Q2 Fiscal 2022
Revenues Reached $629 Million, Up 58% Compared to Q2 Fiscal 2021,
Down 8% Compared to Q2 Fiscal 2020
More than Doubled
Operating Margin Versus the Pre-Pandemic Levels to Reach
13.9%
Q2 Earnings Per Share
Increased by Over 2.5x Compared to Pre-Pandemic Levels to Finish at
$0.91
Raising Full-Year
Outlook for Operating Margin to 10.0%; Increasing Long-Term
Operating Margin Goal to 12% and Adjusted Earnings Per Share to
$3.50 by Fiscal 2024
Increases Share
Repurchase Authorization to $200 Million
Guess?, Inc. (NYSE: GES) today reported financial results for
its second quarter ended July 31, 2021.
Carlos Alberini, Chief Executive Officer, commented, “We are
very pleased with our performance this quarter, which significantly
exceeded our earnings expectations. Compared to the second quarter
of fiscal 2020, the LLY period, we expanded operating margin by
over 700 basis points to 13.9%. Our revenues for the quarter
finished down 8% versus LLY. The entire decline was due to a timing
shift of European wholesale shipments into the third quarter and
the impact of permanent store closures. We achieved this result in
spite of the pandemic and being significantly less promotional in
all of our direct-to-consumer businesses. Our operating profit
growth was strong, up 90% to LLY. This resulted in earnings per
share of $0.91, versus $0.35 in the LLY period.”
Paul Marciano, Co-Founder and Chief Creative Officer, added,
“During the quarter we made great progress on our brand elevation
strategy. This is a very ambitious project that touches almost
every aspect of our business. The work that our teams have put into
this has been extraordinary, and I want to thank them for their
great contributions to this key initiative for our Company and our
future.”
Mr. Alberini concluded, “Based on our progress, we now expect to
deliver our 10% operating margin goal in the current year and are
raising our expectations to reach 12% by fiscal year 2024, which
would yield a return on invested capital of over 30% and adjusted
earnings per share of around $3.50. The Guess brand has significant
white space for revenue growth, and we are confident in our ability
to reach our $2.8 billion revenue target by fiscal 2024. We
continue to prioritize returning value to our shareholders and
announced today that our Board has approved an increase of our
existing share buyback program to $200 million. Overall, I could
not be more excited about our future.”
Adjusted Amounts
This press release contains certain non-GAAP, or adjusted,
financial measures. References to “adjusted” results exclude the
impact of (i) asset impairment charges, (ii) net gains on lease
modifications, (iii) certain professional service and legal fees
and related (credits) costs, (iv) certain separation charges, (v)
non-cash debt discount amortization on our convertible senior
notes, (vi) the related income tax effects of the foregoing items,
as well as the impact from changes in the income tax law on
deferred income taxes in certain tax jurisdictions, net income tax
settlements and adjustments to specific uncertain income tax
positions, and (vii) certain discrete income tax adjustments, in
each case where applicable. A reconciliation of reported GAAP
results to comparable non-GAAP results is provided in the
accompanying tables and discussed under the heading “Presentation
of Non-GAAP Information” below.
Second Quarter Fiscal 2022 Results
Compared to Second Quarter Fiscal 2020
For the second quarter of fiscal 2022, the Company recorded GAAP
net earnings of $61.1 million, a 141.1% increase from $25.3 million
for the second quarter of fiscal 2020. GAAP diluted EPS increased
160.0% to $0.91 for the second quarter of fiscal 2022, compared to
$0.35 for the second quarter of fiscal 2020. The Company estimates
a positive impact from its share buybacks of $0.11 and a minimal
impact from currency on GAAP diluted EPS in the second quarter of
fiscal 2022 when compared to the second quarter of fiscal 2020.
For the second quarter of fiscal 2022, the Company’s adjusted
net earnings were $64.1 million, a 133.7% increase from $27.4
million for the second quarter of fiscal 2020. Adjusted diluted EPS
increased 152.6% to $0.96, compared to $0.38 for the second quarter
of fiscal 2020. The Company estimates its share buybacks had a
positive impact of $0.13 and currency had a minimal impact on
adjusted diluted EPS in the second quarter of fiscal 2022 when
compared to the second quarter of fiscal 2020.
Net Revenue. Total net revenue for the second quarter of
fiscal 2022 decreased 8.0% to $628.6 million, from $683.2 million
in the second quarter of fiscal 2020. In constant currency, net
revenue decreased by 10.8%.
Earnings from Operations. GAAP earnings from operations
for the second quarter of fiscal 2022 increased 90.0% to $87.4
million (including $0.4 million net gains on lease modifications,
$1.5 million in non-cash impairment charges taken on certain
long-lived store related assets and a $0.3 million favorable
currency translation impact), from $46.0 million (including $1.5
million in non-cash impairment charges taken on certain long-lived
store related assets) in the second quarter of fiscal 2020. GAAP
operating margin in the second quarter of fiscal 2022 increased
7.2% to 13.9%, from 6.7% in the second quarter of fiscal 2020,
driven primarily by lower markdowns, lower occupancy costs and
higher initial markups. The negative impact of currency on
operating margin for the quarter was approximately 30 basis
points.
For the second quarter of fiscal 2022, adjusted earnings from
operations increased 84.9% to $88.6 million, from $47.9 million in
the second quarter of fiscal 2020. Adjusted operating margin
increased 7.1% to 14.1%, from 7.0% in the second quarter of fiscal
2020, driven primarily by lower markdowns, lower occupancy costs
and higher initial markups.
Second Quarter Fiscal 2022 Results
Compared to Second Quarter Fiscal 2021
For the second quarter of fiscal 2022, the Company recorded GAAP
net earnings of $61.1 million, as compared to a GAAP net loss of
$20.4 million for the second quarter of fiscal 2021. GAAP diluted
EPS increased to $0.91 for the second quarter of fiscal 2022,
compared to a GAAP diluted loss per share of $0.31 for the same
prior-year quarter. The Company estimates a positive impact from
its share buybacks and currency of $0.03 and $0.01, respectively,
on GAAP diluted EPS in the second quarter of fiscal 2022 when
compared to the prior-year quarter.
For the second quarter of fiscal 2022, the Company’s adjusted
net earnings were $64.1 million, as compared to the Company’s
adjusted net loss of $0.6 million for the second quarter of fiscal
2021. Adjusted diluted EPS increased to $0.96, compared to adjusted
diluted loss per share of $0.01 for the same prior-year quarter.
The Company estimates its share buybacks had a positive impact of
$0.03 and currency had a minimal impact on adjusted diluted EPS in
the second quarter of fiscal 2022 when compared to the prior-year
quarter.
Net Revenue. Total net revenue for the second quarter of
fiscal 2022 increased 57.7% to $628.6 million, from $398.5 million
in the same prior-year quarter. In constant currency, net revenue
increased by 51.1%.
Earnings (Loss) from Operations. GAAP earnings from
operations for the second quarter of fiscal 2022 increased to $87.4
million (including $0.4 million net gains on lease modifications,
$1.5 million in non-cash impairment charges taken on certain
long-lived store related assets and a $2.3 million favorable
currency translation impact), from a GAAP loss from operations of
$14.3 million (including $0.9 million net gains on lease
modifications and $12.0 million in non-cash impairment charges
taken on certain long-lived store related assets) in the same
prior-year quarter. GAAP operating margin in the second quarter of
fiscal 2022 increased 17.5% to 13.9%, from negative 3.6% in the
same prior-year quarter, driven primarily by overall leveraging of
expenses. The positive impact of currency on operating margin for
the quarter was approximately 30 basis points.
For the second quarter of fiscal 2022, adjusted earnings from
operations increased to $88.6 million, from an adjusted operating
loss of $0.9 million in the same prior-year quarter. Adjusted
operating margin increased 14.3% to 14.1%, from negative 0.2% in
the same prior-year quarter, driven primarily by overall leveraging
of expenses.
Six-Month Period Fiscal 2022 Results
Compared to Six-Month Period Fiscal 2020
For the six months ended July 31, 2021, the Company recorded
GAAP net earnings of $73.1 million, compared to $3.9 million for
the six months ended August 3, 2019. GAAP diluted EPS was $1.10 for
the six months ended July 31, 2021, compared to $0.05 for the six
months ended August 3, 2019. The Company estimates a net positive
impact from its share buybacks and its prior year convertible notes
transaction of $0.16 and a negative currency impact of $0.06 on
GAAP diluted EPS for the six months ended July 31, 2021 when
compared to the six months ended August 3, 2019.
For the six months ended July 31, 2021, the Company recorded
adjusted net earnings of $78.0 million, compared to $7.8 million
for the six months ended August 3, 2019. Adjusted diluted EPS was
$1.17, compared to $0.10 for the six months ended August 3, 2019.
The Company estimates its share buybacks and its prior year
convertible notes transaction had a net positive impact of $0.20
and currency had a negative impact of $0.06 on adjusted diluted EPS
during the six months ended July 31, 2021 when compared to the six
months ended August 3, 2019.
Net Revenue. Total net revenue for the first six months
of fiscal 2022 decreased 5.8% to $1.15 billion, from $1.22 billion
for the six months ended August 3, 2019. In constant currency, net
revenue decreased by 8.3%.
Earnings from Operations. GAAP earnings from operations
for the first six months of fiscal 2022 was $114.0 million
(including $2.6 million net gains on lease modifications, $1.9
million in non-cash impairment charges taken on certain long-lived
store related assets and a $1.9 million unfavorable currency
translation impact), compared to $21.5 million (including $3.3
million in non-cash impairment charges taken on certain long-lived
store related assets) for the six months ended August 3, 2019. GAAP
operating margin for the first six months of fiscal 2022 increased
8.1% to 9.9%, from 1.8% for the six months ended August 3, 2019,
driven primarily by lower occupancy costs, higher initial markups
and lower markdowns. The negative impact of currency on operating
margin for the first six months of fiscal 2020 was approximately 50
basis points.
For the six months ended July 31, 2021, adjusted earnings from
operations was $114.5 million, compared to $25.5 million for the
six months ended August 3, 2019. Adjusted operating margin improved
7.9% to 10.0% for the six months ended July 31, 2021, from 2.1% for
the six months ended August 3, 2019, driven primarily by lower
occupancy costs, higher initial markups and lower markdowns.
Six-Month Period Fiscal 2022 Results
Compared to Six-Month Period Fiscal 2021
For the six months ended July 31, 2021, the Company recorded
GAAP net earnings of $73.1 million, compared to GAAP net loss of
$178.0 million for the six months ended August 1, 2020. GAAP
diluted EPS was $1.10 for the six months ended July 31, 2021,
compared to GAAP diluted loss per share of $2.72 during the same
prior-year period. The Company estimates a net positive impact from
its share buybacks and its prior year convertible notes transaction
and currency of $0.05 and $0.10, respectively, on GAAP diluted EPS
for the six months ended July 31, 2021 when compared to the same
prior-year period.
For the six months ended July 31, 2021, the Company recorded
adjusted net earnings of $78.0 million, compared to an adjusted net
loss of $119.6 million for the six months ended August 1, 2020.
Adjusted diluted EPS was $1.17, compared to adjusted loss per share
of $1.83 during the same prior-year period. The Company estimates
its share buybacks and its prior year convertible notes transaction
and currency had a net positive impact of $0.05 and $0.09,
respectively, on adjusted diluted EPS during the six months ended
July 31, 2021 when compared to the same prior-year period.
Net Revenue. Total net revenue for the first six months
of fiscal 2022 increased 74.4% to $1.15 billion, from $658.8
million in the same prior-year period. In constant currency, net
revenue increased by 66.6%.
Earnings (Loss) from Operations. GAAP earnings from
operations for the first six months of fiscal 2022 was $114.0
million (including $2.6 million net gains on lease modifications,
$1.9 million in non-cash impairment charges taken on certain
long-lived store related assets and a $1.6 million favorable
currency translation impact), compared to GAAP loss from operations
of $176.8 million (including $0.4 million net gains on lease
modifications and $64.9 million in non-cash impairment charges
taken on certain long-lived store related assets) in the same
prior-year period. GAAP operating margin in fiscal 2022 increased
36.7% to 9.9%, from negative 26.8% in the same prior-year period,
driven primarily by overall leveraging of expenses. The impact of
currency on operating margin was minimal for the six months ended
July 31, 2021.
For the six months ended July 31, 2021, adjusted earnings from
operations was $114.5 million, compared to adjusted loss from
operations of $109.5 million for the six months ended August 1,
2020. Adjusted operating margin improved 26.6% to 10.0% for the six
months ended July 31, 2021, from negative 16.6% in the same
prior-year period, driven primarily by overall leveraging of
expenses.
Outlook
Given the current circumstances regarding the coronavirus (or
“COVID-19”) crisis and its uncertain impact on our operations, we
are not providing detailed guidance for the third quarter or the
full fiscal year ending January 29, 2022. We expect revenues in the
third quarter of fiscal 2022 to be slightly negative to flat versus
the third quarter of fiscal 2020 as pandemic-related traffic
declines are almost offset by continued momentum in our global
e-commerce business and the favorable shift of European wholesale
shipments from the second quarter into the third quarter.
For the full fiscal year 2022, assuming no additional
COVID-related shutdowns past the second quarter, we expect revenues
to be down mid-single digits versus fiscal 2020 and operating
margin to reach approximately 10.0%. The expectations for the full
year also assume a return to a normal cadence of product
development for our European wholesale business. These comparisons
are versus the pre-pandemic periods from two fiscal years prior in
order to provide a more normalized comparison.
COVID-19 Second Quarter Business
Update
The COVID-19 pandemic is continuing to impact the Company’s
businesses. During the second quarter of fiscal 2022, the Company
experienced lower net revenue compared to the second quarter of
fiscal 2020 as it remained challenged by lower demand, capacity
restrictions and temporary store closures. In light of the current
environment, we continue to strategically manage expenses in order
to protect profitability.
During the second quarter of fiscal 2022, the Company gradually
reopened its stores that were closed at the end of the first
quarter of fiscal 2022 due to COVID-19 restrictions. The overall
impact resulted in stores being closed for approximately 5% of the
total days during the second quarter of fiscal 2022, primarily in
Europe and Canada. As of July 31, 2021, 100% of our stores were
open.
Dividend
The Company’s Board of Directors has approved a quarterly cash
dividend of $0.1125 per share on the Company’s common stock. The
dividend will be payable on September 24, 2021 to shareholders of
record as of the close of business on September 8, 2021.
Share Repurchase
The Company announced today that its Board of Directors has
authorized a program to repurchase, from time-to-time and as market
and business conditions warrant, up to $200 million of its common
stock. The newly authorized $200 million program includes $48
million remaining under the Company's previously authorized $500
million repurchase program. Repurchases may be made on the open
market or in privately negotiated transactions, pursuant to Rule
10b5-1 trading plans or other available means. There is no minimum
or maximum number of shares to be repurchased under the program and
the program may be discontinued at any time, without prior
notice.
Presentation of Non-GAAP
Information
The financial information presented in this release includes
non-GAAP financial measures, such as adjusted results, constant
currency financial information, free cash flows and return on
invested capital. For the three months and six months ended July
31, 2021, August 1, 2020 and August 3, 2019, the adjusted results
exclude the impact of certain professional service and legal fees
and related (credits) costs, certain separation charges, asset
impairment charges, net gains on lease modifications, non-cash
amortization of debt discount on the Company’s convertible senior
notes, the related income tax effects of the foregoing items, as
well as the impact from changes in the income tax law on deferred
income taxes in certain tax jurisdictions, net income tax
settlements and adjustments to specific uncertain income tax
positions, as well as certain discrete income tax adjustments,
where applicable. These non-GAAP measures are provided in addition
to, and not as alternatives for, the Company’s reported GAAP
results.
The Company has excluded these items from its adjusted financial
measures primarily because it believes these items are not
indicative of the underlying performance of its business and the
adjusted financial information provided is useful for investors to
evaluate the comparability of the Company’s operating results and
its future outlook (when reviewed in conjunction with the Company’s
GAAP financial statements). A reconciliation of reported GAAP
results to comparable non-GAAP results is provided.
This release also includes certain constant currency financial
information. Foreign currency exchange rate fluctuations affect the
amount reported from translating the Company’s foreign revenue,
expenses and balance sheet amounts into U.S. dollars. These rate
fluctuations can have a significant effect on reported operating
results under GAAP. The Company provides constant currency
information to enhance the visibility of underlying business
trends, excluding the effects of changes in foreign currency
translation rates. To calculate net revenue and earnings (loss)
from operations on a constant currency basis, actual or forecasted
results for the current-year period are translated into U.S.
dollars at the average exchange rates in effect during the
comparable period of the prior year. The constant currency
calculations do not adjust for the impact of revaluing specific
transactions denominated in a currency different from the
functional currency of that entity when exchange rates fluctuate.
However, in calculating the estimated impact of currency on our
earnings (loss) per share for our actual or forecasted results, the
Company estimates gross margin (including the impact of
merchandise-related hedges) and expenses using the appropriate
prior-year rates, translates the estimated foreign earnings at the
comparable prior-year rates, and excludes the year-over-year
earnings impact of gains or losses arising from balance sheet
remeasurement and foreign currency contracts not designated as
merchandise hedges. The constant currency information presented may
not be comparable to similarly titled measures reported by other
companies.
The Company also includes information regarding its free cash
flows in this release. The Company calculates free cash flows as
cash flows from operating activities less (i) purchases of property
and equipment and (ii) payments for property and equipment under
finance leases. Free cash flows are not intended to be an
alternative to cash flows from operating activities as a measure of
liquidity, but rather to provide additional visibility to investors
regarding how much cash is generated for discretionary and
non-discretionary items after deducting purchases of property and
equipment and payments for property and equipment under finance
leases. Free cash flow information presented may not be comparable
to similarly titled measures reported by other companies. A
reconciliation of reported GAAP cash flows from operating
activities to the comparable non-GAAP free cash flow measure is
provided.
The Company also includes information regarding its return on
invested capital (or “ROIC”) in this release. The Company defines
ROIC as adjusted net operating profit after income taxes divided by
two-year average invested capital. The Company believes ROIC is a
useful financial measure for investors in evaluating how
efficiently the Company deploys its capital. The Company’s method
of calculating ROIC may differ from other companies’ methods and,
therefore, might not be comparable.
Investor Conference Call
The Company will hold a conference call at 4:45 pm (ET) on
August 25, 2021 to discuss the news announced in this press
release. A live webcast of the conference call will be accessible
at www.guess.com via the “Investor Relations” link. The webcast
will be archived on the website for 30 days.
About Guess?
Guess?, Inc. designs, markets, distributes and licenses a
lifestyle collection of contemporary apparel, denim, handbags,
watches, eyewear, footwear and other related consumer products.
Guess? products are distributed through branded Guess? stores as
well as better department and specialty stores around the world. As
of July 31, 2021, the Company directly operated 1,046 retail stores
in the Americas, Europe and Asia. The Company’s partners and
distributors operated 551 additional retail stores worldwide. As of
July 31, 2021, the Company and its partners and distributors
operated in approximately 100 countries worldwide. For more
information about the Company, please visit www.guess.com.
Forward-Looking
Statements
Except for historical information contained herein, certain
matters discussed in this press release or the related conference
call and webcast, including statements concerning the potential
actions and impacts related to the COVID-19 pandemic; statements
concerning the Company’s future outlook including with respect to
the third quarter and full year of fiscal 2022 as well as fiscal
2024; statements concerning the Company’s expectations, goals,
future prospects, global cost reduction opportunities, longer-term
operating margin, revenue, EPS and ROIC expectations, capital
allocation plans, cash needs and current business strategies and
strategic initiatives; and statements expressing optimism or
pessimism about future operating results and growth opportunities
are forward-looking statements that are made pursuant to the safe
harbor provisions of the Private Securities Litigation Reform Act
of 1995. Forward-looking statements, which are frequently indicated
by terms such as “expect,” “could,” “will,” “should,” “goal,”
“strategy,” “believe,” “estimate,” “continue,” “outlook,” “plan,”
“create,” “see,” and similar terms, are only expectations, and
involve known and unknown risks and uncertainties, which may cause
actual results in future periods to differ materially from what is
currently anticipated. Factors which may cause actual results in
future periods to differ materially from current expectations
include, among others: our ability to maintain our brand image and
reputation; domestic and international economic or political
conditions, including economic and other events that could
negatively impact consumer confidence and discretionary consumer
spending; the continuation or worsening of impacts related to the
COVID-19 pandemic, including business, financial, human capital,
litigation and other impacts to the Company and its partners; our
ability to successfully negotiate rent relief or other
lease-related terms with our landlords; our ability to maintain
adequate levels of liquidity; changes to estimates related to
impairments, inventory and other reserves, including the impact of
the CARES Act, which were made using the best information available
at the time; changes in the competitive marketplace and in our
commercial relationships; our ability to anticipate and adapt to
changing consumer preferences and trends; our ability to manage our
inventory commensurate with customer demand; risks related to the
timing and costs of delivering merchandise to our stores and our
wholesale customers; unexpected or unseasonable weather conditions;
our ability to effectively operate our various retail concepts,
including securing, renewing, modifying or terminating leases for
store locations; our ability to successfully and/or timely
implement our growth strategies and other strategic initiatives;
our ability to successfully implement or update information
technology systems, including enhancing our global omni-channel
capabilities; our ability to expand internationally and operate in
regions where we have less experience, including through joint
ventures; risks related to our convertible senior notes issued in
April 2019, including our ability to settle the liability in cash;
our ability to successfully or timely implement plans for cost
reductions; our ability to effectively and efficiently manage the
volume and costs associated with our European distribution centers
without incurring shipment delays; our ability to attract and
retain key personnel; obligations or changes in estimates arising
from new or existing litigation, income tax and other regulatory
proceedings; risks related to the complexity of the Tax Reform,
future clarifications and legislative amendments thereto, as well
as our ability to accurately interpret and predict its impact on
our cash flows and financial condition; the risk of economic
uncertainty associated with the United Kingdom’s departure from the
European Union (“Brexit”) or any other similar referendums that may
be held; the occurrence of unforeseen epidemics, such as the
COVID-19 pandemic; other catastrophic events; changes in U.S. or
foreign income tax or tariff policy, including changes to tariffs
on imports into the U.S.; accounting adjustments to our unaudited
financial statements identified during the completion of our annual
independent audit of financial statements and financial controls or
from subsequent events arising after issuance of this release; risk
of future non-cash asset impairments, including goodwill,
right-of-use lease assets and/or other store asset impairments;
restructuring charges; our ability to adapt to new regulatory
compliance and disclosure obligations; risks associated with our
foreign operations, such as violations of laws prohibiting improper
payments and the burdens of complying with a variety of foreign
laws and regulations (including global data privacy regulations);
risks associated with the acts or omissions of our third party
vendors, including a failure to comply with our vendor code of
conduct or other policies; risks associated with cyber-attacks and
other cyber security risks; risks associated with our ability to
properly collect, use, manage and secure consumer and employee
data; risks associated with our vendors’ ability to maintain the
strength and security of information technology systems; and
changes in economic, political, social and other conditions
affecting our foreign operations and sourcing, including the impact
of currency fluctuations, global income tax rates and economic and
market conditions in the various countries in which we operate. In
addition to these factors, the economic, technological, managerial,
and other risks identified in the Company’s most recent annual
report on Form 10-K and other filings with the Securities and
Exchange Commission, including but not limited to the risk factors
discussed therein, could cause actual results to differ materially
from current expectations. The current global economic climate,
length and severity of the COVID-19 pandemic, and uncertainty
surrounding potential changes in U.S. policies and regulations may
amplify many of these risks. The Company undertakes no obligation
to publicly update or revise any forward-looking statements,
whether as a result of new information, future events or
otherwise.
Guess?, Inc. and
Subsidiaries
Condensed Consolidated
Statements of Income (Loss)
(amounts in thousands, except per
share data)
Three Months Ended
July 31, 2021
August 1, 2020
August 3, 2019
$
%
$
%
$
%
Product sales
$
606,691
96.5
%
$
386,392
97.0
%
$
664,678
97.3
%
Net royalties
21,933
3.5
%
12,147
3.0
%
18,542
2.7
%
Net revenue
628,624
100.0
%
398,539
100.0
%
683,220
100.0
%
Cost of product sales
334,538
53.2
%
251,511
63.1
%
417,554
61.1
%
Gross profit
294,086
46.8
%
147,028
36.9
%
265,666
38.9
%
Selling, general and administrative
expenses
205,617
32.8
%
150,293
37.7
%
218,175
32.0
%
Asset impairment charges
1,501
0.2
%
11,969
3.0
%
1,504
0.2
%
Net gains on lease modifications
(420
)
(0.1
%)
(885
)
(0.2
%)
—
—
%
Earnings (loss) from operations
87,388
13.9
%
(14,349
)
(3.6
%)
45,987
6.7
%
Other income (expense):
Interest expense
(6,009
)
(1.0
%)
(5,941
)
(1.5
%)
(4,951
)
(0.7
%)
Interest income
461
0.1
%
436
0.1
%
313
0.0
%
Other income (expense), net
(1,001
)
(0.1
%)
5,548
1.4
%
(6,355
)
(0.9
%)
Earnings (loss) before income tax
expense
80,839
12.9
%
(14,306
)
(3.6
%)
34,994
5.1
%
Income tax expense
17,692
2.9
%
6,386
1.6
%
8,818
1.3
%
Net earnings (loss)
63,147
10.0
%
(20,692
)
(5.2
%)
26,176
3.8
%
Net earnings (loss) attributable to
noncontrolling interests
2,085
(0.3
%)
(334
)
(0.1
%)
854
0.1
%
Net earnings (loss) attributable to
Guess?, Inc.
$
61,062
9.7
%
$
(20,358
)
(5.1
%)
$
25,322
3.7
%
Net earnings (loss) per common share
attributable to common stockholders:
Basic
$
0.94
$
(0.31
)
$
0.36
Diluted
$
0.91
$
(0.31
)
$
0.35
Weighted average common shares outstanding
attributable to common stockholders:
Basic
64,336
65,177
70,508
Diluted
66,074
65,177
71,356
Effective income tax rate
21.9
%
(44.6
)%
25.2
%
Adjusted selling, general and
administrative expenses1:
$
205,508
32.7
%
$
147,937
37.1
%
$
217,770
31.9
%
Adjusted earnings (loss) from
operations1:
$
88,578
14.1
%
$
(909
)
(0.2
%)
$
47,896
7.0
%
Adjusted net earnings (loss) attributable
to Guess?, Inc.1:
$
64,078
10.2
%
$
(639
)
(0.2
%)
$
27,414
4.0
%
Adjusted diluted earnings (loss) per
common share attributable to common stockholders1:
$
0.96
$
(0.01
)
$
0.38
Adjusted effective income tax rate1:
22.0
%
156.2
%
28.2
%
______________________________________________________________________
See page 22 for footnotes.
Guess?, Inc. and
Subsidiaries
Condensed Consolidated
Statements of Income (Loss)
(amounts in thousands, except per
share data)
Six Months Ended
July 31, 2021
August 1, 2020
August 3, 2019
$
%
$
%
$
%
Product sales
$
1,105,168
96.2
%
$
633,709
96.2
%
$
1,182,551
96.9
%
Net royalties
43,458
3.8
%
25,081
3.8
%
37,360
3.1
%
Net revenue
1,148,626
100.0
%
658,790
100.0
%
1,219,911
100.0
%
Cost of product sales
642,982
56.0
%
477,533
72.5
%
772,296
63.3
%
Gross profit
505,644
44.0
%
181,257
27.5
%
447,615
36.7
%
Selling, general and administrative
expenses
392,301
34.1
%
293,581
44.5
%
422,820
34.6
%
Asset impairment charges
1,942
0.2
%
64,941
9.9
%
3,279
0.3
%
Net gains on lease modifications
(2,565
)
(0.2
%)
(429
)
(0.1
%)
—
—
%
Earnings (loss) from operations
113,966
9.9
%
(176,836
)
(26.8
%)
21,516
1.8
%
Other income (expense):
Interest expense
(11,935
)
(1.0
%)
(11,403
)
(1.7
%)
(6,210
)
(0.5
%)
Interest income
835
0.1
%
1,046
0.2
%
674
0.1
%
Other expense, net
(3,702
)
(0.4
%)
(14,032
)
(2.2
%)
(4,284
)
(0.4
%)
Earnings (loss) before income tax expense
(benefit)
99,164
8.6
%
(201,225
)
(30.5
%)
11,696
1.0
%
Income tax expense (benefit)
23,147
2.0
%
(19,995
)
(3.0
%)
6,101
0.5
%
Net earnings (loss)
76,017
6.6
%
(181,230
)
(27.5
%)
5,595
0.5
%
Net earnings (loss) attributable to
noncontrolling interests
2,949
0.2
%
(3,206
)
(0.5
%)
1,647
0.2
%
Net earnings (loss) attributable to
Guess?, Inc.
$
73,068
6.4
%
$
(178,024
)
(27.0
%)
$
3,948
0.3
%
Net earnings (loss) per common share
attributable to common stockholders:
Basic
$
1.13
$
(2.72
)
$
0.05
Diluted
$
1.10
$
(2.72
)
$
0.05
Weighted average common shares outstanding
attributable to common stockholders:
Basic
64,185
65,446
75,216
Diluted
65,933
65,446
76,155
Effective income tax rate
23.3
%
9.9
%
52.2
%
Adjusted selling, general and
administrative expenses1:
$
391,114
34.0
%
$
290,762
44.1
%
$
422,143
34.6
%
Adjusted earnings (loss) from
operations1:
$
114,530
10.0
%
$
(109,505
)
(16.6
%)
$
25,472
2.1
%
Adjusted net earnings (loss) attributable
to Guess?, Inc.1:
$
77,951
6.8
%
$
(119,552
)
(18.1
%)
$
7,798
0.6
%
Adjusted diluted earnings (loss) per
common share attributable to common stockholders1:
$
1.17
$
(1.83
)
$
0.10
Adjusted effective income tax rate1:
23.2
%
4.6
%
48.4
%
______________________________________________________________________
See page 22 for footnotes.
Guess?, Inc. and
Subsidiaries
Reconciliation of GAAP Results
to Adjusted Results
(dollars in thousands)
The reconciliations of reported GAAP selling, general and
administrative expenses to adjusted selling, general and
administrative expenses, reported GAAP earnings (loss) from
operations to adjusted earnings (loss) from operations, reported
GAAP net earnings (loss) attributable to Guess?, Inc. to adjusted
net earnings (loss) attributable to Guess?, Inc. and reported GAAP
income tax expense (benefit) to adjusted income tax expense
(benefit) follows:
Three Months Ended
July 31, 2021
August 1, 2020
August 3, 2019
Reported GAAP selling, general and
administrative expenses
$
205,617
$
150,293
$
218,175
Certain professional service and legal
fees and related credits (costs)2
(109
)
151
(405
)
Separation charges3
—
(2,507
)
—
Adjusted selling, general and
administrative expenses1
$
205,508
$
147,937
$
217,770
Reported GAAP earnings (loss) from
operations
$
87,388
$
(14,349
)
$
45,987
Certain professional service and legal
fees and related (credits) costs2
109
(151
)
405
Separation charges3
—
2,507
—
Asset impairment charges4
1,501
11,969
1,504
Net gains on lease modifications5
(420
)
(885
)
—
Adjusted earnings (loss) from
operations1
$
88,578
$
(909
)
$
47,896
Reported GAAP net earnings (loss)
attributable to Guess?, Inc.
$
61,062
$
(20,358
)
$
25,322
Certain professional service and legal
fees and related (credits) costs2
109
(151
)
405
Separation charges3
—
2,507
—
Asset impairment charges4
1,501
11,969
1,504
Net gains on lease modifications5
(420
)
(885
)
—
Amortization of debt discount6
2,781
2,598
2,449
Discrete tax adjustments7
81
8,061
—
Income tax impact from adjustments8
(1,036
)
(4,380
)
(2,266
)
Total adjustments affecting net earnings
(loss) attributable to Guess?, Inc.
3,016
19,719
2,092
Adjusted net earnings (loss)
attributable to Guess?, Inc.1
$
64,078
$
(639
)
$
27,414
Reported GAAP income tax expense
$
17,692
$
6,386
$
8,818
Discrete tax adjustments7
(81
)
(8,061
)
—
Income tax impact from adjustments8
1,036
4,380
2,266
Adjusted income tax expense1
$
18,647
$
2,705
$
11,084
Adjusted effective income tax
rate1
22.0
%
156.2
%
28.2
%
______________________________________________________________________
See page 22 for footnotes.
Guess?, Inc. and
Subsidiaries
Reconciliation of GAAP Results
to Adjusted Results (Continued)
(dollars in thousands)
Six Months Ended
July 31, 2021
August 1, 2020
August 3, 2019
Reported GAAP selling, general and
administrative expenses
$
392,301
$
293,581
$
422,820
Certain professional service and legal
fees and related credits (costs)2
(1,187
)
(139
)
(677
)
Separation charges3
—
(2,680
)
—
Adjusted selling, general and
administrative expenses1
$
391,114
$
290,762
$
422,143
Reported GAAP earnings (loss) from
operations
$
113,966
$
(176,836
)
$
21,516
Certain professional service and legal
fees and related (credits) costs2
1,187
139
677
Separation charges3
—
2,680
—
Asset impairment charges4
1,942
64,941
3,279
Net gains on lease modifications5
(2,565
)
(429
)
—
Adjusted earnings (loss) from
operations1
$
114,530
$
(109,505
)
$
25,472
Reported GAAP net earnings (loss)
attributable to Guess?, Inc.
$
73,068
$
(178,024
)
$
3,948
Certain professional service and legal
fees and related (credits) costs2
1,187
139
677
Separation charges3
—
2,680
—
Asset impairment charges4
1,942
64,941
3,279
Net gains on lease modifications5
(2,565
)
(429
)
—
Amortization of debt discount6
5,562
5,197
2,662
Discrete tax adjustments7
228
170
—
Income tax impact from adjustments8
(1,471
)
(14,226
)
(2,768
)
Total adjustments affecting net earnings
(loss) attributable to Guess?, Inc.
4,883
58,472
3,850
Adjusted net earnings (loss)
attributable to Guess?, Inc.1
$
77,951
$
(119,552
)
$
7,798
Reported GAAP income tax expense
(benefit)
$
23,147
$
(19,995
)
$
6,101
Discrete tax adjustments7
(228
)
(170
)
—
Income tax impact from adjustments8
1,471
14,226
2,768
Adjusted income tax expense
(benefit)1
$
24,390
$
(5,939
)
$
8,869
Adjusted effective income tax
rate1
23.2
%
4.6
%
48.4
%
______________________________________________________________________
See page 22 for footnotes.
Guess?, Inc. and
Subsidiaries
Consolidated Segment
Data
(dollars in thousands)
Three Months Ended
% change
July 31, 2021
August 1, 2020
August 3, 2019
August 1, 2020
August 3, 2019
Net revenue:
Americas Retail
$
186,297
$
110,065
$
198,966
69
%
(6
%)
Americas Wholesale
49,858
20,285
41,902
146
%
19
%
Europe
322,723
205,851
340,509
57
%
(5
%)
Asia
47,813
50,191
83,301
(5
%)
(43
%)
Licensing
21,933
12,147
18,542
81
%
18
%
Total net revenue
$
628,624
$
398,539
$
683,220
58
%
(8
%)
Earnings (loss) from operations:
Americas Retail
$
37,916
$
(4,704
)
$
5,957
(906
%)
536
%
Americas Wholesale
12,944
1,688
8,422
667
%
54
%
Europe
51,417
20,795
51,594
147
%
(0
%)
Asia
(4,847
)
(3,367
)
(4,800
)
44
%
1
%
Licensing
20,154
11,511
15,547
75
%
30
%
Total segment earnings from operations
117,584
25,923
76,720
354
%
53
%
Corporate overhead
(29,115
)
(29,188
)
(29,229
)
(0
%)
(0
%)
Asset impairment charges
(1,501
)
(11,969
)
(1,504
)
(87
%)
(0
%)
Net gains on lease modifications
420
885
—
(53
%)
Total earnings (loss) from operations
$
87,388
$
(14,349
)
$
45,987
(709
%)
90
%
Operating margins:
Americas Retail
20.4
%
(4.3
%)
3.0
%
Americas Wholesale
26.0
%
8.3
%
20.1
%
Europe
15.9
%
10.1
%
15.2
%
Asia
(10.1
%)
(6.7
%)
(5.8
%)
Licensing
91.9
%
94.8
%
83.8
%
GAAP operating margin for total
Company
13.9
%
(3.6
%)
6.7
%
Certain professional service and legal
fees and related (credits) costs1, 2
0.0
%
(0.0
%)
0.1
%
Separation charges1, 3
0.1
%
0.6
%
—
%
Asset impairment charges1, 4
0.2
%
3.0
%
0.2
%
Net gains on lease modifications1, 5
(0.1
%)
(0.2
%)
—
%
Adjusted operating margin for total
Company1
14.1
%
(0.2
%)
7.0
%
______________________________________________________________________
See page 22 for footnotes.
Guess?, Inc. and
Subsidiaries
Consolidated Segment
Data
(dollars in thousands)
Six Months Ended
% change
July 31, 2021
August 1, 2020
August 3, 2019
August 1, 2020
August 3, 2019
Net revenue:
Americas Retail
$
341,832
$
184,649
$
375,389
85
%
(9
%)
Americas Wholesale
95,288
46,160
88,107
106
%
8
%
Europe
564,575
312,324
550,564
81
%
3
%
Asia
103,473
90,576
168,491
14
%
(39
%)
Licensing
43,458
25,081
37,360
73
%
16
%
Total net revenue
$
1,148,626
$
658,790
$
1,219,911
74
%
(6
%)
Earnings (loss) from operations:
Americas Retail
$
58,190
$
(41,377
)
$
4,145
(241
%)
1,304
%
Americas Wholesale
24,499
3,312
16,236
640
%
51
%
Europe
55,615
(23,611
)
35,267
(336
%)
58
%
Asia
(6,655
)
(26,144
)
(8,003
)
(75
%)
(17
%)
Licensing
39,585
21,605
32,191
83
%
23
%
Total segment earnings (loss) from
operations
171,234
(66,215
)
79,836
(359
%)
114
%
Corporate overhead
(57,891
)
(46,109
)
(55,041
)
26
%
5
%
Asset impairment charges
(1,942
)
(64,941
)
(3,279
)
(97
%)
(41
%)
Net gains on lease modifications
2,565
429
—
498
%
Total earnings (loss) from operations
$
113,966
$
(176,836
)
$
21,516
(164
%)
430
%
Operating margins:
Americas Retail
17.0
%
(22.4
%)
1.1
%
Americas Wholesale
25.7
%
7.2
%
18.4
%
Europe
9.9
%
(7.6
%)
6.4
%
Asia
(6.4
%)
(28.9
%)
(4.7
%)
Licensing
91.1
%
86.1
%
86.2
%
GAAP operating margin for total
Company
9.9
%
(26.8
%)
1.8
%
Certain professional service and legal
fees and related (credits) costs1, 2
0.1
%
0.0
%
0.0
%
Separation charges1, 3
0.0
%
0.4
%
—
%
Asset impairment charges1, 4
0.2
%
9.9
%
0.3
%
Net gains on lease modifications1, 5
(0.2
%)
(0.1
%)
—
%
Adjusted operating margin for total
Company1
10.0
%
(16.6
%)
2.1
%
______________________________________________________________________
See page 22 for footnotes.
Guess?, Inc. and
Subsidiaries
Constant Currency Financial
Measures
(dollars in thousands)
Three Months Ended
July 31, 2021
August 1, 2020
% change
As Reported
Foreign Currency
Impact
Constant Currency
As Reported
As Reported
Constant Currency
Net revenue:
Americas Retail
$
186,297
$
(3,448
)
$
182,849
$
110,065
69
%
66
%
Americas Wholesale
49,858
(1,722
)
48,136
20,285
146
%
137
%
Europe
322,723
(18,375
)
304,348
205,851
57
%
48
%
Asia
47,813
(2,690
)
45,123
50,191
(5
%)
(10
%)
Licensing
21,933
—
21,933
12,147
81
%
81
%
Total net revenue
$
628,624
$
(26,235
)
$
602,389
$
398,539
58
%
51
%
July 31, 2021
August 3, 2019
% change
As Reported
Foreign Currency
Impact
Constant Currency
As Reported
As Reported
Constant Currency
Net revenue:
Americas Retail
$
186,297
$
(937
)
$
185,360
$
198,966
(6
%)
(7
%)
Americas Wholesale
49,858
25
49,883
41,902
19
%
19
%
Europe
322,723
(16,224
)
306,499
340,509
(5
%)
(10
%)
Asia
47,813
(1,834
)
45,979
83,301
(43
%)
(45
%)
Licensing
21,933
—
21,933
18,542
18
%
18
%
Total net revenue
$
628,624
$
(18,970
)
$
609,654
$
683,220
(8
%)
(11
%)
Guess?, Inc. and
Subsidiaries
Constant Currency Financial
Measures
(dollars in thousands)
Six Months Ended
July 31, 2021
August 1, 2020
% change
As Reported
Foreign Currency
Impact
Constant Currency
As Reported
As Reported
Constant Currency
Net revenue:
Americas Retail
$
341,832
$
(5,437
)
$
336,395
$
184,649
85
%
82
%
Americas Wholesale
95,288
(2,913
)
92,375
46,160
106
%
100
%
Europe
564,575
(36,587
)
527,988
312,324
81
%
69
%
Asia
103,473
(6,134
)
97,339
90,576
14
%
7
%
Licensing
43,458
—
43,458
25,081
73
%
73
%
Total net revenue
$
1,148,626
$
(51,071
)
$
1,097,555
$
658,790
74
%
67
%
July 31, 2021
August 3, 2019
% change
As Reported
Foreign Currency
Impact
Constant Currency
As Reported
As Reported
Constant Currency
Net revenue:
Americas Retail
$
341,832
$
(1,307
)
$
340,525
$
375,389
(9
%)
(9
%)
Americas Wholesale
95,288
294
95,582
88,107
8
%
8
%
Europe
564,575
(25,745
)
538,830
550,564
3
%
(2
%)
Asia
103,473
(3,078
)
100,395
168,491
(39
%)
(40
%)
Licensing
43,458
—
43,458
37,360
16
%
16
%
Total net revenue
$
1,148,626
$
(29,836
)
$
1,118,790
$
1,219,911
(6
%)
(8
%)
Guess?, Inc. and
Subsidiaries
Selected Condensed
Consolidated Balance Sheet Data
(in thousands)
July 31, 2021
January 30,
2021
August 1, 2020
August 3, 2019
ASSETS
Cash and cash equivalents
$
458,914
$
469,110
$
327,970
$
131,060
Receivables, net
299,915
314,147
246,471
292,985
Inventories
430,289
389,144
419,427
484,236
Other current assets
74,771
60,123
80,069
59,226
Property and equipment, net
210,515
216,196
240,081
302,906
Restricted cash
230
235
228
519
Operating lease right-of-use assets
727,636
764,804
766,853
900,062
Other assets
254,631
252,109
229,630
231,210
Total assets
$
2,456,901
$
2,465,868
$
2,310,729
$
2,402,204
LIABILITIES AND STOCKHOLDERS’
EQUITY
Current portion of borrowings and finance
lease obligations
$
21,193
$
38,710
$
42,321
$
32,554
Current operating lease liabilities
214,392
222,800
235,749
213,912
Other current liabilities
479,567
501,029
452,410
426,886
Long-term debt and finance lease
obligations
79,924
68,554
66,069
35,512
Convertible senior notes, net
264,604
258,614
252,988
242,055
Long-term operating lease liabilities
623,040
662,657
659,118
747,791
Other long-term liabilities
138,084
144,004
143,225
125,915
Redeemable and nonredeemable
noncontrolling interests
25,779
25,837
20,581
22,707
Guess?, Inc. stockholders’ equity
610,318
543,663
438,268
554,872
Total liabilities and stockholders’
equity
$
2,456,901
$
2,465,868
$
2,310,729
$
2,402,204
Guess?, Inc. and
Subsidiaries
Condensed Consolidated Cash
Flow Data
(in thousands)
Six Months Ended
July 31, 2021
August 1, 2020
August 3, 2019
Net cash provided by (used in) operating
activities
$
42,976
$
40,685
$
(22,957
)
Net cash used in investing activities
(20,806
)
(11,970
)
(33,868
)
Net cash provided by (used in) financing
activities
(26,639
)
13,585
(18,549
)
Effect of exchange rates on cash, cash
equivalents and restricted cash
(5,732
)
1,070
(4,042
)
Net change in cash, cash equivalents and
restricted cash
(10,201
)
43,370
(79,416
)
Cash, cash equivalents and restricted cash
at the beginning of the year
469,345
284,828
210,995
Cash, cash equivalents and restricted cash
at the end of the period
$
459,144
$
328,198
$
131,579
Supplemental information:
Depreciation and amortization
$
27,918
$
32,250
$
37,225
Total lease costs (excluding finance lease
cost)
$
138,364
$
147,058
$
180,307
Guess?, Inc. and
Subsidiaries
Reconciliation of Net Cash
Provided By Operating Activities to Free Cash Flow
(in thousands)
Six Months Ended
July 31, 2021
August 1, 2020
August 3, 2019
Net cash provided by (used in) operating
activities
$
42,976
$
40,685
$
(22,957
)
Less: Purchases of property and
equipment
(21,601
)
(10,099
)
(34,551
)
Less: Payments for property and equipment
under finance leases
(2,911
)
(1,859
)
(1,202
)
Free cash flow
$
18,464
$
28,727
$
(58,710
)
Guess?, Inc. and
Subsidiaries
Retail Store Data
Global Store and Concession
Count
Stores
Concessions
Region
Total
Directly Operated
Partner Operated
Total
Directly Operated
Partner Operated
As of July 31, 2021
United States
245
244
1
1
—
1
Canada
74
74
—
—
—
—
Central and South America
106
71
35
29
29
—
Total Americas
425
389
36
30
29
1
Europe and the Middle East
745
524
221
44
44
—
Asia and the Pacific
427
133
294
263
91
172
Total
1,597
1,046
551
337
164
173
As of August 1, 2020
United States
259
257
2
1
—
1
Canada
79
79
—
—
—
—
Central and South America
110
72
38
27
27
—
Total Americas
448
408
40
28
27
1
Europe and the Middle East
742
515
227
38
38
—
Asia and the Pacific
432
161
271
303
115
188
Total
1,622
1,084
538
369
180
189
As of August 3, 2019
United States
287
285
2
1
—
1
Canada
80
80
—
—
—
—
Central and South America
111
71
40
27
27
—
Total Americas
478
436
42
28
27
1
Europe and the Middle East
726
510
216
37
37
—
Asia and the Pacific
520
216
304
337
162
175
Total
1,724
1,162
562
402
226
176
Guess?, Inc. and
Subsidiaries
Adjusted Earnings Per Share
for the Fiscal Year
(in thousands)
FY2020
FY2024E*15
Reported GAAP net earnings attributable
to Guess?, Inc.
$
95,975
Certain professional service and legal
fees and related (credits) costs2
(857
)
Separation charges3
438
Asset impairment charges4
9,977
Amortization of debt discount6
7,558
Income tax impact from adjustments8, 9
(8,055
)
Total adjustments affecting net earnings
attributable to Guess?, Inc.
9,061
Adjusted net earnings attributable to
Guess?, Inc.1
$
105,036
GAAP earnings per share
$
1.33
$
3.36
Certain professional service and legal
fees and related (credits) costs2
$
(0.01
)
$
—
Separation charges3
$
—
$
—
Asset impairment charges4
$
0.12
$
—
Amortization of debt discount6
$
0.08
$
0.14
Income tax impact from adjustments8,9
$
(0.07
)
$
—
Adjusted earnings per share1
$
1.45
$
3.50
______________________________________________________________________
* Amounts represent estimates for future fiscal years.
See page 22 for footnotes.
Guess?, Inc. and
Subsidiaries
Return on Invested Capital for
the Fiscal Year
(in thousands)
FY2019
FY2020
FY2020 2-Year Average
FY2023E
FY2024E
FY2024E 2-Year Average
Total assets10
$
1,649,205
$
2,428,962
$
2,039,084
$
2,747,000
$
2,953,000
$
2,850,000
Less: Cash and cash equivalents
(210,460
)
(284,613
)
(247,537
)
(634,000
)
(806,000
)
(720,000
)
Less: Operating right-of-use assets10
—
(851,990
)
(425,995
)
(760,000
)
(764,000
)
(762,000
)
Less: Accounts payable
(286,657
)
(232,761
)
(259,709
)
(333,000
)
(346,000
)
(339,500
)
Less: Accrued expenses
(252,392
)
(204,096
)
(228,244
)
(208,000
)
(209,000
)
(208,500
)
Add: Accrual for European Commission
fine11
45,619
—
22,809
—
—
—
Average invested capital
$
945,315
$
855,502
$
900,408
$
812,000
$
828,000
$
820,000
FY2020
FY2024E
Reported GAAP earnings from
operations
$
140,671
$
335,000
Less: Certain professional service and
legal fees and related (credits) costs2
(857
)
—
Add: Asset impairment charges4
9,977
—
Add: Separation charges3
438
—
Adjusted earnings from
operations12
$
150,229
$
335,000
Less: Asset impairments4
(9,977
)
—
Less: Other income (expense), net
(2,529
)
(1,400
)
Less: Income tax expense13
(29,886
)
(83,400
)
Adjusted net operating profit after
taxes1
$
107,837
$
250,200
Non-GAAP return on invested
capital14
12
%
31
%
______________________________________________________________________
See page 22 for footnotes.
Guess?, Inc. and
Subsidiaries
Footnotes to Condensed
Consolidated Financial Data
Footnotes:
1
The adjusted results reflect the exclusion
of certain professional service and legal fees and related
(credits) costs, certain separation charges, asset impairment
charges, net gains on lease modifications, non-cash amortization of
debt discount on the Company’s convertible senior notes, the
related income tax impacts of these adjustments, as well as certain
discrete income tax adjustments, where applicable. A complete
reconciliation of actual results to adjusted results is presented
in the “Reconciliation of GAAP Results to Adjusted Results.”
2
Amounts recorded represent certain
professional service and legal fees and related (credits) costs,
which the Company otherwise would not have incurred as part of its
business operations.
3
Amounts represent certain
separation-related charges due to headcount reduction in response
to the pandemic and due to the separation of our former Chief
Executive Officer.
4
Amounts represent asset impairment charges
related primarily to impairment of operating lease right-of-use
assets and property and equipment related to certain retail
locations resulting from lower revenue and future cash flow
projections from the ongoing effects of the COVID-19 pandemic and
expected store closures.
5
Amounts recorded represent net gains on
lease modifications related primarily to the early termination of
certain lease agreements.
6
In April 2019, the Company issued $300
million principal amount of 2.00% convertible senior notes due 2024
(the “Notes”) in a private offering. The Company has separated the
Notes into liability (debt) and equity (conversion option)
components. The debt discount, which represents an amount equal to
the fair value of the equity component, is amortized as non-cash
interest expense over the term of the Notes. Estimates of adjusted
earnings per share for the full fiscal year 2024 exclude the
amortization anticipated to be recorded in those years as such
amounts are known. The Company has not assumed any potential share
dilution related to the convert or related warrants.
7
Amounts represent discrete income tax
adjustments related primarily to the impacts from cumulative
valuation allowances and the income tax benefits from an income tax
rate change due to net operating loss carrybacks.
8
The income tax effect of certain
professional service and legal fees and related (credits) costs,
separation charges, asset impairment charges, net gains on lease
modifications and the amortization of debt discount was based on
the Company’s assessment of deductibility using the statutory
income tax rate (inclusive of the impact of valuation allowances)
of the tax jurisdiction in which the charges were incurred.
9
During fiscal year 2020, the Company
recorded the impact from changes in the tax law on deferred taxes
in certain tax jurisdictions, net tax settlements and adjustments
to specific uncertain tax positions.
10
During fiscal year 2020, the Company
adopted a comprehensive new lease standard which superseded
previous lease guidance. The standard requires a lessee to
recognize an asset related to the right to use the underlying asset
and a liability that approximates the present value of the lease
payments over the term of contracts that qualify as leases under
the new guidance. The adoption of the standard resulted in the
recording of operating lease right-of-use assets and operating
lease liabilities.
11
During fiscal year 2019, the Company
recognized a charge of €39.8 million ($45.6 million) related to a
fine by the European Commission related to its inquiry concerning
potential violations of European Union competition rules by the
Company.
12
The adjusted earnings from operations for
fiscal year 2020 reflect the exclusion of certain items which the
Company believes are not indicative of the underlying performance
of its business.
13
Income taxes are calculated using the
adjusted effective income tax rate for fiscal year 2020 of 21.7%
and a projection of 25% for the fiscal 2024 effective income tax
rate.
14
The Company defines return on invested
capital (or "ROIC") as adjusted net operating profit after taxes
divided by two-year average invested capital.
15
The Company is unable to predict future amounts for items excluded
for non-GAAP for fiscal year 2024, with the exception of amounts
related to the amortization of debt discount, as these expenditures
and credits are inconsistent in amount and frequency and certain
elements used to estimate such items have not yet occurred or are
out of the Company's control. As such, the Company has not
considered any future charges in the accompanying GAAP outlook.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210825005751/en/
Guess?, Inc. Fabrice Benarouche VP, Finance and Investor
Relations (213) 765-5578
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