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What changed in GUESS INC's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of GUESS INC's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+500 added−447 removedSource: 10-K (2023-03-24) vs 10-K (2022-03-24)

Top changes in GUESS INC's 2023 10-K

500 paragraphs added · 447 removed · 357 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

77 edited+7 added−10 removed79 unchanged
Biggest changeWith the help of the Council, our diversity and inclusion efforts focus on inclusive leadership, employee training, and a work environment that promotes growth and opportunity for all. Initiatives include training for associates and managers, community support, greater diversity in advertising and marketing, celebrations of multicultural and inclusive holidays, and training and compliance programs in our supply chain, among others.
Biggest changeInitiatives include training for associates and managers, community support, greater diversity in advertising and marketing, celebrations of multicultural and inclusive holidays, and training and compliance programs in our supply chain, among others. Learning and Development We are committed to the growth and development of our employees and offer a wide range of training programs for all levels.
We currently have various domestic and international licenses that include eyewear, watches, handbags, footwear, kids’ and infants’ apparel, outerwear, undergarments and sleepwear, fragrance, jewelry and other fashion accessories; and include licenses for the design, manufacture and distribution of GUESS? branded products in markets which include Africa, Asia, Australia, Europe, the Middle East, Central America, North America and South America.
We currently have various domestic and international licenses that include eyewear, watches, handbags, footwear, kids’ and infants’ apparel, outerwear, undergarments and sleepwear, fragrance, jewelry and other fashion accessories; and include licenses for the design, manufacture and distribution of GUESS? branded products in markets which include Africa, Asia, Australia, Europe, the Middle East, Central America, North America and South America.
In the Americas, our wholesale customers consist primarily of better department stores, including Macy’s, Liverpool and Hudson’s Bay, and select specialty retailers and upscale boutiques, which have the image and merchandising expertise that we require for the effective presentation of our products.
In the Americas, our wholesale customers consist primarily of department stores, including Macy’s, Liverpool and Hudson’s Bay, and select specialty retailers and upscale boutiques, which have the image and merchandising expertise that we require for the effective presentation of our products.
Ou r annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished to the Securities and Exchange Commission (“SEC”) pursuant to Section 13(a) or 15(d) of the Exchange Act, are available at our investor website, free of charge, as soon as reasonably practicable after we electronically file them with, or furnish them to, the SEC.
Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished to the Securities and Exchange Commission (“SEC”) pursuant to Section 13(a) or 15(d) of the Exchange Act, are available at our investor website, free of charge, as soon as reasonably practicable after we electronically file them with, or furnish them to, the SEC.
Product Integrity and Testing Protocol During fiscal 2022, we published new protocols covering all our major regions, which provide minimum product integrity and other testing for apparel, footwear, accessories and handbags to help ensure our products continue to meet or exceed our customers’ expectations. Logistics We utilize distribution centers at strategically located sites.
Product Integrity and Testing Protocol During fiscal 2023, we published new protocols covering all our major regions, which provide minimum product integrity and other testing for apparel, footwear, accessories and handbags to help ensure our products continue to meet or exceed our customers’ expectations. Logistics We utilize distribution centers at strategically located sites.
The European wholesale businesses operate with two primary selling seasons: the Spring/Summer season, which ships from November to April and the Fall/Winter season, which ships from May to October. We may take advantage of early-season demand and potential reorders in its European wholesale business by offering a pre-collection assortment which ships at the beginning of each season.
The European wholesale businesses operate with two primary selling seasons: the Spring/Summer season, which ships from November to April and the Fall/Winter season, which ships from May to October. We may take advantage of early-season demand and potential reorders in our European wholesale business by offering a pre-collection assortment which ships at the beginning of each season.
Financial Statements – Note 18 – Segment Information” in this Form 10-K for disclosures about our segment financial information. Americas Retail Segment In our Americas Retail segment, we sell our products direct-to-consumer through a network of directly operated retail and factory outlet stores and e-commerce sites in the Americas. Retail stores and concessions.
Financial Statements – Note 17 – Segment Information” in this Form 10-K for disclosures about our segment financial information. Americas Retail Segment In our Americas Retail segment, we sell our products direct-to-consumer through a network of directly operated retail and factory outlet stores and e-commerce sites in the Americas. Retail stores and concessions.
Compliance with these laws, regulations and ordinances has not had, and is not expected to have, a material impact on our earnings, competitive position or capital expenditures. Website Access to Our Periodic SEC Reports Our investor website can be found a t http://investors.guess.com .
Compliance with these laws, regulations and ordinances has not had, and is not expected to have, a material impact on our earnings, competitive position or capital expenditures. Website Access to Our Periodic SEC Reports Our investor website can be found at http://investors.guess.com .
During fiscal 2022, we continued to expand the program for additional purchase orders in Europe and North America. The objective is to stop product quality issues at the origin before investing in the transportation of the goods to the final destinations.
During fiscal 2023, we continued to expand the program for additional purchase orders in Europe and North America. The objective is to stop product quality issues at the origin before investing in the transportation of the goods to the final destinations.
We deploy a variety of media focused on national and international contemporary fashion/beauty, lifestyle and celebrity outlets. In recent years, we have also expanded our efforts into influencer marketing, digital 7 Table of Contents advertising with leading fashion and lifestyle websites and advertising on social media platforms, including YouTube, Facebook, Instagram, Twitter, Pinterest, Reddit, Snapchat, TikTok and global search engines.
We deploy a variety of media focused on national and international contemporary fashion/beauty, lifestyle and celebrity outlets. In recent years, we have also expanded our efforts into influencer marketing, digital advertising with leading fashion and lifestyle websites and advertising on social media platforms, including YouTube, Facebook, Instagram, Twitter, Pinterest, Reddit, Snapchat, TikTok and global search engines.
Although local customs vary in different regions of the world, we believe that the issues of business ethics, human rights, health, safety and environmental stewardship transcend geographical boundaries. Initial audits assess compliance and allow us to engage and educate new suppliers on our standards and create the groundwork for strong relationships based on continuous improvement.
Although local customs vary in different regions of the world, we believe that the issues of business ethics, human rights, health, safety and environmental stewardship transcend geographical boundaries. Initial assessments of compliance allow us to engage and educate new suppliers on our standards and create the groundwork for strong relationships based on continuous improvement.
We sell our products both through wholesale distribution channels and through licensed retail stores and concessions operated by our wholesale partners throughout Europe and the Middle East. Our European wholesale business generally relies on a large number of smaller regional distributors and agents to distribute our products primarily to smaller independent multi-brand boutiques.
We sell our products both through wholesale distribution channels and through licensed retail stores and concessions operated by our wholesale partners throughout Europe and the Middle East. Our European wholesale business generally relies on a large number of smaller regional distributors and agents to distribute our products primarily to smaller independent multi- 4 Table of Contents brand boutiques.
We also provide our employees a merchandise discount on most of our products. Sustainability and Climate Change In fiscal 2022, we released our latest sustainability report entitled VISION GUESS, our fourth sustainability report covering fiscal 2021 and fiscal 2020, written in accordance with standards of the Global Reporting Initiative (“GRI”) and Sustainable Accounting Standards Board (“SASB”).
We also provide our employees a merchandise discount on most of our products. 10 Table of Contents Sustainability and Climate Change In fiscal 2022, we released our latest sustainability report entitled VISION GUESS, our fourth sustainability report covering fiscal 2020 and fiscal 2021, written in accordance with standards of the Global Reporting Initiative (“GRI”) and Sustainable Accounting Standards Board (“SASB”).
Customers retain the ability to request early shipment of backlog orders or delay shipment of orders depending on their needs. 9 Table of Contents Human Capital Since our founding, we have been a company that welcomes all, both within our own operations and in our supply chain.
Customers retain the ability to request early shipment of backlog orders or delay shipment of orders depending on their needs. Human Capital Since our founding, we have been a company that welcomes all, both within our own operations and in our supply chain.
Our new global apparel line of products will help improve product development costs by reducing the number of styles and help drive efficiencies in product costs by consolidating orders from multiple regions . Our sourcing strategy provides us with the opportunity to leverage costs and improve speed-to-market.
We believe that our new global apparel line of products will help improve product development costs by reducing the number of styles and help drive efficiencies in product costs by consolidating orders from multiple regions . Our sourcing strategy provides us with the opportunity to leverage costs and improve speed-to-market.
Many department stores have more than one shop-in-shop, with each one featuring women’s, men’s or kids’ apparel and handbags. We also sell product to licensed retail stores and concessions operated by certain wholesale customers. As of January 29, 2022, we had 34 licensed retail stores in the Americas, all of which were located in Central and South America.
Many department stores have more than one shop-in-shop, with each one featuring women’s, men’s or kids’ apparel or handbags. We also sell product to licensed retail stores and concessions operated by certain wholesale customers. As of January 28, 2023, we had 34 licensed retail stores in the Americas, all of which were located in Central and South America.
We seek to achieve efficient and timely delivery of our products, combining global and local sourcing. 6 Table of Contents Almost all of our products are acquired as full package purchases where we design and source product and the vendor delivers the finished product.
We seek to achieve efficient and timely delivery of our products, combining global and local sourcing. Almost all of our products are acquired as full package purchases where we design and source product and the vendor delivers the finished product.
Through the GUESS Animal Welfare Policy, guided by international best practice in accordance with “The Five Freedoms for Animal Welfare” by the Farm Animal Welfare Council, our suppliers are prohibited from using any fur, mohair, angora, 11 Table of Contents exotic leather or any other parts from vulnerable, endangered, or wild-caught species.
Through the GUESS Animal Welfare Policy, guided by international best practice in accordance with “The Five Freedoms for Animal Welfare” by the Farm Animal Welfare Council, our suppliers are prohibited from using any fur, mohair, angora, exotic leather or any other parts from vulnerable, endangered, or wild-caught species.
The typical license agreement requires that the licensee pay us the greater of a royalty based on a percentage of the licensee’s net sales of licensed products or a guaranteed annual minimum royalty that typically increases over the term of the license agreement.
The typical license agreement requires that the licensee pay us the greater of a royalty based on a percentage of the licensee’s net sales of licensed products or a guaranteed annual minimum royalty that typically increases over the 5 Table of Contents term of the license agreement.
As of January 29, 2022, we had over 5,100 trademarks in the U.S. and internationally registered trademarks or trademark applications pending with the trademark offices in over 175 countries around the world, including the U.S. From time-to-time, we adopt new trademarks in connection with the marketing of our product lines.
As of January 28, 2023, we had over 5,100 trademarks in the U.S. and internationally registered trademarks or trademark applications pending with the trademark offices in over 175 countries around the world, including the U.S. From time-to-time, we adopt new trademarks in connection with the marketing of our product lines.
We compete with numerous apparel retailers, manufacturers and distributors, both domestically and internationally, as well as several well-known designers. Our licensed apparel and accessories also compete with a substantial number of well-known brands.
We compete with numerous apparel retailers, manufacturers and distributors, both domestically and internationally, as well as several well-known designers. Our licensed apparel and 8 Table of Contents accessories also compete with a substantial number of well-known brands.
The desirability of the GUESS? brand name among consumers has allowed us to selectively expand our product offerings and global markets through trademark licensing arrangements, with minimal capital investment or on-going operating expenses.
Licensing Segment Our Licensing segment includes our worldwide licensing operations. The desirability of the GUESS? brand name among consumers has allowed us to selectively expand our product offerings and global markets through trademark licensing arrangements, with minimal capital investment or on-going operating expenses.
During fiscal 2022, we improved and stabilized our digital platforms, implemented more payment methods, redesigned our web front, expanded our shopping channels, enhanced our omni-channel experience and continued to develop mobile-based initiatives to support our wholesale and direct-to-consumer businesses.
During fiscal 2023, we improved and stabilized our digital platforms, implemented more payment methods, continued to improve our web front, expanded our shopping channels, enhanced our omni-channel experience and continued to develop mobile-based initiatives to support our wholesale and direct-to-consumer businesses.
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. We and our partners also have a small number of underwear, Gc watch and footwear concept stores.
During fiscal 2021, we integrated our G by GUESS brand into our Factory business over time in order to drive further efficiencies. We and our partners also have a small number of underwear, Gc watch and footwear concept stores.
The sustainability report also provides information about our current and future activities which includes, among others, reducing greenhouse gas (“GHG”) emissions with Science Based Targets, transitioning away from virgin polyester to recycled materials, and continuing our commitment to circular fashion. The VISION GUESS Sustainability report is available at http://sustainability.guess.com .
The sustainability report also provides information about our current and future activities which includes, among others, reducing greenhouse gas (“GHG”) emissions with Science Based Targets, transitioning to more sustainable and recycled materials, and continuing our commitment to circular fashion. The VISION GUESS Sustainability report is available at http://sustainability.guess.com .
These amounts are paid to landlords or existing lessees in certain circumstances. 4 Table of Contents e-Commerce. Our Europe segment also includes our directly operated retail and other marketplace websites.
These amounts are paid to landlords or existing lessees in certain circumstances. e-Commerce. Our Europe segment also includes our directly operated retail and other marketplace websites.
Our partners operated 563 additional retail stores worldwide. As of January 29, 2022, we and our partners operated in approximately 100 countries worldwide. We continue to evaluate the different businesses in our global portfolio, directing capital investments to those with more profit potential. 1 Table of Contents Multiple Distribution Channels.
Our partners operated 562 additional retail stores worldwide. As of January 28, 2023, we and our partners operated in approximately 100 countries worldwide. We continue to evaluate the different businesses in our global portfolio, directing capital investments to those with more profit potential. 1 Table of Contents Multiple Distribution Channels.
They also provide fashion information and a mechanism for customer feedback while promoting customer loyalty and enhancing our brand identity through interactive content online and through smartphone applications. Our U.S. and Canadian online sites are fully integrated with our customer relationship management (“CRM”) system and loyalty programs.
They also provide information about fashion trends and a mechanism for customer feedback while promoting customer loyalty and enhancing our brand identity through interactive content online and through smartphone applications. Our U.S. and Canadian online sites are fully integrated 3 Table of Contents with our customer relationship management (“CRM”) system and loyalty programs.
Our Americas Wholesale customers consist primarily of better department stores, select specialty retailers, upscale boutiques as well as select off-price retailers. Our products were sold to consumers through approximately 1,450 and 1,350 major doors in the Americas, as well as through our customers’ e-commerce sites, as of January 29, 2022 and January 30, 2021, respectively.
Our Americas Wholesale customers consist primarily of department stores, select specialty retailers, upscale boutiques as well as select off-price retailers. Our products were sold to consumers through approximately 1,450 major doors in the Americas, as well as through our customers’ e-commerce sites, as of both January 28, 2023 and January 29, 2022.
We operate on a 52/53-week fiscal year calendar, which ends on the Saturday nearest to January 31 of each year. All references herein to “fiscal 2022,” “fiscal 2021,” and “fiscal 2020” represent the results of the 52-week fiscal years ended January 29, 2022, January 30, 2021, and February 1, 2020.
We operate on a 52/53-week fiscal year calendar, which ends on the Saturday nearest to January 31 of each year. All references herein to “fiscal 2023,” “fiscal 2022,” and “fiscal 2021” represent the results of the 52-week fiscal years ended January 28, 2023, January 29, 2022, and January 30, 2021.
Our Americas Retail stores and concessions are comprised of a mix of GUESS? factory outlet stores, full-priced GUESS? retail stores, G by GUESS (GbG) stores, GUESS? Accessories stores and MARCIANO stores. 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.
Our Americas Retail stores and concessions are comprised of a mix of GUESS? retail stores, GUESS? factory outlet stores, G by GUESS (GbG) stores, GUESS? Accessories stores and MARCIANO stores. During fiscal 2021, we integrated our G by GUESS brand into our Factory business over time in order to drive further efficiencies.
As of January 29, 2022, with an inclusive culture and a commitment to empowering our people, we provide opportunities for approximately 12,500 associates, both full and part-time, consisting of approximately 4,500 in the U.S. and 8,000 in foreign countries.
As of January 28, 2023, with an inclusive culture and a commitment to empowering our people, we provide opportunities for approximately 12,500 associates, both full and part-time, consisting of approximately 4,500 in the U.S. and 8,000 internationally.
The percentage of our revenue generated from outside of the U.S. has grown from approximately 32% of our total revenues for the year ended December 31, 2005 to approximately 71% of our total revenues for the year ended January 29, 2022. As of January 29, 2022, we directly operated 1,068 retail stores in the Americas, Europe and Asia.
The percentage of our revenue generated from outside of the U.S. has grown from approximately 32% of our total revenues for the year ended December 31, 2005 to approximately 74% of our total revenues for the year ended January 28, 2023. As of January 28, 2023, we directly operated 1,046 retail stores in the Americas, Europe and Asia.
We also sell product to retail partners who operate licensed retail stores and concessions which allows us to expand our international operations with a lower level of capital investment while still closely monitoring store designs and merchandise programs in order to protect the integrity of the GUESS? brand. 2 Table of Contents Licensed retail stores and concessions operated by our retail partners were: Year Ended Year Ended Year Ended Jan 29, 2022 Jan 30, 2021 Feb 1, 2020 Region Stores Concessions Stores Concessions Stores Concessions United States — 1 2 1 2 1 Central and South America 34 — 35 — 40 — Total Americas 34 1 37 1 42 1 Europe and the Middle East 223 — 218 — 228 — Asia and the Pacific 306 158 269 203 290 210 Total 563 159 524 204 560 211 Licensing Operations.
We also sell product to retail partners who operate licensed retail stores and concessions, which allows us to expand our international operations with a lower level of capital investment while still closely monitoring store development and merchandise programs and marketing activations in order to protect the integrity of the GUESS? brand. 2 Table of Contents Licensed retail stores and concessions operated by our retail partners were: Year Ended Year Ended Year Ended Jan 28, 2023 Jan 29, 2022 Jan 30, 2021 Region Stores Concessions Stores Concessions Stores Concessions United States — — — 1 2 1 Central and South America 34 — 34 — 35 — Total Americas 34 — 34 1 37 1 Europe and the Middle East 234 — 223 — 218 — Asia and the Pacific 294 121 306 158 269 203 Total 562 121 563 159 524 204 Licensing Operations.
During fiscal 2022, our partners opened 19 new licensed retail stores and closed 14 stores, ending the year with 223 licensed retail stores in Europe and the Middle East. Asia Segment In our Asia segment, we sell our products through direct-to-consumer and wholesale channels throughout Asia and the Pacific. Asian Direct-to-Consumer.
During fiscal 2023, our partners opened 22 new licensed retail stores and closed 11 stores, ending the year with 234 licensed retail stores in Europe and the Middle East. Asia Segment In our Asia segment, we sell our products through direct-to-consumer and wholesale channels throughout Asia and the Pacific. Asian Direct-to-Consumer.
References to “fiscal 2023” represent the 52-week fiscal year ending January 28, 2023. Business Strengths We believe we have several business strengths that set us apart from our competition, including: Brand Equity. The GUESS? brand is an integral part of our business, a significant strategic asset and a primary source of sustainable competitive advantage.
References to “fiscal 2024” represent the 53-week fiscal year ending February 3, 2024. Business Strengths We believe we have several business strengths that set us apart from our competition, including: Brand Equity. The GUESS? brand is an integral part of our business, a significant strategic asset and a primary source of sustainable competitive advantage.
As of January 29, 2022, we operated retail websites in the Americas, Europe and Asia. We have e-commerce available to 55 countries and in 12 languages around the world. Our websites act as virtual storefronts that both sell our products and promote our brands.
As of January 28, 2023, we operated retail websites in the Americas, Europe and Asia. We have e-commerce available to 50 countries and in 13 languages around the world. Our websites act as virtual storefronts that both sell our products and promote our brands.
During fiscal 2022, we opened 71 new stores and closed 22 stores, ending the year with 556 directly operated stores in Europe and the Middle East. This store count does not include 50 directly operated concessions in Europe. Certain of our European stores require initial investments in the form of key money to secure prime store locations.
During fiscal 2023, we opened 46 new stores and closed 42 stores, ending the year with 560 directly operated stores in Europe and the Middle East. This store count does not include 54 directly operated concessions in Europe. Certain of our European stores require initial investments in the form of key money to secure prime store locations.
We will continue implementing a variety of energy efficiency and renewable energy strategies and working with our key vendors to make sure they have such plans in place. Government Regulations As a company with global operations, we are subject to various federal, state, local and foreign laws, regulations and ordinances.
We will also continue implementing a variety of energy efficiency and renewable energy strategies and working with our key vendors to implement energy efficiency and renewable energy plans. Government Regulations As a company with global operations, we are subject to various federal, state, local and foreign laws, regulations and ordinances.
During fiscal 2022, we opened six new stores and closed 26 stores, including stores transferred to and from our partners and other store relocations and remodels. We ended the year with 124 directly operated stores in Asia and the Pacific. This store count does not include 99 directly operated apparel and accessory concessions.
During fiscal 2023, we opened 13 new stores and closed 22 stores, including stores transferred to and from our partners and other store relocations and remodels. We ended the year with 115 directly operated stores in Asia and the Pacific. This store count does not include 129 directly operated apparel and accessory concessions.
We are also committed to maintaining pay equity throughout our organization, conducting annual assessments. We offer a wide array of both employer-paid and employee-paid benefits to support our employees' overall financial, physical, and mental well-being, including, but not limited to, healthcare, retirement savings, paid time off, temporary leave, and flexible work arrangements.
We offer a wide array of both employer-paid and employee-paid benefits to support our employees' overall financial, physical, and mental well-being, including, but not limited to, healthcare, retirement savings, paid time off, temporary leave, and flexible work arrangements.
As of January 29, 2022, these locations included approximately 750 shop-in-shops, a designated selling area within a department store offering a wide array of our products and incorporates GUESS? signage and fixture designs. These shop-in-shops, managed by the department stores, allow us to reinforce the GUESS? brand image with our customers.
As of January 28, 2023, these locations included approximately 700 “shop-in-shops”—designated selling areas within a department store—offering a wide array of our products and incorporating GUESS? signage and fixture designs. These shop-in-shops, managed by the department stores, allow us to reinforce the GUESS? brand image with our customers.
These collective learning and development programs help foster career mobility for our employees, while simultaneously allowing us to fill open positions with existing employees who know our company best.
We also support learning beyond our walls through our tuition assistance program. These collective learning and development programs help foster career mobility for our employees, while simultaneously allowing us to fill open positions with existing employees who know our company best.
We are also continuously searching for new suppliers and sourcing opportunities in reaction to the latest trends. We have developed IT systems to capture and share key performance indicators with our partners to drive ongoing improvements. During fiscal 2022, we continued to significantly reduce our vendor base to around 100 suppliers.
We are also continuously searching for new suppliers and sourcing opportunities in reaction to the latest trends. We have developed IT systems to capture 6 Table of Contents and share key performance indicators with our partners to drive ongoing improvements. During fiscal 2023, we continued to tightly manage our vendor base to around 140 core suppliers.
During fiscal 2022, we opened 10 new stores and closed 17 stores in the Americas, ending the year with 388 stores. This store count does not include 29 concessions in Mexico. We directly operated our retail stores and concessions in Mexico and Brazil through our majority-owned joint ventures. 3 Table of Contents e-Commerce.
During fiscal 2023, we opened 11 new stores and closed 28 stores in the Americas, ending the year with 371 stores. This store count does not include 29 concessions in Mexico. We directly operated our retail stores and concessions in Mexico and Brazil through our majority-owned joint ventures. e-Commerce.
Our directly operated retail stores and concessions were: Year Ended Year Ended Year Ended Jan 29, 2022 Jan 30, 2021 Feb 1, 2020 Region Stores Concessions Stores Concessions Stores Concessions United States 245 — 249 — 280 — Canada 74 — 76 — 80 — Central and South America 69 29 70 27 73 27 Total Americas 388 29 395 27 433 27 Europe and the Middle East 556 50 507 44 517 39 Asia and the Pacific 124 99 144 101 219 117 Total 1,068 178 1,046 172 1,169 183 e-Commerce.
Our directly operated retail stores and concessions were: Year Ended Jan 28, 2023 Jan 29, 2022 Jan 30, 2021 Region Stores Concessions Stores Concessions Stores Concessions United States 240 — 245 — 249 — Canada 62 — 74 — 76 — Central and South America 69 29 69 29 70 27 Total Americas 371 29 388 29 395 27 Europe and the Middle East 560 54 556 50 507 44 Asia and the Pacific 115 129 124 99 144 101 Total 1,046 212 1,068 178 1,046 172 e-Commerce.
In general, our stores average approximately 5,800 square feet in the Americas, approximately 3,000 square feet in Europe and the Middle East and approximately 3,000 square feet in Asia and the Pacific. Concessions generally average 1,300 square feet and are located primarily in South Korea and Greater China.
In general, our stores average approximately 4,900 square feet in the Americas, approximately 2,600 square feet in Europe and the Middle East and approximately 2,400 square feet in Asia and the Pacific. Concessions generally average 1,100 square feet and are located primarily in South Korea and Greater China.
We are committed to sourcing our products in a responsible manner, respecting both the countries in which we conduct business and the business partners that produce our products.
As a global brand, we maintain skilled sourcing teams in North America, Europe and Asia. We are committed to sourcing our products in a responsible manner, respecting both the countries in which we conduct business and the business partners that produce our products.
In addition, the charters of our Board of Directors’ Audit, Compensation and Nominating and Governance Committees, as well as the Board of Directors’ Governance Guidelines and our Code of Ethics are posted on our investor website.
In addition, the charters of our Board of Directors’ Audit, Compensation and Nominating and Governance Committees, as well as the Board of Directors’ Governance Guidelines and our Code of Ethics are posted on our investor website. We have included our Internet website addresses throughout this filing as textual references only.
Distribution of our products in Canada is handled primarily from our operated distribution centers in Montreal, Quebec. In Europe, distribution of our products is handled primarily by third-party distributors through distribution facilities in Italy, the Netherlands and Poland. We also utilize smaller distribution facilities throughout Europe.
In Europe, distribution of our products is handled primarily by third-party distributors through distribution facilities in Italy, the Netherlands, Poland and Spain. We also utilize smaller distribution facilities throughout Europe. We utilize several third-party operated distribution warehouses that service the Asia region.
They travel throughout the world in order to monitor fashion trends and discover new fabrics. These fabrics, together with the trends observed by our designers, serve as the primary source of inspiration for our lines and collections.
Our design teams seek to identify global fashion trends and interpret them for the style-conscious consumer while retaining the distinctive GUESS? image. They travel throughout the world in order to monitor fashion trends and discover new fabrics. These fabrics, together with the trends observed by our designers, serve as the primary source of inspiration for our lines and collections.
Retail stores and concessions. Our European retail stores and concessions are primarily comprised of a mix of directly operated GUESS? retail and outlet stores, MARCIANO retail stores, GUESS? Accessories retail and outlet stores, GUESS? Footwear stores and GUESS? Kids stores.
European Direct-to-Consumer. Our European direct-to-consumer network is comprised of brick-and-mortar retail stores and concessions and e-commerce sites. Retail stores and concessions. Our European retail stores and concessions are primarily comprised of a mix of directly operated GUESS? retail and outlet stores, MARCIANO retail stores, GUESS? Accessories retail and outlet stores, GUESS? Footwear stores and GUESS? Kids stores.
With our commitments in adopting water-saving denim technology and managing environmental impacts in our supply chain, over 20% of our denim meets our GUESS Eco guidelines and approximately 75% of our key laundries completed the Higg Facility Environmental Module (“Higg FEM”) survey. Our strategy in managing GHG emissions includes meeting our carbon footprint goals and setting Science Based Targets.
With our commitments in adopting water-saving denim technology and managing 11 Table of Contents environmental impacts in our supply chain, over 20% of our denim meets our GUESS Eco guidelines and approximately 60% of our key laundries completed the Higg Facility Environmental Module (“Higg FEM”) survey.
By setting sustainability goals to increase use of responsible materials and promote circular fashion, and by following the GUESS Eco material sourcing guide, we source over 12% sustainable materials across all brands in our global portfolio, and also continue to source a portion of our cotton as Better Cotton.
To that end, we have been working with our vendors to incorporate more sustainable materials and practices. By setting sustainability goals to increase use of responsible materials and promote circular fashion, and by following the GUESS Eco material sourcing guide, we source over 19% sustainable materials across all brands in our global portfolio.
From our innovative product designers and developers working behind the scenes, to our dynamic retail store associates—and everyone in between—we are committed to making sure their diverse voices are valued, ideas are elevated, and excellence is rewarded.
From our innovative product designers and developers working behind the scenes, to our dynamic retail store associates—and everyone in between—we are committed to making sure their diverse voices are valued, ideas are elevated, and excellence is rewarded. 9 Table of Contents Celebrating Diversity and Inclusion Our longstanding commitment to diversity and inclusion comes to life each day as we work together to maintain a fair and inclusive workplace.
We have sales representatives in New York, Los Angeles, Toronto, Montreal, Mexico City and Vancouver who coordinate with customers to determine the inventory level and product mix that should be carried in each store. Additionally, we use merchandise coordinators who work with the stores to ensure that our products are displayed appropriately.
Our Americas Wholesale merchandising strategy is to focus on trend-right products supported by key fashion basics. We have sales representatives in New York, Los Angeles, Toronto, Montreal, Mexico City and Vancouver who coordinate with customers to determine the inventory level and product mix that should be carried in each store.
We continue to ensure all operations and businesses are conducted ethically, both with internal personnel and external business partners, and all of our directors, officers, and associates are held to our Code of Ethics. Additionally, in the VISION GUESS sustainability plan, we committed to connecting ESG priorities with business performance incentive and evaluation metrics.
During fiscal 2023, we further engaged with the Board of Directors on ESG priorities, risks, and opportunities. We continue to ensure all operations and businesses are conducted ethically, both with internal personnel and external business partners, and all of our directors, officers, and associates are held to our Code of Ethics.
Throughout the COVID-19 pandemic, our priority has been to ensure the safety and well-being of all of our employees, customers, and the communities in which we operate around the world.
Throughout the COVID-19 pandemic, our priority has been to ensure the safety and well-being of all of our employees, customers, and the communities in which we operate around the world. In this regard, we have implemented new health and safety protocols in our stores, distribution centers, and corporate offices, with several locations offering free COVID-19 testing and vaccinations.
We will continue to regularly assess and implement marketing initiatives that we believe will build brand equity and grow our business by investing in marketing programs to build awareness and drive customer traffic to our stores, websites and smartphone applications.
By retaining control over our advertising programs, we are able to maintain the integrity of our brands while realizing substantial cost savings compared to outside agencies. 7 Table of Contents We will continue to regularly assess and implement marketing initiatives that we believe will build brand equity and grow our business by investing in marketing programs to build awareness and drive customer traffic to our stores, websites and smartphone applications.
We understand sustainably sourced materials are the key to ensuring product responsibility. Lifecycle analyses have shown that fiber and fabric production make up about half of our apparel’s environmental impact. To that end, we have been working with our vendors to incorporate more sustainable materials and practices.
Protecting Our Environment We are committed to protecting our environment and addressing climate change issues through product responsibility, water stewardship, and GHG emissions reduction. We understand sustainably sourced materials are the key to ensuring product responsibility. Lifecycle analyses have shown that fiber and fabric production make up about half of our apparel’s environmental impact.
During fiscal 2022, our two largest wholesale customers accounted for a total of approximately 3.9% of our consolidated net revenue. Europe Segment In our Europe segment, we sell our products through direct-to-consumer and wholesale channels throughout Europe and the Middle East. European Direct-to-Consumer. Our European direct-to-consumer network is comprised of brick-and-mortar retail stores and concessions and e-commerce sites.
Additionally, we use merchandise coordinators who work with the stores to ensure that our products are displayed appropriately. During fiscal 2023, our two largest wholesale customers accounted for a total of approximately 3% of our consolidated net revenue. Europe Segment In our Europe segment, we sell our products through direct-to-consumer and wholesale channels throughout Europe and the Middle East.
During fiscal 2022, our partners opened 54 new licensed retail stores and closed 17 stores, including stores transferred to and from our partners and other store relocations and remodels. We ended the year with 306 licensed retail stores.
During fiscal 2023, our partners opened 14 new licensed retail stores and closed 26 stores, including stores transferred to and from our partners and other store relocations and remodels. We ended the year with 294 licensed retail stores. This store count does not include 121 apparel and accessory concessions operated by our partners in Asia.
In fiscal 2021, we achieved our goal from our first sustainability plan of over 15% GHG emissions reduction per square foot from direct operations. We are now pursuing our Science Based Targets for GHG emissions, which were approved by the Science Based Targets Initiative in fiscal 2021.
Our strategy in managing GHG emissions includes meeting our carbon footprint goals and setting Science Based Targets. In fiscal 2021, we achieved our goal from our first sustainability plan of over 15% Scope 1 GHG emissions intensity reduction per square foot from direct operations.
The Council aims to foster a workplace in which employees enjoy a sense of community, belonging, and opportunity for dialogue. The Council also serves as a resource for internal associates, offers guidance on communication and community engagement, and assists with communication with Executive Management and the GUESS?, Inc. Board of Directors.
The Council also serves as a resource for internal associates, offers guidance on communication and community engagement, and assists with communication with Executive Management and the GUESS?, Inc. Board of Directors. With the help of the Council, our diversity and inclusion efforts focus on inclusive leadership, employee training, and a work environment that promotes growth and opportunity for all.
This site provides information on our policies, social impact and environmental programs, as well as our sustainability strategy, data and reporting. The information contained on, or that may be accessed through, our websites is not incorporated by reference into, and is not a part of, this Annual Report.
The information contained on, or that may be accessed through, our websites is not incorporated by reference into, and is not a part of, this Annual Report. Strengthening Sustainability Oversight We are committed to good governance and sustainability oversight at every level, ethics in every business facet, and transparency in sustainability reporting.
We remain committed to a 50% reduction of absolute Scope 1 and 2 emissions, as well as an ambitious reduction of absolute Scope 3 emissions by 2030. In fiscal 2022, we purchased renewable energy, solar and wind in the Americas, Europe and Asia, equivalent to power approximately 20% of our stores globally.
In fiscal 2022, we purchased renewable energy, solar and wind in the Americas, Europe and Asia, equivalent to power approximately 20% of our stores globally. We are replicating the same in fiscal 2023 while working on a long term strategy to reduce our GHG emissions.
Strategic Partnerships We evaluate opportunities for strategic acquisitions and alliances and pursue those that we believe will support and contribute to our overall strategic initiatives and/or will take advantage of economies of scale. Similarly, when existing investments and alliances no longer align with strategic initiatives or as other circumstances warrant, we will evaluate various exit opportunities.
Strategic Partnerships We evaluate opportunities for strategic acquisitions and alliances and pursue those that we believe will support and contribute to our overall strategic initiatives and/or will leverage our global infrastructure and network of licensees and wholesale partners.
We expect all at GUESS? to promptly report and investigate concerns about possible discrimination, as appropriate, and to facilitate this, we maintain an open-door policy that fosters honest and open communication. GUESS? associates are encouraged to discuss work-related concerns or issues with their manager, department head, Human Resources, or Executive Management without fear of repercussion.
Our expectations of everyone at GUESS? to support a diverse and welcoming workplace are spelled out in the GUESS?, Inc. Code of Ethics. We expect all at GUESS? to promptly report and investigate concerns about possible discrimination, as appropriate, and to facilitate this, we maintain an open-door policy that fosters honest and open communication.
Design Apparel products are designed by in-house design teams that collaborate to share ideas for products that can be sold throughout our global markets and are inspired by our GUESS? heritage. Our design teams seek to identify global fashion trends and interpret them for the style-conscious consumer while retaining the distinctive GUESS? image.
These joint ventures allow us to accelerate expansion, revitalize certain regions, and provide enhanced development of our retail and wholesale channels in these regions. Design Apparel products are designed by in-house design teams that collaborate to share ideas for products that can be sold throughout our global markets and are inspired by our GUESS? heritage.
Learning and Development We are committed to the growth and development of our employees and offer a wide range of training programs for all levels. In addition to receiving ongoing on-the-job training and coaching, our employees can build skills and prepare for the future through our HR training portal.
In addition to receiving ongoing on-the-job training and coaching, our employees can build skills and prepare for the future through our HR training portal. In fiscal 2023, we continued to add new courses and trainings, many of which focus on remote working skills, as well as diversity and inclusion education.
In addition, our global whistle-blower hotline allows associates to report concerns about unethical behavior or other potential conflicts. Cultivating Diversity, Equity, and Belonging through Focused Council In 2018, we launched our Diversity & Inclusion Council (the “Council”), which is integrated throughout our business.
Cultivating Diversity, Equity, and Belonging through Focused Council In 2018, we launched our Diversity & Inclusion Council (the “Council”), which is integrated throughout our business. The Council aims to foster a workplace in which employees enjoy a sense of community, belonging, and opportunity for dialogue.
Our Sustainability and Corporate Social Responsibility Team ensures the environmental and social responsibility is embedded into decision-making processes. In addition, we have implemented a rigorous internal auditing program, covering our sustainability metrics and performance data to ensure complete, accurate, and balanced sustainability reporting.
Additionally, in the VISION GUESS sustainability plan, we committed to connecting ESG priorities with business performance incentive and evaluation metrics. Our Sustainability and Corporate Social Responsibility Team ensures the environmental and social responsibility is embedded into decision-making processes.
Building on the example set by the Marciano brothers and their belief that a diverse organization was a strong and creative one, we have embedded diversity and inclusion principles and practices throughout the Company. Over nearly 40 years, this has created a rich, vibrant culture that respects, and benefits from, different personal attributes, backgrounds, ideas, and perspectives.
Our aim is for all GUESS? associates to feel comfortable and safe bringing their whole selves to work and contributing fully to our shared success. Building on the example set by the Marciano brothers and their belief that a diverse organization was a strong and creative one, we have embedded diversity and inclusion principles and practices throughout the Company.
As of the date of this Annual Report, we have majority-owned joint ventures in Brazil, the Canary Islands, Mexico, Portugal, Russia and a minority-owned joint venture in South Africa. These joint ventures allow us to accelerate expansion, revitalize certain regions, and provide enhanced development of our retail and wholesale channels in these regions.
Similarly, when existing investments and alliances no longer align with strategic initiatives or as other circumstances warrant, we will evaluate various exit opportunities. As of the date of this Annual Report, we have majority-owned joint ventures in Brazil, the Canary Islands, Mexico, Portugal, Russia and a minority-owned joint venture in South Africa.
With our continuous effort, fiscal 2021 and fiscal 2020 mark the first time we completed a reasonable assurance examination indicating our sustainability report was prepared in accordance with the GRI and the SASB. Protecting Our Environment We are committed to protecting our environment and addressing climate change issues through product responsibility, water stewardship, and GHG emissions reduction.
In addition, we have implemented a rigorous internal auditing program, covering our sustainability metrics and performance data to ensure complete, accurate, and balanced sustainability reporting. With our continuous effort, fiscal 2021 and fiscal 2020 marked the first time we underwent a third-party reasonable assurance examination indicating our sustainability report was prepared in accordance with the GRI and the SASB.
Other customer-focused initiatives included implementing Wi-Fi in store customer access, shortening card payment processing time, improving mobile point of sale check out, and continuing the implementation of Salesforce Customer 360, endless aisle.
We completed store infrastructure upgrades, including in-store Wi-Fi for customer access, in preparation for the adoption of new technology and continued to improve upon mobile point of sale check out, Salesforce Customer 360, endless aisle, and real time inventory and sales dashboard.
Today, diversity is a key facet of our company-wide culture, informing our values, recruiting, talent development, and associate advancement, among other operations. Our expectations of everyone at GUESS? to support a diverse and welcoming workplace are spelled out in the GUESS?, Inc. Code of Ethics.
For over 40 years, this has created a rich, vibrant culture that respects, and benefits from, different personal attributes, backgrounds, ideas, and perspectives. Today, diversity is a key facet of our company-wide culture, informing our values, recruiting, talent development, and associate advancement, among other operations.
Removed
This store count does not include one concession that was operated by one of our partners in the U.S. Our Americas Wholesale merchandising strategy is to focus on trend-right products supported by key fashion basics.
Added
Given the global instability and challenges within the supply chain and geopolitical environment, we are building an agile and lean supply chain by identifying new suppliers that can contribute to reduce our dependency on certain countries of origin. Additionally, offering an assortment of global products continues to be an area of focus.
Removed
This store count does not include 158 apparel and accessory concessions operated by our partners in Asia. 5 Table of Contents Licensing Segment Our Licensing segment includes our worldwide licensing operations.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeIn addition, we may choose to initiate, or may become subject to, litigation as a result of a proxy contest or matters arising from a proxy contest or other activist investor actions, which would serve as a further distraction to our Board of Directors, senior management and employees and could require us to incur significant additional costs. 22 Table of Contents • Perceived uncertainties as to our future direction as a result of potential changes to the composition of the Board of Directors may lead to the perception of a change in the direction of the business, instability or lack of continuity, which may be exploited by our competitors, may cause concern to our current or potential customers and employees, may result in the loss of potential business opportunities and may make it more difficult to attract and retain qualified personnel and business partners. • Proxy contests and related actions, including Legion Partners’ “vote no” campaign, could cause significant fluctuations in our stock price based on temporary or speculative market perceptions or other factors that do not necessarily reflect the underlying fundamentals and prospects of our business. • Legion Partners’ “vote no” campaign may cause Company director candidates who fail to receive sufficient votes for election or reelection to tender resignations to the Board of Directors, which may, in its discretion, decide to accept such resignations.
Biggest changeSimilar actions would serve as a further distraction to our Board of Directors, senior management and employees and could require us to incur significant additional costs. • Perceived uncertainties as to our future direction as a result of potential changes to the composition of the Board of Directors may lead to the perception of a change in the direction of the business, instability or lack of continuity, which may be exploited by our competitors, may cause concern to our current or potential customers and employees, may result in the loss of potential business opportunities and may make it more difficult to attract and retain qualified personnel and business partners. • Proxy contests and related actions could cause significant fluctuations in our stock price based on temporary or speculative market perceptions or other factors that do not necessarily reflect the underlying fundamentals and prospects of our business.
Decisions on whether, when and in which amounts to continue making any future dividend distributions are entirely at the discretion of our Board of Directors, which reserves the right, in its sole discretion, to change or terminate our dividend practices at any time and for any reason without prior notice, including without limitation for any of the following reasons: (i) our cash requirements or plans might change for a wide variety of reasons, including changes in our financial position, capital allocation plans (including a desire to retain or accumulate cash), capital spending plans, stock purchase plans, acquisition strategies, strategic 30 Table of Contents initiatives, debt payment plans (including a desire to maintain or improve credit ratings on our debt securities), pension funding or other benefits payments; (ii) our ability to service and refinance our current and future indebtedness and our ability to borrow or raise additional capital to satisfy our capital needs; (iii) the amount of dividends that we may distribute to our shareholders is subject to restrictions under applicable law and restrictions imposed by our existing or future credit facilities, debt securities, then-outstanding preferred stock securities, if any, leases and other agreements, including restricted payment and leverage covenants; and (iv) the amount of cash that our subsidiaries may make available to us, whether by dividends, loans or other payments, may be subject to the legal, regulatory and contractual restrictions in our outstanding indebtedness.
Decisions on whether, when and in which amounts to continue making any future dividend distributions are entirely at the discretion of our Board of Directors, which reserves the right, in its sole discretion, to change or terminate our dividend practices at any time and for any reason without prior notice, including without limitation for any of the following reasons: (i) our cash requirements or plans might change for 31 Table of Contents a wide variety of reasons, including changes in our financial position, capital allocation plans (including a desire to retain or accumulate cash), capital spending plans, stock purchase plans, acquisition strategies, strategic initiatives, debt payment plans (including a desire to maintain or improve credit ratings on our debt securities), pension funding or other benefits payments; (ii) our ability to service and refinance our current and future indebtedness and our ability to borrow or raise additional capital to satisfy our capital needs; (iii) the amount of dividends that we may distribute to our shareholders is subject to restrictions under applicable law and restrictions imposed by our existing or future credit facilities, debt securities, then-outstanding preferred stock securities, if any, leases and other agreements, including restricted payment and leverage covenants; and (iv) the amount of cash that our subsidiaries may make available to us, whether by dividends, loans or other payments, may be subject to the legal, regulatory and contractual restrictions in our outstanding indebtedness.
We have identified several areas that present opportunities for future cost savings and efficiencies, including improved working capital management, distribution, systems integration and development, supply chain, retail store rent relief efforts, store closure opportunities, and other initiatives, based on a number of assumptions and expectations which, if achieved, would improve profitability and cash flows from operating activities.
We have identified several areas that present opportunities for future cost savings and efficiencies, including improved working capital management, distribution, systems integration and development, supply chain, logistics, retail store rent relief efforts, store closure opportunities, and other initiatives, based on a number of assumptions and expectations which, if achieved, would improve profitability and cash flows from operating activities.
However, we cannot predict whether, and to what extent, there may be changes to international trade agreements, such as those with China, or whether quotas, duties, tariffs, exchange controls or other restrictions will be changed or imposed by the U.S. or by other countries.
We cannot predict whether, and to what extent, there may be changes to international trade agreements, such as those with China, or whether quotas, duties, tariffs, exchange controls or other restrictions will be changed or imposed by the U.S. or by other countries.
The efficient operation of our business is very dependent on our computer and information systems. We rely heavily on our merchandise management and ERP systems used to track sales and inventory and manage our supply chain. In addition, we have e-commerce and other Internet websites worldwide.
The efficient operation of our business is dependent on our computer and information systems. We rely heavily on our merchandise management and ERP systems used to track sales and inventory and manage our supply chain. In addition, we have e-commerce and other Internet websites worldwide.
We could fail, or be perceived to fail, to act responsibly in our environmental, social and governance efforts, or we could fail in accurately reporting our progress on such initiatives and goals. In addition, we could be criticized for the scope of such initiatives or goals.
We could fail in achieving our environmental, social and governance initiatives or goals or fail, or be perceived to fail, to act responsibly in our environmental, social and governance efforts or in accurately reporting our progress on our initiatives and goals. In addition, we could be criticized for the scope of such initiatives or goals.
In addition, applicable law, regulatory authorities and the agreements governing our other indebtedness, including our current Credit Facility and other agreements we may enter into in the future, may restrict our ability to make payments on the Notes other than scheduled principal and interest, and as a result, upon a fundamental change we may not be able to repurchase the Notes and upon any conversions of the Notes may be unable to pay the cash amounts, if any, then due.
In addition, applicable law, regulatory authorities and the agreements governing our other indebtedness, including our current credit facilities and other agreements we may enter into in the future, may restrict our ability to make payments on the Notes other than scheduled principal and interest, and as a result, upon a fundamental change we may not be able to repurchase the Notes and upon any conversions of the Notes may be unable to pay the cash amounts, if any, then due.
The raw materials used to manufacture our merchandise are subject to availability constraints and price volatility caused by high demand for fabrics, currency fluctuations, crop yields, weather patterns, climate change, supply conditions, government regulations (including tariffs), labor conditions, energy costs, transportation or freight costs, economic climate, public health crises, market speculation and other unpredictable factors.
The raw materials used to manufacture our merchandise are subject to availability constraints and price volatility caused by high demand for fabrics, currency fluctuations, crop yields, weather patterns, climate change, supply conditions and supply chain disruptions, government regulations (including tariffs), labor conditions, energy costs, transportation or freight costs, economic climate, public health crises, market speculation and other unpredictable factors.
Their stock ownership, together with the anti-takeover effects of certain provisions of applicable Delaware law and our Restated Certificate of Incorporation and Bylaws, may discourage acquisition bids or allow the Marciano’s to delay or prevent a change in control that may be favored by our other stockholders, which in turn could reduce our stock price or prevent our stockholders from realizing a premium over our common stock price.
Their stock ownership, together with the anti-takeover effects of certain provisions of applicable Delaware law and our Restated Certificate of Incorporation and Bylaws, may discourage acquisition bids or allow the Marcianos to delay or prevent a change in control that may be favored by our other stockholders, which in turn could reduce our stock price or prevent our stockholders from realizing a premium over our common stock price.
Such factors that could harm our results of operations and financial condition include, among other things: (i) political instability, war or acts of terrorism, which disrupt trade with the countries where we operate or in which our contractors, suppliers or customers are located; (ii) recessions and volatility in foreign economies, including the economic impact of the ongoing COVID-19 pandemic; (iii) reduced global demand in our industry resulting in the closing of manufacturing facilities; (iv) challenges in managing dispersed foreign operations; (v) local business practices that do not conform to our legal or ethical guidelines; (vi) adoption of additional or revised quotas, restrictions or regulations relating to imports or exports; (vii) additional or increased customs duties, tariffs, taxes and other charges on imports or exports; (viii) anti-American sentiment in foreign countries where we operate resulting from actual or proposed changes to U.S. immigration and travel policies or other factors; (ix) delays in receipts due to our distribution centers as a result of labor unrest, increasing security requirements or other factors at U.S. or other ports; (x) fluctuations in the value of the dollar against foreign currencies; (xi) increased difficulty in protecting our intellectual property rights in foreign jurisdictions; (xii) social, labor, legal or economic instability in the foreign markets in which we do business, which could influence our ability to sell products in, or distribute products from, these international markets; (xiii) restrictions on the transfer of funds between the U.S. and foreign jurisdictions; (xiv) our ability and the ability of our international retail store licensees, distributors and joint venture partners to locate and continue to open desirable new retail locations; and (xv) natural disasters or public health crises in areas in which our contractors, suppliers, or customers are located.
Such factors that could harm our results of operations and financial condition include, among other things: (i) political instability, war or acts of terrorism, which disrupt trade with the countries where we operate or in which our contractors, suppliers or customers are located; (ii) recessions and volatility in domestic and foreign economies; (iii) the economic impact of the COVID-19 pandemic or other global health crises; (iv) reduced global demand in our industry resulting in the closing of manufacturing facilities; (v) challenges in managing dispersed foreign operations; (vi) local business practices that do not conform to our legal or ethical guidelines; (vii) adoption of additional or revised quotas, restrictions or regulations relating to imports or exports; (viii) additional or increased customs duties, tariffs, taxes and other charges on imports or exports; (ix) anti-American sentiment in foreign countries where we operate resulting from actual or proposed changes to U.S. immigration and travel policies or other factors; (x) delays in receipts due to our distribution centers as a result of labor unrest, increasing security requirements or other factors at U.S. or other ports; (xi) fluctuations in the value of the dollar against foreign currencies; (xii) increased difficulty in protecting our intellectual property rights in foreign jurisdictions; (xiii) social, labor, legal or economic instability in the foreign markets in which we do business, which could influence our ability to sell products in, or distribute products from, these international markets; (xiv) restrictions on the transfer of funds between the U.S. and foreign jurisdictions; (xv) our ability and the ability of our international retail store licensees, distributors and joint venture partners to locate and continue to open desirable new retail locations; (xvi) restrictions on the repatriation of funds held internationally and (xvii) natural disasters or public health crises in areas in which our contractors, suppliers, or customers are located.
We are subject to periodic litigation and other regulatory proceedings, which could result in unexpected obligations, as well as the diversion of time and resources. We are involved from time-to-time in various U.S. and foreign lawsuits relating to our business, including purported class action lawsuits, employment claims and intellectual property claims.
We are subject to periodic litigation and other regulatory proceedings, which could result in unexpected obligations, as well as the diversion of time and resources. We are involved from time-to-time in various U.S. and foreign lawsuits relating to our business, including purported class action lawsuits, shareholder derivative lawsuits, employment claims and intellectual property claims.
These rules and actions include Rule 201 of SEC Regulation SHO, the adoption by the Financial Industry Regulatory Authority, Inc., and the national securities exchanges of a “limit up-limit down” program, the imposition of market-wide circuit breakers that halt trading of securities for certain periods following specific market declines, and the implementation of certain regulatory reforms required by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010.
These rules and actions include Rule 201 of SEC Regulation SHO, the adoption by the Financial Industry Regulatory Authority, Inc., and the national 28 Table of Contents securities exchanges of a “limit up-limit down” program, the imposition of market-wide circuit breakers that halt trading of securities for certain periods following specific market declines, and the implementation of certain regulatory reforms required by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010.
The convertible note hedge transactions covered, subject to anti-dilution adjustments substantially similar to those applicable to the Notes, the number of shares of common stock that initially underlie 28 Table of Contents the Notes, including those sold to the initial purchaser, and are 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 converted Notes, as the case may be.
The convertible note hedge transactions covered, subject to anti-dilution adjustments substantially similar to those applicable to the Notes, the number of shares of common stock that initially underlie the Notes, including those sold to the initial purchaser, and are 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 converted Notes, as the case may be.
Our success depends on the strength of our relationships with our suppliers and manufacturers. The majority of our finished goods are sourced from partners and suppliers located in over 30 countries outside the U.S. In fiscal 2022, over one third of these products were sourced from partners and suppliers based in China.
Our success depends on the strength of our relationships with our suppliers and manufacturers. The majority of our finished goods are sourced from partners and suppliers located in over 30 countries outside the U.S. In fiscal 2023, over one third of these products were sourced from partners and suppliers based in China.
If the U.S. dollar strengthens 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 during fiscal 2023, particularly in Canada, Europe (primarily the euro, British pound, Turkish lira and Russian rouble) and Mexico.
If the U.S. dollar strengthens further relative to the respective fiscal 2023 foreign exchange rates, foreign exchange could negatively impact our revenues and operating results, as well as our international cash and other balance sheet items during fiscal 2024, particularly in Canada, Europe (primarily the euro, British pound, Turkish lira and Russian rouble) and Mexico.
Damage to our reputation or loss of consumer confidence for any of these or other reasons could have a material adverse effect on our results of operations and financial condition, as well as require additional resources to rebuild our reputation. 19 Table of Contents We depend on our intellectual property, and our methods of protecting it may not be adequate.
Damage to our reputation or loss of consumer confidence for any of these or other reasons could have a material adverse effect on our results of operations and financial condition, as well as require additional resources to rebuild our reputation. We depend on our intellectual property, and our methods of protecting it may not be adequate.
If any of our international operations, or our employees or agents, violates such laws, we could become subject to sanctions or other penalties that could negatively affect our reputation, business and operating results. Our business may also be affected by new sanctions and export controls targeting Russia and other responses to Russia's invasion of Ukraine.
If any of our international operations, or our employees or agents, violates such laws, we could become subject to sanctions or other penalties that could negatively affect our reputation, business and operating results. Our business may also be affected by existing or future sanctions and export controls targeting Russia and other responses to Russia's invasion of Ukraine.
Any of these factors could result in reductions in sales or prices and could have a material adverse effect on our results of operations and financial condition. Our Americas Wholesale business is highly concentrated. If any large customers decreases its purchases or experiences financial difficulties, our results of operations and financial condition could be adversely affected.
Any of these factors could result in reductions in sales or prices and could have a material adverse effect on our results of operations and financial condition. 22 Table of Contents Our Americas Wholesale business is highly concentrated. If any large customers decreases its purchases or experiences financial difficulties, our results of operations and financial condition could be adversely affected.
Income tax laws, regulations, and administrative practices in various jurisdictions may be subject to significant change. We record income tax expense based on our estimate of future payments, which includes reserves for uncertain tax positions in multiple 15 Table of Contents tax jurisdictions and requires significant judgment in evaluating and estimating our provision and accruals.
Income tax laws, regulations, and administrative practices in various jurisdictions may be subject to significant change. We record income tax expense based on our estimate of future payments, which includes reserves for uncertain tax positions in multiple tax jurisdictions and requires significant judgment in evaluating and estimating our provision and accruals.
As part of our normal operations, we collect, process, transmit and where appropriate, retain certain sensitive and confidential employee and customer information, including credit card information. There is significant concern by consumers and employees over the security of personal information, consumer identity theft and user privacy.
As part of our normal operations, we collect, process, transmit and where appropriate, retain certain sensitive and confidential employee and customer information, including credit card information. There is 21 Table of Contents significant concern by consumers and employees over the security of personal information, consumer identity theft and user privacy.
On March 14, 2022, the Board of Directors expanded the 2021 Share Repurchase Program authorization by $100 million. In connection with this expanded authorization, on March 18, 2022, we entered into an accelerated share repurchase (“2022 ASR Contract”) arrangement to repurchase an aggregate of $175 million of our common stock.
On March 14, 2022, the Board of Directors expanded the 2021 Share Repurchase Program authorization by $100 million. In connection with this expanded authorization, on March 18, 2022, we entered into an accelerated 30 Table of Contents share repurchase (“2022 ASR Contract”) arrangement to repurchase an aggregate of $175 million of our common stock.
In fiscal 2022, our two largest wholesale customers accounted for a total of approximately 3.9% of our consolidated net revenue. Continued consolidation in the retail industry could further decrease the number of, or concentrate the ownership of, stores that carry our products and our licensees’ products.
In fiscal 2023, our two largest wholesale customers accounted for a total of approximately 3.3% of our consolidated net revenue. Continued consolidation in the retail industry could further decrease the number of, or concentrate the ownership of, stores that carry our products and our licensees’ products.
The scope of the impact of sanctions, export controls and the ongoing conflict in Ukraine is impossible to predict at this time, and could have an adverse impact on our business. 13 Table of Contents Currency fluctuations could adversely impact our financial condition, results of operations and earnings.
The scope of the impact of sanctions, export controls and the ongoing conflict in Ukraine is impossible to predict at this time, and could have an adverse impact on our business. Currency fluctuations could adversely impact our financial condition, results of operations and earnings.
Repurchases of shares of our common stock may cause or avoid an increase or a decrease in the market price of our common stock or the Notes and add volatility. There can be no assurance that repurchases will be 29 Table of Contents made at the best possible price.
Repurchases of shares of our common stock may cause or avoid an increase or a decrease in the market price of our common stock or the Notes and add volatility. There can be no assurance that repurchases will be made at the best possible price.
Changes in U.S. or foreign regulations may also negatively impact our ability to deliver product to our customers. Failure to successfully respond to these risks may adversely affect sales as well as damage the reputation of our brands.
Changes in U.S. or foreign regulations may also 18 Table of Contents negatively impact our ability to deliver product to our customers. Failure to successfully respond to these risks may adversely affect sales as well as damage the reputation of our brands.
In addition, purchases from our top two licensees in fiscal 2022 accounted for almost 20% of our total inventory purchases. Although we believe we could replace existing licensees if necessary, we may have a negative impact during the transition period. Our inability to replace existing licensees could adversely affect our revenues and results of operations.
In addition, purchases from our top two licensees in fiscal 2023 accounted for almost 27% of our total inventory purchases. Although we believe we could replace existing licensees if necessary, we may have a negative impact during the transition period. Our inability to replace existing licensees could adversely affect our revenues and results of operations.
Accordingly, among other impacts, we expect application of the if-converted method will result in an increase of approximately 11.6 million shares in our diluted weighted-average shares of common stock outstanding for the purposes of calculating diluted earnings per share, which will reduce our reported diluted earnings per share in the future.
Accordingly, unless the result would be antidilutive, among other impacts, we expect application of the if-converted method will result in an increase of approximately 11.6 million shares in our diluted weighted-average shares of common stock outstanding for the purposes of calculating diluted earnings per share, which will reduce our reported diluted earnings per share in the future.
This could materially and adversely affect our business and results of operations. In fiscal 2022, approximately 75% of our net royalties were derived from our top five licensed product lines. A decrease in customer demand for any of these product lines could have a material adverse effect on our results of operations and financial condition.
This could materially and adversely affect our business and results of operations. In fiscal 2023, approximately 78% of our net royalties were derived from our top five licensed product lines. A decrease in customer demand for any of these product lines could have a material adverse effect on our results of operations and financial condition.
Negative trends in any of these conditions or our inability to appropriately project fabric requirements could increase costs and negatively impact profitability. Risks Related to Brand Reputation, Relevance and Protection Demand for our merchandise may decrease and the appeal of our brand image may diminish if we fail to identify and rapidly respond to consumers’ fashion tastes.
Negative trends in any of these conditions or our inability to appropriately project fabric requirements could increase costs and negatively impact profitability. 19 Table of Contents Risks Related to Brand Reputation, Relevance and Protection Demand for our merchandise may decrease and the appeal of our brand image may diminish if we fail to identify and rapidly respond to consumers’ fashion tastes and shopping preferences.
Our two largest suppliers, which were licensee partners, accounted for approximately 20% of our purchases of finished goods in fiscal 2022. We do not own or operate production facilities, and we depend on independent factories to supply fabric and manufacture products to our specifications.
Our two largest suppliers, which were licensee partners, accounted for approximately 27% of our purchases of finished goods in fiscal 2023. We do not own or operate production facilities, and we depend on independent factories to supply fabric and manufacture products to our specifications.
In addition, our existing Credit Facility contains, and any future indebtedness may contain, financial and other restrictive covenants that limit our ability to operate our business, raise capital or make payments under our other indebtedness.
In addition, our existing Credit Facilities contain, and any future indebtedness may contain, financial and other restrictive covenants that limit our ability to operate our business, raise capital or make payments under our other indebtedness.
In particular, activist investors may suggest changes to our operations, including management, that conflict with our strategic direction and could cause uncertainty amongst employees, customers and our investors about the strategic direction of our business. • Responding to proxy contests or other actions, including Legion Partners’ “vote no” campaign, could disrupt our operations, be costly and time-consuming, and divert the attention of our Board of Directors, senior management and employees away from their regular duties and the pursuit of business strategies.
In particular, activist investors may suggest changes to our operations, including management, that conflict with our strategic direction and could cause uncertainty amongst employees, customers and our investors about the strategic direction of our business. • Responding to proxy contests or other actions, including Legion Partners’ “vote no” campaign in connection with our 2022 annual meeting of shareholders, are costly and time-consuming, and could disrupt our operations and divert the attention of our Board of Directors, senior management and employees away from their regular duties and the pursuit of business strategies.
For further information regarding the risks we face relating to Russia’s invasion of Ukraine, refer to “ —Our business may also be affected by new sanctions and export controls targeting Russia and other responses to Russia's invasion of Ukraine .” Errors in our assumptions, estimates and judgments related to tax matters, including those resulting from regulatory reviews, could adversely affect our financial results.
For further information regarding the risks we face relating to Russia’s invasion of Ukraine, refer to “ —Our business may also be affected by existing or future sanctions and export controls targeting Russia and other responses to Russia's invasion of Ukraine .” 15 Table of Contents Errors in our assumptions, estimates and judgments related to tax matters, including those resulting from regulatory reviews, could adversely affect our financial results.
As a result, we could suffer negative publicity and our reputation could be adversely impacted, which in turn could have a negative impact on investor perception and our products’ acceptance by consumers. This may also impact our ability to attract and retain talent to compete in the marketplace.
In any such events, we could suffer negative publicity and our reputation could be adversely impacted, which in turn could have a negative impact on investor perception and our products’ acceptance by consumers. This may also impact our ability to attract and retain talent to compete in the marketplace.
Compliance with these numerous laws and regulations is complicated, time consuming and expensive. In addition, the laws may be inconsistent from jurisdiction to jurisdiction and are subject to change from time to time, sometimes unexpectedly.
Compliance with these numerous laws and regulations is complicated, time consuming and expensive. In addition, the laws may be inconsistent from jurisdiction to jurisdiction and are subject to change from time to 23 Table of Contents time, sometimes unexpectedly.
In addition, the liquidity of the market for our common stock may decline, including as a result of our anticipated share repurchases, which could reduce the number of shares available for lending in connection with short sale transactions and the number of counterparties willing to enter into an equity swap on our common stock with a note investor.
In addition, the liquidity of the market for our common stock may decline, which could reduce the number of shares available for lending in connection with short sale transactions and the number of counterparties willing to enter into an equity swap on our common stock with a note investor.
Our Two Founding Board Members own a significant percentage of our common stock. Their respective interests may differ from the interests of our other stockholders. Maurice Marciano, Board member, and Paul Marciano, Chief Creative Officer and Board member, collectively, beneficially own approximately 42% of our outstanding shares of common stock as of March 21, 2022.
Our Two Founding Board Members own a significant percentage of our common stock. Their respective interests may differ from the interests of our other stockholders. Maurice Marciano, Board member, and Paul Marciano, Chief Creative Officer and Board member, collectively, beneficially own approximately 46% of our outstanding shares of common stock as of March 20, 2023.
Distribution of our products in Canada is handled primarily from two distribution centers in Montreal, Quebec. In Asia, we utilize several third-party operated distribution warehouses that service the Asia region. In Europe, distribution of our products is handled primarily by third-party distributors through a distribution facility in Venlo, Netherlands. We continue to optimize our logistic network in Europe.
Distribution of our products in Canada is handled primarily from two distribution centers in Montreal, Quebec. In Asia, we utilize several third-party operated distribution warehouses that service the Asia region. In Europe, distribution of our products is handled by third-party distributors through distribution facilities in Italy, the Netherlands, Poland and Spain. We continue to optimize our logistic network in Europe.
Such disruptions could result in store closures, decreased demand for our products and disruptions in our management functions, sales channels and manufacturing and distribution networks, which could have a material adverse effect on our business, financial condition and results of operations. The ongoing COVID-19 pandemic had a material impact on our financial performance.
Such disruptions could result in store closures, decreased demand for our products and disruptions in our management functions, sales channels and manufacturing and distribution networks, which could have a material adverse effect on our business, financial condition and results of operations.
As a result of recent security breaches at a number of prominent retailers and other large institutions, the media and public scrutiny of information security and privacy has become more intense and the regulatory environment has become more stringent.
As security breaches at prominent retailers and other large institutions have become more common, the media and public scrutiny of information security and privacy has become more intense and the regulatory environment has become more stringent.
We may incur additional indebtedness or draw on our existing credit facilities to meet future financing needs, some of which may be secured indebtedness. 26 Table of Contents Our indebtedness could have significant negative consequences for our security holders and our business, results of operations and financial condition by, among other things: (i) increasing our vulnerability to adverse economic and industry conditions; (ii) limiting our ability to obtain additional financing; (iii) requiring the dedication of a substantial portion of our cash flow from operations to service our indebtedness, which will reduce the amount of cash available for other purposes; (iv) limiting our flexibility to plan for, or react to, changes in our business; (v) diluting the interests of our existing stockholders as a result of issuing shares of our common stock upon conversion of the Notes; and (vi) placing us at a possible competitive disadvantage with competitors that are less leveraged than us or have better access to capital.
Our indebtedness could have significant negative consequences for our security holders and our business, results of operations and financial condition by, among other things: (i) increasing our vulnerability to adverse economic and industry conditions; (ii) limiting our ability to obtain additional financing; (iii) requiring the dedication of a substantial portion of our cash flow from operations to service our indebtedness, which will reduce the amount of cash available for other purposes; (iv) limiting our flexibility to plan for, or react to, changes in our business; (v) diluting the interests of our existing stockholders if we issue shares of our common stock in full or in part upon conversion of the Notes; and (vi) placing us at a possible competitive disadvantage with competitors that are less leveraged than us or have better access to capital.
Unfavorable economic conditions, changing shopping patterns, including significant increases in e-commerce sales, which have accelerated during the COVID-19 pandemic, changing demographic patterns and other factors have adversely affected customer traffic in mall and outlet centers. This, in turn, has resulted in significant pricing pressures and a highly promotional retail environment in the apparel sector.
Unfavorable economic conditions, changing shopping patterns, including shifts in consumer preferences from in-person shopping to online shopping, which accelerated during the COVID-19 pandemic, changing demographic patterns and other factors have adversely affected customer traffic in mall and outlet centers. This, in turn, has resulted in significant pricing pressures and a highly promotional retail environment in the apparel sector.
Despite the security measures in place, our facilities and systems, and those of our third-party service providers, are vulnerable to security breaches, cyber-attacks, acts of vandalism, computer viruses, misplaced or lost data, programming and/or human errors, or other similar events.
Despite the security measures in place, our facilities and systems, and those of our third-party service providers, are vulnerable to security breaches, cyber-attacks, acts of vandalism, computer viruses, misplaced or lost data, programming and/or human errors, or other similar events. Additionally, external events, like the conflict between Russia and Ukraine, can increase the likelihood of cybersecurity attacks.
These or other factors could materially and adversely affect our business, prospects, operating results, financial condition and cash flows. 18 Table of Contents Significant fluctuations and volatility in the price of various input costs, including, but not limited to, cotton and oil-related materials, utilities, fuel, freight and wages may have a material adverse effect on our business, results of operations, financial condition and cash flows.
Significant fluctuations and volatility in the price of various input costs, including, but not limited to, cotton and oil-related materials, utilities, fuel, freight and wages may have a material adverse effect on our business, results of operations, financial condition and cash flows.
While we do experience damage or interruption to our systems, such events have not in the past had a material adverse impact on our business, financial condition or results of operations.
While we do experience damage or interruption to our systems, such events have not in the past had a material adverse impact on our business, financial condition or results of operations. It is possible, however, that future events resulting in damage or interruption to our systems could materially adversely impact our business, financial condition or results of operations.
Our reputation could be jeopardized if we or our third-party providers fail to maintain high standards for merchandise quality and integrity. Any negative publicity about these types of concerns may reduce demand for our merchandise.
Our inability to protect our reputation could have a material adverse effect on our brand. Our ability to maintain our reputation is critical. Our reputation could be jeopardized if we or our third-party providers fail to maintain high standards for merchandise quality and integrity. Any negative publicity about these types of concerns may reduce demand for our merchandise.
A disruption in the ability of our significant customers, distributors or licensees to access liquidity could cause serious disruptions or an overall deterioration of their businesses.
The inability of our manufacturers to ship our products could impair our ability to meet delivery date requirements. A disruption in the ability of our significant customers, distributors or licensees to access liquidity could cause serious disruptions or an overall deterioration of their businesses.
If investors and noteholders seeking to employ a convertible note arbitrage strategy are unable to borrow or enter into equity swaps on our common stock on commercially reasonable terms, then the trading price of, and the liquidity of the market for, the Notes may significantly decline. 27 Table of Contents Provisions in the indenture for the Notes (the “Indenture”) could delay or prevent an otherwise beneficial takeover of us.
If investors and noteholders seeking to employ a convertible note arbitrage strategy are unable to borrow or enter into equity swaps on our common stock on commercially reasonable terms, then the trading price of, and the liquidity of the market for, the Notes may significantly decline.
If we experience excess inventories including from 24 Table of Contents temporary store closures, wholesale order cancellations and reduced consumer demand from the COVID-19 pandemic, we could incur inventory write-downs and markdowns, which in turn could have a material adverse effect on our results of operations and financial condition.
If we experience excess inventories, including as a result of reduced consumer demand or any store closures, wholesale order cancellations or for any other reason, we could 25 Table of Contents incur inventory write-downs and markdowns, which in turn could have a material adverse effect on our results of operations and financial condition.
During fiscal 2022, we sourced most of our finished products with partners and suppliers outside the U.S. and we continued to design and purchase fabrics globally, with most coming from China. In addition, we have increased our sales of product outside of the U.S.
During fiscal 2023, we sourced most of our finished products with partners and suppliers outside the U.S., primarily in China, and we continued to design and purchase fabrics globally.
The cost of the materials that are used in our manufacturing process, such as oil-related commodity prices and other raw materials, including cotton, dyes and chemicals, and other costs, such as fuel, energy and utility costs, can fluctuate as a result of inflation, the current situation in Russia and other factors.
The cost of the materials that are used in our manufacturing process, such as oil-related commodity prices and other raw materials, including cotton, dyes and chemicals, and other costs, such as fuel, energy and utility costs, can fluctuate as a result of inflation, supply chain disruptions, including due to the COVID-19 pandemic and the ongoing conflict between Russia and Ukraine and other factors.
In addition, sudden decreases in the costs for materials may result in the cost of inventory exceeding the cost of new production, which could result in lower profitability, particularly if these decreases result in downward price pressure.
In addition, sudden decreases in the costs for materials may result in the cost of inventory exceeding the cost of new production, which could result in lower profitability, particularly if these decreases result in downward price pressure. Furthermore, any price increases to mitigate inflationary pressures may lower consumer demand for our products.
We operate in a highly competitive and fragmented industry with low barriers to entry. We compete with many apparel manufacturers and distributors, both domestically and internationally, as well as many well-known designers.
Risks Related to Competition The apparel industry is highly competitive, and we may face difficulties competing successfully in the future. We operate in a highly competitive and fragmented industry with low barriers to entry. We compete with many apparel manufacturers and distributors, both domestically and internationally, as well as many well-known designers.
Given the complexity of our business it is imperative that we maintain constant operation of our computer hardware and software systems. Despite our preventative efforts, our systems are vulnerable to damage or interruption from, among other things, ineffective upgrades, ineffective support from third-party vendors, difficulties in replacing or integrating new systems, security breaches, computer viruses, natural disasters and power outages.
Despite our preventative efforts, our systems are vulnerable to damage or interruption from, among other things, ineffective upgrades, ineffective support from third-party vendors, difficulties in replacing or integrating new systems, security breaches, computer viruses, natural disasters and power outages.
As a result of Russia's invasion of Ukraine, the United States, the United Kingdom and the European Union governments, among others, have developed coordinated sanctions and export-control measures.
As a result of Russia's invasion of Ukraine, the United States, the United Kingdom and the European Union, among others, have developed coordinated sanctions and export-control measures targeting Russia, Belarus, and the Russian-controlled regions of Ukraine (Crimea, Donetsk, and Luhansk).
If we are unable to successfully develop new store designs, or if consumers are not receptive to the products, design layout, or visual merchandising, our results of operations and financial results could be adversely affected.
There can be no assurance that new store designs will achieve or maintain sales and profitability levels that justify the required investments. If we are unable to successfully develop new store designs, or if consumers are not receptive to the products, design layout, or visual merchandising, our results of operations and financial results could be adversely affected.
We regularly evaluate strategic acquisitions and alliances and pursue those that we believe will support and contribute to our overall growth initiatives.
We regularly evaluate strategic acquisitions and alliances and pursue those that we believe will support and contribute to our overall growth initiatives and/or will leverage our global infrastructure and network of licensees and wholesale partners.
Furthermore, if any of the conditions to the convertibility of the Notes is satisfied, then we may be required under applicable accounting standards to reclassify the liability carrying value of the Notes as a current, rather than a long-term, liability. This reclassification could be required even if no noteholders convert their Notes and could materially reduce our reported working capital.
Furthermore, if any of the conditions to the convertibility of the Notes is satisfied, then we may be required under applicable accounting standards to reclassify the liability carrying value of the Notes as a current, rather than a long-term, liability.
If our vendors fail to ship our fabrics or products on time or to meet our 20 Table of Contents quality standards or are unable to fill our orders, we might not be able to deliver products to our retail stores and wholesale customers on time or at all.
As a result, we compete with other companies for the production capacity of independent contractors. If our vendors fail to ship our fabrics or products on time or to meet our quality standards or are unable to fill our orders, we might not be able to deliver products to our retail stores and wholesale customers on time or at all.
Certain provisions in the Indenture could make a third-party attempt to acquire us more difficult or expensive. If a takeover constitutes a fundamental change, then noteholders will have the right to require us to repurchase their Notes for cash. In addition, if a takeover constitutes a make-whole fundamental change, then we may be required to temporarily increase the conversion rate.
Provisions in the indenture for the Notes (the “Indenture”) could delay or prevent an otherwise beneficial takeover of us. Certain provisions in the Indenture could make a third-party attempt to acquire us more difficult or expensive. If a takeover constitutes a fundamental change, then noteholders will have the right to require us to repurchase their Notes for cash.
Any such suspension could cause the market price of our common stock to decline. Fluctuations in quarterly performance including comparable store sales, sales per square foot, operating margins, timing of wholesale orders, royalty net revenue or other factors could have a material adverse effect on our earnings and our stock price.
We do not expect this provision of the Inflation Reduction Act to have a material impact on our financial results. Fluctuations in quarterly performance including comparable store sales, sales per square foot, operating margins, timing of wholesale orders, royalty net revenue or other factors could have a material adverse effect on our earnings and our stock price.
The market for qualified employees in the apparel and retail industries is highly competitive, and competitors may use aggressive tactics to recruit our key personnel.
The market for qualified employees in the apparel and retail industries is highly competitive, and competitors may use aggressive tactics to recruit our key personnel. Our success depends upon our ability to attract, retain and motivate qualified employees and upon the continued contributions of these individuals.
In addition, any significant litigation or regulatory matters, regardless of the merits, could divert management’s attention from our operations and result in substantial legal fees. Refer to “Part IV.
In addition, any significant litigation or regulatory matters, regardless of the merits, could divert management’s attention from our operations and result in substantial legal fees. Refer to “Part IV. Financial Statements – Note 15 – Commitments and Contingencies” in this Form 10-K for disclosures about our legal and other proceedings.
In addition, acquired businesses and additional store openings may not provide us with increased business opportunities as consumer preferences for in-person shopping has shifted to online shopping due to the COVID-19 pandemic, or result in the growth we anticipate, particularly during economic downturns.
In addition, acquired businesses and additional store openings may not provide us with increased business opportunities as consumer preferences for in-person shopping has shifted to online shopping, or result in the growth we anticipate, particularly during economic downturns. Furthermore, integrating acquired operations (including existing licensees or joint venture partners) is a complex, time-consuming and expensive process.
A default under the Indenture or the fundamental change itself could also lead to a default under agreements governing our other indebtedness, which may result in that other indebtedness becoming immediately payable in full.
A default under the Indenture or the fundamental change itself could also lead to a default under agreements governing our other indebtedness, which may result in that 26 Table of Contents other indebtedness becoming immediately payable in full. We may not have sufficient funds to satisfy all amounts due under the other indebtedness and the Notes.
Refer to “— We cannot ensure that we will continue paying dividends at the current rates, or at all. ” We cannot predict the size of future issuances or the effect they may have on the trading price of our common stock and the Notes.
We cannot predict the size of future issuances or the effect they may have on the trading price of our common stock and the Notes.
In addition, our issuance of additional shares of common stock will dilute the ownership interests of our existing common stockholders. Difficulties in the credit markets could have a negative impact on our customers, suppliers and business partners, which, in turn could materially and adversely affect our results of operations and liquidity.
Difficulties in the credit markets or events limiting access to liquidity could have a negative impact on our customers, suppliers and business partners, which, in turn could materially and adversely affect our results of operations and liquidity.
In addition, while our foreign currency hedges are designed to reduce volatility over the forward contract period, these contracts can create volatility during the period. The degree to which our financial results are affected for any given time period will depend in part upon our hedging activities.
In addition, while our foreign currency hedges are designed to reduce volatility over the forward contract period, these contracts can create volatility during the period.
Additionally, changing privacy laws in the United States, Europe and elsewhere, including the adoption by the European Union of the General Data Protection Regulation (“GDPR”), which became effective May 2018, created individual privacy rights and imposed increased obligations on companies handling personal data.
Additionally, changing privacy laws in the United States, Europe and elsewhere, including the California Consumer Privacy Act, which created an array of consumer privacy rights and business obligations with regard to the collection and sale of personal information, and other similar state laws, and the General Data Protection Regulation (“GDPR”), adopted in the European Union, which created individual privacy rights and imposed increased obligations on companies handling personal data.
There is an increased focus from investors, customers, associates, business partners and other stakeholders concerning environmental, social and governance matters. The expectations related to environmental, social and governance matters are rapidly evolving, and we announce initiatives and goals related to environmental, social and governance matters from time to time.
The expectations related to environmental, social and governance matters are rapidly evolving, and we announce initiatives and goals related to environmental, social and governance matters from time to time.
Similarly, a failure on the part of our insurance providers to meet their obligations for claims made by us could have a material adverse effect on our results of operations and liquidity. Continued market difficulties or additional deterioration could jeopardize our ability to rely on those financial institutions that are parties to our various bank facilities and foreign exchange contracts.
Similarly, a failure on the part of our insurance providers to meet their obligations for claims made by us could have a material adverse effect on our results of operations and liquidity.
As well, the Indenture prohibits us from engaging in certain mergers or acquisitions unless, among other things, the surviving entity assumes our obligations under the Notes.
In addition, if a takeover constitutes a make-whole fundamental change, then we may be required to temporarily increase the conversion rate. As well, the Indenture prohibits us from engaging in certain mergers or acquisitions unless, among other things, the surviving entity assumes our obligations under the Notes.
The Notes’ hedge and warrant transactions may affect the value of the Notes and our common stock. In connection with the pricing of the Notes, we entered into convertible note hedge transactions with the hedge counterparties.
This reclassification could be required even if no noteholders convert their Notes and could materially reduce our reported working capital. 29 Table of Contents The Notes’ hedge and warrant transactions may affect the value of the Notes and our common stock. In connection with the pricing of the Notes, we entered into convertible note hedge transactions with the hedge counterparties.
The imposition of enhanced export controls and economic sanctions on transactions with Russia and Russian entities could prevent us from performing existing contracts or pursuing new business opportunities or maintaining adequate insurance coverage to protect our products and facilities. Additionally, the conflict in Ukraine could disrupt the operations of our distributor in that region and surrounding regions.
Management’s Discussion and Analysis of Financial Condition and Results of Operations - General - Russia-Ukraine Conflict”) or (iii) pursuing new business opportunities or maintaining adequate insurance coverage to protect our products and facilities in Russia. Additionally, the conflict in Ukraine could disrupt the operations of our distributor in that region and surrounding regions.
We may not have sufficient funds to satisfy all amounts due under the other indebtedness and the Notes. 25 Table of Contents The issuance or sale of shares of our common stock, or rights to acquire shares of our common stock, could depress the trading price of our common stock and the Notes.
The issuance or sale of shares of our common stock, or rights to acquire shares of our common stock, could depress the trading price of our common stock and the Notes.
These factors could result in higher wholesale markdowns, lower average unit retail prices, lower product margins and decreased sales volumes and could have a material adverse effect on our results of operations and financial condition. Our inability to protect our reputation could have a material adverse effect on our brand. Our ability to maintain our reputation is critical.
These factors could result in higher wholesale markdowns, lower average unit retail prices, lower product margins and decreased sales volumes and could have a material adverse effect on our results of operations and financial condition. In addition, our customers have become increasingly technologically savvy and expect a seamless omni-channel experience regardless of whether they are shopping in stores or online.
Further, we could incur substantial costs in legal actions relating to our use of intellectual property or the use of our intellectual property by others. Failure to appropriately address emerging environmental, social and governance matters could have a material adverse impact on our reputation and, as a result, our business.
Further, we could incur substantial costs in legal actions relating to our use of intellectual property or the use of our intellectual property by others.
Such actions, including, without limitation, the “vote no” campaign and related activities pursued by Legion Partners, or if other activist investors in the future pursue and maintain a proxy contest or related actions at an annual meeting of shareholders or otherwise take actions that conflict with our strategic direction, could have a material adverse effect on us for the following reasons: • Activist investors may attempt to effect changes in how we are governed and our strategic direction, or to acquire control over the Company.
These actions could have a material adverse effect on us for the following reasons: • Activist investors may attempt to effect changes in how we are governed and our strategic direction, or to acquire control over the Company.
The current political landscape has introduced greater uncertainty with respect to future income tax and trade regulations for U.S. companies with significant business and sourcing operations outside the U.S. The ongoing economic conflict between the U.S. and China has resulted in increased tariffs being imposed on goods we import from China.
In the long-term, we anticipate these international revenues will continue to grow as a percentage of our total business. The current political landscape has introduced greater uncertainty with respect to future income tax and trade regulations for U.S. companies with significant business and sourcing operations outside the U.S.
Furthermore, integrating acquired operations (including existing licensees or joint venture partners) is a complex, time-consuming and expensive process. Failing to acquire and successfully integrate complementary businesses, or to achieve the business synergies or other anticipated benefits of acquisitions or joint ventures, could materially adversely affect our business and results of operations.
Failing to acquire and successfully integrate complementary businesses, or to achieve the business synergies or other anticipated benefits of acquisitions or joint ventures, could materially adversely affect our business and results of operations. We may be unsuccessful in implementing our plans to open and operate new stores, which could harm our business and negatively affect our results of operations.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeCertain information concerning our principal facilities is set forth below: Location Use Approximate Area in Square Feet Lugano (Bioggio)/Stabio, Switzerland Principal executive and administrative offices, global design, sourcing, marketing and licensing facilities, sales offices and showrooms used by our Europe segment and Corporate support group 190,800 Los Angeles, California Executive and administrative offices, supporting design, sourcing and licensing facilities, sales offices and warehouse facilities used by our Americas Wholesale, Americas Retail, and Corporate support group 341,700 Piacenza, Italy Distribution and warehousing facilities used by our Europe segment 592,000 Venlo, Netherlands Distribution and warehousing facilities used by our Europe segment 506,700 Louisville, Kentucky Distribution and warehousing facility used by our Americas Wholesale and Americas Retail segments 506,000 Jasin/Katowice, Poland Distribution and warehousing facilities and administrative offices used by our Europe segment 235,400 Montreal/Toronto/Vancouver, Canada Administrative offices, showrooms and warehouse facilities used by our Americas Wholesale and Americas Retail segments 203,100 Florence, Italy Administrative office used by our Europe segment 113,000 Seoul, South Korea Administrative and sales offices, design facilities and showrooms used by our Asia segment 41,200 Shanghai, China Administrative offices used by our Asia segment 17,800 Our North American corporate, wholesale and retail headquarters and certain warehouse facilities are located in Los Angeles, California, consisting of four buildings totaling approximately 341,700 square feet (the “North American Corporate Headquarters”) and a parking lot adjacent to the North American Corporate Headquarters.
Biggest changeCertain information concerning our principal facilities is set forth below: Location Use Approximate Area in Square Feet Lugano (Bioggio)/Stabio, Switzerland Principal executive and administrative offices, global design, sourcing, marketing and licensing facilities, sales offices and showrooms used by our Europe segment and Corporate support group 204,900 Los Angeles, California, United States Executive and administrative offices, supporting design, sourcing and licensing facilities, sales offices and warehouse facilities used by our Americas Wholesale, Americas Retail, and Corporate support group 341,700 Piacenza, Italy Distribution and warehousing facilities used by our Europe segment 592,400 Venlo, Netherlands Distribution and warehousing facilities used by our Europe segment 507,700 Louisville, Kentucky, United States Distribution and warehousing facility used by our Americas Wholesale and Americas Retail segments 506,000 Jasin/Katowice, Poland Distribution and warehousing facilities and administrative offices used by our Europe segment 378,300 Montreal/Toronto/Vancouver, Canada Administrative offices, showrooms and warehouse facilities used by our Americas Wholesale and Americas Retail segments 203,100 Florence, Italy Administrative office used by our Europe segment 105,300 Seoul, South Korea Administrative and sales offices, design facilities and showrooms primarily used by our Korean subsidiary 41,200 Shanghai, China Administrative offices used by our Asia segment 17,800 Our North American corporate, wholesale and retail headquarters and certain warehouse facilities are located in Los Angeles, California, consisting of four buildings totaling approximately 341,700 square feet (the “North American Corporate Headquarters”) and a parking lot adjacent to the North American Corporate Headquarters.
The related lease liability was approximately $48.4 million as of January 29, 2022. In addition, through a wholly-owned Canadian subsidiary, we lease warehouse and administrative facilities in Montreal, Quebec from a partnership affiliated with the Principal Stockholders. During the second quarter of fiscal 2022, we entered into a lease amendment to extend the lease term through August 2023.
The related lease liability was approximately $38.7 million as of January 28, 2023. In addition, through a wholly-owned Canadian subsidiary, we lease warehouse and administrative facilities in Montreal, Quebec from a partnership affiliated with the Principal Stockholders. During the second quarter of fiscal 2022, we entered into a lease amendment to extend the lease term through August 2023.
ITEM 2. Properties. As of January 29, 2022, all of our principal facilities were leased with the exception of our U.S. distribution center based in Louisville, Kentucky and our administrative office based in Florence, Italy.
ITEM 2. Properties. As of January 28, 2023, all of our principal facilities were leased with the exception of our U.S. distribution center based in Louisville, Kentucky and our administrative office based in Florence, Italy.
We lease our showrooms, advertising, licensing, sales and merchandising offices, remote distribution and warehousing facilities and retail and factory outlet store locations under non-cancelable operating lease agreements expiring on various dates through January 2039. These facilities had aggregate real estate lease liabilities as of January 29, 2022 totaling approximately $699.7 million, excluding related party liabilities. See “Part IV.
We lease our showrooms, advertising, licensing, sales and merchandising offices, remote distribution and warehousing facilities and retail and factory outlet store locations under non-cancelable operating lease agreements expiring on various dates through January 2039. These facilities had aggregate real estate lease liabilities as of January 28, 2023 totaling approximately $648.2 million, excluding related party liabilities. See “Part IV.
The related lease liability was approximately €5.8 million (US$6.4 million) as of January 29, 2022. 32 Table of Contents Refer to “Part IV. Financial Statements – Note 14 – Related Party Transactions” in this Form 10-K for disclosures about our related party transactions. Our U.S. distribution center is a fully automated facility based in Louisville, Kentucky.
The related lease liability was approximately €5.1 million (US$5.5 million) as of January 28, 2023. 33 Table of Contents Refer to “Part IV. Financial Statements – Note 14 – Related Party Transactions” in this Form 10-K for disclosures about our related party transactions. Our U.S. distribution center is a fully automated facility based in Louisville, Kentucky.
The base rent is approximately CAD$0.6 million (US$0.5 million) per year with all other terms of the existing lease remaining in full force and effect. The related lease liability was approximately CAD$0.9 million (US$0.7 million) as of January 29, 2022.
The base rent is approximately CAD$0.6 million (US$0.5 million) per year with all other terms of the existing lease remaining in full force and effect. The related lease liability was approximately CAD$0.3 million (US$0.3 million) as of January 28, 2023.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeShare Repurchase Program Our share repurchases during each fiscal month of the fourth quarter of fiscal 2022 were as follows: Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Number (or Approximate Dollar Value) of Shares That May Yet Be Purchased Under the Plans or Programs October 31, 2021 to November 27, 2021 Repurchase program 1 — — — $ 200,000,000 Employee transactions 2 — — — November 28, 2021 to January 1, 2022 Repurchase program 1 1,925,683 $ 22.19 1,925,683 $ 157,265,474 Employee transactions 2 6,359 $ 23.64 — January 2, 2022 to January 29, 2022 Repurchase program 1 363,609 $ 22.72 363,609 $ 149,004,273 Employee transactions 2 89,446 $ 22.98 — Total Repurchase program 1 2,289,292 $ 22.28 2,289,292 Employee transactions 2 95,805 $ 23.02 — ______________________________________________________________________ 1 On August 23, 2021, our Board of Directors terminated the previously authorized 2012 share repurchase program (which had $47.8 million capacity remaining) and authorized a new program (the “2021 Share Repurchase Program”) to repurchase, from time-to-time and as market and business conditions warrant, up to $200 million of our common stock.
Biggest changeShare Repurchase Program Our share repurchases during each fiscal month of the fourth quarter of fiscal 2023 were as follows: Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Number (or Approximate Dollar Value) of Shares That May Yet Be Purchased Under the Plans or Programs October 30, 2022 to November 26, 2022 Repurchase program 1 — — — $ 62,267,634 Employee transactions 2 — — — November 27, 2022 to December 31, 2022 Repurchase program 1 — — — $ 62,267,634 Employee transactions 2 345 $ 20.86 — January 1, 2023 to January 28, 2023 Repurchase program 1 — — — $ 62,267,634 Employee transactions 2 95,174 $ 22.04 — Total Repurchase program 1 — — — Employee transactions 2 95,519 $ 22.04 — ______________________________________________________________________ 1 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.
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. 2 Consists of shares surrendered to, or withheld by, us in satisfaction of employee tax withholding obligations that occur upon vesting of restricted stock awards granted under our 2004 Equity Incentive Plan, as amended. 34 Table of Contents Performance Graph The Stock Price Performance Graph below compares our cumulative stockholder return with that of the S&P 500 Index (a broad equity market index) and the S&P 1500 Apparel Retail Index (a published industry index) over the five fiscal years beginning January 28, 2017.
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. 2 Consists of shares surrendered to, or withheld by, us in satisfaction of employee tax withholding obligations that occur upon vesting of restricted stock awards granted under our 2004 Equity Incentive Plan, as amended. 35 Table of Contents Performance Graph The Stock Price Performance Graph below compares our cumulative stockholder return with that of the S&P 500 Index (a broad equity market index) and the S&P 1500 Apparel Retail Index (a published industry index) over the five fiscal years beginning February 3, 2018.
ITEM 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Market and Shareholder Information Since August 8, 1996, our common stock has been listed on the New York Stock Exchange under the symbol ‘GES.’ On March 21, 2022, there were 262 holders of record of our common stock.
ITEM 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Market and Shareholder Information Since August 8, 1996, our common stock has been listed on the New York Stock Exchange under the symbol “GES.” On March 20, 2023, there were 277 holders of record of our common stock.
The return on investment is calculated based on an investment of $100 on January 28, 2017, with dividends, if any, reinvested. Past performance is not necessarily indicative of future performance.
The return on investment is calculated based on an investment of $100 at market close on February 3, 2018, with dividends, if any, reinvested. Past performance is not necessarily indicative of future performance.
On March 14, 2022, the Board of Directors expanded its repurchase authorization by $100 million, leaving a new capacity of $249.0 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.
On March 14, 2022, the Board of Directors expanded its repurchase authorization by $100 million, leaving a new capacity of $249.0 million at that time.
COMPARISON OF FIVE YEAR TOTAL RETURN AMONG GUESS?, INC., S&P 500 INDEX AND S&P 1500 APPAREL RETAIL INDEX Period Ended Company/Market/Peer Group 1/28/2017 2/3/2018 2/2/2019 2/1/2020 1/30/2021 1/29/2022 Guess?, Inc. $ 100.00 $ 127.20 $ 172.51 $ 199.12 $ 220.24 $ 207.53 S&P 1500 Apparel Retail Index 100.00 106.26 118.24 131.27 144.95 161.43 S&P 500 Index 100.00 122.83 122.76 149.23 174.97 211.72
COMPARISON OF FIVE YEAR TOTAL RETURN AMONG GUESS?, INC., S&P 500 INDEX AND S&P 1500 APPAREL RETAIL INDEX Period Ended Company/Market/Peer Group 2/3/2018 2/2/2019 2/1/2020 1/30/2021 1/29/2022 1/28/2023 Guess?, Inc. $ 100.00 $ 135.62 $ 156.54 $ 173.14 $ 163.15 $ 181.46 S&P 1500 Apparel Retail Index 100.00 111.27 123.53 136.41 151.92 171.64 S&P 500 Index 100.00 99.94 121.49 142.45 172.36 160.94
Added
On March 18, 2022, pursuant to existing stock repurchase authorizations, we entered into the 2022 ASR Contract with a financial institution (the ”2022 ASR Counterparty”) to repurchase an aggregate of $175.0 million of our common stock. Under this 2022 ASR Contract, we received approximately 8.5 million shares of common stock in the first half of fiscal 2023.
Added
Refer to “Part IV. Financial Statements – Note 22 – Share Repurchase Program” for further information. Repurchases may be made on the open market or in privately negotiated transactions, pursuant to Rule 10b5-1 trading plans or other available means.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

148 edited+89 added−48 removed84 unchanged
Biggest changeA reconciliation of reported GAAP results to comparable non-GAAP results follows (in thousands, except per share data): Fiscal 2022 Fiscal 2021 Reported GAAP net earnings (loss) attributable to Guess?, Inc. $ 171,363 $ (81,229) Certain professional service and legal fees and related (credits) costs 1 2,652 (565) Separation charges 2 — 3,413 Asset impairment charges 3 3,149 80,442 Net gains on lease modifications 4 (259) (2,801) Amortization of debt discount 5 11,125 10,394 Discrete income tax adjustments 6 10,630 4,053 Income tax impact from adjustments 7 (3,973) (18,228) Total adjustments affecting net earnings (loss) attributable to Guess?, Inc. 23,324 76,708 Adjusted net earnings (loss) attributable to Guess?, Inc. $ 194,687 $ (4,521) Net earnings (loss) per common share attributable to common stockholders: GAAP diluted $ 2.57 $ (1.27) Adjusted diluted $ 2.92 $ (0.07) ______________________________________________________________________ Notes: 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 operations. 2 Amounts represent certain separation-related charges due to headcount reduction in response to the pandemic and due to the separation of our former Chief Executive Officer. 47 Table of Contents 3 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 lower revenue and future cash flow projections from the effects of the COVID-19 pandemic and expected store closures. 4 Amounts recorded represent net gains on lease modifications related primarily to the early termination of certain lease agreements. 5 In April 2019, we issued the Notes in a private offering.
Biggest changeWe believe that these “non-GAAP” or “adjusted” financial measures are useful for investors to evaluate the comparability of our operating results and our future outlook when reviewed in conjunction with our GAAP financial statements. 50 Table of Contents A reconciliation of reported GAAP results to comparable non-GAAP results follows (in thousands, except per share data): Fiscal 2023 Fiscal 2022 Reported GAAP net earnings attributable to Guess?, Inc. $ 149,610 $ 171,363 Certain professional service and legal fees and related (credits) costs 1 7,484 2,652 Asset impairment charges 2 9,544 3,149 Net gains on lease modifications 3 (2,267) (259) Amortization of debt discount 4 — 11,125 Discrete income tax adjustments 5 132 10,630 Income tax impact from adjustments 6 (3,447) (3,973) Total adjustments affecting net earnings attributable to Guess?, Inc. 11,446 23,324 Adjusted net earnings attributable to Guess?, Inc. $ 161,056 $ 194,687 Net earnings per common share attributable to common stockholders: GAAP diluted 7 $ 2.18 $ 2.57 Adjusted diluted 7 $ 2.74 $ 2.92 Weighted average common shares outstanding attributable to common stockholders: GAAP diluted 7 70,087 65,919 Adjusted diluted 7 58,123 65,919 ______________________________________________________________________ 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 operations. 2 Amounts represent asset impairment charges related primarily to impairment of property and equipment and operating lease right-of-use assets related to certain retail locations resulting from under-performance and expected store closures. 3 Amounts recorded represent net gains on lease modifications related primarily to the early termination of certain lease agreements. 4 In April 2019, we issued $300 million principal amount of the Notes in a private offering.
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 convertible notes and/or offset any cash payments we are required to make in excess of the principal amount of convertible notes that are converted, as the case may be.
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.
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.
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.
Deferred income tax assets and liabilities are determined based on differences between financial reporting bases and tax bases of assets and liabilities and are measured using the enacted tax rates expected to apply to taxable income in the periods in which the deferred income tax asset or liability is expected to be realized or settled.
Deferred income tax assets and liabilities are determined based on differences between financial reporting bases and income tax bases of assets and liabilities and are measured using the enacted tax rates expected to apply to taxable income in the periods in which the deferred income tax asset or liability is expected to be realized or settled.
Management evaluates its estimates and judgments on an ongoing basis including those related to the allowances for doubtful accounts, sales return and markdown allowances, gift card and loyalty accruals, valuation of inventories, share-based compensation, recoverability of deferred taxes, unrecognized tax benefits, the useful life of assets for depreciation and amortization, evaluation of asset impairment (including goodwill and long-lived assets, such as property and equipment and operating lease right-of-use (“ROU”) assets), pension obligations, workers’ compensation and medical self-insurance expense and accruals, litigation reserves and restructuring expense and accruals.
Management evaluates its estimates and judgments on an ongoing basis including those related to the allowances for doubtful accounts, sales return and markdown allowances, gift card and loyalty accruals, valuation of inventories, share-based compensation, income taxes, recoverability of deferred income taxes, unrecognized income tax benefits, the useful life of assets for depreciation and amortization, evaluation of asset impairment (including goodwill and long-lived assets, such as property and equipment and operating lease right-of-use (“ROU”) assets), pension obligations, workers’ compensation and medical self-insurance expense and accruals, litigation reserves and restructuring expense and accruals.
The constant currency calculations do not adjust for the impact of revaluing specific transactions denominated in a currency that is different to 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.
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.
These costs are amortized to interest expense using the effective interest method over the term of the Notes. Refer to “Part IV. Financial Statements – Note 2 – New Accounting Guidance” and “Part IV. Financial Statements – Note 10 – Convertible Senior Notes and Related Transactions” in this Form 10-K for details on our convertible senior notes.
These costs are amortized to interest expense using the effective interest method over the term of the Notes. Refer to “Part IV. Financial Statements – Note 2 – New Accounting Guidance” and “Part IV. Financial Statements – Note 10 – Convertible Senior Notes and Related Transactions” in this Form 10-K for details on the Notes.
For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities. Guidance was also provided on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. Our continuing practice is to recognize interest and penalties related to income tax matters in income tax expense.
For those benefits to be recognized, an income tax position must be more likely than not to be sustained upon examination by taxing authorities. Guidance was also provided on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. Our continuing practice is to recognize interest and penalties related to income tax matters in income tax expense.
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 plan to optimize our brand architecture to be relevant with our three target consumer groups: Heritage, Millennials, and Generation Z.
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 continue to optimize our brand architecture to be relevant with our three target consumer groups: Heritage, Millennials, and Generation Z.
Our discussion and analysis herein also include 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.
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.
Liquidity 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.
Liquidity and Capital Resources We use our 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.
In accounting for the debt issuance costs related to the issuance of the Notes, we allocated the total amount incurred to the liability and equity components based on their relative values. Debt issuance costs attributable to the liability component were recorded as a contra-liability and are presented net against the convertible senior notes balance on our consolidated balance sheets.
In accounting for the debt issuance costs related to the issuance of the Notes, we allocated the total amount incurred to the liability and equity components based on their relative values. Debt issuance costs attributable to the liability component were recorded as a contra-liability and are presented net against the Notes balance on our consolidated balance sheets.
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 fiscal 2023, particularly in these regions.
Alternatively, if the U.S. dollar weakens relative to the respective fiscal 2023 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 fiscal 2024, particularly in these regions.
During fiscal 2022, the average U.S. dollar rate was stronger against the Turkish lira, Russian rouble, and Japanese yen and weaker against the British pound, Canadian dollar, euro, Chinese yuan, Mexican peso, Polish zloty and Korean won compared to the average rate in fiscal 2021.
During fiscal 2023, the average U.S. dollar rate was stronger against the euro, British pound, Turkish lira, Polish zloty, Canadian dollar, Japanese yen, Korean won, and Chinese yuan and weaker against the Mexican peso and Russian rouble, compared to the average rate in fiscal 2022.
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.
Some of our transactions, primarily those 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.
Throughout the COVID-19 pandemic, we suspended rental payments and/or paid reduced rental amounts with respect to our retail stores that were closed or experiencing drastically reduced customer traffic as a result of the COVID-19 pandemic.
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.
If the U.S. dollar strengthens 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 during fiscal 2023, particularly in Canada, Europe (primarily the euro, British pound, Turkish lira and Russian rouble) and Mexico.
If the U.S. dollar strengthens further relative to the respective fiscal 2023 foreign exchange rates, foreign exchange could negatively impact our revenues and operating results, as well as our international cash and other balance sheet items during fiscal 2024, particularly in Canada, Europe (primarily the euro, British pound, Turkish lira and Russian rouble) and Mexico.
Refer to “Part IV. Financial Statements – Note 12 – Income Taxes” for further detail. 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.
Financial Statements – Note 12 – Income Taxes” for further detail. 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.
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, translates the estimated foreign earnings (loss) at the comparable prior-year rates and excludes 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.
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 consider 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.
We expect to drive 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 overall infrastructure.
We continue to drive 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 overall infrastructure.
To calculate net revenue, comparable store sales 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 net revenue, comparable store sales and earnings (loss) from operations on a constant currency basis, operating results for the current-year 51 Table of Contents period are translated into U.S. dollars at the average exchange rates in effect during the comparable period of the prior year.
Financial Statements – Note 8 – Borrowings and Finance Lease Obligations” in this Form 10-K for disclosures about our borrowings and finance lease obligations. 52 Table of Contents Supplemental Executive Retirement Plan On August 23, 2005, our Board of Directors adopted a Supplemental Executive Retirement Plan (“SERP”) which became effective January 1, 2006.
Financial Statements – Note 8 – Borrowings and Finance Lease Obligations” in this Form 10-K for disclosures about our borrowings and finance lease obligations. Supplemental Executive Retirement Plan On August 23, 2005, our Board of Directors adopted a Supplemental Executive Retirement Plan (“SERP”) which became effective January 1, 2006.
For goodwill, determination of impairment is made at the reporting unit level which may be either an operating segment or one level below an operating segment if discrete financial information is available. Two or more reporting units within an operating segment may be aggregated for impairment testing if they have similar economic characteristics.
For goodwill, determination of impairment is made at the reporting unit level which may be either an operating segment or one level below an operating segment if discrete financial information is available. Two or more reporting units within an operating segment may be aggregated for impairment testing if 60 Table of Contents they have similar economic characteristics.
Changes in the fair value of interest rate swap agreements designated as cash flow hedges are recorded as a component of accumulated other comprehensive income (loss) within stockholders’ equity and are amortized to interest expense over the term of the related debt.
Changes in the fair value of interest rate swap agreements designated as cash flow 59 Table of Contents hedges are recorded as a component of accumulated other comprehensive income (loss) within stockholders’ equity and are amortized to interest expense over the term of the related debt.
This had an overall unfavorable impact on the translation of our international revenues and earnings from operations during fiscal 2022 compared to the prior year.
This had an overall unfavorable impact on the translation of our international revenues and earnings from operations during fiscal 2023 compared to the prior year.
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 our election, in the manner and subject to the terms and conditions provided in the indenture governing the Notes.
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 our election, in the manner and subject to the 52 Table of Contents terms and conditions provided in the indenture governing the Notes.
The accounts receivable balance consists of trade receivables relating primarily to our wholesale 50 Table of Contents 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.
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.
As additional information becomes available, we assess the potential liability related to new claims and existing claims and revise estimates as appropriate. As new claims arise or existing claims evolve, such revisions in estimates of the potential liability could materially impact the results of operations and financial position.
As additional information becomes available, we assess the potential liability related to new claims and existing claims and revise estimates as appropriate. As new claims arise or existing 61 Table of Contents claims evolve, such revisions in estimates of the potential liability could materially impact the results of operations and financial position.
In addition, we have granted certain nonvested units that require certain minimum performance targets to be achieved in order for these awards to vest. Vesting is also subject to continued service requirements through the vesting date. Compensation expense for performance-based awards that vest in increments is recognized based on an accelerated attribution method.
In addition, we have granted certain nonvested units that require certain minimum performance targets to be achieved in order for these awards to vest. Vesting is also subject to continued service requirements through the vesting date. Compensation expense for performance-based awards that vest in increments is recognized based on 58 Table of Contents an accelerated attribution method.
These critical assumptions are evaluated annually which enables expected future payments for benefits to be stated at present value on the measurement date. If actual results are not consistent with actuarial 57 Table of Contents assumptions, the amounts recognized for the defined benefit plans could change significantly. Refer to “Part IV.
These critical assumptions are evaluated annually which enables expected future payments for benefits to be stated at present value on the measurement date. If actual results are not consistent with actuarial assumptions, the amounts recognized for the defined benefit plans could change significantly. Refer to “Part IV.
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. 36 Table of Contents In addition, there are certain real estate leases which are 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).
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 have been and could continue to be unfavorably impacted. 37 Table of Contents 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).
Estimated breakage amounts are accounted for under the redemption recognition method and are classified as additional net revenues as the gift cards are redeemed. We determined a gift card breakage rate based upon historical redemption patterns, which represented the cumulative estimated amount of gift card breakage from the inception of the electronic gift card program in late 2002.
Estimated breakage amounts are accounted for under the redemption recognition method and are classified as additional net revenues as the gift cards are redeemed. We determine a gift card breakage rate based upon historical redemption patterns, which represents the cumulative estimated amount of gift card breakage from the inception of the electronic gift card program in late 2002.
We issue our gift cards in the U.S. and Canada through one of our subsidiaries and are not required by law to escheat the value of unredeemed gift cards to the state in which the subsidiary is domiciled.
Gifts cards are mainly used in the U.S. and Canada. We issue our gift cards in the U.S. and Canada through one of our subsidiaries and are not required by law to escheat the value of unredeemed gift cards to the state in which the subsidiary is domiciled.
We anticipate we will be able to satisfy our ongoing cash requirements during 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.
We anticipate we will be able to satisfy our ongoing cash requirements for the foreseeable future, including 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.
Compensation expense for nonvested stock options and 54 Table of Contents stock awards/units that are not subject to performance-based vesting conditions is recognized on a straight-line basis over the vesting period. We have elected to account for forfeitures as they occur.
Compensation expense for nonvested stock options and stock awards/units that are not subject to performance-based vesting conditions is recognized on a straight-line basis over the vesting period. We have elected to account for forfeitures as they occur.
Our outstanding Notes may be converted at the option of the holders as described in “Part IV. Financial Statements – Note 10 – Convertible Senior Notes and Related Transactions.” As of January 29, 2022, none of the conditions allowing holders of the convertible notes to convert had been met.
Our outstanding Notes may be converted at the option of the holders as described in “Part IV. Financial Statements – Note 10 – Convertible Senior Notes and Related Transactions.” As of January 28, 2023, 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 initial conversion price of the convertible notes of $25.78 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 convertible notes would have the right to convert their convertible notes during the next calendar quarter.
Pursuant to one of these conditions, if our stock trading price exceeds 130% of the conversion price of the Notes (currently $25.08) 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 Notes during the next calendar quarter.
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.
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.
This does not include variable lease costs that are excluded from the measurement of the operating lease liabilities, such as those charges that are based on a percentage of annual sales volume or estimates. In fiscal 2022, these variable charges totaled $77.5 million. Refer to “Part IV.
This does not include variable lease costs that are excluded from the measurement of the operating lease liabilities, such as those charges that are based on a percentage of annual sales volume or estimates. In fiscal 2023, these variable charges totaled $95.7 million. Refer to “Part IV.
Fiscal 2021 Compared to Fiscal 2020 The comparison of fiscal 2021 to fiscal 2020 has been omitted from this Form 10-K, but can be referenced in our Form 10-K for fiscal 2021, filed with the SEC on April 9, 2021. Non-GAAP Measures Our reported financial results are presented in accordance with GAAP.
Fiscal 2022 Compared to Fiscal 2021 The comparison of fiscal 2022 to fiscal 2021 has been omitted from this Form 10-K, but can be referenced in our Form 10-K for fiscal 2022, filed with the SEC on March 24, 2022. Non-GAAP Measures Our reported financial results are presented in accordance with GAAP.
The projected benefit obligation was $49.4 million and $52.3 million as of January 29, 2022 and January 30, 2021, respectively, and was included in accrued expenses and other long-term liabilities in our consolidated balance sheets depending on the expected timing of payments. SERP benefit payments of $1.9 million and $1.7 million were made during fiscal 2022 and fiscal 2021, respectively.
The projected benefit obligation was $42.4 million and $49.4 million as of January 28, 2023 and January 29, 2022, respectively, and was included in accrued expenses and other long-term liabilities in our consolidated balance sheets depending on the expected timing of payments. SERP benefit payments of $1.7 million and $1.9 million were made during fiscal 2023 and fiscal 2022, respectively.
As of January 29, 2022, approximately 50% of our total net trade receivables and 64% 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.
As of January 28, 2023, approximately 50% of our total net trade receivables and 59% 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.
Recently Issued Accounting Guidance Refer to “Part IV. Financial Statements – Note 2 – New Accounting Guidance” in this Form 10-K for disclosures about recently issued accounting guidance.
Recently Issued Accounting Guidance Refer to “Part IV. Financial Statements – Note 2 – New Accounting Guidance” in this Form 10-K for disclosures about recently issued accounting guidance. 62 Table of Contents
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. For example, as of January 29, 2022, we determined that approximately $7.4 million of such foreign earnings are no longer indefinitely reinvested.
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. For example, as of January 28, 2023, we determined that approximately $37.8 million of such foreign earnings are no longer indefinitely reinvested.
During fiscal 2022, we repurchased 2,289,292 shares under the program at an aggregate cost of $51.0 million. During fiscal 2021, we repurchased 4,000,000 shares under the previous program at an aggregate cost of $38.8 million.
During fiscal 2023, we repurchased 8,985,603 shares under the program at an aggregate cost of $186.7 million. During fiscal 2022, we repurchased 2,289,292 shares under the program at an aggregate cost of $51.0 million. During fiscal 2021, we repurchased 4,000,000 shares under the previous program at an aggregate cost of $38.8 million.
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 January 29, 2022, we determined that approximately $7.4 million of such foreign earnings are no longer indefinitely reinvested.
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 January 28, 2023, we determined approximately $37.8 million of such foreign earnings are no longer indefinitely reinvested.
During fiscal 2022, we recognized $3.1 million of asset impairment charges; $2.7 million net of certain professional service and legal fees and related (credits) costs; $0.3 million net gains on lease modifications; $11.1 million of amortization of debt discount related to our Notes; and $10.6 million in additional income tax expense from certain discrete income tax adjustments related primarily to an intra-entity transfer of intellectual property rights to a wholly-owned Swiss subsidiary (or a combined $23.3 million, or $0.35 per share impact, negative impact after considering the related income tax benefit of $4.0 million of these adjustments).
During fiscal 2023, we recognized $9.5 million of asset impairment charges; $7.5 million net of certain professional service and legal fees and related (credits) costs; $2.3 million net gains on lease modifications; and $0.1 million in additional income tax expense from certain discrete income tax adjustments related primarily to an intra-entity transfer of intellectual property rights to a wholly-owned Swiss subsidiary (or a combined $11.4 million, or $0.56 per share impact, negative impact after considering the related income tax benefit of $3.4 million of these adjustments).
Dividends On March 16, 2022, we announced a regular quarterly cash dividend of $0.225 per share on our common stock. The cash dividend will be paid on April 15, 2022 to shareholders of record as of the close of business on March 30, 2022.
Dividends On March 14, 2023, we announced a regular quarterly cash dividend of $0.225 per share on our common stock. The cash dividend will be paid on April 14, 2023 to shareholders of record as of the close of business on March 29, 2023.
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.
During fiscal 2021, we integrated our G by GUESS brand into our Factory business over time in order to drive further efficiencies.
(Such arrangements are described further in “Part IV. Financial Statements – Note 8 – Borrowings and Finance Lease Obligations” in this Form 10-K.) Due to the seasonality of our business and cash needs, we may increase borrowings under our established credit facilities or enter new credit facilities from time-to-time, during 48 Table of Contents the next 12 months and beyond.
Financial Statements – Note 8 – Borrowings and Finance Lease Obligations” in this Form 10-K.) Due to the seasonality of our business and cash needs, we may increase borrowings under our established credit facilities or enter new credit facilities from time-to-time, during the next 12 months and beyond.
As of January 29, 2022, we had remaining authority under the 2021 Share Repurchase Program to purchase $149.0 million of our common stock. On March 14, 2022, the Board of Directors expanded its repurchase authorization by $100 million, leaving a new capacity of $249.0 million.
On March 14, 2022, the Board of Directors expanded its repurchase authorization by $100 million, leaving a new capacity of $249.0 million at that time. As of January 28, 2023, we had remaining authority under the 2021 Share Repurchase Program to purchase $62.3 million of our common stock.
Changes in fair value of foreign exchange currency contracts not designated as hedging instruments are reported in net earnings (loss) as part of other income (expense). 55 Table of Contents Interest Rate Swap Agreements We are exposed to interest rate risk on our floating-rate debt.
We also have foreign exchange currency contracts that are not designated as hedging instruments for accounting purposes. Changes in fair value of foreign exchange currency contracts not designated as hedging instruments are reported in net earnings (loss) as part of other income (expense). Interest Rate Swap Agreements We are exposed to interest rate risk on our floating-rate debt.
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 2.9% for fiscal 2022, compared to fiscal 2021.
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 remained flat for fiscal 2023, compared to fiscal 2022.
ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. General Unless the context indicates otherwise, when we refer to “we,” “us,” “our” or the “Company” in this Form 10‑K, we are referring to Guess?, Inc. and its subsidiaries on a consolidated basis. COVID-19 Business Update The COVID-19 pandemic is continuing to negatively impact our businesses.
ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. General Unless the context indicates otherwise, when we refer to “we,” “us,” “our” or the “Company” in this Form 10‑K, we are referring to Guess?, Inc. and its subsidiaries on a consolidated basis.
Among other provisions, the CARES Act allows for a full offset of taxable income in a five-year carryback period for net operating losses, which will reduce current period income tax expense and may result in a refund of previously paid income tax amounts at higher historical income tax rates.
Among other provisions, the CARES Act allows for a full offset of taxable income in a five-year carryback period for net operating losses, which reduced fiscal 2021 income tax expense and resulted in a refund of previously paid income tax amounts at higher historical income tax rates.
Share Repurchases On August 23, 2021, our Board of Directors terminated the previously authorized 2012 share repurchase program (which had $47.8 million capacity remaining) and authorized a new program (the “2021 Share Repurchase Program”) to repurchase, from time-to-time and as market and business conditions warrant, up to $200 million of our common stock.
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 program (the “2021 Share Repurchase Program”) to repurchase, from time-to-time and as market and business conditions warrant, up to $200 million of our common stock.
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 January 29, 2022, we had cash and cash equivalents of $415.6 million, of which approximately $178.2 million was held in the U.S.
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 January 28, 2023, we had cash and cash equivalents of $275.8 million, of which approximately $99.1 million was held in the U.S.
As a non-qualified pension plan, no dedicated funding of the 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. The amount of any future payments into the insurance policies, if any, may vary depending on investment performance of the trust.
As a non-qualified pension plan, no dedicated funding of the 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.
We base our allowances on analysis of the aging of accounts receivable at the date of the financial statements, assessments of historical and current collection trends, an evaluation of the impact of current economic conditions and whether we obtained credit insurance or other guarantees which are not considered freestanding against the related account receivable balances. 53 Table of Contents Sales Return Allowances We accrue for estimated sales returns in the period in which the related revenue is recognized.
We base our allowances on analysis of the aging of accounts receivable at the date of the financial statements, assessments of historical and current collection trends, an evaluation of the impact of current economic conditions and whether we obtained credit insurance or other guarantees which are not considered freestanding against the related account receivable balances.
Global Store Count In fiscal 2022, together with our partners, we opened 160 new stores worldwide, consisting of 90 stores in Europe and the Middle East, 60 stores in Asia and the Pacific, nine stores in the U.S., and one store in Central and South America.
Global Store Count In fiscal 2023, together with our partners, we opened 106 new stores worldwide, consisting of 68 stores in Europe and the Middle East, 27 stores in Asia and the Pacific, nine stores in the U.S., and two stores in Central and South America.
In connection with the increase to the quarterly cash dividend, we will adjust the conversion rate (which is expected to increase) and the conversion price (which is expected to decrease) of the Notes in accordance with the terms of the indenture governing the Notes. Refer to “Part IV.
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 March 28, 2023 in accordance with the terms of the indenture governing the Notes. Refer to “Part IV.
Excluding the impact of these items, adjusted net earnings attributable to Guess?, Inc. was $194.7 million and adjusted diluted earnings was $2.92 per share for fiscal 2022.
Excluding the impact of these items, adjusted net earnings attributable to Guess?, Inc. was $161.1 million and adjusted diluted earnings was $2.74 per share for fiscal 2023.
As a result of changes in the value of the insurance policy investments, we recorded unrealized gains of $0.6 million, $6.1 million and $7.6 million in other income (expense) during fiscal 2022, fiscal 2021 and fiscal 2020, respectively.
As a result of changes in the value of the insurance policy investments, we recorded unrealized gains (losses) of $(5.7) million, $0.6 million and $6.1 million in other income (expense) during fiscal 2023, fiscal 2022 and fiscal 2021, respectively. During fiscal 2023, the Company also recorded gains of $1.1 million in other income resulting from payout on the insurance policies.
Comparable Store Sales Except as described below in connection with the COVID-19 pandemic, 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.
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. 41 Table of Contents We also separately report the impact of e-commerce sales on our comparable store sales metric.
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.
Strategy In March 2021, Carlos Alberini, our Chief Executive Officer, shared his updated strategic vision and implementation plan for execution which included several key priorities to drive revenue and operating profit growth.
For the year ended January 30, 2021, we recognized a tax benefit of $0.9 million related to the CARES Act. We have a balance related to the 2017 Tax Cuts and Jobs Act (the “Tax Reform”) transition tax included in other long-term liabilities of $19.9 million (excluding related interest) as of January 29, 2022 and January 30, 2021.
For fiscal 2023 and fiscal 2022, no income tax benefit was recognized related to the CARES Act. We have a balance related to the 2017 Tax Cuts and Jobs Act (the “Tax Reform”) transition tax included in other long-term liabilities of $19.9 million (excluding related interest) as of January 28, 2023 and January 29, 2022. Refer to “Part IV.
Asia Net revenue from our Asia segment increased by $4.5 million for fiscal 2022, compared to fiscal 2021. In constant currency, net revenue increased by 0.5% compared to the prior year.
Americas Wholesale Net revenue from our Americas Wholesale segment increased by $5 million for fiscal 2023, compared to fiscal 2022. In constant currency, net revenue increased by 3% compared to the prior year.
Certain convertible debt instruments that may be settled in cash on conversion are required to be separately accounted for as liability and equity components of the instrument in a manner that reflects the issuer’s non-convertible debt borrowing rate. Accordingly, in accounting for the issuance of the Notes, we separated the Notes into liability and equity components.
Prior to January 30, 2022, certain convertible debt instruments that may be settled in cash on conversion were required to be separately accounted for as liability and equity components of the instrument in a manner that reflects the issuer’s non-convertible debt borrowing rate.
In connection with the increase to the quarterly cash dividend, we will adjust the conversion price (which is expected to decrease) of the Notes 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. In connection with the increase to the quarterly cash dividend, we will adjust the conversion price (which is expected to decrease) of the Notes in accordance with the terms of the indenture governing the Notes.
The U.S. taxable gain and income tax expense generated by this intercompany transfer of intellectual property was primarily offset by the recognition of a deferred income tax asset in the Swiss subsidiary. 56 Table of Contents Valuation of Goodwill, Intangible and Other Long-Lived Assets We assess the impairment of our long-lived assets (related primarily to goodwill, property and equipment and operating right-of-use assets), which requires us to make assumptions and judgments regarding the carrying value of these assets on an annual basis, or more frequently if events or changes in circumstances indicate that the assets might be impaired.
Valuation of Goodwill, Intangible and Other Long-Lived Assets We assess the impairment of our long-lived assets (related primarily to goodwill, property and equipment and operating right-of-use assets), which requires us to make assumptions and judgments regarding the carrying value of these assets on an annual basis, or more frequently if events or changes in circumstances indicate that the assets might be impaired.
Product Excellence. We believe product is a key factor of success in our business. We strive to design and make great products and will extend our product offering to provide our customers with products for the different occasions of their lifestyles. We will seek to better address local product needs. Customer Centricity.
We strive to design and make great products and will extend our product offering to provide our customers with products for the different occasions of their lifestyles. We will seek to better address local product needs. Customer Centricity. We continue to place the customer at the center of everything we do.
Risk Factors” 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. COVID-19 Impact on Liquidity Refer to the “—COVID-19 Business Update” section and in “Part IV.
Risk Factors” 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.
The liability component was recorded at fair value, which was derived from a valuation technique used to calculate the fair value of a similar liability without an associated convertible feature.
Accordingly, in accounting for the issuance of the Notes, we separated the Notes into liability and equity components. The liability component was recorded at fair value, which was derived from a valuation technique used to calculate the fair value of a similar liability without an associated convertible feature.
Accounts receivable increased by $14.7 million, or 4.7%, to $328.9 million as of January 29, 2022, compared to $314.1 million at January 30, 2021. On a constant currency basis, accounts receivable increased by $40.7 million, or 12.9%, when compared to January 30, 2021.
Accounts receivable increased by $13.1 million, or 4.0%, to $341.9 million as of January 28, 2023, compared to $328.9 million at January 29, 2022. On a constant currency basis, accounts receivable increased by $24.0 million, or 7.3%, when compared to January 29, 2022.
We have 4,000,000 shares of common stock registered under the ESPP. During the year ended January 29, 2022, 38,144 shares of our common stock were issued pursuant to the ESPP at an average price of $11.81 per share for a total of $0.5 million.
We have 4,000,000 shares of common stock registered under the ESPP. During fiscal 2023, 45,843 shares of our common stock were issued pursuant to the ESPP at an average price of $12.70 per share for a total of $0.6 million.
We have entered into interest rate swap agreements to effectively convert our floating-rate debt to a fixed-rate basis. The principal objective of these contracts is to eliminate or reduce the variability of the cash flows in interest payments associated with our floating-rate debt, thus reducing the impact of interest rate changes on future interest payment cash flows.
The principal objective of these contracts is to eliminate or reduce the variability of the cash flows in interest payments associated with our floating-rate debt, thus reducing the impact of interest rate changes on future interest payment cash flows. We have elected to apply the hedge accounting rules in accordance with authoritative guidance for certain of these contracts.
Corporate overhead costs are presented separately and generally include, among other things, the following unallocated corporate costs: accounting and finance, executive compensation, corporate performance-based compensation, facilities, global advertising and marketing, human resources, information technology and legal. Information regarding these segments is summarized in “Part IV. Financial Statements – Note 18 – Segment Information” in this Form 10-K.
Corporate overhead costs are presented separately and generally include, among other things, the following unallocated corporate costs: accounting and finance, executive compensation, corporate performance-based compensation, facilities, global advertising and marketing, human resources, information technology and legal.
In addition, in the U.S., we need liquidity to fund share repurchases, including our 2022 ASR Contract, and payment of dividends to our stockholders. During fiscal 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.
During fiscal 2023, 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.
Risk Factors.” 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 “Part II, Item 7A.
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 “Part II, Item 7A.
Financial Statements – Note 1 – Description of the Business and Summary of Significant Accounting Policies and Practices” for a discussion of the impact from the COVID-19 pandemic on our financial performance and our liquidity. 49 Table of Contents In light of store closures and reduced traffic in stores, we took certain actions with respect to certain of our existing leases, including engaging with landlords to discuss rent deferrals, as well as other rent concessions.
COVID-19 Impact on Liquidity In light of store closures and reduced traffic in stores during the height of the COVID-19 pandemic, we took actions at that time with respect to certain of our leases, including engaging with landlords to discuss rent deferrals, as well as other rent concessions.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeThe Mortgage Debt is covered by a separate interest rate swap agreement with a swap fixed interest rate of approximately 3.06% that matures in January 2026. The interest rate swap agreement is designated as a cash flow hedge and converts the nature of our real estate secured term loan from LIBOR floating-rate debt to fixed-rate debt.
Biggest changeThe interest rate swap agreement is designated as a cash flow hedge and converts the nature of our real estate secured term loan from LIBOR floating-rate debt to fixed-rate debt. As of January 28, 2023, we also had borrowings under our credit facility arrangements of $70.3 million which are based on variable rates of interest.
Additionally, we carry the convertible senior notes at face value, less any unamortized discount on our balance sheet and we present the fair value for disclosure purposes only.
Additionally, we carry the Notes at face value, less any unamortized discount on our balance sheet and we present the fair value for disclosure purposes only.
As of January 29, 2022 and January 30, 2021, the carrying value of all financial instruments was not materially different from fair value, as the interest rates on our debt approximated rates currently available to us.
As of January 28, 2023 and January 29, 2022, the carrying value of all financial instruments was not materially different from fair value, as the interest rates on our debt approximated rates currently available to us.
As of January 29, 2022, accumulated other comprehensive income (loss) related to the interest rate swap agreement included a net unrealized loss of approximately $0.1 million, net of tax, which will be recognized in interest expense over the following 12 months, at the then current values on a pre-tax basis, which can be different than the current year-end values.
As of January 28, 2023, accumulated other comprehensive income (loss) related to the interest rate swap agreement included a net unrealized gain of approximately $0.8 million, net of tax, which will be recognized in interest expense over the following 12 months, at the then current values on a pre-tax basis, which can be different than the current year-end values.
ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk. Exchange Rate Risk More than two-thirds of product sales and licensing revenue recorded for the year ended January 29, 2022 were denominated in currencies other than the U.S. dollar. Our primary exchange rate risk relates to operations in Europe, Canada, South Korea, China, Hong Kong, and Mexico.
ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk. Exchange Rate Risk More than two-thirds of product sales and licensing revenue recorded for fiscal 2023 were denominated in currencies other than the U.S. dollar. Our primary exchange rate risk relates to operations in Europe, Canada, South Korea, China, Hong Kong, and Mexico.
Foreign Exchange Currency Contracts Designated as Cash Flow Hedges During fiscal 2022, we purchased U.S. dollar forward contracts in Europe totaling US$197.0 million that were designated as cash flow hedges.
Foreign Exchange Currency Contracts Designated as Cash Flow Hedges During fiscal 2023, we purchased U.S. dollar forward contracts in Europe totaling US$315.0 million that were designated as cash flow hedges.
Conversely, if the U.S. dollar uniformly strengthened by 10% against all of the U.S. dollar denominated foreign exchange derivatives, the fair value of these instruments would have increased by $15.0 million.
Conversely, if the U.S. dollar uniformly strengthened by 10% against all of the U.S. dollar denominated foreign exchange derivatives, the fair value of these instruments would have increased by $30.6 million.
As of January 29, 2022, we had forward contracts outstanding for our European operations of US$146.0 million to hedge forecasted merchandise purchases, which are expected to mature over the next 14 months. Our derivative financial instruments are recorded in our consolidated balance sheet at fair value based on quoted market rates.
As of January 28, 2023, we had forward contracts outstanding for our European operations of US$253.0 million to hedge forecasted merchandise purchases, which are expected to mature over the next 15 months. Our derivative financial instruments are recorded in our consolidated balance sheet at fair value based on quoted market rates.
As of January 29, 2022, the net unrealized loss of the interest rate swap recorded in our consolidated balance sheet was approximately $0.1 million. At January 30, 2021, the net unrealized loss of the interest rate swap recorded in our consolidated balance sheet was approximately $1.0 million.
As of January 28, 2023, the net unrealized gain of the interest rate swap recorded in our consolidated balance sheet was approximately $1.0 million. At January 29, 2022, the net unrealized loss of the interest rate swap recorded in our consolidated balance sheet was approximately $0.1 million.
As of January 29, 2022, accumulated other comprehensive income (loss) related to foreign exchange currency contracts included a net unrealized gain of approximately $7.3 million, net of tax, of which $5.4 million will be recognized in cost of product sales over the following 12 months, at the then current values on a pre-tax basis, which can be different than the current year-end values.
As of January 28, 2023, accumulated other comprehensive income (loss) related to foreign exchange currency contracts included a net unrealized loss of approximately $2.4 million, net of tax, of which $1.1 million will be recognized in cost of product sales over the following 12 months, at the then current values on a pre-tax basis, which can be different than the current year-end values.
At January 30, 2021, the net unrealized loss of these open forward contracts recorded in our consolidated balance sheet was approximately $3.3 million. Foreign Exchange Currency Contracts Not Designated as Hedging Instruments We also have foreign exchange currency contracts that are not designated as hedging instruments for accounting purposes.
At January 29, 2022, the net unrealized gain of these open forward contracts recorded in our consolidated balance sheet was approximately $6.0 million. Foreign Exchange Currency Contracts Not Designated as Hedging Instruments We also have foreign exchange currency contracts that are not designated as hedging instruments for accounting purposes.
As of January 29, 2022, the net unrealized gain of the remaining open forward contracts recorded in our consolidated balance sheet was approximately $6.0 million. At January 30, 2021, we had forward contracts outstanding for our European operations of US$100.0 million that were designated as cash flow hedges.
As of January 28, 2023, the net unrealized loss of the remaining open forward contracts recorded in our consolidated balance sheet was approximately $11.9 million. At January 29, 2022, we had forward contracts outstanding for our European operations of US$146.0 million that were designated as cash flow hedges.
Sensitivity Analysis As of January 29, 2022, a sensitivity analysis of changes in foreign currencies when measured against the U.S. dollar indicates that, if the U.S. dollar had uniformly weakened by 10% against all of the U.S. dollar denominated foreign exchange derivatives totaling US$165.0 million, the fair value of the instruments would have decreased by $18.3 million.
Sensitivity Analysis As of January 28, 2023, a sensitivity analysis of changes in foreign currencies when measured against the U.S. dollar indicates that, if the U.S. dollar had uniformly weakened by 10% against all of the U.S. dollar denominated foreign exchange derivatives totaling US$336.5 million, the fair value of the instruments would have decreased by $37.4 million.
A 100 basis point increase in interest rates would not have a significant effect on interest expense for the year ended January 29, 2022. The fair values of our debt instruments are based on the amount of future cash flows associated with each instrument discounted using our incremental borrowing rate.
Accordingly, changes in interest rates would impact our results of operations in future periods. A 100 basis point increase in interest rates would not have a significant effect on interest expense for fiscal 2023. The fair values of our debt instruments are based on the amount of future cash flows associated with each instrument discounted using our incremental borrowing rate.
The ability to reduce the exposure of currencies on earnings depends on the magnitude of the derivatives compared to the balance sheet positions during each reporting cycle. Interest Rate Risk We are exposed to interest rate risk on our floating-rate debt. We have entered into interest rate swap agreements to effectively convert our floating-rate debt to a fixed-rate basis.
The ability to reduce the exposure of currencies on earnings depends on the magnitude of the derivatives compared to the balance sheet positions during each reporting cycle. Interest Rate Risk We are exposed to interest rate risk on our floating-rate debt.
Changes in fair value of foreign exchange currency contracts not designated as hedging instruments are reported in net earnings (loss) as part of other income (expense). For the year ended January 29, 2022, we recorded a net gain of $1.9 million for our euro dollar foreign currency contracts not designated as hedges, which has been included in other income (expense).
Changes in fair value of foreign exchange currency contracts not designated as hedging instruments are reported in net earnings (loss) as part of other income (expense). For fiscal 2023, we recorded a net loss of $2.8 million for our euro dollar foreign currency contracts not designated as hedges, which has been included in other income (expense).
At January 30, 2021, we had euro foreign exchange currency contracts to purchase US$19.0 million. At January 30, 2021, the net unrealized loss of these open forward contracts recorded in our consolidated balance sheet was approximately $1.2 million.
As of January 28, 2023, the net unrealized loss of these open forward contracts recorded in our consolidated balance sheet was approximately $2.6 million. 63 Table of Contents At January 29, 2022, we had euro foreign exchange currency contracts to purchase US$19.0 million.
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.
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. We are also subject to certain translation and economic exposures related to our net investment in certain of our international subsidiaries.
The interest and market value changes affect the fair value of the convertible senior notes but do not impact our financial position, cash flows or results of operations due to the fixed nature of the debt obligation.
The fair value of the Notes will generally increase as our common stock price increases and will generally decrease as our common stock price declines. The interest and market value changes affect the fair value of the Notes but do not impact our financial position, cash flows or results of operations due to the fixed nature of the debt obligation.
The principal objective of these 59 Table of Contents contracts is to eliminate or reduce the variability of the cash flows in interest payments associated with our floating-rate debt, thus reducing the impact of interest rate changes on future interest payment cash flows.
The principal objective of these contracts is to eliminate or reduce the variability of the cash flows in interest payments associated with our floating-rate debt, thus reducing the impact of interest rate changes on future interest payment cash flows. We have elected to apply the hedge accounting rules in accordance with authoritative guidance for certain of these contracts.
We have elected to apply the hedge accounting rules in accordance with authoritative guidance for certain of these contracts. In April 2019, we issued $300 million principal amount of convertible senior notes in a private offering. The fair value of the convertible senior notes is subject to interest rate risk, market risk and other factors due to its conversion feature.
In April 2019, we issued $300 million principal amount of the Notes in a private offering. The fair value of the Notes is subject to interest rate risk, market risk and other factors due to its conversion feature.
The fair value of our convertible senior notes is determined based on inputs that are observable in the market and have been classified as Level 2 in the fair value hierarchy. 60 Table of Contents Derivatives Designated as Hedging Instruments The following summarizes net after-tax activity related to our foreign exchange currency contracts and interest rate swap agreement designated as cash flow hedges recorded in accumulated other comprehensive income (loss) (in thousands): Year Ended Jan 29, 2022 Year Ended Jan 30, 2021 Beginning balance gain (loss) $ (4,876) $ 6,300 Net gains (losses) from changes in cash flow hedges 10,121 (5,709) Net (gains) losses reclassified to earnings (loss) 2,035 (5,467) Ending balance gain (loss) $ 7,280 $ (4,876)
Derivatives Designated as Hedging Instruments The following summarizes net after-tax activity related to our foreign exchange currency contracts and interest rate swap agreement designated as cash flow hedges recorded in accumulated other comprehensive income (loss) (in thousands): Year Ended Jan 28, 2023 Jan 29, 2022 Beginning balance gain (loss) $ 7,280 $ (4,876) Net gains from changes in cash flow hedges 47 10,121 Net (gains) losses reclassified to earnings (loss) (8,911) 2,035 Ending balance gain (loss) $ (1,584) $ 7,280
Sensitivity Analysis As of January 29, 2022, we had indebtedness related to term loans of $48.3 million, finance lease obligations of $22.9 million and the Mortgage Debt of $17.9 million. The term loans provide for annual interest rates ranging between 1.3% to 2.2%. The finance lease obligations are based on fixed interest rates derived from the respective agreements.
Sensitivity Analysis As of January 28, 2023, we had indebtedness related to term loans of $25.5 million, finance lease obligations of $19.9 million and the Mortgage Debt of $17.2 million. The term loans provide for annual interest 64 Table of Contents rates ranging between 1.3% to 4.4%.
As of January 29, 2022, we had euro foreign exchange currency contracts to purchase US$19.0 million expected to mature over the next two months. As of January 29, 2022, the net unrealized gain of these open forward contracts recorded in our consolidated balance sheet was approximately $1.1 million.
At January 29, 2022, the net unrealized gain of these open forward contracts recorded in our consolidated balance sheet was approximately $1.1 million.
We are also subject to certain translation and economic exposures 58 Table of Contents related to our net investment in certain of our international subsidiaries. We enter into derivative financial instruments to offset some but not all of our exchange risk.
We enter into derivative financial instruments to offset some but not all of our exchange risk.
Removed
The fair value of the convertible senior notes will generally increase as our common stock price increases and will generally decrease as our common stock price declines.
Added
As of January 28, 2023, we had euro foreign exchange currency contracts to purchase US$83.5 million expected to mature over the next 11 months.
Removed
As of January 29, 2022, we also had borrowings under our short-term borrowing arrangements of $12.2 million which are based on variable rates of interest. Accordingly, changes in interest rates would impact our results of operations in future periods.
Added
We have entered into interest rate swap agreements for certain of these agreements to effectively convert our floating-rate debt to a fixed-rate basis.
Added
The finance lease obligations are based on fixed interest rates derived from the respective agreements. The Mortgage Debt is covered by a separate interest rate swap agreement with a swap fixed interest rate of approximately 3.06% that matures in January 2026.
Added
The fair value of the Notes is determined based on inputs that are observable in the market and have been classified as Level 2 in the fair value hierarchy.

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