,490	Current portion of borrowings and finance lease obligations	$	17,917	$	38,710
Accounts payable	Accounts payable	293,109		232,761		Accounts payable	257,926		300,427
Accrued expenses and other current liabilities	Accrued expenses and other current liabilities	180,976		204,096		Accrued expenses and other current liabilities	176,156		200,602
Current portion of operating lease liabilities	Current portion of operating lease liabilities	227,209		192,066		Current portion of operating lease liabilities	224,676		222,800
Total current liabilities	Total current liabilities	735,373		638,413		Total current liabilities	676,675		762,539
Convertible senior notes, net	Convertible senior notes, net	255,801		247,363		Convertible senior notes, net	261,609		258,614
Long-term debt and finance lease obligations	Long-term debt and finance lease obligations	70,069		32,770		Long-term debt and finance lease obligations	86,724		68,554

Long-term operating lease liabilities	Long-term operating lease liabilities	689,251		714,079		Long-term operating lease liabilities	632,574		662,657
Other long-term liabilities	Other long-term liabilities	147,065		130,259		Other long-term liabilities	139,285		144,004
		1,897,559		1,762,884			1,796,867		1,896,368
Redeemable noncontrolling interests	Redeemable noncontrolling interests	3,740		4,731		Redeemable noncontrolling interests	3,949		3,920

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

Stockholders’ equity:	Stockholders’ equity:					Stockholders’ equity:
Preferred stock, $.01 par value. Authorized 10,000,000 shares; 0 shares issued and outstanding	Preferred stock, $.01 par value. Authorized 10,000,000 shares; 0 shares issued and outstanding	0		0		Preferred stock, $.01 par value. Authorized 10,000,000 shares; 0 shares issued and outstanding	0		0
Common stock, $.01 par value. Authorized 150,000,000 shares; issued 142,842,793 and 142,867,947 shares, outstanding 63,626,809 and 65,848,510 shares, as of October 31, 2020 and February 1, 2020, respectively		636		658
Common stock, $.01 par value. Authorized 150,000,000 shares; issued 142,792,840 and 142,793,679 shares, outstanding 64,932,613 and 64,230,162 shares, as of May 1, 2021 and January 30, 2021, respectively						Common stock, $.01 par value. Authorized 150,000,000 shares; issued 142,792,840 and 142,793,679 shares, outstanding 64,932,613 and 64,230,162 shares, as of May 1, 2021 and January 30, 2021, respectively	649		642
Paid-in capital	Paid-in capital	553,369		563,004		Paid-in capital	550,831		553,111
Retained earnings	Retained earnings	971,724		1,130,409		Retained earnings	1,039,581		1,034,823
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(134,013)		(139,910)		Accumulated other comprehensive loss	(120,902)		(120,675)
Treasury stock, 79,215,984 and 77,019,437 shares as of October 31, 2020 and February 1, 2020, respectively		(931,913)		(914,447)
Treasury stock, 77,860,227 and 78,563,517 shares as of May 1, 2021 and January 30, 2021, respectively						Treasury stock, 77,860,227 and 78,563,517 shares as of May 1, 2021 and January 30, 2021, respectively	(915,964)		(924,238)
Guess?, Inc. stockholders’ equity	Guess?, Inc. stockholders’ equity	459,803		639,714		Guess?, Inc. stockholders’ equity	554,195		543,663
Nonredeemable noncontrolling interests	Nonredeemable noncontrolling interests	18,904		21,633		Nonredeemable noncontrolling interests	22,998		21,917
Total stockholders’ equity	Total stockholders’ equity	478,707		661,347		Total stockholders’ equity	577,193		565,580
		$	2,380,006	$	2,428,962		$	2,378,009	$	2,465,868

See accompanying notes to condensed consolidated financial statements.

Table of Contents

GUESS?, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)

(in thousands, except per share data)

(unaudited)


		Three Months Ended				Nine Months Ended					Three Months Ended
		Oct 31, 2020		Nov 2, 2019		Oct 31, 2020		Nov 2, 2019			May 1, 2021		May 2, 2020
Product sales	Product sales	$	549,851	$	593,736	$	1,183,560	$	1,776,287	Product sales	$	498,477	$	247,317
Net royalties	Net royalties	19,433		22,208		44,514		59,568		Net royalties	21,525		12,934
Net revenue	Net revenue	569,284		615,944		1,228,074		1,835,855		Net revenue	520,002		260,251
Cost of product sales	Cost of product sales	329,764		386,445		807,297		1,158,741		Cost of product sales	308,444		226,022
Gross profit	Gross profit	239,520		229,499		420,777		677,114		Gross profit	211,558		34,229
Selling, general and administrative expenses	Selling, general and administrative expenses	184,739		205,003		478,320		627,823		Selling, general and administrative expenses	186,684		143,288

Asset impairment charges	Asset impairment charges	10,335		1,847		75,276		5,126		Asset impairment charges	441		52,972
Net gains on lease modifications		(21)		0		(450)		0
Net (gains) losses on lease modifications										Net (gains) losses on lease modifications	(2,145)		456
Earnings (loss) from operations	Earnings (loss) from operations	44,467		22,649		(132,369)		44,165		Earnings (loss) from operations	26,578		(162,487)
Other income (expense):	Other income (expense):									Other income (expense):
Interest expense	Interest expense	(5,809)		(4,946)		(17,212)		(11,156)		Interest expense	(5,926)		(5,462)
Interest income	Interest income	562		492		1,608		1,166		Interest income	374		610
Other expense, net	Other expense, net	(6,521)		(62)		(20,553)		(4,346)		Other expense, net	(2,701)		(19,580)
		(11,768)		(4,516)		(36,157)		(14,336)			(8,253)		(24,432)

Earnings (loss) before income tax expense (benefit)	Earnings (loss) before income tax expense (benefit)	32,699		18,133		(168,526)		29,829		Earnings (loss) before income tax expense (benefit)	18,325		(186,919)
Income tax expense (benefit)	Income tax expense (benefit)	5,145		4,548		(14,850)		10,649		Income tax expense (benefit)	5,455		(26,381)
Net earnings (loss)	Net earnings (loss)	27,554		13,585		(153,676)		19,180		Net earnings (loss)	12,870		(160,538)
Net earnings (loss) attributable to noncontrolling interests	Net earnings (loss) attributable to noncontrolling interests	1,178		1,162		(2,028)		2,809		Net earnings (loss) attributable to noncontrolling interests	864		(2,872)
Net earnings (loss) attributable to Guess?, Inc.	Net earnings (loss) attributable to Guess?, Inc.	$	26,376	$	12,423	$	(151,648)	$	16,371	Net earnings (loss) attributable to Guess?, Inc.	$	12,006	$	(157,666)

Net earnings (loss) per common share attributable to common stockholders (Note 3):	Net earnings (loss) per common share attributable to common stockholders (Note 3):									Net earnings (loss) per common share attributable to common stockholders (Note 3):
Basic	Basic	$	0.41	$	0.19	$	(2.35)	$	0.22	Basic	$	0.19	$	(2.40)
Diluted	Diluted	$	0.41	$	0.18	$	(2.35)	$	0.22	Diluted	$	0.18	$	(2.40)

Weighted average common shares outstanding attributable to common stockholders (Note 3):	Weighted average common shares outstanding attributable to common stockholders (Note 3):									Weighted average common shares outstanding attributable to common stockholders (Note 3):
Basic	Basic	62,789		66,393		64,561		72,275		Basic	64,035		65,715
Diluted	Diluted	63,579		67,314		64,561		73,211		Diluted	65,940		65,715

See accompanying notes to condensed consolidated financial statements.

Table of Contents

GUESS?, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF

COMPREHENSIVE INCOME (LOSS)

(in thousands)

(unaudited)


		Three Months Ended				Nine Months Ended					Three Months Ended
		Oct 31, 2020		Nov 2, 2019		Oct 31, 2020		Nov 2, 2019			May 1, 2021		May 2, 2020
Net earnings (loss)	Net earnings (loss)	$	27,554	$	13,585	$	(153,676)	$	19,180	Net earnings (loss)	$	12,870	$	(160,538)
Other comprehensive income (loss) (“OCI”):	Other comprehensive income (loss) (“OCI”):									Other comprehensive income (loss) (“OCI”):
Foreign currency translation adjustment	Foreign currency translation adjustment									Foreign currency translation adjustment
Gains (losses) arising during the period		(1,043)		3,224		13,260		(14,136)
Losses arising during the period										Losses arising during the period	(2,216)		(18,499)

Derivative financial instruments designated as cash flow hedges	Derivative financial instruments designated as cash flow hedges									Derivative financial instruments designated as cash flow hedges
Gains (losses) arising during the period		1,465		859		(2,896)		7,581
Gains arising during the period										Gains arising during the period	1,781		3,536
Less income tax effect	Less income tax effect	(179)		(83)		350		(963)		Less income tax effect	(228)		(356)
Reclassification to net earnings (loss) for gains realized		(1,737)		(2,854)		(6,187)		(4,931)
Reclassification to net earnings (loss) for (gains) losses realized										Reclassification to net earnings (loss) for (gains) losses realized	398		(1,988)
Less income tax effect	Less income tax effect	184		327		667		651		Less income tax effect	62		219

Defined benefit plans	Defined benefit plans									Defined benefit plans

Foreign currency and other adjustments	Foreign currency and other adjustments	(5)		14		(241)		(46)		Foreign currency and other adjustments	129		0
Less income tax effect	Less income tax effect	3		(1)		27		4		Less income tax effect	(13)		(1)
Net actuarial loss amortization	Net actuarial loss amortization	101		112		294		334		Net actuarial loss amortization	105		96
Prior service credit amortization	Prior service credit amortization	(17)		(10)		(49)		(29)		Prior service credit amortization	(17)		(16)
Less income tax effect	Less income tax effect	(10)		(12)		(29)		(35)		Less income tax effect	(11)		(9)
Total comprehensive income (loss)	Total comprehensive income (loss)	26,316		15,161		(148,480)		7,610		Total comprehensive income (loss)	12,860		(177,556)
Less comprehensive income (loss) attributable to noncontrolling interests:	Less comprehensive income (loss) attributable to noncontrolling interests:									Less comprehensive income (loss) attributable to noncontrolling interests:
Net earnings (loss)	Net earnings (loss)	1,178		1,162		(2,028)		2,809		Net earnings (loss)	864		(2,872)
Foreign currency translation adjustment	Foreign currency translation adjustment	1,166		283		(701)		141		Foreign currency translation adjustment	217		(3,626)
Amounts attributable to noncontrolling interests	Amounts attributable to noncontrolling interests	2,344		1,445		(2,729)		2,950		Amounts attributable to noncontrolling interests	1,081		(6,498)
Comprehensive income (loss) attributable to Guess?, Inc.	Comprehensive income (loss) attributable to Guess?, Inc.	$	23,972	$	13,716	$	(145,751)	$	4,660	Comprehensive income (loss) attributable to Guess?, Inc.	$	11,779	$	(171,058)

See accompanying notes to condensed consolidated financial statements.

Table of Contents

GUESS?, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)


		Nine Months Ended					Three Months Ended
		Oct 31, 2020		Nov 2, 2019			May 1, 2021		May 2, 2020
Cash flows from operating activities:	Cash flows from operating activities:					Cash flows from operating activities:
Net earnings (loss)	Net earnings (loss)	$	(153,676)	$	19,180	Net earnings (loss)	$	12,870	$	(160,538)
Adjustments to reconcile net earnings (loss) to net cash provided by (used in) operating activities:
Adjustments to reconcile net earnings (loss) to net cash used in operating activities:						Adjustments to reconcile net earnings (loss) to net cash used in operating activities:
Depreciation and amortization	Depreciation and amortization	48,009		53,989		Depreciation and amortization	14,188		17,024
Amortization of debt discount	Amortization of debt discount	7,796		5,109		Amortization of debt discount	2,781		2,599
Amortization of debt issuance costs	Amortization of debt issuance costs	1,017		663		Amortization of debt issuance costs	362		307
Share-based compensation expense	Share-based compensation expense	14,529		14,639		Share-based compensation expense	4,060		5,786
Forward contract (gains) losses		2,926		(60)
Forward contract gains						Forward contract gains	(101)		(1,102)

Net loss from impairment and disposition of long-term assets	Net loss from impairment and disposition of long-term assets	76,046		6,558		Net loss from impairment and disposition of long-term assets	1,011		53,483
Other items, net	Other items, net	12,784		6,368		Other items, net	2,315		9,951
Changes in operating assets and liabilities:	Changes in operating assets and liabilities:					Changes in operating assets and liabilities:
Accounts receivable	Accounts receivable	41,188		17,190		Accounts receivable	4,373		84,667
Inventories	Inventories	3,591		(56,467)		Inventories	(9,574)		(7,894)
Prepaid expenses and other assets	Prepaid expenses and other assets	(10,174)		6,162		Prepaid expenses and other assets	(15,328)		1,059
Operating lease assets and liabilities, net	Operating lease assets and liabilities, net	34,323		3,350		Operating lease assets and liabilities, net	(1,953)		27,704
Accounts payable and accrued expenses	Accounts payable and accrued expenses	21,157		(97,776)		Accounts payable and accrued expenses	(67,724)		(93,294)
Other long-term liabilities	Other long-term liabilities	(1,165)		(6,910)		Other long-term liabilities	(923)		(1,305)
Net cash provided by (used in) operating activities		98,351		(28,005)
Net cash used in operating activities						Net cash used in operating activities	(53,643)		(61,553)
Cash flows from investing activities:	Cash flows from investing activities:					Cash flows from investing activities:
Purchases of property and equipment	Purchases of property and equipment	(12,364)		(49,020)		Purchases of property and equipment	(9,139)		(5,973)
Proceeds from sale of long-term assets		1,596		319
Proceeds from sale of business and long-term assets						Proceeds from sale of business and long-term assets	1,648		257

Net cash settlement of forward contracts	Net cash settlement of forward contracts	(743)		162		Net cash settlement of forward contracts	(283)		0
Purchases of investments		(2,344)		0

Other investing activities	Other investing activities	(723)		589		Other investing activities	(14)		0
Net cash used in investing activities	Net cash used in investing activities	(14,578)		(47,950)		Net cash used in investing activities	(7,788)		(5,716)
Cash flows from financing activities:	Cash flows from financing activities:					Cash flows from financing activities:
Proceeds from borrowings	Proceeds from borrowings	294,893		120,794		Proceeds from borrowings	5,651		245,961
Repayments on borrowings and finance lease obligations	Repayments on borrowings and finance lease obligations	(249,727)		(89,802)		Repayments on borrowings and finance lease obligations	(9,804)		(31,884)
Proceeds from issuance of convertible senior notes		0		300,000
Proceeds from issuance of warrants		0		28,080
Purchase of convertible note hedges		0		(60,990)
Convertible debt issuance costs		0		(5,101)

Dividends paid	Dividends paid	(8,114)		(34,286)		Dividends paid	(7,511)		(958)

Noncontrolling interest capital distribution		0		(668)

Issuance of common stock, net of tax withholdings on vesting of stock awards	Issuance of common stock, net of tax withholdings on vesting of stock awards	(2,724)		846		Issuance of common stock, net of tax withholdings on vesting of stock awards	1,945		(3,036)
Purchase of treasury stock		(38,876)		(280,564)
Net cash used in financing activities		(4,548)		(21,691)

Net cash provided by (used in) financing activities						Net cash provided by (used in) financing activities	(9,719)		210,083
Effect of exchange rates on cash, cash equivalents and restricted cash	Effect of exchange rates on cash, cash equivalents and restricted cash	1,432		(2,732)		Effect of exchange rates on cash, cash equivalents and restricted cash	(2,834)		(8,014)
Net change in cash, cash equivalents and restricted cash	Net change in cash, cash equivalents and restricted cash	80,657		(100,378)		Net change in cash, cash equivalents and restricted cash	(73,984)		134,800
Cash, cash equivalents and restricted cash at the beginning of the year	Cash, cash equivalents and restricted cash at the beginning of the year	284,828		210,995		Cash, cash equivalents and restricted cash at the beginning of the year	469,345		284,828
Cash, cash equivalents and restricted cash at the end of the period	Cash, cash equivalents and restricted cash at the end of the period	$	365,485	$	110,617	Cash, cash equivalents and restricted cash at the end of the period	$	395,361	$	419,628

Supplemental cash flow data:	Supplemental cash flow data:					Supplemental cash flow data:
Interest paid	Interest paid	$	9,265	$	4,865	Interest paid	$	3,977	$	3,960
Income taxes paid, net of refunds	Income taxes paid, net of refunds	$	6,326	$	11,668	Income taxes paid, net of refunds	$	5,346	$	590

Non-cash investing and financing activity:	Non-cash investing and financing activity:					Non-cash investing and financing activity:
Assets acquired under finance lease obligations	Assets acquired under finance lease obligations	$	6,803	$	3,070	Assets acquired under finance lease obligations	$	2,323	$	86
Receivable and related adjustments from sale of retail locations		$	574	$	5,102

See accompanying notes to condensed consolidated financial statements.

Table of Contents

GUESS?, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands, except share data)


		For the three and nine months ended October 31, 2020																	For the three months ended May 1, 2021
		Guess?, Inc. Stockholders’ Equity																	Guess?, Inc. Stockholders’ Equity
		Common Stock									Treasury Stock								Common Stock									Treasury Stock
		Shares	Amount		Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Shares	Amount		Nonredeemable Noncontrolling Interests		Total			Shares	Amount		Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Shares	Amount		Nonredeemable Noncontrolling Interests		Total
Balance at February 1, 2020		65,848,510	$	658	$	563,004	$	1,130,409	$	(139,910)	77,019,437	$	(914,447)	$	21,633	$	661,347
Balance at January 30, 2021																		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 loss		—	—		—		(157,666)		—		—	—		(2,872)		(160,538)
Other comprehensive loss, net of income tax of ($147)		—	—		—		—		(13,392)		—	—		(3,626)		(17,018)
Net earnings																		Net earnings	—	—		—		12,006		—		—	—		864		12,870
Other comprehensive income (loss), net of income tax of ($190)																		Other comprehensive income (loss), net of income tax of ($190)	—	—		—		—		(227)		—	—		217		(10)
Issuance of common stock under stock compensation plans	Issuance of common stock under stock compensation plans	1,763,311	18		(24,264)		—		—		(1,770,223)	21,017		—		(3,229)		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	Issuance of stock under Employee Stock Purchase Plan	32,427	—		(192)		—		—		(32,427)	385		—		193		Issuance of stock under Employee Stock Purchase Plan	12,798	—		81		—		—		(12,798)	151		—		232
Share-based compensation	Share-based compensation	—	—		5,771		15		—		—	—		—		5,786		Share-based compensation	—	—		4,056		4		—		—	—		—		4,060
Dividends, net of forfeitures on non-participating securities	Dividends, net of forfeitures on non-participating securities	—	—		—		248		—		—	—		—		248		Dividends, net of forfeitures on non-participating securities	—	—		—		(7,252)		—		—	—		—		(7,252)

Balance at May 2, 2020		67,644,248	$	676	$	544,319	$	973,006	$	(153,302)	75,216,787	$	(893,045)	$	15,135	$	486,789

Net loss		—	—		—		(20,358)		—		—	—		(334)		(20,692)
Other comprehensive income, net of income tax of $1,164		—	—		—		—		21,693		—	—		1,759		23,452
Issuance of common stock under stock compensation plans		(54,926)	—		429		—		—		37,730	(448)		—		(19)
Issuance of stock under Employee Stock Purchase Plan		25,427	—		(154)		—		—		(25,427)	301		—		147
Share-based compensation		—	—		3,968		35		—		—	—		—		4,003
Dividends, net of forfeitures on non-participating securities		—	—		—		24		—		—	—		—		24
Share repurchases		(4,000,000)	(40)		40		—		—		4,000,000	(38,876)		—		(38,876)

Balance at August 1, 2020		63,614,749	$	636	$	548,602	$	952,707	$	(131,609)	79,229,090	$	(932,068)	$	16,560	$	454,828
Net earnings		—	—		—		26,376		—		—	—		1,178		27,554
Other comprehensive income (loss), net of income tax of ($2)		—	—		—		—		(2,404)		—	—		1,166		(1,238)
Issuance of common stock under stock compensation plans		(5,229)	—		92		—		—		4,183	(49)		—		43
Issuance of stock under Employee Stock Purchase Plan		17,289	—		(63)		—		—		(17,289)	204		—		141
Share-based compensation		—	—		4,738		2		—		—	—		—		4,740
Dividends, net of forfeitures on non-participating securities		—	—		—		(7,361)		—		—	—		—		(7,361)
Balance at May 1, 2021																		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

Balance at October 31, 2020		63,626,809	$	636	$	553,369	$	971,724	$	(134,013)	79,215,984	$	(931,913)	$	18,904	$	478,707

See accompanying notes to condensed consolidated financial statements.

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GUESS?, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands, except share data)

For the three and nine months ended November 2, 2019
Guess?, Inc. Stockholders’ Equity
Common Stock Treasury Stock
Shares Amount Paid-in
Capital Retained Earnings Accumulated Other Comprehensive Loss Shares Amount Nonredeemable
Noncontrolling
Interests Total
Balance at February 2, 2019 81,379,660 $ 814 $ 523,331 $ 1,077,747 $ (126,179) 61,327,640 $ (638,486) $ 16,418 $ 853,645
Cumulative adjustment from adoption of new accounting guidance — — — (1,684) 1,981 — — — 297
Net earnings (loss) — — — (21,374) — — — 793 (20,581)
Other comprehensive income (loss), net of income tax of ($499) — — — — (8,508) — — 310 (8,198)
Issuance of common stock under stock compensation plans 545,881 5 (3,042) — — (211,221) 2,225 — (812)
Issuance of stock under Employee Stock Purchase Plan 11,377 1 69 — — (11,377) 120 — 190
Share-based compensation — — 4,440 28 — — — — 4,468
Dividends, net of forfeitures on non-participating securities — — — (18,331) — — — — (18,331)
Share repurchases (10,264,052) (103) 103 — — 10,264,052 (201,564) — (201,564)
Equity component value of convertible note issuance, net — — 42,324 — — — — — 42,324
Sale of common stock warrant — — 28,080 — — — — — 28,080
Purchase of convertible note hedge — — (46,440) — — — — — (46,440)
Equity forward contract issuance — — (68,000) — — — — — (68,000)
Balance at May 4, 2019 71,672,866 $ 717 $ 480,865 $ 1,036,386 $ (132,706) 71,369,094 $ (837,705) $ 17,521 $ 565,078
Net earnings — — — 25,322 — — — 854 26,176
Other comprehensive loss, net of income tax of ($75) — — — — (4,496) — — (452) (4,948)
Issuance of common stock under stock compensation plans 64,080 — (852) — — (106,039) 1,249 — 397
Issuance of stock under Employee Stock Purchase Plan 19,538 — 38 — — (19,538) 230 — 268
Share-based compensation — — 4,928 58 — — — — 4,986
Dividends, net of forfeitures on non-participating securities — — — (8,162) — — — — (8,162)
Share repurchases (749,252) (7) 7 — — 749,252 (11,000) — (11,000)
Balance at August 3, 2019 71,007,232 $ 710 $ 484,986 $ 1,053,604 $ (137,202) 71,992,769 $ (847,226) $ 17,923 $ 572,795
Net earnings — — — 12,423 — — — 1,162 13,585
Other comprehensive income, net of income tax of $231 — — — — 1,293 — — 283 1,576
Issuance of common stock under stock compensation plans 24,491 — (36) — — (54,500) 644 — 608
Issuance of stock under Employee Stock Purchase Plan 14,284 — 26 — — (14,284) 169 — 195
Share-based compensation — — 5,128 57 — — — — 5,185
Dividends, net of forfeitures on non-participating securities — — — (7,516) — — — — (7,516)
Share repurchases (5,399,305) (54) 54 — — 5,399,305 (68,000) — (68,000)
Noncontrolling interest capital distribution — — — — — — — (668) (668)
Equity forward contract settlement — — 68,000 — — — — — 68,000
Balance at November 2, 2019 65,646,702 $ 656 $ 558,158 $ 1,058,568 $ (135,909) 77,323,290 $ (914,413) $ 18,700 $ 585,760


	For the three months ended May 2, 2020
	Guess?, Inc. Stockholders’ Equity
	Common Stock									Treasury Stock
	Shares	Amount		Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Shares	Amount		Nonredeemable Noncontrolling Interests		Total
Balance at February 1, 2020	65,848,510	$	658	$	563,004	$	1,130,409	$	(139,910)	77,019,437	$	(914,447)	$	21,633	$	661,347

Net loss	—	—		—		(157,666)		—		—	—		(2,872)		(160,538)
Other comprehensive loss, net of income tax of ($147)	—	—		—		—		(13,392)		—	—		(3,626)		(17,018)


Issuance of common stock under stock compensation plans including tax effect	1,763,311	18		(24,264)		—		—		(1,770,223)	21,017		—		(3,229)
Issuance of stock under Employee Stock Purchase Plan	32,427	0		(192)		—		—		(32,427)	385		—		193
Share-based compensation	—	—		5,771		15		—		—	—		—		5,786
Dividends, net of forfeitures on non-participating securities	—	—		—		248		—		—	—		—		248





Balance at May 2, 2020	67,644,248	$	676	$	544,319	$	973,006	$	(153,302)	75,216,787	$	(893,045)	$	15,135	$	486,789

See accompanying notes to condensed consolidated financial statements.

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GUESS?, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~October 31, 2020~~May 1, 2021

(unaudited)

(1)Basis of Presentation ~~and New Accounting Guidance~~

Description of the Business

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

~~Basis of Presentation~~Interim Financial Statements

In the opinion of management, the accompanying unaudited condensed consolidated financial statements of the Company contain all adjustments, consisting of normal recurring adjustments, considered necessary for a fair presentation of the condensed consolidated balance sheets as of ~~October 31, 2020~~May 1, 2021 and ~~February 1, 2020,~~January 30, 2021, the condensed consolidated statements of income (loss), comprehensive income (loss), cash flows and stockholders’ equity for the three ~~and nine~~ months ended ~~October 31, 2020~~May 1, 2021 and ~~November~~May 2, ~~2019 and the condensed consolidated statements of cash flows for the nine months ended October 31, 2020 and November 2, 2019.~~2020. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with ~~accounting principles generally accepted in the~~ U.S. Generally Accepted Accounting Principles (“GAAP”) for interim financial information and the instructions to Rule 10-01 of Regulation S-X of the Securities and Exchange Commission (the “SEC”). Accordingly, they have been condensed and do not include all of the information and footnotes required by GAAP for complete financial statements. The results of operations and cash flows for the three ~~and nine~~ months ended ~~October 31, 2020~~May 1, 2021 are not necessarily indicative of the results of operations to be expected for the full fiscal year.

These financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended ~~February 1, 2020.~~January 30, 2021.

Fiscal Periods

The three ~~and nine~~ months ended ~~October 31, 2020~~May 1, 2021 had the same number of days as the three ~~and nine~~ months ended ~~November~~May 2, ~~2019.~~2020. All references herein to “fiscal ~~2021,~~2022,” “fiscal ~~2020”~~2021” and “fiscal ~~2019”~~2020” represent the results of the 52-week fiscal ~~year~~years ending January 29, 2022, January 30, 2021 and ~~the 52-week fiscal years ended~~ February 1, 2020, respectively.

COVID-19 Business Update

The coronavirus (or “COVID-19”) pandemic is continuing to impact the Company’s businesses. During the first quarter of fiscal 2022, the Company experienced significantly higher net revenue compared to the first quarter of fiscal 2021 (when government-mandated store closures were much more widespread) but lower net revenue compared to the pre-pandemic first quarter of fiscal 2020 as it remained challenged by lower demand, temporary store closures and ~~February 2, 2019, respectively.~~capacity restrictions. In light of the current environment, the Company continues to strategically manage expenses in order to protect profitability.

In late fiscal 2021, the Company incurred a new round of government-mandated temporary store closures, mostly in Europe. The number of temporarily closed stores ebbed and flowed during the first quarter of fiscal 2022 based on local conditions. As of May 1, 2021, the majority of closed stores were located primarily in Europe and Canada.

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Summary of Significant Accounting Policies

The accounting policies of the Company are set forth in further detail in Note 1 to the Company's Consolidated Financial Statements contained in the Company’s fiscal 2021 Annual Report on Form 10-K. The Company includes herein certain updates to those policies.

Reclassifications

The Company has made certain reclassifications to prior period amounts to conform to the current period presentation within the accompanying condensed consolidated financial statements and notes to the condensed consolidated financial statements.

Use of Estimates

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

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As discussed ~~further below,~~above, the ~~coronavirus (or “COVID-19”)~~COVID-19 pandemic has materially impacted the Company’s results during the three ~~and nine~~ months ended ~~October 31,~~May 1, 2021 and May 2, 2020. 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.

~~COVID-19 Business Update~~

The COVID-19 pandemic, which is ongoing and dynamic in nature, has had and is continuing to have a material impact on the Company’s financial performance. Since the start of the pandemic, the Company has experienced various temporary retail store closures in key regions globally, including the closure of a significant majority of its stores during the first quarter of fiscal 2021. During the second quarter of fiscal 2021, the Company gradually reopened most of its global fleet of stores. Toward the end of the third quarter of fiscal 2021, the Company started to incur a new round of government-mandated temporary store closures, resulting in the closure of just over 5% of our directly operated stores as of October 31, 2020, mostly in Europe. That percentage increased to slightly under 20% during the fiscal month of November, but recent store re-openings have helped decrease the store closure percentage to just under 10% as of November 29, 2020. The overall impact of these closures resulted in stores being closed for over 25% of the total days during the nine months ended October 31, 2020. The store closure impact was minimal during the third quarter of fiscal 2021. The Company will continue to reopen stores (and/or close again, if appropriate) as governmental guidelines and local conditions permit or require, taking an informed, measured approach based on numerous factors. The Company’s e-commerce sites have remained open in all regions throughout the pandemic. In addition to the impact of store closures, retail stores that are open have and continue to experience significant reductions in traffic and revenue. Many of the Company’s wholesale and licensing partners have also substantially reduced their operations. The Company has brought back furloughed store associates and support staff as stores reopen. The extent and duration of the global pandemic remains uncertain and may continue to impact consumer purchasing activity in the foreseeable future.

During the first nine months of fiscal 2021, in addition to the negative impact from lower net revenue, the Company’s operating results reflected asset impairment charges as well as additional inventory valuation reserves and higher allowances for markdowns and doubtful accounts due to the ongoing effects of the COVID-19 pandemic. These charges were partially offset by lower selling, general and administrative (“SG&A”) expenses driven primarily by expense savings, both one-time, such as furloughs and temporary salary reductions, and permanent, such as headcount reductions and lower discretionary spending. In addition, the Company benefited from various government assistance programs related primarily to the recovery of employee payroll costs as well as certain favorable tax treatments.

During the first nine months of fiscal 2021, the Company implemented a number of measures to help mitigate the operating and financial impact of the pandemic, including: (i) furloughing its U.S. and Canada store associates and significant portions of its U.S. and Canada corporate and distribution center associates and permanently reducing U.S. corporate headcount; (ii) implementing temporary tiered salary reductions for management level corporate employees, including its executive officers; (iii) deferring annual merit increases; (iv) executing substantial reductions in expenses, store occupancy costs, capital expenditures and overall costs, including through reduced inventory purchases; (v) working globally with country management teams to maximize the Company’s participation in all eligible government or other initiatives available to businesses or employees impacted by the COVID-19 pandemic; (vi) drawing down on certain credit facilities and entering into certain term loans to ensure financial flexibility and maintain maximum liquidity; (vii) engaging with landlords to negotiate rent deferrals or other rent concessions; (viii) working with vendors to extend payment terms; and (ix) postponing its decision related to the payment of its quarterly cash dividend.

During the second quarter of fiscal 2021, as the situation began to stabilize, the Company repaid a significant portion of its previously drawn down credit facilities, continued to bring back furloughed employees, eliminated the temporary tiered salary reductions and invested in share repurchases to return value to its shareholders. The Company also announced that it would resume paying its quarterly cash dividend

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~~beginning in the third quarter of fiscal 2021, but decided to not declare any cash dividends for the first and second quarters of fiscal 2021.~~

In response to the COVID-19 pandemic, governments in various jurisdictions have implemented relief programs to provide assistance in the form of wage subsidies and tax related payment deferrals (related to payroll, income, sales and other taxes). The Company is leveraging these relief initiatives where able to help mitigate expenses and provide additional liquidity. An example of such an economic relief program is the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act, which was enacted by the U.S. government in March 2020. The provisions of the CARES Act include the deferral of the employer portion of social security taxes, creation of refundable employee retention tax credits, modification of net operating loss carryback periods, relaxation of the net interest deduction limitations and technical amendment for qualified improvement property deduction.

In light of store closures and reduced traffic in stores, the Company has taken certain actions with respect to certain of its existing leases, including engaging with landlords to discuss rent deferrals as well as other rent concessions. Since April 2020, the Company has suspended rental payments and/or paid reduced rental amounts with respect to its retail stores that were closed or were experiencing drastically reduced customer traffic as a result of the COVID-19 pandemic. The Company is engaging in discussions with the affected landlords in an effort to achieve appropriate rent relief and other lease concessions and, in some cases, to terminate existing leases. Consistent with updated guidance from the Financial Accounting Standards Board (“FASB”) in April 2020, the Company has elected to treat any such agreed-upon payment deferrals related to the COVID-19 pandemic as if there were no modifications to the lease contract and has accrued such amounts within the current portion of operating lease liabilities in the Company’s condensed consolidated balance sheet. The Company has elected to treat other rent concessions which result in reduced lease payments as variable lease payments if the concessions that are provided are for a period of generally less than 12 months. For any rent concessions which reduce the lease payments for a period of generally more than 12 months or change the payment terms from minimum rental amounts to amounts based on a percentage of sales volume for the remainder of the lease term, the Company has elected to treat such changes as lease modifications under the current lease guidance.

Revenue Recognition

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

The Company also recognizes royalty revenue from its trademark license agreements. The Company’s trademark license agreements represent symbolic licenses that are dependent on the Company’s continued support over the term of the license agreement. The amount of revenue that is recognized from the licensing arrangements is based on sales-based royalty and advertising fund contributions as well as specific fixed payments, where applicable. The Company’s trademark license agreements customarily provide for a multi-year initial term ranging from three to ~~ten~~15 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 ~~October 31, 2020,~~May 1, 2021, the Company had ~~$6.2~~$6.1 million and ~~$14.3~~$15.9 million of deferred royalties related to these upfront payments included in accrued expenses and other current liabilities and other long-term liabilities, respectively. This compares to ~~$6.7~~$6.6 million and ~~$18.7~~$17.1 million of deferred royalties related to these upfront payments included in accrued expenses and other current liabilities and other long-term liabilities, respectively, at ~~February 1, 2020.~~January 30, 2021. During the three ~~and nine~~ months ended ~~October 31,~~May 1, 2021 and May 2, 2020, the Company recognized ~~$3.1~~$3.5 million and ~~$9.8 million in net royalties related to the amortization of the deferred royalties, respectively. During the three and nine months ended November 2, 2019, the Company recognized $3.1 million and $9.2~~$3.6 million in net royalties related to the amortization of the deferred royalties, respectively.

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

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Allowance for Doubtful Accounts

During the first quarter of fiscal 2021, the Company adopted authoritative guidance related to the measurement of credit losses on financial instruments. This guidance replaces the “as incurred” loss model with an “expected loss” model which requires the recognition of an allowance for credit losses expected to be incurred over an asset’s lifetime. The adoption of this guidance did not have a material impact on the Company’s allowance for doubtful accounts.

In the normal course of business, the Company grants credit directly to certain wholesale customers after a credit analysis is performed based on financial and other criteria. Accounts receivable are recorded net of an allowance for doubtful accounts. The Company maintains allowances for doubtful accounts for estimated losses that may result from the inability of its wholesale customers and licensing partners to make their required payments. The Company bases its allowances on analysis of the aging of accounts receivable at the date of the financial statements, assessments of historical and current collection trends, 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 ~~October 31, 2020,~~May 1, 2021, approximately 48% of the Company’s total net trade accounts receivable and ~~61%~~60% of its European net trade receivables were subject to credit insurance coverage, certain bank guarantees or letters of credit for collection purposes. The Company’s credit insurance coverage contains certain terms and conditions specifying deductibles and annual claim limits. Management evaluates the creditworthiness of the counterparties to the credit insurance, bank guarantees, and letters of credit and records a provision for the risk of loss on these instruments based on these evaluations as considered necessary.

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

~~Net Gains on Lease Modifications~~

During the nine months ended October 31, 2020, the Company recorded net gains on lease modifications of $0.5 million related primarily to the early termination of lease agreements for certain of the Company’s retail locations. There were minimal net gains on lease modifications during the three months ended October 31, 2020.

~~Other Assets~~

During fiscal 2019, the Company invested $8.3 million in a privately-held apparel company in exchange for a 30% minority interest. During the nine months ended October 31, 2020, the Company invested a net additional $2.3 million and increased its minority interest from 30% to 30.5%. The Company’s ownership in this company is accounted for under the equity method of accounting. The Company recognized its proportionate share of net losses of this company of $0.5 million and $4.6 million in other income (expense) in its condensed consolidated statements of income (loss) during the three and nine months ended October 31, 2020, respectively. During the three and nine months ended November 2, 2019, the Company recognized its proportionate share of net losses of this company of $3.9 million and $6.8 million in other income (expense) in its condensed consolidated statements of income (loss), respectively.

~~Sale of Australian Stores~~

During fiscal 2020, the Company entered into a definitive agreement to sell its Australian retail locations to the Company’s wholesale distributor in the region for approximately AUD$7.1 million (US$4.9 million), subject to certain adjustments, and recognized a loss on the sale of approximately AUD$1.2 million (US$0.8 million). During the second quarter of fiscal 2021, the Company recorded an adjustment of AUD$0.5 million (US$0.4 million) to reduce the purchase price. As per the terms of the agreement, the wholesale distributor entered into a promissory note with the Company to make periodic payments on the sale through August 2021. The Company included AUD$4.6 million (US$3.3 million) and AUD$5.1 million (US$3.4 million) in

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~~accounts receivable, net and other assets in its condensed consolidated balance sheets based on the timing of the payments as of October 31, 2020 and February 1, 2020, respectively.~~

~~New Accounting Guidance~~

~~Recently Adopted Accounting Guidance~~

In June 2016, the FASB issued authoritative guidance related to the measurement of credit losses on financial instruments. This guidance replaces the “as incurred” loss model with an “expected loss” model which requires the recognition of an allowance for credit losses expected to be incurred over an asset’s lifetime. The measurement of expected credit losses is based on relevant information about past events, current conditions and reasonable and supportable forecasts impacting the collectability of the reported amounts. This guidance was adopted as of February 2, 2020 on a modified retrospective basis and did not have a material impact on the Company’s consolidated financial statements or related disclosures.

In August 2018, the FASB issued authoritative guidance to modify the disclosure requirements on fair value measurements. This guidance was adopted as of February 2, 2020 on a prospective basis and did not have a material impact on the Company’s related disclosures.

In August 2018, the FASB issued authoritative guidance to align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). The Company adopted this guidance as of February 2, 2020 on a prospective basis. Prior to the adoption of this guidance, the Company capitalized implementation costs related to a hosting arrangement that is a service contract to property and equipment, net in the Company’s consolidated balance sheets and included such expenditures within the investing section of the Company’s consolidated statements of cash flows. These assets were amortized over their estimated useful life with the related amortization included in depreciation and amortization in either cost of product sales or SG&A expenses in the Company’s consolidated statements of income (loss) depending on the nature of how the assets were used. Subsequent to the adoption of this guidance, these costs are included within other current assets or other assets in the Company’s consolidated balance sheets depending on the short or long-term nature of the underlying hosting agreement with such expenditures included in the operating section of the Company’s consolidated statements of cash flows. These assets are now amortized over the shorter of the estimated useful life or the term of the underlying hosting agreement, including any probable renewal periods, with the related amortization included in cost of product sales or SG&A expenses in the Company’s consolidated statements of income (loss), consistent with the presentation of the expense related to the underlying hosting arrangement. The adoption of this guidance, including the different classification requirements for the implementation costs, did not have a material impact on the Company’s consolidated financial statements or the related disclosures.

In December 2019, the FASB issued authoritative guidance that simplifies the accounting for income taxes by eliminating certain exceptions to general principles related to intraperiod tax allocations, ownership changes in foreign investments and calculating income taxes in an interim period when year-to-date losses exceed total anticipated losses. The new guidance also simplifies the accounting for income taxes related to franchise taxes that are partially based on income, the step up in the tax basis of goodwill, allocation of current and deferred tax expense for certain legal entities and enacted changes in tax laws or rates during interim periods, among other improvements. This guidance was adopted during the second quarter of fiscal 2021 on a prospective basis and did not have a material impact on the Company’s consolidated financial statements or related disclosures.

In August 2018, the FASB issued authoritative guidance to modify the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans. This guidance was adopted in fiscal 2021 and did not have a material impact on the Company’s financial statement disclosures.

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Recently Issued Accounting Guidance

In March 2020, the ~~FASB~~Financial Accounting Standards Board (“FASB”) issued authoritative guidance to provide temporary optional expedients and exceptions related to contract modifications and hedge accounting to ease the financial reporting burdens of the expected market transition from LIBOR and other interbank offered rates to alternative reference rates, such as SOFR. This guidance may be adopted ~~as of March 12, 2020 through December 31, 2022. This temporary relief cannot be applied~~up to ~~contract modifications after~~ December 31, 2022. The Company is currently evaluating its election options and the impact on its consolidated financial statements and related disclosures.

In August 2020, the FASB issued authoritative guidance to simplify the accounting for convertible instruments and contracts in an entity’s own equity and the diluted earnings per share computations for these instruments. This guidance removes major separation models required under current guidance which will enable more convertible debt instruments to be reported as a single liability instrument with no separate accounting for embedded conversion features. This guidance also removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception. The new guidance also requires the “if -converted” method to be applied for all convertible instruments (the treasury stock method is no longer available) and removes the ability to rebut the presumption of share settlement for contracts that may be settled in cash or stock. In addition, expanded disclosures are required on the terms and features of convertible instruments. This guidance is effective for fiscal years beginning after December 31, 2021, which will be the Company’s first quarter of fiscal 2023, on either a full or modified retrospective basis. Early adoption is permitted for fiscal years beginning after December 31, 2020, which will be the Company’s first quarter of fiscal 2022. The Company is currently evaluating the impact of the adoption of this guidance on its consolidated financial statements and related disclosures.

(2) Lease Accounting

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

The Company’s lease agreements primarily provide for lease payments based on a minimum annual rental amount, a percentage of annual sales volume, periodic adjustments related to inflation or a combination of such lease payments. Certain retail store leases provide for lease payments based upon the minimum annual rental amount and a percentage of annual sales volume, generally ranging from 1%3% to ~~25%~~28%, when specific sales volumes are exceeded. The Company’s retail concession leases also provide for lease payments primarily based upon a percentage of annual sales volume, which averages approximately 33%.

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In addition to the amounts as disclosed below, the Company has estimated additional operating lease commitments of approximately ~~$3.7~~$5.0 million for leases where the Company has not yet taken possession of the underlying asset as of ~~October 31, 2020.~~May 1, 2021. As such, the related operating lease ROU assets and operating lease liabilities have not been recognized in the Company’s condensed consolidated balance sheet as of ~~October 31, 2020.~~May 1, 2021.

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~~As of October 31, 2020 and February 1, 2020, the~~The components of leases are as follows (in thousands):


			Oct 31, 2020		Feb 1, 2020				May 1, 2021		Jan 30, 2021
Assets	Assets	Balance Sheet Location					Assets	Balance Sheet Location
Operating	Operating	Operating lease right-of-use assets	$	789,742	$	851,990	Operating	Operating lease right-of-use assets	$	738,544	$	764,804
Finance	Finance	Property and equipment, net	20,933		15,972		Finance	Property and equipment, net	21,405		20,595
Total lease assets	Total lease assets		$	810,675	$	867,962	Total lease assets		$	759,949	$	785,399

Liabilities	Liabilities	Balance Sheet Location					Liabilities	Balance Sheet Location
Current:	Current:						Current:
Operating	Operating	Current portion of operating lease liabilities	$	227,209	$	192,066	Operating	Current portion of operating lease liabilities	$	224,676	$	222,800
Finance	Finance	Current portion of borrowings and finance lease obligations	4,414		2,273		Finance	Current portion of borrowings and finance lease obligations	4,551		4,698
Noncurrent:	Noncurrent:						Noncurrent:
Operating	Operating	Long-term operating lease liabilities	689,251		714,079		Operating	Long-term operating lease liabilities	632,574		662,657
Finance	Finance	Long-term debt and finance lease obligations	17,748		14,262		Finance	Long-term debt and finance lease obligations	17,870		17,365
Total lease liabilities	Total lease liabilities		$	938,622	$	922,680	Total lease liabilities		$	879,671	$	907,520

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~~As of October 31, 2020 and November 2, 2019, the~~The components of lease costs are as follows (in thousands):


			Three Months Ended				Nine Months Ended						Three Months Ended
		Income Statement Location	Oct 31, 2020		Nov 2, 2019		Oct 31, 2020		Nov 2, 2019			Income Statement Location	May 1, 2021		May 2, 2020
Operating lease costs	Operating lease costs	Cost of product sales	$	50,684	$	56,370	$	156,058	$	173,935	Operating lease costs	Cost of product sales	$	46,684	$	55,369
Operating lease costs	Operating lease costs	Selling, general and administrative expenses	5,191		6,746		15,722		17,730		Operating lease costs	Selling, general and administrative expenses	6,357		5,176
Operating lease costs1, 2	Operating lease costs1, 2	Net gains on lease modifications	(21)		0		(450)		0		Operating lease costs1, 2	Net (gains) losses on lease modifications	(2,145)		456
Finance lease costs	Finance lease costs										Finance lease costs
Amortization of leased assets1, 3	Amortization of leased assets1, 3	Cost of product sales	5		132		37		219		Amortization of leased assets1, 3	Cost of product sales	11		12
Amortization of leased assets1, 3	Amortization of leased assets1, 3	Selling, general and administrative expenses	1,185		561		2,523		1,741		Amortization of leased assets1, 3	Selling, general and administrative expenses	1,361		864
Interest on lease liabilities	Interest on lease liabilities	Interest expense	353		165		843		738		Interest on lease liabilities	Interest expense	366		282
Variable lease costs4	Variable lease costs4	Cost of product sales	14,755		24,592		42,312		74,500		Variable lease costs4	Cost of product sales	15,739		14,348
Variable lease costs4	Variable lease costs4	Selling, general and administrative expenses	33		677		1,250		2,132		Variable lease costs4	Selling, general and administrative expenses	574		579
Short-term lease costs	Short-term lease costs	Cost of product sales	142		0		562		0		Short-term lease costs	Cost of product sales	105		239
Short-term lease costs	Short-term lease costs	Selling, general and administrative expenses	2,407		208		4,366		603		Short-term lease costs	Selling, general and administrative expenses	1,171		1,789
Total lease costs1	Total lease costs1		$	74,734	$	89,451	$	223,223	$	271,598	Total lease costs1		$	70,223	$	79,114

Notes:

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

2During the three ~~and nine~~ months ended ~~October 31,~~May 1, 2021 and May 2, 2020, net ~~gains~~(gains) losses on lease modifications related primarily to the early termination of lease agreements for certain of the Company’s retail locations. Operating lease costs for these retail locations prior to the early termination were included in cost of product sales.

3Amortization of leased assets related to finance leases are included in depreciation expense within cost of product sales or selling, general and administrative expenses depending on the nature of the asset in the Company’s condensed consolidated statements of income (loss).

4During the three ~~and nine~~ months ended ~~October 31,~~May 1, 2021 and May 2, 2020, variable lease costs included certain rent concessions of approximately $6.1 million and $2.7 million, respectively, received by the Company, primarily in Europe, related to the COVID-19 ~~pandemic~~pandemic.

Table of ~~approximately $8.0 million and $18.4 million, respectively. Refer to Note 1 for further information.~~Contents

Maturities of the Company’s operating and finance lease liabilities as of ~~October 31, 2020~~May 1, 2021 are as follows (in thousands):


									Operating Leases
Maturity of Lease Liabilities	Maturity of Lease Liabilities	Operating Leases		Finance Leases		Total		Maturity of Lease Liabilities	Non-Related Parties		Related Parties		Finance Leases		Total
20211		$	91,693	$	1,452	$	93,145
2022		215,039		5,809		220,848
20221								20221	$	193,515	$	5,965	$	4,294	$	203,774
2023	2023	180,630		5,327		185,957		2023	181,879		7,260		5,974		195,113
2024	2024	154,320		5,148		159,468		2024	146,015		7,678		5,887		159,580
2025	2025	110,724		3,285		114,009		2025	103,560		7,321		3,946		114,827
After 2025		258,149		5,414		263,563
2026								2026	73,458		6,928		3,034		83,420
After 2026								After 2026	170,672		36,410		3,158		210,240
Total lease payments	Total lease payments	1,010,555		26,435		1,036,990		Total lease payments	869,099		71,562		26,293		966,954
Less: Interest	Less: Interest	94,095		4,273		98,368		Less: Interest	71,415		11,996		3,872		87,283
Present value of lease liabilities	Present value of lease liabilities	$	916,460	$	22,162	$	938,622	Present value of lease liabilities	$	797,684	$	59,566	$	22,421	$	879,671

Notes:

1Represents the maturity of lease liabilities for the remainder of fiscal ~~2021~~2022 and also includes rent payments that have been deferred due to the COVID-19 pandemic. This amount does not include payments made during the ~~nine~~three months ended ~~October 31, 2020.~~May 1, 2021.

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

Lease Term and Discount Rate

~~Oct 31, 2020~~May 1, 2021

Weighted-average remaining lease term

Operating leases

~~6.0 years~~6.1 Years

Finance leases

~~5.2 years~~4.8 Years

Weighted-average discount rate

Operating leases

~~3.6%~~3.5%

Finance leases

~~7.1%~~6.8%


		Nine Months Ended					Three Months Ended
Supplemental Cash Flow Information	Supplemental Cash Flow Information	Oct 31, 2020		Nov 2, 2019		Supplemental Cash Flow Information	May 1, 2021		May 2, 2020
Cash paid for amounts included in the measurement of lease liabilities	Cash paid for amounts included in the measurement of lease liabilities					Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	Operating cash flows from operating leases	$	133,776	$	187,523	Operating cash flows from operating leases	$	53,428	$	32,618

New operating ROU assets obtained in exchange for lease liabilities	New operating ROU assets obtained in exchange for lease liabilities	$	49,810	$	118,486	New operating ROU assets obtained in exchange for lease liabilities	$	22,596	$	16,332

Impairment

During the three ~~and nine~~ months ended ~~October 31,~~May 1, 2021, there was minimal ROU asset impairment charges recorded. During the three months ended May 2, 2020, the Company recorded ROU asset impairment charges of ~~$5.6~~$28.2 million ~~and $42.1 million, respectively,~~ related primarily to ~~ROU assets at~~ certain retail locations in North America and, to a lesser extent, Europe. The asset impairment charges were determined based on the excess of carrying value over the fair value of the ROU assets. The Company uses estimates of market participant rents to calculate fair value of the ROU assets. ~~There were $0.5 million of asset impairment charges recorded related to the Company’s ROU assets during the three and nine months ended November 2, 2019.~~ Refer to Note 15 for more information on the Company’s impairment testing.

(3)Earnings (Loss) per Share

Basic earnings (loss) per share represents net earnings (loss) attributable to common stockholders divided by the weighted average number of common shares outstanding during the period. The Company considers any restricted stock units with forfeitable dividend rights that are issued and outstanding, but considered contingently returnable if certain service conditions are not met, as common equivalent shares outstanding. These restricted stock units are excluded from the weighted average number of common shares outstanding and basic earnings (loss) per share calculation until the respective service conditions have been met. Diluted earnings per share represents net earnings attributable to common stockholders divided by the weighted average number of common shares outstanding, inclusive of the dilutive impact of common equivalent shares outstanding during the period, and the dilutive impact of the Company’s convertible senior notes and related warrants, as applicable.

The Company expects to settle the principal amount of its outstanding convertible senior notes in cash and any excess in shares. As a result, upon conversion of the convertible senior notes, only the amounts in excess of the principal amount are considered in diluted earnings per share under the treasury stock method, if applicable. See Note 10 for more information regarding the Company’s convertible senior notes.

~~In periods when there is a net loss, the potentially dilutive impact~~

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

In addition, the Company has granted certain nonvested stock units that are subject to certain performance-based or market-based vesting conditions as well as continued service requirements through the respective vesting periods. These nonvested stock units are included in the computation of diluted net earnings

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per common share attributable to common stockholders only to the extent that the underlying performance-based or market-based vesting conditions are satisfied as of the end of the reporting period, or would be considered satisfied if the end of the reporting period was the end of the related contingency period, and the results would be dilutive under the treasury stock method.

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


		Three Months Ended				Nine Months Ended					Three Months Ended
		Oct 31, 2020		Nov 2, 2019		Oct 31, 2020		Nov 2, 2019			May 1, 2021		May 2, 2020
Net earnings (loss) attributable to Guess?, Inc.	Net earnings (loss) attributable to Guess?, Inc.	$	26,376	$	12,423	$	(151,648)	$	16,371	Net earnings (loss) attributable to Guess?, Inc.	$	12,006	$	(157,666)
Less net earnings attributable to nonvested restricted stockholders	Less net earnings attributable to nonvested restricted stockholders	340		118		93		306		Less net earnings attributable to nonvested restricted stockholders	130		0
Net earnings (loss) attributable to common stockholders	Net earnings (loss) attributable to common stockholders	$	26,036	$	12,305	$	(151,741)	$	16,065	Net earnings (loss) attributable to common stockholders	$	11,876	$	(157,666)

Weighted average common shares used in basic computations	Weighted average common shares used in basic computations	62,789		66,393		64,561		72,275		Weighted average common shares used in basic computations	64,035		65,715

Effect of dilutive securities: Stock options and restricted stock units1	Effect of dilutive securities: Stock options and restricted stock units1	790		921		0		936		Effect of dilutive securities: Stock options and restricted stock units1	1,905		0
Weighted average common shares used in diluted computations	Weighted average common shares used in diluted computations	63,579		67,314		64,561		73,211		Weighted average common shares used in diluted computations	65,940		65,715

Net earnings (loss) per common share attributable to common stockholders:	Net earnings (loss) per common share attributable to common stockholders:									Net earnings (loss) per common share attributable to common stockholders:
Basic	Basic	$	0.41	$	0.19	$	(2.35)	$	0.22	Basic	$	0.19	$	(2.40)
Diluted	Diluted	$	0.41	$	0.18	$	(2.35)	$	0.22	Diluted	$	0.18	$	(2.40)

______________________________________________________________________

Notes:

1For the ~~nine~~three months ended ~~October 31,~~May 2, 2020, there were ~~397,099~~484,674 of potentially dilutive shares that were not included in the computation of diluted weighted average common shares and common equivalent shares outstanding because their effect would have been antidilutive given the Company’s net loss.

~~For~~During the three months ended ~~October 31,~~May 1, 2021 and May 2, 2020, ~~and November 2, 2019,~~ equity awards granted for ~~3,610,026~~390,243 and ~~3,277,923, respectively, of the Company’s common shares and for the nine months ended October 31, 2020 and November 2, 2019, equity awards granted for 3,792,552 and 3,067,758,~~3,157,824, respectively, of the Company’s common shares were outstanding but were excluded from the computation of diluted weighted average common shares and common equivalent shares outstanding because the assumed proceeds, as calculated under the treasury stock method, resulted in these awards being antidilutive. ~~For the three and nine months ended October 31, 2020, the Company also excluded 525,875~~There were 0 nonvested stock units ~~which are~~ subject to the achievement of performance-based or market-based vesting conditions that were excluded from the computation of diluted weighted average common shares and common equivalent shares outstanding ~~because these~~as the respective conditions were ~~not~~ achieved as of ~~October 31, 2020. For the three and nine months ended November 2, 2019, the~~May 1, 2021. The Company excluded ~~1,182,805~~227,729 nonvested stock units which were subject to the achievement of performance-based vesting conditions from the computation of diluted weighted average common shares and common equivalent shares outstanding because these conditions were not achieved as of ~~November~~May 2, ~~2019.~~2020.

The conversion spread on the Company’s convertible senior notes will have a dilutive impact on diluted earnings per share when the average market price of the Company’s common stock for a given period exceeds the conversion price of $25.78 per share of common stock. For the three ~~and nine~~ months ended ~~October 31,~~May 1, 2021 and May 2, 2020, ~~and November 2, 2019,~~ the convertible senior notes have been excluded from the computation of diluted earnings per share as the effect would be antidilutive since the conversion price of the convertible senior notes exceeded the average market price of the Company’s common stock. Warrants to initially purchase 11.6 million shares of the Company’s common shares at an initial strike price of $46.88 per share were outstanding as of ~~October 31,~~May 1, 2021 and May 2, 2020. These warrants were excluded from the computation of diluted earnings per share since

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the warrants’ adjusted strike price was greater than the average market price of the Company’s common stock during the three ~~and nine~~ months ended ~~October 31, 2020~~May 1, 2021 and ~~November~~May 2, ~~2019. See Note 10 for more information regarding the Company’s convertible senior notes.~~2020.

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(4)Stockholders’ Equity

Share Repurchase Program

On June 26, 2012, the Company’s Board of Directors authorized a program to repurchase, from time-to-time and as market and business conditions warrant, up to $500 million of the Company’s common stock. Repurchases under the program may be made on the open market or in privately negotiated transactions, pursuant to Rule 10b5-1 trading plans or other available means. There is no minimum or maximum number of shares to be repurchased under the program, which may be discontinued at any time, without prior notice. There were 4,000,000 shares repurchased at an aggregate cost of $38.8 million under the program during the nine months ended October 31, 2020. The shares were repurchased during the three months ended August 1, 2020. During the nine months ended November 2, 2019, the Company repurchased 16,412,609 shares under the program at an aggregate cost of $280.5 million, which is inclusive of the shares repurchased under the accelerated share repurchase agreement (the “ASR Contract”) as described below. The Company repurchased 10,264,052 shares at an aggregate cost of $201.5 million during the three months ended May ~~4, 2019, 749,252~~1, 2021 and May 2, 2020, there were no shares ~~at an aggregate cost of $11.0 million during~~repurchased under the ~~three months ended August 3, 2019 and an additional 5,399,305 shares at an aggregate cost of $68.0 million during the three months ended November 2, 2019.~~Company’s Share Repurchase Program. As of ~~October 31, 2020,~~May 1, 2021, the Company had remaining authority under the program to purchase $47.8 million of its common stock.

On April 26, 2019, pursuant to existing stock repurchase authorizations, the Company entered into an ASR Contract with JPMorgan Chase Bank, National Association (in such capacity, the “ASR Counterparty”), to repurchase an aggregate of $170 million of the Company’s common stock. Under the ASR Contract, the Company made an initial payment of $170 million to the ASR Counterparty and received an initial delivery of approximately 5.2 million shares of common stock, which represented approximately $102 million (or 60%) of the ASR Contract. The Company received a final delivery of an additional 5.4 million shares, or $68 million, under its ASR Contract during the third quarter of fiscal 2020. The final share amount was determined based on the daily volume-weighted average price since the effective date of the ASR Contract, less the applicable contractual discount. When combined with the 5.2 million upfront shares received at the inception of the ASR in April 2019, the Company repurchased approximately 10.6 million of its shares under the ASR at an average repurchase price of $16.09 per share. All shares were repurchased in accordance with the Company’s publicly announced ASR program, which was completed during the third quarter of fiscal 2020. The shares delivered under the ASR Contract reduced the Company’s outstanding shares and its weighted average number of common shares outstanding for purposes of calculating basic and diluted earnings per share.

Dividends

The following table sets forth the cash dividend declared per ~~share for the three and nine months ended October 31, 2020 and November 2, 2019:~~share:

Three Months Ended Nine Months Ended
Oct 31, 2020 Nov 2, 2019 Oct 31, 2020 Nov 2, 2019
Cash dividend declared per share $ 0.1125 $ 0.1125 $ 0.1125 $ 0.4500


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

During the first quarter of fiscal 2021, the Company announced that its Board of Directors had deferred the decision with respect to the payment of its quarterly cash ~~dividend. The Board of Directors decided to continue to postpone its decision with respect to the payment of its quarterly cash~~ dividend, ~~during the second quarter of fiscal 2021 in order to preserve the Company’s cash position and provide continued financial flexibility~~ in light of the uncertainties related to the COVID-19 pandemic. The Company ~~announced that it~~

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~~would resume~~resumed paying its quarterly cash dividend of $0.1125 per share beginning in the third quarter of fiscal 2021, but decided to not declare any cash dividends for the first and second quarters of fiscal 2021.

During the first quarter of fiscal 2020, the Company announced that its Board of Directors reduced the future quarterly cash dividends that may be paid to holders of the Company’s common stock, when, and if any such dividend is declared by the Company’s Board of Directors, from $0.225 per share to $0.1125 per share to redeploy capital and return incremental value to shareholders through share repurchases.

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

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

Accumulated Other Comprehensive Income (Loss)

The changes in accumulated other comprehensive income (loss), net of related income taxes, ~~for the three and nine months ended October 31, 2020 and November 2, 2019~~ are as follows (in thousands):

Three Months Ended Oct 31, 2020
Foreign Currency Translation Adjustment Derivative Financial Instruments Designated as Cash Flow Hedges Defined Benefit Plans Total
Balance at August 1, 2020 $ (121,119) $ (1,499) $ (8,991) $ (131,609)
Gains (losses) arising during the period (2,209) 1,286 (2) (925)
Reclassification to net earnings for (gains) losses realized
0 (1,553) 74 (1,479)
Net other comprehensive income (loss) (2,209) (267) 72 (2,404)
Balance at October 31, 2020 $ (123,328) $ (1,766) $ (8,919) $ (134,013)


	Three Months Ended May 1, 2021
	Foreign Currency Translation Adjustment		Derivative Financial Instruments Designated as Cash Flow Hedges		Defined Benefit Plans		Total
Balance at January 30, 2021	$	(105,970)	$	(4,876)	$	(9,829)	$	(120,675)
Gains (losses) arising during the period	(2,433)		1,553		116		(764)
Reclassification to net earnings for losses realized	0		460		77		537
Net other comprehensive income (loss)	(2,433)		2,013		193		(227)
Balance at May 1, 2021	$	(108,403)	$	(2,863)	$	(9,636)	$	(120,902)

Nine Months Ended Oct 31, 2020
Foreign Currency Translation Adjustment Derivative Financial Instruments Designated as Cash Flow Hedges Defined Benefit Plans Total
Balance at February 1, 2020 $ (137,289) $ 6,300 $ (8,921) $ (139,910)
Gains (losses) arising during the period 13,961 (2,546) (214) 11,201
Reclassification to net loss for (gains) losses realized
0 (5,520) 216 (5,304)
Net other comprehensive income (loss) 13,961 (8,066) 2 5,897
Balance at October 31, 2020 $ (123,328) $ (1,766) $ (8,919) $ (134,013)

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Three Months Ended Nov 2, 2019
Foreign Currency Translation Adjustment Derivative Financial Instruments Designated as Cash Flow Hedges Defined Benefit Plans Total
Balance at August 3, 2019 $ (136,764) $ 9,069 $ (9,507) $ (137,202)
Gains arising during the period 2,941 776 13 3,730
Reclassification to net earnings for (gains) losses realized 0 (2,527) 90 (2,437)
Net other comprehensive income (loss) 2,941 (1,751) 103 1,293
Balance at November 2, 2019 $ (133,823) $ 7,318 $ (9,404) $ (135,909)


	Three Months Ended May 2, 2020
	Foreign Currency Translation Adjustment		Derivative Financial Instruments Designated as Cash Flow Hedges		Defined Benefit Plans		Total
Balance at February 1, 2020	$	(137,289)	$	6,300	$	(8,921)	$	(139,910)

Gains (losses) arising during the period	(14,873)		3,180		(1)		(11,694)
Reclassification to net earnings for (gains) losses realized	0		(1,769)		71		(1,698)
Net other comprehensive income (loss)	(14,873)		1,411		70		(13,392)
Balance at May 2, 2020	$	(152,162)	$	7,711	$	(8,851)	$	(153,302)

Nine Months Ended Nov 2, 2019
Foreign Currency Translation Adjustment Derivative Financial Instruments Designated as Cash Flow Hedges Defined Benefit Plans Total
Balance at February 2, 2019 $ (119,546) $ 2,999 $ (9,632) $ (126,179)
Cumulative adjustment reclassified from retained earnings due to adoption of new accounting guidance1
0 1,981 0 1,981
Gains (losses) arising during the period (14,277) 6,618 (42) (7,701)
Reclassification to net earnings for (gains) losses realized 0 (4,280) 270 (4,010)
Net other comprehensive income (loss) (14,277) 2,338 228 (11,711)
Balance at November 2, 2019 $ (133,823) $ 7,318 $ (9,404) $ (135,909)

~~Notes:~~

1During the first quarter of fiscal 2020, the Company adopted new authoritative guidance which eliminated the requirement to separately measure and report ineffectiveness for instruments that qualify for hedge accounting and generally requires that the entire change in the fair value of such instruments ultimately be presented in the same line as the respective hedge item. As a result, there is no interest component recognized for the ineffective portion of instruments that qualify for hedge accounting, but rather all changes in the fair value of such instruments are included in other comprehensive income (loss). Upon adoption of this guidance, the Company reclassified approximately $2.0 million in gains from retained earnings to accumulated other comprehensive loss related to the previously recorded interest component on outstanding instruments that qualified for hedge accounting.

Details on reclassifications out of accumulated other comprehensive income (loss) to net earnings (loss) ~~during the three and nine months ended October 31, 2020 and November 2, 2019~~ are as follows (in thousands):


		Three Months Ended				Nine Months Ended				Location of (Gain) Loss Reclassified from Accumulated OCI into Earnings (Loss)		Three Months Ended				Location of (Gain) Loss Reclassified from Accumulated OCI into Earnings (Loss)
		Oct 31, 2020		Nov 2, 2019		Oct 31, 2020		Nov 2, 2019				May 1, 2021		May 2, 2020

Derivative financial instruments designated as cash flow hedges:	Derivative financial instruments designated as cash flow hedges:										Derivative financial instruments designated as cash flow hedges:
Foreign exchange currency contracts	Foreign exchange currency contracts	$	(1,804)	$	(2,826)	$	(6,299)	$	(4,813)	Cost of product sales	Foreign exchange currency contracts	$	462	$	(1,991)		Cost of product sales

Interest rate swap	Interest rate swap	67		(28)		112		(118)		Interest expense	Interest rate swap	(64)		3			Interest expense
Less income tax effect	Less income tax effect	184		327		667		651		Income tax expense (benefit)	Less income tax effect	62		219			Income tax expense (benefit)
		(1,553)		(2,527)		(5,520)		(4,280)				460		(1,769)

Defined benefit plans:	Defined benefit plans:										Defined benefit plans:
Net actuarial loss amortization	Net actuarial loss amortization	101		112		294		334		Other income (expense)	Net actuarial loss amortization	105		96			Other income (expense)
Prior service credit amortization	Prior service credit amortization	(17)		(10)		(49)		(29)		Other income (expense)	Prior service credit amortization	(17)		(16)			Other income (expense)
Less income tax effect	Less income tax effect	(10)		(12)		(29)		(35)		Income tax expense (benefit)	Less income tax effect	(11)		(9)			Income tax expense (benefit)
		74		90		216		270				77		71
Total reclassifications during the period	Total reclassifications during the period	$	(1,479)	$	(2,437)	$	(5,304)	$	(4,010)		Total reclassifications during the period	$	537	$	(1,698)

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(5)Accounts Receivable

Accounts receivable is summarized as follows (in thousands):

Oct 31, 2020 Feb 1, 2020
Trade $ 277,908 $ 309,508
Royalty 19,024 12,775
Other 18,073 13,429
315,005 335,712
Less allowances1
14,573 8,431
$ 300,432 $ 327,281

~~Notes:~~

1During the first quarter of fiscal 2021, the Company adopted authoritative guidance related to the measurement of credit losses on financial instruments. This guidance replaces the “as incurred” loss model with an “expected loss” model which requires the recognition of an allowance for credit losses expected to be incurred over an asset’s lifetime. The adoption of this guidance did not have a material impact on the Company’s allowance for doubtful accounts. Refer to Note 1 for further information.


	May 1, 2021		Jan 30, 2021
Trade	$	283,787	$	288,782
Royalty	20,187		20,565
Other	16,929		19,000
	320,903		328,347
Less allowances	14,606		14,200
	$	306,297	$	314,147

Accounts receivable consists of trade receivables relating primarily to the Company’s wholesale business in Europe and, to a lesser extent, to its wholesale businesses in the Americas and Asia, royalty receivables relating to its licensing operations, credit card and retail concession receivables related to its retail businesses and certain other receivables. Other receivables generally relate to amounts due to the Company that result from activities that are not related to the direct sale of the Company’s products or collection of royalties.

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(6)Inventories

Inventories consist of the following (in thousands):


		Oct 31, 2020		Feb 1, 2020			May 1, 2021		Jan 30, 2021
Raw materials	Raw materials	$	201	$	399	Raw materials	$	217	$	53
Work in progress	Work in progress	43		52		Work in progress	24		43
Finished goods	Finished goods	392,918		392,678		Finished goods	404,610		389,048
		$	393,162	$	393,129		$	404,851	$	389,144

The above balances include an allowance to write down inventories to the lower of cost or net realizable value of ~~$42.1~~$36.9 million and ~~$24.5~~$35.5 million as of ~~October 31, 2020~~May 1, 2021 and ~~February 1, 2020,~~January 30, 2021, respectively.

(7)Income Taxes

Effective Tax Rate

Income tax expense for the interim periods was computed using the tax rate estimated to be applicable for the full fiscal year, adjusted for discrete items. The Company’s effective income tax rate was an expense of 29.8% for the three months ended May 1, 2021, compared to a benefit of ~~8.8%~~14.1% for the ~~nine~~three months ended ~~October 31, 2020, compared to an expense of 35.7% for~~May 2, 2020. During the ~~nine~~three months ended ~~November~~May 2, ~~2019. During the nine months ended October 31,~~ 2020, the Company recognized a tax benefit of approximately $11.8 million from a tax rate change related to the ability to carryback net operating losses to tax years with a higher federal corporate tax rate as allowed under the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act enacted in March 2020. This benefit was partially offset by a valuation allowance of ~~$4.9~~$3.7 million resulting from jurisdictions where there have been cumulative net operating losses, limiting the Company’s ability to consider other subjective evidence to continue to recognize the existing deferred tax assets. This was partially offset by a tax benefit of approximately $4.6 million from a tax rate change related to the ability to carryback net operating losses to tax years with a higher federal corporate tax rate as allowed under the CARES Act enacted in March 2020. Excluding the impact of these items, the ~~change~~increase in the effective tax rate was due primarily to a ~~shift~~change in the ~~distribution~~mix of statutory earnings ~~among~~for the ~~Company’s tax jurisdictions during the nine~~three months ended ~~October 31, 2020,~~May 1, 2021, compared to the same prior-year period.

On March 27, 2020, the U.S. government enacted the CARES Act to provide economic relief from the COVID-19 pandemic. The CARES Act includes certain provisions that affect the Company’s income taxes, including temporary five-year net operating loss carryback provisions, relaxation of the net interest deduction limitations and the technical amendment for qualified improvement property deduction.

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Unrecognized Tax Benefit

From time-to-time, the Company is subject to routine income and other tax audits on various tax matters around the world in the ordinary course of business. As of ~~October 31, 2020,~~May 1, 2021, several tax audits were ongoing for various periods in multiple jurisdictions. These audits could conclude with an assessment of additional tax liability for the Company. These assessments could arise as the result of timing or permanent differences and could be material to the Company’s net income or future cash flows. In the event the Company disagrees with an assessment from a taxing authority, the Company may elect to appeal, litigate, pursue settlement or take other actions. The Company accrues an amount for its estimate of additional tax liability which the Company, more likely than not, will incur as a result of the ultimate resolution of tax audits (“uncertain tax positions”). The Company reviews and updates the estimates used in the accrual for uncertain tax positions, as appropriate, as more definitive information or interpretations become available from taxing authorities, upon completion of tax audits, upon receipt of assessments, upon expiration of statutes of limitation, or upon occurrence of other events.

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

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The Company had aggregate accruals for uncertain tax positions, including penalties and interest, of ~~$36.1~~$40.8 million and ~~$34.0~~$40.0 million as of ~~October 31, 2020~~May 1, 2021 and ~~February 1, 2020,~~January 30, 2021, respectively. This includes an accrual of $19.9 million for the estimated transition tax (excluding related interest) related to the 2017 Tax Cuts and Jobs Act for each of the periods ended ~~October 31, 2020~~May 1, 2021 and ~~February 1, 2020.~~January 30, 2021.

(8)Segment Information

The Company’s businesses are grouped into 5 reportable segments for management and internal financial reporting purposes: Americas Retail, Americas Wholesale, Europe, Asia and Licensing. The Company’s Americas Retail, Americas Wholesale, Europe and Licensing reportable segments are the same as their respective operating segments. Certain components of the Company’s Asia operating segment are separate operating segments based on region, which have been aggregated into the Asia reportable segment for disclosure purposes.

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

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Net revenue and earnings (loss) from operations are summarized as follows ~~for the three and nine months ended October 31, 2020 and November 2, 2019~~ (in thousands):


		Three Months Ended				Nine Months Ended					Three Months Ended
		Oct 31, 2020		Nov 2, 2019		Oct 31, 2020		Nov 2, 2019			May 1, 2021		May 2, 2020
Net revenue:	Net revenue:									Net revenue:
Americas Retail	Americas Retail	$	130,328	$	177,824	$	314,977	$	553,213	Americas Retail	$	155,535	$	74,584
Americas Wholesale	Americas Wholesale	35,971		56,398		82,131		144,505		Americas Wholesale	45,430		25,875
Europe	Europe	321,574		277,253		633,898		827,817		Europe	241,852		106,473
Asia	Asia	61,978		82,261		152,554		250,752		Asia	55,660		40,385
Licensing	Licensing	19,433		22,208		44,514		59,568		Licensing	21,525		12,934
Total net revenue	Total net revenue	$	569,284	$	615,944	$	1,228,074	$	1,835,855	Total net revenue	$	520,002	$	260,251
Earnings (loss) from operations:	Earnings (loss) from operations:									Earnings (loss) from operations:
Americas Retail	Americas Retail	$	473	$	1,601	$	(40,904)	$	5,746	Americas Retail	$	20,274	$	(36,673)
Americas Wholesale	Americas Wholesale	8,247		11,216		11,559		27,452		Americas Wholesale	11,555		1,624
Europe	Europe	51,476		19,475		27,865		54,742		Europe	4,198		(44,406)
Asia	Asia	1,415		(2,432)		(24,729)		(10,435)		Asia	(1,808)		(22,777)
Licensing	Licensing	18,228		19,372		39,833		51,563		Licensing	19,431		10,094
Total segment earnings from operations		79,839		49,232		13,624		129,068
Total segment earnings (loss) from operations										Total segment earnings (loss) from operations	53,650		(92,138)
Corporate overhead	Corporate overhead	(25,058)		(24,736)		(71,167)		(79,777)		Corporate overhead	(28,776)		(16,921)

Asset impairment charges1	Asset impairment charges1	(10,335)		(1,847)		(75,276)		(5,126)		Asset impairment charges1	(441)		(52,972)
Net gains on lease modifications2		21		0		450		0
Net gains (losses) on lease modifications2										Net gains (losses) on lease modifications2	2,145		(456)

Total earnings (loss) from operations	Total earnings (loss) from operations	$	44,467	$	22,649	$	(132,369)	$	44,165	Total earnings (loss) from operations	$	26,578	$	(162,487)

Notes:

1During the three ~~and nine~~ months ended ~~October 31,~~May 1, 2021 and May 2, 2020 , the Company recognized asset impairment charges related primarily to impairment of certain operating lease ROU assets and impairment of property and equipment related to certain retail locations resulting from lower revenue and future cash flow projections from the ongoing effects of the COVID-19 pandemic. During the three and nine months ended November 2, 2019, the Company’s asset impairment charges related primarily to impairment of property and equipment related to certain retail locations resulting from under-performance and expected store closures.pandemic. Refer to Note 2 and Note 15 for more information regarding these asset impairment charges.

2During the three ~~and nine~~ months ended ~~October 31,~~May 1, 2021 and May 2, 2020, the Company recorded net gains (losses) on lease modifications related primarily to the early termination of lease agreements for certain of the Company’s retail locations.

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


		Three Months Ended				Nine Months Ended					Three Months Ended
		Oct 31, 2020		Nov 2, 2019		Oct 31, 2020		Nov 2, 2019			May 1, 2021		May 2, 2020
Net revenue:	Net revenue:									Net revenue:
U.S.	U.S.	$	116,205	$	164,807	$	282,872	$	505,735	U.S.	$	157,066	$	69,465
Italy	Italy	77,050		61,952		133,073		198,884		Italy	47,553		19,352
Germany	Germany	43,321		32,619		88,059		83,357		Germany	34,678		11,362
South Korea	South Korea	32,681		38,596		82,997		105,411		South Korea	27,809		21,224
Canada	Canada	31,691		47,042		72,542		129,624		Canada	26,640		16,677
Spain	Spain	30,217		33,511		63,594		101,408		Spain	25,507		12,996
France		31,836		28,478		61,291		85,373
Other foreign countries	Other foreign countries	186,850		186,731		399,132		566,495		Other foreign countries	179,224		96,241
Total product sales	Total product sales	549,851		593,736		1,183,560		1,776,287		Total product sales	498,477		247,317
Net royalties	Net royalties	19,433		22,208		44,514		59,568		Net royalties	21,525		12,934
Net revenue	Net revenue	$	569,284	$	615,944	$	1,228,074	$	1,835,855	Net revenue	$	520,002	$	260,251

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

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(9)Borrowings and Finance Lease Obligations

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


		Oct 31, 2020		Feb 1, 2020			May 1, 2021		Jan 30, 2021
Term loans	Term loans	$	51,852	$	0	Term loans	$	55,951	$	56,765
Finance lease obligations	Finance lease obligations	22,162		16,535		Finance lease obligations	22,421		22,063
Mortgage debt	Mortgage debt	18,664		19,132		Mortgage debt	18,346		18,507
Borrowings under credit facilities	Borrowings under credit facilities	9,175		3,957		Borrowings under credit facilities	5,097		7,332
Other	Other	2,295		2,636		Other	2,826		2,597
		104,148		42,260			104,641		107,264
Less current installments	Less current installments	34,079		9,490		Less current installments	17,917		38,710
Long-term debt and finance lease obligations	Long-term debt and finance lease obligations	$	70,069	$	32,770	Long-term debt and finance lease obligations	$	86,724	$	68,554

Term Loans

As a precautionary measure to ensure financial flexibility and maintain maximum liquidity in response to the COVID-19 pandemic, in addition to drawing down on certain of the credit facilities as noted below, the Company entered into term loans with certain banks primarily in Europe during the ~~nine months~~fiscal year ended ~~October 31, 2020.~~January 30, 2021. These loans are primarily unsecured, have terms ranging from ~~one~~one-~~-to-five~~to-five years and provide annual interest rates ranging between 0.5% to ~~1.5%~~2.2%. ~~Certain of these loans also have an option to extend the term for a period of up to five years, subject to certain terms and conditions.~~ As of ~~October 31, 2020,~~May 1, 2021 and January 30, 2021, the Company had outstanding borrowings of ~~$51.9~~$56.0 million and $56.8 million under these borrowing ~~arrangements.~~arrangements, respectively.

Finance Lease Obligations

During fiscal 2018, the Company entered into a finance lease related to equipment used in its European distribution center located in the Netherlands. The finance lease primarily provides for monthly minimum lease payments through May 2027 with an effective interest rate of approximately 6%. During ~~the third quarter of~~ fiscal 2021, the Company also entered into finance leases for equipment used in its European distribution centers located in Italy. These finance lease obligations totaled ~~$18.3~~$19.2 million and ~~$12.6~~$18.4 million as of ~~October 31, 2020~~May 1, 2021 and ~~February 1, 2020,~~January 30, 2021, respectively.

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The Company also has smaller finance leases related primarily to computer hardware and software. As of ~~October 31, 2020~~May 1, 2021 and ~~February 1, 2020,~~January 30, 2021, these finance lease obligations totaled ~~$3.9~~$3.2 million and ~~$4.0~~$3.7 million, respectively.

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 31, 2020, outstanding borrowings under the Mortgage Debt, net of debt issuance costs of $0.1 million, were $18.7 million. At February 1, 2020, outstanding borrowings under the Mortgage Debt, net of debt issuance costs of $0.1 million, were $19.1 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, 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.

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On February 16, 2016, the Company also entered into a separate interest rate swap agreement, designated as a cash flow hedge, that resulted in a swap fixed rate of approximately 3.06%. This interest rate swap agreement matures in January 2026 and converts the nature of the Mortgage Debt from LIBOR floating-rate debt to fixed-rate debt. The fair value of the interest rate swap liability was approximately $1.1 million and $0.3 million as of October 31, 2020 and February 1, 2020, respectively.

Credit Facilities

~~On April 21, 2020,~~During fiscal 2021, the Company entered into an amendment of its senior secured asset-based revolving credit facility with Bank of America, N.A. and ~~the~~ other lenders ~~party thereto to extend the maturity date of the credit facility to April 21, 2023, among other changes~~ (as amended, the “Credit Facility”). The Credit Facility provides for a borrowing capacity in an amount up to $120 million, including a Canadian sub-facility up to $20 million, subject to a borrowing base. Based on applicable accounts receivable and inventory balances as of ~~October 31, 2020,~~May 1, 2021, the Company could have borrowed up to ~~$97~~$109 million under the Credit Facility. The Credit Facility has an option to expand the borrowing capacity by up to $180 million subject to certain terms and conditions, including the willingness of existing or new lenders to assume such increased amount. The Credit Facility is available for direct borrowings and the issuance of letters of credit, subject to certain letters of credit sublimits, and may be used for working capital and other general corporate purposes.

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

Direct borrowings under the Credit Facility made by the Company and its domestic subsidiaries shall bear interest at the U.S. base rate plus an applicable margin (varying from 0.75% to 1.25%) or at LIBOR plus an applicable margin (varying from 1.75% to 2.25%), provided that LIBOR may not be less than 1.0%. The U.S. base rate is based on the greater of (i) the U.S. prime rate, (ii) the federal funds rate, plus 0.5%, and (iii) LIBOR for a 30-day interest period, plus 1.0%. Direct borrowings under the Credit Facility made by the Company’s Canadian subsidiaries shall bear interest at the Canadian prime rate plus an applicable margin (varying from 0.75% to 1.25%) or at the Canadian BA rate plus an applicable margin (varying from 1.75% to 2.25%), provided that the Canadian BA rate may not be less than 1.0%. The Canadian prime rate is based on the greater of (i) the Canadian prime rate and (ii) the Canadian BA rate for a one-month interest period, plus 1.0%, provided that the Canadian prime rate may not be less than 0. The applicable margins are calculated quarterly and vary based on the average daily availability of the aggregate borrowing base. The Company is also obligated to pay certain commitment, letter of credit and other fees customary for a credit facility of this size and type. As of ~~October 31, 2020,~~May 1, 2021, the Company had $2.1 million in outstanding standby letters of credit, 0 outstanding documentary letters of credit and 0 outstanding borrowings under the Credit Facility.

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

The Company, through its European subsidiaries, maintains short-term committed and uncommitted borrowing agreements, primarily for working capital purposes, with various banks in Europe. Some of these

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agreements include certain equity-based financial covenants. As of ~~October 31, 2020,~~May 1, 2021, the Company had 0 outstanding borrowings, 0 outstanding documentary letters of credit and ~~$142.3~~$113.5 million available for future borrowings under these agreements. The agreements are denominated primarily in euros and provide for annual interest rates ranging from ~~0.7%~~1.05% to ~~1.3%~~1.1%.

The Company, through its China subsidiary, maintains a short-term uncommitted bank borrowing agreement that provides for a borrowing capacity up to $30 million, primarily for working capital purposes. ~~During the second quarter~~

Table of ~~fiscal 2021, the borrowing capacity under the multicurrency borrowing agreement increased from $20.0 million to $30.0 million.~~ Contents

The Company had ~~$9.1~~$5.1 million and ~~$4.0~~$7.3 million in outstanding borrowings under this agreement as of ~~October 31, 2020~~May 1, 2021 and ~~February 1, 2020,~~January 30, 2021, respectively.

Other

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

(10)Convertible Senior Notes and Related Transactions

2.00% Convertible Senior Notes due 2024

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

The Notes are convertible in certain circumstances into cash, shares of the Company’s common stock, or a combination of cash and shares of the Company’s common stock, at the Company’s election, at an initial conversion rate of 38.7879 shares of common stock per $1,000 principal amount of Notes, which is equivalent to an initial conversion price of approximately $25.78 per share, subject to adjustment upon the occurrence of certain events. Prior to November 15, 2023, the Notes are convertible only upon the occurrence of certain events and during certain periods, and thereafter, at any time until the close of business on the second scheduled trading day immediately preceding the maturity date of the Notes. Following certain corporate events described in the Indenture that occur prior to the maturity date, the conversion rate will be increased for a holder who elects to convert its Notes in connection with such corporate event in certain circumstances. The Notes are not redeemable prior to maturity, and no sinking fund is provided for the Notes.

If As of May 1, 2021, none of the ~~Company undergoes a “fundamental change,” as defined in the Indenture, subject to certain~~ conditions allowing holders of the Notes ~~may require the~~to convert had been met. The Company expects to ~~purchase for cash all or any portion of their Notes. The fundamental change purchase price will be 100% of~~settle the principal amount of the Notes ~~to be purchased plus any accrued and unpaid interest up to but excluding the fundamental change purchase date.~~

~~The Indenture contains certain other customary terms and covenants, including that upon certain events of default occurring and continuing, either the Trustee or the holders of at least 25%~~ in ~~principal amount of the outstanding Notes may declare 100% of the principal of, and accrued and unpaid interest on, all the Notes to be due and payable.~~

~~Under GAAP, certain convertible debt instruments that may be settled~~2024 in cash ~~on conversion are required to be separately accounted for as liability~~ and ~~equity components of the instrument~~any excess in ~~a manner that reflects the issuer’s non-convertible debt borrowing rate. Accordingly, in accounting for the issuance of the Notes, the~~shares.

The Company separated the Notes into liability and equity components. The liability component was recorded at fair ~~value, which was derived from a valuation technique used to calculate the fair value of a similar liability without an associated conversion feature.~~value. The ~~carrying amount of the~~ equity component ~~which was recognized as a debt discount,~~ represented the difference between the proceeds from the issuance of the Notes and the fair value of the liability ~~component of the Notes.~~component. The excess ~~of the principal amount~~ of the liability component over its carrying amount (“debt discount”) ~~will be~~is being amortized to interest expense ~~using an effective interest rate~~

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~~of 6.8%~~ over the term of the Notes. The equity component is not remeasured as long as it continues to meet the conditions for equity classification. During the three and nine months ended October 31, 2020, the Company recorded approximately $2.6 million and $7.8 million, respectively, of interest expense related to the amortization of the debt discount. During the three and nine months ended November 2, 2019, the Company recorded approximately $2.4 million and $5.1 million, respectively, of interest expense related to the amortization of the debt discount.

Debt issuance costs related to the Notes were comprised of discounts and commissions payable to the initial purchasers of $3.8 million and third-party offering costs of approximately $1.5 million. ~~In accounting for the debt issuance costs related to the issuance of the Notes, the~~The Company allocated the total amount incurred to the liability and equity components based on their relative values. Debt issuance costs attributable to the liability component were recorded as a contra-liability and are presented net against the convertible senior notes balance on the Company’s condensed consolidated balance sheets. These costs are being amortized to interest expense ~~using the effective interest method~~ over the term of the Notes.

During the three ~~and nine~~ months ended ~~October 31,~~May 1, 2021 and May 2, 2020, the Company recorded ~~$0.2~~$2.8 million and ~~$0.6~~$2.6 million, respectively, of interest expense related to the amortization of the debt ~~issuance costs, respectively. During the three and nine months ended November 2, 2019, the Company recorded $0.2 million and $0.4 million related to the amortization~~discount.

Table of ~~debt issuance costs, respectively. Debt issuance costs attributable to the equity component are netted with the equity component in stockholders’ equity.~~Contents

The Notes consist of the following components ~~as of October 31, 2020 and February 1, 2020~~ (in thousands):


		Oct 31, 2020		Feb 1, 2020			May 1, 2021		Jan 30, 2021
Liability component:	Liability component:					Liability component:
Principal	Principal	$	300,000	$	300,000	Principal	$	300,000	$	300,000
Unamortized debt discount	Unamortized debt discount	(41,221)		(49,017)		Unamortized debt discount	(35,841)		(38,623)
Unamortized issuance costs	Unamortized issuance costs	(2,978)		(3,620)		Unamortized issuance costs	(2,550)		(2,763)
Net carrying amount	Net carrying amount	$	255,801	$	247,363	Net carrying amount	$	261,609	$	258,614

Equity component, net1	Equity component, net1	$	42,320	$	42,320	Equity component, net1	$	42,320	$	42,320

Notes:

1Included 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 ~~October 31, 2020~~May 1, 2021 and ~~February 1, 2020,~~January 30, 2021, the fair value, net of unamortized debt discount and issuance costs, of the Notes was approximately ~~$202.6~~$339.5 million and ~~$272.0~~$303.5 million, respectively. The fair value of the Notes is determined based on inputs that are observable in the market and have been classified as Level 2 in the fair value hierarchy.

Convertible Bond Hedge and Warrant Transactions

In connection with the offering of the Notes, the Company entered into convertible note hedge transactions whereby the Company had the option to purchase a total of approximately 11.6 million shares of its common stock at an initial strike price of approximately $25.78 per share, in each case subject to adjustment in certain circumstances. The total cost of the convertible note hedge transactions was $61.0 million. In addition, the Company sold warrants whereby the holders of the warrants had the option to purchase a total of approximately 11.6 million shares of the Company’s common stock at an initial strike price of $46.88 per share. Both the number of shares underlying the convertible note hedges and warrants and the strike price of the instruments are subject to customary adjustments. The Company received $28.1 million in cash proceeds from the sale of these warrants. Taken together, the purchase of the convertible note hedges and sale of the warrants are intended to offset dilution from the conversion of the Notes to the extent the market price per share of the Company’s common stock exceeds the adjusted strike price of the convertible note hedges. The warrant transaction may have a dilutive effect with respect to the Company’s common stock to the extent the

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market price per share of the Company’s common stock exceeds the adjusted strike price of the warrants. ~~As these transactions meet certain accounting criteria, the~~The convertible note hedges and warrants are recorded in stockholders’ equity, are not accounted for as derivatives and are not remeasured each reporting period.

The Company had a deferred tax liability of ~~$11.2~~$8.8 million in connection with the debt discount associated with the Notes and a deferred tax asset of ~~$12.3~~$9.7 million in connection with the convertible note hedge transactions for each of the periods ended ~~October 31, 2020~~May 1, 2021 and ~~February 1, 2020.~~January 30, 2021. The net deferred tax impact was included in deferred tax assets on the Company’s condensed consolidated balance sheets.

(11)Share-Based Compensation

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 31, 2020 and November 2, 2019~~ (in thousands):


		Three Months Ended				Nine Months Ended					Three Months Ended
		Oct 31, 2020		Nov 2, 2019		Oct 31, 2020		Nov 2, 2019			May 1, 2021		May 2, 2020
Stock options	Stock options	$	1,006	$	829	$	2,521	$	2,116	Stock options	$	907	$	695
Stock awards/units	Stock awards/units	3,693		4,298		11,754		12,318		Stock awards/units	3,073		4,926
Employee Stock Purchase Plan	Employee Stock Purchase Plan	41		58		254		205		Employee Stock Purchase Plan	80		165
Total share-based compensation expense	Total share-based compensation expense	$	4,740	$	5,185	$	14,529	$	14,639	Total share-based compensation expense	$	4,060	$	5,786

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Unrecognized compensation cost related to nonvested stock options and nonvested stock awards/units totaled approximately ~~$9.1~~$7.1 million and ~~$18.0~~$22.5 million, respectively, as of ~~October 31, 2020.~~May 1, 2021. This cost is expected to be recognized over a weighted average period of 1.7 years.

~~The weighted average grant date fair value per share of stock options granted was $4.41 and $5.41 during the nine months ended October 31, 2020 and November 2, 2019, respectively.~~

~~Grants~~

As a precautionary measure to maintain maximum liquidity in response to the COVID-19 pandemic, the Company elected to pay out its fiscal 2020 corporate bonus in stock awards rather than cash compensation. As such, on April 27, 2020, the Company issued 816,708 restricted stock units that vested immediately. These awards were granted to certain of the Company’s employees that were eligible to receive the corporate bonus based on the satisfaction of certain performance measures during fiscal 2020.

On June 11, 2020, the Company made a grant of 792,057 stock options to certain of its executive employees. On June 29, 2020, the Company made a grant of 736,026 nonvested stock units to certain of its executive employees. These nonvested stock units are subject to certain performance-based or market-based vesting conditions.

In connection with a new employment agreement entered into between the Company and Carlos Alberini (the “Alberini Employment Agreement”), who became the Company’s Chief Executive Officer on February 20, 2019, the Company granted Mr. Alberini 600,000 stock options and 250,000 nonvested stock units which were subject to the achievement of certain performance-based vesting conditions. Mr. Alberini was also granted 150,000 restricted stock units which were considered contingently returnable as a result of certain service conditions set forth in the Alberini Employment Agreement. The service conditions were satisfied during the nine months ended October 31, 2020.

On June 10, 2019, the Company made a special grant of 1,077,700 stock options to certain of its employees. On June 20, 2019, the Company also granted select key management 205,339 nonvested stock units which were subject to certain performance-based vesting conditions.

Annual Grants

On April 13, ~~2020,~~2021, the Company made an annual grant of ~~743,800~~367,440 nonvested stock awards/units to its employees. ~~On March 29, 2019, the Company made an annual grant of 5,100 stock options and 280,700 nonvested stock awards/units to its employees.~~

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Performance-Based Awards

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

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

The following table summarizes the activity for nonvested performance-based units during the ~~nine~~three months ended ~~October 31, 2020:~~May 1, 2021:


		Number of Units	Weighted Average Grant Date Fair Value			Number of Units	Weighted Average Grant Date Fair Value
Nonvested at February 1, 2020		1,140,023	$	16.66
Nonvested at January 30, 2021					Nonvested at January 30, 2021	769,632	$	16.15
Granted	Granted	310,881	9.65		Granted	0	0
Vested	Vested	(310,413)	13.99		Vested	(166,547)	14.06
Forfeited	Forfeited	(249,139)	12.24		Forfeited	(186,714)	21.83
Nonvested at October 31, 2020		891,352	$	16.38
Nonvested at May 1, 2021					Nonvested at May 1, 2021	416,371	$	14.45

Market-Based Awards

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

The following table summarizes the activity for nonvested market-based units during the ~~nine~~three months ended ~~October 31, 2020:~~May 1, 2021:


		Number of Units	Weighted Average Grant Date Fair Value			Number of Units	Weighted Average Grant Date Fair Value
Nonvested at February 1, 2020		288,202	$	13.43
Nonvested at January 30, 2021					Nonvested at January 30, 2021	509,012	$	8.67
Granted1	Granted1	526,711	7.20		Granted1	41,955	20.28
Vested1	Vested1	(305,901)	10.62		Vested1	(125,822)	20.28

Nonvested at October 31, 2020		509,012	$	8.67
Nonvested at May 1, 2021					Nonvested at May 1, 2021	425,145	$	6.38

Notes:

1~~Amounts include, as~~As a result of the achievement of certain market-based vesting conditions, ~~101,566~~there were 41,955 shares that vested in addition to the original target number of shares granted in fiscal ~~2018.~~2019.

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(12)Related Party Transactions

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

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Leases

The Company leases warehouse and administrative facilities, including the Company’s corporate headquarters in Los Angeles, California, from partnerships affiliated with the Marciano Entities and certain of their affiliates. There were 4 of these leases in effect as of ~~October 31, 2020~~May 1, 2021 with expiration or option exercise dates ranging from calendar years ~~2020~~2021 to ~~2025.~~2030.

~~On October 7, 2020,~~During the first quarter of fiscal 2022, the Company ~~and~~entered into a nine-year lease extension with the related party landlord ~~entered into amendments to the leases~~ for ~~the Company’s corporate headquarters located~~its existing office location in ~~Los Angeles, California (the “Corporate Headquarters”) and~~Paris, France, which includes a ~~parking lot adjacent to the Corporate Headquarters (together, the “Lease Amendments”). The Lease Amendments provide for: (1) a~~ ~~five-year lease renewal term ending September 30, 2025, with an additional~~ ~~five-year renewal~~Company option ~~to September 30, 2030~~for early termination at the ~~Company’s sole discretion; (2) triple net~~end of the third and sixth years. The lease has standard terms with ~~an aggregate~~a quarterly base charge plus a variable charge aggregating approximately €0.9 million per year (with subsequent annual rent ~~in the amount of approximately $7.4 million for the first lease year of the renewal term, subject to an annual 2.5% increase each year thereafter; (3) 100% rent abatement for the first~~ ~~three~~ ~~months of the renewal term for the Corporate Headquarters; and (4) a Company right to reduce the amount of rented space in the Corporate Headquarters by up to approximately 25% (and reduce its rent~~adjustments based on a ~~pro-rata basis), subject to certain~~ specified ~~conditions, including a~~ ~~six~~ ~~month notice period and limits on the specific space that may be reduced.~~price index). All other material terms in the previously existing ~~leases for the Corporate Headquarters and the parking lot adjacent to the Corporate Headquarters~~Paris lease remain the same.

~~Subsequent to the third quarter of fiscal 2021, the Company agreed with the related party landlord to receive a~~ ~~two~~-month rent abatement related to COVID-19 relief on its lease for its warehouse and administrative facilities located in Montreal, Quebec. The monthly lease payment is CAD$49,000 (US$37,000). All other terms of the existing lease remain in full force and effect.

The Company is currently in discussions with the related party landlord for extensions of the lease for the office location in Paris, and in the meantime, this lease is continuing on a month-to-month basis under the existing lease terms.

Aggregate lease costs recorded under these 4 related party leases were approximately ~~$4.1~~$2.2 million and ~~$3.8~~$1.3 million for the ~~nine~~three months ended ~~October 31,~~May 1, 2021 and May 2, 2020, ~~and November 2, 2019,~~ respectively. The Company believes ~~that~~ the terms of the related party leases have not been significantly affected by the fact ~~that~~ the Company and the lessors are related.

Aircraft Arrangements

The Company periodically charters aircraft owned by the Marciano Entities through informal arrangements with the Marciano Entities and independent third-party management companies contracted by such Marciano Entities to manage their aircraft. The total fees paid under these arrangements for the ~~nine~~three months ended ~~October 31,~~May 1, 2021 and May 2, 2020 ~~and November 2, 2019~~ were approximately ~~$2.0~~$0.9 million and ~~$0.3~~$0.2 million, respectively.

Minority Investment

~~In September 2020, the~~The Company ~~purchased~~owns a 30% interest in a ~~privately-held~~privately held men’s footwear company (the “Footwear Company”) ~~for approximately $857,000. Prior to this investment,~~in which Marciano Entities ~~held~~also own a 45% ~~ownership interest in~~interest. In December 2020, the ~~Footwear Company. The Footwear~~ Company used approximately $385,000 of the proceeds from the Company’s investment to repay outstanding member loans previously made by the Marciano Entities. The Marciano Entities then purchased additional units inprovided the Footwear Company ~~from~~with a ~~third-party investor~~revolving credit facility for ~~the same per-unit price paid by~~$2.0 million, which provides for an annual interest rate of 2.75% and matures in November 2023. As of both May 1, 2021 and January 30, 2021, the Company ~~for~~had a note receivable of $0.2 million included in other assets in its ~~investment, resulting in the Marciano Entities continuing~~consolidated balance sheets related to ~~own a 45% interest in~~outstanding borrowings by the Footwear Company ~~following the transactions. The Company has an option to increase its ownership interest in the Footwear Company to 51% beginning in January 2023.~~under this revolving credit facility.

These related party disclosures should be read in conjunction with the disclosure concerning related party transactions in the Company’s Annual Report on Form 10-K for the year ended February 1, 2020.

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(13) Commitments and Contingencies

Investment Commitments

As of ~~October 31, 2020,~~May 1, 2021, the Company had an unfunded commitment to invest ~~€3.6~~€2.3 million ($~~4.2~~2.8 million) in a private equity fund. Refer to Note 15 for further information.

Legal and Other Proceedings

The Company is involved in legal proceedings, arising both in the ordinary course of business and otherwise, including the proceedings described below as well as various other claims and other matters incidental to the Company’s business. Unless otherwise stated, the resolution of any particular proceeding is not currently expected to have a material adverse impact on the Company’s financial position, results of operations or cash flows. Even if such an impact could be material, the Company may not be able to estimate the reasonably possible loss or range of loss until developments in the proceedings have provided sufficient information to support an assessment.

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The Company has received customs tax assessment notices from the Italian Customs Agency (“ICA”) regarding its customs tax audit of 1 of the Company’s European subsidiaries for the period from July 2010 through December 2012. Such assessments totaled €9.8 million ($~~11.4~~11.8 million), including potential penalties and interest. The Company strongly disagreed with the ICA’s positions and therefore filed appeals with the Milan First Degree Tax Court (“MFDTC”). Those appeals were split into a number of different cases that were then heard by different sections of the MFDTC. The MFDTC ruled in favor of the Company on all of these appeals. The ICA subsequently appealed €9.7 million ($~~11.3~~11.7 million) of these favorable MFDTC judgments with the Appeals Court. To date, €8.5 million ($~~9.9~~10.2 million) have been decided in favor of the Company and €1.2 million ($1.4 million) have been decided in favor of the ICA. The Company believes that the unfavorable Appeals Court ruling is incorrect and inconsistent with the prior rulings on similar matters by both the MFDTC and other judges within the Appeals Court, and ~~plans to appeal~~has appealed the decision to the Supreme Court. The ICA has appealed most of the favorable Appeals Court rulings to the Supreme Court. To date, of the cases that have been appealed to the Supreme Court, €0.4 million ($0.5 million) have been decided in favor of the Company based on the merits of the case and €1.1 million ($1.3 million) have been remanded back to the lower court for further consideration. There can be no assurances the Company will be successful in the remaining appeals. It also continues to be possible that the Company will receive similar or even larger assessments for periods subsequent to December 2012 or other claims or charges related to the matter in the future. Although the Company believes that it has a strong position and will continue to vigorously defend this matter, it is unable to predict with certainty whether or not these efforts will ultimately be successful or whether the outcome will have a material impact on the Company’s financial position, results of operations or cash flows.

On January 19, 2021, a former model for the Company filed an action against the Company's Chief Creative Officer and the Company in the California Superior Court in Los Angeles (Jane Doe v. Paul Marciano, et al.). The complaint asserts several claims based on allegations that the former model was treated improperly by Mr. Marciano and retaliated against by the Company. The complaint seeks an unspecified amount of general damages, medical expenses, lost earnings, punitive damages and attorneys’ fees. The case is still at an early stage. Mr. Marciano and the Company dispute these claims fully and intend to contest them vigorously. In March and April 2021, the Company received separate communications from two other individuals containing similar allegations against Mr. Marciano and the Company. Mr. Marciano and the Company also dispute these allegations fully. Each individual who contacted the Company in March and April is represented by the same attorney who represents the plaintiff in the January lawsuit, though no complaint has been filed with respect to either of these allegations.

Redeemable Noncontrolling Interests

The Company is party to a put arrangement with respect to the common securities that represent the remaining noncontrolling interest for its majority-owned subsidiary, Guess Brasil Comércio e Distribuição S.A. (“Guess Brazil”)~~, which was established through a majority-owned joint venture during fiscal 2014.~~. The put arrangement for Guess Brazil, representing 40% of the total outstanding equity interest of that subsidiary, may be exercised at the discretion of the noncontrolling interest holder by providing written notice to the Company every third anniversary beginning in March 2019, subject to certain time restrictions. The redemption value of the Guess Brazil put arrangement is based on a multiple of Guess Brazil’s earnings before interest, taxes, depreciation and amortization subject to certain adjustments and is classified as a redeemable noncontrolling interest outside of permanent equity in the Company’s condensed consolidated balance sheet. The carrying value of the redeemable noncontrolling interest related to Guess Brazil was $0.9 million ~~and $1.2 million~~ as of ~~October 31, 2020~~May 1, 2021 and ~~February 1, 2020, respectively.~~January 30, 2021.

The Company is also party to a put arrangement with respect to the common securities that represent the remaining noncontrolling interest for its majority-owned subsidiary, Guess? CIS, LLC (“Guess CIS”), which was established through a majority-owned joint venture during fiscal 2016. The put arrangement for Guess CIS, representing 30% of the total outstanding equity interest of that subsidiary, may be exercised at the

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discretion of the noncontrolling interest holder by providing written notice to the Company during the period beginning after the fifth anniversary of the agreement through December 31, 2025, or sooner in certain limited circumstances. The redemption value of the Guess CIS put arrangement is based on a multiple of Guess CIS’s

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earnings before interest, taxes, depreciation and amortization subject to certain adjustments and is classified as a redeemable noncontrolling interest outside of permanent equity in the Company’s condensed consolidated balance sheet. The carrying value of the redeemable noncontrolling interest related to Guess CIS was ~~$2.8 million and $3.5~~$3.0 million as of ~~October 31, 2020~~May 1, 2021 and ~~February 1, 2020, respectively.~~January 30, 2021.

A reconciliation of the total carrying amount of redeemable noncontrolling interests ~~for the nine months ended October 31, 2020 and November 2, 2019~~ is as follows (in thousands):


		Nine Months Ended					Three Months Ended
		Oct 31, 2020		Nov 2, 2019			May 1, 2021		May 2, 2020
Beginning balance	Beginning balance	$	4,731	$	4,853	Beginning balance	$	3,920	$	4,731
Foreign currency translation adjustment	Foreign currency translation adjustment	(991)		(10)		Foreign currency translation adjustment	29		(797)

Ending balance	Ending balance	$	3,740	$	4,843	Ending balance	$	3,949	$	3,934

(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 pension plan, no dedicated funding of the SERP is required; however, the Company has made periodic payments into insurance policies held in a rabbi trust to fund the expected obligations arising under the non-qualified SERP. The ~~amount of any future payments into the insurance policies, if any, may vary depending on investment performance of the trust. The~~ cash surrender values of the insurance policies were ~~$68.1~~$71.6 million and ~~$67.7~~$72.1 million as of ~~October 31, 2020~~May 1, 2021 and ~~February 1, 2020,~~January 30, 2021, respectively, and were included in other assets in the Company’s condensed consolidated balance sheets. As a result of changes in the value of the insurance policy investments, the Company recorded minimal unrealized gains (losses) ~~of $(0.3) million~~during the three months ended May 1, 2021 and ~~$1.7~~$(3.1) million in other income (expense) during the three ~~and nine~~ months ended ~~October 31, 2020, respectively, and unrealized gains of $2.0 million and $5.0 million in other income during the three and nine months ended November~~May 2, ~~2019, respectively.~~2020. The projected benefit obligation was ~~$51.6~~$52.1 million and ~~$51.9~~$52.3 million as of ~~October 31, 2020~~May 1, 2021 and ~~February 1, 2020,~~January 30, 2021, respectively, and was included in accrued expenses and other long-term liabilities in the Company’s condensed consolidated balance sheets depending on the expected timing of payments. SERP benefit payments of ~~$0.4~~$0.5 million and ~~$1.3~~$0.6 million were made during the three ~~and nine~~ months ended ~~October 31,~~May 1, 2021 and May 2, 2020, respectively. ~~SERP benefit payments of $0.4 million and $1.3 million were made during the three and nine months ended November 2, 2019, respectively.~~

Foreign Pension Plans

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

As of ~~October 31, 2020~~May 1, 2021 and ~~February 1, 2020,~~January 30, 2021, the foreign pension plans had a total projected benefit obligation of ~~$36.4~~$40.6 million and ~~$34.8~~$41.5 million, respectively, and plan assets held in independent investment fiduciaries of ~~$29.9~~$34.3 million and ~~$28.9~~$35.0 million, respectively. The net liability of ~~$6.5~~$6.3 million and ~~$5.9~~$6.4 million

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was included in other long-term liabilities in the Company’s condensed consolidated balance sheets as of ~~October 31, 2020~~May 1, 2021 and ~~February 1, 2020,~~January 30, 2021, respectively.

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The components of net periodic defined benefit pension cost ~~for the three and nine months ended October 31, 2020 and November 2, 2019~~ related to the Company’s defined benefit plans are as follows (in thousands):


		Three Months Ended Oct 31, 2020							Three Months Ended May 1, 2021
		SERP		Foreign Pension Plans		Total			SERP		Foreign Pension Plans		Total
Service cost	Service cost	$	0	$	809	$	809	Service cost	$	0	$	790	$	790
Interest cost	Interest cost	319		8		327		Interest cost	289		19		308
Expected return on plan assets	Expected return on plan assets	0		(48)		(48)		Expected return on plan assets	0		(52)		(52)
Net amortization of unrecognized prior service credit	Net amortization of unrecognized prior service credit	0		(17)		(17)		Net amortization of unrecognized prior service credit	0		(17)		(17)
Net amortization of actuarial losses	Net amortization of actuarial losses	10		91		101		Net amortization of actuarial losses	20		85		105
Net periodic defined benefit pension cost	Net periodic defined benefit pension cost	$	329	$	843	$	1,172	Net periodic defined benefit pension cost	$	309	$	825	$	1,134

Nine Months Ended Oct 31, 2020
SERP Foreign Pension Plans Total
Service cost $ 0 $ 2,339 $ 2,339
Interest cost 958 23 981
Expected return on plan assets 0 (138) (138)
Net amortization of unrecognized prior service credit 0 (49) (49)
Net amortization of actuarial losses 30 264 294
Net periodic defined benefit pension cost $ 988 $ 2,439 $ 3,427


		Three Months Ended Nov 2, 2019							Three Months Ended May 2, 2020
		SERP		Foreign Pension Plans		Total			SERP		Foreign Pension Plans		Total
Service cost	Service cost	$	0	$	809	$	809	Service cost	$	0	$	764	$	764
Interest cost	Interest cost	481		68		549		Interest cost	319		8		327
Expected return on plan assets	Expected return on plan assets	0		(78)		(78)		Expected return on plan assets	0		(45)		(45)
Net amortization of unrecognized prior service credit	Net amortization of unrecognized prior service credit	0		(10)		(10)		Net amortization of unrecognized prior service credit	0		(16)		(16)
Net amortization of actuarial losses	Net amortization of actuarial losses	15		97		112		Net amortization of actuarial losses	10		86		96
Net periodic defined benefit pension cost	Net periodic defined benefit pension cost	$	496	$	886	$	1,382	Net periodic defined benefit pension cost	$	329	$	797	$	1,126

Nine Months Ended Nov 2, 2019
SERP Foreign Pension Plans Total
Service cost $ 0 $ 2,424 $ 2,424
Interest cost 1,443 203 1,646
Expected return on plan assets 0 (233) (233)
Net amortization of unrecognized prior service credit 0 (29) (29)
Net amortization of actuarial losses 46 288 334
Net periodic defined benefit pension cost $ 1,489 $ 2,653 $ 4,142

(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

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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.

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The following table presents the fair value hierarchy for those assets and liabilities measured at fair value on a recurring basis ~~as of October 31, 2020 and February 1, 2020~~ (in thousands):


		Fair Value Measurements								Fair Value Measurements									Fair Value Measurements								Fair Value Measurements
		at Oct 31, 2020								at Feb 1, 2020									at May 1, 2021								at Jan 30, 2021
Recurring Fair Value Measures	Recurring Fair Value Measures	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total		Recurring Fair Value Measures	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets:	Assets:																	Assets:
Foreign exchange currency contracts	Foreign exchange currency contracts	$	0	$	522	$	0	$	522	$	0	$	4,854	$	0	$	4,854	Foreign exchange currency contracts	$	0	$	353	$	0	$	353	$	0	$	0	$	0	$	0

Total	Total	$	0	$	522	$	0	$	522	$	0	$	4,854	$	0	$	4,854	Total	$	0	$	353	$	0	$	353	$	0	$	0	$	0	$	0
Liabilities:	Liabilities:																	Liabilities:
Foreign exchange currency contracts	Foreign exchange currency contracts	$	0	$	2,592	$	0	$	2,592	$	0	$	0	$	0	$	0	Foreign exchange currency contracts	$	0	$	2,580	$	0	$	2,580	$	0	$	4,481	$	0	$	4,481
Interest rate swap	Interest rate swap	0		1,098		0		1,098		0		348		0		348		Interest rate swap	0		665		0		665		0		999		0		999
Deferred compensation obligations	Deferred compensation obligations	0		13,806		0		13,806		0		14,091		0		14,091		Deferred compensation obligations	0		16,845		0		16,845		0		15,612		0		15,612
Total	Total	$	0	$	17,496	$	0	$	17,496	$	0	$	14,439	$	0	$	14,439	Total	$	0	20,090		$	0	$	20,090	$	0	$	21,092	$	0	$	21,092

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

The Company included ~~€1.2~~€2.5 million ($~~1.4~~3.0 million) and ~~€1.2~~€2.4 million ($~~1.3~~3.0 million)~~, respectively,~~ in other assets in the Company’s condensed consolidated balance ~~sheet~~sheets related to its investment in a private equity fund for the periods ended ~~October 31, 2020~~May 1, 2021 and ~~February 1, 2020. As permitted in accordance with authoritative guidance, the~~January 30, 2021, respectively. The Company uses net asset value per share as a practical expedient to measure the fair value of this investment and has not included this investment in the fair value hierarchy as disclosed above. During the three and nine months ended October 31, 2020, the Company recorded minimal unrealized losses in other income (expense) as a result of changes in the value of the private equity investment. During the nine months ended November 2, 2019 the Company recorded unrealized losses of €0.1 million ($0.1 million) in other income (expense) as a result of changes in the value of the private equity investment. There were minimal unrealized losses recorded during the three months ended November 2, 2019. As of ~~October 31, 2020,~~May 1, 2021, the Company had an unfunded commitment to invest an additional ~~€3.6~~€2.3 million ($~~4.2~~2.8 million) in 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 ~~October 31, 2020~~May 1, 2021 and ~~February 1, 2020,~~January 30, 2021, the carrying value was not materially different from fair value, as the interest rates on the Company’s debt approximated rates currently available to the Company. The fair value of the Company’s convertible senior notes (see Note 10) is determined based on inputs that are observable in the market and have been classified as Level 2 in the fair value hierarchy.

The carrying amount of the Company’s remaining financial instruments, which principally include cash and cash equivalents, trade receivables, accounts payable and accrued expenses, approximates fair value due to the relatively short maturity of such instruments.

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Long-Lived Assets

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

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An asset is considered to be impaired if the Company determines that the carrying value may not be recoverable based upon its assessment of the asset’s ability to continue to generate earnings from operations and positive cash flow in future periods or if significant changes in the Company’s strategic business objectives and utilization of the assets occurred. If the carrying amount of an asset exceeds its estimated undiscounted future cash flows adjusted for lease payments, an impairment charge is recognized in the amount by which the carrying amount of the asset exceeds the estimated fair value. The Company uses estimates of market participant rents to calculate fair value of ROU assets and discounted future cash flows of the asset group to quantify fair value for other long-lived assets. These nonrecurring fair value measurements are considered Level 3 inputs as defined above. The impairment loss calculations require management to apply judgment in estimating future cash flows and the discount rates that reflect the risk inherent in future cash flows. Future expected cash flows for assets in regular retail locations are based on management’s estimates of future cash flows over the remaining lease period or expected life, if shorter. For expected location closures, the Company will evaluate whether it is necessary to shorten the useful life for any of the assets within the respective asset group. The Company will use this revised useful life when estimating the asset group’s future cash flows. The Company considers historical trends, expected future business trends and other factors when estimating the future cash flow for each regular retail location. The Company also considers factors such as the following: the local environment for each regular retail location, including mall traffic and competition; the Company’s ability to successfully implement strategic initiatives; and the ability to control variable costs such as cost of sales and payroll and, in some cases, renegotiate lease costs. As discussed further in Note 1, the COVID-19 pandemic has materially impacted the Company’s financial results during the three ~~and nine~~ months ended ~~October 31,~~May 1, 2021 and May 2, 2020 and could continue to impact the Company’s operations in ways the Company is not able to predict today due to the evolving situation. The Company has made reasonable assumptions and judgments to determine the fair value of the assets tested based on the facts and circumstances that were available as of the reporting date. If actual results are not consistent with the assumptions and judgments used in estimating future cash flows and asset fair values, there may be additional exposure to future impairment losses that could be material to the Company’s results of operations.

The Company recorded asset impairment charges of ~~$10.3~~$0.4 million and ~~$75.3~~$53.0 million during the three ~~and nine~~ months ended ~~October 31,~~May 1, 2021 and May 2, 2020, respectively. The Company recognized ~~$5.6 million~~minimal ROU asset impairment in the three months ended May 1, 2021 and ~~$42.1~~$28.2 million in impairment of certain operating lease ROU assets primarily in North America and, to a lesser extent, Europe during the three ~~and nine~~ months ended ~~October 31, 2020, respectively.~~May 2, 2020. The Company also recognized ~~$4.7~~$0.4 million and ~~$33.2~~$24.8 million in impairment of property and equipment related to certain retail locations primarily in North America,

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Europe and Asia driven by lower revenue and future cash flow projections from the ongoing effects of the COVID-19 pandemic during the three ~~and nine~~ months ended ~~October 31,~~May 1, 2021 and May 2, 2020, respectively. This compares to recorded asset impairment charges of $1.8 million and $5.1 million during the three and nine months ended November 2, 2019, respectively. The Company recognized $0.5 million in impairment of certain operating lease ROU assets primarily in North America during the three and nine months ended November 2, 2019. The Company also recognized $1.3 million and $4.6 million in impairment of property and equipment related to certain retail locations primarily in Europe, North America and Asia resulting from under-performance and expected store closures during the three and nine months ended November 2, 2019, respectively. Refer to Note 2 for further information on impairment charges recognized on operating lease ROU assets.

Goodwill

Goodwill is tested annually for impairment or more frequently if events and circumstances indicate that the asset might be impaired. An impairment loss is recognized to the extent that the carrying amount exceeds the asset’s fair value. This determination is made at the reporting unit level which may be either an operating segment or one level below an operating segment if discrete financial information is available. Two or more reporting units within an operating segment may be aggregated for impairment testing if they have similar economic characteristics. The Company has identified its Americas Retail segment, its Americas Wholesale segment and its European wholesale and European retail components of its Europe segment as reporting units for goodwill impairment testing. Goodwill associated with its China retail component of its Asia segment was fully impaired during fiscal 2020. If it is more likely than not that the fair value of a reporting unit is less than its carrying amount, the amount of any impairment loss to be recognized for that reporting unit is determined through a quantitative test using two steps. First, the Company determines the fair value of the reporting unit using a discounted cash flow analysis, which requires unobservable inputs (Level 3) within the fair value hierarchy as defined above. These inputs include selection of an appropriate discount rate and the amount and timing of expected future cash flows. Second, if the carrying amount of a reporting unit exceeds its fair value, an impairment loss is recognized based on the difference between a reporting unit’s fair value and its carrying value.

The COVID-19 pandemic ~~has~~ materially impacted the Company’s ~~financial results during~~businesses beginning in the ~~three and nine months ended October 31, 2020 as discussed further in Note 1.~~first quarter of fiscal 2021. As a result, ~~of these conditions,~~ the Company concluded that a triggering event had occurred resulting in the need to perform quantitative interim impairment testing ~~over~~on the Company’s goodwill and flagship assets ~~during the first quarter~~as of ~~fiscal 2021.~~May 2, 2020. The testing concluded that the fair values of the respective reporting units exceeded their carrying ~~amounts. During the second and third quarters~~amounts as of ~~fiscal 2021, the Company assessed qualitative factors and determined that it is not more likely than not that the fair values of its reporting units are less than their carrying amounts.~~May 2, 2020. Accordingly, the Company did not record any asset impairment charges on its goodwill or flagship ~~assets that continued to meet the appropriate criteria during the three and nine months ended October 31, 2020.~~assets. In performing its assessment, the Company ~~believes~~believed it made reasonable accounting estimates based on the facts and circumstances that were available as of the testing date in light of the evolving situation resulting from the COVID-19 pandemic. If actual results are not consistent with the assumptions and

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judgments used, there may be additional exposure to future impairment losses that could be material to the Company’s results of operations.

The COVID-19 pandemic has continued to impact the Company’s businesses during the first quarter of fiscal 2022. During the three months ended May 1, 2021, the Company assessed qualitative factors and determined that it is not more likely than not that the fair values of its reporting units are less than their carrying amounts.

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(16)Derivative Financial Instruments

Hedging Strategy

Foreign Exchange Currency Contracts

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

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

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

Interest Rate Swap Agreements

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

The impact of the credit risk of the counterparties to the derivative contracts is considered in determining the fair value of the foreign exchange currency contracts and interest rate swap agreements. As of ~~October 31, 2020,~~May 1, 2021, credit risk has not had a significant effect on the fair value of the Company’s foreign exchange currency contracts and interest rate swap agreements.

Hedge Accounting Policy

Foreign Exchange Currency Contracts

U.S. dollar forward contracts are used to hedge forecasted merchandise purchases over specific months. Changes in the fair value of these U.S. dollar forward contracts, designated as cash flow hedges, are recorded as a component of accumulated other comprehensive income (loss) within stockholders’ equity and are

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

The Company has also used U.S. dollar forward contracts to hedge the net investments of certain of the Company’s international subsidiaries over specific months. Changes in the fair value of these U.S. dollar

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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.

Interest Rate Swap Agreements

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

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

Summary of Derivative Instruments

The fair value of derivative instruments in the condensed consolidated balance sheets ~~as of October 31, 2020 and February 1, 2020~~ is as follows (in thousands):


		Derivative Balance Sheet Location	Fair Value at Oct 31, 2020		Fair Value at Feb 1, 2020			Derivative Balance Sheet Location	Fair Value at May 1, 2021		Fair Value at Jan 30, 2021
ASSETS:	ASSETS:						ASSETS:
Derivatives designated as hedging instruments:	Derivatives designated as hedging instruments:						Derivatives designated as hedging instruments:
Cash flow hedges:	Cash flow hedges:						Cash flow hedges:
Foreign exchange currency contracts	Foreign exchange currency contracts	Other current assets/ Other assets	$	522	$	3,987	Foreign exchange currency contracts	Other current assets/Other assets	$	353	$	0

Derivatives not designated as hedging instruments:
Foreign exchange currency contracts		Other current assets/ Other assets	0		867

Total	Total		$	522	$	4,854	Total		$	353	$	0
LIABILITIES:	LIABILITIES:						LIABILITIES:
Derivatives designated as hedging instruments:	Derivatives designated as hedging instruments:						Derivatives designated as hedging instruments:
Cash flow hedges:	Cash flow hedges:						Cash flow hedges:
Foreign exchange currency contracts	Foreign exchange currency contracts	Accrued expenses	$	1,744	$	0	Foreign exchange currency contracts	Accrued expenses	$	1,663	$	3,326
Interest rate swap	Interest rate swap	Other long-term liabilities	1,098		348		Interest rate swap	Other long-term liabilities	665		999
Total derivatives designated as hedging instruments	Total derivatives designated as hedging instruments		2,842		348		Total derivatives designated as hedging instruments		2,328		4,325
Derivatives not designated as hedging instruments:	Derivatives not designated as hedging instruments:						Derivatives not designated as hedging instruments:
Foreign exchange currency contracts	Foreign exchange currency contracts	Accrued expenses	848		0		Foreign exchange currency contracts	Accrued expenses	917		1,155

Total	Total		$	3,690	$	348	Total		$	3,245	$	5,480

Derivatives Designated as Hedging Instruments

Foreign Exchange Currency Contracts Designated as Cash Flow Hedges

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had forward contracts outstanding for its European operations of US$~~106.0~~126.0 million to hedge forecasted merchandise purchases, which are expected to mature over the next 1415 months.

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

At ~~February 1, 2020,~~January 30, 2021, the Company had forward contracts outstanding for its European operations of US$~~148.6~~100.0 million that were designated as cash flow hedges.

Interest Rate Swap Agreement Designated as Cash Flow Hedge

The following table summarizes the gains (losses) before taxes recognized on the derivative instruments designated as cash flow hedges in OCI and net earnings (loss) for the three ~~and nine~~ months ended ~~October 31,~~May 1, 2021 and May 2, 2020 ~~and November 2, 2019~~ (in thousands):


		Gains (Losses) Recognized in OCI				Location of Gains (Losses) Reclassified from Accumulated OCI into Earnings		Gains (Losses) Reclassified from Accumulated OCI into Earnings							Gains (Losses) Recognized in OCI							Location of Gains (Losses) Reclassified from Accumulated OCI into Earnings		Gains (Losses) Reclassified from Accumulated OCI into Earnings
		Three Months Ended					Three Months Ended					Three Months Ended											Three Months Ended
		Oct 31, 2020		Nov 2, 2019			Oct 31, 2020		Nov 2, 2019			May 1, 2021					May 2, 2020						May 1, 2021		May 2, 2020
Derivatives designated as cash flow hedges:	Derivatives designated as cash flow hedges:															Derivatives designated as cash flow hedges:
Foreign exchange currency contracts	Foreign exchange currency contracts	$	1,314	$	958		Cost of product sales		$	1,804			$	2,826		Foreign exchange currency contracts	$	1,511		$	4,410		Cost of product sales		$	(462)		$	1,991

Interest rate swap	Interest rate swap	151		(99)		Interest expense		(67)			28		Interest rate swap		270				(874)			Interest expense		64			(3)

Gains (Losses) Recognized in OCI
Location of Gain (Loss) Reclassified from Accumulated OCI into Earnings (Loss) Gains (Losses) Reclassified from Accumulated OCI into Earnings (Loss)
Nine Months Ended Nine Months Ended
Oct 31, 2020 Nov 2, 2019 Oct 31, 2020 Nov 2, 2019
Derivatives designated as cash flow hedges:
Foreign exchange currency contracts $ (2,034) $ 8,676 Cost of product sales $ 6,299 $ 4,813
Interest rate swap (862) (1,095) Interest expense (112) 118

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

Three Months Ended Nine Months Ended
Oct 31, 2020 Nov 2, 2019 Oct 31, 2020 Nov 2, 2019
Beginning balance gain (loss) $ (1,499) $ 9,069 $ 6,300 $ 2,999
Cumulative adjustment from adoption of new accounting guidance1
0 0 0 1,981
Net gains (losses) from changes in cash flow hedges 1,286 776 (2,546) 6,618
Net gains reclassified into earnings (loss) (1,553) (2,527) (5,520) (4,280)
Ending balance gain (loss) $ (1,766) $ 7,318 $ (1,766) $ 7,318

~~Notes:~~


	Three Months Ended
	May 1, 2021		May 2, 2020
Beginning balance gain (loss)	$	(4,876)	$	6,300

Net gains from changes in cash flow hedges	1,553		3,180
Net (gains) losses reclassified into earnings (loss)	460		(1,769)
Ending balance gain (loss)	$	(2,863)	$	7,711

1 During the first quarter of fiscal 2020, the Company adopted new authoritative guidance which eliminated the requirement to separately measure and report ineffectiveness for instruments that qualify for hedge accounting and generally requires that the entire change in the fair value of such instruments ultimately be presented in the same line as the respective hedge item. As a result, there is no interest component recognized for the ineffective portion of instruments that qualify for hedge accounting, but rather all changes in the fair value of such instruments are included in other comprehensive income (loss). Upon adoption of this guidance, the Company reclassified $2.0 million in gains from retained earnings to accumulated other comprehensive loss related to the previously recorded interest component on outstanding instruments that qualified for hedge accounting.

Foreign Exchange Currency Contracts Not Designated as Hedging Instruments

As of ~~October 31, 2020,~~May 1, 2021, the Company had euro foreign exchange currency contracts to purchase US$~~38.0~~19.0 million expected to mature over the next ~~seven months.~~one month. As of January 30, 2021, the Company had euro foreign exchange currency contracts to purchase US$19.0 million.

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The following table summarizes the gains (losses) before taxes recognized on the derivative instruments not designated as hedging instruments in other income (expense) ~~for the three and nine months ended October 31, 2020 and November 2, 2019~~ (in thousands):

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

Gain (Loss) Recognized in Earnings (Loss)

Location of Gain Recognized in Earnings (Loss)

Gain Recognized in Earnings (Loss)

Three Months Ended

Nine Months Ended

Three Months Ended

Oct 31, 2020

Nov 2, 2019

Oct 31, 2020

Nov 2, 2019

May 1, 2021

May 2, 2020

Derivatives not designated as hedging instruments:

Foreign exchange currency contracts

Other income (expense)

506

(184)

(3,112)

624

Foreign exchange currency contracts

Other income (expense)

1,088

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

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(17)Subsequent Events

Dividends

On ~~December 2, 2020,~~May 27, 2021, the Company announced a regular quarterly cash dividend of $0.1125 per share on the Company’s common stock. The cash dividend will be paid on ~~January 4,~~June 25, 2021 to shareholders of record as of the close of business on ~~December 16, 2020.~~June 9, 2021.

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

General

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

~~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 press releases and in other documents. ~~In addition, from time-to-time,~~

Except for historical information contained herein, certain matters discussed in this Quarterly Report, including statements concerning the Company, through its management, may make oral forward-looking statements. These statements relate to expectations, analyses and other information based on current plans, forecasts of future results and estimates of amounts not yet determinable. These statements also relate to our goals, future prospects, potential actions and impacts related to the ~~coronavirus (or “COVID-19”) pandemic,~~COVID-19 pandemic; statements concerning our future outlook; statements concerning our expectations, goals, future prospects, global cost reduction opportunities, ~~and~~ profitability efforts, capital allocation plans, cash needs and current business strategies and strategic ~~initiatives. These~~initiatives; and statements expressing optimism or pessimism about future 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,” “estimate,” “continue,” ~~“could,~~“outlook,” “plan,” “create,” ~~“estimate,” “expect,” “goal,” “intend,” “may,” “outlook,” “pending,” “plan,” “predict,” “project,”~~ “see,~~” “should,” “strategy,” “will,” “would,~~” and ~~other~~ similar terms, are only expectations, and ~~phrases, including references to assumptions.~~

~~Although we believe that the expectations reflected in any of our forward-looking statements are reasonable,~~involve known and unknown risks and uncertainties, which may cause actual results ~~could~~in future periods to differ materially from ~~those projected or assumed.~~what is currently anticipated. Factors which may cause actual results in future periods to differ materially from current expectations include, among others: our ability to maintain our brand image and reputation; domestic and international economic or political conditions, including economic and other events that could negatively impact consumer confidence and discretionary consumer spending; the continuation or worsening of impacts related to the COVID-19 pandemic, including business, financial, human capital, litigation and other impacts to ~~the Company~~us and its partners; our ability to successfully negotiate rent relief or other lease-related terms with our landlords; ~~our ability to successfully negotiate or defer our vendor obligations;~~ our ability to maintain adequate levels of liquidity; changes to estimates related to impairments, inventory and other reserves, including the impact of the ~~Coronavirus Aid, Relief, and Economic Security (“CARES”)~~CARES Act, ~~enacted in March 2020,~~ which were made using the best information available at the time; changes in the competitive marketplace and in our commercial relationships; our ability to anticipate and adapt to changing consumer preferences and trends; our ability to manage our inventory commensurate with customer demand; risks related to the timing and costs of delivering merchandise to our stores and our wholesale customers; unexpected or unseasonable weather conditions; our ability to effectively operate our various retail concepts, including securing, renewing, modifying or terminating leases for store locations; our ability to successfully and/or timely implement our growth strategies and other strategic initiatives; our ability to successfully implement or update information technology systems, including enhancing our global omni-channel capabilities; our ability to expand internationally and operate in regions where we have less experience, including through joint ventures; risks related to our convertible senior notes issued in April 2019, including our ability to settle the liability in cash; our ability to successfully or timely implement plans for cost reductions; our ability to effectively and efficiently manage the volume and costs associated with our European distribution centers without incurring shipment delays; our ability to attract and retain key personnel; obligations or changes in estimates arising from new or existing litigation, income tax and other regulatory proceedings; risks related to the complexity of the ~~2017~~ Tax ~~Cuts and Jobs Act (the “Tax Reform”),~~Reform, future clarifications and legislative amendments thereto, as well as our ability to accurately interpret and predict its impact on our cash flows and financial condition; the risk of economic uncertainty associated with ~~the transition period of~~ the United Kingdom’s departure from the European Union (“Brexit”) or any other similar referendums that may be held; the occurrence of unforeseen epidemics, such as the COVID-19 pandemic; other catastrophic events; changes in U.S. or foreign income tax or tariff policy, including changes to tariffs on imports into the U.S.; accounting adjustments to our unaudited financial statements identified during the completion of our annual independent audit of financial statements and financial controls or from subsequent events arising after issuance of this release; risk of future non-cash asset impairments, including goodwill, ~~right of-use~~right-of-use lease assets and/or other

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~~assets and/or other~~ store asset impairments; restructuring charges; our ability to adapt to new regulatory compliance and disclosure obligations; risks associated with our foreign operations, such as violations of laws prohibiting improper payments and the burdens of complying with a variety of foreign laws and regulations (including global data privacy regulations); risks associated with the acts or omissions of our third party vendors, including a failure to comply with our vendor code of conduct or other policies; risks associated with cyber-attacks and other cyber security risks; risks associated with our ability to properly collect, use, manage and secure consumer and employee data; risks associated with our vendors’ ability to maintain the strength and security of information technology systems; and changes in economic, political, social and other conditions affecting our foreign operations and sourcing, including the impact of currency fluctuations, global income tax rates and economic and market conditions in the various countries in which we operate. ~~These~~In addition to these factors, the economic, technological, managerial, and other risks ~~and uncertainties are discussed~~identified in ~~further detail under “Part I, Item 1A. Risk Factors” contained in the Company’s~~our most recent ~~Annual Report~~annual report on Form 10-K, ~~for the fiscal year ended February 1, 2020 and~~ under “Part II, Item 1A. Risk Factors” contained herein, ~~as such risk factors may be updated in our~~and 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 ~~this report.~~the COVID-19 pandemic, and uncertainty surrounding potential changes in U.S. policies and regulations may amplify many of these risks. We ~~do not intend, and~~ undertake no obligation to publicly update ~~our~~or revise any forward-looking statements, ~~to reflect~~whether as a result of new information, future events or ~~circumstances. If we do update or correct one or more of these statements, investors and others should not conclude that we will make additional updates or corrections.~~otherwise.

COVID-19 Business Update

The ~~COVID-19~~coronavirus (or “COVID-19”) pandemic ~~which is ongoing and dynamic in nature, has had and~~ is continuing to ~~have a material~~ impact on the Company’s financial performance. Since the start of the pandemic, the Company has experienced various temporary retail store closures in key regions globally, including the closure of a significant majority of its stores duringbusinesses. During the first quarter of fiscal ~~2021. During~~2022, the ~~second~~Company experienced significantly higher net revenue compared to the first quarter of fiscal 2021 (when government-mandated store closures were much more widespread) but lower net revenue compared to the ~~Company gradually reopened most~~pre-pandemic first quarter of ~~its global fleet of stores. Toward the end~~fiscal 2020 as it remained challenged by lower demand, temporary store closures and capacity restrictions. In light of the ~~third quarter of~~current environment, we continue to strategically manage expenses in order to protect profitability.

In late fiscal 2021, the Company ~~started to incur~~incurred a new round of government-mandated temporary store closures, ~~resulting in the closure of just over 5% of our directly operated stores as of October 31, 2020,~~ mostly in Europe. ~~That percentage increased to slightly under 20%~~The number of temporarily closed stores ebbed and flowed during the first quarter of fiscal ~~month of November, but recent store re-openings have helped decrease the store closure percentage to just under 10% as of November 29, 2020.~~2022 based on local conditions. The overall impact ~~of these closures~~ resulted in stores being closed for ~~over 25%~~less than 20% of the total days during the ~~nine months ended October 31, 2020. The store closure impact was minimal during the third~~first quarter of fiscal ~~2021. The Company will continue to reopen~~2022, primarily in Europe and Canada. As of May 1, 2021 80% of our stores ~~(and/or close again, if appropriate) as governmental guidelines~~were open, with the majority of closed stores located primarily in Europe and local conditions permit or require, taking an informed, measured approach based on numerous factors. The Company’s e-commerce sites have remained open in all regions throughout the pandemic. In addition to the impactCanada. As of ~~store closures, retail~~May 19, 2021 nearly 95% of our stores that are open have and continue to experience significant reductions in traffic and revenue. Many of the Company’s wholesale and licensing partners have also substantially reduced their operations. The Company has brought back furloughed store associates and support staff as stores reopen. The extent and duration of the global pandemic remains uncertain and may continue to impact consumer purchasing activity in the foreseeable future.

During the first nine months of fiscal 2021, in addition to the negative impact from lower net revenue, the Company’s operating results reflected asset impairment charges as well as additional inventory valuation reserves and higher allowances for markdowns and doubtful accounts due to the ongoing effects of the COVID-19 pandemic. These charges were partially offset by lower SG&A expenses driven primarily by expense savings, both one-time, such as furloughs and temporary salary reductions, and permanent, such as headcount reductions and lower discretionary spending. In addition, the Company benefited from various government assistance programs related primarily to the recovery of employee payroll costs as well as certain favorable tax treatments.

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(iv) executing substantial reductions in expenses, store occupancy costs, capital expenditures and overall costs, including through reduced inventory purchases; (v) working globally with country management teams to maximize the Company’s participation in all eligible government or other initiatives available to businesses or employees impacted by the COVID-19 pandemic; (vi) drawing down on certain credit facilities and entering into certain term loans to ensure financial flexibility and maintain maximum liquidity; (vii) engaging with landlords to negotiate rent deferrals or other rent concessions; (viii) working with vendors to extend payment terms; and (ix) postponing its decision related to the payment of its quarterly cash dividend.

Although we are unable to determine with any degree of accuracy the length and severity of the COVID-19 pandemic, we expect it will continue to have a material impact on our consolidated financial position, consolidated results of operations, and consolidated cash flows in the foreseeable future.open.

Business Segments

The Company’s businesses are grouped into five reportable segments for management and internal financial reporting purposes: Americas Retail, Americas Wholesale, Europe, Asia and Licensing. The Company’s Americas Retail, Americas Wholesale, Europe and Licensing reportable segments are the same as their respective operating segments. Certain components of the Company’s Asia operating segment are separate operating segments based on region, which have been aggregated into the Asia reportable segment for disclosure purposes.

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

Products

We derive our net revenue from the sale of GUESS?, G by GUESS (GbG), GUESS Kids and MARCIANO apparel and our licensees’ products through our worldwide network of directly-operated and

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licensed retail stores, wholesale customers and distributors, as well as our online sites. We also derive royalty revenue from worldwide licensing activities.

Foreign Currency Volatility

Since the majority of our international operations are conducted in currencies other than the U.S. dollar (primarily the British pound, Canadian dollar, Chinese yuan, euro, Japanese yen, Korean won, Mexican peso, Polish zloty, Russian rouble and Turkish lira), currency fluctuations can have a significant impact on the translation of our international revenues and earnings (loss) into U.S. dollar amounts.

Some of our transactions that occur primarily in Europe, Canada, South Korea, China, Hong Kong and Mexico are denominated in U.S. dollars, Swiss francs, British pounds and Russian roubles, exposing them to exchange rate fluctuations when these transactions (such as inventory purchases or periodic lease payments)

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are converted to their functional currencies. As a result, fluctuations in exchange rates can impact the operating margins of our foreign operations and reported earnings (loss), and are largely dependent on the transaction timing and magnitude during the period that the currency fluctuates. When these foreign exchange rates weaken versus the U.S. dollar at the time the respective U.S. dollar denominated payment is made relative to the payments made in the comparable period, our product margins could be unfavorably impacted.

In addition, there are certain real estate leases that are denominated in a currency other than the functional currency of the respective entity that entered into the agreement (primarily Swiss francs, Russian roubles and Polish zloty). As a result, the Company may be exposed to volatility related to unrealized gains or losses on the translation of present value of future lease payment obligations when translated at the exchange rate as of a reporting period-end.

During the first ~~nine~~three months of fiscal ~~2021,~~2022, the average U.S. dollar rate was ~~stronger~~weaker against the Euro, Canadian dollar, Chinese yuan, Mexican peso, Japanese Yen and Korean won, ~~Mexican peso,~~and stronger against the Russian ~~rouble~~Ruble and Turkish lira ~~and weaker against the euro and Japanese yen~~ compared to the average rate in the same prior-year period. This had an overall favorable impact on the translation of our international revenues and ~~loss~~an unfavorable impact on earnings from operations for the ~~nine~~three months ended ~~October 31, 2020~~May 1, 2021 compared to the same prior-year period.

If the U.S. dollar strengthens in fiscal 2022 relative to the respective fiscal ~~2020~~2021 foreign exchange rates, foreign exchange could negatively impact our revenues and operating results, as well as our international cash and other balance sheet items, during the remainder of fiscal ~~2021,~~2022, particularly in Canada, Europe (primarily with respect to the euro, Turkish lira and Russian rouble) and Mexico. Alternatively, if the U.S. dollar weakens relative to the respective fiscal ~~2020~~2021 foreign exchange rates, our revenues and operating results, as well as our other cash balance sheet items, could be positively impacted by foreign currency fluctuations during the remainder of fiscal ~~2021,~~2022, particularly in these regions.

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

Strategy

In December 2019 and updated in March 2021, Carlos Alberini, the Company’s Chief Executive Officer, shared his strategic vision and implementation plan for execution which included the identification of several key priorities to drive revenue and operating profit growth over the next ~~five~~several years. These priorities are: (i) brand relevancy; (ii) product excellence; (iii) customer centricity; ~~(iii)~~(iv) global footprint; ~~(iv) product excellence;~~ and (v) functional capabilities; each as further described below:

Brand Relevancy. We plan to optimize our brand architecture to be relevant with our three target consumer groups: Heritage, Millennials, and Generation Z. We also plan to elevate our brand and improve the quality of our products. We will continue to use unique go-to-market strategies and execute celebrity and influencer partnerships and collaborations as we believe that they are critical to engage more effectively with a younger and broader audience.

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

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

Global Footprint. We will continue to expand the reach of our brands by optimizing the productivity and profitability of our current footprint and expanding our distribution channels.

~~Product Excellence.~~ ~~We will extend our product offering to provide our customers with products for the different occasions of their lifestyles. We will seek to better address local product needs.~~

Functional Capabilities. We expect to drive material operational improvements in the next ~~five~~four years to leverage and support our global business more effectively, primarily in the areas of logistics, sourcing, product development and production, inventory management, and overall infrastructure.

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While we have been challenged with the extremely difficult situation presented by the COVID-19 pandemic, we believe that the opportunities identified above remain in place for the long-term and provide a solid roadmap to grow our business, increase profitability over time and create significant value for our shareholders. In the short-term, we remain focused on enhancing our omni-channel platform centered around our consumer and accelerating efforts to gain efficiencies across our global operations and rationalize our store portfolios, measures which we believe will also maximize our liquidity to address the current crisis.

Capital Allocation

We plan to continue to prioritize capital allocation toward investments that support growth and infrastructure, while remaining highly disciplined in the way we allocate capital across projects, including new store development, store remodels, technology and logistics investments and others. When we prioritize investments, we will focus on their strategic significance and their return on invested capital expectations. We also plan to manage product buys and inventory ownership rigorously and optimize overall working capital management consistently.

Comparable Store Sales

~~Except as described below in connection with the COVID-19 pandemic, the~~The Company reports National Retail Federation calendar comparable store sales on a quarterly basis for our retail businesses which include the combined results from our brick-and-mortar retail stores and our e-commerce sites. We also separately report the impact of e-commerce sales on our comparable store sales metric. As a result of our omni-channel strategy, our e-commerce business has become strongly intertwined with our brick-and-mortar retail store business. Therefore, we believe that the inclusion of e-commerce sales in our comparable store sales metric provides a more meaningful representation of our retail results.

Sales from our brick-and-mortar retail stores include purchases that are initiated, paid for and fulfilled at our retail stores and directly-operated concessions as well as merchandise that is reserved online but paid for and picked up at our retail stores. Sales from our e-commerce sites include purchases that are initiated and paid for online and shipped from either our distribution centers or our retail stores as well as purchases that are initiated in a retail store, but due to inventory availability at the retail store, are ordered and paid for online and shipped from our distribution centers or picked up from a different retail store.

Store sales are considered comparable after the store has been open for 13 full fiscal months. If a store remodel results in a square footage change of more than 15%, or involves a relocation or a change in store concept, the store sales are removed from the comparable store base until the store has been opened at its new size, in its new location or under its new concept for 13 full fiscal months. Stores that are permanently closed or temporarily closed (including as a result of pandemic-related closures) for more than seven days in any fiscal month are excluded from the calculation in the fiscal month that they are closed. E-commerce sales are considered comparable after the online site has been operational in a country for 13 full fiscal months and exclude any related revenue from shipping fees. These criteria are consistent with the metric used by management for internal reporting and analysis to measure performance of the store or online sites. Definitions and calculations of comparable store sales used by the Company may differ from similarly titled measures reported by other companies.

As a result of the significant and varying temporary store closures ~~resulting from~~and various other restrictions during the COVID-19 pandemic, both in fiscal 2021 and 2022, the Company ~~has not disclosed any comparable store sales measures when discussing the results of operations for the nine months ended October 31, 2020. We believe~~believes that comparable store sales ~~measures for the nine months ended October 31, 2020~~during these periods are not as meaningful to the evaluation of the Company’s results ~~until the impact from the temporary store closures resulting from the COVID-19 pandemic has normalized.~~as they would be during more normalized periods.

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Other

The Company operates on a 52/53-week fiscal year calendar, which ends on the Saturday nearest to January 31 of each year. The ~~nine~~three months ended ~~October 31, 2020~~May 1, 2021 had the same number of days as the ~~nine~~three months ended ~~November~~May 2, ~~2019.~~2020.

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Executive Summary

Overview

Net earnings attributable to Guess?, Inc. increased ~~112.3%~~107.6% to ~~$26.4 million, or diluted earnings of $0.41 per common share, for the quarter ended October 31, 2020, compared to net earnings attributable to Guess?, Inc. of $12.4~~$12.0 million, or diluted earnings of $0.18 per common share, for the quarter ended ~~November~~May 1, 2021, compared to net loss attributable to Guess?, Inc. of $157.7 million, or diluted loss of $2.40 per common share, for the quarter ended May 2, ~~2019.~~2020.

During the quarter ended ~~October 31, 2020,~~May 1, 2021, the Company recognized ~~$10.3~~$0.4 million of asset impairment charges; ~~minimal~~$2.1 million net gains on lease modifications; ~~a net credit of $0.2~~$1.1 million of certain professional services and legal fees and related ~~costs; $0.7 million of separation charges; $2.6~~net credits; $2.8 million of amortization of debt discount related to the Company’s convertible senior ~~notes~~notes; and ~~$0.6~~$0.1 million in additional tax expense from certain discrete tax adjustments (or a combined ~~$11.0~~$1.9 million, or $0.17 per share, negative impact after considering the related tax benefit of these adjustments of $3.1 million). Excluding the impact of these items, adjusted net earnings attributable to Guess?, Inc. were $37.4 million and adjusted diluted earnings were $0.58 per common share for the quarter ended October 31, 2020. During the quarter ended November 2, 2019, the Company recognized $1.8 million of asset impairment charges; a net credit of $1.4 million of certain professional services and legal fees and related costs and $2.4 million of amortization of debt discount related to the Company’s convertible senior notes (or a combined $2.5 million, or $0.04$0.03 per share, negative impact after considering the related tax benefit of these adjustments of $0.4 million). Excluding the impact of these items, adjusted net earnings attributable to Guess?, Inc. were ~~$14.9~~$13.9 million and adjusted diluted earnings were ~~$0.22~~$0.21 per common share for the quarter ended ~~November~~May 1, 2021. During the quarter ended May 2, ~~2019.~~2020, the Company recognized $53.0 million of asset impairment charges; $0.5 million of net losses on lease terminations; $0.3 million of certain professional services and legal fees and related net credits; $0.2 million of separation charges; $2.6 million of amortization of debt discount related to the Company’s convertible senior notes; and a benefit of $7.9 million from certain discrete tax adjustments (or a combined $38.8 million, or $0.59 per share, negative impact after considering the related tax benefit of these adjustments of $9.8 million). Excluding the impact of these items, adjusted net loss attributable to Guess?, Inc. was $118.9 million and adjusted diluted loss was $1.81 per common share for the quarter ended May 2, 2020. References to financial results excluding the impact of these items are non-GAAP measures and are addressed below under “Non-GAAP Measures.”

Highlights of the Company’s performance for the quarter ended ~~October 31, 2020~~May 1, 2021 compared to the same prior-year period are presented below followed by a more comprehensive discussion under “Results of Operations”:

Operations

•Total net revenue ~~decreased 7.6%~~increased 99.8% to ~~$569.3~~$520.0 million for the quarter ended ~~October 31, 2020,~~May 1, 2021, from ~~$615.9~~$260.3 million in the same prior-year quarter. In constant currency, net revenue ~~decreased~~increased by ~~10.1%~~90.3%.

•Gross margin (gross profit as a percentage of total net revenue) increased ~~480 basis points~~27.5% to ~~42.1%~~40.7% for the quarter ended ~~October 31, 2020,~~May 1, 2021, from ~~37.3%~~13.2% in the same prior-year period.

•Selling, general and administrative (“SG&A”) expenses as a percentage of total net revenue (“SG&A rate”) decreased ~~80 basis points~~19.1% to ~~32.5%~~35.9% for the quarter ended ~~October 31, 2020,~~May 1, 2021, compared to ~~33.3%~~55.0% in the same prior-year period. SG&A expenses ~~decreased 9.9%~~increased 30.3% to ~~$184.7~~$186.7 million for the quarter ended ~~October 31, 2020,~~May 1, 2021, from ~~$205.0~~$143.3 million in the same prior-year period.

•During the quarter ended ~~October 31, 2020,~~May 1, 2021, the Company recognized asset impairment charges of ~~$10.3~~$0.4 million, compared to ~~$1.8~~$53.0 million in the same prior-year period.

•Operating margin increased ~~410 basis points~~67.5% to ~~7.8%~~5.1% for the quarter ended ~~October 31, 2020,~~May 1, 2021, compared to ~~3.7%~~negative 62.4% in the same prior-year period, driven primarily by ~~the~~ ~~benefit~~overall leveraging of ~~higher wholesale revenue in Europe as we elongated the fall-winter season’s shipment window and, to a lesser extent, higher initial markups in Europe and overall lower~~ expenses ~~partially offset by the unfavorable impact from negative comparable sales~~. ~~Higher~~Lower asset impairment charges ~~unfavorably~~favorably impacted operating margin by ~~150 basis points~~20.3% during the quarter ended ~~October 31, 2020~~May 1, 2021 compared to the same prior-year period. Lower net credits related to certain professional service and legal fees and related costs unfavorably impacted operating margin by 30 basis points during the quarter ended October 31, 2020. Separation charges unfavorably impacted operating margin by 10 basis points during the quarter ended October 31, 2020. Earnings from operations were ~~$44.5~~$26.6 million for the quarter ended May 1, 2021, compared to losses from operations of $162.5 million in the same prior-year period.

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~~million for the quarter ended October 31, 2020, compared to $22.6 million in the same prior-year period.~~

•Other expense, net (including interest income and expense), was ~~$11.8~~$8.3 million for the quarter ended ~~October 31, 2020,~~May 1, 2021, compared to ~~$4.5~~$24.4 million in the same prior-year period.

•The effective income tax rate ~~decreased to 15.7%~~was an expense of 29.8% for the quarter ended ~~October 31, 2020,~~May 1, 2021, compared to ~~25.1%~~a benefit of 14.1% in the same prior-year period. The Company’s effective income tax rate for the quarter ended ~~October 31,~~May 2, 2020 included the ~~unfavorable~~favorable impact from certain discrete income tax adjustments totaling ~~$0.6~~$7.9 million.

Key Balance Sheet Accounts

•The Company had ~~$365.3~~$395.1 million in cash and cash equivalents and $0.2 million in restricted cash as of ~~October 31, 2020,~~May 1, 2021, compared to ~~$110.1~~$419.4 million in cash and cash equivalents and ~~$0.5~~$0.2 million in restricted cash at ~~November~~May 2, ~~2019.~~2020.

◦As of ~~October 31, 2020,~~May 1, 2021, the Company had ~~$51.9~~$56.0 million in outstanding borrowings under its term loans and ~~$9.2~~$5.1 million in outstanding borrowings under its credit facilities compared to ~~help ensure financial flexibility~~$193.7 million in outstanding borrowings under its credit facilities and ~~liquidity~~$24.7 million in ~~response to uncertainty surrounding the COVID-19 pandemic.~~outstanding borrowings under its term loans as of May 2, 2020.

◦~~During~~There were no share repurchases during the ~~nine months~~quarters ended October 31, 2020, the Company repurchased 4.0 million shares of its common stock for $38.9 million (including commissions). During fiscal 2020, the Company used $170 million of proceeds from its offering of convertible senior notes to enter into an accelerated share repurchase program (“ASR Contract”), pursuant to which it received a total of approximately 10.6 million shares. The Company also repurchased shares of its common stock for $118.1 million (including commissions) during fiscalMay 1, 2021 and May 2, 2020.

•Accounts receivable consists of trade receivables relating primarily to the Company’s wholesale business in Europe and, to a lesser extent, to its wholesale businesses in the Americas and Asia, royalty receivables relating to its licensing operations, credit card and retail concession receivables related to its retail businesses and certain other receivables. Accounts receivable increased by ~~$0.2~~$66.8 million, or ~~0.1%~~27.9%, to ~~$300.4~~$306.3 million as of ~~October 31, 2020, from~~ ~~$300.2~~May 1, 2021 compared to $239.5 million at ~~November~~May 2, ~~2019.~~2020. On a constant currency basis, accounts receivable ~~decreased~~increased by ~~$5.5~~$45.7 million, or ~~1.8%~~19.1%, when compared to ~~November~~May 2, ~~2019.~~2020.

•Inventory ~~decreased~~increased by ~~$126.7~~$12.4 million, or ~~24.4%~~3.1%, to ~~$393.2~~$404.9 million as of ~~October 31, 2020,~~May 1, 2021, from ~~$519.9~~$392.5 million at ~~November~~May 2, ~~2019.~~2020. On a constant currency basis, inventory decreased by ~~$127.9~~$15.7 million, or ~~24.6%~~4.0%, when compared to ~~November~~May 2, ~~2019.~~2020.

Global Store Count

In the ~~third~~first quarter of fiscal ~~2021,~~2022, together with our partners, we opened 1734 new stores worldwide, consisting of ten stores in Europe and the Middle East ~~six~~and 24 stores in Asia and the Pacific. Together with our partners, we closed 24 stores worldwide, consisting of ten stores in Asia and the Pacific, ~~and one store in Central and South America. Together with our partners, we closed 35 stores worldwide, consisting of 15 stores in Asia and the Pacific, ten~~seven stores in Europe and the Middle East, five stores in the U.S., ~~four~~and two stores in ~~Central~~Canada.

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


	Stores			Concessions
Region	Total	Directly-Operated	Partner Operated	Total	Directly-Operated	Partner Operated
United States	246	244	2	1	—	1
Canada	74	74	—	—	—	—
Central and South America	105	70	35	29	29	—
Total Americas	425	388	37	30	29	1
Europe and the Middle East	728	511	217	45	45	—
Asia and the Pacific	427	142	285	287	92	195
Total	1,580	1,041	539	362	166	196

Of the total 1,580 stores, 1,316 were GUESS? stores, 171 were GUESS? Accessories stores, 58 were G by GUESS (GbG) stores and ~~one store in Canada.~~35 were MARCIANO stores.

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~~We ended the third quarter of fiscal 2021 with 1,604 stores and 368 concessions worldwide, comprised as follows:~~

Stores Concessions
Region Total Directly-Operated Partner Operated Total Directly-Operated Partner Operated
United States 254 252 2 1 — 1
Canada 78 78 — — — —
Central and South America 107 72 35 27 27 —
Total Americas 439 402 37 28 27 1
Europe and the Middle East 742 511 231 43 43 —
Asia and the Pacific 423 155 268 297 109 188
Total 1,604 1,068 536 368 179 189

~~Of the total 1,604 stores, 1,325 were GUESS? stores, 178 were GUESS? Accessories stores, 63 were G by GUESS (GbG) stores and 38 were MARCIANO stores.~~

Results of Operations

Three Months Ended ~~October 31,~~May 1, 2021 and May 2, 2020 ~~and November 2, 2019~~

Consolidated Results

Net Revenue. Net revenue ~~decreased~~increased by ~~$46.7~~$259.8 million, or ~~7.6%~~99.8%, to ~~$569.3~~$520.0 million for the quarter ended ~~October 31, 2020,~~May 1, 2021, from ~~$615.9~~$260.3 million for the quarter ended ~~November~~May 2, ~~2019.~~2020. In constant currency, net revenue ~~decreased~~increased by ~~10.1%~~90.3%, driven ~~primarily~~ by ~~the unfavorable impact on revenue due primarily to negative~~lower comparable sales driven ~~primarily~~ by ~~lower~~reduced store traffic and temporary store closures resulting from the COVID-19 pandemic in the same prior-year period and, to a lesser extent, ~~lower~~a shift in European wholesale shipments in Americas Wholesale resulting from lower demand as a result of the COVID-19 pandemic. This was partially offset by the benefit of higher European wholesale revenue as we elongated the fall-winter season’s shipment window.into fiscal 2022. Currency translation fluctuations relating to our foreign operations favorably impacted net revenue by ~~$15.5~~$24.8 million, compared to the same prior-year period.

Gross Margin. Gross margin increased ~~480 basis points~~27.5% to ~~42.1%~~40.7% for the quarter ended ~~October 31, 2020,~~May 1, 2021, compared to ~~37.3%~~13.2% in the same prior-year period, of which ~~280 basis points~~21.0% was due to a lower occupancy rate and ~~200~~650 basis points was due to higher product margins. The lower occupancy rate ~~was driven~~resulted primarily byfrom leveraging of occupancy costs due mainly to ~~higher European wholesale revenue~~the impact of prior-year temporary store closures in Americas Retail and, to a lesser extent, ~~the favorable impact from rent concessions granted related to the COVID-19 pandemic primarily~~a shift in ~~Europe, partially offset by the unfavorable impact from negative comparable sales.~~European wholesale shipments into fiscal 2022. The ~~higher~~ product margins were ~~driven primarily by~~ higher ~~initial markups in Europe during~~as the prior year’s quarter ~~ended October 31, 2020, compared to the same prior-year period.~~included significant inventory reserves.

Gross Profit. Gross profit increased by ~~$10.0~~$177.3 million, or ~~4.4%~~518.1%, to ~~$239.5~~$211.6 million for the quarter ended ~~October 31, 2020,~~May 1, 2021, compared to ~~$229.5~~$34.2 million in the same prior-year period. The increase in gross profit, which included the favorable impact of currency translation, was due primarily to ~~lower occupancy costs and, to a lesser extent, higher overall product margins, partially offset by~~ the ~~unfavorable~~favorable impact on gross profit from higher revenue, as well as lower ~~revenue.~~occupancy costs. Currency translation fluctuations relating to our foreign operations favorably impacted gross profit by ~~$6.9~~$8.1 million.

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

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include retail store occupancy costs in SG&A expenses and others, like the Company, include retail store occupancy costs in cost of product sales.

SG&A Rate. The Company’s SG&A rate decreased ~~80 basis points~~19.1% to ~~32.5%~~35.9% for the quarter ended ~~October 31, 2020,~~May 1, 2021, from ~~33.3%~~55.0% in the same prior-year period. The Company’s SG&A rate included the unfavorable impact of 30 basis points from lower net credits related to certain professional service and legal fees and related costs which the Company otherwise would not have incurred as part of its business operations and the unfavorable impact of 10 basis points from separation charges. Excluding these items, the SG&A rate would have decreased by 120 basis points during the quarter ended October 31, 2020 compared to the same prior-year period, driven by leveraging of expenses due to higher European wholesale ~~revenue~~revenues and, to a lesser extent, ~~lower~~temporary store ~~selling expenses~~closures in Americas Retail ~~partially offset by~~in the ~~unfavorable impact from negative comparable sales.~~same prior-year period.

SG&A Expenses. SG&A expenses ~~decreased~~increased by ~~$20.3~~$43.4 million, or ~~9.9%~~30.3%, to ~~$184.7~~$186.7 million for the quarter ended ~~October 31, 2020,~~May 1, 2021, from ~~$205.0~~$143.3 million in the same prior-year period. The ~~decrease,~~increase, which included the unfavorable impact of currency translation, was driven primarily by higher variable expenses in the current year quarter as well as lower ~~store selling expenses~~payroll and ~~to a lesser extent, lower~~ overall discretionary ~~expenses.~~expenses due to significant COVID-19 impacts in the same prior-year period. Currency translation fluctuations relating to our foreign operations unfavorably impacted SG&A expenses by ~~$5.1~~$9.0 million.

Asset Impairment Charges. During the quarter ended ~~October 31, 2020,~~May 1, 2021, the Company recognized ~~$5.6 million in~~minimal impairment of certain operating lease right-of-use (“ROU”) assets and ~~$4.7~~$0.4 million inof impairment charges of property and equipment related to certain retail locations compared to impairments of $28.2 million of certain operating lease ROU assets and $24.8 million of property and equipment during the quarter ended May 2, 2020, resulting from lower revenue and future cash flow projections from the ongoing effects of the COVID-19 pandemic. This compares to $1.3 million in impairment of property and equipment and $0.5 million in impairment of certain operating lease right-of-use assets related to certain retail locations resulting from under-performance and expected store closures during the quarter ended November 2, 2019. Currency translation fluctuations relating to our foreign operations ~~unfavorably impacted~~had minimal unfavorable impact on asset impairment ~~charges by $0.2 million.~~charges.

Operating Margin. Operating margin increased ~~410 basis points~~67.5% to ~~7.8%~~5.1% for the quarter ended ~~October 31, 2020,~~May 1, 2021, compared to ~~3.7%~~negative 62.4% in the same prior-year period, driven primarily by ~~the benefit~~overall leveraging of ~~higher wholesale revenue in Europe as we elongated the fall-winter season’s shipment window~~expenses and, to a

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lesser extent, ~~higher initial markups in Europe and overall~~ lower ~~expenses, partially offset by the unfavorable impact from negative comparable sales. Higher~~ asset impairment charges ~~unfavorably~~. Lower asset impairment charges favorably impacted operating margin by ~~150 basis points~~20.3% during the quarter ended ~~October 31, 2020~~May 1, 2021 compared to the same prior-year period. ~~Lower~~Excluding the impact of lower asset impairment charges, net ~~credits~~gains on lease modifications compared to net losses on lease modifications, and increased expenses related to certain professional ~~service~~services and legal fees and related costs unfavorably impacted operating margin by 30 basis points during the quarter ended October 31, 2020. Separation charges unfavorably impacted operating margin by 10 basis points during the quarter ended October 31, 2020. Excluding the impact of these items,net credits, the Company’s operating margin would have increased ~~600 basis points~~46.7% compared to the same prior-year period. The negative impact of currency on operating margin for the quarter was approximately 40 basis points.

Earnings from Operations. Earnings from operations increased by ~~$21.8~~$189.1 million, or ~~96.3%~~116.4%, to ~~$44.5~~$26.6 million for the quarter ended ~~October 31, 2020,~~May 1, 2021, compared to ~~$22.6~~a loss from operations of $162.5 million in the same prior-year period. Currency translation fluctuations relating to our foreign operations ~~favorably~~unfavorably impacted earnings from operations by ~~$1.6~~$0.7 million.

Interest Expense, Net. Interest expense, net, was ~~$5.2~~$5.6 million for the quarter ended ~~October 31, 2020,~~May 1, 2021, compared to ~~$4.5~~$4.9 million for the quarter ended ~~November~~May 2, ~~2019.~~2020.

Other Expense, Net. Other expense, net, was ~~$6.5~~$2.7 million for the quarter ended ~~October 31, 2020,~~May 1, 2021, compared to ~~$0.1~~$19.6 million in the same prior-year period. The change was driven primarily by market volatility which resulted in lower net unrealized losses on the translation of foreign currency balances ~~and,~~compared to ~~a lesser extent,~~higher net unrealized losses ~~on our SERP-related assets, compared to net unrealized gains~~ in ~~the same prior-year quarter. This was partially offset by lower net losses related to one of our minority investments during~~ the quarter ended ~~October 31, 2020, compared to the same prior-year quarter.~~May 2, 2020.

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Income Tax ~~Expense.~~Expense (Benefit). Income tax expense for the quarter ended ~~October 31, 2020~~May 1, 2021 was ~~$5.1~~$5.5 million, or a ~~15.7%~~29.8% effective tax rate, compared to ~~$4.5~~income tax benefit of $26.4 million, or a ~~25.1%~~14.1% effective tax rate, in the same prior-year period. Generally, income taxes for the interim periods are computed using the tax rate estimated to be applicable for the full fiscal year, adjusted for discrete items, which is subject to ongoing review and evaluation by management. During the quarter ended October 31, 2020, the Company recognized valuation allowances of $1.2 million resulting from jurisdictions where there have been cumulative net operating losses, limiting the Company’s ability to consider other subjective evidence to continue to recognize the existing deferred tax assets. This was partially offset by a discrete tax benefit of approximately $0.7 million related to lower forecasts for the current fiscal year which changes the estimate of the net operating losses that the Company can carryback to tax years with a higher federal corporate tax rate as allowed under the CARES Act. Excluding the impact from these items, the change in the effective tax rate was due primarily to a shift in the distribution of earnings among the Company’s tax jurisdictions during the quarter ended October 31, 2020, compared to the same prior-year period.

~~Net Earnings Attributable to Noncontrolling Interests.~~ ~~Net earnings attributable to noncontrolling interests were $1.2 million, net of taxes, for each of the quarters ended October 31, 2020 and November 2, 2019.~~

~~Net Earnings Attributable to Guess?, Inc.~~ ~~Net earnings~~attributable to Guess?, Inc. were $26.4 million for the quarter ended October 31, 2020, compared to $12.4 million in the same prior-year period. Diluted earnings per share were $0.41 for the quarter ended October 31, 2020, compared to ~~$0.18~~ in the same prior-year period. We estimate that the favorable impact from the Company’s share repurchases was $0.03 on diluted earnings per share for the quarter ended October 31, 2020. We also estimate that the negative impact of currency on diluted earnings per share for the quarter ended October 31, 2020 was approximately $0.11 per share. During the quarter ended October 31, 2020, the Company recognized $10.3 million of asset impairment charges; minimal net gains on lease modifications; a net credit of $0.2 million of certain professional services and legal fees and related costs; $0.7 million of separation charges; $2.6 million of amortization of debt discount related to the Company’s convertible senior notes and $0.6 million in additional tax expense from certain discrete tax adjustments (or a combined $11.0 million, or $0.17 per share, negative impact after considering the related tax benefit of these adjustments of $3.1 million). Excluding the impact of these items, adjusted net earnings attributable to Guess?, Inc. were $37.4 million and adjusted diluted earnings were $0.58 per common share for the quarter ended October 31, 2020. We estimate that the favorable impact from the Company’s share repurchases was $0.05 on adjusted diluted earnings per share for the quarter ended October 31, 2020. During the quarter ended November 2, 2019, the Company recognized $1.8 million of asset impairment charges; a net credit of $1.4 million of certain professional services and legal fees and related costs and $2.4 million of amortization of debt discount related to the Company’s convertible senior notes (or a combined $2.5 million, or $0.04 per share, negative impact after considering the related tax benefit of these adjustments of $0.4 million). Excluding the impact of these items, adjusted net earnings attributable to Guess?, Inc. were $14.9 million and adjusted diluted earnings were $0.22 per common share for the quarter ended November 2, 2019. References to financial results excluding the impact of these items are non-GAAP measures and are addressed below under “Non-GAAP Measures.”

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~~Information by Business Segment~~

~~The following table presents our net revenue and earnings (loss) from operations by segment for~~ the three months ended ~~October 31, 2020 and November~~May 2, ~~2019 (dollars in thousands):~~

Three Months Ended
Oct 31, 2020 Nov 2, 2019 $ Change % Change
Net revenue:
Americas Retail $ 130,328 $ 177,824 $ (47,496) (26.7 %)
Americas Wholesale 35,971 56,398 (20,427) (36.2 %)
Europe 321,574 277,253 44,321 16.0 %
Asia 61,978 82,261 (20,283) (24.7 %)
Licensing 19,433 22,208 (2,775) (12.5 %)
Total net revenue $ 569,284 $ 615,944 $ (46,660) (7.6 %)
Earnings (loss) from operations:
Americas Retail $ 473 $ 1,601 $ (1,128) (70.5 %)
Americas Wholesale 8,247 11,216 (2,969) (26.5 %)
Europe 51,476 19,475 32,001 164.3 %
Asia 1,415 (2,432) 3,847 158.2 %
Licensing 18,228 19,372 (1,144) (5.9 %)
Total segment earnings from operations 79,839 49,232 30,607 62.2 %
Corporate overhead (25,058) (24,736) (322) 1.3 %
Asset impairment charges (10,335) (1,847) (8,488) 459.6 %
Net gains on lease modifications 21 — 21
Total earnings from operations $ 44,467 $ 22,649 $ 21,818 96.3 %
Operating margins:
Americas Retail 0.4 % 0.9 %
Americas Wholesale 22.9 % 19.9 %
Europe 16.0 % 7.0 %
Asia 2.3 % (3.0 %)
Licensing 93.8 % 87.2 %
Total Company 7.8 % 3.7 %

~~Americas Retail~~

~~Net revenue from our~~ ~~Americas Retail~~ segment decreased by $47.5 million, or 26.7%, to $130.3 million for the quarter ended October 31, 2020, from $177.8 million in the same prior-year period. In constant currency, net revenue decreased by 26.2%, due primarily to lower comparable sales driven primarily by reduced store traffic resulting from the COVID-19 pandemic and, to a lesser extent, the negative impact from permanent store closures. Comparable sales (including e-commerce) decreased 21% in U.S. dollars and 20% in constant currency compared to the same prior-year period. The inclusion of our e-commerce sales increased the comparable sales percentage by 2% in U.S. dollars and constant currency. Excluding the impact from the temporary store closures, the store base for the U.S. and Canada decreased by an average of 32 net stores during the quarter ended October 31, 2020 compared to the same prior-year period, resulting in a 6.0% net decrease in average square footage. Currency translation fluctuations relating to our non-U.S. retail stores and e-commerce sites unfavorably impacted net revenue by $0.9 million.

Operating margin decreased 50 basis points to 0.4% for the quarter ended October 31, 2020, from 0.9% in the same prior-year quarter, due to lower gross margins and, to a lesser extent, a higher SG&A rate. The lower gross margins were driven primarily by overall deleveraging of occupancy costs due primarily to negative comparable sales, partially offset by lower lease costs. The higher SG&A rate was driven primarily by overall deleveraging of expenses, partially offset by lower store selling expenses due primarily to lower payroll costs.

~~Earnings from operations from our~~ ~~Americas Retail~~ ~~segment decreased by $1.1 million, or 70.5%, to $0.5 million for the quarter ended October 31, 2020, from $1.6 million in the same prior-year period. The~~

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~~deterioration is due primarily to the unfavorable impact on earnings from lower revenue, partially offset by lower store selling expenses and lower occupancy costs.~~

~~Americas Wholesale~~

~~Net revenue from our~~ ~~Americas Wholesale~~ segment decreased by $20.4 million, or 36.2%, to $36.0 million for the quarter ended October 31, 2020, from $56.4 million in the same prior-year period. In constant currency, net revenue decreased by 34.2%, driven primarily by our U.S. wholesale business due mainly to lower demand resulting from the COVID-19 pandemic. Currency translation fluctuations relating to our non-U.S. wholesale businesses unfavorably impacted net revenue by $1.2 million.

~~Operating margin increased 300 basis points to 22.9% for the quarter ended October 31, 2020, compared to 19.9% in the same prior-year quarter, due primarily to overall higher product margins.~~

~~Earnings from operations from our~~ ~~Americas Wholesale~~ segment decreased by $3.0 million, or 26.5%, to $8.2 million for the quarter ended October 31, 2020, from $11.2 million in the same prior-year period. The decrease reflects the unfavorable impact on earnings from lower revenue.

~~Europe~~

~~Net revenue from our~~ ~~Europe~~ segment increased by $44.3 million, or 16.0%, to $321.6 million for the quarter ended October 31, 2020, compared to $277.3 million in the same prior-year period. In constant currency, net revenue increased by 10.2%, driven primarily by the benefit of higher wholesale revenue as we elongated the fall-winter season’s shipment window, partially offset by lower comparable sales driven by reduced store traffic resulting from the COVID-19 pandemic. Comparable sales (including e-commerce) decreased 9% in U.S. dollars and 13% in constant currency compared to the same prior-year period. The inclusion of our e-commerce sales increased the comparable sales percentage by 6% in U.S. dollars and 5% in constant currency. As of October 31, 2020, we directly operated 511 stores in Europe compared to 516 stores at November 2, 2019, excluding concessions, which represents a 1.0% decrease over the same prior-year period. Currency translation fluctuations relating to our ~~European operations favorably impacted net revenue by $16.0 million.~~

Operating margin increased 900 basis points to 16.0% for the quarter ended October 31, 2020, compared to 7.0% in the same prior-year quarter, due to higher overall gross margins and, to a lesser extent, a lower SG&A rate. The higher gross margins were driven primarily by higher initial markups and, to a lesser extent, overall leveraging of occupancy costs due to higher wholesale revenue and the favorable impact from certain rent concessions granted related to the COVID-19 pandemic. The lower SG&A rate was due primarily to overall leveraging of expenses resulting from higher wholesale revenue.

~~Earnings from operations from our~~ ~~Europe~~ segment increased by $32.0 million, or 164.3%, to $51.5 million for the quarter ended October 31, 2020, compared to $19.5 million in the same prior-year period, driven primarily by the favorable impact on earnings from higher revenue. Currency translation fluctuations relating to our ~~European operations favorably impacted earnings from operations by $2.4 million.~~

~~Asia~~

~~Net revenue from our~~ ~~Asia~~ segment decreased by $20.3 million, or 24.7%, to $62.0 million for the quarter ended October 31, 2020, from $82.3 million in the same prior-year period. In constant currency, net revenue decreased by 26.6%, due primarily to the negative impact from permanent store closures and, to a lesser extent, lower comparable sales driven by reduced store traffic resulting from the COVID-19 pandemic. As of October 31, 2020, we and our partners operated 423 stores and 297 concessions in Asia, compared to 519 stores and 327 concessions at November 2, 2019. As of October 31, 2020, we directly operated 155 stores and 109 concessions in Asia, compared to 219 directly-operated stores and 154 concessions at November 2, 2019. Comparable sales (including e-commerce) decreased 15% in U.S. dollars and 18% in constant currency. The inclusion of our e-commerce sales decreased the comparable sales percentage by 1% in U.S. dollars and constant currency. Currency translation fluctuations relating to our ~~Asian operations favorably impacted net revenue by $1.6 million.~~

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Operating margin increased 530 basis points to 2.3% for the quarter ended October 31, 2020, from negative 3.0% in the same prior-year quarter, driven by higher gross margins and, to a lesser extent, a lower SG&A rate. The higher gross margins were driven primarily by overall higher product margins. The lower SG&A rate was driven primarily by the favorable impact of business mix.

~~Earnings from operations from our~~ ~~Asia~~ segment was $1.4 million for the quarter ended October 31, 2020, compared to loss from operations of $2.4 million in the same prior-year period. The improvement was driven primarily by the favorable impact on earnings from lower SG&A expenses and, to a lesser extent, lower occupancy costs, partially offset by the unfavorable impact from lower revenue.

~~Licensing~~

~~Net royalty revenue from our~~ ~~Licensing~~ segment decreased by $2.8 million, or 12.5%, to $19.4 million for the quarter ended October 31, 2020, from $22.2 million in the same prior-year period, due primarily to lower demand resulting from the COVID-19 pandemic.

~~Earnings from operations from our~~ ~~Licensing~~ segment decreased by $1.1 million, or 5.9%, to $18.2 million for the quarter ended October 31, 2020, from $19.4 million in the same prior-year period. The decrease was driven by the unfavorable impact to earnings from lower revenue.

~~Corporate Overhead~~

~~Unallocated corporate overhead increased by $0.3 million to $25.1 million for the quarter ended October 31, 2020, compared to $24.7 million in the same prior-year period.~~

~~Nine Months Ended October 31, 2020 and November 2, 2019~~

~~Consolidated Results~~

~~Net Revenue~~. Net revenue decreased by $607.8 million, or 33.1%, to $1.23 billion for the nine months ended October 31, 2020, compared to $1.84 billion for the nine months ended November 2, 2019. In constant currency, net revenue decreased by 33.4%, driven primarily by the unfavorable impact on revenue due to temporary store closures and lower store traffic and, to a lesser extent, lower wholesale shipments resulting from lower demand as a result of the COVID-19 pandemic. Currency translation fluctuations relating to our foreign operations unfavorably impacted net revenue by $5.0 million, compared to the same prior-year period.

~~Gross Margin.~~ Gross margin decreased 260 basis points to 34.3% for the nine months ended October 31, 2020, from 36.9% in the same prior-year period, of which 280 basis points was due to a higher occupancy rate, partially offset by 20 basis points due to higher product margins. The higher occupancy rate was driven primarily by overall deleveraging of occupancy costs due mainly to lower revenue resulting from the impact of the COVID-19 pandemic, partially offset by the favorable impact from rent concessions granted related to the COVID-19 pandemic primarily in Europe. The higher product margins were driven primarily by higher initial markups in Europe, partially offset by higher inventory reserves in Asia during the nine months ended October 31, 2020, compared to the same prior-year period.

~~Gross Profit.Gross profit decreased by $256.3 million, or 37.9%, to $420.8 million for the nine months ended October 31, 2020, from $677.1 million in the same prior-year period.~~ ~~The decrease in gross profit, which included the favorable impact of currency translation,~~ ~~was due primarily to the unfavorable impact on gross profit from lower revenue, partially offset by lower occupancy costs.Currency translation fluctuations relating to our foreign operations favorably impacted gross profit by $5.5 million.~~

~~SG&A Rate.~~ The Company’s SG&A rate increased 480 basis points to 39.0% for the nine months ended October 31, 2020, compared to 34.2% in the same prior-year period. The Company’s SG&A rate included the unfavorable impact of 30 basis points from separation charges and the unfavorable impact of 10 basis from lower net credits related to certain professional service and legal fees and related costs which the Company otherwise would not have incurred as part of its business operations. Excluding these items, the Company’s SG&A rate would have increased by 440 basis points during nine months ended October 31, 2020 compared to

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~~the same prior-year period, driven by overall deleveraging of expenses due mainly to lower revenue resulting from the impact of the COVID-19 pandemic, partially offset by expense savings.~~

~~SG&A Expenses.~~ SG&A expenses decreased by $149.5 million, or 23.8%, to $478.3 million for the nine months ended October 31, 2020, from $627.8 million in the same prior-year period. The decrease, which included the unfavorable impact of currency translation, was driven primarily by lower payroll costs and, to a lesser extent, lower overall discretionary expenses.The lower payroll costs were driven primarily by the impact of furloughs and, to a lesser extent, government assistance programs related to the recovery of employee payroll costs, temporary tiered salary reductions for management level corporate employees that have since been restored and permanent headcount reductions. Currency translation fluctuations relating to our foreign operations unfavorably impacted SG&A expenses by $0.3 million.

~~Asset Impairment Charges.~~ During the nine months ended October 31, 2020, the Company recognized $42.1 million in impairment of certain operating lease right-of-use assets and $33.2 million in impairment of property and equipment related to certain retail locations resulting from lower revenue and future cash flow projections from the ongoing effects of the COVID-19 pandemic. This compares to $4.6 million in impairment of property and equipment and $0.5 million in impairment of certain operating lease right-of-use assets related to certain retail locations resulting from under-performance and expected store closures during the nine months ended November 2, 2019. Currency translation fluctuations relating to our foreign operations favorably impacted asset impairment charges by $1.4 million.

~~Net Gains on Lease Modifications.~~ During the nine months ended October 31, 2020, the Company recorded net gains on lease modifications of $0.5 million related primarily to the early termination of lease agreements for certain of the Company’s retail locations. There were no net gains on lease modifications recorded during the nine months ended November 2, 2019.

~~Operating Margin.~~ Operating margin decreased 13.2% to negative 10.8% for the nine months ended October 31, 2020, from 2.4% in the same prior-year period, driven primarily by overall deleveraging of expenses due to the negative impact from the COVID-19 pandemic on our global operations and, to a lesser extent, higher asset impairment charges. Higher asset impairment charges negatively impacted operating margin by 580 basis points during the nine months ended October 31, 2020 compared to the same prior-year period. Separation charges unfavorably impacted operating margin by 30 basis points during the nine months ended October 31, 2020. Lower net credits related to certain professional service and legal fees and related costs unfavorably impacted operating margin by 10 basis points during the nine months ended October 31, 2020. Excluding the impact of these items, the Company’s operating margin would have decreased 700 basis points compared to the same prior-year period. The positive impact of currency on operating margin for the first nine months of fiscal 2021 was approximately 20 basis points.

~~Earnings (Loss) from Operations.~~ Loss from operations was $132.4 million for the nine months ended October 31, 2020, compared to earnings from operations of $44.2 million in the same prior-year period. Currency translation fluctuations relating to our foreign operations favorably impacted loss from operations by $6.7 million.

~~Interest Expense, Net.~~ Interest expense, net, was $15.6 million for the nine months ended October 31, 2020, compared to $10.0 million for the nine months ended November 2, 2019. The increase in interest expense was due primarily to higher amortization of debt discount and higher interest expense related to the Company’s convertible senior notes during the nine months ended October 31, 2020.

~~Other Expense, Net~~. Other expense, net, was $20.6 million for the nine months ended October 31, 2020, compared to $4.3 million in the same prior-year period. The change was due primarily to market volatility which resulted in higher unrealized losses on the translation of foreign currency balances and, to a lesser extent, lower net unrealized gains on our SERP-related assets, compared to the same prior-year period. During the first nine months of fiscal 2021, the Company also recognized net mark-to-market losses on revaluation of foreign exchange currency contracts, compared to gains in the same prior-year period.

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~~Income Tax Expense (Benefit).~~ Income tax benefit for the nine months ended October 31, 2020 was $14.9 million, or an 8.8% effective tax rate, compared to income tax expense of $10.6 million, or a 35.7% effective tax rate, in the same prior-year period. Generally, income taxes for the interim periods are computed using the tax rate estimated to be applicable for the full fiscal year, adjusted for discrete items, which is subject to ongoing review and evaluation by management. During the nine months ended October 31, 2020, the Company recognized a valuation allowance of $4.9 million resulting from jurisdictions where there have been cumulative net operating losses, limiting the Company’s ability to consider other subjective evidence to continue to recognize the existing deferred tax assets. This was partially offset by a tax benefit of approximately ~~$4.6~~$11.8 million from a tax rate change related to the ability to carryback net operating losses to tax years with a higher federal corporate tax rate as allowed under the CARES Act enacted in March 2020. This benefit was partially offset by a valuation allowance of $3.7 million resulting from jurisdictions where there have been cumulative net operating losses, limiting the Company’s ability to consider other subjective evidence to continue to recognize the existing deferred tax assets. Excluding the impact of these items, the ~~change~~increase in the effective tax rate was due primarily to a ~~shift~~change in the ~~distribution~~mix of statutory earnings ~~among~~for the ~~Company’s tax jurisdictions during the nine~~three months ended ~~October 31, 2020,~~May 1, 2021, compared to the same prior-year period.

Net Earnings (Loss) Attributable to Noncontrolling Interests. Net ~~loss~~earnings (loss) attributable to noncontrolling interests ~~was $2.0~~were $0.9 million and $(2.9) million, net of taxes, for the ~~nine months~~quarters ended ~~October 31,~~May 1, 2021 and May 2, 2020, ~~compared to net earnings attributable to noncontrolling interests of $2.8 million, net of taxes, for the nine months ended November 2, 2019.~~respectively.

Net Earnings (Loss) Attributable to Guess?, Inc. Net ~~loss~~earnings (loss) attributable to Guess?, Inc. ~~was $151.6~~were $12.0 million for the ~~nine months~~quarter ended ~~October 31, 2020,~~May 1, 2021, compared to ~~net earnings attributable to Guess?, Inc. of $16.4~~$(157.7) million in the same prior-year period. Diluted earnings per share (“EPS”) were $0.18 for the quarter ended May 1, 2021, compared to diluted loss per share ~~was $2.35 for the nine months ended October 31, 2020, compared to diluted earnings per share~~ of ~~$0.22~~$2.40 in the same prior-year period. ~~We estimate that the unfavorable~~The Company estimates a positive impact from ~~the Company’s~~its share ~~repurchases~~buybacks and ~~additional interest expense recognized related to the offering~~currency of ~~convertible senior notes had a net negative impact~~$0.01 and $0.09, respectively, on diluted ~~loss per share~~EPS in the first quarter of $0.35 for the nine months ended October 31, 2020. We also estimate that the negative impact of currency on diluted loss per share for the nine months ended October 31, 2020 was approximately $0.17 per share.fiscal 2022. During the ~~nine months~~quarter ended ~~October 31, 2020,~~May 1, 2021, the Company recognized ~~$75.3~~$0.4 million of asset impairment charges; ~~$0.5~~$2.1 million of net gains on lease modifications; ~~a net credit of $0.1~~$1.1 million of certain professional services and legal fees and related ~~costs; $3.4 million of separation charges; $7.8~~net credits; $2.8 million of amortization of debt discount related to the Company’s convertible senior notes; and ~~$0.8~~$0.1 million in additional tax expense from certain discrete tax adjustments (or a combined ~~$69.5~~$1.9 million, or ~~$1.08~~$0.03 per share, negative impact after considering the related tax benefit of these adjustments of ~~$17.3~~$0.4 million). Excluding the impact of these items, adjusted net earnings attributable to Guess?, Inc. were $13.9 million and adjusted diluted earnings were $0.21 per common share for the quarter ended May 1, 2021. The Company estimates its share buybacks and currency had a positive impact of $0.01 and $0.09, respectively, on adjusted diluted EPS in the first quarter of fiscal 2022. During the quarter ended May 2, 2020, the Company recognized $53.0 million of asset impairment charges; $0.5 million of net losses on lease terminations; $0.3 million of certain professional services and legal fees and related net credits; $0.2 million of separation charges; $2.6 million of amortization

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of debt discount related to the Company’s convertible senior notes; and a benefit of $7.9 million from certain discrete tax adjustments (or a combined $38.8 million, or $0.59 per share, negative impact after considering the related tax benefit of these adjustments of $9.8 million). Excluding the impact of these items, adjusted net loss attributable to Guess?, Inc. was ~~$82.2~~$118.9 million and adjusted diluted loss was ~~$1.27~~$1.81 per common share ~~during the nine months ended October 31, 2020. We estimate that the~~ ~~unfavorable~~ ~~impact from share repurchases and additional interest expense recognized related to the offering of convertible senior notes had a net negative impact of $0.18 on adjusted diluted loss per share~~ for the ~~nine months~~quarter ended ~~October 31,~~May 2, 2020. During the nine months ended November 2, 2019, the Company recognized $5.1 million of asset impairment charges; a net credit of $0.7 million of certain professional services and legal fees and related costs; and $5.1 million of amortization of debt discount related to the Company’s convertible senior notes (or a combined $6.3 million, or $0.09 per share, negative impact after considering the related tax benefit of these adjustments of $3.2 million). Excluding the impact of these items, adjusted net earnings attributable to Guess?, Inc. were $22.7 million and adjusted diluted earnings per share were $0.31 per common share during the nine months ended November 2, 2019. References to financial results excluding the impact of these items are non-GAAP measures and are addressed below under “Non-GAAP Measures.”

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Information by Business Segment

The following table presents our net revenue and earnings (loss) from operations by segment for the ~~nine~~three months ended ~~October 31,~~May 1, 2021 and May 2, 2020 ~~and November 2, 2019~~ (dollars in thousands):


		Nine Months Ended
		Oct 31, 2020			Nov 2, 2019				$ Change			% Change			Three Months Ended
								May 1, 2021			May 2, 2020				$ Change			% Change
Net revenue:	Net revenue:													Net revenue:
Americas Retail	Americas Retail	$	314,977		$	553,213			$	(238,236)		(43.1	%)	Americas Retail	$	155,535		$	74,584		$	80,951	108.5	%
Americas Wholesale	Americas Wholesale	82,131			144,505				(62,374)			(43.2	%)	Americas Wholesale	45,430			25,875			19,555		75.6	%
Europe	Europe	633,898			827,817				(193,919)			(23.4	%)	Europe	241,852			106,473			135,379		127.1	%
Asia	Asia	152,554			250,752				(98,198)			(39.2	%)	Asia	55,660			40,385			15,275		37.8	%
Licensing	Licensing	44,514			59,568				(15,054)			(25.3	%)	Licensing	21,525			12,934			8,591		66.4	%
Total net revenue	Total net revenue	$	1,228,074		$	1,835,855			$	(607,781)		(33.1	%)	Total net revenue	$	520,002		$	260,251		$	259,751	99.8	%
Earnings (loss) from operations:	Earnings (loss) from operations:													Earnings (loss) from operations:
Americas Retail	Americas Retail	$	(40,904)		$	5,746			$	(46,650)		(811.9	%)	Americas Retail	$	20,274		$	(36,673)		$	56,947	(155.3	%)
Americas Wholesale	Americas Wholesale	11,559			27,452				(15,893)			(57.9	%)	Americas Wholesale	11,555			1,624			9,931		611.5	%
Europe	Europe	27,865			54,742				(26,877)			(49.1	%)	Europe	4,198			(44,406)			48,604		(109.5	%)
Asia	Asia	(24,729)			(10,435)				(14,294)			(137.0	%)	Asia	(1,808)			(22,777)			20,969		(92.1	%)
Licensing	Licensing	39,833			51,563				(11,730)			(22.7	%)	Licensing	19,431			10,094			9,337		92.5	%
Total segment earnings from operations		13,624			129,068				(115,444)			(89.4	%)
Total segment earnings (loss) from operations														Total segment earnings (loss) from operations	53,650			(92,138)			145,788		(158.2	%)
Corporate overhead	Corporate overhead	(71,167)			(79,777)				8,610			(10.8	%)	Corporate overhead	(28,776)			(16,921)			(11,855)		70.1	%

Asset impairment charges	Asset impairment charges	(75,276)			(5,126)				(70,150)			1,368.5	%	Asset impairment charges	(441)			(52,972)			52,531		(99.2	%)
Net gains (losses) on lease modifications														Net gains (losses) on lease modifications	2,145			(456)			2,601		(570.4	%)
Total earnings (loss) from operations														Total earnings (loss) from operations	$	26,578		$	(162,487)		$	189,065	(116.4	%)

Net gains on lease modifications		450			—				450

Total earnings (loss) from operations		$	(132,369)		$	44,165			$	(176,534)		(399.7	%)
Operating margins:	Operating margins:													Operating margins:
Americas Retail	Americas Retail	(13.0		%)	1.0		%							Americas Retail	13.0		%	(49.2		%)
Americas Wholesale	Americas Wholesale	14.1		%	19.0		%							Americas Wholesale	25.4		%	6.3		%
Europe	Europe	4.4		%	6.6		%							Europe	1.7		%	(41.7		%)
Asia	Asia	(16.2		%)	(4.2		%)							Asia	(3.2		%)	(56.4		%)
Licensing	Licensing	89.5		%	86.6		%							Licensing	90.3		%	78.0		%
Total Company	Total Company	(10.8		%)	2.4		%							Total Company	5.1		%	(62.4		%)

Americas Retail

Net revenue from our Americas Retail segment ~~decreased~~increased by ~~$238.2~~$81.0 million, or ~~43.1%~~108.5%, to ~~$315.0~~$155.5 million for the ~~nine months~~quarter ended ~~October 31, 2020, compared to $553.2~~May 1, 2021, from $74.6 million in the same prior-year period. In constant currency, net revenue ~~decreased~~increased by ~~42.6%~~105.9%, due primarily to lower comparable sales driven ~~primarily~~ by reduced store traffic and temporary store closures ~~and, to a lesser extent, lower store traffic~~ resulting from the COVID-19 ~~pandemic.~~pandemic in the same prior-year period. Comparable store sales (including e-commerce) increased 6% in U.S. dollars and 5% in constant currency compared to the same prior-year period. The inclusion of our e-commerce sales increased the comparable sales percentage by 16% in U.S. dollars and constant currency. Excluding the impact from the temporary store closures, the store base for the U.S. and Canada decreased by an average of 2437 net stores during the ~~nine months~~quarter ended ~~October 31, 2020~~May 1, 2021 compared to the same prior-year period, resulting in a ~~4.3%~~7.7% net decrease in average square footage. Currency translation fluctuations relating to our non-U.S. retail stores and e-commerce sites ~~unfavorably~~favorably impacted net revenue by ~~$2.7~~$2.0 million.

Operating margin ~~decreased 14.0%~~increased 62.2% to ~~negative~~ 13.0% for the ~~nine months~~quarter ended ~~October 31, 2020,~~May 1, 2021, from ~~1.0%~~negative 49.2% in the same prior-year ~~period, due to lower gross margins and, to a lesser extent, a higher SG&A rate. The lower gross margins were~~quarter, driven primarily by ~~overall deleveraging of occupancy costs due primarily to the negative impact from temporary store closures and lower store traffic. The higher SG&A rate was driven primarily by overall deleveraging~~leveraging of expenses ~~partially offset by~~as well as lower ~~store selling expenses due to payroll savings resulting from the temporary furlough~~markdowns.

Table of ~~the Company’s store associates in the U.S. and Canada and lower overall payroll costs.~~Contents

~~Loss~~Earnings from operations from our Americas Retail segment ~~was $40.9~~increased by $56.9 million, or 155.3%, to $20.3 million for the ~~nine months~~quarter ended ~~October 31, 2020, compared to earnings~~May 1, 2021, from loss from operations of ~~$5.7~~$36.7 million in the same prior-year period. The ~~deterioration~~increase is due primarily ~~due~~ to the ~~unfavorable~~favorable impact on earnings from ~~lower~~higher revenue ~~partially offset by lower store selling expenses~~ and ~~lower occupancy costs.~~

~~Table~~leveraging of ~~Contents~~expenses.

Americas Wholesale

Net revenue from our Americas Wholesale segment ~~decreased~~increased by ~~$62.4~~$19.6 million, or ~~43.2%~~75.6%, to ~~$82.1~~$45.4 million for the ~~nine months~~quarter ended ~~October 31, 2020,~~May 1, 2021, from ~~$144.5~~$25.9 million in the same prior-year period. In constant currency, net revenue ~~decreased~~increased by ~~40.8%~~71.0%, driven primarily by increased demand in our U.S. wholesale ~~business due mainly to lower demand resulting from the COVID-19 pandemic.~~ Cu~~rrency~~business. Currency translation fluctuations relating to our non-U.S. wholesale businesses ~~unfavorably~~favorably impacted net revenue by ~~$3.4~~$1.2 million.

Operating margin ~~decreased 490 basis points~~increased 19.1% to ~~14.1%~~25.4% for the ~~nine months~~quarter ended ~~October 31, 2020, from 19.0%~~May 1, 2021, compared to 6.3% in the same prior-year ~~period,~~quarter, due ~~primarily~~mainly to ~~a higher SG&A rate driven primarily by overall deleveraging~~lower markdowns and leveraging of ~~expenses resulting from lower wholesale shipments.~~expenses.

Earnings from operations from our Americas Wholesale segment ~~decreased~~increased by ~~$15.9~~$9.9 million, or ~~57.9%~~611.5%, to $11.6 million for the ~~nine months~~quarter ended ~~October 31, 2020,~~May 1, 2021, from ~~$27.5~~$1.6 million in the same prior-year period. The ~~decrease~~increase reflects the ~~unfavorable~~favorable impact on earnings from ~~lower~~higher revenue.

Europe

Net revenue from our Europe segment ~~decreased~~increased by ~~$193.9~~$135.4 million, or ~~23.4%~~127.1%, to ~~$633.9~~$241.9 million for the ~~nine months~~quarter ended ~~October 31, 2020, from $827.8~~May 1, 2021, compared to $106.5 million in the same prior-year period. In constant currency, net revenue ~~decreased~~increased by ~~24.9%~~110.0%, driven primarily by ~~temporary store closures and lower store traffic resulting from the COVID-19 pandemic and, to~~ a ~~lesser extent, lower~~shift in wholesale shipments ~~resulting from lower demand.~~into fiscal 2022. Comparable store sales (including e-commerce) increased 44% in U.S. dollars and 32% in constant currency compared to the same prior-year period. The inclusion of our e-commerce sales increased the comparable sales percentage by 43% in U.S. dollars and 38% in constant currency. As of May 1, 2021, the Company directly operated 511 stores in Europe compared to 517 stores at May 2, 2020, excluding concessions, which represents a 1.2% decrease over the same prior-year period. Currency translation fluctuations relating to our European operations favorably impacted net revenue by ~~$12.0~~$18.2 million.

Operating margin ~~decreased 220 basis points~~increased 43.4% to ~~4.4%~~1.7% for the ~~nine months~~quarter ended ~~October 31, 2020, from 6.6%~~May 1, 2021, compared to negative 41.7% in the same prior-year ~~period,~~quarter, driven by ~~a higher SG&A rate, partially offset by higher gross margins. The higher SG&A rate was due primarily to~~ overall ~~deleveraging~~leveraging of expenses ~~resulting from lower revenue. The higher gross margins were driven primarily by the favorable impact from certain rent concessions granted related to the COVID-19 pandemic and,~~due to a ~~lesser extent, higher initial markups, partially offset by overall deleveraging of occupancy costs due to lower revenue.~~shift in wholesale shipments.

Earnings from operations from our Europe segment ~~decreased~~increased by ~~$26.9~~$48.6 million, or ~~49.1%~~109.5%, to ~~$27.9~~$4.2 million for the ~~nine months~~quarter ended ~~October 31, 2020,~~May 1, 2021, compared to loss from ~~$54.7~~operations of $44.4 million in the same prior-year ~~period. The decrease was~~period, driven primarily by the ~~unfavorable~~favorable impact on earnings from ~~lower~~higher revenue ~~partially offset by lower occupancy costs~~ and ~~to a lesser extent, lower SG&A~~overall leveraging of expenses. Currency translation fluctuations relating to our European operations ~~favorably~~unfavorably impacted earnings from operations by ~~$4.7~~$1.4 million.

Asia

Net revenue from our Asia segment ~~decreased~~increased by ~~$98.2~~$15.3 million, or ~~39.2%~~37.8%, to ~~$152.6~~$55.7 million for the ~~nine months~~quarter ended ~~October 31, 2020, compared to $250.8~~May 1, 2021, from $40.4 million in the same prior-year period. In constant currency, net revenue ~~decreased~~increased by ~~38.8%~~29.3%, due primarily to lower comparable sales driven ~~primarily~~ by ~~lower~~reduced store traffic ~~and, to a lesser extent, permanent store closures and temporary store closures~~ resulting from the COVID-19 ~~pandemic. Currency translation fluctuations relating to our~~ ~~Asian operations unfavorably impacted net revenue by $0.9 million.~~

Operating margin decreased 12.0% to negative 16.2% for the nine months ended October 31, 2020, from negative 4.2% in the same prior-year period, driven by lower gross margins and, to a lesser extent, a higher SG&A rate. The lower gross margins were due primarily to the negative impacts from the COVID-19 pandemic ~~which resulted in higher inventory reserves. The higher SG&A rate was driven primarily by overall deleveraging of expenses, partially offset by the favorable impact of business mix.~~

~~Loss from operations from our~~ ~~Asia~~ ~~segment deteriorated by $14.3 million, or 137.0%, to $24.7 million for the nine months ended October 31, 2020, from $10.4 million~~ in the same prior-year period. Comparable store sales (including e-commerce) increased 32% in U.S. dollars and 23% in constant currency. The ~~deterioration was driven primarily~~inclusion of the Company’s e-commerce sales decreased the comparable sales percentage by ~~the unfavorable impact on earnings from lower revenue~~11% in U.S. dollars and ~~to a lesser extent, lower product margins, partially offset by lower SG&A expenses and, to a lesser extent, lower occupancy costs.~~constant currency. Currency translation fluctuations relating to our Asian operations favorably impacted net revenue by $3.4 million.

Operating margin increased 53.2% to negative 3.2% for the quarter ended May 1, 2021, from negative 56.4% in the same prior-year quarter, as the prior year’s quarter included significant inventory reserves and the current quarter benefited from leveraging of expenses.

Loss from operations from our Asia segment was $1.8 million for the quarter ended May 1, 2021, compared to loss from operations ~~by $1.0 million.~~of $22.8 million in the same prior-year period. The decrease was due to

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significant inventory reserves in the prior year quarter and the leveraging of expenses in the current year quarter.

Licensing

Net royalty revenue from our Licensing segment ~~decreased~~increased by ~~$15.1~~$8.6 million, or ~~25.3%~~66.4%, to ~~$44.5~~$21.5 million for the ~~nine months~~quarter ended ~~October 31, 2020, compared to $59.6~~May 1, 2021, from $12.9 million in the same prior-year period, due primarily to ~~lower~~higher demand ~~resulting from the COVID-19 pandemic.~~and strong performance in handbags, fragrance, and footwear.

Earnings from operations from our Licensing segment ~~decreased~~increased by ~~$11.7~~$9.3 million, or ~~22.7%~~92.5%, to ~~$39.8~~$19.4 million for the ~~nine months~~quarter ended ~~October 31, 2020, compared to $51.6~~May 1, 2021, from $10.1 million in the same prior-year period. The ~~decrease~~increase was ~~driven primarily by the unfavorable impact~~mainly due to ~~earnings from lower revenue.~~leveraging of expenses.

Corporate Overhead

Unallocated corporate overhead ~~decreased~~increased by ~~$8.6~~$11.9 million to ~~$71.2~~$28.8 million for the ~~nine months~~quarter ended ~~October 31, 2020, from $79.8~~May 1, 2021, compared to $16.9 million in the same prior-year ~~period,~~period. The increase was due ~~primarily~~ to lower expenses in the prior year quarter mainly related to expense savings in response to the pandemic and lower performance-based ~~compensation and, to a lesser extent, lower overall discretionary expenses.~~compensation.

Non-GAAP Measures

The ~~Company’s reported~~ financial ~~results are~~information presented in ~~accordance with GAAP. The reported net earnings (loss) attributable to Guess?, Inc.~~this Quarterly Report includes non-GAAP financial measures, such as adjusted results and ~~diluted earnings (loss) per share for~~constant currency financial information. For the three ~~and nine~~ months ended ~~October 31,~~May 1, 2021 and May 2, 2020, ~~reflect~~the adjusted results exclude the impact of ~~asset impairment charges, net gains on lease modifications,~~ certain professional service, ~~and~~ legal fees and related net credits, certain separation charges, asset impairment charges, net (gains) losses on lease modifications, non-cash amortization of debt discount on the Company’s convertible senior notes, ~~and~~ the related income tax ~~effects~~impacts of these adjustments as well as certain discrete income tax ~~adjustments. The reported net earnings attributable~~adjustments, where applicable. These non-GAAP measures are provided in addition to, ~~Guess?, Inc.~~ and ~~diluted earnings per share~~not as alternatives for, the ~~three and nine months ended November 2, 2019 reflect the impact of asset impairment charges, certain professional service and legal fees and related net credits, amortization of debt discount on the~~ Company’s ~~convertible senior notes and the tax effects of these adjustments as well as adjustments to uncertain tax positions excluded from results in prior years.~~ reported GAAP results.

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

The adjusted measures for the three months ended ~~October 31, 2020~~May 1, 2021 exclude the impact of ~~$10.3~~$0.4 million of asset impairment charges; ~~minimal~~$2.1 million net gains on lease modifications; ~~a net credit of $0.2~~$1.1 million of certain professional services and legal fees and related ~~costs; $0.7 million of separation charges; $2.6~~net credits; $2.8 million of amortization of debt discount on the Company’s convertible senior ~~notes~~notes; and ~~$0.6~~$0.1 million in additional tax expense from certain discrete tax adjustments. The asset impairment charges related primarily to impairment of property and equipment related to certain retail locations resulting from lower revenue and future cash flow projections from the ongoing effects of the COVID-19 pandemic. Certain professional service and legal fees and related net credits were primarily due to amounts which the Company otherwise would not have incurred as part of its business operations. These items resulted in a combined $1.9 million negative impact (after considering the related tax benefit of $0.4 million), or an unfavorable $0.03 per share impact during the three months ended May 1, 2021. Net earnings attributable to Guess?, Inc. were $12.0 million and diluted earnings were $0.18 per common share for the three months ended May 1, 2021. Excluding the impact of these items, adjusted net earnings attributable to Guess?, Inc. were $13.9 millionand adjusted diluted earnings were $0.21 per common share for the three months ended May 1, 2021.

The adjusted measures for the three months ended May 2, 2020 exclude the impact of $53.0 million of asset impairment charges; $0.5 million of net losses on lease terminations; $0.3 million of certain professional services and legal fees and related net credits; $0.2 million of separation charges; $2.6 million of amortization

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of debt discount on the Company’s convertible senior notes; and a benefit of $7.9 million from certain discrete tax adjustments. The asset impairment charges related to the impairment of certain operating lease right-of-use assets and, to a lesser extent, impairment of property and equipment related to certain retail locations resulting from lower revenue and future cash flow projections ~~from~~due to the ongoing effects of the COVID-19 pandemic. The net losses on lease terminations related primarily to the early termination of certain lease agreements. Certain professional service and legal fees and related ~~(credits) costs~~net credits were primarily due to amounts which the Company otherwise would not have incurred as part of its business operations. The separation-related charges mainly related to cash severance payments as a result of headcount reductions in response to the pandemic. During the three months ended October 31, 2020, the Company recognized valuation allowances of $1.2 million resulting from jurisdictions where there have been cumulative net operating losses, limiting the Company’s ability to consider other subjective evidence to continue to recognize the existing deferred tax assets. This was partially offset by a discrete tax benefit of approximately $0.7 million related to lower forecasts for the current fiscal year which changes the estimate of the net operating losses that the Company can carryback to tax years with a higher federal corporate tax rate as allowed under the CARES Act. These items resulted in a combined $11.0 million negative impact (after considering the related tax benefit of $3.1 million), or an unfavorable $0.17 per share impact during the three months ended October 31, 2020. Net earnings attributable to Guess?, Inc. were $26.4 million and diluted earnings were $0.41 per common share for the three months ended October 31, 2020. Excluding the impact of

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~~these items, adjusted net earnings attributable to Guess?, Inc. were $37.4 millionand adjusted diluted earnings were $0.58 per common share for the three months ended October 31, 2020.~~

The adjusted measures for the nine months ended October 31, 2020 exclude the impact of $75.3 million of asset impairment charges; $0.5 million of net gains on lease modifications; a net credit of $0.1 million of certain professional services and legal fees and related costs; $3.4 million of separation charges; $7.8 million of amortization of debt discount related to the Company’s convertible senior notes; and $0.8 million in additional tax expense from certain discrete tax adjustments. The asset impairment charges related to the impairment of certain operating lease right-of-use assets and, to a lesser extent, impairment of property and equipment related to certain retail locations resulting from lower revenue and future cash flow projections from the ongoing effects of the COVID-19 pandemic. The net gains on lease modifications related primarily to the early termination of lease agreements for certain of the Company’s retail locations. The separation-related charges mainly related to certain cash severance payments, partially offset by adjustments to non-cash stock-based compensation expense related to our former Chief Executive Officer resulting from changes in expected performance conditions of certain previously granted stock awards that were no longer subject to service vesting requirements after his departure. During the ~~nine~~three months ended ~~October 31,~~May 2, 2020, the Company recognized a valuation allowance of $4.9 million resulting from jurisdictions where there have been cumulative net operating losses, limiting the Company’s ability to consider other subjective evidence to continue to recognize the existing deferred tax assets. This was partially offset by a tax benefit of approximately ~~$4.6~~$11.8 million from a tax rate change related to the ability to carryback net operating losses to tax years with a higher federal corporate tax rate as allowed under the CARES Act enacted in March 2020. This benefit was partially offset by a valuation allowance of $3.7 million resulting from jurisdictions where there have been cumulative net operating losses, limiting the Company’s ability to consider other subjective evidence to continue to recognize the existing deferred tax assets. These items resulted in a combined ~~$69.5~~$38.8 million negative impact (after considering the related tax benefit of ~~$17.3~~$9.8 million), or an unfavorable ~~$1.08~~$0.59 per share impact during the ~~nine~~three months ended ~~October 31,~~May 2, 2020. Net loss attributable to Guess?, Inc. was ~~$151.6~~$157.7 million and diluted loss was ~~$2.35~~$2.40 per common share for the ~~nine~~three months ended ~~October 31,~~May 2, 2020. Excluding the impact of these items, adjusted net loss attributable to Guess?, Inc. was ~~$82.2~~$118.9 millionand adjusted diluted loss was ~~$1.27 per common share for the nine months ended October 31, 2020.~~

The adjusted measures for the three months ended November 2, 2019 exclude the impact of $1.8 million of asset impairment charges; a net credit of $1.4 million of certain professional services and legal fees and related costs and $2.4 million of amortization of debt discount on the Company’s convertible senior notes. The asset impairment charges related primarily to the impairment of property and equipment and, to a lesser extent, impairment of certain operating lease right-of-use assets related to certain retail locations resulting from under-performance and expected store closures. These items resulted in a combined $2.5 million negative impact (after considering the related tax benefit of $0.4 million), or an unfavorable $0.04 per share impact during the three months ended November 2, 2019. Net earnings attributable to Guess?, Inc. were $12.4 million and diluted earnings were $0.18$1.81 per common share for the three months ended ~~November~~May 2, ~~2019. Excluding the impact of these items, adjusted net earnings attributable to Guess?, Inc. were $14.9 million and adjusted diluted earnings were $0.22per common share for the three months ended November 2, 2019.~~2020.

The adjusted measures for the nine months ended November 2, 2019 exclude the impact of $5.1 million of asset impairment charges; a net credit of $0.7 million of certain professional services and legal fees and related costs and $5.1 million of amortization of debt discount on the Company’s convertible senior notes. The asset impairment charges related primarily to the impairment of property and equipment and, to a lesser extent, impairment of certain operating lease right-of-use assets related to certain retail locations resulting from under-performance and expected store closures. These items resulted in a combined $6.3 million negative impact (after considering the related tax benefit of $3.2 million), or an unfavorable $0.09 per share impact during the nine months ended November 2, 2019. Net earnings attributable to Guess?, Inc. were $16.4 million and diluted earnings were $0.22 per common share for the nine months ended November 2, 2019. Excluding the impact of these items, adjusted net earnings attributable to Guess?, Inc. were $22.7 million and adjusted diluted earnings were $0.31 per common share for the nine months ended November 2, 2019.

Our discussion and analysis herein also includes certain constant currency financial information. Foreign currency exchange rate fluctuations affect the amount reported from translating the Company’s foreign

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revenue, expenses and balance sheet amounts into U.S. dollars. These rate fluctuations can have a significant effect on reported operating results under GAAP. The Company provides constant currency information to enhance the visibility of underlying business trends, excluding the effects of changes in foreign currency translation rates. To calculate net revenue and earnings (loss) from operations on a constant currency basis, operating results for the current-year period are translated into U.S. dollars at the average exchange rates in effect during the comparable period of the prior year. To calculate balance sheet amounts on a constant currency basis, the current period balance sheet amount is translated into U.S. dollars at the exchange rate in effect at the comparable prior-year period end. The constant currency calculations do not adjust for the impact of revaluing specific transactions denominated in a currency that is different from the functional currency of that entity when exchange rates fluctuate. The constant currency information presented may not be comparable to similarly titled measures reported by other companies.

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

Liquidity and Capital Resources

We need liquidity globally primarily to fund our working capital, occupancy costs, interest payments on our debt, remodeling and rationalization of our retail stores, shop-in-shop programs, concessions, systems, infrastructure, other existing operations, expansion plans, international growth and potential acquisitions and investments. In addition, in the U.S. we need liquidity to fund share repurchases and payment of dividends to our stockholders. Generally, our working capital needs are highest during the late summer and fall as our inventories increase before the holiday selling period. During the ~~nine~~three months ended ~~October 31, 2020,~~May 1, 2021, we relied primarily on trade credit, available cash, real estate and other operating leases, finance leases, proceeds from

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our credit facilities and term loans and internally generated funds to finance our operations. We anticipate that we will be able to satisfy our ongoing cash requirements during the next 12 months for working capital, capital expenditures, payments on our debt, finance leases and operating leases as well as lease ~~termination~~modification payments, potential acquisitions and investments, and share repurchases and dividend payments to stockholders, primarily with cash flow from operations and existing cash balances as supplemented by borrowings under our existing Credit Facility in the U.S. and Canada as well as bank facilities in Europe and China and proceeds from our term loans, as needed. As further noted above under the “—COVID-19 Business Update” section, the Company has also implemented a number of other measures to help preserve liquidity in response to the COVID-19 pandemic. We expect to settle the principal amount of our outstanding convertible senior notes in 2024 in cash and any excess in shares. Such arrangements are described further in “Part I, Item 1. Financial Statements – Note 9 – Borrowings and Finance Lease Obligations” and “Part I, Item 1. Financial Statements – Note 10 – Convertible Senior Notes and Related Transactions” of this Form 10-Q. Due to the seasonality of our business and cash needs, we may increase borrowings under our established credit facilities from time-to-time during the next 12 months. If we experience a sustained decrease in consumer demand related to the COVID-19 pandemic, we may require access to additional credit, which may not be available to us on commercially acceptable terms or at all.

Our outstanding convertible senior notes may be converted at the option of the holders as described in “Part I, Item 1, Financial Statements – Note 10 – Convertible Senior Notes and Related Transactions” of this Form 10-Q and in “Note 10 – Convertible Senior Notes and Related Transactions” of the Consolidated Financial Statements included in our Annual Report on Form 10-K. As of May 1, 2021, none of the conditions allowing holders of the convertibles notes to convert had been met. If our trading price exceeds 130% of the conversion price of the convertible notes for at least 20 trading days during the 30 consecutive trading-day period ending on, and including, September 30, 2021, holders of the convertible notes would have the right to convert their convertible notes during the calendar quarter beginning October 1, 2021. Upon conversion, we will pay or deliver, as the case may be, cash, shares of our common stock or a combination of cash and shares of our common stock, at our election, in the manner and subject to the terms and conditions provided in the indenture governing the convertible notes. The convertible note hedge transaction we entered into in connection with our issuance of the convertible notes is expected generally to reduce the potential dilution upon conversion of the convertible notes and/or offset any cash payments we are required to make in excess of the principal amount of convertible notes that are converted, as the case may be. We expect to settle the principal amount of our outstanding convertible senior notes in 2024 in cash and any excess in shares.

On March 27, 2020, the U.S. government enacted the CARES Act to provide economic relief from the COVID-19 pandemic. Among other provisions, the CARES Act allows for a full offset of taxable income in a five-year carryback period for net operating losses, which will reduce current period tax expense and may result in a refund of previously paid income tax amounts at higher historical tax rates. ~~During the nine months ended October 31, 2020, the Company recognized a tax benefit of approximately $4.6 million related to this provision.~~

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In December 2017, the U.S. government enacted the Tax Reform, which significantly changed the U.S. corporate income tax laws, including moving from a global taxation regime to a territorial regime and lowering the U.S. federal corporate income tax rate from 35% to 21%. The Tax Reform also required a one-time mandatory transition tax on accumulated foreign earnings. Any income tax payable related to the transition tax is due over an eight-year period beginning in calendar 2018. The balance related to this transition tax included in other long-term liabilities was $19.9 million (excluding related interest) for each of the periods ended October 31, 2020 and February 1, 2020.

The Company has historically considered the undistributed earnings of its foreign subsidiaries to be indefinitely reinvested. As a result of the Tax Reform, the Company had a substantial amount of previously taxed earnings that could be distributed to the U.S. without additional U.S. taxation. The Company continues to evaluate its plans for reinvestment or repatriation of unremitted foreign earnings and regularly reviews its cash positions and determination of permanent reinvestment of foreign earnings. If the Company determines that all or a portion of such foreign earnings are no longer indefinitely reinvested, it may be subject to additional foreign withholding taxes and U.S. state income taxes, beyond the Tax Reform’s one-time transition tax. The Company intends to indefinitely reinvest the remaining earnings from the Company’s foreign subsidiaries for which a deferred tax liability has not already been recorded. It is not practicable to estimate the amount of tax that might be payable if these earnings were repatriated due to the complexities associated with the hypothetical calculation. As of ~~October 31, 2020,~~May 1, 2021, the Company had cash and cash equivalents of ~~$365.3~~$395.1 million, of which approximately ~~$80.2~~$101.0 million was held in the U.S.

Excess cash and cash equivalents, which represent the majority of our outstanding cash and cash equivalents balance, are held primarily in overnight deposit and short-term time deposit accounts and money market accounts. Please see “—Important Factors Regarding Forward-Looking Statements” discussed above, “Part II, Item 1A. Risk Factors” in this Form 10-Q and “Part I, Item 1A. Risk Factors” contained in the Company’s most recent Annual Report on Form 10-K for the fiscal year ended ~~February 1, 2020~~January 30, 2021 for a discussion of risk factors which could reasonably be likely to result in a decrease of internally generated funds available to finance capital expenditures and working capital requirements.

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COVID-19 Impact on Liquidity

Refer to the ~~“—COVID-19~~“COVID-19 Business Update” section above for a discussion of the impact from the COVID-19 pandemic on our financial performance and our liquidity.

In light of store closures and reduced traffic in stores, the Company has taken certain actions with respect to certain of its existing leases, including engaging with landlords to discuss rent deferrals as well as other rent concessions. ~~Since April 2020,~~ Throughout the COVID-19 pandemic, we have suspended rental payments and/or paid reduced rental amounts with respect to our retail stores that were closed or ~~were~~ experiencing drastically reduced customer traffic as a result of the COVID-19 pandemic. ~~We are engaging~~Over the last year, we have successfully negotiated with several landlords, including some of our larger landlords and have received rent abatement benefits as well as new lease terms for some of our affected leases. The Company continues to engage in discussions with ~~the~~additional affected landlords in an effort to achieve appropriate rent relief and other lease concessions and, in some cases, to terminate existing leases. ~~However, there can be no assurances~~In some instances, where negotiations with landlords have proven unsuccessful, the Company is engaged in litigation related to rent obligations both during the ~~outcome~~COVID-19 pandemic and through the term of ~~such negotiations.~~the lease.

~~Nine~~Three Months Ended ~~October 31,~~May 1, 2021 and May 2, 2020 ~~and November 2, 2019~~

The Company has presented below the cash flow performance comparison of the ~~nine~~three months ended ~~October 31, 2020,~~May 1, 2021, compared to the ~~nine~~three months ended ~~November~~May 2, ~~2019.~~2020.

Operating Activities

Net ~~cash provided by operating activities was $98.4 million for the nine months ended October 31, 2020, compared to net~~ cash used in operating activities ~~of $28.0~~was $53.6 million for the ~~nine~~three months ended ~~November~~May 1, 2021, compared to $61.6 million for the three months ended May 2, ~~2019,~~2020, or an improvement of ~~$126.4~~$7.9 million. This improvement was driven primarily by ~~favorable~~higher cash flows generated from net earnings, partially offset by unfavorable changes in working ~~capital, partially offset by lowercash flows generated from~~net earnings. The favorable changes in working capital were due primarily to the extension of vendor payment terms on our accounts payable balances and the suspension and/or reduction of our operating lease payments, which could be temporary, as well as overall lower expenditures and improved inventory management. In addition, during the nine months ended November 2, 2019, net cash used in operating activities included the payment of the European Commission fine of $45.6 million which was imposed and accrued in fiscal 2019.

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capital.

Investing Activities

Net cash used in investing activities was ~~$14.6~~$7.8 million for the ~~nine~~three months ended ~~October 31, 2020,~~May 1, 2021, compared to ~~$48.0~~$5.7 million for the ~~nine~~three months ended ~~November~~May 2, ~~2019.~~2020. Net cash used in investing activities for the ~~nine~~three months ended ~~October 31, 2020~~May 1, 2021 related primarily to capital expenditures incurred on leasehold improvements, investments in technology infrastructure and, to a lesser extent, existing store remodeling programs and international retail expansion. ~~In addition, purchases of investments, settlements of forward exchange currency contracts and proceeds from the sale of long-term assets are also included in cash flows used in investing activities.~~

The ~~decrease~~increase in cash used in investing activities was driven primarily by ~~lower spending on~~higher strategic investments in technology and retail ~~expansion~~remodels during the ~~nine~~three months ended ~~October 31, 2020~~May 1, 2021 compared to the same prior-year period. During the ~~nine~~three months ended ~~October 31, 2020,~~May 1, 2021, the Company opened 1311 directly-operated stores compared to 60five directly-operated stores that were opened in the same prior-year period.

Financing Activities

Net cash used in financing activities was ~~$4.5~~$9.7 million for the ~~nine~~three months ended ~~October 31, 2020,~~May 1, 2021, compared to net cash ~~used in~~provided by financing activities of ~~$21.7~~$210.1 million for the ~~nine~~three months ended ~~November~~May 2, ~~2019.~~2020. Net cash used in financing activities for the ~~nine~~three months ended ~~October 31, 2020~~May 1, 2021 related primarily to ~~repurchases of shares of the Company’s common stock. In addition,~~ payment of dividends ~~cash activity from the issuance of common stock under our equity plans, payments related to~~and repayments on borrowings and finance lease obligations, ~~net~~partially offset by proceeds from ~~borrowings and net proceeds related to issuance of convertible senior notes and related warrants are also included~~borrowings.

The change in cash ~~flows from financing activities.~~

~~The decrease in cash used in~~provided by (used in) financing activities was driven primarily by ~~the~~ lower ~~investments made in share repurchases and, to a lesser extent, lower payment of dividends and higher net~~ proceeds received from borrowings and higher payment of dividends during the ~~nine~~three months ended ~~October 31, 2020~~May 1, 2021 compared to the same prior-year period. ~~This was partially offset by net proceeds from the issuance of convertible senior notes and related warrants during the nine months ended November 2, 2019.~~

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

During the ~~nine~~three months ended ~~October 31, 2020,~~May 1, 2021, changes in foreign currency translation rates ~~increased~~decreased our reported cash, cash equivalents and restricted cash balance by ~~$1.4~~$2.8 million. This compares to a decrease of ~~$2.7~~$8.0 million in cash, cash equivalents and restricted cash driven by changes in foreign currency translation rates during the ~~nine~~three months ended ~~November~~May 2, ~~2019.~~2020.

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Working Capital

As of ~~October 31, 2020,~~May 1, 2021, the Company had net working capital (including cash and cash equivalents) of ~~$397.5~~$497.5 million, compared to ~~$425.8~~$470.0 million at ~~February 1, 2020~~January 30, 2021 and ~~$340.8~~$388.2 million at ~~November~~May 2, ~~2019.~~2020.

The Company’s primary working capital needs are for the current portion of lease liabilities, accounts receivable and inventory. The accounts receivable balance consists of trade receivables relating primarily to the Company’s wholesale business in Europe and, to a lesser extent, to its wholesale businesses in the Americas and Asia, royalty receivables relating to its licensing operations, credit card and retail concession receivables related to its retail businesses and certain other receivables. Accounts receivable increased by ~~$0.2~~$66.8 million, or ~~0.1%~~27.9%, to ~~$300.4~~$306.3 million as of ~~October 31, 2020,~~May 1, 2021, from ~~$300.2~~$239.5 million at ~~November~~May 2, ~~2019.~~2020. On a constant currency basis, accounts receivable ~~decreased~~increased by ~~$5.5~~$45.7 million, or ~~1.8%~~19.1%, when compared to ~~November~~May 2, ~~2019.~~2020. As of ~~October 31, 2020,~~May 1, 2021, approximately 48% of our total net trade receivables and ~~61%~~60% of our European net trade receivables were subject to credit insurance coverage, certain bank guarantees or letters of credit for collection purposes. Our credit insurance coverage contains certain terms and conditions specifying deductibles and annual claim limits. Inventory ~~decreased~~increased by ~~$126.7~~$12.4 million, or ~~24.4%~~3.1%, to ~~$393.2~~$404.9 million as of ~~October 31, 2020,~~May 1, 2021, from ~~$519.9~~$392.5 million at ~~November~~May 2, ~~2019.~~2020. On a constant currency basis, inventory decreased by ~~$127.9~~$15.7 million, or ~~24.6%~~4.0%, when compared to ~~November~~May 2, ~~2019,~~2020, driven primarily by improved inventory ~~management compared to the same prior-year period.~~

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management.

Capital Expenditures

Gross capital expenditures totaled ~~$12.4~~$9.1 million, before deducting lease incentives of ~~$1.2~~$1.1 million, for the ~~nine~~three months ended ~~October 31, 2020.~~May 1, 2021. This compares to gross capital expenditures of ~~$49.0~~$6.0 million, before deducting lease incentives of ~~$5.0~~$0.4 million for the ~~nine~~three months ended ~~November~~May 2, ~~2019.~~2020.

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

Dividends

Share Repurchases

On June 26, 2012, the Company’s Board of Directors authorized a program to repurchase, from time-to-time and as market and business conditions warrant, up to $500 million of the Company’s common stock. Repurchases under the program may be made on the open market or in privately negotiated transactions, pursuant to Rule 10b5-1 trading plans or other available means. There is no minimum or maximum number of shares to be repurchased under the program, which may be discontinued at any time, without prior notice. There were 4,000,000 shares repurchased at an aggregate cost of $38.8 million under the program during the nine months ended October 31, 2020. The shares were repurchased during the three months ended August 1, 2020. During the nine months ended November 2, 2019, the Company repurchased 16,412,609 shares under the program at an aggregate cost of $280.5 million, which is inclusive of theno shares repurchased under the ~~ASR Contract. The Company repurchased 10,264,052 shares at an aggregate cost of $201.5 million~~Company’s share repurchase program during the three months ended May 4, 2019, 749,252 shares at an aggregate cost of $11.0 million during the three months ended August 3, 2019 and an additional 5,399,305 shares at an aggregate cost of $68.0 million during the three months ended November 2, 2019.1, 2021. As of ~~October 31, 2020,~~May 1, 2021, the Company had remaining authority under the program to purchase $47.8 million of its common stock.

Borrowings and Finance Lease Obligations and Convertible Senior Notes

See “Part I, Item 1. Financial Statements – Note 9 – Borrowings and Finance Lease Obligations” and “Part I, Item 1. Financial Statements – Note 10 – Convertible Senior Notes and Related Transactions” in this Form 10-Q for disclosures about our borrowings and finance lease obligations and convertible senior notes.

Supplemental Executive Retirement Plan

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

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

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 ~~$68.1~~$71.6 million and ~~$67.7~~$72.1 million as of ~~October 31, 2020~~May 1, 2021 and ~~February 1, 2020,~~January 30, 2021, respectively, and

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were included in other assets in the Company’s condensed consolidated balance sheets. As a result of changes in the value of the insurance policy investments, the Company recorded minimal unrealized ~~gains (losses) of $(0.3)~~losses and $3.1 million ~~and $1.7 million~~unrealized losses in other ~~income (expense)~~expense during the three ~~and nine~~ months ended ~~October 31,~~May 1, 2021 and May 2, 2020, ~~respectively, and unrealized gains of $2.0 million and $5.0 million in other income during the three and nine months ended November 2, 2019,~~ respectively. The projected benefit obligation was ~~$51.6~~$52.1 million and ~~$51.9~~$52.3 million as of ~~October 31, 2020~~May 1, 2021 and ~~February 1, 2020,~~January 30, 2021, respectively, and was included in accrued expenses and other long-term liabilities in the Company’s condensed consolidated balance sheets depending on the expected timing of payments. SERP benefit payments of ~~$0.4~~$0.5 million and ~~$1.3~~$0.6 million were made during the three ~~and nine~~ months ended ~~October 31,~~May 1, 2021 and May 2, 2020, ~~respectively. SERP benefit payments of $0.4 million and $1.3 million were made during the three and nine months ended November 2, 2019,~~ respectively.

Contractual Obligations and Commitments

During the nine months ended October 31, 2020, the Company entered into certain term loans to ensure financial flexibility and maintain maximum liquidity in response to uncertainty surrounding the COVID-19 pandemic. See “Part I, Item 1. Financial Statements – Note 9 – Borrowings and Finance Lease Obligations” for further information on these arrangements. As of ~~October 31, 2020,~~May 1, 2021, there were no ~~other~~ material changes to our contractual obligations and commitments outside the ordinary course of business compared to the disclosures included in our Form 10-K for the fiscal year ended ~~February 1, 2020.~~

~~Wholesale Backlog~~

~~We generally receive orders~~January 30, 2021. See “Part I, Item 1. Financial Statements – Note 9 – Borrowings and Finance Lease Obligations” and “Part I, Item 1. Financial Statements – Note 10 – Convertible Senior Notes and Related Transactions” for fashion apparel three to six months prior to the time the products are delivered to our customers’ stores. The backlog of wholesale orders at any given time is affected by various factors, including pricing, seasonality, cancellations, the scheduling of market weeks, and the timing of the receipt and shipment of orders and may include orders for multiple seasons. Accordingly, a comparison of backlogs of wholesale orders from period-to-period is not necessarily meaningful and may not be indicative of eventual actual shipments. This is particularly true in light of recent events resulting from the COVID-19 pandemic, which we expect could continue to have a material impactfurther information on ~~our wholesale orders and backlog.~~

~~U.S. and Canada Backlog.~~Our U.S. and Canadian wholesale backlog as of November 30, 2020, consisting primarily of orders for fashion apparel, was $36.5 million in constant currency, compared to $47.5 million at December 2, 2019, a decrease of 23.3%.

~~Europe Backlog.~~ As of November 29, 2020, the European wholesale backlog was €321.9 million, compared to €296.0 million at December 1, 2019, an increase of 8.8%. The backlog as of November 29, 2020 is comprised primarily of sales orders for the Spring/Summer 2021 and Fall/Winter 2021 seasons.these arrangements.

Application of Critical Accounting Policies and Estimates

Our critical accounting policies reflecting our estimates and judgments are described in “Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in our Annual Report on Form 10-K for the fiscal year ended ~~February 1, 2020~~January 30, 2021 filed with the SEC on April ~~1, 2020.~~9, 2021. There have been no significant changes to our critical accounting policies during the ~~nine~~three months ended ~~October 31, 2020.~~May 1, 2021.

Recently Issued Accounting Guidance

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

ITEM 3.Quantitative and Qualitative Disclosures About Market Risk.

Exchange Rate Risk

More than two-thirds of product sales ~~and licensing revenue~~ recorded for the ~~nine~~three months ended ~~October 31, 2020~~May 1, 2021 were denominated in currencies other than the U.S. dollar. The Company’s primary exchange rate risk relates to operations in Europe, Canada, South Korea, China, Hong Kong and Mexico. Changes in

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currencies affect our earnings in various ways. For further discussion on currency-related risk, please refer to our risk factors under “Part I, Item 1A. Risk Factors” contained in the Company’s most recent Annual Report on Form 10-K for the fiscal year ended ~~February 1, 2020.~~January 30, 2021.

Foreign Currency Translation Adjustment

The local selling currency is typically the functional currency for all of the Company’s significant international operations. In accordance with authoritative guidance, assets and liabilities of the Company’s foreign operations are translated from foreign currencies into U.S. dollars at period-end rates, while income and expenses are translated at the weighted average exchange rates for the period. The related translation adjustments are reflected as a foreign currency translation adjustment in accumulated other comprehensive income (loss) within stockholders’ equity. In addition, the Company records foreign currency translation adjustments related to its noncontrolling interests within stockholders’ equity. Accordingly, our reported other comprehensive income (loss) could be unfavorably impacted if the U.S. dollar strengthens, particularly against the British pound, Canadian dollar, Chinese yuan, euro, Japanese yen, Korean won, Mexican peso, Polish zloty, Russian rouble and Turkish lira. Alternatively, if the U.S. dollar weakens relative to those currencies, our reported other comprehensive income (loss) could be favorably impacted. Our foreign currency translation adjustments recorded in other comprehensive income (loss) are significantly impacted by net assets denominated in euros.

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

During the ~~nine~~three months ended ~~October 31, 2020,~~May 1, 2021, the total foreign currency translation adjustment ~~increased~~decreased stockholders’ equity by ~~$13.3~~$2.2 million, driven primarily by the weakening of the U.S. dollar against the euro.

Foreign Currency Transaction Gains and Losses

Transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency, including gains and losses on foreign exchange currency contracts (see below), are included in the condensed consolidated statements of income (loss). Net foreign currency transaction ~~gains (losses)~~losses of ~~$(10.2)~~$4.1 million and ~~$3.1~~$10.5 million were included in the determination of net earnings (loss) for the ~~nine~~three months ended ~~October 31,~~May 1, 2021 and May 2, 2020, ~~and November 2, 2019,~~ respectively.

Foreign Exchange Currency Contracts

The Company operates in foreign countries, which exposes it to market risk associated with foreign currency exchange rate fluctuations. Various transactions that occur primarily in Europe, Canada, South Korea, China, Hong Kong and Mexico are denominated in U.S. dollars, British pounds and Russian roubles and thus are exposed to earnings risk as a result of exchange rate fluctuations when converted to their functional currencies. These types of transactions include U.S. dollar-denominated purchases of merchandise and U.S. dollar- and British pound-denominated intercompany liabilities. In addition, certain operating expenses, tax liabilities and pension-related liabilities are denominated in Swiss francs and are exposed to earnings risk as a result of exchange rate fluctuations when converted to the functional currency. Further, there are certain real estate leases that are denominated in a currency other than the functional currency of the respective entity that entered into the agreement (primarily Swiss francs, Russian roubles and Polish zloty). As a result, the Company may be exposed to volatility related to unrealized gains or losses on the translation of present value of future lease payment obligations when translated at the exchange rate as of a reporting period-end. The Company is also subject to certain translation and economic exposures related to its net investment in certain of its international subsidiaries. The Company enters into derivative financial instruments to offset some, but not all, of its exchange risk. In addition, some of the derivative contracts in place will create volatility during

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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 31, 2020,~~May 1, 2021, the Company purchased U.S. dollar forward contracts in Europe totaling US$~~85.0~~40.0 million that were designated as cash flow hedges. As of ~~October 31, 2020,~~May 1, 2021, the Company had forward contracts outstanding for its European operations of US$~~106.0~~126.0 million to hedge forecasted merchandise purchases, which are expected to mature over the next 1415 months. The Company’s foreign exchange currency contracts are recorded in its condensed consolidated balance sheet at fair value based on quoted market rates. Changes in the fair value of the U.S. dollar forward contracts, designated as cash flow hedges for forecasted merchandise purchases, are recorded as a component of accumulated other comprehensive income (loss) within stockholders’ equity and are recognized in cost of product sales in the period that approximates the time the hedged merchandise inventory is sold. Changes in the fair value of the U.S. dollar forward contracts, designated as cash flow hedges for forecasted intercompany royalties, are recorded as a component of accumulated other comprehensive income (loss) within stockholders’ equity and are recognized in other income (expense) in the period in which the royalty expense is incurred.

As of ~~October 31, 2020,~~May 1, 2021, accumulated other comprehensive income (loss) related to foreign exchange currency contracts included a net unrealized loss of approximately ~~$0.9~~$2.3 million net of tax, which will be recognized in cost of product sales over the following 12 months, at the then current values on a pre-tax basis, which can be different than the current quarter-end values.

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As of ~~October 31, 2020,~~May 1, 2021, the net unrealized loss of the remaining open forward contracts recorded in the Company’s condensed consolidated balance sheet was approximately ~~$1.2~~$1.3 million.

At ~~February 1, 2020,~~January 30, 2021, the Company had forward contracts outstanding for its European operations of US$~~148.6~~100.0 million that were designated as cash flow hedges. At ~~February 1, 2020,~~January 30, 2021, the net unrealized ~~gain~~loss of these open forward contracts recorded in the Company’s condensed consolidated balance sheet was approximately ~~$4.0~~$3.3 million.

Foreign Exchange Currency Contracts Not Designated as Hedging Instruments

The Company has also foreign exchange currency contracts that are not designated as hedging instruments for accounting purposes. Changes in fair value of foreign exchange currency contracts not designated as hedging instruments are reported in net earnings (loss) as part of other income (expense). For the ~~nine~~three months ended ~~October 31, 2020,~~May 1, 2021, the Company recorded a net ~~loss~~gain of ~~$3.1~~$0.1 million for its euro dollar foreign exchange currency contracts not designated as hedges, which has been included in other income (expense). As of ~~October 31, 2020,~~May 1, 2021, the Company had euro foreign exchange currency contracts to purchase US$~~38.0~~19.0 million expected to mature over the next ~~seven months.~~one month. As of ~~October 31, 2020,~~May 1, 2021, the net unrealized loss of these open forward contracts recorded in the Company’s condensed consolidated balance sheet was approximately ~~$0.8~~$0.9 million.

At ~~February 1, 2020,~~January 30, 2021, the Company had euro foreign exchange currency contracts to purchase US$~~46.1~~19.0 million. At ~~February 1, 2020,~~January 30, 2021, the net unrealized ~~gain~~loss of these open forward contracts recorded in the Company’s condensed consolidated balance sheet was approximately ~~$0.9~~$1.2 million.

Sensitivity Analysis

As of ~~October 31, 2020,~~May 1, 2021, a sensitivity analysis of changes in foreign currencies when measured against the U.S. dollar indicates that, if the U.S. dollar had uniformly weakened by 10% against all of the U.S. dollar denominated foreign exchange derivatives totaling US$~~144.0~~145.0 million, the fair value of the instruments would have decreased by ~~$16.0~~$16.1 million. Conversely, if the U.S. dollar uniformly strengthened by 10% against all of the U.S. dollar denominated foreign exchange derivatives, the fair value of these instruments would have increased by ~~$13.1~~$13.2 million. Any resulting changes in the fair value of the hedged instruments may be partially offset by changes in the fair value of certain balance sheet positions (primarily U.S. dollar denominated liabilities in our foreign operations) impacted by the change in the foreign currency rate. The ability to reduce

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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

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

Interest Rate Swap Agreement Designated as Cash Flow Hedge

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

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the variability of cash flows in interest payments associated with the Company’s floating-rate Mortgage Debt, are recorded as a component of accumulated other comprehensive income (loss) within stockholders’ equity and are amortized to interest expense over the term of the related debt.

As of ~~October 31, 2020,~~May 1, 2021, accumulated other comprehensive income (loss) related to the interest rate swap agreement included a net unrealized loss of ~~$0.8~~$0.5 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 31, 2020,~~May 1, 2021, the net unrealized loss of the interest rate swap recorded in the Company’s condensed consolidated balance sheet was approximately ~~$1.1~~$0.7 million. As of ~~February 1, 2020,~~January 30, 2021, the net unrealized loss of the interest rate swap recorded in the Company’s condensed consolidated balance sheet was approximately ~~$0.3~~$1.0 million.

Sensitivity Analysis

As of ~~October 31, 2020,~~May 1, 2021, the Company had borrowings under its credit facility arrangements of ~~$9.2~~$5.1 million which are based on variable rates of interest. Accordingly, changes in interest rates would impact the Company’s results of operations in future periods. A 100 basis point increase in interest rates would not have had a significant effect on interest expense for the ~~nine~~three months ended ~~October 31, 2020.~~May 1, 2021.

As of ~~October 31, 2020,~~May 1, 2021, the Company also had indebtedness related to term loans of ~~$51.9~~$56.0 million, finance lease obligations of ~~$22.2~~$22.4 million and its Mortgage Debt of ~~$18.7~~$18.3 million. The term loans provide for annual interest rates ranging between 0.5% to ~~1.5%~~2.2%. The finance lease obligations are based on fixed interest rates derived from the respective agreements. The Mortgage Debt is covered by a separate interest rate swap agreement with a swap fixed interest rate of approximately 3.06% that matures in January 2026. The interest rate swap agreement is designated as a cash flow hedge and converts the nature of the Company’s Mortgage Debt from LIBOR floating-rate debt to fixed-rate debt.

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The fair values of the Company’s debt instruments are based on the amount of future cash flows associated with each instrument discounted using the Company’s incremental borrowing rate. As of ~~October 31, 2020~~May 1, 2021 and ~~February 1, 2020,~~January 30, 2021, the carrying value was not materially different from fair value, as the interest rates on the Company’s debt approximated rates currently available to the Company. The fair value of the Company’s convertible senior notes is determined based on inputs that are observable in the market and have been classified as Level 2 in the fair value hierarchy.

ITEM 4. Controls and Procedures.

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

There was no change in our internal control over financial reporting during the ~~third~~first quarter of fiscal ~~2021~~2022 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

ITEM 1.Legal Proceedings.

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

ITEM 1A. Risk Factors.

~~Other than the risk factor noted below, there~~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 ~~February 1, 2020,~~January 30, 2021 filed with the SEC on April ~~1, 2020.~~

Our inability to successfully negotiate rent deferrals or other rent concessions with respect to retail stores that were closed or significantly impacted by the COVID-19 pandemic could result in financial damages, unwanted store closures or other consequences that could negatively impact our financial position, results of operations and cash flows.

Since April 2020, we have suspended rental payments and/or paid reduced rental amounts with respect to our retail stores that were closed or were experiencing drastically reduced customer traffic as a result of the COVID-19 pandemic. We are engaging in discussions with the affected landlords in an effort to achieve appropriate rent relief and other lease concessions and, in some cases, to terminate existing leases. However, there can be no assurances that those discussions will result in satisfactory agreements between the parties. Some landlords of these existing leases have alleged, and others in the future may allege (through notices, lawsuits or other legal actions), that the Company is in default, seeking financial damages, eviction, termination, acceleration of future rent payments or other remedies. While we believe that we have strong legal grounds to support our position for non-payment or partial payment of rent associated with the COVID-19 pandemic, there can be no assurances that such arguments will prevail or that we will be able to reach mutually agreeable terms with our landlords. In addition, any disputes that arise could be costly to litigate and may jeopardize our ability to continue operations at the impacted locations. If any of these scenarios occur and are significant they could negatively impact our future consolidated financial position, results of operations and cash flows.

9, 2021.

~~Table of Contents~~

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

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
August 2, 2020 to August 29, 2020
Repurchase program1
— — — $ 47,834,956
Employee transactions2
— — —
August 30, 2020 to October 3, 2020
Repurchase program1
— — — $ 47,834,956
Employee transactions2
1,029 $ 10.72 —
October 4, 2020 to October 31, 2020
Repurchase program1
— — — $ 47,834,956
Employee transactions2
— — —
Total
Repurchase program1
— — —
Employee transactions2
1,029 $ 10.72 —
The Company’s share repurchases during each fiscal month of the first quarter of fiscal 2022 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
January 31, 2021 to February 27, 2021
Repurchase program1	—	—		—	$	47,834,956
Employee transactions2	—	—		—
February 28, 2021 to April 3, 2021
Repurchase program1	—	—		—	$	47,834,956
Employee transactions2	595	$	22.86	—
April 4, 2021 to May 1, 2021
Repurchase program1	—	—		—	$	47,834,956
Employee transactions2	82	27.85		—
Total
Repurchase program1	—	—		—
Employee transactions2	677	$	23.47	—

Notes:

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

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

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ITEM 6.Exhibits.


Exhibit Number						Description
3.1.						Restated Certificate of Incorporation of the Registrant (incorporated by reference from Amendment No. 3 to the Registrant’s Registration Statement on Form S-1 (Registration No. 333-4419) filed July 30, 1996).
3.2.						Third Amended and Restated Bylaws of the Registrant (incorporated by reference from the Registrant’s Annual Report on Form 10-K for the year ended February 3, 2018).







†~~10.1.~~						~~Fourth Amendment to Lease Agreement~~ ~~dated as of October 7, 2020~~ ~~between~~ ~~the~~ ~~Registrant and 1444 Partners, Ltd. with respect to the Registrant's corporate headquarters~~.
†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.						Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
††32.2.						Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
†101.INS						XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
†101.SCH						XBRL Taxonomy Extension Schema Document
†101.CAL						XBRL Taxonomy Extension Calculation Linkbase Document
†101.DEF						XBRL Taxonomy Extension Definition Linkbase Document
†101.LAB						XBRL Taxonomy Extension Label Linkbase Document
†101.PRE						XBRL Taxonomy Extension Presentation Linkbase Document
†104						Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)



†			Filed herewith
††			Furnished herewith

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SIGNATURES

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


		Guess?, Inc.

Date:	~~December~~June 4, ~~2020~~2021	By:	/s/ CARLOS ALBERINI
			Carlos Alberini
			Chief Executive Officer

Date:	~~December~~June 4, ~~2020~~2021	By:	/s/ KATHRYN ANDERSON
			Kathryn Anderson
			Chief Financial Officer
			(Principal Financial Officer)

7253


	Nine Months Ended Oct 31, 2020
	Foreign Currency Translation Adjustment		Derivative Financial Instruments Designated as Cash Flow Hedges		Defined Benefit Plans		Total
Balance at February 1, 2020	$	(137,289)	$	6,300	$	(8,921)	$	(139,910)
Gains (losses) arising during the period	13,961		(2,546)		(214)		11,201
Reclassification to net loss for (gains) losses realized	0		(5,520)		216		(5,304)
Net other comprehensive income (loss)	13,961		(8,066)		2		5,897
Balance at October 31, 2020	$	(123,328)	$	(1,766)	$	(8,919)	$	(134,013)


	Nine Months Ended Nov 2, 2019
	Foreign Currency Translation Adjustment		Derivative Financial Instruments Designated as Cash Flow Hedges		Defined Benefit Plans		Total
Balance at February 2, 2019	$	(119,546)	$	2,999	$	(9,632)	$	(126,179)
Cumulative adjustment reclassified from retained earnings due to adoption of new accounting guidance1	0		1,981		0		1,981
Gains (losses) arising during the period	(14,277)		6,618		(42)		(7,701)
Reclassification to net earnings for (gains) losses realized	0		(4,280)		270		(4,010)
Net other comprehensive income (loss)	(14,277)		2,338		228		(11,711)
Balance at November 2, 2019	$	(133,823)	$	7,318	$	(9,404)	$	(135,909)


	Gains (Losses) Recognized in OCI				Location of Gain (Loss) Reclassified from Accumulated OCI into Earnings (Loss)	Gains (Losses) Reclassified from Accumulated OCI into Earnings (Loss)
	Nine Months Ended					Nine Months Ended
	Oct 31, 2020		Nov 2, 2019			Oct 31, 2020		Nov 2, 2019
Derivatives designated as cash flow hedges:
Foreign exchange currency contracts	$	(2,034)	$	8,676	Cost of product sales	$	6,299	$	4,813


Interest rate swap	(862)		(1,095)		Interest expense	(112)		118