SEC Filing | Guess, Inc.

View:

ges-20220730

Table of Content s

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 July 30, 2022

☐ 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.)

Strada Regina 44
Bioggio, Switzerland CH-6934
(Address of principal executive offices and zip code)

+41 91 809 5000

(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 August 26, 2022, the registrant had 54,437,964 shares of Common Stock, $0.01 par value per share, outstanding.

Table of Content s

GUESS?, INC.

FORM 10-Q

TABLE OF CONTENTS


PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements (unaudited)	1

	Condensed Consolidated Balance Sheets as of July 30 , 2022 and January 29, 2022	1

	Condensed Consolidated Statements of Income — Three and Six Months Ended July 30 , 2022 and July 31 , 2021	2

	Condensed Consolidated Statements of Comprehensive Income — Three and Six Months Ended July 30, 2022 and July 31, 2021	3

	Condensed Consolidated Statements of Cash Flows — Six Months Ended July 30, 2022 and July 31 , 2021	4

	Condensed Consolidated Statements of Stockholders’ Equity — Three and Six Months Ended July 30, 2022 and July 31 , 2021	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	60

Item 4.	Controls and Procedures	63

PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	64

Item 1A.	Risk Factors	64

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	66



Item 6.	Exhibits	67

Table of Content s

PART I. FINANCIAL INFORMATION

ITEM 1. Financial Statements.

GUESS?, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)


	Jul 30, 2022		Jan 29, 2022
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	174,372	$	415,565

Accounts receivable, net	301,659		328,856
Inventories	535,530		462,295
Other current assets	87,434		77,378
Total current assets	1,098,995		1,284,094
Property and equipment, net	230,376		228,765
Goodwill	32,971		34,885
Deferred income tax assets	156,901		165,120

Operating lease right-of-use assets	651,925		685,799

Other assets	145,503		156,965
	$	2,316,671	$	2,555,628

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of borrowings and finance lease obligations	$	37,996	$	43,379
Accounts payable	340,943		325,797
Accrued expenses and other current liabilities	211,247		253,182
Current portion of operating lease liabilities	170,133		195,516
Total current liabilities	760,319		817,874
Convertible senior notes, net	298,521		270,595
Long-term debt and finance lease obligations	99,287		60,970

Long-term operating lease liabilities	552,190		582,757
Other long-term liabilities	153,904		160,289
Total liabilities	1,864,221		1,892,485
Redeemable noncontrolling interests	10,277		9,500

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 142,771,946 shares; outstanding 54,437,964 and 62,697,032 shares as of July 30, 2022 and January 29, 2022, respectively	544		627
Paid-in capital	525,776		565,024
Retained earnings	1,184,896		1,158,664
Accumulated other comprehensive loss	(156,524)		(135,549)
Treasury stock, 88,333,982 and 80,074,914 shares as of July 30, 2022 and January 29, 2022, respectively	(1,143,849)		(966,108)
Guess?, Inc. stockholders’ equity	410,843		622,658
Nonredeemable noncontrolling interests	31,330		30,985
Total stockholders’ equity	442,173		653,643
	$	2,316,671	$	2,555,628

See accompanying notes to condensed consolidated financial statements.

Table of Content s

GUESS?, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except per share data)

(unaudited)


	Three Months Ended				Six Months Ended
	Jul 30, 2022		Jul 31, 2021		Jul 30, 2022		Jul 31, 2021
Product sales	$	617,922	$	606,691	$	1,184,995	$	1,105,168
Net royalties	24,768		21,933		51,168		43,458
Net revenue	642,690		628,624		1,236,163		1,148,626
Cost of product sales	372,189		334,538		718,513		642,982
Gross profit	270,501		294,086		517,650		505,644
Selling, general and administrative expenses	216,043		205,617		425,874		392,301


Asset impairment charges	1,919		1,501		3,463		1,942
Net gains on lease modifications	(907)		(420)		(1,508)		(2,565)
Earnings from operations	53,446		87,388		89,821		113,966
Other income (expense):
Interest expense	(3,195)		(6,009)		(6,288)		(11,935)
Interest income	419		461		993		835
Other, net	(9,053)		(1,001)		(25,505)		(3,702)
Total other expense	(11,829)		(6,549)		(30,800)		(14,802)

Earnings before income tax expense	41,617		80,839		59,021		99,164
Income tax expense	14,177		17,692		21,127		23,147
Net earnings	27,440		63,147		37,894		76,017
Net earnings attributable to noncontrolling interests	3,478		2,085		5,962		2,949
Net earnings attributable to Guess?, Inc.	$	23,962	$	61,062	$	31,932	$	73,068

Net earnings per common share attributable to common stockholders:
Basic	$	0.42	$	0.94	$	0.54	$	1.13
Diluted	$	0.35	$	0.91	$	0.46	$	1.10

Weighted average common shares outstanding attributable to common stockholders:
Basic	56,954		64,336		59,003		64,185
Diluted	70,299		66,074		72,443		65,933

See accompanying notes to condensed consolidated financial statements.

Table of Content s

GUESS?, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF

COMPREHENSIVE INCOME

(in thousands)

(unaudited)


	Three Months Ended				Six Months Ended
	Jul 30, 2022		Jul 31, 2021		Jul 30, 2022		Jul 31, 2021
Net earnings	$	27,440	$	63,147	$	37,894	$	76,017
Other comprehensive income (loss) (“OCI”):
Foreign currency translation adjustment
Losses arising during the period	(10,885)		(5,251)		(28,801)		(7,467)



Derivative financial instruments designated as cash flow hedges
Gains arising during the period	2,082		1,633		10,685		3,414
Less income tax effect	(203)		(162)		(1,243)		(390)
Reclassification to net earnings for (gains) losses realized	(1,163)		1,024		(2,776)		1,422
Less income tax effect	124		(234)		294		(172)





Defined benefit plans

Foreign currency and other adjustments	(90)		(44)		78		85
Less income tax effect	9		5		(7)		(8)
Net actuarial loss amortization	12		106		42		211
Prior service credit amortization	(22)		(17)		(45)		(34)
Less income tax effect	1		(12)		(2)		(23)
Total comprehensive income	17,305		60,195		16,119		73,055
Less comprehensive income attributable to noncontrolling interests:
Net earnings	3,478		2,085		5,962		2,949
Foreign currency translation adjustment	(324)		74		(800)		291
Amounts attributable to noncontrolling interests	3,154		2,159		5,162		3,240
Comprehensive income attributable to Guess?, Inc.	$	14,151	$	58,036	$	10,957	$	69,815

See accompanying notes to condensed consolidated financial statements.

Table of Content s

GUESS?, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)


	Six Months Ended
	Jul 30, 2022		Jul 31, 2021
Cash flows from operating activities:
Net earnings	$	37,894	$	76,017
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization	30,533		27,918
Amortization of debt discount	—		5,562
Amortization of debt issuance costs	731		681
Share-based compensation expense	10,679		8,862
Forward contract (gains) losses	2,123		(421)

Net loss from impairment and disposition of long-term assets	4,013		3,152
Other items, net	21,362		8,357
Changes in operating assets and liabilities:
Accounts receivable	4,623		3,947
Inventories	(102,163)		(39,230)
Prepaid expenses and other assets	(5,049)		(24,902)
Operating lease assets and liabilities, net	(19,151)		(10,323)
Accounts payable and accrued expenses and other current liabilities	13,050		(16,494)
Other long-term liabilities	2,857		(150)
Net cash provided by operating activities	1,502		42,976
Cash flows from investing activities:
Purchases of property and equipment	(51,221)		(21,601)
Proceeds from sale of business and long-term assets	192		1,648

Net cash settlement of forward contract	—		(755)

Other investing activities	(207)		(98)
Net cash used in investing activities	(51,236)		(20,806)
Cash flows from financing activities:
Proceeds from borrowings	104,855		10,730
Repayments on borrowings and finance lease obligations	(68,113)		(21,638)



Debt issuance costs	(1,361)		—

Dividends paid	(27,092)		(14,818)

Noncontrolling interest capital distribution	(4,817)		(3,452)
Issuance of common stock, net of income tax withholdings on vesting of stock awards	2,126		2,539
Purchase of treasury stock	(186,747)		—
Net cash used in financing activities	(181,149)		(26,639)
Effect of exchange rates on cash, cash equivalents and restricted cash	(10,310)		(5,732)
Net change in cash, cash equivalents and restricted cash	(241,193)		(10,201)
Cash, cash equivalents and restricted cash at the beginning of the year	415,565		469,345
Cash, cash equivalents and restricted cash at the end of the period	$	174,372	$	459,144

Supplemental cash flow data:
Interest paid	$	5,170	$	5,051
Income taxes paid, net of refunds	$	15,595	$	21,382

Non-cash investing and financing activity:
Change in accrual of property and equipment	$	(3,848)	$	374
Assets acquired under finance lease obligations	$	3,323	$	5,751

See accompanying notes to condensed consolidated financial statements.

Table of Content s

GUESS?, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands, except share data)

(unaudited)


	For the three and six months ended July 30, 2022
	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 29, 2022	62,697,032	$	627	$	565,024	$	1,158,664	$	(135,549)	80,074,914	$	(966,108)	$	30,985	$	653,643
Cumulative adjustment from adoption of new accounting guidance	—	—		(43,078)		21,355		—		—	—		—		(21,723)
Net earnings	—	—		—		7,970		—		—	—		2,484		10,454
Other comprehensive loss, net of income tax of ($889)	—	—		—		—		(11,164)		—	—		(476)		(11,640)
Issuance of common stock under stock compensation plans	411,785	4		(3,608)		—		—		(411,785)	5,074		—		1,470
Issuance of stock under Employee Stock Purchase Plan	10,976	—		69		—		—		(10,976)	137		—		206
Share-based compensation	—	—		4,003		49		—		—	—		—		4,052
Dividends, net of forfeitures on non-participating securities	—	—		—		(13,659)		—		—	—		—		(13,659)
Share repurchases	(3,789,576)	(38)		38		—		—		3,789,576	(81,747)		—		(81,747)
Noncontrolling interest capital distribution	—	—		—		—		—		—	—		(4,817)		(4,817)



Equity forward contract issuance	—	—		(105,000)		—		—		—	—		—		(105,000)
Balance at April 30, 2022	59,330,217	$	593	$	417,448	$	1,174,379	$	(146,713)	83,441,729	$	(1,042,644)	$	28,176	$	431,239
Cumulative adjustment from adoption of new accounting guidance	—	—		—		433		—		—	—		—		433
Net earnings	—	—		—		23,962		—		—	—		3,478		27,440
Other comprehensive loss, net of income tax of ($69)	—	—		—		—		(9,811)		—	—		(324)		(10,135)
Issuance of common stock under stock compensation plans	290,393	3		(3,392)		—		—		(290,393)	3,628		—		239
Issuance of stock under Employee Stock Purchase Plan	13,381	—		44		—		—		(13,381)	167		—		211
Share-based compensation	—	—		6,624		3		—		—	—		—		6,627
Dividends, net of forfeitures on non-participating securities	—	—		—		(13,881)		—		—	—		—		(13,881)
Share repurchases	(5,196,027)	(52)		52		—		—		5,196,027	(105,000)		—		(105,000)




Equity forward contract settlement	—	—		105,000		—		—		—	—		—		105,000
Balance at July 30, 2022	54,437,964	$	544	$	525,776	$	1,184,896	$	(156,524)	88,333,982	$	(1,143,849)	$	31,330	$	442,173

See accompanying notes to condensed consolidated financial statements.

Table of Content s

GUESS?, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands, except share data)

(unaudited)


	For the three and six months ended July 31, 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

See