SEC Filing | Guess, Inc.

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ges-20210501

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

For the quarterly period ended May 1, 2021

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

For the transition period from to

Commission file number: 1-11893

GUESS?, INC.

(Exact name of registrant as specified in its charter)


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

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

(213) 765-3100

(Registrant’s telephone number, including area code)

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

Title of each class

Trading symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.01 per share

GES

New York Stock Exchange

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

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

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

Large accelerated filer

☐

Accelerated filer

☒

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐


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

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

As of May 28, 2021, the registrant had 64,923,786 shares of Common Stock, $.01 par value per share, outstanding.

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GUESS?, INC.

FORM 10-Q

TABLE OF CONTENTS


PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements (unaudited)	1

	Condensed Consolidated Balance Sheets as of May 1, 2021 and January 30, 2021	1

	Condensed Consolidated Statements of Income (Loss) — Three Months Ended May 1, 2021 and May 2, 2020	2

	Condensed Consolidated Statements of Comprehensive Income (Loss) — Three Months Ended May 1, 2021 and May 2, 2020	3

	Condensed Consolidated Statements of Cash Flows — Three Months Ended May 1, 2021 and May 2, 2020	4

	Condensed Consolidated Statements of Stockholders’ Equity — Three Months Ended May 1 , 2021 and May 2 , 2020	5

	Notes to Condensed Consolidated Financial Statements	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	32

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	47

Item 4.	Controls and Procedures	50

PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	51

Item 1A.	Risk Factors	51

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	51

Item 6.	Exhibits	52

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PART I. FINANCIAL INFORMATION

ITEM 1. Financial Statements.

GUESS?, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)


	May 1, 2021		Jan 30, 2021
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	395,128	$	469,110

Accounts receivable, net	306,297		314,147
Inventories	404,851		389,144
Other current assets	67,907		60,123
Total current assets	1,174,183		1,232,524
Property and equipment, net	211,354		216,196
Goodwill	36,516		36,736
Deferred tax assets	71,979		72,417
Restricted cash	233		235
Operating lease right-of-use assets	738,544		764,804

Other assets	145,200		142,956
	$	2,378,009	$	2,465,868

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of borrowings and finance lease obligations	$	17,917	$	38,710
Accounts payable	257,926		300,427
Accrued expenses and other current liabilities	176,156		200,602
Current portion of operating lease liabilities	224,676		222,800
Total current liabilities	676,675		762,539
Convertible senior notes, net	261,609		258,614
Long-term debt and finance lease obligations	86,724		68,554

Long-term operating lease liabilities	632,574		662,657
Other long-term liabilities	139,285		144,004
	1,796,867		1,896,368
Redeemable noncontrolling interests	3,949		3,920

Commitments and contingencies (Note 13)

Stockholders’ equity:
Preferred stock, $.01 par value. Authorized 10,000,000 shares; no shares issued and outstanding	—		—
Common stock, $.01 par value. Authorized 150,000,000 shares; issued 142,792,840 and 142,793,679 shares, outstanding 64,932,613 and 64,230,162 shares, as of May 1, 2021 and January 30, 2021, respectively	649		642
Paid-in capital	550,831		553,111
Retained earnings	1,039,581		1,034,823
Accumulated other comprehensive loss	(120,902)		(120,675)
Treasury stock, 77,860,227 and 78,563,517 shares as of May 1, 2021 and January 30, 2021, respectively	(915,964)		(924,238)
Guess?, Inc. stockholders’ equity	554,195		543,663
Nonredeemable noncontrolling interests	22,998		21,917
Total stockholders’ equity	577,193		565,580
	$	2,378,009	$	2,465,868

See accompanying notes to condensed consolidated financial statements.

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GUESS?, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)

(in thousands, except per share data)

(unaudited)


	Three Months Ended
	May 1, 2021		May 2, 2020
Product sales	$	498,477	$	247,317
Net royalties	21,525		12,934
Net revenue	520,002		260,251
Cost of product sales	308,444		226,022
Gross profit	211,558		34,229
Selling, general and administrative expenses	186,684		143,288


Asset impairment charges	441		52,972
Net (gains) losses on lease modifications	(2,145)		456
Earnings (loss) from operations	26,578		(162,487)
Other income (expense):
Interest expense	(5,926)		(5,462)
Interest income	374		610
Other expense, net	(2,701)		(19,580)
	(8,253)		(24,432)

Earnings (loss) before income tax expense (benefit)	18,325		(186,919)
Income tax expense (benefit)	5,455		(26,381)
Net earnings (loss)	12,870		(160,538)
Net earnings (loss) attributable to noncontrolling interests	864		(2,872)
Net earnings (loss) attributable to Guess?, Inc.	$	12,006	$	(157,666)

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

Weighted average common shares outstanding attributable to common stockholders (Note 3):
Basic	64,035		65,715
Diluted	65,940		65,715

See accompanying notes to condensed consolidated financial statements.

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GUESS?, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF

COMPREHENSIVE INCOME (LOSS)

(in thousands)

(unaudited)


	Three Months Ended
	May 1, 2021		May 2, 2020
Net earnings (loss)	$	12,870	$	(160,538)
Other comprehensive income (loss) (“OCI”):
Foreign currency translation adjustment
Losses arising during the period	(2,216)		(18,499)



Derivative financial instruments designated as cash flow hedges
Gains arising during the period	1,781		3,536
Less income tax effect	(228)		(356)
Reclassification to net earnings (loss) for (gains) losses realized	398		(1,988)
Less income tax effect	62		219





Defined benefit plans

Foreign currency and other adjustments	129		—
Less income tax effect	(13)		(1)
Net actuarial loss amortization	105		96
Prior service credit amortization	(17)		(16)
Less income tax effect	(11)		(9)
Total comprehensive income (loss)	12,860		(177,556)
Less comprehensive income (loss) attributable to noncontrolling interests:
Net earnings (loss)	864		(2,872)
Foreign currency translation adjustment	217		(3,626)
Amounts attributable to noncontrolling interests	1,081		(6,498)
Comprehensive income (loss) attributable to Guess?, Inc.	$	11,779	$	(171,058)

See accompanying notes to condensed consolidated financial statements.

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GUESS?, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)


	Three Months Ended
	May 1, 2021		May 2, 2020
Cash flows from operating activities:
Net earnings (loss)	$	12,870	$	(160,538)
Adjustments to reconcile net earnings (loss) to net cash used in operating activities:
Depreciation and amortization	14,188		17,024
Amortization of debt discount	2,781		2,599
Amortization of debt issuance costs	362		307
Share-based compensation expense	4,060		5,786
Forward contract gains	(101)		(1,102)

Net loss from impairment and disposition of long-term assets	1,011		53,483
Other items, net	2,315		9,951
Changes in operating assets and liabilities:
Accounts receivable	4,373		84,667
Inventories	(9,574)		(7,894)
Prepaid expenses and other assets	(15,328)		1,059
Operating lease assets and liabilities, net	(1,953)		27,704
Accounts payable and accrued expenses	(67,724)		(93,294)
Other long-term liabilities	(923)		(1,305)
Net cash used in operating activities	(53,643)		(61,553)
Cash flows from investing activities:
Purchases of property and equipment	(9,139)		(5,973)
Proceeds from sale of business and long-term assets	1,648		257


Net cash settlement of forward contracts	(283)		—

Other investing activities	(14)		—
Net cash used in investing activities	(7,788)		(5,716)
Cash flows from financing activities:
Proceeds from borrowings	5,651		245,961
Repayments on borrowings and finance lease obligations	(9,804)		(31,884)





Dividends paid	(7,511)		(958)


Issuance of common stock, net of tax withholdings on vesting of stock awards	1,945		(3,036)

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

Supplemental cash flow data:
Interest paid	$	3,977	$	3,960
Income taxes paid, net of refunds	$	5,346	$	590

Non-cash investing and financing activity:
Assets acquired under finance lease obligations	$	2,323	$	86

See accompanying notes to condensed consolidated financial statements.

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GUESS?, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands, except share data)


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

Net earnings	—	—		—		12,006		—		—	—		864		12,870
Other comprehensive income (loss), net of income tax of ($190)	—	—		—		—		(227)		—	—		217		(10)
Issuance of common stock under stock compensation plans	689,653	7		(6,417)		—		—		(690,492)	8,123		—		1,713
Issuance of stock under Employee Stock Purchase Plan	12,798	—		81		—		—		(12,798)	151		—		232
Share-based compensation	—	—		4,056		4		—		—	—		—		4,060
Dividends, net of forfeitures on non-participating securities	—	—		—		(7,252)		—		—	—		—		(7,252)






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

See accompanying notes to condensed consolidated financial statements.

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GUESS?, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands, except share data)


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

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


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





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

See accompanying notes to condensed consolidated financial statements.

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GUESS?, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

May 1, 2021

(unaudited)

(1)Basis of Presentation

Description of the Business

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

Interim Financial Statements

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

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

Fiscal Periods

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

COVID-19 Business Update

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

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

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Summary of Significant Accounting Policies

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

Reclassifications

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

Use of Estimates

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

As discussed above, the COVID-19 pandemic has materially impacted the Company’s results during the three months ended May 1, 2021 and May 2, 2020. The Company’s operations could continue to be impacted in ways the Company is not able to predict today due to the evolving situation. While the Company believes it has made reasonable accounting estimates based on the facts and circumstances that were available as of the reporting date, to the extent there are differences between these estimates and actual results, the Company’s results of operations and financial position could be materially impacted.

Revenue Recognition

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

The Company also recognizes royalty revenue from its trademark license agreements. The Company’s trademark license agreements represent symbolic licenses that are dependent on the Company’s continued support over the term of the license agreement. The amount of revenue that is recognized from the licensing arrangements is based on sales-based royalty and advertising fund contributions as well as specific fixed payments, where applicable. The Company’s trademark license agreements customarily provide for a multi-year initial term ranging from three to 15 years and may contain options to renew prior to expiration for an additional multi-year period. The unrecognized portion of upfront payments is included in deferred royalties in accrued expenses and other long-term liabilities depending on the short or long-term nature of the payments to be recognized. As of May 1, 2021, the Company had $6.1 million and $15.9 million of deferred royalties related to these upfront payments included in accrued expenses and other current liabilities and other long-term liabilities, respectively. This compares to $6.6 million and $17.1 million of deferred royalties related to these upfront payments included in accrued expenses and other current liabilities and other long-term liabilities, respectively, at January 30, 2021. During the three months ended May 1, 2021 and May 2, 2020, the Company recognized $3.5 million and $3.6 million in net royalties related to the amortization of the deferred royalties, respectively.

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

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Allowance for Doubtful Accounts

In the normal course of business, the Company grants credit directly to certain wholesale customers after a credit analysis is performed based on financial and other criteria. Accounts receivable are recorded net of an allowance for doubtful accounts. The Company maintains allowances for doubtful accounts for estimated losses that may result from the inability of its wholesale customers and licensing partners to make their required payments. The Company bases its allowances on analysis of the aging of accounts receivable at the date of the financial statements, assessments of historical and current collection trends, evaluation of the impact of current and future forecasted economic conditions and whether the Company has obtained credit insurance or other guarantees. Management performs regular evaluations concerning the ability of its customers and records a provision for doubtful accounts based on these evaluations.

As of May 1, 2021, approximately 48% of the Company’s total net trade accounts receivable and 60% of its European net trade receivables were subject to credit insurance coverage, certain bank guarantees or letters of credit for collection purposes. The Company’s credit insurance coverage contains certain terms and conditions specifying deductibles and annual claim limits. Management evaluates the creditworthiness of the counterparties to the credit insurance, bank guarantees, and letters of credit and records a provision for the risk of loss on these instruments based on these evaluations as considered necessary.

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

Recently Issued Accounting Guidance

In March 2020, the Financial Accounting Standards Board (“FASB”) issued authoritative guidance to provide temporary optional expedients and exceptions related to contract modifications and hedge accounting to ease the financial reporting burdens of the expected market transition from LIBOR and other interbank offered rates to alternative reference rates, such as SOFR. This guidance may be adopted up to December 31, 2022. The Company is currently evaluating its election options and the impact on its consolidated financial statements and related disclosures.

In August 2020, the FASB issued authoritative guidance to simplify the accounting for convertible instruments and contracts in an entity’s own equity and the diluted earnings per share computations for these instruments. This guidance removes major separation models required under current guidance which will enable more convertible debt instruments to be reported as a single liability instrument with no separate accounting for embedded conversion features. This guidance is effective for fiscal years beginning after December 31, 2021, which will be the Company’s first quarter of fiscal 2023, on either a full or modified retrospective basis. Early adoption is permitted for fiscal years beginning after December 31, 2020, which will be the Company’s first quarter of fiscal 2022. The Company is currently evaluating the impact of the adoption of this guidance on its consolidated financial statements and related disclosures.

(2) Lease Accounting

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

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

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

The components of leases are as follows (in thousands):


		May 1, 2021		Jan 30, 2021
Assets	Balance Sheet Location
Operating	Operating lease right-of-use assets	$	738,544	$	764,804
Finance	Property and equipment, net	21,405		20,595
Total lease assets		$	759,949	$	785,399

Liabilities	Balance Sheet Location
Current:
Operating	Current portion of operating lease liabilities	$	224,676	$	222,800
Finance	Current portion of borrowings and finance lease obligations	4,551		4,698
Noncurrent:
Operating	Long-term operating lease liabilities	632,574		662,657
Finance	Long-term debt and finance lease obligations	17,870		17,365
Total lease liabilities		$	879,671	$	907,520

The components of lease costs are as follows (in thousands):


		Three Months Ended
	Income Statement Location	May 1, 2021		May 2, 2020
Operating lease costs	Cost of product sales	$	46,684	$	55,369
Operating lease costs	Selling, general and administrative expenses	6,357		5,176
Operating lease costs1, 2	Net (gains) losses on lease modifications	(2,145)		456
Finance lease costs
Amortization of leased assets1, 3	Cost of product sales	11		12
Amortization of leased assets1, 3	Selling, general and administrative expenses	1,361		864
Interest on lease liabilities	Interest expense	366		282
Variable lease costs4	Cost of product sales	15,739		14,348
Variable lease costs4	Selling, general and administrative expenses	574		579
Short-term lease costs	Cost of product sales	105		239
Short-term lease costs	Selling, general and administrative expenses	1,171		1,789
Total lease costs1		$	70,223	$	79,114

____________________________________________________________________

Notes:

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

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

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

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

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


	Operating Leases
Maturity of Lease Liabilities	Non-Related Parties		Related Parties		Finance Leases		Total
20221	$	193,515	$	5,965	$	4,294	$	203,774
2023	181,879		7,260		5,974		195,113
2024	146,015		7,678		5,887		159,580
2025	103,560		7,321		3,946		114,827
2026	73,458		6,928		3,034		83,420
After 2026	170,672		36,410		3,158		210,240
Total lease payments	869,099		71,562		26,293		966,954
Less: Interest	71,415		11,996		3,872		87,283
Present value of lease liabilities	$	797,684	$	59,566	$	22,421	$	879,671

______________________________________________________________________

Notes:

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

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

Lease Term and Discount Rate

May 1, 2021

Weighted-average remaining lease term

Operating leases

6.1 Years

Finance leases

4.8 Years

Weighted-average discount rate

Operating leases

3.5%

Finance leases

6.8%


	Three Months Ended
Supplemental Cash Flow Information	May 1, 2021		May 2, 2020
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	53,428	$	32,618


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

Impairment

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

(3)Earnings (Loss) per Share

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

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

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


	Three Months Ended
	May 1, 2021		May 2, 2020
Net earnings (loss) attributable to Guess?, Inc.	$	12,006	$	(157,666)
Less net earnings attributable to nonvested restricted stockholders	130		—
Net earnings (loss) attributable to common stockholders	$	11,876	$	(157,666)

Weighted average common shares used in basic computations	64,035		65,715

Effect of dilutive securities: Stock options and restricted stock units1	1,905		—
Weighted average common shares used in diluted computations	65,940		65,715

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

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Notes:

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

During the three months ended May 1, 2021 and May 2, 2020, equity awards granted for 390,243 and 3,157,824, respectively, of the Company’s common shares were outstanding but were excluded from the computation of diluted weighted average common shares and common equivalent shares outstanding because the assumed proceeds, as calculated under the treasury stock method, resulted in these awards being antidilutive. There were no nonvested stock units subject to the achievement of performance-based or market-based vesting conditions that were excluded from the computation of diluted weighted average common shares and common equivalent shares outstanding as the respective conditions were achieved as of May 1, 2021. The Company excluded 227,729 nonvested stock units which were subject to the achievement of performance-based vesting conditions from the computation of diluted weighted average common shares and common equivalent shares outstanding because these conditions were not achieved as of May 2, 2020.

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

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(4)Stockholders’ Equity

Share Repurchase Program

During the three months ended May 1, 2021 and May 2, 2020, there were no shares repurchased under the Company’s Share Repurchase Program. As of May 1, 2021, the Company had remaining authority under the program to purchase $47.8 million of its common stock.

Dividends

The following table sets forth the cash dividend declared per share:


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

During the first quarter of fiscal 2021, the Company announced that its Board of Directors had deferred the decision with respect to the payment of its quarterly cash dividend, in light of the uncertainties related to the COVID-19 pandemic. The Company resumed paying its quarterly cash dividend of $0.1125 per share beginning in the third quarter of fiscal 2021, but decided to not declare any cash dividends for the first and second quarters of fiscal 2021.

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

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

Accumulated Other Comprehensive Income (Loss)

The changes in accumulated other comprehensive income (loss), net of related income taxes, are as follows (in thousands):


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

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

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

Details on reclassifications out of accumulated other comprehensive income (loss) to net earnings (loss) are as follows (in thousands):


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



Derivative financial instruments designated as cash flow hedges:
Foreign exchange currency contracts	$	462	$	(1,991)		Cost of product sales

Interest rate swap	(64)		3			Interest expense
Less income tax effect	62		219			Income tax expense (benefit)
	460		(1,769)




Defined benefit plans:
Net actuarial loss amortization	105		96