Q3 Fiscal 2022
Revenues Reached $643 Million, Up 13% Compared to Q3 Fiscal 2021,
Up 4% Compared to Q3 Fiscal 2020
Delivered Operating
Margin in Excess of 10.0%
Q3 EPS of $0.45 and
Adjusted EPS of $0.62
Raises Full-Year
Outlook for Operating Margin to 11.0%
Doubles Quarterly Cash
Dividend from $0.1125 to $0.225 per Share on the Company’s Common
Stock
Guess?, Inc. (NYSE: GES) today reported financial results for
its third quarter ended October 30, 2021.
Carlos Alberini, Chief Executive Officer, commented, “We are
very pleased with our performance this quarter, which exceeded our
expectations for revenues and earnings. Our revenues for the
quarter increased 13% versus last year and were up 4% compared to
the third quarter of fiscal year 2020, pre-pandemic. The better
performance than expected was driven by our European Wholesale,
Americas Retail and Licensing businesses, which posted strong top
and bottom line results across the board. All in all, we delivered
a 10% operating margin in the period, driven by strong gross margin
expansion, as a result of lower promotional activity and improved
IMUs in spite of increased freight costs related to the supply
chain disruptions experienced in the market.”
Paul Marciano, Co-Founder and Chief Creative Officer, added, “I
am very pleased with the progress we have made during the last few
months with our brand elevation strategy. For the first time in our
Company’s history we have one global line of products across all
categories and our products are highly elevated, with a strong
focus on quality and sustainability. The Guess brand is enjoying
strong momentum worldwide, and we see a big opportunity to gain
market share and grow in multiple markets and product
categories.”
Mr. Alberini concluded, “We are confident in our plans for the
holiday business. Our inventory position is strong, and our
customers are responding well to our assortments. Based on our
progress, we now expect to deliver an operating margin of 11.0% in
the current year, double that of fiscal 2020, pre-pandemic. I am
very pleased with our performance for the current year but I am
even more excited with what lies ahead for us. I believe that we
are at an inflection point at Guess and I am very confident our
business is well positioned to generate superior returns in the
future. We will continue to prioritize returning value to our
shareholders and announced today that our Board has approved to
double our quarterly cash dividend from $0.1125 to $0.225.”
Adjusted Amounts
This press release contains certain non-GAAP, or adjusted,
financial measures. References to “adjusted” results exclude the
impact of (i) asset impairment charges, (ii) net (gains) losses on
lease modifications, (iii) certain professional service and legal
fees and related (credits) costs, (iv) certain separation charges,
(v) non-cash debt discount amortization on our convertible senior
notes, (vi) the related income tax effects of the foregoing items,
as well as the impact from changes in the income tax law on
deferred income taxes in certain tax jurisdictions, net income tax
settlements and adjustments to specific uncertain income tax
positions, and (vii) certain discrete income tax adjustments
related primarily to an intra-entity transfer of intellectual
property rights to a wholly-owned Swiss subsidiary, in each case
where applicable. A reconciliation of reported GAAP results to
comparable non-GAAP results is provided in the accompanying tables
and discussed under the heading “Presentation of Non-GAAP
Information” below.
Third Quarter Fiscal 2022 Results
Compared to Third Quarter Fiscal 2020
For the third quarter of fiscal 2022, the Company recorded GAAP
net earnings of $29.9 million, a 140.5% increase from $12.4 million
for the third quarter of fiscal 2020. GAAP diluted EPS increased
150.0% to $0.45 for the third quarter of fiscal 2022, compared to
$0.18 for the third quarter of fiscal 2020. The Company estimates a
net positive impact from its share buybacks and its convertible
notes transaction of $0.04 and a negative impact from currency of
$0.12 on GAAP diluted EPS in the third quarter of fiscal 2022 when
compared to the third quarter of fiscal 2020.
For the third quarter of fiscal 2022, the Company’s adjusted net
earnings were $41.6 million, a 178.8% increase from $14.9 million
for the third quarter of fiscal 2020. Adjusted diluted EPS
increased 181.8% to $0.62, compared to $0.22 for the third quarter
of fiscal 2020. The Company estimates a net positive impact from
its share buybacks and its convertible notes transaction of $0.05
and a negative impact from currency of $0.12 on adjusted diluted
EPS in the third quarter of fiscal 2022 when compared to the third
quarter of fiscal 2020.
Net Revenue. Total net revenue for the third quarter of
fiscal 2022 increased 4.4% to $643.1 million, from $615.9 million
in the third quarter of fiscal 2020. In constant currency, net
revenue increased by 2.1%.
Earnings from Operations. GAAP earnings from operations
for the third quarter of fiscal 2022 increased 190.0% to $65.7
million (including $3.0 million net losses on lease modifications,
$1.2 million in non-cash impairment charges taken on certain
long-lived store related assets and a $2.0 million unfavorable
currency translation impact), from $22.6 million (including $1.8
million in non-cash impairment charges taken on certain long-lived
store related assets) in the third quarter of fiscal 2020. GAAP
operating margin in the third quarter of fiscal 2022 increased 6.5%
to 10.2%, from 3.7% in the third quarter of fiscal 2020, driven
primarily by lower markdowns, higher initial markups, overall
leveraging of expenses and lower occupancy costs, partially offset
by higher performance-based compensation. The negative impact of
currency on operating margin for the quarter was approximately 40
basis points.
For the third quarter of fiscal 2022, adjusted earnings from
operations increased 204.9% to $70.4 million, from $23.1 million in
the third quarter of fiscal 2020. Adjusted operating margin
increased 7.2% to 10.9%, from 3.7% in the third quarter of fiscal
2020, driven primarily by lower markdowns, higher initial markups,
overall leveraging of expenses and lower occupancy costs, partially
offset by higher performance-based compensation.
Third Quarter Fiscal 2022 Results
Compared to Third Quarter Fiscal 2021
For the third quarter of fiscal 2022, the Company recorded GAAP
net earnings of $29.9 million, a 13.3% increase from $26.4 million
for the third quarter of fiscal 2021. GAAP diluted EPS increased
9.8% to $0.45 for the third quarter of fiscal 2022, compared to
$0.41 for the same prior-year quarter. The Company estimates a
minimal impact from its share buybacks and its convertible notes
transaction and a positive impact from currency of $0.02 on GAAP
diluted EPS in the third quarter of fiscal 2022 when compared to
the same prior-year quarter.
For the third quarter of fiscal 2022, the Company’s adjusted net
earnings were $41.6 million, an 11.2% increase from $37.4 million
for the third quarter of fiscal 2021. Adjusted diluted EPS
increased 6.9% to $0.62, compared to $0.58 for the same prior-year
quarter. The Company estimates a minimal impact from its share
buybacks and its convertible notes transaction and a positive
impact from currency of $0.02 on adjusted diluted EPS in the third
quarter of fiscal 2022 when compared to the same prior-year
quarter.
Net Revenue. Total net revenue for the third quarter of
fiscal 2022 increased 13.0% to $643.1 million, from $569.3 million
in the same prior-year quarter. In constant currency, net revenue
increased by 12.8%.
Earnings from Operations. GAAP earnings from operations
for the third quarter of fiscal 2022 increased 47.7% to $65.7
million (including $3.0 million net losses on lease modifications,
$1.2 million in non-cash impairment charges taken on certain
long-lived store related assets and a $0.2 million favorable
currency translation impact), from $44.5 million (including $10.3
million in non-cash impairment charges taken on certain long-lived
store related assets and minimal net gains on lease modifications)
in the same prior-year quarter. GAAP operating margin in the third
quarter of fiscal 2022 increased 2.4% to 10.2%, from 7.8% in the
same prior-year quarter, driven primarily by lower non-cash
impairment charges, lower markdowns, higher initial markups and
overall leveraging of expenses, partially offset by higher
performance-based compensation. The positive impact of currency on
operating margin for the quarter was approximately 60 basis
points.
For the third quarter of fiscal 2022, adjusted earnings from
operations increased 27.3% to $70.4 million, from $55.3 million in
the same prior-year quarter. Adjusted operating margin increased
1.2% to 10.9%, from 9.7% in the same prior-year quarter, driven
primarily by lower markdowns, higher initial markups and overall
leveraging of expenses, partially offset by higher
performance-based compensation.
Nine-Month Period Fiscal 2022 Results
Compared to Nine-Month Period Fiscal 2020
For the nine months ended October 30, 2021, the Company recorded
GAAP net earnings of $102.9 million, compared to $16.4 million for
the nine months ended November 2, 2019. GAAP diluted EPS was $1.55
for the nine months ended October 30, 2021, compared to $0.22 for
the nine months ended November 2, 2019. The Company estimates a net
positive impact from its share buybacks and its convertible notes
transaction of $0.19 and a negative currency impact of $0.18 on
GAAP diluted EPS for the nine months ended October 30, 2021 when
compared to the nine months ended November 2, 2019.
For the nine months ended October 30, 2021, the Company recorded
adjusted net earnings of $119.5 million, compared to $22.7 million
for the nine months ended November 2, 2019. Adjusted diluted EPS
was $1.79, compared to $0.31 for the nine months ended November 2,
2019. The Company estimates its share buybacks and its convertible
notes transaction had a net positive impact of $0.25, and currency
had a negative impact of $0.18 on adjusted diluted EPS during the
nine months ended October 30, 2021 when compared to the nine months
ended November 2, 2019.
Net Revenue. Total net revenue for the first nine months
of fiscal 2022 decreased 2.4% to $1.79 billion, from $1.84 billion
for the nine months ended November 2, 2019. In constant currency,
net revenue decreased by 4.8%.
Earnings from Operations. GAAP earnings from operations
for the first nine months of fiscal 2022 were $179.6 million
(including $0.4 million net losses on lease modifications, $3.1
million in non-cash impairment charges taken on certain long-lived
store related assets and a $3.9 million unfavorable currency
translation impact), compared to $44.2 million (including $5.1
million in non-cash impairment charges taken on certain long-lived
store related assets) for the nine months ended November 2, 2019.
GAAP operating margin for the first nine months of fiscal 2022
increased 7.6% to 10.0%, from 2.4% for the nine months ended
November 2, 2019, driven primarily by higher initial markups, lower
occupancy costs and lower markdowns. The negative impact of
currency on operating margin for the first nine months of fiscal
2022 was approximately 50 basis points.
For the nine months ended October 30, 2021, adjusted earnings
from operations were $184.9 million, compared to $48.6 million for
the nine months ended November 2, 2019. Adjusted operating margin
improved 7.7% to 10.3% for the nine months ended October 30, 2021,
from 2.6% for the nine months ended November 2, 2019, driven
primarily by higher initial markups, lower occupancy costs and
lower markdowns.
Nine-Month Period Fiscal 2022 Results
Compared to Nine-Month Period Fiscal 2021
For the nine months ended October 30, 2021, the Company recorded
GAAP net earnings of $102.9 million, compared to a GAAP net loss of
$151.6 million for the nine months ended October 31, 2020. GAAP
diluted EPS was $1.55 for the nine months ended October 30, 2021,
compared to GAAP diluted loss per share of $2.35 during the same
prior-year period. The Company estimates a net positive impact from
its share buybacks and its convertible notes transaction and
currency of $0.05 and $0.12, respectively, on GAAP diluted EPS for
the nine months ended October 30, 2021 when compared to the same
prior-year period.
For the nine months ended October 30, 2021, the Company recorded
adjusted net earnings of $119.5 million, compared to an adjusted
net loss of $82.2 million for the nine months ended October 31,
2020. Adjusted diluted EPS was $1.79, compared to adjusted loss per
share of $1.27 during the same prior-year period. The Company
estimates its share buybacks and its convertible notes transaction
and currency had a net positive impact of $0.05 and $0.11,
respectively, on adjusted diluted EPS during the nine months ended
October 30, 2021 when compared to the same prior-year period.
Net Revenue. Total net revenue for the first nine months
of fiscal 2022 increased 45.9% to $1.79 billion, from $1.23 billion
in the same prior-year period. In constant currency, net revenue
increased by 41.7%.
Earnings (Loss) from Operations. GAAP earnings from
operations for the first nine months of fiscal 2022 were $179.6
million (including $0.4 million net losses on lease modifications,
$3.1 million in non-cash impairment charges taken on certain
long-lived store related assets and a $1.8 million favorable
currency translation impact), compared to a GAAP loss from
operations of $132.4 million (including $0.5 million net gains on
lease modifications and $75.3 million in non-cash impairment
charges taken on certain long-lived store related assets) in the
same prior-year period. GAAP operating margin in fiscal 2022
increased 20.8% to 10.0%, from negative 10.8% in the same
prior-year period, driven primarily by overall leveraging of
expenses, lower non-cash impairment charges and lower markdowns.
The positive impact of currency on operating margin for the nine
months ended October 30, 2021 was approximately 20 basis
points.
For the nine months ended October 30, 2021, adjusted earnings
from operations were $184.9 million, compared to adjusted loss from
operations of $54.2 million for the nine months ended October 31,
2020. Adjusted operating margin improved 14.7% to 10.3% for the
nine months ended October 30, 2021, from negative 4.4% in the same
prior-year period, driven primarily by overall leveraging of
expenses and lower markdowns.
Outlook
Given the current circumstances regarding the coronavirus (or
“COVID-19”) crisis and its uncertain impact on our operations, we
are not providing detailed guidance for the fourth quarter or the
full fiscal year ending January 29, 2022. We expect revenues in the
fourth quarter of fiscal 2022 to be down mid-single digits versus
the fourth quarter of fiscal 2020 as the impact of permanent store
closures and an unfavorable shift of European wholesale shipments
from the fourth quarter into the first quarter of next year are
partially offset by continued momentum in our global e-commerce
business.
For the full fiscal year 2022, assuming no increased
COVID-related shutdowns from current levels (approximately 1% of
our directly operated stores), we expect revenues to be down
low-single digits versus fiscal 2020 and operating margin to reach
approximately 11.0%. These comparisons are versus the pre-pandemic
periods from two fiscal years prior in order to provide a more
normalized comparison.
A reconciliation of the Company’s outlook for GAAP operating
margin to adjusted operating margin for the fourth quarter and
fiscal year ending January 29, 2022 is as follows:
Reconciliation of GAAP Outlook
to Adjusted Outlook
Fourth Quarter of
Fiscal 2022
Fiscal Year 2022
GAAP operating margin
13.1%
11.0%
Certain professional service and legal
fees and related (credits) cost1
—%
0.1%
Asset impairment charges2
—%
0.1%
Net (gains) losses on lease
modifications3
—%
—%
Adjusted operating margin
13.1%
11.2%
________________________________________________
See pages 21 and 22 for footnotes
COVID-19 Third Quarter Business
Update
The COVID-19 pandemic is continuing to negatively impact the
Company’s businesses. Although we achieved slightly higher net
revenue during the third quarter of fiscal 2022 compared to the
third quarter of fiscal 2020, we remained challenged by lower
traffic and capacity restrictions. In addition, while we began the
third quarter of fiscal 2022 with 100% of our directly operated
stores open for business, we started to incur a new round of
government-mandated temporary store closures toward the end of the
quarter. This resulted in the closure of less than 5% of our
directly operated stores as of October 30, 2021, mostly in Europe,
the impact of which was minimal to our third quarter results.
In light of the fluid nature of the pandemic, we continue to
carefully monitor global and regional developments, particularly in
Europe, and respond appropriately. We also continue to
strategically manage expenses in order to protect
profitability.
Dividend
The Company’s Board of Directors has approved an increase to our
quarterly cash dividend payment, from $0.1125 to $0.225 per share,
realigning the per-share dividend amount to the level prior to the
issuance of our Convertible Senior Notes in April 2019. The
dividend will be payable on December 24, 2021 to shareholders of
record as of the close of business on December 8, 2021.
Presentation of Non-GAAP
Information
The financial information presented in this release includes
non-GAAP financial measures, such as adjusted results, constant
currency financial information, free cash flows and return on
invested capital. For the three months and nine months ended
October 30, 2021, October 31, 2020 and November 2, 2019, the
adjusted results exclude the impact of certain professional service
and legal fees and related (credits) costs, certain separation
charges, asset impairment charges, net (gains) losses on lease
modifications, non-cash amortization of debt discount on the
Company’s convertible senior notes, the related income tax effects
of the foregoing items, the impact from changes in the income tax
law on deferred income taxes in certain tax jurisdictions, net
income tax settlements and adjustments to specific uncertain income
tax positions, as well as certain discrete income tax adjustments
related primarily to an intra-entity transfer of intellectual
property rights to a wholly-owned Swiss subsidiary, in each case
where applicable. These non-GAAP measures are provided in addition
to, and not as alternatives for, the Company’s reported GAAP
results.
The Company has excluded these items from its adjusted financial
measures primarily because it believes these items are not
indicative of the underlying performance of its business and the
adjusted financial information provided is useful for investors to
evaluate the comparability of the Company’s operating results and
its future outlook (when reviewed in conjunction with the Company’s
GAAP financial statements). A reconciliation of reported GAAP
results to comparable non-GAAP results is provided.
This release also includes certain constant currency financial
information. Foreign currency exchange rate fluctuations affect the
amount reported from translating the Company’s foreign revenue,
expenses and balance sheet amounts into U.S. dollars. These rate
fluctuations can have a significant effect on reported operating
results under GAAP. The Company provides constant currency
information to enhance the visibility of underlying business
trends, excluding the effects of changes in foreign currency
translation rates. To calculate net revenue and earnings (loss)
from operations on a constant currency basis, actual or forecasted
results for the current-year period are translated into U.S.
dollars at the average exchange rates in effect during the
comparable period of the prior year. The constant currency
calculations do not adjust for the impact of revaluing specific
transactions denominated in a currency different from the
functional currency of that entity when exchange rates fluctuate.
However, in calculating the estimated impact of currency on our
earnings (loss) per share for our actual or forecasted results, the
Company estimates gross margin (including the impact of
merchandise-related hedges) and expenses using the appropriate
prior-year rates, translates the estimated foreign earnings at the
comparable prior-year rates, and excludes the year-over-year
earnings impact of gains or losses arising from balance sheet
remeasurement and foreign currency contracts not designated as
merchandise hedges. The constant currency information presented may
not be comparable to similarly titled measures reported by other
companies.
The Company also includes information regarding its free cash
flows in this release. The Company calculates free cash flows as
cash flows from operating activities less (i) purchases of property
and equipment and (ii) payments for property and equipment under
finance leases. Free cash flows are not intended to be an
alternative to cash flows from operating activities as a measure of
liquidity, but rather to provide additional visibility to investors
regarding how much cash is generated for discretionary and
non-discretionary items after deducting purchases of property and
equipment and payments for property and equipment under finance
leases. Free cash flow information presented may not be comparable
to similarly titled measures reported by other companies. A
reconciliation of reported GAAP cash flows from operating
activities to the comparable non-GAAP free cash flow measure is
provided.
The Company also includes information regarding its return on
invested capital (or “ROIC”) in this release. The Company defines
ROIC as adjusted net operating profit after income taxes divided by
two-year average invested capital. The Company believes ROIC is a
useful financial measure for investors in evaluating how
efficiently the Company deploys its capital. The Company’s method
of calculating ROIC may differ from other companies’ methods and,
therefore, might not be comparable.
Investor Conference Call
The Company will hold a conference call at 4:15 pm (ET) on
November 23, 2021 to discuss the news announced in this press
release. A live webcast of the conference call will be accessible
at www.guess.com via the “Investor
Relations” link. The webcast will be archived on the website for 30
days.
About Guess?
Guess?, Inc. designs, markets, distributes and licenses a
lifestyle collection of contemporary apparel, denim, handbags,
watches, eyewear, footwear and other related consumer products.
Guess? products are distributed through branded Guess? stores as
well as better department and specialty stores around the world. As
of October 30, 2021, the Company directly operated 1,052 retail
stores in the Americas, Europe and Asia. The Company’s partners and
distributors operated 558 additional retail stores worldwide. As of
October 30, 2021, the Company and its partners and distributors
operated in approximately 100 countries worldwide. For more
information about the Company, please visit www.guess.com.
Forward-Looking
Statements
Except for historical information contained herein, certain
matters discussed in this press release or the related conference
call and webcast, including statements concerning the potential
actions and impacts related to the COVID-19 pandemic; statements
concerning the Company’s future outlook including with respect to
the fourth quarter and full year of fiscal 2022 as well as fiscal
2024; statements concerning the Company’s expectations, goals,
future prospects, longer-term operating margin, revenue, EPS and
ROIC expectations and current business strategies and strategic
initiatives; and statements expressing optimism or pessimism about
future operating results and growth opportunities are
forward-looking statements that are made pursuant to the safe
harbor provisions of the Private Securities Litigation Reform Act
of 1995. Forward-looking statements, which are frequently indicated
by terms such as “expect,” “could,” “will,” “should,” “goal,”
“strategy,” “believe,” “estimate,” “continue,” “outlook,” “plan,”
“create,” “see,” and similar terms, are only expectations, and
involve known and unknown risks and uncertainties, which may cause
actual results in future periods to differ materially from what is
currently anticipated. Factors which may cause actual results in
future periods to differ materially from current expectations
include, among others: our ability to maintain our brand image and
reputation; domestic and international economic or political
conditions, including economic and other events that could
negatively impact consumer confidence and discretionary consumer
spending; the continuation or worsening of impacts related to the
COVID-19 pandemic, including business, financial, human capital,
litigation and other impacts to the Company and its partners; our
ability to successfully negotiate rent relief or other
lease-related terms with our landlords; our ability to maintain
adequate levels of liquidity; changes to estimates related to
impairments, inventory and other reserves, including the impact of
the CARES Act, which were made using the best information available
at the time; changes in the competitive marketplace and in our
commercial relationships; our ability to anticipate and adapt to
changing consumer preferences and trends; our ability to manage our
inventory commensurate with customer demand; risks related to the
timing and costs of delivering merchandise to our stores and our
wholesale customers; unexpected or unseasonable weather conditions;
our ability to effectively operate our various retail concepts,
including securing, renewing, modifying or terminating leases for
store locations; our ability to successfully and/or timely
implement our growth strategies and other strategic initiatives;
our ability to successfully implement or update information
technology systems, including enhancing our global omni-channel
capabilities; our ability to expand internationally and operate in
regions where we have less experience, including through joint
ventures; risks related to our convertible senior notes issued in
April 2019, including our ability to settle the liability in cash;
our ability to successfully or timely implement plans for cost
reductions; our ability to effectively and efficiently manage the
volume and costs associated with our European distribution centers
without incurring shipment delays; our ability to attract and
retain key personnel; obligations or changes in estimates arising
from new or existing litigation, income tax and other regulatory
proceedings; risks related to the complexity of the Tax Reform,
future clarifications and legislative amendments thereto, as well
as our ability to accurately interpret and predict its impact on
our cash flows and financial condition; risks related to the tax
treatment of our third quarter fiscal 2022 intra-entity transfer of
intellectual property rights from certain U.S entities to a
wholly-owned Swiss subsidiary; the risk of economic uncertainty
associated with the United Kingdom’s departure from the European
Union (“Brexit”) or any other similar referendums that may be held;
the occurrence of unforeseen epidemics, such as the COVID-19
pandemic; other catastrophic events; changes in U.S. or foreign
income tax or tariff policy, including changes to tariffs on
imports into the U.S.; accounting adjustments to our unaudited
financial statements identified during the completion of our annual
independent audit of financial statements and financial controls or
from subsequent events arising after issuance of this release; risk
of future non-cash asset impairments, including goodwill,
right-of-use lease assets and/or other store asset impairments;
restructuring charges; our ability to adapt to new regulatory
compliance and disclosure obligations; risks associated with our
foreign operations, such as violations of laws prohibiting improper
payments and the burdens of complying with a variety of foreign
laws and regulations (including global data privacy regulations);
risks associated with the acts or omissions of our third party
vendors, including a failure to comply with our vendor code of
conduct or other policies; risks associated with cyber-attacks and
other cyber security risks; risks associated with our ability to
properly collect, use, manage and secure consumer and employee
data; risks associated with our vendors’ ability to maintain the
strength and security of information technology systems; and
changes in economic, political, social and other conditions
affecting our foreign operations and sourcing, including the impact
of currency fluctuations, global income tax rates and economic and
market conditions in the various countries in which we operate. In
addition to these factors, the economic, technological, managerial,
and other risks identified in the Company’s most recent annual
report on Form 10-K and other filings with the Securities and
Exchange Commission, including but not limited to the risk factors
discussed therein, could cause actual results to differ materially
from current expectations. The current global economic climate,
length and severity of the COVID-19 pandemic, and uncertainty
surrounding potential changes in U.S. policies and regulations may
amplify many of these risks. The Company undertakes no obligation
to publicly update or revise any forward-looking statements,
whether as a result of new information, future events or
otherwise.
Guess?, Inc. and
Subsidiaries
Condensed Consolidated
Statements of Income
(amounts in thousands, except per
share data)
Three Months Ended
October 30, 2021
October 31, 2020
November 2, 2019
$
%
$
%
$
%
Product sales
$
616,489
95.9
%
$
549,851
96.6
%
$
593,736
96.4
%
Net royalties
26,581
4.1
%
19,433
3.4
%
22,208
3.6
%
Net revenue
643,070
100.0
%
569,284
100.0
%
615,944
100.0
%
Cost of product sales
349,466
54.3
%
329,764
57.9
%
386,445
62.7
%
Gross profit
293,604
45.7
%
239,520
42.1
%
229,499
37.3
%
Selling, general and administrative
expenses
223,775
34.8
%
184,739
32.5
%
205,003
33.3
%
Asset impairment charges
1,152
0.2
%
10,335
1.8
%
1,847
0.3
%
Net (gains) losses on lease
modifications
3,006
0.5
%
(21
)
(0.0
%)
—
—
%
Earnings from operations
65,671
10.2
%
44,467
7.8
%
22,649
3.7
%
Other income (expense):
Interest expense
(5,550
)
(0.9
%)
(5,809
)
(1.0
%)
(4,946
)
(0.8
%)
Interest income
487
0.1
%
562
0.1
%
492
0.1
%
Other expense, net
(7,800
)
(1.2
%)
(6,521
)
(1.2
%)
(62
)
(0.1
%)
Earnings before income tax expense
52,808
8.2
%
32,699
5.7
%
18,133
2.9
%
Income tax expense
20,441
3.2
%
5,145
0.9
%
4,548
0.7
%
Net earnings
32,367
5.0
%
27,554
4.8
%
13,585
2.2
%
Net earnings attributable to
noncontrolling interests
2,487
0.4
%
1,178
0.2
%
1,162
0.2
%
Net earnings attributable to Guess?,
Inc.
$
29,880
4.6
%
$
26,376
4.6
%
$
12,423
2.0
%
Net earnings per common share attributable
to common stockholders:
Basic
$
0.46
$
0.41
$
0.19
Diluted4
$
0.45
$
0.41
$
0.18
Weighted average common shares outstanding
attributable to common stockholders:
Basic
64,373
62,789
66,393
Diluted4
65,852
63,579
67,314
Effective income tax rate
38.7
%
15.7
%
25.1
%
Adjusted selling, general and
administrative expenses5:
$
223,225
34.7
%
$
184,231
32.4
%
$
206,417
33.6
%
Adjusted earnings from operations5:
$
70,379
10.9
%
$
55,289
9.7
%
$
23,082
3.7
%
Adjusted net earnings attributable to
Guess?, Inc.5:
$
41,553
6.5
%
$
37,363
6.6
%
$
14,902
2.4
%
Adjusted diluted earnings per common share
attributable to common stockholders5:
$
0.62
$
0.58
$
0.22
Adjusted effective income tax rate5:
27.0
%
16.4
%
23.6
%
________________________________________________
See pages 21 and 22 for footnotes.
Guess?, Inc. and
Subsidiaries
Condensed Consolidated
Statements of Income (Loss)
(amounts in thousands, except per
share data)
Nine Months Ended
October 30, 2021
October 31, 2020
November 2, 2019
$
%
$
%
$
%
Product sales
$
1,721,657
96.1
%
$
1,183,560
96.4
%
$
1,776,287
96.8
%
Net royalties
70,039
3.9
%
44,514
3.6
%
59,568
3.2
%
Net revenue
1,791,696
100.0
%
1,228,074
100.0
%
1,835,855
100.0
%
Cost of product sales
992,448
55.4
%
807,297
65.7
%
1,158,741
63.1
%
Gross profit
799,248
44.6
%
420,777
34.3
%
677,114
36.9
%
Selling, general and administrative
expenses
616,076
34.4
%
478,320
39.0
%
627,823
34.2
%
Asset impairment charges
3,094
0.2
%
75,276
6.1
%
5,126
0.3
%
Net (gains) losses on lease
modifications
441
0.0
%
(450
)
(0.0
%)
—
—
%
Earnings (loss) from operations
179,637
10.0
%
(132,369
)
(10.8
%)
44,165
2.4
%
Other income (expense):
Interest expense
(17,485
)
(1.0
%)
(17,212
)
(1.4
%)
(11,156
)
(0.6
%)
Interest income
1,322
0.1
%
1,608
0.1
%
1,166
0.1
%
Other expense, net
(11,502
)
(0.6
%)
(20,553
)
(1.6
%)
(4,346
)
(0.3
%)
Earnings (loss) before income tax expense
(benefit)
151,972
8.5
%
(168,526
)
(13.7
%)
29,829
1.6
%
Income tax expense (benefit)
43,588
2.4
%
(14,850
)
(1.2
%)
10,649
0.6
%
Net earnings (loss)
108,384
6.1
%
(153,676
)
(12.5
%)
19,180
1.0
%
Net earnings (loss) attributable to
noncontrolling interests
5,436
0.3
%
(2,028
)
(0.2
%)
2,809
0.1
%
Net earnings (loss) attributable to
Guess?, Inc.
$
102,948
5.8
%
$
(151,648
)
(12.3
%)
$
16,371
0.9
%
Net earnings (loss) per common share
attributable to common stockholders:
Basic
$
1.58
$
(2.35
)
$
0.22
Diluted4
$
1.55
$
(2.35
)
$
0.22
Weighted average common shares outstanding
attributable to common stockholders:
Basic
64,248
64,561
72,275
Diluted4
65,893
64,561
73,211
Effective income tax rate
28.7
%
8.8
%
35.7
%
Adjusted selling, general and
administrative expenses5:
$
614,339
34.3
%
$
474,993
38.7
%
$
628,560
34.3
%
Adjusted earnings (loss) from
operations5:
$
184,909
10.3
%
$
(54,216
)
(4.4
%)
$
48,554
2.6
%
Adjusted net earnings (loss) attributable
to Guess?, Inc.5:
$
119,504
6.7
%
$
(82,189
)
(6.7
%)
$
22,700
1.2
%
Adjusted diluted earnings (loss) per
common share attributable to common stockholders5:
$
1.79
$
(1.27
)
$
0.31
Adjusted effective income tax rate5:
24.5
%
(2.0
%)
35.1
%
________________________________________________
See pages 21 and 22 for footnotes.
Guess?, Inc. and
Subsidiaries
Reconciliation of GAAP Results
to Adjusted Results
(dollars in thousands)
The reconciliations of reported GAAP
selling, general and administrative expenses to adjusted selling,
general and administrative expenses, reported GAAP earnings (loss)
from operations to adjusted earnings (loss) from operations,
reported GAAP net earnings (loss) attributable to Guess?, Inc. to
adjusted net earnings (loss) attributable to Guess?, Inc. and
reported GAAP income tax expense (benefit) to adjusted income tax
expense (benefit) follows:
Three Months Ended
October 30,
2021
October 31,
2020
November 2,
2019
Reported GAAP selling, general and
administrative expenses
$
223,775
$
184,739
$
205,003
Certain professional service and legal
fees and related credits (costs)6
(550
)
195
1,414
Separation charges7
—
(703
)
—
Adjusted selling, general and
administrative expenses5
$
223,225
$
184,231
$
206,417
Reported GAAP earnings from operations
$
65,671
$
44,467
$
22,649
Certain professional service and legal
fees and related (credits) costs6
550
(195
)
(1,414
)
Separation charges7
—
703
—
Asset impairment charges8
1,152
10,335
1,847
Net (gains) losses on lease
modifications9
3,006
(21
)
—
Adjusted earnings from
operations5
$
70,379
$
55,289
$
23,082
Reported GAAP net earnings attributable to
Guess?, Inc.
$
29,880
$
26,376
$
12,423
Certain professional service and legal
fees and related (credits) costs6
550
(195
)
(1,414
)
Separation charges7
—
703
—
Asset impairment charges8
1,152
10,335
1,847
Net (gains) losses on lease
modifications9
3,006
(21
)
—
Amortization of debt discount10
2,782
2,599
2,447
Discrete income tax adjustments11
5,912
635
—
Income tax impact from adjustments12
(1,729
)
(3,069
)
(401
)
Total adjustments affecting net earnings
attributable to Guess?, Inc.
11,673
10,987
2,479
Adjusted net earnings attributable to
Guess?, Inc.5
$
41,553
$
37,363
$
14,902
Reported GAAP income tax expense
$
20,441
$
5,145
$
4,548
Discrete income tax adjustments11
(5,912
)
(635
)
—
Income tax impact from adjustments12
1,729
3,069
401
Adjusted income tax expense5
$
16,258
$
7,579
$
4,949
Adjusted effective income tax
rate5
27.0
%
16.4
%
23.6
%
________________________________________________
See pages 21 and 22 for footnotes.
Guess?, Inc. and
Subsidiaries
Reconciliation of GAAP Results
to Adjusted Results (Continued)
(dollars in thousands)
Nine Months Ended
October 30,
2021
October 31,
2020
November 2,
2019
Reported GAAP selling, general and
administrative expenses
$
616,076
$
478,320
$
627,823
Certain professional service and legal
fees and related credits (costs)6
(1,737
)
56
737
Separation charges7
—
(3,383
)
—
Adjusted selling, general and
administrative expenses5
$
614,339
$
474,993
$
628,560
Reported GAAP earnings (loss) from
operations
$
179,637
$
(132,369
)
$
44,165
Certain professional service and legal
fees and related (credits) costs6
1,737
(56
)
(737
)
Separation charges7
—
3,383
—
Asset impairment charges8
3,094
75,276
5,126
Net (gains) losses on lease
modifications9
441
(450
)
—
Adjusted earnings (loss) from
operations5
$
184,909
$
(54,216
)
$
48,554
Reported GAAP net earnings (loss)
attributable to Guess?, Inc.
$
102,948
$
(151,648
)
$
16,371
Certain professional service and legal
fees and related (credits) costs6
1,737
(56
)
(737
)
Separation charges7
—
3,383
—
Asset impairment charges8
3,094
75,276
5,126
Net (gains) losses on lease
modifications9
441
(450
)
—
Amortization of debt discount10
8,344
7,796
5,109
Discrete income tax adjustments11
6,140
805
—
Income tax impact from adjustments12
(3,200
)
(17,295
)
(3,169
)
Total adjustments affecting net earnings
(loss) attributable to Guess?, Inc.
16,556
69,459
6,329
Adjusted net earnings (loss)
attributable to Guess?, Inc.5
$
119,504
$
(82,189
)
$
22,700
Reported GAAP income tax expense
(benefit)
$
43,588
$
(14,850
)
$
10,649
Discrete income tax adjustments11
(6,140
)
(805
)
—
Income tax impact from adjustments12
3,200
17,295
3,169
Adjusted income tax expense5
$
40,648
$
1,640
$
13,818
Adjusted effective income tax
rate5
24.5
%
(2.0
%)
35.1
%
________________________________________________
See pages 21 and 22 for footnotes.
Guess?, Inc. and
Subsidiaries
Consolidated Segment
Data
(dollars in thousands)
Three Months Ended
% change
October 30,
2021
October 31,
2020
November 2,
2019
October 31,
2020
November 2,
2019
Net revenue:
Americas Retail
$
169,617
$
130,328
$
177,824
30%
(5%)
Americas Wholesale
58,999
35,971
56,398
64%
5%
Europe
330,736
321,574
277,253
3%
19%
Asia
57,137
61,978
82,261
(8%)
(31%)
Licensing
26,581
19,433
22,208
37%
20%
Total net revenue
$
643,070
$
569,284
$
615,944
13%
4%
Earnings (loss) from operations:
Americas Retail
$
24,070
$
473
$
1,601
4,989%
1,403%
Americas Wholesale
17,316
8,247
11,216
110%
54%
Europe
44,509
51,476
19,475
(14%)
129%
Asia
(2,399
)
1,415
(2,432
)
(270%)
(1%)
Licensing
24,402
18,228
19,372
34%
26%
Total segment earnings from operations
107,898
79,839
49,232
35%
119%
Corporate overhead
(38,069
)
(25,058
)
(24,736
)
52%
54%
Asset impairment charges
(1,152
)
(10,335
)
(1,847
)
(89%)
(38%)
Net gains (losses) on lease
modifications
(3,006
)
21
—
(14,414%)
Total earnings from operations
$
65,671
$
44,467
$
22,649
48%
190%
Operating margins:
Americas Retail
14.2
%
0.4
%
0.9
%
Americas Wholesale
29.3
%
22.9
%
19.9
%
Europe
13.5
%
16.0
%
7.0
%
Asia
(4.2
%)
2.3
%
(3.0
%)
Licensing
91.8
%
93.8
%
87.2
%
GAAP operating margin for total
Company
10.2
%
7.8
%
3.7
%
Certain professional service and legal
fees and related (credits) costs5, 6
0.1
%
(0.0
%)
(0.3
%)
Separation charges5, 7
—
%
0.1
%
—
%
Asset impairment charges5, 8
0.2
%
1.8
%
0.3
%
Net (gains) losses on lease
modifications5, 9
0.4
%
(0.0
%)
—
%
Adjusted operating margin for total
Company5
10.9
%
9.7
%
3.7
%
________________________________________________
See pages 21 and 22 for footnotes.
Guess?, Inc. and
Subsidiaries
Consolidated Segment
Data
(dollars in thousands)
Nine Months Ended
% change
October 30,
2021
October 31,
2020
November 2,
2019
October 31,
2020
November 2,
2019
Net revenue:
Americas Retail
$
511,449
$
314,977
$
553,213
62%
(8%)
Americas Wholesale
154,287
82,131
144,505
88%
7%
Europe
895,311
633,898
827,817
41%
8%
Asia
160,610
152,554
250,752
5%
(36%)
Licensing
70,039
44,514
59,568
57%
18%
Total net revenue
$
1,791,696
$
1,228,074
$
1,835,855
46%
(2%)
Earnings (loss) from operations:
Americas Retail
$
82,260
$
(40,904
)
$
5,746
(301%)
1,332%
Americas Wholesale
41,815
11,559
27,452
262%
52%
Europe
100,124
27,865
54,742
259%
83%
Asia
(9,054
)
(24,729
)
(10,435
)
(63%)
(13%)
Licensing
63,987
39,833
51,563
61%
24%
Total segment earnings from operations
279,132
13,624
129,068
1,949%
116%
Corporate overhead
(95,960
)
(71,167
)
(79,777
)
35%
20%
Asset impairment charges
(3,094
)
(75,276
)
(5,126
)
(96%)
(40%)
Net gains (losses) on lease
modifications
(441
)
450
—
(198%)
Total earnings (loss) from operations
$
179,637
$
(132,369
)
$
44,165
(236%)
307%
Operating margins:
Americas Retail
16.1
%
(13.0
%)
1.0
%
Americas Wholesale
27.1
%
14.1
%
19.0
%
Europe
11.2
%
4.4
%
6.6
%
Asia
(5.6
%)
(16.2
%)
(4.2
%)
Licensing
91.4
%
89.5
%
86.6
%
GAAP operating margin for total
Company
10.0
%
(10.8
%)
2.4
%
Certain professional service and legal
fees and related (credits) costs5, 6
0.1
%
(0.0
%)
(0.1
%)
Separation charges5, 7
—
%
0.3
%
—
%
Asset impairment charges5, 8
0.2
%
6.1
%
0.3
%
Net (gains) losses on lease
modifications5, 9
0.0
%
(0.0
%)
—
%
Adjusted operating margin for total
Company5
10.3
%
(4.4
%)
2.6
%
________________________________________________
See pages 21 and 22 for footnotes.
Guess?, Inc. and
Subsidiaries
Constant Currency Financial
Measures
(dollars in thousands)
As Reported
Foreign
Currency
Impact
Constant
Currency
As Reported
As
Reported
Constant
Currency
Three Months Ended
% change
October 30, 2021
October 31, 2020
Net revenue:
Americas Retail
$
169,617
$
(2,090
)
$
167,527
$
130,328
30%
29%
Americas Wholesale
58,999
(1,103
)
57,896
35,971
64%
61%
Europe
330,736
2,394
333,130
321,574
3%
4%
Asia
57,137
(169
)
56,968
61,978
(8%)
(8%)
Licensing
26,581
—
26,581
19,433
37%
37%
Total net revenue
$
643,070
$
(968
)
$
642,102
$
569,284
13%
13%
October 30, 2021
November 2, 2019
Net revenue:
Americas Retail
$
169,617
$
(841
)
$
168,776
$
177,824
(5%)
(5%)
Americas Wholesale
58,999
67
59,066
56,398
5%
5%
Europe
330,736
(11,680
)
319,056
277,253
19%
15%
Asia
57,137
(1,677
)
55,460
82,261
(31%)
(33%)
Licensing
26,581
—
26,581
22,208
20%
20%
Total net revenue
$
643,070
$
(14,131
)
$
628,939
$
615,944
4%
2%
Nine Months Ended
October 30, 2021
October 31, 2020
Net revenue:
Americas Retail
$
511,449
$
(7,527
)
$
503,922
$
314,977
62%
60%
Americas Wholesale
154,287
(4,016
)
150,271
82,131
88%
83%
Europe
895,311
(34,193
)
861,118
633,898
41%
36%
Asia
160,610
(6,303
)
154,307
152,554
5%
1%
Licensing
70,039
—
70,039
44,514
57%
57%
Total net revenue
$
1,791,696
$
(52,039
)
$
1,739,657
$
1,228,074
46%
42%
October 30, 2021
November 2, 2019
Net revenue:
Americas Retail
$
511,449
$
(2,148
)
$
509,301
$
553,213
(8%)
(8%)
Americas Wholesale
154,287
361
154,648
144,505
7%
7%
Europe
895,311
(37,425
)
857,886
827,817
8%
4%
Asia
160,610
(4,755
)
155,855
250,752
(36%)
(38%)
Licensing
70,039
—
70,039
59,568
18%
18%
Total net revenue
$
1,791,696
$
(43,967
)
$
1,747,729
$
1,835,855
(2%)
(5%)
Guess?, Inc. and
Subsidiaries
Selected Condensed
Consolidated Balance Sheet Data
(in thousands)
October 30,
2021
January 30,
2021
October 31,
2020
November 2,
2019
ASSETS
Cash and cash equivalents
$
391,065
$
469,110
$
365,259
$
110,095
Receivables, net
321,296
314,147
300,432
300,197
Inventories
482,475
389,144
393,162
519,875
Other current assets
76,414
60,123
74,063
67,425
Property and equipment, net
212,126
216,196
220,996
298,036
Restricted cash
224
235
226
522
Operating lease right-of-use assets
706,161
764,804
789,742
874,945
Other assets
353,606
252,109
236,126
219,805
Total assets
$
2,543,367
$
2,465,868
$
2,380,006
$
2,390,900
LIABILITIES AND STOCKHOLDERS’
EQUITY
Current portion of borrowings and finance
lease obligations
$
32,960
$
38,710
$
34,079
$
37,484
Current operating lease liabilities
209,072
222,800
227,209
189,582
Other current liabilities
562,606
501,029
474,085
429,701
Long-term debt and finance lease
obligations
67,456
68,554
70,069
34,712
Convertible senior notes, net
267,599
258,614
255,801
244,696
Long-term operating lease liabilities
599,472
662,657
689,251
740,484
Other long-term liabilities
140,746
144,004
147,065
123,638
Redeemable and nonredeemable
noncontrolling interests
38,119
25,837
22,644
23,543
Guess?, Inc. stockholders’ equity
625,337
543,663
459,803
567,060
Total liabilities and stockholders’
equity
$
2,543,367
$
2,465,868
$
2,380,006
$
2,390,900
Guess?, Inc. and
Subsidiaries
Condensed Consolidated Cash
Flow Data
(in thousands)
Nine Months Ended
October 30,
2021
October 31,
2020
November 2,
2019
Net cash provided by (used in) operating
activities13
$
4,581
$
98,351
$
(28,005
)
Net cash used in investing activities
(40,375
)
(14,578
)
(47,950
)
Net cash used in financing activities
(28,494
)
(4,548
)
(21,691
)
Effect of exchange rates on cash, cash
equivalents and restricted cash
(13,768
)
1,432
(2,732
)
Net change in cash, cash equivalents and
restricted cash
(78,056
)
80,657
(100,378
)
Cash, cash equivalents and restricted cash
at the beginning of the year
469,345
284,828
210,995
Cash, cash equivalents and restricted cash
at the end of the period
$
391,289
$
365,485
$
110,617
Supplemental information:
Depreciation and amortization
$
41,613
$
48,009
$
53,989
Total lease costs (excluding finance lease
cost)
$
213,712
$
219,820
$
268,900
Guess?, Inc. and
Subsidiaries
Reconciliation of Net Cash
Provided By (Used In) Operating Activities to Free Cash
Flow
(in thousands)
Nine Months Ended
October 30,
2021
October 31,
2020
November 2,
2019
Net cash provided by (used in) operating
activities13
$
4,581
$
98,351
$
(28,005
)
Less: Purchases of property and
equipment
(40,598
)
(12,364
)
(49,020
)
Less: Payments for property and equipment
under finance leases
(4,583
)
(2,924
)
(2,081
)
Free cash flow
$
(40,600
)
$
83,063
$
(79,106
)
________________________________________________
See pages 21 and 22 for footnotes
Guess?, Inc. and
Subsidiaries
Retail Store Data
Global Store and Concession
Count
Stores
Concessions
Region
Total
Directly
Operated
Partner
Operated
Total
Directly
Operated
Partner
Operated
As of October 30, 2021
United States
244
243
1
1
—
1
Canada
74
74
—
—
—
—
Central and South America
105
70
35
29
29
—
Total Americas
423
387
36
30
29
1
Europe and the Middle East
760
540
220
46
46
—
Asia and the Pacific
427
125
302
268
103
165
Total
1,610
1,052
558
344
178
166
As of October 31, 2020
United States
254
252
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
As of November 2, 2019
United States
287
285
2
1
—
1
Canada
82
82
—
—
—
—
Central and South America
112
72
40
27
27
—
Total Americas
481
439
42
28
27
1
Europe and the Middle East
743
516
227
40
40
—
Asia and the Pacific
519
219
300
327
154
173
Total
1,743
1,174
569
395
221
174
Guess?, Inc. and
Subsidiaries
Adjusted Earnings Per Share
for the Fiscal Year
(in thousands)
FY2020
FY2024E*,15
Reported GAAP net earnings attributable
to Guess?, Inc.
$
95,975
Certain professional service and legal
fees and related (credits) costs6
(857
)
Separation charges7
438
Asset impairment charges8
9,977
Amortization of debt discount10
7,558
Income tax impact from adjustments12,
14
(8,055
)
Total adjustments affecting net earnings
attributable to Guess?, Inc.
9,061
Adjusted net earnings attributable to
Guess?, Inc.5
$
105,036
GAAP earnings per share4
$
1.33
$
3.36
Certain professional service and legal
fees and related (credits) costs6
(0.01
)
—
Separation charges7
—
—
Asset impairment charges8
0.12
—
Amortization of debt discount10
0.08
0.14
Income tax impact from adjustments12,
14
(0.07
)
—
Adjusted earnings per share5
$
1.45
$
3.50
________________________________________________
* Amounts represent estimates for future
fiscal years.
See pages 21 and 22 for footnotes
Guess?, Inc. and
Subsidiaries
Return on Invested Capital for
the Fiscal Year
(in thousands)
FY2019
FY2020
FY2020
2-Year
Average
FY2023E
FY2024E
FY2024E
2-Year
Average
Total assets16
$
1,649,205
$
2,428,962
$
2,039,084
$
2,747,000
$
2,953,000
$
2,850,000
Less: Cash and cash equivalents
(210,460
)
(284,613
)
(247,537
)
(634,000
)
(806,000
)
(720,000
)
Less: Operating right-of-use assets16
—
(851,990
)
(425,995
)
(760,000
)
(764,000
)
(762,000
)
Less: Accounts payable
(286,657
)
(232,761
)
(259,709
)
(333,000
)
(346,000
)
(339,500
)
Less: Accrued expenses
(252,392
)
(204,096
)
(228,244
)
(208,000
)
(209,000
)
(208,500
)
Add: Accrual for European Commission
fine17
45,619
—
22,809
—
—
—
Average invested capital
$
945,315
$
855,502
$
900,408
$
812,000
$
828,000
$
820,000
FY2020
FY2024E
Reported GAAP earnings from
operations
$
140,671
$
335,000
Less: Certain professional service and
legal fees and related (credits) costs6
(857
)
—
Add: Asset impairment charges8
9,977
—
Add: Separation charges7
438
—
Adjusted earnings from
operations18
$
150,229
$
335,000
Less: Asset impairments8
(9,977
)
—
Less: Other income (expense), net
(2,529
)
(1,400
)
Less: Income tax expense19
(29,886
)
(83,400
)
Adjusted net operating profit after
taxes5
$
107,837
$
250,200
Non-GAAP return on invested
capital20
12
%
31
%
________________________________________________
See pages 21 and 22 for footnotes
Guess?, Inc. and Subsidiaries
Footnotes to Condensed
Consolidated Financial Data
Footnotes:
1
Amounts for the full fiscal year include
certain professional service and legal fees and related (credits)
costs recognized during the nine months ended October 30, 2021
which the Company otherwise would not have incurred as part of its
business operations. The Company is unable to predict future
amounts as these expenditures are inconsistent in amount and
frequency and certain elements used to estimate such items have not
yet occurred or are out of the Company’s control. As such, the
Company has not considered any future charges in the accompanying
GAAP outlook.
2
Amounts for the full fiscal year include
asset impairment charges related primarily to impairment of
operating lease right-of-use assets and property and equipment
related to certain retail locations recognized during the nine
months ended October 30, 2021 that resulted from lower revenue and
future cash flow projections from the ongoing effects of the
COVID-19 pandemic and expected store closures. The adjusted results
do not assume any additional future asset impairment charges
because of the uncertainty and variability of the nature and
amount. As such, the Company has not considered any future asset
impairment charges and recorded amounts currently determined under
GAAP.
3
Amounts for the full fiscal year represent
net (gains) losses on lease modifications related primarily to the
early termination of certain lease agreements recognized during the
nine months ended October 30, 2021. The Company is unable to
predict future amounts as these (gains) losses are inconsistent in
amount and frequency and certain elements used to estimate such
items have not yet occurred or are out of the Company’s control. As
such, the Company has not considered any future (gains) losses in
the accompanying GAAP outlook.
4
For GAAP purposes, the Company incurs
dilution above the strike price of the Company’s convertible senior
notes of $25.78. However, the Company excludes from its adjusted
diluted shares outstanding calculation the dilutive impact of the
convertible notes between $25.78 and $46.88, based on the bond
hedge contracts in place that will deliver shares to offset
dilution in these ranges. At stock prices in excess of $46.88, the
Company incurs dilution related to the notes, and it would have an
obligation to deliver additional shares in excess of the dilution
protection provided by the bond hedges. Diluted net income per
share for the three and nine months ended October 30, 2021 is
calculated based on GAAP net income and diluted weighted-average
shares of 65,852,024 and 65,892,772, respectively. There was no
dilution related to the convertible notes for either period.
5
The adjusted results reflect the exclusion
of certain professional service and legal fees and related
(credits) costs, certain separation charges, asset impairment
charges, net (gains) losses on lease modifications, non-cash
amortization of debt discount on the Company’s convertible senior
notes, the related income tax impacts of these adjustments, as well
as certain discrete income tax adjustments related primarily to an
intra-entity transfer of intellectual property rights to a
wholly-owned Swiss subsidiary, in each case where applicable. A
complete reconciliation of actual results to adjusted results is
presented in the “Reconciliation of GAAP Results to Adjusted
Results.”
6
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.
7
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.
8
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.
9
Amounts recorded represent net (gains)
losses on lease modifications related primarily to the early
termination of certain lease agreements.
10
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.
11
Amounts represent discrete income tax
adjustments related primarily to the impacts from an intra-entity
transfer of intellectual property rights to a wholly-owned Swiss
subsidiary during the quarter ended October 30, 2021, impacts from
cumulative valuation allowances and the income tax benefits from an
income tax rate change due to net operating loss carrybacks.
12
The income tax effect of certain
professional service and legal fees and related (credits) costs,
separation charges, asset impairment charges, net (gains) losses on
lease modifications and the amortization of debt discount was based
on the Company’s assessment of deductibility using the statutory
income tax rate (inclusive of the impact of valuation allowances)
of the tax jurisdiction in which the charges were incurred.
13
The Company made a U.S. income tax payment
of $80.4 million in the three months ended October 30, 2021, with a
remaining estimated $27.0 million currently expected to be paid in
January 2022 due to an intra-entity transfer of intellectual
property rights to a wholly-owned Swiss subsidiary.
14
During fiscal year 2020, the Company
recorded the impact from changes in the income tax law on deferred
income taxes in certain tax jurisdictions, net income tax
settlements and adjustments to specific uncertain income tax
positions.
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.
16
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.
17
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.
18
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.
19
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.
20
The Company defines return on invested
capital (or "ROIC") as adjusted net operating profit after taxes
divided by two-year average invested capital.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20211123006104/en/
Guess?, Inc. Fabrice Benarouche VP, Finance and Investor
Relations (213) 765-5578
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