GUESS INC Management’s report and analysis of financial condition and results of operations. (Form 10-Q)

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General


Unless the context indicates otherwise, when we refer to "we," "us," "our" or
the "Company" in this Form 10­Q, we are referring to Guess?, Inc. ("GUESS?") and
its subsidiaries on a consolidated basis.

Forward-looking statements


This Quarterly Report on Form 10-Q contains certain forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements may also be contained in our other reports filed
under the Securities Exchange Act of 1934, as amended, in our press releases and
in other documents.

Except for historical information contained herein, certain matters discussed in
this Quarterly Report, including statements concerning the potential actions and
impacts related to the COVID-19 pandemic; results of the accelerated share
repurchase and cash needs; statements concerning the our future outlook,
including with respect to the second quarter and full year of fiscal 2023;
statements concerning share repurchase plans; statements concerning our
expectations, goals, future prospects, 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; recent sanctions and export controls targeting
Russia and other impacts related to the war in Ukraine; the continuation or
worsening of impacts related to the COVID-19 pandemic; risks relating to our
indebtedness; changes to estimates related to impairments, inventory and other
reserves, 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; the high
concentration of our Americas Wholesale business; risks related to the costs and
timely delivery of merchandise to our distribution facilities, stores and
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 enhance our global omni-channel
capabilities; our ability to expand internationally and operate in regions where
we have less experience, including through joint ventures; risks relating to our
$300 million 2.00% convertible senior notes due 2024 (the "Notes"), including
our ability to settle the liability in cash; disruptions at our distribution
facilities; our ability to attract and retain management and other key
personnel; obligations or changes in estimates arising from new or existing
litigation, income tax and other regulatory proceedings; risks related to the
income 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 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; violations of, or changes to,
domestic or international laws and regulations; risks associated with the acts
or omissions of our licensees and 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

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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; 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; impacts of inflation
and further inflationary pressures; wages; risks relating to activist investor
activity; and the significant voting power of our family founders. In addition
to these factors, the economic, technological, managerial, and other risks
identified in "Part I, Item 1A. Risk Factors" of our most recent Annual Report
on Form 10-K, "Part II, Item 1A. Risk Factors" herein 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. We undertake no
obligation to publicly update or revise any forward-looking statements, whether
as a result of new information, future events or otherwise.

COVID-19 Business Update


The COVID-19 pandemic is continuing to negatively impact certain regions of our
business, especially in Asia where our operations were impacted by capacity
restrictions and temporary store closures. Overall, this resulted in the closure
of less than 2% of our directly operated stores as of April 30, 2022, mostly in
China, the impact of which was minimal to our first quarter results.

The COVID-19 crisis has also contributed to disruptions in the overall global
supply chain, leading to industry-wide product delays and higher product and
freight costs. We have been working actively to mitigate these headwinds to the
extent possible through a number of global supply chain initiatives.

In light of the fluid nature of the pandemic, we continue to carefully monitor
global and regional developments and respond appropriately. We also continue to
strategically manage expenses in order to protect profitability and to mitigate,
to the extent possible, the effect of supply chain disruptions.

Activity area


Our businesses are grouped into five reportable segments for management and
internal financial reporting purposes: Americas Retail, Americas Wholesale,
Europe, Asia, and Licensing. Our Americas Retail, Americas Wholesale, Europe and
Licensing reportable segments are the same as their respective operating
segments. Certain components of our Asia operating segment are separate
operating segments based on region, which have been aggregated into the Asia
reportable segment for disclosure purposes.

Management evaluates segment performance based primarily on revenues and
earnings (loss) from operations before corporate performance-based compensation
costs, asset impairment charges, net gains (losses) on lease modifications,
restructuring charges and certain non-recurring credits (charges), if any. We
believe this segment reporting reflects how our business segments are managed
and how each segment's performance is evaluated by our chief operating decision
maker to assess performance and make resource allocation decisions. Information
regarding these segments is summarized in "Part I, Item 1. Financial Statements
- Note 8 - Segment Information."

Some products


We derive our net revenue from the sale of GUESS?, G by GUESS (GbG), GUESS Kids
and MARCIANO apparel and our licensees' products through our worldwide network
of directly-operated and licensed retail stores, wholesale customers and
distributors, as well as our online sites. We also derive royalty revenue from
worldwide licensing activities. During fiscal 2021, we made the decision to
integrate our G by GUESS brand into our Factory business over time in order to
drive further efficiencies.

Foreign Currency Volatility

Since the majority of our international transactions are conducted in currencies other than the WE dollar (mainly British Pound, Canadian Dollar, Chinese Yuan, Euro, Japanese Yen, Korean Won, Mexican Peso,

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Polish zloty, Russian rouble and Turkish lira), currency fluctuations can have a
significant impact on the translation of our international revenues and earnings
(loss) into U.S. dollars.

Some of our transactions that occur primarily in Europe, Canada, South Korea,
China, Hong Kong and Mexico are denominated in U.S. dollars, Swiss francs,
British pounds and Russian roubles, exposing them to exchange rate fluctuations
when these transactions (such as inventory purchases or periodic lease payments)
are converted to their functional currencies. As a result, fluctuations in
exchange rates can impact the operating margins of our foreign operations and
reported earnings (loss), and are largely dependent on the transaction timing
and magnitude during the period that the currency fluctuates. When these foreign
exchange rates weaken versus the U.S. dollar at the time the respective U.S.
dollar denominated payment is made relative to the payments made in the
comparable period, our product margins could be unfavorably impacted.

In addition, there are certain real estate leases denominated in a currency
other than the functional currency of the respective entity that entered into
the agreement (primarily Swiss francs, Russian roubles and Polish zloty). As a
result, we may be exposed to volatility related to unrealized gains or losses on
the translation of present value of future lease payment obligations when
translated at the exchange rate as of a reporting period-end.

During the first three months of fiscal 2023, the average U.S. dollar rate was
weaker against the Chinese yuan, and stronger against the euro, British pound,
Turkish lira, Polish Slotzy, Canadian dollar, Russian rouble, Japanese yen,
Korean won, and Mexican peso, compared to the average rate in the same
prior-year period. This had an overall unfavorable impact on the translation of
our international revenues and on earnings from operations for the three months
ended April 30, 2022 compared to the same prior-year period.

If the U.S. dollar strengthens in fiscal 2023 relative to the respective fiscal
2022 foreign exchange rates, foreign exchange could negatively impact our
revenues and operating results, as well as our international cash and other
balance sheet items, particularly in Canada, Europe (primarily the euro, Turkish
lira, British Pound and Russian rouble) and Mexico. Alternatively, if the U.S.
dollar weakens relative to the respective fiscal 2022 foreign exchange rates,
our revenues and operating results, as well as our other cash balance sheet
items, could be positively impacted by foreign currency fluctuations during the
remainder of fiscal 2023, particularly in these regions.

We are currently operating in Russia through our wholesale and retail channels,
including through our 70%-owned Russian joint venture. Please refer to "Part II,
Item 1A. Risk Factors" herein for a discussion of risks we face relating to the
ongoing conflict between Russia and Ukraine.

We enter into derivative financial instruments to offset some, but not all, of
the exchange risk on foreign currency transactions. For additional discussion
regarding our exposure to foreign currency risk, forward contracts designated as
hedging instruments and forward contracts not designated as hedging instruments,
refer to "Item 3. Quantitative and Qualitative Disclosures About Market Risk."

Strategy


In December 2019 and updated in March 2021, Carlos Alberini, our Chief Executive
Officer, shared his strategic vision and implementation plan for execution which
included the identification of several key priorities to drive revenue and
operating profit growth. These priorities are: (i) brand relevancy and brand
elevation; (ii) product excellence; (iii) customer centricity; (iv) global
footprint; and (v) functional capabilities; each as further described below:

Brand Relevancy and Brand Elevation. We will continue to optimize our brand
architecture to be relevant with our three target consumer groups: Heritage,
Millennials, and Generation Z. We have developed and launched one global line of
product for all categories. We have also elevated our brand and improved the
quality of our products, allowing us to realize more full-priced sales and rely
less on promotional activity. We will continue to use unique go-to-market
strategies and execute celebrity and influencer partnerships and collaborations
as we believe that they are critical to engage more effectively with a younger
and broader audience.

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Product Excellence. We believe that the product is a key success factor in our business. We strive to design and manufacture excellent products and will expand our product offerings to provide our customers with products suitable for different occasions in their lifestyle. We will seek to better meet the needs of local products.


Customer Centricity. We will continue to place the customer at the center of
everything we do. We plan to implement processes and platforms to provide our
customers with a seamless omni-channel experience and expand our digital
business.

Overall footprint. We will continue to expand the reach of our brands by optimizing the productivity and profitability of our current presence and expanding our distribution channels.

Functional capacities. We will continue to make operational improvements to leverage and support our global business more effectively, primarily in the areas of logistics, sourcing, product development and production, inventory management and infrastructure overall.

Capital allocation


We plan to continue to prioritize capital allocation toward investments that
support growth and infrastructure, while remaining highly disciplined in the way
we allocate capital across projects, including new store development, store
remodels, technology and logistics investments and others. When we prioritize
investments, we will focus on their strategic significance and their return on
invested capital expectations. We also plan to manage product buys and inventory
ownership rigorously and optimize overall working capital management
consistently. In addition, we plan to continue to return value to shareholders
through dividends and share repurchases.

During fiscal 2022, the Board of Directors terminated our previous 2012 $500
million share repurchase program (which had $47.8 million capacity remaining)
and authorized a new $200 million share repurchase program. On March 14, 2022,
the Board of Directors expanded the repurchase authorization by $100.0 million,
leaving an available capacity of $249.0 million at that time. On March 18, 2022,
in connection with this expanded authorization, we entered into an accelerated
share repurchase agreement (the "2022 ASR Contract) with a financial institution
(in such capacity, the "2022 ASR Counterparty") to repurchase an aggregate
$175.0 million of our common stock. Under the 2022 ASR Contract, we made a
payment of $175.0 million to the 2022 ASR Counterparty and received an initial
delivery of approximately 3.3 million shares of our common stock on March 21,
2022, representing approximately 40% ($70.0 million) of the total value expected
to be repurchased under the 2022 ASR Contract. Refer to "Part I, Item 1.
Financial Statements - Note 4 - Stockholders' Equity" for further information on
the 2022 ASR Contract. During the three months ended April 30, 2022, we also
repurchased approximately 0.5 million shares of our common stock in open market
transactions totaling $11.7 million.

Comparable store sales


We report National Retail Federation calendar comparable store sales on a
quarterly basis for our retail businesses which include the combined results
from our brick-and-mortar retail stores and our e-commerce sites. We also
separately report the impact of e-commerce sales on our comparable store sales
metric. As a result of our omni-channel strategy, our e-commerce business has
become strongly intertwined with our brick-and-mortar retail store business.
Therefore, we believe that the inclusion of e-commerce sales in our comparable
store sales metric provides a more meaningful representation of our retail
results.

Sales from our brick-and-mortar retail stores include purchases that are
initiated, paid for and fulfilled at our retail stores and directly-operated
concessions as well as merchandise that is reserved online but paid for and
picked up at our retail stores. Sales from our e-commerce sites include
purchases that are initiated and paid for online and shipped from either our
distribution centers or our retail stores as well as purchases that are
initiated in a retail store, but due to inventory availability at the retail
store, are ordered and paid for online and shipped from our distribution centers
or picked up from a different retail store.

Store sales are considered comparable after the store has been open for 13 full
fiscal months. If a store remodel results in a square footage change of more
than 15%, or involves a relocation or a change in store

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concept, the store sales are removed from the comparable store base until the
store has been opened at its new size, in its new location or under its new
concept for 13 full fiscal months. Stores that are permanently closed or
temporarily closed (including as a result of pandemic-related closures) for more
than seven days in any fiscal month are excluded from the calculation in the
fiscal month that they are closed. E-commerce sales are considered comparable
after the online site has been operational in a country for 13 full fiscal
months and exclude any related revenue from shipping fees. These criteria are
consistent with the metric used by management for internal reporting and
analysis to measure performance of the store or online sites. Definitions and
calculations of comparable store sales used by us may differ from similarly
titled measures reported by other companies.

Other

We operate on a 52/53 week exercise schedule which ends on the Saturday closest to January 31 of each year. The three months ended April 30, 2022 had the same number of days as the three months ended May 1, 2021.

Summary

Insight


Net earnings attributable to Guess?, Inc. decreased 33.6% to $8.0 million, or
diluted earnings per share ("EPS") of $0.12 per common share, for the quarter
ended April 30, 2022, compared to $12.0 million, or diluted EPS of $0.18 per
common share, for the quarter ended May 1, 2021.

During the quarter ended April 30, 2022, we recognized $1.5 million in asset
impairment charges; $0.6 million in net gains on lease modifications; $4.4
million for certain professional service and legal fees and related credits
(costs); and $3.2 million in additional income tax expense from certain discrete
income tax adjustments (or a combined $7.3 million, or $0.12 per share, negative
impact after considering the related tax benefit of $1.3 million). Excluding the
impact of these items, adjusted net earnings attributable to Guess?, Inc. was
$15.2 million and adjusted diluted earnings was $0.24 per common share for the
quarter ended April 30, 2022.

During the quarter ended May 1, 2021, we recognized $0.4 million in asset
impairment charges; $2.1 million in net gains on lease modifications; $1.1
million for certain professional services and legal fees and related credits
(costs); $2.8 million of amortization of debt discount related to our Notes; and
$0.1 million in additional income tax expense from certain discrete income tax
adjustments (or a combined $1.9 million, or $0.03 per share, negative impact
after considering the related income tax benefit of these adjustments of $0.4
million). Excluding the impact of these items, adjusted net earnings
attributable to Guess?, Inc. was $13.9 million and adjusted diluted earnings was
$0.21 per common share for the quarter ended May 1, 2021. References to
financial results excluding the impact of these items are non-GAAP measures and
are addressed below under "Non-GAAP Measures."

Highlights of our performance for the quarter ended April 30, 2022 compared to the same quarter of the previous year are presented below, followed by a more complete discussion under “Operating results”:

Operations


•  Total net revenue increased 14.1% to $593.5 million for the quarter ended
April 30, 2022, compared to $520.0 million in the same prior-year quarter. In
constant currency, net revenue increased by 20.6%.

•  Gross margin (gross profit as a percentage of total net revenue) increased 90
basis points to 41.6% for the quarter ended April 30, 2022, compared to 40.7% in
the same prior-year quarter.

•  Selling, general and administrative ("SG&A") expenses as a percentage of
total net revenue ("SG&A rate") decreased 60 basis points to 35.3% for the
quarter ended April 30, 2022, compared to 35.9% in the same prior-year quarter.
SG&A expenses increased 12.4% to $209.8 million for the quarter ended April 30,
2022, compared to $186.7 million in the same prior-year quarter.

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• During the quarter ended April 30, 2022we recognized $1.5 million asset impairment charges, compared to $0.4 million in the same quarter of the previous year.

• During the quarter ended April 30, 2022we have registered $0.6 million net gains on lease modifications, compared to $2.1 million in the same quarter of the previous year.


•  Operating margin improved 100 basis points to 6.1% for the quarter ended
April 30, 2022, compared to 5.1% in the same prior-year quarter. The improvement
in operating margin was mainly driven by 410 basis points resulting from expense
leverage due to higher sales. This was partially offset by higher store labor
costs in Americas Retail and an unfavorable currency impact which negatively
impacted operating margin by 120 basis points and 100 basis points,
respectively. Higher expenses related to certain professional service and legal
fees and related costs unfavorably impacted operating margin by 50 basis points.
Lower net gains from lease modifications and higher asset impairment charges
negatively impacted operating margin by 50 basis points. Earnings from
operations increased 36.9% to $36.4 million for the quarter ended April 30,
2022, compared to $26.6 million in the same prior-year quarter.

• Other expenses, net, totaled $16.5 million for the quarter ended April 30, 2022compared to $2.7 million in the same quarter of the previous year.

• Effective tax rate increased from 10.1% to 39.9% for the quarter ended April 30, 2022against 29.8% in the same quarter of the previous year.

Balance sheet key accounts

•We have had $147.9 million in cash and cash equivalents at April 30, 2022
compared to $395.1 million in cash and cash equivalents and $0.2 million in cash allocated to May 1, 2021.


•As of April 30, 2022, we had $43.8 million in outstanding borrowings under our
term loans and $42.7 million in outstanding borrowings under our credit
facilities compared to $56.0 million in outstanding borrowings under our term
loans and $5.1 million in outstanding borrowings under our credit facilities as
of May 1, 2021.

•During the quarter ended April 30, 2022, we made a payment of $175.0 million
related to the 2022 ASR Contract and also repurchased 0.5 million shares of our
common stock for $11.7 million in open market transactions. During the quarter
ended May 1, 2021, there were no share repurchases.

•Accounts receivable consists of trade receivables relating primarily to our
wholesale business in Europe and, to a lesser extent, to our wholesale
businesses in the Americas and Asia, royalty receivables relating to our
licensing operations, credit card and retail concession receivables related to
our retail businesses and certain other receivables. Accounts receivable
decreased by $10.9 million, or 3.5%, to $295.4 million as of April 30, 2022
compared to $306.3 million at May 1, 2021. On a constant currency basis,
accounts receivable increased by $23.8 million, or 7.8%, when compared to May 1,
2021.

• Inventory increased by $79.1 millioni.e. 19.5%, at $483.9 million of the
April 30, 2022of $404.9 million at May 1, 2021. At constant exchange rates, inventories increased by $124.1 millioni.e. 30.7%, compared to May 1, 2021.


Global Store Count

During the quarter ended April 30, 2022, together with our partners, we opened
34 new stores worldwide, consisting of 25 stores in Europe and the Middle East,
six stores in Asia and the Pacific, and three stores in the U.S. Together with
our partners, we closed 27 stores worldwide, consisting of 12 stores in Asia and
the Pacific, nine stores in Europe and the Middle East, and six stores in the
Americas.

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We ended the first quarter of fiscal 2023 with stores and concessions worldwide
comprised as follows:

                                                                        Stores                                                                Concessions
Region                                       Total            Directly-Operated           Partner Operated            Total           Directly-Operated           Partner Operated
United States                                   244                   244                          -                      1                     -                          1
Canada                                           74                    74                          -                      -                     -                          -
Central and South America                       101                    67                         34                     29                    29                          -
Total Americas                                  419                   385                         34                     30                    29                          1
Europe and the Middle East                      795                   564                        231                     51                    51                          -
Asia and the Pacific                            424                   124                        300                    253                   111                        142
Total                                         1,638                 1,073                        565                    334                   191                        143

Of the total stores, 1,355 were GUESS? stores, 186 were GUESS? accessories stores, 60 were G by GUESS (GbG) stores and 37 were MARCIANO stores.

Operating results

Three months completed April 30, 2022 and May 1, 2021

Consolidated results

The following table presents our condensed consolidated statements of earnings (in thousands, except per share data):

                                                          Three Months Ended
                                         Apr 30, 2022                             May 1, 2021                   $ change       % change
Net revenue                    $ 593,473               100.0  %        $ 520,002               100.0  %        $ 73,471             14.1  %
Cost of product sales            346,324                58.4  %          308,444                59.3  %          37,880             12.3  %
Gross profit                     247,149                41.6  %          211,558                40.7  %          35,591             16.8  %

Selling, general and
administrative expenses          209,831                35.3  %          186,684                35.9  %          23,147             12.4  %
Asset impairment charges           1,544                 0.3  %              441                 0.1  %           1,103            250.1  %
Net gains on lease
modifications                       (601)               (0.1  %)          (2,145)               (0.4  %)          1,544            (72.0  %)
Earnings from operations          36,375                 6.1  %           26,578                 5.1  %           9,797             36.9  %
Interest expense, net             (2,519)               (0.4  %)          (5,552)               (1.0  %)          3,033            (54.6  %)
Other expense, net               (16,452)               (2.8  %)          (2,701)               (0.6  %)        (13,751)           509.1  %
Earnings before income tax
expense                           17,404                 2.9  %           18,325                 3.5  %            (921)            (5.0  %)
Income tax expense                 6,950                 1.1  %            5,455                 1.1  %           1,495             27.4  %
Net earnings                      10,454                 1.8  %           12,870                 2.4  %          (2,416)           (18.8  %)
Net earnings attributable to
noncontrolling interests           2,484                 0.5  %              864                 0.1  %           1,620            187.5  %
Net earnings attributable to
Guess?, Inc.                   $   7,970                 1.3  %        $  12,006                 2.3  %          (4,036)           (33.6  %)

Net earnings per common share attributable to common stockholders:
Basic                          $    0.13                               $    0.19                               $  (0.06)
Diluted                        $    0.12                               $    0.18                               $  (0.06)

Effective income tax rate           39.9  %                                 29.8  %


Net Revenue. Net revenue increased by $73.5 million or 14%, compared to the same
prior-year quarter. In constant currency, net revenue increased by 20.6%. Almost
60% of the increase was driven by the operation of stores this quarter that had
been temporarily closed in the same prior-year quarter and slightly over 25%
from higher wholesale shipments. The remaining increase was driven by new stores
and higher licensing revenue,

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partially offset by permanent store closures. Currency translation fluctuations
relating to our non-U.S. operations unfavorably impacted net revenue by $33.5
million compared to the same prior-year quarter.

Gross Margin. Gross margin increased 0.9% for the quarter ended April 30, 2022
compared to the same prior-year quarter, driven entirely by a lower occupancy
rate. The lower occupancy rate was due to a 180 basis point favorable impact
from leveraging of expenses as a result of higher revenues and business mix,
partially offset by 70 basis points due to rent relief in the same prior-year
quarter. Product margin remained flat to the same prior-year quarter as
favorable business mix and lower markdowns were offset by unfavorable currency
translation fluctuations and lower initial markups.

Gross Profit. Gross profit increased $35.6 million for the quarter ended
April 30, 2022 compared to the same prior-year quarter. The increase in gross
profit, which included an unfavorable impact from currency translation, was
driven by $43 million due to higher net revenue, partially offset by $9 million
due to rent relief in the same prior-year quarter and lower initial markups.
Currency translation fluctuations relating to our foreign operations unfavorably
impacted gross profit by $16.7 million.

We include inbound freight charges, purchasing costs and related overhead,
retail store occupancy costs, including lease costs and depreciation and
amortization, and a portion of our distribution costs related to our retail
business in cost of product sales. We also include net royalties received on our
inventory purchases of licensed product as a reduction to cost of product sales.
Our gross margin may not be comparable to that of other entities since some
entities include all of the costs related to their distribution in cost of
product sales and others, like us, generally exclude wholesale-related
distribution costs from gross margin, including them instead in SG&A expenses.
Additionally, some entities include retail store occupancy costs in SG&A
expenses and others, like us, include retail store occupancy costs in cost of
product sales.

SG&A Rate. Our SG&A rate decreased 0.6% for the quarter ended April 30, 2022
from the same prior-year quarter. The favorable change in SG&A rate was driven
by a 240 basis point favorable impact resulting from an overall leveraging of
expenses, partially offset by 120 basis points from higher store labor costs in
Americas Retail and 50 basis points from higher expenses related to certain
professional service and legal fees and related (credits) costs.

SG&A Expenses. SG&A expenses increased $23.1 million for the quarter ended
April 30, 2022 from the same prior-year quarter, mainly driven by approximately
$18 million of higher store expenses as stores were fully open compared to last
year and store labor costs were higher in Americas Retail. Currency translation
fluctuations relating to our foreign operations favorably impacted SG&A expenses
by $10.3 million.

Asset impairment charges. During the quarters ended April 30, 2022 and May 1, 2021we recognized $1.5 million and $0.4 million impairment charges for property, plant and equipment related to certain retail locations resulting from underperformance and planned store closures, respectively.


Net Gains on Lease Modifications. During the quarters ended April 30, 2022 and
May 1, 2021, we recorded net gains on lease modifications of $0.6 million and
$2.1 million related primarily to the early termination of lease agreements for
certain retail locations, respectively.

Operating Margin. Operating margin increased 1.0% for the quarter ended
April 30, 2022 compared to the same prior-year quarter. The improvement in
operating margin was mainly driven by 410 basis points resulting from expense
leverage due to higher sales. This was partially offset by higher store labor
costs in Americas Retail and an unfavorable currency impact which negatively
impacted operating margin by 120 basis points and 100 basis points,
respectively. Higher expenses related to certain professional service and legal
fees and related (credits) costs unfavorably impacted operating margin by 50
basis points. Excluding the impact of higher asset impairment charges and lower
net gains on lease modifications, our operating margin would have increased 2.0%
compared to the same prior-year quarter.

Earnings from Operations.   Earnings from operations increased by $9.8 million
for the quarter ended April 30, 2022 compared to the same prior-year quarter.
Currency translation fluctuations relating to our foreign operations unfavorably
impacted earnings from operations by $6.4 million.

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Other Expense, Net. Other expense, net for the quarter ended April 30, 2022 was
$16.5 million compared to $2.7 million in the same prior-year quarter. The
change was primarily due to higher net unrealized and realized losses from
foreign currency exposures and higher net unrealized losses on our Supplemental
Executive Retirement Plan ("SERP") related assets compared to the same
prior-year quarter.

Income Tax Expense.  Income tax expense for the quarter ended April 30, 2022 was
$7.0 million, or a 39.9% effective income tax rate, compared to $5.5 million, or
a 29.8% effective income tax rate in the same prior-year quarter. Generally,
income taxes for the interim periods are computed using the income tax rate
estimated to be applicable for the full fiscal year, adjusted for discrete
items, which is subject to ongoing review and evaluation by management. The
change in the effective income tax rate was primarily due to: (1) a shift in the
distribution of earnings among our tax jurisdictions compared to the same
prior-year quarter; and (2) losses during the current quarter in certain tax
jurisdictions for which we did not recognize an income tax benefit.

Net Earnings Attributable to Guess?, Inc. Net earnings attributable to Guess?,
Inc. decreased $4.0 million for the quarter ended April 30, 2022 compared to the
same prior-year quarter. Diluted EPS decreased $0.06 for the quarter ended
April 30, 2022 compared to the same prior-year quarter. We estimate a net
positive impact of $0.04 from our adoption of new accounting guidance related to
our Notes and share buybacks and a negative impact from currency of $0.14 on
diluted EPS in the quarter ended April 30, 2022 when compared to the same
prior-year quarter.

Refer to "Non-GAAP Measures" for an overview of our non-GAAP, or adjusted,
financial results for the quarters ended April 30, 2022 and May 1, 2021.
Excluding the impact of these non-GAAP items, adjusted net earnings attributable
to Guess?, Inc. increased $1.4 million and adjusted diluted EPS increased $0.03
for the quarter ended April 30, 2022 compared to the same prior-year quarter. We
estimate a net positive impact from our share buybacks of $0.01 and a net
negative impact from currency of $0.14 on adjusted diluted EPS in the quarter
ended April 30, 2022 when compared to the same prior-year quarter.

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Information by business sector


The following presents our net revenue and earnings from operations by segment
(in thousands):

                                                 Three Months Ended
                                            Apr 30, 2022      May 1, 2021      $ change      % change
 Net revenue:
 Americas Retail                           $  166,485        $ 155,535        $ 10,950         7.0  %
 Americas Wholesale                            68,357           45,430          22,927        50.5  %
 Europe                                       276,009          241,852          34,157        14.1  %
 Asia                                          56,222           55,660             562         1.0  %
 Licensing                                     26,400           21,525           4,875        22.6  %
 Total net revenue                         $  593,473        $ 520,002          73,471        14.1  %

Operating profit (loss):

 Americas Retail                           $   14,266        $  20,274          (6,008)      (29.6  %)
 Americas Wholesale                            17,397           11,555           5,842        50.6  %
 Europe                                        17,890            4,198          13,692       326.2  %
 Asia                                          (3,487)          (1,808)         (1,679)       92.9  %
 Licensing                                     24,444           19,431           5,013        25.8  %
 Total segment earnings from operations        70,510           53,650          16,860        31.4  %
 Corporate overhead                           (33,192)         (28,776)         (4,416)       15.3  %

 Asset impairment charges                      (1,544)            (441)         (1,103)      250.1  %
 Net gains on lease modifications                 601            2,145      

(1,544) (72.0%)

 Total earnings from operations            $   36,375        $  26,578           9,797        36.9  %

 Operating margins:
 Americas Retail                                  8.6  %          13.0  %
 Americas Wholesale                              25.5  %          25.4  %
 Europe                                           6.5  %           1.7  %
 Asia                                            (6.2  %)         (3.2  %)
 Licensing                                       92.6  %          90.3  %
 Total Company                                    6.1  %           5.1  %


Americas Retail

Net revenue from our Americas Retail segment increased by $11.0 million, or 7.0%
for the quarter ended April 30, 2022 from the same prior-year quarter. In
constant currency, net revenue increased by 7.1% compared to the same prior-year
quarter. Over 80% of the increase was driven by the operation of stores this
quarter that had been temporarily closed in the same prior-year quarter and 40%
of the increase was driven by positive comparable store sales, partially offset
by permanent store closures. Comparable sales (including e-commerce) increased
3% in U.S. dollars and constant currency compared to the same prior-year
quarter. The inclusion of our e-commerce sales decreased the comparable sales
percentage by 1% in U.S. dollars and constant currency. As of April 30, 2022, we
directly operated 385 stores in the Americas compared to 388 stores at May 1,
2021, excluding concessions, which represents a 0.8% decrease from the same
prior-year quarter. Currency translation fluctuations relating to our non-U.S.
retail stores and e-commerce sites had an immaterial impact on net revenue.

Operating margin decreased 4.4% for the quarter ended April 30, 2022 from the
same prior-year quarter. Approximately 320 basis points of the decrease was
driven by higher store labor costs, and approximately 150 basis points for both
higher markdowns and higher government subsidies received in the same prior-year
quarter. This was partially offset by 280 basis points of favorable impact from
higher initial markups.

Earnings from operations from our Americas Retail segment decreased by $6.0
million, or 29.6% for the quarter ended April 30, 2022 from the same prior-year
quarter. Higher store expenses drove $7.3 million of the decrease and
approximately $2.5 million in decreases resulted from both higher markdowns and
higher

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government grants received during the same quarter of the previous year. This was partially offset by $6.8 million a favorable impact due to the increase in revenues and $4.7 million driven by higher initial margins.

Americas Wholesale


Net revenue from our Americas Wholesale segment increased by $22.9 million, or
50.5% for the quarter ended April 30, 2022 from the same prior-year quarter. In
constant currency, net revenue increased by 50.4%. Approximately 65% of the
increase was driven by our U.S. wholesale business, almost 20% from our Mexico
wholesale business, and the remaining increase was driven by our Canada
wholesale business. Overall, the growth compared to the same prior-year quarter
was driven by a favorable timing of this year's deliveries to some of our
partners. Currency translation fluctuations relating to our non-U.S. wholesale
businesses had an immaterial impact on net revenue.

Operating margin increased by 0.1% for the quarter ended April 30, 2022 compared to the same quarter of the previous year. The slight improvement was due to expense leverage resulting from higher sales, offset by slightly lower product margins.


Earnings from operations from our Americas Wholesale segment increased by $5.8
million, or 50.6% for the quarter ended April 30, 2022 from the same prior-year
quarter, mainly driven by higher revenues.

Europe


Net revenue from our Europe segment increased by $34.2 million, or 14.1% for the
quarter ended April 30, 2022 compared to the same prior-year quarter. In
constant currency, net revenue increased by 26.4%. The increase in constant
currency was driven over 60% by the operation of stores this quarter that had
been temporarily closed in the same prior-year quarter, nearly 20% by higher
wholesale revenues, 10% by net new store impact and almost 5% by positive
comparable store sales. Comparable sales (including e-commerce) decreased 6% in
U.S. dollars and increased 3% in constant currency compared to the same
prior-year quarter. The inclusion of our e-commerce sales decreased the
comparable sales percentage by 2% in U.S. dollars and decreased 4% in constant
currency. As of April 30, 2022, we directly operated 564 stores in Europe
compared to 511 stores at May 1, 2021, excluding concessions, which represents a
10.4% increase from the same prior-year quarter. Currency translation
fluctuations relating to our European operations unfavorably impacted net
revenue by $29.7 million.

Operating margin increased 4.8% for the quarter ended April 30, 2022 compared to
the same prior-year quarter. The increase was mainly driven by a 730 basis point
improvement due to expense leverage resulting from higher sales and a 190 basis
point improvement due to lower markdowns, partially offset by a 390 basis point
unfavorable impact from lower initial markups due to higher freight costs and a
200 basis point unfavorable impact from currency exchange rate.

Earnings from operations from our Europe segment increased by $13.7 million, or
326.2% for the quarter ended April 30, 2022 compared to the same prior-year
quarter. Higher revenue, including the benefits from lower markdowns, was the
main driver for the increase in earnings from operations and resulted in an
increase of $25.0 million compared to the same prior-year quarter. This was
partially offset by $11.7 million increase in freight expenses. Currency
translation fluctuations relating to our European operations unfavorably
impacted earnings from operations by $6.4 million.

Asia


Net revenue from our Asia segment increased by $0.6 million, or 1.0% for the
quarter ended April 30, 2022 from the same prior-year quarter. In constant
currency, net revenue increased by 7.7% driven by the impact of the direct
operation of some of our stores in South Korea, which we acquired from one of
our wholesale partners, which was slightly offset by the impact of the COVID-19
pandemic in China. Comparable sales (including e-commerce) decreased 11% in U.S.
dollars and 5% in constant currency compared to the same prior-year quarter. The
inclusion of our e-commerce sales negatively impacted the comparable sales
percentage by 1% in U.S. dollars and constant currency. Currency translation
fluctuations relating to our Asian operations unfavorably impacted net revenue
by $3.7 million.

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Operating margin decreased 3.0% for the quarter ended April 30, 2022 from the
same prior-year quarter. Approximately 800 basis points of margin decrease were
driven by the lower profitability in our China business mainly due to the impact
of the COVID-19 pandemic in that market. This was partially offset by 400 basis
points of impact driven by the profitability improvement in South Korea mainly
due to the direct operation of some of our stores.

Earnings from operations from our Asia segment decreased by $1.7 million, or
92.9% for the quarter ended April 30, 2022 compared to the same prior-year
quarter. Approximately $4.0 million was driven by the lower profit in China due
to the impact of the COVID-19 pandemic, partially offset by $1.7 million of
higher profit in South Korea. Currency translation fluctuations relating to our
Asia operations unfavorably impacted the loss from operations by $0.2 million.

Licence

Net royalty income from our Licensing segment increased by $4.9 millionor 22.6% for the quarter ended April 30, 2022 compared to the same quarter of the previous year, mainly due to higher royalties in our category of handbags.


Earnings from operations from our Licensing segment increased by $5.0 million,
or 25.8% for the quarter ended April 30, 2022 from the same prior-year quarter.
The increase was driven by the favorable impact to earnings from higher
revenues.

Business overhead


Unallocated corporate overhead increased by $4.4 million, or 15.3% for the
quarter ended April 30, 2022 compared to the same prior-year quarter primarily
due to higher expenses related to certain professional service and legal fees
and related (credits) costs.

Non-GAAP Measures

The financial information presented in this Quarterly Report includes non-GAAP
financial measures, such as adjusted results and constant currency financial
information. For the three months ended April 30, 2022 and May 1, 2021, the
adjusted results exclude the impact of certain professional service and legal
fees and related (credits) costs, asset impairment charges, net gains on lease
modifications, non-cash amortization of debt discount on our 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. These non-GAAP measures are provided in addition to, and not as
alternatives for, our reported GAAP results.

These items affect the comparability of our reported results. The financial
results are also presented on a non-GAAP basis, as defined in Section 10(e) of
Regulation S-K of the SEC, to exclude the effect of these items. We have
excluded these items from our adjusted financial measures primarily because we
believe these items are not indicative of the underlying performance of our
business and the adjusted financial information provided is useful for investors
to evaluate the comparability of our operating results and our future outlook
(when reviewed in conjunction with our GAAP financial statements).

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A reconciliation of reported GAAP results to comparable non-GAAP results follows (in thousands, except per share data):

Three months completed

                                                                     Apr 30, 2022           May 1, 2021
Reported GAAP net earnings attributable to Guess?, Inc.            $       

7,970 $12,006
Certain professional service fees and legal and related fees (credits)1

                                                                     4,417                 1,078
 Asset impairment charges2                                                 1,544                   441
 Net gains on lease modifications3                                          (601)               (2,145)
 Amortization of debt discount4                                                -                 2,781
 Discrete tax adjustments5                                                 3,188                   147
 Income tax impact from adjustments6                                      (1,281)                 (435)

Total adjustments affecting net income attributable to Guess?, Inc.

                                                                       7,267                 1,867
Adjusted net earnings attributable to Guess?, Inc.                 $      

15,237 $13,873


Net earnings per common share attributable to common stockholders:
GAAP diluted7                                                      $        0.12          $       0.18
Adjusted diluted7                                                  $        0.24          $       0.21

_______________________________________________________________________

Remarks:


1  Amounts recorded represent certain professional service and legal fees and
related (credits) costs which we otherwise would not have incurred as part of
our business.

2  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 under-performance and expected store
closures.

3 The amounts recognized represent net gains on lease modifications mainly related to the early termination of certain leases.


4  In April 2019, we issued $300 million principal amount of the Notes in a
private offering. Prior to adoption of ASU 2020-06, we separated the Notes into
liability (debt) and equity (conversion option) components. The debt discount,
which represented an amount equal to the fair value of the equity component, was
amortized as non-cash interest expense over the term of the Notes. We adopted
ASU 2020-06 under the modified retrospective method as of January 30, 2022. Upon
adoption, the equity component was eliminated in the current period and recorded
as an adjustment to retained earnings. Prior periods are not affected.

5  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, impacts from cumulative valuation allowances and
the income tax benefits from an income tax rate change due to net operating loss
carrybacks.

6  The income tax effect of certain professional service and legal fees and
related (credits) costs, asset impairment charges, net gains on lease
modifications and the amortization of debt discount was based on the our
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.

7  Prior to adoption of ASU 2020-06, Debt-Debt with Conversion and Other Options
(Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity's Own Equity
(Subtopic 815-40), for GAAP purposes, we incurred dilution above the initial
strike price of our Notes of $25.78. At May 1, 2021, there was no dilution
related to the Notes for the period.

We adopted ASU 2020-06 under the modified retrospective method as of January 30,
2022. Upon adoption, we prospectively utilize the if-converted method to
calculate GAAP diluted EPS. For GAAP purposes, we incur dilution of our Notes
based on the initial conversion rate associated with the Notes. For the three
months ended April 30, 2022, shares used in computing diluted EPS increased by
11.8 million shares due to the change from the treasury stock method to the
if-converted method. Diluted net income per share for the three months ended
April 30, 2022 is calculated based on GAAP net income and diluted
weighted-average shares of 74.5 million, which also includes the potentially
dilutive effect of our stock options, restricted stock units and the Notes.

For adjusted diluted shares, we exclude the dilutive impact of the Notes at
stock prices below $46.88, based on the bond hedge contracts in place that will
deliver shares to offset dilution. At stock prices in excess of $46.88, we would
have an obligation to deliver additional shares in excess of the dilution
protection provided by the bond hedges.

Our discussion and analysis herein also includes certain constant currency
financial information. Foreign currency exchange rate fluctuations affect the
amount reported from translating our 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. We provide 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,
operating 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. To calculate balance sheet amounts on a constant currency basis, the
current period balance

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sheet amount is translated into U.S. dollars at the exchange rate in effect at
the comparable prior-year period end. The constant currency calculations do not
adjust for the impact of revaluing specific transactions denominated in a
currency that is different from the functional currency of that entity when
exchange rates fluctuate. The constant currency information presented may not be
comparable to similarly titled measures reported by other companies.

In calculating the estimated impact of currency fluctuations (including
translational and transactional impacts) on other measures such as earnings
(loss) per share, we estimate gross margin (including the impact of foreign
exchange currency contracts designated as cash flow hedges for anticipated
merchandise purchases) and expenses using the appropriate prior-year rates,
translate the estimated foreign earnings (loss) at the comparable prior-year
rates and exclude the year-over-year earnings impact of gains or losses arising
from balance sheet remeasurement and foreign exchange currency contracts not
designated as cash flow hedges for merchandise purchases.

Cash and capital resources


We need liquidity globally primarily to fund our working capital, occupancy
costs, interest payments on our debt, remodeling and rationalization of our
retail stores, shop-in-shop programs, concessions, systems, infrastructure,
compensation expenses, other existing operations, expansion plans, international
growth and potential acquisitions and investments. If we experience a sustained
decrease in consumer demand, we may require access to additional credit, which
may not be available to us on commercially acceptable terms, or at all.
Generally, our working capital needs are highest during the late summer and fall
as our inventories increase before the holiday selling period. In addition, in
the U.S., we need liquidity to fund share repurchases and payment of dividends
to our stockholders.

During the three months ended April 30, 2022, we relied primarily on trade
credit, available cash, real estate and other operating leases, finance leases,
proceeds from our credit facilities and term loans and internally generated
funds to finance our operations. We anticipate we will be able to satisfy our
ongoing cash requirements for at least the next 12 months for working capital,
capital expenditures, payments on our debt, finance leases and operating leases,
as well as lease modification payments, potential acquisitions and investments,
expected income tax payments, and share repurchases and dividend payments to
stockholders, primarily with cash flow from operations and existing cash
balances as supplemented by borrowings under our existing Credit Facilities and
proceeds from our term loans, as needed. (Such arrangements are described
further in "Part I, Item 1. Financial Statements - Note 9 - Borrowings and
Finance Lease Obligations" in the Form 10-Q.) Due to the seasonality of our
business and cash needs, we may increase borrowings under our established credit
facilities from time-to-time during the next 12 months and beyond. On May 5,
2022, we entered into a €250 million revolving credit facility through a
European subsidiary, which replaced certain European short-term borrowing
arrangements. Refer to "Part I, Item 1. Financial Statements - Note 17 -
Subsequent Events" for further information. If we experience a sustained
decrease in consumer demand related to the COVID-19 pandemic or to economic,
political or other conditions or events, we may require access to additional
credit, which may not be available to us on commercially acceptable terms or at
all.

We expect to settle the principal amount of our outstanding Notes in 2024 in
cash and any excess in shares. Our outstanding Notes may be converted at the
option of the holders as described in "Part I, Item 1. Financial Statements -
Note 10 - Convertible Senior Notes and Related Transactions" of this Form 10-Q
and in "Note 10 - Convertible Senior Notes and Related Transactions" of the
Consolidated Financial Statements included in our Annual Report on Form 10-K. As
of April 30, 2022, none of the conditions allowing holders of the Notes to
convert had been met. Pursuant to one of these conditions, if our stock trading
price exceeds 130% of the conversion price of the Notes (currently $25.53) for
at least 20 trading days during the 30 consecutive trading-day period ending on,
and including, the last trading day of any calendar quarter, holders of the
Notes would have the right to convert their convertible notes during the next
calendar quarter. In accordance with the terms of the indenture governing the
Notes, we have adjusted the conversion rate and the conversion price of the
Notes for quarterly dividends exceeding $0.1125 per share. Upon conversion, we
will pay or deliver, as the case may be, cash, shares of our common stock or a
combination of cash and shares of our common stock, at

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our election, in the manner and subject to the terms and conditions provided in
the indenture governing the Notes. The convertible note hedge transaction we
entered into in connection with our issuance of the Notes is expected generally
to reduce the potential dilution upon conversion of the Notes and/or offset any
cash payments we are required to make in excess of the principal amount of the
Notes that are converted, as the case may be.

We have historically considered the undistributed earnings of our foreign
subsidiaries to be indefinitely reinvested. As a result of the Tax Reform, we
had a substantial amount of previously taxed earnings that could be distributed
to the U.S. without additional U.S. taxation. We continue to evaluate our plans
for reinvestment or repatriation of unremitted foreign earnings and regularly
review our cash positions and determination of indefinite reinvestment of
foreign earnings. If we determine that all or a portion of such foreign earnings
are no longer indefinitely reinvested, we may be subject to additional foreign
withholding taxes and U.S. state income taxes, beyond the one-time transition
tax. As of April 30, 2022, we determined that approximately $12.7 million of
such foreign earnings are no longer indefinitely reinvested. The incremental tax
cost to repatriate these earnings to the U.S. is immaterial. We intend to
indefinitely reinvest the remaining earnings from the our foreign subsidiaries
for which a deferred income tax liability has not already been recorded. It is
not practicable to estimate the amount of income tax that might be payable if
these earnings were repatriated due to the complexities associated with the
hypothetical calculation. As of April 30, 2022, we had cash and cash equivalents
of $147.9 million, of which approximately $16.5 million was held in the U.S.

Excess cash and cash equivalents, which represent the majority of our
outstanding cash and cash equivalents balance, are held primarily in overnight
deposit and short-term time deposit accounts and money market accounts. Please
refer to "Forward-Looking Statements" discussed above and "Part I, Item 1A. Risk
Factors" contained in our most recent Annual Report on Form 10-K for the fiscal
year ended January 29, 2022 for a discussion of risk factors which could
reasonably be likely to result in a decrease of internally generated funds
available to finance capital expenditures and working capital requirements.

Impact of COVID-19 on liquidity

Refer to the “COVID-19 Business Update” section and “Part 1, Item 1. Financial Statements – Note 1 – Base of Presentation” for a discussion of the impact of the COVID-19 pandemic on our performance finances and our liquidity.


In light of store closures and reduced traffic in stores, we have taken certain
actions with respect to certain of our existing leases, including engaging with
landlords to discuss rent deferrals as well as other rent concessions. We
suspended rental payments and/or paid reduced rental amounts with respect to
certain of our retail stores that were closed or experiencing drastically
reduced customer traffic as a result of the COVID-19 pandemic. We also have
successfully negotiated with several landlords, including some of our larger
landlords and received rent abatement benefits as well as new lease terms for
some of our affected leases. In some instances, where negotiations with
landlords proved unsuccessful, we were engaged in litigation related to rent
obligations both during the COVID-19 pandemic and through the term of the lease.

Three months completed April 30, 2022 and May 1, 2021

Operational activities


Net cash provided by operating activities was $54.6 million for the three months
ended April 30, 2022, compared to $53.6 million for the three months ended May
1, 2021, or a deterioration of $0.9 million. This deterioration was driven
primarily by unfavorable changes in working capital partially offset by higher
cash flows generated from net earnings. The unfavorable changes in working
capital were due primarily to higher inventory levels as we placed orders
earlier in order to mitigate some of the supply chain disruptions.

Investing activities


Net cash used in investing activities was $29.2 million for the three months
ended April 30, 2022 compared to $7.8 million for the three months ended May 1,
2021. Net cash used in investing activities for the

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three months completed April 30, 2022 primarily related to investments in existing store refurbishment programs and retail expansion and, to a lesser extent, technology and other infrastructure.


The increase in cash used in investing activities was driven primarily by higher
retail remodel and expansion costs and higher investments in technology and
other infrastructure during the three months ended April 30, 2022 compared to
the same prior-year period. During the three months ended April 30, 2022, we
opened 20 directly-operated stores compared to 11 directly-operated stores that
were opened in the same prior-year period.

Fundraising activities


Net cash used in financing activities was $176.8 million for the three months
ended April 30, 2022 compared to $9.7 million for the three months ended May 1,
2021. Net cash used in financing activities for the three months ended April 30,
2022 related primarily to our entrance into the 2022 ASR Contract to repurchase
an aggregate of $175.0 million of the our common stock.

Effect of exchange rates on cash, cash equivalents and restricted cash


During the three months ended April 30, 2022, the change in foreign currency
translation rates decreased our reported cash, cash equivalents and restricted
cash balance by $7.1 million compared to a decrease of $2.8 million during the
three months ended May 1, 2021. Refer to "Foreign Currency Volatility" for
further information on fluctuations in exchange rates.

Working capital

Of the April 30, 2022we had net working capital (including cash and cash equivalents) of $264.9 million compared to $466.2 million at January 29, 2022
and $497.5 million at May 1, 2021.


Our primary working capital needs are for the current portion of lease
liabilities, accounts receivable and inventory. The accounts receivable balance
consists of trade receivables relating primarily to our wholesale business in
Europe and, to a lesser extent, to our wholesale businesses in the Americas and
Asia, royalty receivables relating to our licensing operations, credit card and
retail concession receivables related to our retail businesses and certain other
receivables. Accounts receivable decreased by $10.9 million, or 3.5%, to $295.4
million as of April 30, 2022, from $306.3 million at May 1, 2021. On a constant
currency basis, accounts receivable increased by $23.8 million, or 7.8%, when
compared to May 1, 2021. As of April 30, 2022, approximately 45% of our total
net trade receivables and 61% of our European net trade receivables were subject
to credit insurance coverage, certain bank guarantees or letters of credit for
collection purposes. Our credit insurance coverage contains certain terms and
conditions specifying deductibles and annual claim limits. Inventory increased
by $79.1 million, or 19.5%, to $483.9 million as of April 30, 2022, from $404.9
million at May 1, 2021. On a constant currency basis, inventory increased by
$124.1 million, or 30.7%, when compared to May 1, 2021, driven primarily by
management initiatives to mitigate supply chain disruptions, including
accelerating product orders.

Capital expenditure


Gross capital expenditures totaled $28.7 million for the three months ended
April 30, 2022. This compares to gross capital expenditures of $9.1 million,
before deducting lease incentives of $1.1 million, for the three months ended
May 1, 2021.

We will periodically evaluate strategic acquisitions and alliances and pursue those that we believe will support and contribute to our overall growth initiatives.

Dividends


On May 25, 2022, we announced a regular quarterly cash dividend of $0.225 per
share on our common stock. The cash dividend will be paid on June 24, 2022 to
shareholders of record as of the close of business on June 8, 2022. In
accordance with the terms of the indenture governing the Notes, we will adjust
the conversion rate (which is expected to increase) and the conversion price
(which is expected to decrease) of the Notes effective as of June 7, 2022.

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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
our Board of Directors, which reserves the right to change or terminate our
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 our 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.

Share buybacks


During fiscal 2022, the Board of Directors terminated its previous 2012 $500
million share repurchase program and authorized a new $200 million share
repurchase program. On March 14, 2022, the Board of Directors expanded its
repurchase authorization by $100.0 million. Repurchases may be made on the open
market or in privately negotiated transactions, pursuant to Rule 10b5-1 trading
plans or other available means. There is no minimum or maximum number of shares
to be repurchased under the program and the program may be discontinued at any
time, without prior notice.

On March 18, 2022, pursuant to existing share repurchase authorizations, we
entered into the 2022 ASR Contract with the 2022 ASR Counterparty to repurchase
an aggregate of $175.0 million of our common stock. Under the 2022 ASR Contract,
we made an initial payment of $175.0 million to the 2022 ASR Counterparty and
received an initial delivery of approximately 3.3 million shares of common stock
on March 21, 2022, representing approximately 40% ($70.0 million) of the total
shares expected to be repurchased under the 2022 ASR Contract. The remaining
balance of $105.0 million was classified as an equity forward contract and
recorded in additional paid-in capital within shareholders' equity as of March
21, 2022.

The exact number of shares we will repurchase under the 2022 ASR Contract will
be based generally upon the average daily volume weighted average price of the
common stock during the repurchase period, less a discount. At settlement, under
certain circumstances, the 2022 ASR Counterparty may be required to deliver
additional shares of common stock to us, or under certain circumstances, we may
be required either to deliver shares of common stock or to make a cash payment
to the 2022 ASR Counterparty. Final settlement of the transactions under the
2022 ASR Contract is expected to be completed by the end of July 2022. The terms
of the 2022 ASR Contract are subject to adjustment, including, but not limited
to, adjustments arising if we were to enter into or announce certain types of
transactions or to take certain corporate actions. The 2022 ASR Contract
contains the principal terms and provisions governing the accelerated share
repurchases, including, but not limited to, the mechanism used to determine the
number of shares that will be delivered, the required timing of delivery of the
shares, the circumstances under which the 2022 ASR Counterparty is permitted to
make adjustments to valuation and calculation periods and various
acknowledgments, representations and warranties made by us and the 2022 ASR
Counterparty to one another.

During the three months ended April 30, 2022, we repurchased 3,789,576 shares
under our share repurchase program at an aggregate cost of $81.7 million, which
is inclusive of the shares repurchased under the 2022 ASR Contract. As of
April 30, 2022, we had remaining authority under the share repurchase program to
purchase $62.3 million of our common stock. There were no shares repurchased
during the three months ended May 1, 2021.

Borrowings and finance lease bonds and senior convertible bonds


Refer to "Part I, Item 1. Financial Statements - Note 9 - Borrowings and Finance
Lease Obligations," "Part I, Item 1. Financial Statements - Note 10 -
Convertible Senior Notes and Related Transactions" and "Part I, Item 1.
Financial Statements - Note 17 - Subsequent Events" in this Form 10-Q for
disclosures about our borrowings and finance lease obligations and convertible
senior notes.

Supplementary pension scheme for executives


As a non-qualified pension plan, no dedicated funding of our SERP is required;
however, we have made periodic payments into insurance policies held in a rabbi
trust to fund the expected obligations arising under the non-qualified SERP.

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Contents


The cash surrender values of the insurance policies were $67.1 million and $70.9
million as of April 30, 2022 and January 29, 2022, respectively, and were
included in other assets in our condensed consolidated balance sheets. As a
result of changes in the value of the insurance policy investments, we recorded
unrealized losses of $3.3 million and minimal unrealized losses in other expense
during the three months ended April 30, 2022 and May 1, 2021, respectively. The
projected benefit obligation was $49.3 million and $49.4 million as of April 30,
2022 and January 29, 2022, respectively, and was included in accrued expenses
and other long-term liabilities in our condensed consolidated balance sheets
depending on the expected timing of payments. SERP benefit payments of $0.5
million were made during each of the three months ended April 30, 2022 and
May 1, 2021.

Material cash needs


As of April 30, 2022, there were no material changes to our material cash
requirements from known contractual and other obligations, including commitments
for capital expenditures, outside the ordinary course of business compared to
the disclosures included under "Liquidity and Capital Resources - Material Cash
Requirements" in Item Part II, Item 7 in our Form 10-K for the fiscal year ended
January 29, 2022. Refer to "Part I, Item 1. Financial Statements - Note 9 -
Borrowings and Finance Lease Obligations" and "Part I, Item 1. Financial
Statements - Note 10 - Convertible Senior Notes and Related Transactions" for
further information on these arrangements.

Application of critical accounting policies and estimates


Our critical accounting policies reflecting our estimates and judgments are
described in "Part II, Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations," in our Annual Report on Form 10-K for the
fiscal year ended January 29, 2022 filed with the SEC on March 24, 2022. There
have been no significant changes to our critical accounting policies other than
the January 30, 2022 adoption of ASU 2020-06 which impacted the accounting and
financial statement presentation of our Notes and our calculation of diluted
earnings per common share. Refer to "Part I, Item 1. Financial Statements - Note
3 - Earnings per Share" and "Part I, Item 1. Financial Statements - Note 10
-Convertible Senior Notes and Related Transactions" for further information.

Recently released accounting guidelines

Refer to “Part I, Item 1. Financial Statements – Note 1 – Basis of Presentation” for information on recently issued accounting guidance.

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