Guess(US:GES)2021-12-02 16:00PART I. FINANCIAL INFORMATION This section presents the company's unaudited condensed consolidated financial statements and related disclosures for the period ended October 30, 2021 Item 1. Financial Statements This item presents the company's unaudited condensed consolidated financial statements, including balance sheets, income statements, and cash flow statements Condensed Consolidated Balance Sheets This section provides a snapshot of the company's financial position, detailing assets, liabilities, and equity as of specific dates Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | Oct 30, 2021 (in thousands) | Jan 30, 2021 (in thousands) | | :--- | :--- | :--- | | Total Current Assets | $1,271,250 | $1,232,524 | | Total Assets | $2,562,441 | $2,465,868 | | Total Current Liabilities | $804,638 | $762,539 | | Total Liabilities | $1,898,985 | $1,896,368 | | Total Stockholders' Equity | $653,705 | $565,580 | Condensed Consolidated Statements of Income (Loss) This section outlines the company's financial performance over specific periods, detailing revenues, expenses, and net earnings Q3 Financial Performance (in thousands, except per share data) | Metric | Three Months Ended Oct 30, 2021 (in thousands) | Three Months Ended Oct 31, 2020 (in thousands) | | :--- | :--- | :--- | | Net Revenue | $643,070 | $569,284 | | Gross Profit | $293,604 | $239,520 | | Earnings from Operations | $65,671 | $44,467 | | Net Earnings Attributable to Guess?, Inc. | $29,880 | $26,376 | | Diluted EPS | $0.45 | $0.41 | Nine Months Financial Performance (in thousands, except per share data) | Metric | Nine Months Ended Oct 30, 2021 (in thousands) | Nine Months Ended Oct 31, 2020 (in thousands) | | :--- | :--- | :--- | | Net Revenue | $1,791,696 | $1,228,074 | | Gross Profit | $799,248 | $420,777 | | Earnings (Loss) from Operations | $179,637 | $(132,369) | | Net Earnings (Loss) Attributable to Guess?, Inc. | $102,948 | $(151,648) | | Diluted EPS | $1.55 | $(2.35) | Condensed Consolidated Statements of Cash Flows This section details the cash inflows and outflows from operating, investing, and financing activities over specific periods Cash Flow Summary (in thousands) | Cash Flow Activity | Nine Months Ended Oct 30, 2021 (in thousands) | Nine Months Ended Oct 31, 2020 (in thousands) | | :--- | :--- | :--- | | Net cash provided by operating activities | $4,581 | $98,351 | | Net cash used in investing activities | $(40,375) | $(14,578) | | Net cash used in financing activities | $(28,494) | $(4,548) | | Net change in cash, cash equivalents and restricted cash | $(78,056) | $80,657 | Notes to Condensed Consolidated Financial Statements This section provides detailed explanations of accounting policies, significant transactions, and other relevant financial information supporting the consolidated statements - The COVID-19 pandemic continues to negatively impact the business through lower traffic, capacity restrictions, and global supply chain disruptions leading to product delays and higher freight costs2425 - During Q3 2021, the company completed an intra-entity transfer of intellectual property rights from a U.S. entity to a Swiss subsidiary, resulting in a U.S. taxable gain and a U.S. income tax payment of $80.4 million in the quarter6366 - On November 23, 2021, the company announced an increase in its regular quarterly cash dividend from $0.1125 to $0.225 per share55156 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management provides an analysis of the company's financial condition, operational results, and liquidity, highlighting key performance drivers and strategic priorities Executive Summary This section provides a high-level overview of the company's financial performance and strategic direction for the reported period Q3 FY2022 Performance vs. Prior Periods | Metric | Q3 FY2022 | vs. Q3 FY2021 | vs. Q3 FY2020 (Pre-COVID) | | :--- | :--- | :--- | :--- | | Net Revenue | $643.1M | +13.0% | +4.4% | | Earnings from Operations | $65.7M | +47.7% | +190.0% | | Operating Margin | 10.2% | +2.4% | +6.5% | | Diluted EPS | $0.45 | +9.8% | +150.0% | - The company's strategic priorities include: brand relevancy, product excellence, customer centricity, global footprint, and enhancing functional capabilities in areas like logistics and sourcing174175176177 Results of Operations This section details the company's revenue, gross profit, and operating earnings performance across various segments for the reported period Q3 FY2022 Net Revenue by Segment (in thousands) | Segment | Q3 FY2022 (in thousands) | Q3 FY2021 (in thousands) | % Change | | :--- | :--- | :--- | :--- | | Americas Retail | $169,617 | $130,328 | 30.1% | | Americas Wholesale | $58,999 | $35,971 | 64.0% | | Europe | $330,736 | $321,574 | 2.8% | | Asia | $57,137 | $61,978 | (7.8%) | | Licensing | $26,581 | $19,433 | 36.8% | | Total | $643,070 | $569,284 | 13.0% | Q3 FY2022 Earnings from Operations by Segment (in thousands) | Segment | Q3 FY2022 (in thousands) | Q3 FY2021 (in thousands) | % Change | | :--- | :--- | :--- | :--- | | Americas Retail | $24,070 | $473 | 4,988.8% | | Americas Wholesale | $17,316 | $8,247 | 110.0% | | Europe | $44,509 | $51,476 | (13.5%) | | Asia | $(2,399) | $1,415 | (269.5%) | | Licensing | $24,402 | $18,228 | 33.9% | Liquidity and Capital Resources This section discusses the company's cash position, cash flow activities, debt, and capital allocation strategies, including share repurchases and dividends - Net cash from operating activities decreased by $93.8 million year-over-year, mainly due to unfavorable working capital changes and a large U.S. income tax payment of $80.4 million related to an IP transfer278 - A new $200 million share repurchase program was authorized on August 23, 2021, replacing the previous program290 - The quarterly cash dividend was increased from $0.1125 to $0.225 per share, effective for the payment on December 24, 2021288 Item 3. Quantitative and Qualitative Disclosures About Market Risk This item details the company's exposure to market risks, including foreign currency and interest rate fluctuations, and its strategies for managing these risks - The company's primary exchange rate risk relates to operations in Europe, Canada, South Korea, China, Hong Kong, and Mexico, as over two-thirds of product sales are in non-U.S. dollar currencies298 - To mitigate currency risk, the company uses forward contracts, holding US$136.0 million in forward contracts as of October 30, 2021, to hedge forecasted merchandise purchases for its European operations305 - The company is exposed to interest rate risk on its floating-rate debt and uses interest rate swap agreements to effectively convert it to a fixed-rate basis311 Item 4. Controls and Procedures Management assessed the effectiveness of the company's disclosure controls and procedures, concluding they were effective with no material changes in internal control - The principal executive officer and principal financial officer concluded that the company's disclosure controls and procedures were effective as of October 30, 2021317 PART II. OTHER INFORMATION This section provides additional information not covered in the financial statements, including legal proceedings, risk factors, and equity security sales Item 1. Legal Proceedings This item details the company's ongoing legal matters, including a customs tax dispute and legal actions against an executive and the company - The company is involved in an ongoing customs tax dispute with the Italian Customs Agency (ICA) regarding audits from 2010-2012, with various appeals pending at the Supreme Court108 - Several legal actions have been filed against executive Paul Marciano and the company by former models alleging improper treatment, which the company and Mr. Marciano dispute and intend to contest vigorously109110111 Item 1A. Risk Factors There have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the fiscal year ended January 30, 2021 - No material changes were reported in the Risk Factors from the company's most recent Annual Report on Form 10-K321 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This item reports on equity security transactions, noting no share repurchases during the quarter but the authorization of a new $200 million program - No shares were repurchased under the company's publicly announced plans during the third quarter of fiscal 2022322 - On August 23, 2021, the Board authorized a new $200 million share repurchase program, which had its full capacity remaining as of October 30, 2021322 Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including the company's Restated Certificate of Incorporation, Bylaws, and certifications from the CEO and CFO as required by the Sarbanes-Oxley Act