Guess(US:GES)2021-09-01 16:00PART I. FINANCIAL INFORMATION Item 1. Financial Statements This section presents the unaudited condensed consolidated financial statements, highlighting a significant recovery with $61.1 million net earnings for the quarter Condensed Consolidated Balance Sheets As of July 31, 2021, total assets were $2.46 billion, liabilities $1.82 billion, and stockholders' equity $632.0 million Condensed Consolidated Statements of Income (Loss) For Q2 2021, the company reported $628.6 million net revenue and $63.1 million net earnings, a turnaround from a $20.7 million net loss in the prior year Condensed Consolidated Statements of Comprehensive Income (Loss) Total comprehensive income for Q2 2021 was $60.2 million, a significant increase from $2.8 million in Q2 2020 Condensed Consolidated Statements of Cash Flows For the six months ended July 31, 2021, net cash from operating activities was $43.0 million, resulting in a $10.2 million net decrease in cash Condensed Consolidated Statements of Stockholders' Equity Total stockholders' equity increased from $565.6 million to $632.0 million at July 31, 2021, primarily driven by net earnings Notes to Condensed Consolidated Financial Statements The notes provide detailed explanations of accounting policies, segment performance, debt obligations, and subsequent events - The COVID-19 pandemic continued to impact the business, but as of July 31, 2021, almost all stores were open2526 - The company has five reportable segments: Americas Retail, Americas Wholesale, Europe, Asia, and Licensing; for Q2 2021, Europe was the largest revenue contributor with $322.7 million6870 - The company has $300 million in 2.00% convertible senior notes due 2024, with a net carrying amount of $264.6 million as of July 31, 20218489 - Subsequent to the quarter's end, on August 25, 2021, the Board authorized a new $200 million share repurchase program and declared a quarterly dividend of $0.1125 per share152153 Condensed Consolidated Balance Sheet Highlights (as of July 31, 2021) | Metric | Value (in thousands) | | :--- | :--- | | Total Assets | $2,456,901 | | Cash and cash equivalents | $458,914 | | Total current assets | $1,263,889 | | Total Liabilities | $1,820,804 | | Total current liabilities | $715,152 | | Total Stockholders' Equity | $632,023 | Condensed Consolidated Statements of Income Highlights | Period | Net Revenue (in thousands) | Net Earnings (Loss) Attributable to Guess?, Inc. (in thousands) | Diluted EPS (Loss) | | :--- | :--- | :--- | :--- | | Three Months Ended Jul 31, 2021 | $628,624 | $61,062 | $0.91 | | Three Months Ended Aug 1, 2020 | $398,539 | $(20,358) | $(0.31) | | Six Months Ended Jul 31, 2021 | $1,148,626 | $73,068 | $1.10 | | Six Months Ended Aug 1, 2020 | $658,790 | $(178,024) | $(2.72) | - For the six months ended July 31, 2021, net cash provided by operating activities was $43.0 million, a slight improvement from $40.7 million in the prior-year period14 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management analyzes the company's strong Q2 fiscal 2022 recovery, with $628.6 million revenue and 13.9% operating margin - The company's strategic priorities include brand relevancy, product excellence, customer centricity, global footprint optimization, and improving functional capabilities169170171172 Q2 FY2022 vs. Q2 FY2021 Performance | Metric | Q2 FY2022 | Q2 FY2021 | % Change | | :--- | :--- | :--- | :--- | | Net Revenue | $628.6M | $398.5M | +57.7% | | Earnings (Loss) from Operations | $87.4M | $(14.3)M | -709.0% | | Operating Margin | 13.9% | -3.6% | +17.5% | Q2 FY2022 vs. Q2 FY2020 (Pre-COVID) Performance | Metric | Q2 FY2022 | Q2 FY2020 | % Change | | :--- | :--- | :--- | :--- | | Net Revenue | $628.6M | $683.2M | -8.0% | | Earnings from Operations | $87.4M | $46.0M | +90.0% | | Operating Margin | 13.9% | 6.7% | +7.2% | - The company ended the quarter with a strong liquidity position, holding $458.9 million in cash and cash equivalents197267 Results of Operations This section details financial results for the three and six-month periods, showing a 9.9% increase in gross margin to 46.8% YoY for Q2 2021 - Gross margin for Q2 2021 increased to 46.8% from 36.9% in the prior-year period, primarily due to lower occupancy rates and higher product margins from reduced markdowns199 Segment Operating Earnings (Loss) - Q2 2021 vs Q2 2020 (in thousands) | Segment | Q2 2021 | Q2 2020 | | :--- | :--- | :--- | | Americas Retail | $37,916 | $(4,704) | | Americas Wholesale | $12,944 | $1,688 | | Europe | $51,417 | $20,795 | | Asia | $(4,847) | $(3,367) | | Licensing | $20,154 | $11,511 | Liquidity and Capital Resources The company's liquidity relies on cash from operations and credit facilities, with $458.9 million cash and a new $200 million share repurchase program - The company anticipates satisfying its cash requirements for the next 12 months with cash flow from operations and existing cash balances, supplemented by borrowings if needed264 - On August 25, 2021, the Board authorized a new $200 million share repurchase program, which includes the $48 million remaining from the previous program284 Item 3. Quantitative and Qualitative Disclosures About Market Risk This section outlines the company's exposure to market risks, primarily foreign currency and interest rates, mitigated by derivatives - The company is exposed to foreign currency risk as more than two-thirds of its product sales are denominated in currencies other than the U.S. dollar292 - As of July 31, 2021, the company had outstanding forward contracts of US$114.0 million designated as cash flow hedges for its European operations to hedge forecasted merchandise purchases298 - A sensitivity analysis indicates that a 10% uniform weakening of the U.S. dollar would decrease the fair value of its foreign exchange derivatives by $14.3 million303 Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective as of July 31, 2021, with no material changes in internal control - The company's principal executive officer and principal financial officer concluded that disclosure controls and procedures were effective as of the end of the quarterly period311 - No material changes to the company's internal control over financial reporting occurred during the second quarter of fiscal 2022312 PART II. OTHER INFORMATION Item 1. Legal Proceedings This section directs readers to Note 13 of the financial statements for detailed information regarding ongoing legal proceedings - For disclosures about legal and other proceedings, the report refers to "Part I, Item 1. Financial Statements – Note 13 – Commitments and Contingencies – Legal and Other Proceedings"314 Item 1A. Risk Factors The company reports no material changes to the risk factors previously disclosed in its Annual Report on Form 10-K for FY2021 - There have been no material changes in Risk Factors from those disclosed in the Annual Report on Form 10-K for the year ended January 30, 2021315 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds No shares were repurchased in Q2 FY2022, with $47.8 million remaining under the program, and a new $200 million program approved - No shares were repurchased under the company's publicly announced program during the second quarter of fiscal 2022316 - On August 25, 2021, the Board of Directors authorized a new $200 million share repurchase program, which incorporates the $47.8 million remaining from the previous program318 Item 6. Exhibits This section lists all exhibits filed with the Form 10-Q, including corporate documents, compensatory plans, and CEO/CFO certifications - The report includes a list of filed exhibits, such as management contracts, compensatory plans, and certifications by the CEO and CFO pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act320