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What changed in GUESS INC's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of GUESS INC's 2023 and 2024 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 2024 report.

+593 added−506 removedSource: 10-K (2024-04-01) vs 10-K (2023-03-24)

Top changes in GUESS INC's 2024 10-K

593 paragraphs added · 506 removed · 423 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

82 edited+25 added−9 removed72 unchanged
Biggest changeWe 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.
Biggest changeWe 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.
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.
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.
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 countries where the brand is well known, we operate through showrooms where agents and distributors can view our line and place orders. We currently have showrooms in key cities such as Barcelona, Düsseldorf, Lugano, Munich, Paris, Lisbon, Florence, Moscow and Warsaw.
In countries where the brand is well known, we operate through showrooms where agents and distributors can view our line and place orders. We currently have showrooms in key cities such as Barcelona, Düsseldorf, Istanbul, Lugano, Munich, Paris, Lisbon, Florence, Moscow and Warsaw.
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.
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. 10 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.
Our Guess List loyalty program has experienced growth in its overall member engagement numbers through the introduction of experiential rewards and unique member content. The programs are also used to promote new products to our customers which in turn increases traffic in the stores and online. The loyalty programs generate substantial repeat business that might otherwise go to competing brands.
Our Guess List loyalty program has experienced growth in its overall member engagement numbers through the introduction of experiential incentives and unique member content. The programs are also used to promote new products to our customers which in turn increases traffic in the stores and online. The loyalty programs generate substantial repeat business that might otherwise go to competing brands.
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.
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, X, Pinterest, Reddit, Snapchat, TikTok and global search engines.
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.
Product Integrity and Testing Protocol During fiscal 2024, 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.
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 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 2024, we continued to add new courses and trainings, many of which focus on remote working skills, as well as diversity and inclusion education.
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.
During fiscal 2024, 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.
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 2024, 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 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.
During fiscal 2024, 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.
Our smartphone applications provide a unique mobile media experience by combining fashion, e-commerce, personalized product recommendations, targeted promotions and social loyalty rewards to drive mobile brand engagement. We also require our licensees and distributors to invest a percentage of their net sales of licensed products and net purchases of GUESS? products in Company-approved advertising, promotion and marketing.
Our smartphone applications provide a unique mobile media experience by combining fashion, e-commerce, personalized product recommendations, targeted promotions and customer loyalty rewards to drive mobile brand engagement. We also require our licensees and distributors to invest a percentage of their net sales of licensed products and net purchases of GUESS? products in Company-approved advertising, promotion and marketing initiatives.
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.
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 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.
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 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.
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.
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. 7 Table of Contents Additionally, offering an assortment of global products continues to be an area of focus.
We continue to invest in new technologies and update computer hardware, network infrastructure, system applications and cyber-security. Our computer information systems consist of a full range of financial, distribution, merchandising, point-of-sales, customer relationship management, supply chain, digital platform, enterprise resource planning and other systems.
We continue to invest in new technologies and update computer hardware, network infrastructure, system applications and cybersecurity. Our computer information systems consist of a full range of financial, distribution, merchandising, point-of-sales, customer relationship management, supply chain, digital platform, enterprise resource planning and other systems.
Employee Safety and Well-Being We are committed to the safety, health, and overall well-being of each of our employees and their families, providing a wide array of physical, emotional and social support. Our GUESS Wellness 360 online portal offers our employees physical and mental wellness support using challenges, contests, and prizes.
Employee Safety and Well-Being We are committed to the safety, health, and overall well-being of each of our employees and their families, providing a wide array of physical, emotional and social support. Our GUESS Wellness 360 online portal in the U.S. offers our employees physical and mental wellness support using challenges, contests, and prizes.
Although the level and nature of competition differs among our product categories and geographic regions, we believe that we differentiate ourselves from our competitors by offering a global lifestyle brand on the basis of our global brand image and wide product assortment comprising both apparel and accessories.
Although the level and nature of competition differs among our product categories and geographic regions, we believe that we differentiate 9 Table of Contents ourselves from our competitors by offering a global lifestyle brand on the basis of our global brand image and wide product assortment comprising both apparel and accessories.
Compensation and Benefits We are committed to providing competitive compensation and benefits to attract and retain a diverse and talented workforce. We are also committed to maintaining pay equity throughout our organization, conducting annual assessments.
Compensation and Benefits We are committed to providing competitive compensation and benefits to attract and retain a diverse and talented workforce. We are also committed to maintaining pay parity throughout our organization, conducting annual assessments.
Customers retain the ability to request early shipment of backlog orders, delay shipments or cancel orders depending on their needs. Revenues from sales to our wholesale licensed stores are also recognized as wholesale sales within our European wholesale operations.
Customers retain the ability to request early shipment of backlog orders, delay shipments or 4 Table of Contents cancel orders depending on their needs. Revenues from sales to our wholesale licensed stores are also recognized as wholesale sales within our European wholesale operations.
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.
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.
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.
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 plan to release our next sustainability report in summer 2023, covering fiscal 2022 and fiscal 2023, which will also be available on our website at the foregoing link. This site provides information on our policies, social impact and environmental programs, as well as our sustainability strategy, data and reporting.
We plan to release our next ESG report in summer 2025, covering fiscal 2024 and fiscal 2025, which will also be available on our website at the foregoing link. This site provides information on our policies, social impact and environmental programs, as well as our sustainability strategy, data and reporting.
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.
As of February 3, 2024, 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.
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.
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 2024, we continued to tightly manage our vendor base to around 140 core suppliers.
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 .
The ESG 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 “Our best today, better tomorrow” ESG report is available at http://sustainability.guess.com .
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.
In general, our stores average approximately 2,900 square feet in Europe and the Middle East, approximately 4,800 square feet in the Americas and approximately 2,300 square feet in Asia and the Pacific. Concessions generally average 600 square feet and are located primarily in South Korea and Greater China.
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.
As of February 3, 2024, 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.
In addition to driving efficiencies, this initiative is expected to help elevate our brand by allowing us to offer products to our customers across all markets from one line while still addressing each local market’s need. We also maintain a fashion library consisting of vintage and contemporary garments as another source of creative concepts.
In addition to driving efficiencies, these initiatives helped to elevate our brand by allowing us to offer products to our customers across all markets from one line while still addressing each local market’s need. We also maintain a fashion library consisting of vintage and contemporary garments as another source of creative concepts.
As part of these initiatives, we currently have loyalty programs in North America, Europe and Asia covering all of our brands. The programs are designed to reward our members by earning points for purchases that can be redeemed on future purchases either in our stores or online.
As part of these initiatives, we have implemented tiered CRM loyalty programs in North America, Europe and Asia covering our portfolio of brands. The point-based programs are designed to reward our members by earning points for purchases that can be redeemed on future purchases either in our stores or online.
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. We also provide our employees a merchandise discount on most of our products.
The information contained within these websites is not incorporated into this Annual Report on Form 10-K. 12 Table of Contents
The information contained within these websites is not incorporated into this Annual Report on Form 10-K.
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.
As of February 3, 2024, with an inclusive culture and a commitment to empowering our people, we provide opportunities for approximately 12,000 associates, both full and part-time, consisting of approximately 4,500 in the U.S. and 7,500 internationally.
We continue to enhance our loyalty program offerings by understanding our members’ interests and needs by strategically marketing to this large and growing customer base. Quality Control Our quality control program is designed to ensure that products meet our high-quality standards.
We continue to enhance our CRM program by keeping abreast on our members’ interests and needs by strategically marketing to this large and growing customer base. Quality Control Our quality control program is designed to ensure that products meet our high-quality standards.
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.
During fiscal 2024, we opened 16 new stores and closed 33 stores, ending the year with 543 directly operated stores in Europe and the Middle East. This store count does not include 57 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 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.
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 2024,” “fiscal 2023,” and “fiscal 2022” represent the 53-week fiscal year ending February 3, 2024, and the 52-week fiscal years ended January 28, 2023 and January 29, 2022.
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.
During fiscal 2024, our partners opened 25 new licensed retail stores and closed 24 stores, including stores transferred to and from our partners and other store relocations and remodels. We ended the year with 295 licensed retail stores. This store count does not include 113 apparel and accessory concessions operated by our partners in Asia.
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.
During fiscal 2024, we opened six new stores and closed 18 stores, including stores transferred to and from our partners and other store relocations and remodels. We ended the year with 103 directly operated stores in Asia and the Pacific. This store count does not include 134 directly operated apparel and accessory concessions.
The GUESS? brand communicates a distinctive image that is fun, fashionable and sexy. We have developed and maintained this image worldwide through our consistent emphasis on innovative and distinctive product designs and through our award-winning advertising, under the creative leadership and vision of Paul Marciano, our Chief Creative Officer and Director.
We have developed and maintained this image worldwide through our consistent emphasis on innovative and distinctive product designs and through our award-winning advertising, under the creative leadership and vision of Paul Marciano, our Chief Creative Officer and Director.
Our Millennial customers are typically between the ages of 25 to 39 and Generation Z customers are typically between the ages of 10 to 24 years old. These two target consumer groups shop streetwear and vintage inspired trends, viewing GUESS as accessible luxury. We were founded in 1981 and currently operate as a Delaware corporation.
Our Millennial customers are typically between the ages of 25 to 39 and Generation Z customers are typically between the ages of 10 to 24 years old. These two target consumer groups shop streetwear and vintage inspired trends, viewing GUESS as accessible luxury.
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.
As of February 3, 2024, we had over 5,500 trademarks in the U.S. and internationally registered trademarks or trademark applications pending with the trademark offices in over 180 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.
Additionally, the U.S. business is partnered with Customs Trade Partnership Against Terrorism (“CTPAT”), which expedites movement of goods into our U.S. trade lanes. We have been CTPAT certified for several years, and complete our recertification annually. Distribution of our products in Canada is handled primarily from our operated distribution centers in Montreal, Quebec.
Additionally, the U.S. business is partnered with Customs Trade Partnership Against Terrorism (“CTPAT”), which expedites movement of goods into our U.S. trade lanes. We have been CTPAT certified for several years, and complete our recertification annually.
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.
Accessories stores and MARCIANO stores. During fiscal 2024, we opened 8 new stores and closed 23 stores in the Americas, ending the year with 356 stores. This store count does not include 29 directly operated concessions in Mexico. We directly operated our retail stores and concessions in Mexico and Brazil through our majority-owned joint ventures.
We plan to further strengthen communications with customers through an emphasis on digital marketing, and through our websites, loyalty programs, direct catalog and marketing mailings.
We plan to further deepen relationships with customers through an emphasis on digital marketing, and through our websites, loyalty programs, direct catalog and marketing 8 Table of Contents mailings.
The Europe segment includes our retail, e-commerce and wholesale operations in Europe and the Middle East. The Asia segment includes our retail, e-commerce and wholesale operations in Asia and the Pacific. The Licensing segment includes our worldwide licensing operations. Refer to “Part IV.
The Europe segment includes our retail, e-commerce and wholesale operations in Europe and the Middle East. The Americas Retail segment includes our retail and e-commerce operations in the Americas. The Americas Wholesale segment includes our wholesale operations in the Americas. The Asia segment includes our retail, e-commerce and wholesale operations in Asia and the Pacific.
We strategically reposition our existing licensing portfolio by monitoring and evaluating the performance of our licensees worldwide. For instance, between 2005 and 2013, we acquired several of our European apparel licensees. As a result, we now directly manage our adult and children’s apparel businesses in Europe.
We strategically reposition our existing licensing portfolio by monitoring and evaluating the performance of our licensees worldwide. For instance, between 2005 and 2013, we acquired several of our European apparel licensees.
Our direct-to-consumer network is omni-channel, made up of both directly operated brick-and-mortar retail stores and concessions as well as integrated e-commerce sites that create a seamless shopping experience for our customers. Directly operated retail stores and concessions.
The use of multiple channels also allows us to adapt quickly to changes in the distribution environment in any particular region. Direct-to-Consumer. Our direct-to-consumer network is omni-channel, made up of both directly operated brick-and-mortar retail stores and concessions as well as integrated e-commerce sites that create a seamless shopping experience for our customers. • Directly operated retail stores and concessions.
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.
Our directly operated retail stores and concessions were: Year Ended Feb 3, 2024 Jan 28, 2023 Jan 29, 2022 Region Stores Concessions Stores Concessions Stores Concessions United States 231 — 240 — 245 — Canada 53 — 62 — 74 — Central and South America 72 29 69 29 69 29 Total Americas 356 29 371 29 388 29 Europe and the Middle East 543 57 560 54 556 50 Asia and the Pacific 103 134 115 129 124 99 Total 1,002 220 1,046 212 1,068 178 • e-Commerce.
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.
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.
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.
With our commitments in adopting water-saving denim technology and managing 12 Table of Contents environmental impacts in our supply chain, over 40% of our denim across all brands within our product portfolios in the Americas and Europe meets our GUESS Eco guidelines and approximately 100% of our key laundries completed the Higg Facility Environmental Module survey.
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.
As a result, we now directly manage our adult and children’s apparel businesses in Europe. 6 Table of Contents 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 use direct-to-consumer, wholesale and licensing distribution channels to sell our products globally. This allows us to maintain a critical balance as our operating results do not depend solely on the performance of any single channel. The use of multiple channels also allows us to adapt quickly to changes in the distribution environment in any particular region. Direct-to-Consumer.
We continue to evaluate the different businesses in our global portfolio, directing capital investments to those with more profit potential. Multiple Distribution Channels. We use direct-to-consumer, wholesale and licensing distribution channels to sell our products globally. This allows us to maintain a critical balance as our operating results do not depend solely on the performance of any single channel.
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.
These amounts are paid to landlords or existing lessees in certain circumstances. We also expect to acquire two rag & bone stores in the U.K. as part of the pending rag & bone acquisition. • e-Commerce. Our Europe segment also includes our directly operated retail and other marketplace websites.
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.
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 28% sustainable materials across all brands within our product portfolios in the Americas and Europe.
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.
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. 2 Table of Contents Through our foreign subsidiaries and our network of international distributors, our products are also available in major cities throughout Africa, Asia, Australia and the Middle East. • Licensed stores and concessions.
Omni-channel initiatives that we have already deployed in the U.S. and Canada include “buy online, pick-up in stores” or “buy online, return in stores” and “order from store” as well as mobile-optimized commerce sites and smartphone applications. In the U.S. and Canada, e-commerce orders may be fulfilled from our distribution centers, or from our retail stores, or both.
Our U.S. and Canadian online sites are fully integrated with our customer relationship management (“CRM”) system and loyalty programs. Omni-channel initiatives that we have already deployed in the U.S. and Canada include “buy online, pick-up in stores” or “buy online, return in stores” and “order from store” as well as mobile-optimized commerce sites and smartphone applications.
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.
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.
Americas Wholesale Segment In our Americas Wholesale segment, we sell our products through wholesale channels throughout the Americas and to third-party distributors based in Central and South America as well as licensed retail locations operated by our wholesale partners. Our Americas Wholesale business generally experiences stronger performance from July through November.
In the U.S. and Canada, e-commerce orders may be fulfilled from our distribution centers, or from our retail stores, or both. Americas Wholesale Segment In our Americas Wholesale segment, we sell our products through wholesale channels throughout the Americas and to third-party distributors based in Central and South America as well as licensed retail locations operated by our wholesale partners.
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.
Additionally, in the ACTION GUESS strategy, we committed to connecting ESG priorities with business performance incentive and evaluation metrics. Our Sustainability and ESG Team ensures that 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 ESG reporting.
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 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.
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 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.
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.
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.
In fiscal 2021, we developed our first ever global line of apparel products and in fiscal 2022, we developed our first ever global line across all product categories including accessories.
These efforts, combined with our Guess brand DNA, serve as the primary source of inspiration for our lines and collections. In fiscal 2021, we developed our first ever global line of apparel products and in fiscal 2022, we developed our first ever global line across all product categories including accessories.
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.
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. 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?
This allows us to target the various demographics in each region through dedicated store concepts that market each brand or concept specifically to the desired customer population. Having multiple store concepts also allows us to target our newer brands and concepts in different markets than our flagship GUESS? store concept.
We and our partners also have a small number of underwear, Gc watch and footwear concept stores. This allows us to target the various demographics in each region through dedicated store concepts that market each brand or concept specifically to the desired customer population.
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.
Our products were sold to consumers through approximately 1,350 and 1,450 major doors in the Americas as of February 3, 2024 and January 28, 2023, respectively, as well as through our customers’ 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 2024, our two largest wholesale customers accounted for a total of approximately 3.8% of our consolidated net revenue. 5 Table of Contents 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.
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.
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 77% of our total revenues for the year ended February 3, 2024.
Business Segments Our businesses are grouped into five reportable segments for management and internal financial reporting purposes: Americas Retail, Americas Wholesale, Europe, Asia and Licensing. The Americas Retail segment includes our retail and e-commerce operations in the Americas. The Americas Wholesale segment includes our wholesale operations in the Americas.
The acquisition is subject to customary closing conditions and is expected to close during the first quarter of fiscal 2025. Business Segments Our businesses are grouped into five reportable segments for management and internal financial reporting purposes: Europe, Americas Retail, Americas Wholesale, Asia and Licensing.
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.
Similarly, when existing investments and alliances no longer align with strategic initiatives or as other circumstances warrant, we will evaluate various exit opportunities.
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.
The additional week in fiscal 2024 occurred during the fourth quarter ended February 3, 2024. References to “fiscal 2025” represent the 52-week fiscal year ending February 1, 2025. Business Strengths We believe we have several business strengths that set us apart from our competition, including: Brand Equity.
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 .
Government Regulations As a company with global operations, we are subject to various federal, state, local and foreign laws, regulations and ordinances. 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.
The publication of VISION GUESS is a milestone achievement for us, marking the successful completion of a reasonable assurance engagement examining the metrics and disclosures in this sustainability report. The sustainability report shares our significant progress on Environmental, Social, and Governance (ESG) topics since our first sustainability plan launched in 2016.
The publication of “Our best today, better tomorrow” is a milestone achievement for us, marking the successful completion of a double materiality assessment and a reasonable assurance engagement examining the metrics and disclosures in this ESG report.
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.
During fiscal 2024, our partners opened 18 new licensed retail stores and closed 25 stores, ending the year with 227 licensed retail stores in Europe and the Middle East.
We are now pursuing our Science Based Targets for GHG emissions, which were approved by the Science Based Targets Initiative in fiscal 2021. 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.
Our strategy in managing GHG emissions includes meeting our carbon footprint goals and setting Science Based Targets. We are now pursuing our Science Based Targets for GHG emissions, which were approved by the Science Based Targets Initiative in fiscal 2021.
Our Americas Retail segment also includes our directly operated retail and other marketplace websites in the U.S., Canada, Mexico and Brazil. These websites operate as virtual storefronts that, combined with our retail stores, provide a seamless shopping experience to the consumer to sell our products and promote our brands.
These websites operate as virtual storefronts that, combined with our retail stores, provide a seamless shopping experience to the consumer to sell our products and promote our brands. 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.
In addition, our design teams work closely with members of our sales, merchandising and retail operations teams to further refine our products to meet the particular needs of our markets. Global Sourcing and Supply Chain We source products through numerous suppliers, many of whom have established long-term relationships with us.
This process also enables our sales teams to use digital sales books, allowing our buyers and visual teams to easily merchandise their product assortments options and guidelines to stores. Global Sourcing and Supply Chain We source products through numerous suppliers, many of whom have established long-term relationships with us.
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.
We replicated the same in fiscal 2024 while working on a long term strategy to reduce our GHG emissions. 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.
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.
We remain committed to a 50% reduction of absolute Scope 1 and 2 emissions, as well as an ambitious 30% reduction of absolute Scope 3 emissions by 2030. In fiscal 2023, we continued purchasing renewable energy, solar and wind in the Americas, Europe and Asia, equivalent to power approximately 25% of our stores globally.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeThe degree to which our financial results are affected for any given time period will depend in part upon our hedging activities. 14 Table of Contents Abnormally harsh or unseasonable weather conditions, including as a result of climate change or power outage, could have a material adverse impact on our sales, inventory levels and operating results.
Biggest changeAbnormally harsh or unseasonable weather conditions, including as a result of climate change or power outage, could have a material adverse impact on our sales, inventory levels and operating results. Extreme weather conditions in areas in which our retail stores and wholesale doors are located, particularly in markets where we have a concentration of locations, could adversely affect our business.
Any significant interruption in the operation of any of our distribution centers due to natural events (including public health crises), weather conditions, accidents, system failures, capacity issues, labor issues, relationships with our third-party warehouse operators or landlords, failure to successfully complete or delays in optimizing our logistics network, new providers, and/or new distribution systems or other unforeseen causes could have a material adverse effect on our ability to efficiently manage the volume and/or costs associated with the distribution of our products without encountering shipment delays or wholesale order cancellations.
Any significant interruption in the operation of any of our warehouse or distribution centers due to natural events (including public health crises), weather conditions, accidents, system failures, capacity issues, labor issues, relationships with our third-party warehouse operators or landlords, failure to successfully complete or delays in optimizing our logistics network, new providers, and/or new distribution systems or other unforeseen causes could have a material adverse effect on our ability to efficiently manage the volume and/or costs associated with the distribution of our products without encountering shipment delays or wholesale order cancellations.
Our comparable store sales, quarterly results of operations and stock price can also be affected by a variety of other factors, including, but not limited to: (i) shifts in consumer tastes and fashion trends; (ii) the timing of new store openings and the relative proportion of new stores to mature stores; (iii) the timing and effectiveness of planned store closures; (iv) calendar shifts of holiday or seasonal periods; (v) the timing of seasonal wholesale shipments; (vi) the effectiveness of our inventory management; (vii) the effectiveness and efficiency of our product distribution network; (viii) changes in our merchandise mix; (ix) changes in our mix of revenues by segment; (x) the timing of promotional events; (xi) actions by competitors; (xii) weather conditions; (xiii) public health crises; (xiv) changes in the business environment; (xv) inflationary changes in prices and costs; (xvi) changes in the payment of future cash dividends; (xvii) changes in currency exchange rates; (xviii) population trends; (xix) changes in patterns of commerce such as the expansion of e-commerce; (xx) the level of pre-operating expenses associated with new stores; and (xxi) volatility in securities’ markets which could impact the value of our investments in non-operating assets.
Our retail comparable sales, quarterly results of operations and stock price can also be affected by a variety of other factors, including, but not limited to: (i) shifts in consumer tastes and fashion trends; (ii) the timing of new store openings and the relative proportion of new stores to mature stores; (iii) the timing and effectiveness of planned store closures; (iv) calendar shifts of holiday or seasonal periods; (v) the timing of seasonal wholesale shipments; (vi) the effectiveness of our inventory management; (vii) the effectiveness and efficiency of our product distribution network; (viii) changes in our merchandise mix; (ix) changes in our mix of revenues by segment; (x) the timing of promotional events; (xi) actions by competitors; (xii) weather conditions; (xiii) public health crises; (xiv) changes in the business environment; (xv) inflationary changes in prices and costs; (xvi) changes in the payment of future cash dividends; (xvii) changes in currency exchange rates; (xviii) population trends; (xix) changes in patterns of commerce such as the expansion of e-commerce; (xx) the level of pre-operating expenses associated with new stores; and (xxi) volatility in securities’ markets which could impact the value of our investments in non-operating assets.
Since the majority of our international operations are conducted in currencies other than the U.S. dollar (primarily the British pound, Canadian dollar, Chinese yuan, euro, Japanese yen, Korean won, Mexican peso, Polish zloty, Russian rouble and Turkish lira), currency fluctuations can have a significant impact on the translation of our international revenues and earnings (loss) into U.S. dollars.
Since the majority of our international operations are conducted in currencies other than the U.S. dollar (primarily the euro, British pound, Canadian dollar (CAD), Chinese yuan, Japanese yen, Korean won, Mexican peso, Polish zloty, Russian rouble and Turkish lira), currency fluctuations can have a significant impact on the translation of our international revenues and earnings (loss) into U.S. dollars.
Any of these challenges could delay our store openings, prevent us from completing our store opening plans or hinder the operations of stores we open. These challenges could be even more pronounced in foreign markets due to unfamiliar local regulations, business conditions and other factors. Once open, we cannot be sure that our new stores will be profitable.
Any of these challenges could delay our store openings, prevent us from completing our store opening plans or hinder the operations of stores we open or acquire. These challenges could be even more pronounced in foreign markets due to unfamiliar local regulations, business conditions and other factors. Once open, we cannot be sure that our new stores will be profitable.
Consequently, we may incur significant costs related to complying with laws regarding the protection and unauthorized disclosure of personal information. A failure to comply with the stringent rules of the GDPR or state privacy laws could result in material fines. Our business could suffer if our computer systems and websites are disrupted or cease to operate effectively.
Consequently, we may incur significant costs related to complying with laws regarding the protection and unauthorized disclosure of personal information. A failure to comply with the stringent rules of the GDPR or state privacy laws could result in material fines. Our business could suffer if our information systems or websites are disrupted or cease to operate effectively.
Refer to “Part IV. Financial Statements - Note 10 - Convertible Senior Notes and Related Transactions” in this Form 10-K for disclosures about the Notes. Any quarterly dividends on our common stock will be paid from funds legally available for such purpose when, as and if declared by our Board of Directors.
Refer to “Part IV. Financial Statements - Note 10 - Convertible Senior Notes and Related Transactions” in this Form 10-K for disclosures about the Notes. Any dividends on our common stock will be paid from funds legally available for such purpose when, as and if declared by our Board of Directors.
Additionally, actions taken by individuals that we partner with, such as brand representatives, influencers or our associates, that fail to represent our brand in a manner consistent with our brand image, whether through our social media platforms or their own, could harm our brand reputation and materially impact our business.
Additionally, actions taken by our employees or individuals that we partner with, such as brand representatives, influencers or our associates, that fail to represent our brand in a manner consistent with our brand image, whether through our social media platforms or their own, could harm our brand reputation and materially impact our business.
An unfavorable change in any of the above factors, among others could have a material adverse effect on our results of operations and our stock price. We cannot ensure we will continue paying dividends at the current rates or at all. We cannot ensure we will continue periodic dividends on our common stock at the current rates, or at all.
An unfavorable change in any of the above factors, among others could have a material adverse effect on our results of operations and our stock price. We cannot ensure we will continue paying periodic dividends at the current rates or any dividends at all.
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 information 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.
For example, recent sanctions imposed in response to Russia’s invasion of Ukraine, and subsequent downgradings by Fitch and Moody’s of Russia’s sovereign debt to “junk” status, have resulted in record lows of the Russian rouble against the U.S. dollar.
For example, sanctions imposed in response to Russia’s invasion of Ukraine, and subsequent downgradings by Fitch and Moody’s of Russia’s sovereign debt to “junk” status, have resulted in record lows of the Russian rouble against the U.S. dollar.
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.
Decisions on whether, when and in what 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 initiatives, debt payment plans (including a desire to maintain or improve credit ratings on our debt securities), debt covenant requirements, 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 34 Table of Contents 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.
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.
Furthermore, if any of the conditions to the convertibility of the 2028 Notes is satisfied, then we may be required under applicable accounting standards to reclassify the liability carrying value of the 2028 Notes as a current, rather than a long-term, liability.
In addition, the hedge counterparties or affiliates thereof may modify their hedge positions by entering into or unwinding various derivatives with respect to our common stock and/or purchasing or selling our common stock or other securities of ours in secondary market transactions prior to the maturity of the Notes (and are likely to do so during any observation period related to a conversion of Notes).
In addition, the hedge counterparties or affiliates thereof may modify their hedge positions by entering into or unwinding various derivatives with respect to our common stock and/or purchasing or selling our common stock or other securities of ours in secondary market or privately negotiated transactions prior to the maturity of the Notes (and are likely to do so during any observation period related to a conversion of Notes).
In such cases, and in other cases, our obligations under the Notes and the Indenture could increase the cost of acquiring us or otherwise discourage a third-party from acquiring us or removing incumbent management, including in a transaction that noteholders or holders of our common stock may view as favorable.
In such cases, and in other cases, our obligations under the Notes and the Indentures could increase the cost of acquiring us or otherwise discourage a third-party from acquiring us or removing incumbent management, including in a transaction that noteholders or holders of our common stock may view as favorable.
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.
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.
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.
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 .” Errors in our assumptions, estimates and judgments related to tax matters, including those resulting from regulatory reviews, could adversely affect our financial results.
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.
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 and increase our supply chain costs; (ii) recessions and volatility in domestic and foreign economies; (iii) the economic impact of 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 13 Table of Contents 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 numerous laws and regulations at the state, federal and international levels, including, but not limited to, the areas of health care, data privacy, taxes, transportation and logistics, the environment, trade, conflict minerals, product safety, employment and labor, advertising and pricing practices, consumer protection, e-commerce, anti-competition, anti-corruption, including the federal Foreign Corrupt Practices Act, and intellectual property.
We are subject to numerous laws and regulations at the state, federal and international levels, including, but not limited to, the areas of health care, data privacy, taxes, transportation and logistics, the environment, trade, conflict minerals, product safety, employment and labor, advertising and pricing practices, consumer protection, e-commerce, anti-competition, anti-corruption, including the federal Foreign Corrupt Practices Act, and intellectual 25 Table of Contents property.
Guess CIS currently operates 44 retail stores in Russia and acts as a distributor for our wholesale partners in Russia. We also operate in Russia through other local wholesale partners and by selling directly to retail customers through our European online store.
Guess CIS currently operates 45 retail stores in Russia and acts as a distributor for our wholesale partners in Russia. We also operate in Russia through other local wholesale partners and by selling directly to retail customers through our European online store.
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.
If the U.S. dollar strengthens relative to the respective fiscal 2024 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 2025, particularly in Europe (primarily the euro, British pound, Turkish lira and Russian rouble), Canada and Mexico.
Risks Related to Data Privacy and Cybersecurity A data privacy breach or failure to comply with confidentiality and data privacy obligations could damage our reputation and customer relationships, expose us to litigation risk and potential fines and adversely affect our business.
Risks Related to Data Privacy and Cybersecurity A cybersecurity incident or failure to comply with confidentiality and data privacy obligations could damage our reputation and customer relationships, expose us to litigation risk and potential fines and adversely affect our business.
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.
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 incur inventory write-downs and markdowns, which in turn could have a material adverse effect on our results of operations and financial condition.
Our corporate headquarters, as well as other key operational locations, including retail, distribution and warehousing facilities, are in areas subject to natural events such as severe weather and geological events or public health crises that could disrupt our operations. Many of our suppliers and customers also have operations in these locations.
Our corporate headquarters, as well as other key operational locations, including retail, distribution and warehousing facilities, are in areas subject to natural events such as severe weather and geological events or public health crises that could disrupt our operations. Many of our suppliers and customers also have operations in these 14 Table of Contents locations.
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.
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 each series of Notes other than scheduled principal and interest, and as a result, upon a fundamental change we may not be able to repurchase any or all of the Notes and upon any conversions of the applicable series of Notes may be unable to pay the cash amounts, if any, then due.
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.
During fiscal 2024, 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.
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.
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.
Under this new accounting guidance, diluted earnings per share will generally be calculated assuming all the Notes were converted solely into shares of common stock at the beginning of the reporting period, unless the result would be antidilutive.
Under this new accounting guidance, diluted earnings per share will generally be calculated assuming all the 32 Table of Contents Notes were converted solely into shares of common stock at the beginning of the reporting period, unless the result would be antidilutive.
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.
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.
As long as these individuals own a significant percentage of our common stock, if aligned, they may effectively be able to: (i) elect our directors; (ii) amend or prevent amendment of our Restated Certificate of Incorporation or Bylaws; (iii) effect or prevent a merger, sale and/or purchase of assets or other corporate transactions; and (iv) control the outcome of any other matter submitted to our stockholders for vote.
As long as these individuals beneficially own and have voting power over a significant percentage of our common stock, if aligned, they may effectively be able to: (i) elect our directors; (ii) amend or prevent amendment of our Restated Certificate of Incorporation or Bylaws; (iii) effect or prevent a merger, sale and/or purchase of assets or other corporate transactions; and (iv) control the outcome of any other matter submitted to our stockholders for vote.
Future changes to U.S. income tax or trade policies impacting multi-national companies could materially affect our financial condition and results of operations. A significant portion of our product sales are generated outside of the U.S. In fiscal 2023, approximately 74% of our consolidated net product sales was generated by sales from outside of the U.S.
Future changes to U.S. income tax or trade policies impacting multi-national companies could materially affect our financial condition and results of operations. A significant portion of our product sales are generated outside of the U.S. In fiscal 2024, approximately 77% of our consolidated net product sales was generated by sales from outside of the U.S.
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.
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. 24 Table of Contents Our Americas Wholesale business is highly concentrated. If any large customer decreases its purchases or experiences financial difficulties, our results of operations and financial condition could be adversely affected.
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.
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 15.9 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.
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.
In addition, purchases from our top two licensees in fiscal 2024 accounted for almost 43% 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.
Any security breach involving the misappropriation, loss or other unauthorized disclosure of confidential customer or employee information, whether by us or our vendors, could result in significant legal and remediation expenses, severely damage our reputation and our customer relationships, harm sales, expose us to risks of litigation and liability and result in a material adverse effect on our business, financial condition and results of operations.
Any security breach involving the misappropriation, loss or other unauthorized disclosure of confidential customer or employee information, whether by us, our vendors, or another party with access to our information systems, could result in significant legal and remediation expenses, severely damage our reputation and our customer relationships, harm sales, expose us to risks of litigation and liability and result in a material adverse effect on our business, financial condition and results of operations.
If we are unsuccessful in continuing to shorten lead-times or if we fail to anticipate fashion trends or consumer demand, we could have excess inventories. Additionally, our vendors could fail to timely supply the quality products and materials we require. Moreover, we could fail to effectively market or merchandise products once we receive them.
If we are unsuccessful in continuing to shorten lead-times or if we fail to anticipate fashion trends or consumer demand, we could have excess inventories. Additionally, our vendors could fail to timely supply the quality products and materials we require. Moreover, we could fail to effectively market or merchandise products 27 Table of Contents once we receive them.
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.
This could materially and adversely affect our business and results of operations. In fiscal 2024, approximately 81% 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.
A disruption at our distribution facilities could have a material adverse impact on our sales and operating results. Our U.S. business relies primarily on a single distribution center located in Louisville, Kentucky to receive, store and distribute merchandise to our U.S. retail stores, wholesale customers and e-commerce customers.
A disruption impacting our warehouse or distribution facilities could have a material adverse impact on our sales and operating results. Our U.S. business relies primarily on a single distribution center located in Louisville, Kentucky to receive, store and distribute merchandise to our U.S. retail stores, wholesale customers and e-commerce customers.
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.
Our two largest suppliers, which were licensee partners, accounted for approximately 43% of our purchases of finished goods in fiscal 2024. We do not own or operate production facilities, and we depend on independent factories to supply fabric and manufacture products to our specifications.
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.
The efficient operation of our business is dependent on our computer and information systems. We rely heavily on our merchandise management and enterprise resource planning systems used to track sales and inventory and manage our supply chain. In addition, we have e-commerce and other Internet websites worldwide.
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.
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 20 countries outside the U.S. In fiscal 2024, over one-third of these products were sourced from partners and suppliers based in China.
Innovation by existing or new competitors could alter the competitive landscape by improving the customer experience and heightening customer expectations or by transforming other aspects of their business through new technologies.
Innovation by existing or new 21 Table of Contents competitors could alter the competitive landscape by improving the customer experience and heightening customer expectations or by transforming other aspects of their business through new technologies.
We may not have enough available cash or be able to obtain financing at the time we are required to repurchase the Notes or pay the cash amounts due upon conversion.
We may not have enough available cash or be able to obtain financing at the time we are required to repurchase each series of Notes or pay the cash amounts due upon conversion.
In addition, upon conversion, we will satisfy part or all of our conversion obligation in cash unless we elect to settle conversions solely in shares of our common stock. We will be required to repay the Notes in cash at their maturity, unless earlier converted or repurchased.
In addition, upon conversion, we will satisfy part or all of our conversion obligation in cash unless we elect to settle conversions solely in shares of our common stock. We will be required to repay each series of Notes in cash at their respective maturity, unless earlier converted or repurchased.
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.
We are subject to periodic litigation and regulatory proceedings, which could result in substantial charges, 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.
Similarly, natural disasters, labor unrest, actual or potential terrorist acts, public health crises, including the COVID-19 pandemic or other similar pandemics, global trade, immigration policies, geopolitical unrest and other conflicts can also create significant instability and uncertainty in the world, causing consumers to defer purchases and travel, or prevent suppliers and service providers from providing required services or materials to us.
Similarly, natural disasters, labor unrest, actual or potential terrorist acts, public health crises, global trade, immigration policies, geopolitical unrest and other conflicts can also create significant instability and uncertainty in the world, causing consumers to defer purchases and travel, or prevent suppliers and service providers from providing required services or materials to us.
The accounting method for the Notes could adversely affect our reported financial condition and results. The accounting method for reflecting the Notes on our balance sheet, accruing interest expense for the Notes and reflecting the underlying shares of our common stock in our reported diluted earnings per share may adversely affect our reported earnings and financial condition.
The accounting method for the Notes could adversely affect our reported financial condition and results. The accounting method for reflecting the shares of our common stock underlying the Notes in our reported diluted earnings per share and reflecting the 2028 Notes on our balance sheet may adversely affect our reported earnings and financial condition.
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.
Unfavorable economic conditions, changing shopping patterns, including shifts in consumer preferences from in-person shopping to online shopping, 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.
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 addition, 31 Table of Contents 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.
As of January 28, 2023, our total assets in Russia, all of which are held by Guess CIS, represented less than 2% of our total assets, consisting primarily of leasehold right of use assets, store inventory, furnishings and fixtures and receivables. We only maintain inventory in Russia in an amount sufficient for operating our Russian retail stores.
As of February 3, 2024, our total assets in Russia, all of which are held by Guess CIS, represented less than 2% of our total assets, consisting primarily of leasehold right of use assets, store inventory, furnishings and fixtures and receivables. We only maintain inventory in Russia in an amount sufficient for operating our Russian retail stores.
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.
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.
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.
A default under the Indentures or the fundamental change itself could also lead to a default under agreements governing the Notes and our other indebtedness, which may result in that 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.
While we must keep up to date with emerging technology trends in the retail environment in order to develop a successful omnichannel shopping experience, it is possible these initiatives may not prove to be successful, may increase our costs, may not succeed in driving sales or attracting customers and could result in significant investments that do not provide the anticipated benefits or desired rates of return.
Our success depends on our ability to respond to shifting consumer traffic patterns and ability to engage our customers. 19 Table of Contents While we must keep up to date with emerging technology trends in the retail environment in order to develop a successful omnichannel shopping experience, it is possible these initiatives may not prove to be successful, may increase our costs, may not succeed in driving sales or attracting customers and could result in significant investments that do not provide the anticipated benefits or desired rates of return.
Noteholders may require us to repurchase their Notes following a fundamental change at a cash repurchase price generally equal to the principal amount of the Notes to be repurchased, plus accrued and unpaid interest, if any.
Holders of our 2024 Notes and 2028 Notes may require us to repurchase their Notes following a fundamental change, at a cash repurchase price generally equal to the principal amount of the applicable series of Notes to be repurchased, plus accrued and unpaid interest, if any.
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.
In fiscal 2024, our three largest Americas Wholesale customers accounted for a total of approximately 4.1% 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.
Any of the foregoing could adversely affect our business, supply chain, partners or customers. In addition, the conflict between Russia and Ukraine could lead to disruption, instability and volatility in global markets and industries that could negatively impact our operations.
Additionally, the war in Ukraine could disrupt the operations of our distributor in that region and surrounding regions. Any of the foregoing could adversely affect our business, supply chain, partners or customers. In addition, the war between Russia and Ukraine could lead to disruption, instability and volatility in global markets and industries that could negatively impact our operations.
Even if noteholders do not elect to convert their Notes, we could be required under applicable accounting rules to reclassify all or a portion of the outstanding principal of the Notes as a current liability, which would result in a material reduction of our net working capital.
In addition, even if noteholders do not elect to convert their 2028 Notes, if the conditional conversion features of the 2028 Notes are satisfied, we could be required under 29 Table of Contents applicable accounting rules to reclassify all or a portion of the outstanding principal of the 2028 Notes as a current liability, which would result in a material reduction of our net working capital.
In connection with establishing their initial hedges of the convertible note hedge and warrant transactions, the hedge counterparties or affiliates thereof entered into various derivative transactions with respect to our common stock concurrently with or shortly after the pricing of the Notes, and may unwind these derivative transactions and purchase shares of our common stock in open market transactions shortly following the pricing of the Notes.
It is our understanding that in connection with establishing their initial hedges of the convertible note hedge and warrant transactions, the hedge counterparties or affiliates thereof entered into various derivative transactions with respect to our common stock concurrently with or shortly after the pricing of the respective Notes, and may have unwound these derivative transactions and purchased shares of our common stock in open market transactions shortly following the pricing of the respective Notes.
These activities could increase (or reduce the size of any decrease in) the market price of our common stock or the Notes at that time.
These activities could have increased (or reduced the size of any decrease in) the market price of our common stock or the Notes at that time.
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.
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 ongoing war in Ukraine and Gaza, the Red Sea crisis, and other factors.
If, in the future we incur volatility in the costs for materials, labor and freight that we are unable to offset through price adjustments or improved efficiencies, or if our competitors’ unwillingness to follow our price changes results in downward price pressure, our business, results of operations, financial condition and cash flows may be adversely affected.
If, in the future we incur volatility in the costs for materials, labor and freight that we are unable to offset through price adjustments or improved efficiencies, or if our competitors’ unwillingness to follow our price changes results in downward price pressure, our business, results of operations, financial condition and cash flows may be adversely affected. 20 Table of Contents Fluctuations in the price or availability of quality raw materials and commodities could increase costs and negatively impact profitability.
Our operations in Russia, Belarus, and Ukraine represented slightly more than 3% of the Company’s total revenue for fiscal 2023, with our operations in Russia comprising over 90% of this total revenue.
Our operations in Russia, Belarus, and Ukraine represented less than 4% of the Company’s total revenue for fiscal 2024, with our operations in Russia comprising over 90% of this total revenue.
For example, extended periods of unseasonably warm or prolonged periods of unseasonably cold temperatures during the winter season or cool weather during the summer season could render a portion of our inventory incompatible with those unseasonable conditions.
Our business is also susceptible to unseasonable weather conditions, including conditions resulting from climate change. For example, extended periods of unseasonably warm or prolonged periods of unseasonably cold temperatures during the winter season or cool weather during the summer season could render a portion of our inventory incompatible with those unseasonable conditions.
This execution requires experienced and talented management in various areas of our business. Our success depends upon the personal efforts and abilities of our key personnel and senior management, particularly Carlos Alberini, Chief Executive Officer, and founding board member and Chief Creative Officer Paul Marciano.
Our success depends upon the personal efforts and abilities of our key personnel and senior management, particularly Carlos Alberini, Chief Executive Officer, and founding board member and Chief Creative Officer Paul Marciano.
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 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.
The apparel industry is subject to rapidly evolving fashion trends and shifting consumer demands. Accordingly, our brand image and profitability are heavily dependent upon the priority our customers place on fashion and our ability to anticipate, identify and capitalize upon emerging fashion trends.
Accordingly, our brand image and profitability are heavily dependent upon the priority our customers place on fashion and our ability to anticipate, identify and capitalize upon emerging fashion trends.
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.
The scope of the impact of sanctions, export controls and the ongoing war in Ukraine is impossible to predict at this time, and could have an adverse impact on our business.
Our e-commerce operations are a critical element of our long-term growth strategy and are vital to the success of our business. Furthermore, a substantial portion of our corporate employees continue to work remotely. Given the complexity of our business it is imperative that we maintain constant operation of our computer hardware and software systems.
Our e-commerce operations are a critical element of our long-term growth strategy and are vital to the success of our business. Given the complexity of our business it is imperative that we maintain constant operation of our information systems.
The sale or prospect of the sale of a substantial number of these shares could have an adverse impact on the market price of our common stock.
The sale or prospect of the sale of a substantial number of the shares beneficially owned by Messrs. Paul or Maurice Marciano could have an adverse impact on the market price of our common stock.
As of January 28, 2023, we had approximately $17.2 million of secured indebtedness, $399.2 million of senior unsecured indebtedness at maturity and approximately $289.4 million of trade payables on a consolidated basis. We may incur additional indebtedness or draw on our existing credit facilities to meet future financing needs, some of which may be secured indebtedness.
As of February 3, 2024, we had approximately $16.4 million of secured indebtedness, $421.9 million of senior unsecured indebtedness at maturity and approximately $272.8 million of trade payables on a consolidated basis. We may incur additional indebtedness or draw on our existing credit facilities to meet future financing needs, some of which may be secured indebtedness.
If one or more noteholders elect to convert their Notes, unless we elect to satisfy our conversion obligation by delivering solely shares of our common stock, we would be required to settle all or a portion of the conversion obligation through the payment of cash, which could adversely affect our liquidity.
While we also intend to settle the principal amount of the 2028 Notes in cash and any excess in shares, if one or more noteholders elect to convert the 2028 Notes prior to the maturity date, unless we elect to satisfy our conversion obligation by delivering solely shares of our common stock, we would be required to settle all or a portion of the conversion obligation through the payment of cash earlier than the maturity date of the 2028 Notes, which could adversely affect our liquidity.
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.
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.
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.
While we do occasionally experience damage or interruption to our systems, we are not aware of any such events in the past that have had a material adverse impact on our business, financial condition or results of operations.
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.
Fluctuations in quarterly performance including retail comparable 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.
Potential risks and uncertainties also include, but are not necessarily limited to, the amount and timing of future share repurchases and the origin of funds used for such repurchases.
There can be no assurance that repurchases will be made at the best possible price. Potential risks and uncertainties also include, but are not necessarily limited to, the amount and timing of future share repurchases and the origin of funds used for such repurchases.
In addition, pursuant to the terms of the indenture governing the Notes, our increase to the quarterly cash dividend in fiscal 2022 requires adjustments to the conversion rate (resulting in an increase in the conversion rate) and the conversion price (resulting in a decrease in the conversion price) in connection with the payment of the quarterly dividend.
In addition, pursuant to the terms of the indentures governing our then outstanding Notes, the increases to our quarterly cash dividend in fiscal 2022 and fiscal 2024 and our extraordinary cash dividend in fiscal 2025, required and will require adjustments to the conversion rate (resulting in an increase in the conversion rate) and the conversion price (resulting in a decrease in the conversion price) of the Notes in connection with the payment of those dividends.
Additionally, certain logistics operators have imposed bans on direct air deliveries to Russia and restrictions on land deliveries to and from Russia, Belarus and Ukraine, none of which have had a material impact on our operations to date.
Additionally, certain logistics operators have imposed bans on direct air deliveries to Russia and restrictions on land deliveries to and from Russia, Belarus and Ukraine, none of which have had a material impact on our operations to date. 16 Table of Contents We are currently operating in Russia through wholesale and retail channels, and we have immaterial wholesale operations through local wholesale partners in Belarus and Ukraine.
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.
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 are subject to risks associated with public health crises, including relating to the COVID-19 pandemic. The COVID-19 pandemic had, and may continue to have, a material adverse effect on our business. Other future public health crises, including any future outbreaks of contagious diseases, could have a similar material adverse impact on our business.
For example, the COVID-19 pandemic had a material adverse effect on our business. Other future public health crises, including any future outbreaks of COVID-19 or other contagious diseases, could have a similar material adverse impact on our business.
Risks Related to Credit, Indebtedness and Investment in our Stock We may be unable to raise the funds necessary to repurchase our $300 million 2.0% convertible senior notes due 2024 (the “Notes”) for cash following a fundamental change, or to pay any cash amounts due upon conversion, and our other indebtedness may limit our ability to repurchase the Notes or pay cash upon their conversion.
Such events could negatively impact our sales, inventory positions, operating results and customer relations. 28 Table of Contents Risks Related to Credit, Indebtedness and Investment in our Stock We may be unable to raise the funds necessary to repurchase our $48 million 2.0% convertible senior notes due 2024 or our $340 million 3.75% convertible senior notes due 2028 for cash following a fundamental change, or to pay any cash amounts due upon conversion, and our other indebtedness may limit our ability to repurchase the Notes or pay cash upon their conversion.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeDistribution of our products in Canada is handled primarily from two leased facilities based in Montreal, Quebec. Distribution of our products in Europe is handled by third-party distributors. Additionally, we utilize several third-party operated distribution warehouses that service the Asia region.
Biggest changeWe are transitioning the operation of our U.S. distribution center, which is currently owner-operated, to a third-party logistics provider during the first half of fiscal 2025. Distribution of our products in Canada is handled primarily from two leased facilities based in Montreal, Quebec. Distribution of our products in Europe is handled by third-party distributors.
The lease has standard terms with a quarterly base charge plus a variable charge aggregating approximately €0.9 million (US$1.0 million) per year (with subsequent annual rent adjustments based on a specific price index). All other material terms in the previously existing Paris lease remain the same.
The lease has standard terms with a quarterly base charge plus a variable charge aggregating approximately €0.9 million ($1.0 million) per year (with subsequent annual rent adjustments based on a specific price index). All other material terms in the previously existing Paris lease remain the same.
Certain 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.
Certain 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 235,800 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 205,300 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 7,700 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.
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.
ITEM 2. Properties. As of February 3, 2024, 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.
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 related lease liability was approximately €4.4 million ($4.8 million) as of February 3, 2024. 37 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.
These facilities are leased by us from limited partnerships in which the sole partners are trusts controlled by and for the benefit of Maurice Marciano and Paul Marciano (the “Principal Stockholders”) and their families pursuant to a lease that expires September 30, 2025, with an additional five-year renewal option to September 30, 2030 at our sole discretion.
These facilities are leased by us from entities that are owned by or for the benefit of Maurice Marciano and Paul Marciano (the “Principal Stockholders”) pursuant to a lease that expires September 30, 2025, with an additional five-year renewal option to September 30, 2030 at our sole discretion.
Financial Statements – Note 9 – Lease Accounting” in this Form 10-K for further detail. We believe our existing facilities are well maintained, in good operating condition and are adequate to support our present level of operations.
We believe our existing facilities are well maintained, in good operating condition and are adequate to support our present level of operations.
Through a French subsidiary, we lease a showroom and office space located in Paris, France from an entity that is owned in part by an affiliate of the Principal Stockholders. During the first quarter of fiscal 2022, we entered into a nine-year lease extension which includes an option for early termination at the end of the third and sixth years.
During the first quarter of fiscal 2022, we entered into a nine-year lease extension which includes an option for early termination at the end of the third and sixth years.
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.
Additionally, we utilize several third-party operated distribution warehouses that service the Asia region. 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.
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.
The related lease liability was approximately $35.5 million as of February 3, 2024. In addition, through a wholly-owned Canadian subsidiary, we lease warehouse and administrative facilities in Montreal, Quebec from an entity that is owned by or for the benefit of the Principal Stockholders. During August 2023, we entered into a three-year lease extension through August 2026.
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.
All other material terms in the previously existing Canada lease (including base rent of approximately CAD$0.6 million ($0.4 million) per year) remain the same. The related lease liability was approximately CAD$1.3 million ($1.0 million) as of February 3, 2024.
Added
Through a French subsidiary, we lease a showroom and office space located in Paris, France from an entity that is owned in part by an entity that is owned by or for the benefit of the Principal Stockholders.
Added
These facilities had aggregate real estate lease liabilities as of February 3, 2024 totaling approximately $665.3 million, excluding related party liabilities. See “Part IV. Financial Statements – Note 9 – Lease Accounting” in this Form 10-K for further detail.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

8 edited+4 added−5 removed0 unchanged
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.
Biggest changeThe payment of cash dividends in the future will be based upon a number of business, legal and other considerations, 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), debt covenant requirements, pension funding or other benefits payments. 38 Table of Contents Share Repurchase Program Our share repurchases during each fiscal month of the fourth quarter of fiscal 2024 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 3 October 29, 2023 to November 25, 2023 Repurchase program 1 — — — $ 19,748,066 Employee transactions 2 228 $ 21.50 — November 26, 2023 to December 30, 2023 Repurchase program 1 — — — $ 19,748,066 Employee transactions 2 — — — December 31, 2023 to February 3, 2024 Repurchase program 1 915,467 $ 23.05 915,467 $ — Employee transactions 2 113,944 $ 23.04 — Total Repurchase program 1 915,467 $ 23.05 915,467 Employee transactions 2 114,172 $ 23.04 — ______________________________________________________________________ 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.
Decisions on whether, when and in what amounts to continue making any future dividend distributions will remain at all times entirely at the discretion of our Board of Directors, which reserves the right to change or terminate our dividend practices at any time and for any reason without prior notice.
Decisions on whether, when and in what amounts to continue making any future dividend distributions will remain at all times entirely at the discretion of our Board of Directors, which reserves the right, in its sole discretion, to change or terminate our dividend practices at any time and for any reason without prior notice.
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.
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 25, 2024, there were 280 holders of record of our common stock.
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.
The return on investment is calculated based on an investment of $100 at market close on February 2, 2019, with dividends, if any, reinvested. Past performance is not necessarily indicative of future performance.
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
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 2/2/2019 2/1/2020 1/30/2021 1/29/2022 1/28/2023 2/3/2024 Guess?, Inc. $ 100.00 $ 115.42 $ 127.67 $ 120.30 $ 133.80 $ 141.77 S&P 1500 Apparel Retail Index 100.00 111.02 122.59 136.53 154.25 190.27 S&P 500 Index 100.00 121.56 142.53 172.46 161.03 199.42
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.
During fiscal 2023, the Board of Directors expanded its repurchase authorization by $100 million, leaving a new capacity of $249.0 million at that time. In January 2024, the Board of Directors expanded its repurchase authorization by approximately $1.4 million to cover the repurchases associated with the issuance of the Additional 2028 Notes.
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.
Repurchases may be made on the open market or in privately negotiated transactions, pursuant to Rule 10b5-1 trading plans or other available means. There is no minimum or maximum number of shares to be repurchased under the program and the program may be discontinued at any time, without prior notice.
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.
Financial Statements – Note 23 – Subsequent Events”, which we anticipate will be completed in April 2024. 39 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 2, 2019.
Removed
Prior to the initiation of a quarterly dividend on February 12, 2007, we had not declared any dividends on our common stock since our initial public offering in 1996.
Added
On March 20, 2024, we announced that our Board of Directors has approved a special cash dividend of $2.25 per share on our common stock and a quarterly cash dividend of $0.30 per share on our common stock.
Removed
During the first and second quarters of fiscal 2021, we announced that our Board of Directors had deferred the decision with respect to the payment of our quarterly cash dividend in light of the uncertainties related to the COVID-19 pandemic.
Added
Both dividends will be payable on May 3, 2024 to shareholders of record as of the close of business on April 17, 2024.
Removed
We resumed paying our quarterly cash dividend of $0.1125 per share beginning in the third quarter of fiscal 2021, but decided to not declare any cash dividends for the first and second quarters of fiscal 2021. On November 23, 2021, we announced an increase to our regular quarterly cash dividend from $0.1125 to $0.225 per share on our common stock.
Added
As of February 3, 2024, we had no remaining authority under the 2021 Share Repurchase Program to purchase our common stock. 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. 3 On March 25, 2024, the Board of Directors authorized a new $200 million share repurchase program.
Removed
The payment of cash dividends in the future will be based upon a number of business, legal and other considerations, including our cash flow from operations, capital expenditures, debt service and covenant requirements, cash paid for income taxes, earnings, share repurchases, economic conditions and U.S. and global liquidity.
Added
We have agreed to use a portion of the authorized share repurchase program to repurchase shares of our common stock in connection with the exchange of 2024 Notes for additional 2028 Notes as described in “Part IV.
Removed
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.

Item 7. Management's Discussion & Analysis

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

181 edited+78 added−52 removed88 unchanged
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.
Biggest changeWe have excluded these items from our adjusted financial measures primarily because we believe these items are not indicative of the underlying performance of our business and the adjusted financial information provided is useful for investors to evaluate the comparability of our operating results and our future outlook (when reviewed in conjunction with our GAAP financial statements). 55 Table of Contents A reconciliation of reported GAAP results to comparable non-GAAP results follows (in thousands, except per share data): Fiscal 2024 Fiscal 2023 Reported GAAP net earnings attributable to Guess?, Inc. $ 198,199 $ 149,610 Certain professional service and legal fees and related (credits) costs 1 (14,033) 7,484 Transaction costs 2 565 — Asset impairment charges 3 6,887 9,544 Net gains on lease modifications 4 (1,662) (2,267) Loss on extinguishment of debt 5 12,351 — Amortization of debt discount 6 622 — Fair value remeasurement of derivatives 7 (998) — Discrete income tax adjustments 8 (26,854) 132 Income tax impact from adjustments 9 (1,041) (3,447) Total adjustments affecting net earnings attributable to Guess?, Inc.
The duration and scope of these conditions cannot be predicted, and therefore, any anticipated negative financial impact to our operating results cannot be reasonably estimated. Business Segments Our businesses are grouped into five reportable segments for management and internal financial reporting purposes: Americas Retail, Americas Wholesale, Europe, Asia and Licensing.
The duration and scope of these conditions cannot be predicted, and therefore, any anticipated negative financial impact to our operating results cannot be reasonably estimated. Business Segments Our businesses are grouped into five reportable segments for management and internal financial reporting purposes: Europe, Americas Retail, Americas Wholesale, Asia and Licensing.
Our Americas Retail, Americas Wholesale, Europe and Licensing reportable segments are the same as their respective operating segments. Certain components of our Asia operating segment are separate operating segments based on region, which have been aggregated into the Asia reportable segment for disclosure purposes.
Our Europe, Americas Retail, Americas Wholesale and Licensing reportable segments are the same as their respective operating segments. Certain components of our Asia operating segment are separate operating segments based on region, which have been aggregated into the Asia reportable segment for disclosure purposes.
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.
Some of our transactions, primarily those in Europe, Canada, China, Hong Kong, Mexico and South Korea are denominated in U.S. dollars, Swiss francs, British pounds and Russian roubles, exposing them to exchange rate fluctuations when these transactions (such as inventory purchases or periodic lease payments) are converted to their functional currencies.
As a result of our omni-channel strategy, our e-commerce business has become strongly intertwined with our brick-and-mortar retail store business. Therefore, we believe that the inclusion of e-commerce sales in our comparable store sales metric provides a more meaningful representation of our retail results.
As a result of our omni-channel strategy, our e-commerce business has become strongly intertwined with our brick-and-mortar retail store business. Therefore, we believe that the inclusion of e-commerce sales in our retail comparable sales metric provides a more meaningful representation of our retail results.
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 have identified our Americas Retail segment, our Americas Wholesale segment and our European wholesale and European retail components of our Europe segment as reporting units for goodwill impairment testing. For long-lived assets (other than goodwill), the majority relate to our retail operations which consist primarily of regular retail and flagship locations.
We have identified our European wholesale and European retail components of our Europe segment, our Americas Retail segment and our Americas Wholesale segment as reporting units for goodwill impairment testing. For long-lived assets (other than goodwill), the majority relate to our retail operations which consist primarily of regular retail and flagship locations.
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.
Liquidity and Capital Resources We use our liquidity globally primarily to fund our working capital, occupancy costs, interest and principal 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 Notes balance on our consolidated balance sheets.
In accounting for the debt issuance costs related to the issuance of the 2024 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 2024 Notes balance on our consolidated balance sheets.
If a store remodel results in a square footage change of more than 15%, or involves a relocation or a change in store concept, the store sales are removed from the comparable store base until the store has been opened at its new size, in its new location or under its new concept for 13 full fiscal months.
If a store remodel results in a square footage change of more than 15%, or involves a relocation or a change in store concept, the store sales are removed from the retail comparable sales base until the store has been opened at its new size, in its new location or under its new concept for 13 full fiscal months.
Following adoption, the equity component was eliminated and recorded as an adjustment to retained earnings. In addition, we derecognized the remaining unamortized debt discount on the Notes. Debt issuance costs were recorded as a contra-liability and are presented net against the Notes balance on our consolidated balance sheets.
Following adoption, the equity component was eliminated and recorded as an adjustment to retained earnings. In addition, we derecognized the remaining unamortized debt discount on the 2024 Notes. Debt issuance costs were recorded as a contra-liability and are presented net against the 2024 Notes balance on our consolidated balance sheets.
These costs are amortized to interest expense using the effective interest method over the term of the Notes. On January 30, 2022, we adopted the authoritative guidance which simplifies the accounting for convertible instruments and contracts in an entity’s own equity using the modified retrospective method.
These costs are amortized to interest expense using the effective interest method over the term of the 2024 Notes. On January 30, 2022, we adopted the authoritative guidance which simplifies the accounting for convertible instruments and contracts in an entity’s own equity using the modified retrospective method.
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.
Accordingly, in accounting for the issuance of the 2024 Notes, we separated the 2024 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.
Certain restricted stock units vest immediately but are considered contingently returnable as a result of certain service conditions. Compensation expense for these types of restricted stock units are recognized on a straight-line basis over the implied service period.
Certain restricted stock units vest immediately but are considered contingently returnable as a result of certain service conditions. Compensation expense for these types of restricted stock units is recognized on a straight-line basis over the implied service period.
There has been no material impact to our existing operations as a result of the ongoing conflict in Ukraine, although we are limited in our ability to expand our business in Russia due to the U.S. ban on new investments in Russia described below under “―Impact of Sanctions and Trade Restrictions.” With respect to our supply and distribution channels, we have experienced increased costs and transit times associated with deliveries related to our Russia operations, due in part to new procedures and sanctions screening implemented in response to the conflict in Ukraine and the imposition of related sanctions.
There has been no material impact to our existing operations as a result of the ongoing war in Ukraine, although we are limited in our ability to expand our business in Russia due to the U.S. ban on new investments in Russia described below under “―Impact of Sanctions and Trade Restrictions.” With respect to our supply and distribution channels, we have experienced increased costs and transit times associated with deliveries related to our Russia operations, due in part to new procedures and sanctions screening implemented in response to the war in Ukraine and the imposition of related sanctions.
The Put Option provides the noncontrolling interest holder of Guess CIS, a non-sanctioned Russian citizen (the “Minority Holder”), the right to compel us, through a wholly-owned European subsidiary, to purchase the remaining 30% of the total outstanding equity interest of Guess CIS at its sole discretion by providing written notice to us during the period after December 28, 2020, the fifth anniversary of the agreement, through December 31, 2025.
The Put Option provided the noncontrolling interest holder of Guess CIS, a non-sanctioned Russian citizen (the “Minority Holder”), the right to compel us, through a wholly-owned European subsidiary, to purchase the remaining 30% of the total outstanding equity interest of Guess CIS at its sole discretion by providing written notice to us during the period after December 28, 2020, the fifth anniversary of the agreement, through December 31, 2025.
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.
The convertible note hedge transactions 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.
Excluded from the above table of material cash requirements is the noncurrent liability for unrecognized tax benefits, including penalties and interest, of $64.4 million. This liability for unrecognized tax benefits has been excluded because we cannot make a reliable estimate of the period in which the liability will be settled, if ever.
Excluded from the above table of material cash requirements is the noncurrent liability for unrecognized tax benefits, including penalties and interest, of $63.4 million. This liability for unrecognized tax benefits has been excluded because we cannot make a reliable estimate of the period in which the liability will be settled, if ever.
Decisions on whether, when and in what amounts to continue making any future dividend distributions will remain at all times entirely at the discretion of our Board of Directors, which reserves the right to change or terminate our dividend practices at any time and for any reason without prior notice.
Decisions on whether, when and in what amounts to continue making any future dividend distributions will remain at all times entirely at the discretion of our Board of Directors, which reserves the right, in its sole discretion, to change or terminate our dividend practices at any time and for any reason without prior notice.
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.
Alternatively, if the U.S. dollar weakens relative to the respective fiscal 2024 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 2025, particularly in these regions.
Products We derive our net revenue from the sale of GUESS?, G by GUESS (GbG), GUESS Kids and MARCIANO apparel and our licensees’ products through our worldwide network of directly-operated and licensed retail stores, wholesale customers and distributors, as well as our online sites. We also derive royalty revenue from worldwide licensing activities.
Products We derive our net revenue from the sale of GUESS?, G by GUESS (GbG), GUESS Kids and MARCIANO apparel and certain accessories and our licensees’ products through our worldwide network of directly-operated and licensed retail stores, wholesale customers and distributors, as well as our online sites. We also derive royalty revenue from worldwide licensing activities.
Generally, our working capital needs are highest during the late summer and fall as our inventories increase before the holiday selling period. In addition, in the U.S., we need liquidity for payment of dividends to our stockholders and to fund share repurchases.
Generally, our working capital needs are highest during the late summer and fall as our inventories increase before the holiday selling period. In addition, in the U.S., we need liquidity for payment of dividends to our stockholders and to fund share repurchases, if any.
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.
During fiscal 2024, the average U.S. dollar rate was stronger against the Turkish lira, Canadian dollar, Russian rouble, Japanese yen, Korean won, and Chinese yuan and weaker against the euro, British pound, Polish zloty and Mexican peso, compared to the average rate in fiscal 2023.
While the extent to which our future operations in Russia, Belarus and Ukraine will be impacted by the ongoing conflict is impossible to predict, the impact is not expected to be material to our results of operations, financial condition or cash flows.
While the extent to which our future operations in Russia, Belarus and Ukraine will be impacted by the ongoing war is impossible to predict, the impact is not expected to be material to our results of operations, financial condition or cash flows.
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.
If the U.S. dollar strengthens relative to the respective fiscal 2024 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 2025, particularly in Europe (primarily the euro, British pound, Turkish lira and Russian rouble), Canada and Mexico.
In November 2022, the Minority Holder exercised the Put Option, triggering a contractual obligation for us to purchase the Minority Holder’s 30% interest in Guess CIS. Following a comprehensive review of the various economic sanctions imposed by the United States and European governments with respect to Russia, and obtaining guidance from the 39 Table of Contents U.S.
In November 2022, the Minority Holder exercised the Put Option, triggering a contractual obligation for us to purchase the Minority Holder’s 30% interest in Guess CIS. Following a comprehensive review of the various economic sanctions imposed by the United States and European governments with respect to Russia and obtaining guidance from the U.S.
We use market participant rents to calculate fair value of ROU assets and discounted future cash flows of the asset group to quantify fair value for other long-lived assets. The impairment loss calculations require management to apply judgment in estimating future cash flows and the discount rates that reflect the risk inherent in future cash flows.
We use market participant rents to calculate fair value of ROU assets and discounted future cash flows of the asset group to quantify fair 66 Table of Contents value for other long-lived assets. The impairment loss calculations require management to apply judgment in estimating future cash flows and the discount rates that reflect the risk inherent in future cash flows.
Our inbound and outbound transportation costs vary by the method of shipping, including air, ocean and ground. Each of these methods may be impacted by various factors, including inflation and other considerations, such as an imbalance between the overall freight capacity on the marketplace and demand.
Our inbound and outbound transportation costs vary by the method of shipping, including air, ocean and ground. Each of these methods may be impacted by various factors, including inflation and other considerations, such as an imbalance between the overall freight capacity on the marketplace and demand, as well as geopolitical conflicts.
As such, this amount reflects operating lease costs that are considered in the measurement of the related operating lease liabilities, which may include fixed payments related to rent, insurance, property taxes, sales promotion, common area maintenance and certain utility charges, where applicable.
As such, this amount reflects operating lease costs that are considered in the measurement of the related operating lease liabilities, which may include fixed payments related to rent, insurance, property taxes, sales promotion, 60 Table of Contents common area maintenance and certain utility charges, where applicable.
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.
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.
The redemption value of the Put Option is based on a multiple of Guess CIS’s earnings before interest, taxes, depreciation and amortization, subject to certain adjustments. The carrying value of the redeemable noncontrolling interest related to the put arrangement was €8.0 million ($8.7 million) as of January 28, 2023.
The redemption value of the Put Option was based on a multiple of Guess CIS’s earnings before interest, taxes, depreciation and amortization, subject to certain adjustments. The carrying value of the redeemable noncontrolling interest related to Guess CIS was €8.0 million ($8.7 million) as of January 28, 2023.
Our retail sales in Turkey, a relatively small market, had an outsized impact on our comparable sales (including e-commerce), contributing a negative impact of 2% in U.S. dollars and a positive impact of 1% in constant currency, largely due to the current hyper-inflation environment in Turkey.
Our retail sales in Turkey, a relatively small market, had an outsized impact on our retail comparable sales (including e-commerce), contributing a minimal impact in U.S. dollars and a positive impact of 2% in constant currency, largely due to the current hyper-inflation environment in Turkey.
Net realizable value of aged inventory is estimated based on historical sales trends for each product line category, the impact of market trends, an evaluation of economic conditions, available liquidation channels and the value of current orders relating to the future sales of this type of inventory.
Net realizable value of aged inventory is estimated based on historical sales trends for each product line category, the impact of market trends, an evaluation of economic conditions, available liquidation channels and the value of 63 Table of Contents current orders relating to the future sales of this type of inventory.
Risk Factors— 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 for additional information. 40 Table of Contents We are actively monitoring the situation in Ukraine.
Risk Factors— 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 for additional information. We are actively monitoring the situation in Ukraine.
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.
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 65 Table of Contents to taxable income in the periods in which the deferred income tax asset or liability is expected to be realized or settled.
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.
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.
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.
Management evaluates its estimates and judgments on an ongoing basis including those related to the allowances for doubtful accounts, sales return and markdown allowances, 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, restructuring expense and accruals and convertible senior notes.
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.
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.
We include the allowance for 57 Table of Contents sales returns in accrued expenses and the estimated cost associated with such sales returns within other current assets in our consolidated balance sheet. Markdown Allowances Costs associated with customer markdowns are recorded as a reduction to revenues and any amounts unapplied to existing receivables are included in accrued expenses.
We include the allowance for sales returns in accrued expenses and the estimated cost associated with such sales returns within other current assets in our consolidated balance sheet. Markdown Allowances Costs associated with customer markdowns are recorded as a reduction to revenues and any amounts unapplied to existing receivables are included in accrued expenses.
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.
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.
We evaluate segment performance based primarily on revenues and earnings (loss) from operations before corporate performance-based compensation costs, asset impairment charges, net gains (losses) from lease modifications, restructuring charges and certain non-recurring credits (charges), if any. The Americas Retail segment includes our retail and e-commerce operations in the Americas. The Americas Wholesale segment includes our wholesale operations in the Americas.
We evaluate segment performance based primarily on revenues and earnings (loss) from operations before corporate performance-based compensation costs, asset impairment charges, net gains (losses) on lease modifications, restructuring charges and certain non-recurring credits (charges), if any. The Europe segment includes our retail, e-commerce and wholesale operations in Europe and the Middle East.
References to financial results excluding the impact of these items are non-GAAP measures and are addressed below under “Non-GAAP Measures.” Highlights of our performance for fiscal 2023 compared to the prior year are presented below, followed by a more comprehensive discussion under “Results of Operations”: (References to constant currency results are non-GAAP measures and are addressed under “Non-GAAP Measures.”) Operations • Total net revenue increased 3.7% to $2.69 billion for fiscal 2023, compared to $2.59 billion in the prior year.
References to financial results excluding the impact of these items are non-GAAP measures and are addressed below under “Non-GAAP Measures.” Highlights of our performance for fiscal 2024 compared to the prior year are presented below, followed by a more comprehensive discussion under “Results of Operations”: (References to constant currency results are non-GAAP measures and are addressed under “Non-GAAP Measures.”) Operations • Total net revenue increased 3.3% to $2.78 billion for fiscal 2024, compared to $2.69 billion in the prior year.
Changes in the fair value of forward contracts designated as cash flow hedges are recorded as a component of accumulated other comprehensive income (loss) within stockholders’ equity and are recognized in cost of product sales in the period which approximates the time the hedged merchandise inventory is sold.
Changes in the fair value of forward contracts designated as cash flow hedges are recorded as a component of accumulated other comprehensive income (loss) (“AOCL”) within stockholders’ equity and are 64 Table of Contents recognized in cost of product sales in the period which approximates the time the hedged merchandise inventory is sold.
Business Update, Market Trends and Uncertainties Macroeconomic conditions, including rising inflation, higher interest rates, foreign exchange rate fluctuations, declines in consumer spending, the impact of the ongoing conflict in Ukraine and the lingering effects of public health crises, continue to negatively impact our business.
Business Update, Market Trends and Uncertainties Macroeconomic conditions, including inflation, higher interest rates, foreign exchange rate fluctuations, declines in consumer spending, the impact of the ongoing conflicts in Ukraine and Gaza and the lingering effects of public health crises continue to negatively impact our business.
These measures include: (i) blocking sanctions prohibiting dealings with various Russian senior government officials, and companies in various sectors important to the Russian economy, including major Russian financial institutions; (ii) expanded sectoral sanctions related to designated Russian entities’ ability to raise capital; (iii) the disconnection of certain Russian and Belarusian banks from the Society for Worldwide Interbank Financial Telecommunication (“SWIFT”) financial messaging network; (iv) a ban on new investment in Russia; (v) a ban on the provision of certain accounting, trust formation and management consulting services; (vi) bans on the import into the United States of certain Russian origin products, including various energy products; (vii) bans on the conduct of business or investment activity in the Russian-controlled Crimea, Donetsk and Luhansk regions of Ukraine; and (viii) restrictions on the export of various products to Russia and Belarus, including certain dual-use industrial and commercial products, and luxury goods.
These measures include: (i) blocking sanctions prohibiting dealings with various Russian senior government officials, and companies in various sectors important to the Russian economy, including major Russian financial institutions; (ii) expanded sectoral sanctions related to designated Russian entities’ ability to raise capital; (iii) the disconnection of certain Russian and Belarusian banks from the Society for Worldwide Interbank Financial Telecommunication (“SWIFT”) financial messaging network; (iv) a ban on new investment in Russia; (v) a ban on the provision of certain services in Russia in the areas of accounting, trust formation, management consulting , quantum computing, architecture, engineering and in relation to the maritime transport of Russian-origin crude oil and petroleum products; (vi) bans on the import into the United States of certain Russian origin products, including various energy products; (vii) bans on the conduct of business or investment activity in the Russian-controlled Crimea, Donetsk and Luhansk regions of Ukraine; and (viii) restrictions on the export of various products to Russia and Belarus, including certain dual-use industrial and commercial products, and luxury goods.
Department of the Treasury’s Office of Foreign Assets Control (“OFAC”), we determined that our acquisition of the Minority Holder’s 30% interest in Guess CIS pursuant to our pre-sanctions contractual obligations to fulfill the Minority Holder’s exercise of the Put Option is not prohibited by current economic sanctions, including the U.S. ban on new investment in Russia.
Department of the Treasury’s Office of Foreign Assets Control, we determined that our acquisition of the Minority Holder’s 30% interest in Guess CIS pursuant to our pre-sanctions contractual obligation to fulfill the Minority Holder’s exercise of the Put Option was not prohibited by current economic sanctions, including the U.S. ban on new investment in Russia.
Our operations in Russia, Belarus and Ukraine represented slightly more than 3% of our total revenue for fiscal 2023 and slightly less than 3% for fiscal 2022, with our operations in Russia comprising over 90% of this total revenue.
Our operations in Russia, Belarus and Ukraine represented less than 4% of our total revenue for fiscal 2024 and slightly more than 3% for fiscal 2023, with our operations in Russia comprising over 90% of this total revenue.
We continue to evaluate our compensation and benefit offerings to be competitive with the current market and evaluate strategies to be more effective and efficient at all levels within the organization, including how to best serve our customers. Raw Materials.
We continue to evaluate our compensation and benefit offerings to be competitive with the current market and evaluate strategies to be more effective and efficient at all levels within the organization, including how to best serve our customers. 42 Table of Contents Raw Materials.
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.
To calculate net revenue, retail comparable 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.
Changes in the fair value of these U.S. dollar forward contracts, designated as net investment hedges, are recorded in foreign currency translation adjustment as a component of accumulated other comprehensive income (loss) within stockholders’ equity and are not recognized in earnings (loss) until the sale or liquidation of the hedged net investment.
Changes in the fair value of these U.S. dollar forward contracts, designated as net investment hedges, are recorded in foreign currency translation adjustment as a component of AOCL within stockholders’ equity and are not recognized in earnings (loss) until the sale or liquidation of the hedged net investment.
The above table also excludes current liabilities (other than short-term borrowings) as these amounts will be paid within one year and certain long-term liabilities that do not require cash payments. Off-Balance Sheet Arrangements Other than certain obligations and commitments included in the table above, we did not have any material off-balance sheet arrangements as of January 28, 2023.
The above table also excludes current liabilities (other than short-term borrowings) as these amounts will be paid within one year and certain long-term liabilities that do not require cash payments. Off-Balance Sheet Arrangements Other than certain obligations and commitments included in the table above, we did not have any material off-balance sheet arrangements as of February 3, 2024.
Following the exercise of the Put Option by the Minority Holder, the Company and the Minority Holder entered into an agreement to proceed with the Company’s acquisition of the Minority Holder’s 30% interest in Guess CIS for a purchase price of €8.0 million, subject to the formal approval of the acquisition by the relevant Russian government commission and certain other customary conditions.
As such, following the exercise of the Put Option by the Minority Holder, we entered into an agreement with the Minority Holder to proceed with our acquisition of the Minority Holder’s 30% interest in Guess CIS for a purchase price of €8.0 million, subject to the formal approval of the acquisition by the relevant Russian government commission and certain other customary conditions.
We continue to evaluate our plans for reinvestment or repatriation of unremitted foreign earnings and regularly review our cash positions and determination of permanent reinvestment of foreign earnings.
We continue to evaluate our plans for reinvestment or 58 Table of Contents repatriation of unremitted foreign earnings and regularly review our cash positions and determination of permanent reinvestment of foreign earnings.
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.
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.
As of January 28, 2023, our total assets in Russia, all of which are held by Guess CIS, represented less than 2% of our total assets, consisting primarily of leasehold right of use assets, store inventory, furnishings and fixtures, and receivables. We only maintain inventory in Russia in an amount sufficient for operating our Russian retail stores.
As of February 3, 2024, our total assets in Russia, all of which are held by Guess CIS, represented less than 2% of our total assets, consisting primarily of leasehold right of use assets, store inventory, furnishings and fixtures, and receivables. We only maintain inventory in Russia in an amount sufficient for operating our Russian retail stores.
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.
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 2024, these variable charges totaled $105.8 million. Refer to “Part IV.
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.
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, including the 2024 Notes, finance leases and operating leases, as well as lease modification payments, the acquisition of rag & bone and any other potential acquisitions and investments, expected income tax payments, dividend payments to stockholders and share repurchases, if any, 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 and other indebtedness, as needed.
In addition, inflation could materially increase the interest rates on any future debt we may incur. 38 Table of Contents We expect inflationary pressures will persist in the near term.
In addition, inflation could materially increase the interest rates on any future debt we may incur. We expect inflationary pressures will persist in the near term.
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.
(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 the next 12 months and beyond.
Convertible Senior Notes In April 2019, we issued $300 million principal amount of 2.00% convertible senior notes due 2024 in a private offering.
Convertible Senior Notes In April 2019, we issued $300 million principal amount of 2024 Notes in a private offering.
Comparable sales (including e-commerce) decreased 1% in both U.S. dollars and constant currency compared to the prior year. The inclusion of our e-commerce sales had minimal impact on the comparable sales percentage in U.S. dollars and constant currency.
Retail comparable sales (including e-commerce) decreased 5% in U.S. dollars and 6% in constant currency compared to the prior year. The inclusion of our e-commerce sales had a minimal impact on the retail comparable sales percentage in both U.S. dollars and constant currency.
These conditions have also negatively impacted global supply chains, contributing to industry-wide increases to product and freight costs, relative to pre- 36 Table of Contents pandemic levels. We have been working actively to mitigate these headwinds to the extent possible through a number of global supply chain initiatives.
These conditions have also negatively impacted global supply chains, contributing to industry-wide increases of product and freight costs. We have been working actively to mitigate these headwinds to the extent possible through a number of global supply chain initiatives.
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.
Overall this had a minimal favorable impact on the translation of our international revenues and an unfavorable impact on earnings from operations during fiscal 2024 compared to the prior year.
In connection with our investment in Guess CIS, we are party to a put arrangement with respect to the securities that represent the remaining noncontrolling interest for Guess CIS (the “Put Option”).
In connection with our investment in Guess CIS, we were previously party to a put arrangement with respect to the securities that represented the remaining noncontrolling interest for Guess CIS (the “Put Option”).
The carrying amount of the equity component, which is recognized as a debt discount, represents the difference between the proceeds from the issuance of the Notes and the fair value of the liability component of the Notes.
The carrying amount of the equity component, which was recognized as a debt discount, represented the difference between the proceeds from the issuance of the 2024 Notes and the fair value of the liability component of the 2024 Notes.
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.
The projected benefit obligation was $37.7 million and $42.4 million as of February 3, 2024 and January 28, 2023, 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 $2.1 million and $1.7 million were made during fiscal 2024 and fiscal 2023, respectively.
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.
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 February 3, 2024, we determined that approximately $228.5 million of such foreign earnings are no longer indefinitely reinvested.
As of January 28, 2023, we directly operated 371 stores in the Americas compared to 388 stores at January 29, 2022, excluding concessions, which represents a 4% decrease from the prior year. Operating margin decreased 5.0% for fiscal 2023, compared to fiscal 2022 .
As of February 3, 2024, we directly operated 356 stores in the Americas compared to 371 stores at January 28, 2023, excluding concessions, which represents a 4% decrease from the prior year. Operating margin decreased 3.5% for fiscal 2024, compared to fiscal 2023 .
Excess cash and cash equivalents, which represent the majority of our outstanding cash and cash equivalents balance, are held primarily in overnight deposit and short-term time deposit accounts and money market accounts. Refer to “Part I, Item 1A.
Excess cash and cash equivalents, which represent the majority of our outstanding cash and cash equivalents balance, are held primarily in overnight deposit and short-term time deposit accounts and money market accounts.
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.
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 February 3, 2024, we determined approximately $228.5 million of such foreign earnings are no longer indefinitely reinvested.
At roughly prevailing exchange rates, we expect currencies to continue to represent a headwind to operating profit and margin for fiscal 2024. We enter into derivative financial instruments to offset some but not all of the exchange risk on foreign currency transactions.
At roughly prevailing exchange rates, we expect currencies to represent a headwind on revenues for fiscal 2025. We enter into derivative financial instruments to offset some but not all of the exchange risk on foreign currency transactions.
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.
During fiscal 2024, 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 for the financing of our operations.
The Europe segment includes our retail, e-commerce and wholesale operations in Europe and the Middle East. The Asia segment includes our retail, e-commerce and wholesale operations in Asia and the Pacific. The Licensing segment includes the worldwide licensing operations.
The Americas Retail segment includes our retail and e-commerce operations in the Americas. The Americas Wholesale segment includes our wholesale operations in the Americas. The Asia segment includes our retail, e-commerce and wholesale operations in Asia and the Pacific. The Licensing segment includes the worldwide licensing operations.
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.
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.
This compares to $0.7 million in impairment of certain operating lease right-of-use assets and $2.4 million in impairment of property and equipment related to certain retail locations resulting from under-performance and expected store closures. Currency translation fluctuations relating to our foreign operations favorably impacted asset impairment charges by $0.9 million during fiscal 2023. Net Gains on Lease Modifications.
This compares to $9.5 million in impairment of property and equipment related to certain retail locations resulting from under-performance and expected store closures during fiscal 2023. Currency translation fluctuations relating to our foreign operations unfavorably impacted asset impairment charges by $0.1 million during fiscal 2024. Net Gains on Lease Modifications.
Asia Net revenue from our Asia segment increased by $2 million for fiscal 2023, compared to fiscal 2022. In constant currency, net revenue increased by 12% compared to the prio r year.
Asia Net revenue from our Asia segment increased by $38 million for fiscal 2024, compared to fiscal 2023. In constant currency, net revenue increased by 18% compared to the prio r year.
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.
As a result of changes in the value of the insurance policy investments, we recorded unrealized gains (losses) of $1.1 million, $(5.7) million and $0.6 million in other income (expense) during fiscal 2024, fiscal 2023 and fiscal 2022, respectively.
During fiscal 2023 and fiscal 2022, we recorded net gains on lease modifications of $2.3 million and $0.3 million, respectively, related primarily to the early termination of lease agreements for certain retail locations. Operating Margin. Operating margin decreased 2.6% to 9.2% for fiscal 2023, compared to 11.8% in fiscal 2022.
During fiscal 2024 and fiscal 2023, we recorded net gains on lease modifications of $1.7 million and $2.3 million, respectively, related primarily to the early termination of lease agreements for certain retail locations. Operating Margin. Operating margin increased 0.3% to 9.5% for fiscal 2024, compared to 9.2% in fiscal 2023.
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.
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.
SG&A expenses increased 3.7% to $893.3 million for fiscal 2023, compared to $861.6 million in the prior year. • During fiscal 2023, we recognized asset impairment charges of $9.5 million, compared to $3.1 million in the prior year. • During fiscal 2023, we recognized net gains on lease modifications of $2.3 million, compared to $0.3 million in the prior year. 42 Table of Contents • Oper ating margin decreased 260 basis points to 9.2% for fiscal 2023, compared to 11.8% in the prior year.
SG&A expenses increased 6.8% to $954.1 million for fiscal 2024, compared to $893.3 million in the prior year. • During fiscal 2024, we recognized asset impairment charges of $6.9 million, compared to $9.5 million in the prior year. • During fiscal 2024, we recognized net gains on lease modifications of $1.7 million, compared to $2.3 million in the prior year. • Oper ating margin increased 30 basis points to 9.5% for fiscal 2024, compared to 9.2% in the prior year.

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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 changeAs 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.
Biggest changeAs of February 3, 2024, we had euro foreign exchange currency contracts to purchase $52.0 million expected to mature over the next 2 months. As of February 3, 2024, the net unrealized loss of these open forward contracts recorded in our consolidated balance sheet was approximately $0.3 million.
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.
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 2024 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.
In addition, some of the derivative contracts in place will create volatility during the fiscal year as they are marked-to-market according to the accounting rules and may result in revaluation gains or losses in different periods from when the currency impact on the underlying transactions are realized.
In addition, some of the derivative contracts in place will create volatility during the fiscal year as they are marked-to-market according to the accounting rules and may result in revaluation gains or losses in different periods from when the currency impacts on the underlying transactions are realized.
Changes in the fair value of the interest rate swap agreement, designated as a cash flow hedge to hedge the variability of cash flows in interest payments associated with our floating-rate real estate secured loan (the “Mortgage Debt”), 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 the interest rate swap agreement, designated as a cash flow hedge to hedge the variability of cash flows in interest payments associated with our floating-rate real estate secured loan (the “Mortgage Debt”), are recorded as a component of AOCL within stockholders’ equity and are amortized to interest expense over the term of the related debt.
Changes in the fair value of the U.S. dollar forward contracts, designated as cash flow hedges for forecasted merchandise purchases, are recorded as a component of accumulated other comprehensive income (loss) within stockholders’ equity and are recognized in cost of product sales in the period which approximates the time the hedged merchandise inventory is sold.
Changes in the fair value of the U.S. dollar forward contracts, designated as cash flow hedges for forecasted merchandise purchases, are recorded as a component of AOCL within stockholders’ equity and are recognized in cost of product sales in the period which approximates the time the hedged merchandise inventory is sold.
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.
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 $14.2 million.
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 February 3, 2024 and January 28, 2023, 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.
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.
Foreign Exchange Currency Contracts Designated as Cash Flow Hedges During fiscal 2024, we purchased U.S. dollar forward contracts in Europe totaling $119.0 million that were designated as cash flow hedges.
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).
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 2024, we recorded a net gain of $2.3 million for our euro dollar foreign currency contracts not designated as hedges, which was included in other income (expense).
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. 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.
The interest rate swap agreement is designated as a cash flow hedge and converts the nature of our real estate secured term loan from SOFR floating-rate debt to fixed-rate debt. As of February 3, 2024, we also had borrowings under our credit facility arrangements of $21.7 million which are based on variable rates of interest.
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 February 3, 2024, we had forward contracts outstanding for our European operations of $104.0 million to hedge forecasted merchandise purchases, which are expected to mature over the next 11 months. Our derivative financial instruments are recorded in our consolidated balance sheet at fair value based on quoted market rates.
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.
A 100 basis point increase in interest rates would not have a significant effect on interest expense for fiscal 2024. 70 Table of Contents 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.
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 February 3, 2024, the net unrealized gain of the interest rate swap recorded in our consolidated balance sheet was approximately $0.8 million. At 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 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.
At January 28, 2023, the net unrealized loss of these open forward contracts recorded in our consolidated balance sheet was approximately $11.9 million. Derivative Instruments 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 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.
As of February 3, 2024, AOCL related to foreign exchange currency contracts included a net unrealized loss of approximately $1.2 million, net of tax, of which $1.3 million will be recognized in cost of product sales over 68 Table of Contents 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.
As of February 3, 2024, AOCL related to the interest rate swap agreement included a net unrealized gain of approximately $0.6 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.
This interest rate swap agreement matures in January 2026 and converts the nature of our real estate secured term loan from LIBOR floating-rate debt to fixed-rate debt, resulting in a swap fixed rate of approximately 3.06%. The fair value of the interest rate swap agreement is based upon inputs corroborated by observable market data.
This interest rate swap agreement matures in January 2026 and converts the nature of our real estate secured term loan from LIBOR floating-rate debt to fixed-rate debt, resulting in a swap fixed rate of approximately 3.06%.
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.
As of February 3, 2024, the net unrealized gain of the remaining open forward contracts recorded in our consolidated balance sheet was approximately $0.8 million. At January 28, 2023, we had forward contracts outstanding for our European operations of $253.0 million that were designated as cash flow hedges.
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
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 AOCL (in thousands): Year Ended Feb 3, 2024 Jan 28, 2023 Beginning balance gain (loss) $ (1,584) $ 7,280 Net gains from changes in cash flow hedges 5,451 47 Net (gains) reclassified to earnings (4,411) (8,911) Ending balance loss $ (544) $ (1,584)
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 interest and market value changes affect the fair value of the Notes but do not impact our corresponding financial position, cash flows or results of operations due to the fixed nature of the debt obligation.
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.
Contract Sensitivity Analysis As of February 3, 2024, 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 $156.0 million, the fair value of the instruments would have decreased by $17.3 million.
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.
The principal objective of these contracts is to eliminate or reduce the variability of the cash flows in interest payments 69 Table of Contents associated with our floating-rate debt, thus reducing the impact of interest rate changes on future interest payment cash flows.
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%.
Interest Rate Swap Agreement Sensitivity Analysis As of February 3, 2024, we had indebtedness related to term loans of $12.1 million, finance lease obligations of $15.4 million and the Mortgage Debt of $16.4 million. The term loans provide for annual interest rates ranging between 1.5% to 6.7%.
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.
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. The fair values of the equity-linked derivatives are measured using a binomial lattice model utilizing unobservable inputs (e.g. the expected volatility and instrument specific credit spread).
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.
The finance lease obligations are based on fixed interest rates derived from the respective agreements. Prior to May 1, 2023, the interest rate on the Mortgage Debt was a variable rate based on LIBOR. In May 2023, the Company amended the terms of the Mortgage Debt for the interest rate to be based on SOFR, effective May 1, 2023.
At 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 28, 2023, we had euro foreign exchange currency contracts to purchase $83.5 million. At January 28, 2023, the net unrealized loss of these open forward contracts recorded in our consolidated balance sheet was approximately $2.6 million. We have recognized equity-linked derivatives including the embedded derivative associated with the Additional 2028 Notes.
Removed
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.
Added
In connection with the 2028 Notes, we also purchased convertible note hedge which did not qualify for the derivative scope exception for equity-linked instruments. These derivatives are not designated as hedging instruments for accounting purposes. Changes in fair value of these derivatives are reported in net earnings (loss) as part of other income (expense).
Removed
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.
Added
As of February 3, 2024, if the expected volatility were increased to 40%, keeping all other inputs constant, the fair value of the embedded derivative would increase from $16.4 million to $20.9 million and the fair value of the convertible note hedge would increase from $85.9 million to $109.5 million.
Removed
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.
Added
If the expected volatility were decreased to 20%, the fair value of the embedded derivative would decrease from $16.4 million to $11.7 million and the fair value of the convertible note hedge would decrease from $85.9 million to $61.4 million.
Added
If the credit spread increased from 4.3% to 5.3%, keeping all other inputs constant, the fair value of the embedded derivative would increase from $16.4 million to $17.0 million and the fair value of the convertible note hedge would increase from $85.9 million to $89.3 million.
Added
If the credit spread decreased from 4.3% to 3.3%, the fair value of the embedded derivative would decrease from $16.4 million to $15.7 million and the fair value of the convertible note hedge would decrease from $85.9 million to $82.3 million. Interest Rate Risk We are exposed to interest rate risk on our floating-rate debt.
Added
We have elected to apply the hedge accounting rules in accordance with authoritative guidance for certain of these contracts. In April 2023, we issued $275 million aggregate principal amount of Initial 2028 Notes and retired approximately $184.9 million aggregate principal of 2024 Notes in a private offering.
Added
In January 2024, we issued $64.8 million aggregate principal amount of Additional 2028 Notes and retired approximately $67.1 million aggregate principal of 2024 Notes in a private offering, leaving approximately $48.1 million aggregate principal amount of 2024 Notes outstanding at February 3, 2024. Refer to “Part IV.
Added
Financial Statements – Note 23 Subsequent Events” in this Form 10-K for disclosures about our Notes and related transactions. The fair value of the Notes and the equtiy-linked derivatives associated with the 2028 Notes are subject to interest rate risk, market risk and other factors due to the conversion feature of the Notes.
Added
The fair value of the Notes and the equity-linked derivatives will generally increase as our common stock price increases and will generally decrease as our common stock price declines. Changes in fair value of the equity-linked derivatives impact our financial position and results of operations.
Added
Effective May 1, 2023, the Company amended its existing interest rate swap agreement from LIBOR to SOFR, resulting in a swap fixed rate of approximately 3.14%. This amended interest rate swap agreement matures in January 2026 and converts the nature of the Mortgage Debt from SOFR floating-rate debt to fixed-rate debt.
Added
The fair value of the interest rate swap agreement is based upon inputs corroborated by observable market data.
Added
The Company also amended its existing interest rate swap agreement, resulting in a swap fixed rate of approximately 3.14% that matures in January 2026 (prior to this amendment, the agreement resulted in a swap fixed rate of approximately 3.06%).
Added
Accordingly, changes in interest rates would impact our results of operations in future periods.

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