Los Angeles, CA, November 1, 2001 – Guess?, Inc. (NYSE:GES) today announced its financial results for the third quarter and nine months ended September 29, 2001 and updated its outlook for the balance of the fiscal year.

Third Quarter Results

For the third quarter ended September 29, 2001, the Company reported net earnings, before charges, of $3.9 million, or diluted earnings of $0.09 per share. These results exclude restructuring, impairment and severance charges of $4.4 million, or $2.6 million net of taxes. Including the charges, net earnings were $1.3 million, or diluted earnings of $0.03 per share. The third quarter results were slightly higher than previously revised expectations of diluted earnings per share of $0.06 to $0.08 before the aforementioned charges, and compare to net earnings of $8.4 million, or diluted earnings of $0.19 per share, for the third quarter of 2000.

Maurice Marciano, Co-Chairman and Co-Chief Executive Officer, commented, “In spite of a weak retail environment and the impact of the events of September 11th, we continued to make significant progress during the quarter in positioning our Company for a return to long-term, sustainable growth. Our organization is operating more efficiently, as evidenced by the 18% reduction in SG&A expense despite our larger store base; our inventory position is significantly improved; and, our balance sheet is stronger, with a $48 million reduction in outstanding borrowings from year-ago levels. These actions have created a more solid foundation for the future, and we expect to see further benefits when sales improve. Toward that end, we continue to refine our core men's and women's collections to offer the best selection of merchandise for our customers.”

Net revenue from overall product sales declined 21.6% to $162.3 million in the third quarter of 2001 from $206.8 million in the third quarter last year.

The Company's retail stores, including those in Canada, generated revenue of $95.5 million in the 2001 third quarter, a decrease of 7.8% from $103.5 million reported in the same period a year ago. Comparable store sales decreased 15.9% in the third quarter of 2001 versus the year-ago period.

Net revenue from the Company's wholesale business was $66.8 million in the third quarter of 2001, down 35.4% from $103.3 million for the 2000 period.

Net revenue from the licensing segment increased 6.6% to $10.2 million in the 2001 third quarter from $9.5 million in the third quarter last year.

Gross profit decreased to $59.1 million in the third quarter of 2001, to 34.3% of net revenue, from $77.2 million, or 35.7% of net revenue, in the comparable 2000 period. The decrease in gross profit was attributable to lower revenues in the wholesale and retail businesses coupled with increased retail occupancy costs. While gross profit margins improved in the wholesale business as a result of lower shipments to the off-price channel, retail margins declined due to the lower store sales productivity and higher occupancy costs.

Selling, general and administrative (SG&A) expenses decreased to $49.2 million, or 28.5% of net revenue, in the 2001 third quarter from $59.9 million, or 27.7% of net revenue, in the 2000 third quarter. The overall SG&A expense reduction of 17.9% from the same period last year resulted from cost containment initiatives in both the retail and wholesale businesses, which were partially offset by the costs of operating new stores.

In the third quarter, the Company recorded restructuring, impairment and severance charges totaling $4.4 million for an increase in its reserves to dispose of idle facilities, write-off of impaired assets, and to recognize severance costs related to its efforts to streamline operations.

Earnings from operations, including the above-mentioned charges, were $5.5 million in the third quarter of 2001 versus $17.3 million in the comparable year-ago period. The wholesale segment posted a loss from operations of $4.1 million for the third quarter of 2001, compared to earnings from operations of $1.9 million for the same period last year. The retail segment posted earnings from operations of $1.0 million in the 2001 third quarter, versus earnings from operations of $8.0 million in the 2000 third quarter. Earnings from operations for the licensing segment increased to $8.5 million in the third quarter of 2001 from $7.3 million for the same period last year.

The Company also announced that, based on its current business needs, it reached an agreement with its bank group to amend its existing credit facility, in order to reduce its facility to $100.0 million from $125.0 million and to provide increased flexibility with respect to certain of its financial covenants through the term of the facility.

Nine Month Results

For the nine months ended September 29, 2001, the Company reported net earnings, before charges, of $7.8 million, or diluted earnings of $0.18 per share. These results exclude restructuring, impairment and severance charges of $5.0 million, or $2.9 million after taxes. Including the charges, net earnings for the first nine months of 2001 were $4.9 million, or diluted earnings of $0.11 per share. In the comparable period for 2000, the Company posted net earnings of $29.6 million, or diluted earnings of $0.67 per share.

Net revenue from overall product sales declined 15.9% to $465.9 million in the 2001 nine-month period from $553.9 million in the same period in 2000.

The Company's retail stores, including those in Canada, generated sales of $258.0 million for the first nine months of 2001, down 3.0% from $266.1 million for the same period last year. Sales generated by new stores were offset by a comparable store sales decrease of 15.5% for the 2001 nine-month period.

Net revenue from the Company's wholesale business in the first nine months of 2001 declined by 27.8% to $207.9 million from $287.8 million in the first nine months of 2001.

Net revenue from licensing was $28.4 million for the 2001 first nine months, a slight decrease from $29.0 million for the same period in 2000.

Gross profit decreased to $169.5 million for the 2001 nine-month period, or 34.3% of net revenue, from $225.7 million, or 38.7% of net revenue, for the same period in 2000. Lower revenues and higher allowances in the wholesale business contributed to the decline in gross profit for the 2001 year-to-date period. In addition, in the retail segment, higher markdowns and increased occupancy costs due to lower store sales productivity adversely impacted gross profit margins.

SG&A expenses decreased to $147.3 million for the first nine months of 2001 from $168.4 million in the same period in 2000, a decline of 12.5%, as a result of cost containment programs in both the wholesale and retail businesses, which more than offset the costs to operate the new stores.

Earnings from operations, including the above-mentioned charges, were $18.2 million for the first nine months of 2001, versus $58.8 million for the comparable 2000 period. Earnings from operations for the wholesale segment decreased to $1.0 million from $22.1 million in the year-ago period. For the retail segment, the loss from operations was $6.7 million, compared to earnings from operations of $13.8 million in the first nine months of last year. Earnings from operations for the licensing segment in the first nine months of 2001 increased to $24.0 million, compared to $23.0 million in the first nine months of 2000.

Fiscal 2001 Outlook

The Company expects to report a same store sales decrease in the low teens in its retail stores for the month of October 2001.

Within the current retail environment, the Company has experienced continued pressure on both sales and gross margins. As a result, the Company now expects diluted earnings per share in the 2001 fourth quarter to be in the range of $0.08 to $0.10 versus previously announced expectations of diluted earnings of $0.22 to $0.24 per share for the period. Based on the revised fourth quarter outlook, full year earnings per share for fiscal 2001 are expected to be in the range of $0.19 to $0.21, including the charges recorded in the first nine months.

Mr. Marciano commented, “Subsequent to recent events, we expect that the economic slowdown, lower consumer confidence and the decline in shopping traffic will impact results in the near term. Within this climate, we are watching our inventories and costs very carefully, while continuing to improve our core product lines through focused design and merchandising strategies.”

2001 Share Repurchase Program In May 2001, the Company's Board of Directors authorized the Company to repurchase shares of its own stock in an amount of up to $15 million from time to time in open market transactions. During the third quarter, the Company purchased 474,700 shares at an aggregate cost of $3.5 million or an average price of $7.40 per share. To date, the Company has purchased 531,100 shares at an aggregate cost of $4.0 million or an average price of $7.45 per share.

The Company will hold a conference call at 4:30 pm (ET) on November 1, 2001 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's Page” link from the “Guess, Inc.” section of the site. The webcast will be archived on the website through Thursday, November 8th at 7:30 pm (ET).