SEC Filing | Guess, Inc.

View:

ges-20211030

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

For the quarterly period ended October 30, 2021

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

For the transition period from to

Commission file number: 1-11893

GUESS?, INC.

(Exact name of registrant as specified in its charter)


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

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

(213) 765-3100

(Registrant’s telephone number, including area code)

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

Title of each class

Trading symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.01 per share

GES

New York Stock Exchange

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

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

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

Large accelerated filer

☐

Accelerated filer

☒

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐


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

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

As of November 29, 2021, the registrant had 64,974,647 shares of Common Stock, $.01 par value per share, outstanding.

Table of Contents

GUESS?, INC.

FORM 10-Q

TABLE OF CONTENTS


PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements (unaudited)	1

	Condensed Consolidated Balance Sheets as of October 3 0 , 2021 and January 30, 2021	1

	Condensed Consolidated Statements of Income (Loss) — Three and Nine Months Ended October 3 0 , 2021 and October 3 1, 2020	2

	Condensed Consolidated Statements of Comprehensive Income (Loss) — Three and Nine Months Ended October 3 0 , 2021 and October 3 1, 2020	3

	Condensed Consolidated Statements of Cash Flows — Nine Months Ended October 3 0 , 2021 and October 3 1, 2020	4

	Condensed Consolidated Statements of Stockholders’ Equity — Three and Nine Months Ended October 3 0 , 2021 and October 3 1, 2020	5

	Notes to Condensed Consolidated Financial Statements	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	36

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	57

Item 4.	Controls and Procedures	60

PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	61

Item 1A.	Risk Factors	61

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	61

Item 6.	Exhibits	62

Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. Financial Statements.

GUESS?, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)


	Oct 30, 2021		Jan 30, 2021
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	391,065	$	469,110

Accounts receivable, net	321,296		314,147
Inventories	482,475		389,144
Other current assets	76,414		60,123
Total current assets	1,271,250		1,232,524
Property and equipment, net	212,126		216,196
Goodwill	35,539		36,736
Deferred tax assets	186,957		72,417
Restricted cash	224		235
Operating lease right-of-use assets	706,161		764,804

Other assets	150,184		142,956
	$	2,562,441	$	2,465,868

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of borrowings and finance lease obligations	$	32,960	$	38,710
Accounts payable	313,727		300,427
Accrued expenses and other current liabilities	248,879		200,602
Current portion of operating lease liabilities	209,072		222,800
Total current liabilities	804,638		762,539
Convertible senior notes, net	267,599		258,614
Long-term debt and finance lease obligations	67,456		68,554

Long-term operating lease liabilities	599,472		662,657
Other long-term liabilities	159,820		144,004
Total liabilities	1,898,985		1,896,368
Redeemable noncontrolling interests	9,751		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 142,788,502 and 142,793,679 shares, outstanding 64,974,647 and 64,230,162 shares, as of October 30, 2021 and January 30, 2021, respectively	650		642
Paid-in capital	562,177		553,111
Retained earnings	1,105,129		1,034,823
Accumulated other comprehensive loss	(127,200)		(120,675)
Treasury stock, 77,813,855 and 78,563,517 shares as of October 30, 2021 and January 30, 2021, respectively	(915,419)		(924,238)
Guess?, Inc. stockholders’ equity	625,337		543,663
Nonredeemable noncontrolling interests	28,368		21,917
Total stockholders’ equity	653,705		565,580
	$	2,562,441	$	2,465,868

See accompanying notes to condensed consolidated financial statements.

Table of Contents

GUESS?, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)

(in thousands, except per share data)

(unaudited)


	Three Months Ended				Nine Months Ended
	Oct 30, 2021		Oct 31, 2020		Oct 30, 2021		Oct 31, 2020
Product sales	$	616,489	$	549,851	$	1,721,657	$	1,183,560
Net royalties	26,581		19,433		70,039		44,514
Net revenue	643,070		569,284		1,791,696		1,228,074
Cost of product sales	349,466		329,764		992,448		807,297
Gross profit	293,604		239,520		799,248		420,777
Selling, general and administrative expenses	223,775		184,739		616,076		478,320


Asset impairment charges	1,152		10,335		3,094		75,276
Net (gains) losses on lease modifications	3,006		(21)		441		(450)
Earnings (loss) from operations	65,671		44,467		179,637		(132,369)
Other income (expense):
Interest expense	(5,550)		(5,809)		(17,485)		(17,212)
Interest income	487		562		1,322		1,608
Other expense, net	(7,800)		(6,521)		(11,502)		(20,553)
Total other expense	(12,863)		(11,768)		(27,665)		(36,157)

Earnings (loss) before income tax expense (benefit)	52,808		32,699		151,972		(168,526)
Income tax expense (benefit)	20,441		5,145		43,588		(14,850)
Net earnings (loss)	32,367		27,554		108,384		(153,676)
Net earnings (loss) attributable to noncontrolling interests	2,487		1,178		5,436		(2,028)
Net earnings (loss) attributable to Guess?, Inc.	$	29,880	$	26,376	$	102,948	$	(151,648)

Net earnings (loss) per common share attributable to common stockholders:
Basic	$	0.46	$	0.41	$	1.58	$	(2.35)
Diluted	$	0.45	$	0.41	$	1.55	$	(2.35)

Weighted average common shares outstanding attributable to common stockholders:
Basic	64,373		62,789		64,248		64,561
Diluted	65,852		63,579		65,893		64,561

See accompanying notes to condensed consolidated financial statements.

Table of Contents

GUESS?, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF

COMPREHENSIVE INCOME (LOSS)

(in thousands)

(unaudited)


	Three Months Ended				Nine Months Ended
	Oct 30, 2021		Oct 31, 2020		Oct 30, 2021		Oct 31, 2020
Net earnings (loss)	$	32,367	$	27,554	$	108,384	$	(153,676)
Other comprehensive income (loss) (“OCI”):
Foreign currency translation adjustment
Gains (losses) arising during the period	(7,907)		(1,043)		(15,374)		13,260



Derivative financial instruments designated as cash flow hedges
Gains (losses) arising during the period	3,072		1,465		6,486		(2,896)
Less income tax effect	(371)		(179)		(761)		350
Reclassification to net earnings (loss) for (gains) losses realized	1,342		(1,737)		2,764		(6,187)
Less income tax effect	(157)		184		(329)		667





Defined benefit plans

Foreign currency and other adjustments	54		(5)		139		(241)
Less income tax effect	(6)		3		(14)		27
Net actuarial loss amortization	106		101		317		294
Prior service credit amortization	(16)		(17)		(50)		(49)
Less income tax effect	(13)		(10)		(36)		(29)
Total comprehensive income (loss)	28,471		26,316		101,526		(148,480)
Less comprehensive income (loss) attributable to noncontrolling interests:
Net earnings (loss)	2,487		1,178		5,436		(2,028)
Foreign currency translation adjustment	(624)		1,166		(333)		(701)
Amounts attributable to noncontrolling interests	1,863		2,344		5,103		(2,729)
Comprehensive income (loss) attributable to Guess?, Inc.	$	26,608	$	23,972	$	96,423	$	(145,751)

See accompanying notes to condensed consolidated financial statements.

Table of Contents

GUESS?, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)


	Nine Months Ended
	Oct 30, 2021		Oct 31, 2020
Cash flows from operating activities:
Net earnings (loss)	$	108,384	$	(153,676)
Adjustments to reconcile net earnings (loss) to net cash provided by operating activities:
Depreciation and amortization	41,613		48,009
Amortization of debt discount	8,343		7,796
Amortization of debt issuance costs	1,035		1,017
Share-based compensation expense	15,068		14,529
Forward contract (gains) losses	(766)		2,926
Deferred income taxes	(119,853)		912
Net loss from impairment and disposition of long-term assets	4,972		76,046
Other items, net	14,797		11,872
Changes in operating assets and liabilities:
Accounts receivable	(22,301)		41,188
Inventories	(96,673)		3,591
Prepaid expenses and other assets	(23,045)		(10,174)
Operating lease assets and liabilities, net	(17,422)		34,323
Accounts payable and accrued expenses	72,360		21,157
Other long-term liabilities	18,069		(1,165)
Net cash provided by operating activities	4,581		98,351
Cash flows from investing activities:
Purchases of property and equipment	(40,598)		(12,364)
Proceeds from sale of business and long-term assets	3,625		1,596

Net cash settlement of forward contracts	(740)		(743)
Purchases of investments	(2,045)		(2,344)
Other investing activities	(617)		(723)
Net cash used in investing activities	(40,375)		(14,578)
Cash flows from financing activities:
Proceeds from borrowings	19,310		294,893
Repayments on borrowings and finance lease obligations	(25,077)		(249,727)





Dividends paid	(22,121)		(8,114)

Noncontrolling interest capital distribution	(3,452)		—
Issuance of common stock, net of income tax withholdings on vesting of stock awards	2,846		(2,724)
Purchase of treasury stock	—		(38,876)
Net cash used in financing activities	(28,494)		(4,548)
Effect of exchange rates on cash, cash equivalents and restricted cash	(13,768)		1,432
Net change in cash, cash equivalents and restricted cash	(78,056)		80,657
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	$	391,289	$	365,485

Supplemental cash flow data:
Interest paid	$	9,009	$	9,265
Income taxes paid, net of refunds	$	107,687	$	6,326

Non-cash investing and financing activity:
Assets acquired under finance lease obligations	$	2,854	$	6,803
Receivable and related adjustments from sale of retail locations	$	—	$	574

See accompanying notes to condensed consolidated financial statements.

Table of Contents

GUESS?, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands, except share data)


	For the three and nine months ended October 30, 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

Net earnings	—	—		—		61,062		—		—	—		2,085		63,147
Other comprehensive income (loss), net of income tax of ($403)	—	—		—		—		(3,026)		—	—		74		(2,952)
Issuance of common stock under stock compensation plans	24,233	1		60		—		—		(27,409)	323		—		384
Issuance of stock under Employee Stock Purchase Plan	11,129	—		79		—		—		(11,129)	130		—		209
Share-based compensation	—	—		4,795		7		—		—	—		—		4,802
Dividends, net of forfeitures on non-participating securities	—	—		—		(7,308)		—		—	—		—		(7,308)

Noncontrolling interest capital distribution	—	—		—		—		—		—	—		(3,452)		(3,452)




Balance at July 31, 2021	64,967,975	$	650	$	555,765	$	1,093,342	$	(123,928)	77,821,689	$	(915,511)	$	21,705	$	632,023
Net earnings	—	—		—		29,880		—		—	—		2,487		32,367
Other comprehensive loss, net of income tax of ($547)	—	—		—		—		(3,272)		—	—		(624)		(3,896)
Issuance of common stock under stock compensation plans	(1,137)	—		160		—		—		(25)	—		—		160
Issuance of stock under Employee Stock Purchase Plan	7,809	—		56		—		—		(7,809)	92		—		148
Share-based compensation	—	—		6,196		10		—		—	—		—		6,206
Dividends, net of forfeitures on non-participating securities	—	—		—		(7,649)		—		—	—		—		(7,649)

Redeemable noncontrolling interest redemption value adjustment	—	—		—		(10,454)		—		—	—		4,800		(5,654)





Balance at October 30, 2021	64,974,647	$	650	$	562,177	$	1,105,129	$	(127,200)	77,813,855	$	(915,419)	$	28,368	$	653,705

See accompanying notes to condensed consolidated financial statements.

Table of Contents

GUESS?, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands, except share data)


	For the three and nine months ended October 31, 2020
	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	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

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

Balance at August 1, 2020	63,614,749	$	636	$	548,602	$	952,707	$	(131,609)	79,229,090	$	(932,068)	$	16,560	$	454,828
Net earnings	—	—		—		26,376		—		—	—		1,178		27,554
Other comprehensive income (loss), net of income tax of ($2)	—	—		—		—		(2,404)		—	—		1,166		(1,238)
Issuance of common stock under stock compensation plans	(5,229)	—		92		—		—		4,183	(