Table of Contents

 	
 	
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q 

x         QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended August 1, 2015 
OR 
o                  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from             to           
Commission file number: 1-11893
GUESS?, INC.
(Exact name of registrant as specified in its charter)

Delaware	95-3679695	
(State or other jurisdiction of	(I.R.S. Employer	
incorporation or organization)	Identification No.)	
 	 	
1444 South Alameda Street	 	
Los Angeles, California	90021	
(Address of principal executive offices)	(Zip Code)	
(213) 765-3100
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes  x   No  o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes  x   No  o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer x	Accelerated filer o	
 	 	
Non-accelerated filer o	Smaller reporting company o	
(Do not check if a smaller reporting company)	 	
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes  o   No  x
As of September 1, 2015 the registrant had 85,759,076 shares of Common Stock, $.01 par value per share, outstanding.

 	

Table of Contents

GUESS?, INC.
FORM 10-Q
TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION	
Item 1.	Financial Statements (unaudited)	1	
 	 	 	
 	Condensed Consolidated Balance Sheets as of August 1, 2015 and January 31, 2015	1	
 	 	 	
 	Condensed Consolidated Statements of Income — Three and Six Months Ended August 1, 2015 and August 2, 2014	2	
 	 	 	
 	Condensed Consolidated Statements of Comprehensive Income — Three and Six Months Ended August 1, 2015 and August 2, 2014	3	
 	 	 	
 	Condensed Consolidated Statements of Cash Flows — Six Months Ended August 1, 2015 and August 2, 2014	4	
 	 	 	
 	Notes to Condensed Consolidated Financial Statements	5	
 	 	 	
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	28	
 	 	 	
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	47	
 	 	 	
Item 4.	Controls and Procedures	49	
PART II. OTHER INFORMATION	
Item 1.	Legal Proceedings	50	
 	 	 	
Item 1A.	Risk Factors	51	
 	 	 	
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	51	
 	 	 	
Item 6.	Exhibits	52	

i

Table of Contents

PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements.
GUESS?, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data) 	
 	 	 	 	 	 	 	 	
 	Aug 1,
2015	 	Jan 31,
2015	
 	(unaudited)	 	 	
ASSETS	 	

Current assets:	 	

Cash and cash equivalents	$	470,946	
 	 	$	483,483	
 	
Accounts receivable, net	198,735	
 	 	216,205	
 	
Inventories	335,460	
 	 	319,078	
 	
Other current assets	85,013	
 	 	92,593	
 	
Total current assets	1,090,154	
 	 	1,111,359	
 	
Property and equipment, net	241,579	
 	 	259,524	
 	
Goodwill	33,766	
 	 	34,133	
 	
Other intangible assets, net	8,009	
 	 	9,745	
 	
Long-term deferred tax assets	66,513	
 	 	68,747	
 	
Other assets	123,591	
 	 	117,897	
 	
 	$	1,563,612	
 	 	$	1,601,405	
 	
LIABILITIES AND STOCKHOLDERS’ EQUITY	 	

Current liabilities:	 	

Current portion of capital lease obligations	$	4,840	
 	 	$	1,548	
 	
Accounts payable	159,244	
 	 	159,924	
 	
Accrued expenses	155,132	
 	 	140,494	
 	
Total current liabilities	319,216	
 	 	301,966	
 	
Long-term debt and capital lease obligations	2,057	
 	 	6,165	
 	
Deferred rent and lease incentives	78,820	
 	 	81,761	
 	
Other long-term liabilities	99,721	
 	 	117,630	
 	
 	499,814	
 	 	507,522	
 	
Redeemable noncontrolling interests	5,349	
 	 	4,437	

Commitments and contingencies (Note 12)	

 	

Stockholders’ equity:	 	

Preferred stock, $.01 par value. Authorized 10,000,000 shares; no shares issued and outstanding	—	
 	 	—	
 	
Common stock, $.01 par value. Authorized 150,000,000 shares; issued   139,975,804 and 139,559,000 shares, outstanding 85,763,440   and 85,323,154 shares, as of August 1, 2015 and January 31, 2015, respectively	858	
 	 	853	
 	
Paid-in capital	459,838	
 	 	453,546	
 	
Retained earnings	1,247,339	
 	 	1,265,524	
 	
Accumulated other comprehensive loss	(142,804	)	 	(127,065	)	
Treasury stock, 54,212,364 and 54,235,846 shares as of August 1, 2015 and January 31, 2015, respectively	(518,778	)	 	(519,002	)	
Guess?, Inc. stockholders’ equity	1,046,453	
 	 	1,073,856	
 	
Nonredeemable noncontrolling interests	11,996	
 	 	15,590	
 	
Total stockholders’ equity	1,058,449	
 	 	1,089,446	
 	
 	$	1,563,612	
 	 	$	1,601,405	

See accompanying notes to condensed consolidated financial statements.

1

Table of Contents

GUESS?, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
(unaudited)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	Three Months Ended	 	Six Months Ended	
 	Aug 1,
2015	 	Aug 2,
2014	 	Aug 1,
2015	 	Aug 2,
2014	
Product sales	$	520,937	
 	 	$	581,779	
 	 	$	973,896	
 	 	$	1,078,707	
 	
Net royalties	25,327	
 	 	26,792	
 	 	51,192	
 	 	52,405	
 	
Net revenue	546,264	
 	 	608,571	
 	 	1,025,088	
 	 	1,131,112	
 	
Cost of product sales	348,147	
 	 	391,794	
 	 	661,486	
 	 	738,104	
 	
Gross profit	198,117	
 	 	216,777	
 	 	363,602	
 	 	393,008	
 	
Selling, general and administrative expenses	171,916	
 	 	186,919	
 	 	333,048	
 	 	365,127	
 	
Earnings from operations	26,201	
 	 	29,858	
 	 	30,554	
 	 	27,881	
 	
Other income (expense):	 	

Interest expense	(729	)	 	(772	)	 	(1,164	)	 	(1,297	)	
Interest income	239	
 	 	320	
 	 	511	
 	 	725	
 	
Other income, net	3,708	
 	 	4,766	
 	 	6,334	
 	 	3,647	
 	
 	3,218	
 	 	4,314	
 	 	5,681	
 	 	3,075	

Earnings before income tax expense	29,419	
 	 	34,172	
 	 	36,235	
 	 	30,956	
 	
Income tax expense	10,940	
 	 	11,900	
 	 	13,769	
 	 	10,871	
 	
Net earnings	18,479	
 	 	22,272	
 	 	22,466	
 	 	20,085	
 	
Net earnings attributable to noncontrolling interests	190	
 	 	318	
 	 	836	
 	 	232	
 	
Net earnings attributable to Guess?, Inc.	$	18,289	
 	 	$	21,954	
 	 	$	21,630	
 	 	$	19,853	

Net earnings per common share attributable to common stockholders (Note 2):	
Basic	$	0.21	
 	 	$	0.26	
 	 	$	0.25	
 	 	$	0.23	
 	
Diluted	$	0.21	
 	 	$	0.26	
 	 	$	0.25	
 	 	$	0.23	

Weighted average common shares outstanding attributable to common stockholders (Note 2):	
Basic	85,004	
 	 	84,573	
 	 	84,985	
 	 	84,536	
 	
Diluted	85,290	
 	 	84,799	
 	 	85,132	
 	 	84,765	

Dividends declared per common share	$	0.225	
 	 	$	0.225	
 	 	$	0.450	
 	 	$	0.450	

See accompanying notes to condensed consolidated financial statements.

2

Table of Contents

GUESS?, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
(unaudited)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	Three Months Ended	 	Six Months Ended	
 	Aug 1,
2015	 	Aug 2,
2014	 	Aug 1,
2015	 	Aug 2,
2014	
Net earnings	$	18,479	
 	 	$	22,272	
 	 	$	22,466	
 	 	$	20,085	
 	
Other comprehensive income (loss) (“OCI”):	 	

Foreign currency translation adjustment	 	 	 	 	 	 	 	
Gains (losses) arising during the period	(20,933	)	 	(19,708	)	 	(21,636	)	 	2,542	
 	
Derivative financial instruments designated as cash flow hedges	 	

Gains (losses) arising during the period	5,721	
 	 	1,867	
 	 	4,426	
 	 	(812	)	
Less income tax effect	(1,137	)	 	(515	)	 	(768	)	 	106	
 	
Reclassification to net earnings for (gains) losses realized	(3,523	)	 	290	
 	 	(5,759	)	 	815	
 	
Less income tax effect	511	
 	 	391	
 	 	812	
 	 	370	
 	
Marketable securities	 	

Losses arising during the period	(7	)	 	(40	)	 	(14	)	 	(66	)	
Less income tax effect	3	
 	 	15	
 	 	6	
 	 	25	
 	
Reclassification to net earnings for gains realized	—	
 	 	—	
 	 	—	
 	 	(87	)	
Less income tax effect	—	
 	 	—	
 	 	—	
 	 	33	
 	
Defined benefit plans	 	

Actuarial gain	11,378	
 	 	—	
 	 	11,378	
 	 	—	
 	
Less income tax effect	(4,352	)	 	—	
 	 	(4,352	)	 	—	
 	
Actuarial loss amortization	430	
 	 	235	
 	 	943	
 	 	469	
 	
Prior service credit amortization	(39	)	 	(58	)	 	(97	)	 	(116	)	
Curtailment	(1,651	)	 	—	
 	 	(1,651	)	 	—	
 	
Less income tax effect	522	
 	 	(68	)	 	373	
 	 	(135	)	
Total comprehensive income	5,402	
 	 	4,681	
 	 	6,127	
 	 	23,229	
 	
Less comprehensive income (loss) attributable to noncontrolling interests:	 	

Net earnings	190	
 	 	318	
 	 	836	
 	 	232	
 	
Foreign currency translation adjustment	(236	)	 	(284	)	 	(600	)	 	117	
 	
Amounts attributable to noncontrolling interests	(46	)	 	34	
 	 	236	
 	 	349	
 	
Comprehensive income attributable to Guess?, Inc.	$	5,448	
 	 	$	4,647	
 	 	$	5,891	
 	 	$	22,880	

See accompanying notes to condensed consolidated financial statements.

3

Table of Contents

GUESS?, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)	
 	 	 	 	 	 	 	 	
 	Six Months Ended	
 	Aug 1,
2015	 	Aug 2,
2014	
Cash flows from operating activities:	 	

Net earnings	$	22,466	
 	 	$	20,085	
 	
Adjustments to reconcile net earnings to net cash provided by operating activities:	 	

Depreciation and amortization of property and equipment	35,363	
 	 	41,363	
 	
Amortization of intangible assets	1,080	
 	 	1,291	
 	
Share-based compensation expense	8,052	
 	 	7,613	
 	
Unrealized forward contract gains	(1,979	)	 	(1,047	)	
Net (gain) loss on disposition of long-term assets and property and equipment	(171	)	 	5,986	
 	
Other items, net	167	
 	 	847	
 	
Changes in operating assets and liabilities:	 	

Accounts receivable	12,943	
 	 	42,381	
 	
Inventories	(21,791	)	 	(43,485	)	
Prepaid expenses and other assets	(5,624	)	 	(8,484	)	
Accounts payable and accrued expenses	18,432	
 	 	(30,286	)	
Deferred rent and lease incentives	(2,455	)	 	(442	)	
Other long-term liabilities	(9,747	)	 	(5,459	)	
Net cash provided by operating activities	56,736	
 	 	30,363	
 	
Cash flows from investing activities:	 	

Purchases of property and equipment	(24,963	)	 	(32,316	)	
Changes in other assets	1,768	
 	 	319	
 	
Proceeds from sale of investment	—	
 	 	598	
 	
Acquisition of businesses, net of cash acquired	(846	)	 	(309	)	
Net cash settlement of forward contracts	6,814	
 	 	(842	)	
Net cash used in investing activities	(17,227	)	 	(32,550	)	
Cash flows from financing activities:	 	

Payment of debt issuance costs	(945	)	 	—	
 	
Proceeds from borrowings	581	
 	 	786	
 	
Repayment of capital lease obligations and borrowings	(756	)	 	(3,720	)	
Dividends paid	(38,520	)	 	(38,455	)	
Noncontrolling interest capital distributions	(3,830	)	 	—	
 	
Issuance of common stock, net of nonvested award repurchases	(1,052	)	 	619	
 	
Excess tax benefits from share-based compensation	79	
 	 	148	
 	
Net cash used in financing activities	(44,443	)	 	(40,622	)	
Effect of exchange rates on cash and cash equivalents	(7,603	)	 	1,383	
 	
Net change in cash and cash equivalents	(12,537	)	 	(41,426	)	
Cash and cash equivalents at the beginning of the year	483,483	
 	 	502,945	
 	
Cash and cash equivalents at the end of the period	$	470,946	
 	 	$	461,519	

Supplemental cash flow data:	 	

Interest paid	$	508	
 	 	$	870	
 	
Income taxes paid	$	14,590	
 	 	$	46,208	

See accompanying notes to condensed consolidated financial statements.

4

Table of Contents

GUESS?, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
August 1, 2015 
(unaudited) 
 	 	
(1)	Basis of Presentation	
In the opinion of management, the accompanying unaudited condensed consolidated financial statements of Guess?, Inc. and its subsidiaries (the “Company”) contain all adjustments, consisting of normal recurring adjustments, considered necessary for a fair presentation of the condensed consolidated balance sheets as of August 1, 2015 and January 31, 2015, the condensed consolidated statements of income and comprehensive income for the three and six months ended August 1, 2015 and August 2, 2014 and the condensed consolidated statements of cash flows for the six months ended August 1, 2015 and August 2, 2014. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the U.S. (“GAAP”) for interim financial information and the instructions to Rule 10-01 of Regulation S-X of the Securities and Exchange Commission. Accordingly, they have been condensed and do not include all of the information and footnotes required by GAAP for complete financial statements. The results of operations for the three and six months ended August 1, 2015 are not necessarily indicative of the results of operations to be expected for the full fiscal year. These financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended January 31, 2015.
The three and six months ended August 1, 2015 had the same number of days as the three and six months ended August 2, 2014. All references herein to “fiscal 2016,” “fiscal 2015” and “fiscal 2014” represent the results of the 52-week fiscal year ending January 30, 2016 and the 52-week fiscal years ended January 31, 2015 and February 1, 2014, respectively. 
Principles of Consolidation
The condensed consolidated financial statements include the accounts of Guess?, Inc., its wholly-owned direct and indirect subsidiaries and its non wholly-owned subsidiaries and joint ventures in which the Company has a controlling financial interest and is determined to be the primary beneficiary. Accordingly, all references herein to “Guess?, Inc.” include the consolidated results of the Company, its wholly-owned subsidiaries and its joint ventures. All intercompany accounts and transactions are eliminated during the consolidation process.
Reclassifications
The Company has made certain reclassifications to prior year amounts to conform to the current period presentation within the accompanying notes to the condensed consolidated financial statements.
New Accounting Guidance
In April 2014, the Financial Accounting Standards Board (“FASB”) issued authoritative guidance which raises the threshold for disposals to qualify as discontinued operations. Under this new guidance, a discontinued operation is (1) a component of an entity or group of components that have been disposed of or are classified as held for sale and represent a strategic shift that has or will have a major effect on an entity’s operations and financial results, or (2) an acquired business that is classified as held for sale on the acquisition date. This guidance also requires expanded or new disclosures for discontinued operations, individually material disposals that do not meet the definition of a discontinued operation, an entity’s continuing involvement with a discontinued operation following disposal and retained equity method investments in a discontinued operation. The Company adopted this guidance effective February 1, 2015. The adoption of this guidance did not have a material impact on the Company’s condensed consolidated financial statements for the three and six months ended August 1, 2015.
In May 2014, the FASB issued a comprehensive new revenue recognition standard which will supersede previous existing revenue recognition guidance. The standard creates a five-step model for revenue recognition that requires companies to exercise judgment when considering contract terms and relevant facts and circumstances. The five-step model includes (1) identifying the contract, (2) identifying the separate performance

5

Table of Contents

obligations in the contract, (3) determining the transaction price, (4) allocating the transaction price to the separate performance obligations and (5) recognizing revenue when each performance obligation has been satisfied. The standard also requires expanded disclosures surrounding revenue recognition. The standard is effective for fiscal periods beginning after December 15, 2017, which will be the Company’s first quarter of fiscal 2019, and allows for either full retrospective or modified retrospective adoption. Early adoption is permitted for fiscal periods beginning after December 15, 2016, which will be the Company’s first quarter of fiscal 2018. The Company is currently evaluating the impact of the adoption of this standard on its consolidated financial statements, including the choice of application method upon adoption. 
In August 2014, the FASB issued authoritative guidance that requires an entity’s management to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity’s ability to continue as a going concern and requires additional disclosures if certain criteria are met. This guidance is effective for fiscal periods ending after December 15, 2016, which will be the Company’s fourth quarter of fiscal 2017, with early adoption permitted. The adoption of this guidance is not expected to impact the Company’s consolidated financial statements or related disclosures. 
In February 2015, the FASB issued authoritative guidance which modifies existing consolidation guidance for reporting organizations that are required to evaluate whether they should consolidate certain legal entities. This guidance is effective for fiscal periods beginning after December 15, 2015, which will be the Company’s first quarter of fiscal 2017, and allows for either full retrospective or modified retrospective adoption, with early adoption permitted. The Company is currently evaluating the impact of the adoption of this standard on its consolidated financial statements, including the choice of application method upon adoption. 
In April 2015, the FASB issued authoritative guidance to simplify the presentation of debt issuance costs by requiring such costs to be presented as a deduction from the corresponding debt liability. This guidance is effective for fiscal years beginning after December 15, 2015, which will be the Company’s first quarter of fiscal 2017, and requires retrospective adoption, with early adoption permitted. The adoption of this guidance is not expected to have a material impact on the Company’s consolidated financial statements or related disclosures. 
In April 2015, the FASB issued authoritative guidance which would permit an entity to measure its defined benefit plan assets and obligations using the calendar month-end that is closest to the entity’s fiscal period-end for interim and annual periods. This guidance is effective for fiscal years beginning after December 15, 2015, which will be the Company’s first quarter of fiscal 2017, and requires prospective adoption, with early adoption permitted. The Company is currently evaluating whether it will adopt this guidance, but if adopted, this guidance is not expected to have a material impact on the Company’s consolidated financial statements or related disclosures. 
In July 2015, the FASB issued authoritative guidance to simplify the subsequent measurement of inventories by replacing the lower of cost or market test with a lower of cost and net realizable value test. This guidance is effective for fiscal years beginning after December 15, 2016, which will be the Company’s first quarter of fiscal 2018, and requires prospective adoption, with early adoption permitted. The adoption of this guidance is not expected to have a material impact on the Company’s consolidated financial statements or related disclosures. 
 	 	
(2)	Earnings Per Share	
Basic earnings per share represents net earnings attributable to common stockholders divided by the weighted average number of common shares outstanding during the period. The weighted average number of common shares outstanding does not include restricted stock units with forfeitable dividend rights that have been classified as issued and outstanding but are considered contingently returnable as a result of certain service conditions. These restricted stock units are considered common equivalent shares outstanding and are excluded from the basic earnings per share calculation until the respective service conditions have been met. Diluted earnings per share represents net earnings attributable to common stockholders divided by the weighted average number of common shares outstanding, inclusive of the dilutive impact of common equivalent shares outstanding during the period. However, nonvested restricted stock awards (referred to as participating securities) are excluded from the dilutive impact of common equivalent shares outstanding in accordance with authoritative guidance under the two-class method since the nonvested restricted stockholders are entitled to participate in dividends declared

6

Table of Contents

on common stock as if the shares were fully vested and hence are deemed to be participating securities. Under the two-class method, earnings attributable to nonvested restricted stockholders are excluded from net earnings attributable to common stockholders for purposes of calculating basic and diluted earnings per common share. However, net losses are not allocated to nonvested restricted stockholders since they are not contractually obligated to share in the losses of the Company.
In addition, the Company has granted certain nonvested stock units that are subject to certain performance-based or market-based vesting conditions as well as continued service requirements through the respective vesting periods. These nonvested stock units are included in the computation of diluted net earnings per common share attributable to common stockholders only to the extent that the underlying performance-based or market-based vesting conditions are satisfied as of the end of the reporting period, or would be considered satisfied if the end of the reporting period were the end of the related contingency period, and the results would be dilutive under the treasury stock method.
The computation of basic and diluted net earningsper common share attributable to common stockholders is as follows (in thousands, except per share data):

 	Three Months Ended	 	Six Months Ended	
 	Aug 1, 2015	 	Aug 2, 2014	 	Aug 1, 2015	 	Aug 2, 2014	
Net earnings attributable to Guess?, Inc.	$	18,289	
 	 	$	21,954	
 	 	$	21,630	
 	 	$	19,853	
 	
Less net earnings attributable to nonvested restricted stockholders	143	
 	 	167	
 	 	227	
 	 	292	
 	
Net earnings attributable to common stockholders	$	18,146	
 	 	$	21,787	
 	 	$	21,403	
 	 	$	19,561	

Weighted average common shares used in basic computations	85,004	
 	 	84,573	
 	 	84,985	
 	 	84,536	
 	
Effect of dilutive securities:	 	

 	 	 	
 	
Stock options and restricted stock units	286	
 	 	226	
 	 	147	
 	 	229	
 	
Weighted average common shares used in diluted computations	85,290	
 	 	84,799	
 	 	85,132	
 	 	84,765	

Net earnings per common share attributable to common stockholders:	
Basic	$	0.21	
 	 	$	0.26	
 	 	$	0.25	
 	 	$	0.23	
 	
Diluted	$	0.21	
 	 	$	0.26	
 	 	$	0.25	
 	 	$	0.23	
 	
For the three months ended August 1, 2015 and August 2, 2014, equity awards granted for 2,525,300 and 1,666,111, respectively, of the Company’s common shares and for the six months ended August 1, 2015 and August 2, 2014, equity awards granted for 2,473,325 and 1,549,291, respectively, of the Company’s common shares were outstanding but were excluded from the computation of diluted weighted average common shares and common share equivalents outstanding because the assumed proceeds, as calculated under the treasury stock method, resulted in these awards being antidilutive. For the three and six months ended August 1, 2015, the Company also excluded 425,866 nonvested stock units which are subject to the achievement of performance-based or market-based vesting conditions from the computation of diluted weighted average common shares and common share equivalents outstanding because these conditions were not achieved as of August 1, 2015. For the three and six months ended August 2, 2014, the Company excluded 259,700 nonvested stock units which were subject to the achievement of performance-based vesting conditions from the computation of diluted weighted average common shares and common share equivalents outstanding because these conditions were not achieved as of August 2, 2014.

7

Table of Contents

Share Repurchase Program
On June 26, 2012, the Company’s Board of Directors authorized a program to repurchase, from time-to-time and as market and business conditions warrant, up to $500 million of the Company’s common stock (the “2012 Share Repurchase Program”). Repurchases under the program 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, which may be discontinued at any time, without prior notice. As of August 1, 2015, the Company had remaining authority under the 2012 Share Repurchase Program to purchase $495.8 million of its common stock. There were no share repurchases during the three and six months ended August 1, 2015 and August 2, 2014.

8

Table of Contents
 	 	
(3)	Stockholders’ Equity and Redeemable Noncontrolling Interests	
A reconciliation of common stock outstanding, treasury stock and the total carrying amount of total stockholders’ equity, Guess?, Inc. stockholders’ equity and stockholders’ equity attributable to nonredeemable and redeemable noncontrolling interests for the fiscal year ended January 31, 2015 and six months ended August 1, 2015 is as follows (in thousands, except share data):

 	Shares	 	Stockholders’ Equity	 	 	
 	Common Stock	 	Treasury Stock	 	Guess?, Inc.
Stockholders’
Equity	 	Nonredeemable
Noncontrolling
Interests	 	Total	 	Redeemable
Noncontrolling
Interests	
Balance at February 1, 2014	84,962,345	
 	 	54,283,384	
 	 	$	1,154,514	
 	 	$	15,472	
 	 	$	1,169,986	
 	 	$	5,830	
 	
Net earnings	—	
 	 	—	
 	 	94,570	
 	 	2,614	
 	 	97,184	
 	 	—	
 	
Foreign currency translation adjustment	—	
 	 	—	
 	 	(114,566	)	 	(2,141	)	 	(116,707	)	 	(788	)	
Gain on derivative financial instruments designated as cash flow hedges, net of income tax of ($721)	—	
 	 	—	
 	 	7,270	
 	 	—	
 	 	7,270	
 	 	—	
 	
Loss on marketable securities, net of income tax of $61	—	
 	 	—	
 	 	(106	)	 	—	
 	 	(106	)	 	—	
 	
Prior service credit amortization and actuarial valuation loss and related amortization on defined benefit plans, net of income tax of $2,335	—	
 	 	—	
 	 	(5,862	)	 	—	
 	 	(5,862	)	 	—	
 	
Issuance of common stock under stock compensation plans, net of tax effect	313,271	
 	 	—	
 	 	(1,937	)	 	—	
 	 	(1,937	)	 	—	
 	
Issuance of stock under Employee Stock Purchase Plan	47,538	
 	 	(47,538	)	 	1,008	
 	 	—	
 	 	1,008	
 	 	—	
 	
Share-based compensation	—	
 	 	—	
 	 	15,342	
 	 	—	
 	 	15,342	
 	 	—	
 	
Dividends	—	
 	 	—	
 	 	(76,982	)	 	—	
 	 	(76,982	)	 	—	
 	
Noncontrolling interest capital distribution	—	
 	 	—	
 	 	—	
 	 	(355	)	 	(355	)	 	—	
 	
Redeemable noncontrolling interest redemption value adjustment	—	
 	 	—	
 	 	605	
 	 	—	
 	 	605	
 	 	(605	)	
Balance at January 31, 2015	85,323,154	
 	 	54,235,846	
 	 	$	1,073,856	
 	 	$	15,590	
 	 	$	1,089,446	
 	 	$	4,437	
 	
Net earnings	—	
 	 	—	
 	 	21,630	
 	 	836	
 	 	22,466	
 	 	—	
 	
Foreign currency translation adjustment	—	
 	 	—	
 	 	(21,036	)	 	(600	)	 	(21,636	)	 	(308	)	
Loss on derivative financial instruments designated as cash flow hedges, net of income tax of $44	—	
 	 	—	
 	 	(1,289	)	 	—	
 	 	(1,289	)	 	—	
 	
Loss on marketable securities, net of income tax of $6	—	
 	 	—	
 	 	(8	)	 	—	
 	 	(8	)	 	—	
 	
Actuarial valuation gain (loss) and related amortization, curtailment and prior service credit amortization on defined benefit plans, net of income tax of ($3,979)	—	
 	 	—	
 	 	6,594	
 	 	—	
 	 	6,594	
 	 	—	
 	
Issuance of common stock under stock compensation plans, net of tax effect	416,804	
 	 	—	
 	 	(1,842	)	 	—	
 	 	(1,842	)	 	—	
 	
Issuance of stock under Employee Stock Purchase Plan	23,482	
 	 	(23,482	)	 	374	
 	 	—	
 	 	374	
 	 	—	
 	
Share-based compensation	—	
 	 	—	
 	 	8,052	
 	 	—	
 	 	8,052	
 	 	—	
 	
Dividends	—	
 	 	—	
 	 	(38,658	)	 	—	
 	 	(38,658	)	 	—	
 	
Noncontrolling interest capital distribution	—	
 	 	—	
 	 	—	
 	 	(3,830	)	 	(3,830	)	 	—	
 	
Redeemable noncontrolling interest redemption value adjustment	—	
 	 	—	
 	 	(1,220	)	 	—	
 	 	(1,220	)	 	1,220	
 	
Balance at August 1, 2015	85,763,440	
 	 	54,212,364	
 	 	$	1,046,453	
 	 	$	11,996	
 	 	$	1,058,449	
 	 	$	5,349	

9

Table of Contents

Accumulated Other Comprehensive Income (Loss)
The changes in accumulated other comprehensive income (loss), net of related income taxes, for the three and six months ended August 1, 2015 and August 2, 2014 are as follows (in thousands):

 	Three Months Ended Aug 1, 2015	
 	Foreign Currency Translation Adjustment	 	Derivative Financial Instruments Designated as Cash Flow Hedges	 	Marketable Securities	 	Defined Benefit Plans	 	Total	
Balance at May 2, 2015	$	(121,908	)	 	$	4,296	
 	 	$	(7	)	 	$	(12,344	)	 	$	(129,963	)	
Gains (losses) arising during the period	(20,697	)	 	4,584	
 	 	(4	)	 	7,026	
 	 	(9,091	)	
Reclassification to net earnings for gains realized	—	
 	 	(3,012	)	 	—	
 	 	(738	)	 	(3,750	)	
Net other comprehensive income (loss)	(20,697	)	 	1,572	
 	 	(4	)	 	6,288	
 	 	(12,841	)	
Balance at August 1, 2015	$	(142,605	)	 	$	5,868	
 	 	$	(11	)	 	$	(6,056	)	 	$	(142,804	)	

 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	Six Months Ended Aug 1, 2015	
 	Foreign Currency Translation Adjustment	 	Derivative Financial Instruments Designated as Cash Flow Hedges	 	Marketable Securities	 	Defined Benefit Plans	 	Total	
Balance at January 31, 2015	$	(121,569	)	 	$	7,157	
 	 	$	(3	)	 	$	(12,650	)	 	$	(127,065	)	
Gains (losses) arising during the period	(21,036	)	 	3,658	
 	 	(8	)	 	7,026	
 	 	(10,360	)	
Reclassification to net earnings for gains realized	—	
 	 	(4,947	)	 	—	
 	 	(432	)	 	(5,379	)	
Net other comprehensive income (loss)	(21,036	)	 	(1,289	)	 	(8	)	 	6,594	
 	 	(15,739	)	
Balance at August 1, 2015	$	(142,605	)	 	$	5,868	
 	 	$	(11	)	 	$	(6,056	)	 	$	(142,804	)	

 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	Three Months Ended Aug 2, 2014	
 	Foreign Currency Translation Adjustment	 	Derivative Financial Instruments Designated as Cash Flow Hedges	 	Marketable Securities	 	Defined Benefit Plans	 	Total	
Balance at May 3, 2014	$	14,846	
 	 	$	(1,667	)	 	$	33	
 	 	$	(6,679	)	 	$	6,533	
 	
Gains (losses) arising during the period	(19,424	)	 	1,352	
 	 	(25	)	 	—	
 	 	(18,097	)	
Reclassification to net earnings for losses realized	—	
 	 	681	
 	 	—	
 	 	109	
 	 	790	
 	
Net other comprehensive income (loss)	(19,424	)	 	2,033	
 	 	(25	)	 	109	
 	 	(17,307	)	
Balance at August 2, 2014	$	(4,578	)	 	$	366	
 	 	$	8	
 	 	$	(6,570	)	 	$	(10,774	)	

 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	Six Months Ended Aug 2, 2014	
 	Foreign Currency Translation Adjustment	 	Derivative Financial Instruments Designated as Cash Flow Hedges	 	Marketable Securities	 	Defined Benefit Plans	 	Total	
Balance at February 1, 2014	$	(7,003	)	 	$	(113	)	 	$	103	
 	 	$	(6,788	)	 	$	(13,801	)	
Gains (losses) arising during the period	2,425	
 	 	(706	)	 	(41	)	 	—	
 	 	1,678	
 	
Reclassification to net earnings for (gains) losses realized	—	
 	 	1,185	
 	 	(54	)	 	218	
 	 	1,349	
 	
Net other comprehensive income (loss)	2,425	
 	 	479	
 	 	(95	)	 	218	
 	 	3,027	
 	
Balance at August 2, 2014	$	(4,578	)	 	$	366	
 	 	$	8	
 	 	$	(6,570	)	 	$	(10,774	)	

10

Table of Contents

Details on reclassifications out of accumulated other comprehensive income (loss) to net earnings during the three and six months ended August 1, 2015 and August 2, 2014 are as follows (in thousands):

 	Three Months Ended	 	Six Months Ended	 	Location of
(Gain) Loss
Reclassified from
Accumulated OCI
into Earnings	
 	Aug 1, 2015	 	Aug 2, 2014	 	Aug 1, 2015	 	Aug 2, 2014	 	 	
Derivative financial instruments designated as cash flow hedges:	 	 	 	 	 	 	 	 	 	
   Foreign exchange currency contracts	$	(3,193	)	 	$	265	
 	 	$	(4,943	)	 	$	759	
 	 	Cost of product sales	
   Foreign exchange currency contracts	(330	)	 	25	
 	 	(816	)	 	56	
 	 	Other income/expense	
      Less income tax effect	511	
 	 	391	
 	 	812	
 	 	370	
 	 	Income tax expense	
 	(3,012	)	 	681	
 	 	(4,947	)	 	1,185	
 	 	 	
Marketable securities:	 	 	 	 	 	 	 	 	 	
   Available-for-sale securities	—	
 	 	—	
 	 	—	
 	 	(87	)	 	Other income/expense	
      Less income tax effect	—	
 	 	—	
 	 	—	
 	 	33	
 	 	Income tax expense	
 	—	
 	 	—	
 	 	—	
 	 	(54	)	 	 	
Defined benefit plans:	 	 	 	 	 	 	 	 	 	
   Actuarial loss amortization	430	
 	 	235	
 	 	943	
 	 	469	
 	 	(1) 	
   Prior service credit amortization	(39	)	 	(58	)	 	(97	)	 	(116	)	 	(1) 	
   Curtailment	(1,651	)	 	—	
 	 	(1,651	)	 	—	
 	 	(1) 	
      Less income tax effect	522	
 	 	(68	)	 	373	
 	 	(135	)	 	Income tax expense	
 	(738	)	 	109	
 	 	(432	)	 	218	
 	 	 	
Total reclassifications during the period	$	(3,750	)	 	$	790	
 	 	$	(5,379	)	 	$	1,349	
 	 	 	
__________________________________
 	 	
(1)	These accumulated other comprehensive income (loss) components are included in the computation of net periodic defined benefit pension cost. Refer to Note 13 for further information.	
Redeemable Noncontrolling Interests
The Company is party to a put arrangement with respect to the common securities that represent the remaining noncontrolling interest from the acquisition of its majority-owned subsidiary, Guess Sud SAS (“Guess Sud”). The put arrangement for Guess Sud, representing 40% of the total outstanding equity interest of that subsidiary, may be exercised at the discretion of the noncontrolling interest holders by providing written notice to the Company any time after January 30, 2012. The put arrangement is recorded on the balance sheet at its expected redemption value based on a method which approximates fair value and classified as a redeemable noncontrolling interest outside of permanent equity. The redemption value of the Guess Sud redeemable put arrangement was $4.5 million and $3.4 million as of August 1, 2015 and January 31, 2015, respectively.
The Company is also party to a put arrangement with respect to the common securities that represent the remaining noncontrolling interest for its majority-owned subsidiary, Guess Brasil Comércio e Distribuiçăo S.A. (“Guess Brazil”), which was established through a majority-owned joint venture during fiscal 2014. The put arrangement for Guess Brazil, representing 40% of the total outstanding equity interest of that subsidiary, may be exercised at the discretion of the noncontrolling interest holder by providing written notice to the Company beginning in the sixth year of the agreement, or sooner in certain limited circumstances, and every third anniversary from the end of the sixth year thereafter subject to certain time restrictions. The redemption value of the Guess Brazil put arrangement is based on a multiple of Guess Brazil’s earnings before interest, taxes, depreciation and amortization subject to certain adjustments. The carrying value of the redeemable noncontrolling interest related to Guess Brazil was $0.8 million and $1.0 million as of August 1, 2015 and January 31, 2015, respectively.

11

Table of Contents
 	 	
(4)	Accounts Receivable	
Accounts receivable is summarized as follows (in thousands):

 	Aug 1, 2015	 	Jan 31, 2015	
Trade	$	208,976	
 	 	$	229,618	
 	
Royalty	10,830	
 	 	10,118	
 	
Other	8,404	
 	 	8,389	
 	
 	228,210	
 	 	248,125	
 	
Less allowance for doubtful accounts	29,475	
 	 	31,920	
 	
 	$	198,735	
 	 	$	216,205	
 	
Accounts receivable consists of trade receivables relating primarily to the Company’s wholesale business in Europe, and to a lesser extent, to its wholesale businesses in the Americas and Asia, royalty receivables relating to its licensing operations, and certain other receivables. Other receivables generally relate to amounts due to the Company that result from activities that are not related to the direct sale of the Company’s products or collection of royalties. The accounts receivable allowance includes allowances for doubtful accounts, wholesale sales returns and wholesale markdowns. Retail sales returns allowances are included in accrued expenses.
 	 	
(5)	Inventories	
Inventories consist of the following (in thousands):

 	Aug 1, 2015	 	Jan 31, 2015	
Raw materials	$	3,409	
 	 	$	4,548	
 	
Work in progress	59	
 	 	77	
 	
Finished goods	331,992	
 	 	314,453	
 	
 	$	335,460	
 	 	$	319,078	
 	
The above balances include an allowance to write down inventories to the lower of cost or market of $18.6 million and $19.7 million as of August 1, 2015 and January 31, 2015, respectively.
 	 	
(6)	Restructuring Charges	
During the first quarter of fiscal 2014, the Company implemented plans to streamline its structure and reduce expenses in both Europe and North America. During the second quarter of fiscal 2014, the Company expanded these plans to include the consolidation and streamlining of certain operations in Europe and Asia. The Company incurred total restructuring charges of $12.4 million under these plans related primarily to severance, impairment and lease termination costs during fiscal 2014. There were no restructuring charges incurred during the three and six months ended August 1, 2015 and August 2, 2014 related to these plans. The Company does not expect significant future cash-related charges to be incurred as the actions under these plans were substantially completed during fiscal 2014. As of August 1, 2015, the Company had a balance of approximately $0.2 million in accrued expenses for amounts expected to be paid during the remainder of fiscal 2016. At January 31, 2015, the Company had a balance of approximately $0.3 million in accrued expenses related to these restructuring activities.
The following table summarizes restructuring activities related primarily to severance during the fiscal year ended January 31, 2015 and six months ended August 1, 2015 (in thousands):

 	Total	
Balance at February 1, 2014	$	4,578	
 	
Cash payments	(2,952	)	
Foreign currency and other adjustments	(1,350	)	
Balance at January 31, 2015	$	276	
 	
Cash payments	(39	)	
Foreign currency and other adjustments	(56	)	
Balance at August 1, 2015	$	181	

12

Table of Contents
 	 	
(7)	Income Taxes	
Income tax expense for the interim periods was computed using the effective tax rate estimated to be applicable for the full fiscal year. The Company’s effective income tax rate increased to 38.0% for the six months ended August 1, 2015 from 35.1% for the six months ended August 2, 2014. The increase in the effective income tax rate was due primarily to a larger mix of taxable income in higher taxable jurisdictions and higher non-deductible compensation costs during the six months ended August 1, 2015 compared to the same prior-year period.  
From time-to-time, the Company is subject to routine compliance reviews on various tax matters around the world in the ordinary course of business. As of August 1, 2015, several income tax audits were underway for various periods in multiple jurisdictions. The Company accrues an amount for its estimate of additional income tax liability which the Company, more likely than not, could incur as a result of the ultimate resolution of income tax audits (“uncertain tax positions”). The Company reviews and updates the estimates used in the accrual for uncertain tax positions as more definitive information becomes available from taxing authorities, upon completion of tax audits, upon expiration of statutes of limitation, or upon occurrence of other events.
The Company had aggregate accruals for uncertain tax positions, including penalties and interest, of $14.3 million and $14.4 million as of August 1, 2015 and January 31, 2015, respectively.
 	 	
(8)	Segment Information	
The Company’s businesses are grouped into five reportable segments for management and internal financial reporting purposes: Americas Retail, Europe, Asia, Americas Wholesale and Licensing. Beginning in the second quarter of fiscal 2016, the Company changed the names of its “North American Retail” and “North American Wholesale” segments to “Americas Retail” and “Americas Wholesale” to better reflect that these segments are inclusive of its operations in North America as well as Central and South America. There have been no changes to the underlying reporting in either segment. The Company’s operating segments are the same as its reportable segments. Management evaluates segment performance based primarily on revenues and earnings (loss) from operations before restructuring charges, if any. The Company believes this segment reporting reflects how its five business segments are managed and how each segment’s performance is evaluated by the Company’s chief operating decision maker to assess performance and make resource allocation decisions. The Americas Retail segment includes the Company’s retail and e-commerce operations in North and Central America and its retail operations in South America. The Europe segment includes the Company’s wholesale, retail and e-commerce operations in Europe and the Middle East. The Asia segment includes the Company’s wholesale, retail and e-commerce operations in Asia. The Americas Wholesale segment includes the Company’s wholesale operations in the Americas. The Licensing segment includes the worldwide licensing operations of the Company. The business segment operating results exclude corporate overhead costs, which consist of shared costs of the organization, and restructuring charges. These costs are presented separately and generally include, among other things, the following unallocated corporate costs: accounting and finance, executive compensation, facilities, global advertising and marketing, human resources, information technology and legal. 

13

Table of Contents

Net revenue and earnings (loss) from operations are summarized as follows for the three and six months ended August 1, 2015 and August 2, 2014 (in thousands):     

 	Three Months Ended	 	Six Months Ended	
 	Aug 1, 2015	 	Aug 2, 2014	 	Aug 1, 2015	 	Aug 2, 2014	
Net revenue:	 	

Americas Retail(1)	$	232,456	
 	 	$	244,000	
 	 	$	446,705	
 	 	$	472,344	
 	
Europe	199,375	
 	 	235,260	
 	 	336,772	
 	 	394,418	
 	
Asia	56,745	
 	 	64,267	
 	 	120,780	
 	 	134,385	
 	
Americas Wholesale(1)	32,361	
 	 	38,252	
 	 	69,639	
 	 	77,560	
 	
Licensing	25,327	
 	 	26,792	
 	 	51,192	
 	 	52,405	
 	
Total net revenue	$	546,264	
 	 	$	608,571	
 	 	$	1,025,088	
 	 	$	1,131,112	
 	
Earnings (loss) from operations:	 	

Americas Retail(1)	$	5,244	
 	 	$	(4,662	)	 	$	(1,965	)	 	$	(13,061	)	
Europe	18,186	
 	 	24,513	
 	 	14,518	
 	 	17,881	
 	
Asia	887	
 	 	2,264	
 	 	5,500	
 	 	5,617	
 	
Americas Wholesale(1)	4,872	
 	 	5,167	
 	 	11,619	
 	 	12,920	
 	
Licensing	22,415	
 	 	24,909	
 	 	45,440	
 	 	47,630	
 	
Corporate Overhead	(25,403	)	 	(22,333	)	 	(44,558	)	 	(43,106	)	
Total earnings from operations	$	26,201	
 	 	$	29,858	
 	 	$	30,554	
 	 	$	27,881	
 	
__________________________________
 	 	
(1)	Beginning in the second quarter of fiscal 2016, the Company changed the names of its “North American Retail” and “North American Wholesale” segments to “Americas Retail” and “Americas Wholesale” to better reflect that these segments are inclusive of its operations in North America as well as Central and South America. There have been no changes to the underlying reporting in either segment.	
Due to the seasonal nature of the Company’s business segments, the above net revenue and operating results are not necessarily indicative of the results that may be expected for the full fiscal year.
 	 	
(9)	Borrowings and Capital Lease Obligations	
Borrowings and capital lease obligations are summarized as follows (in thousands):

 	Aug 1, 2015	 	Jan 31, 2015	
European capital lease, maturing quarterly through May 2016	$	4,840	
 	 	$	5,745	
 	
Other	2,057	
 	 	1,968	
 	
 	6,897	
 	 	7,713	
 	
Less current installments	4,840	
 	 	1,548	
 	
Long-term debt and capital lease obligations	$	2,057	
 	 	$	6,165	
 	
Capital Lease
The Company leases a building in Florence, Italy under a capital lease which provides for minimum lease payments through May 1, 2016. As of August 1, 2015, the capital lease obligation was $4.8 million. The Company entered into a separate interest rate swap agreement designated as a non-hedging instrument that resulted in a swap fixed rate of 3.55%. This interest rate swap agreement matures on February 1, 2016 and converts the nature of the capital lease obligation from Euribor floating-rate debt to fixed-rate debt. The fair value of the interest rate swap liability as of August 1, 2015 was approximately $0.2 million.
Credit Facilities
On June 23, 2015, the Company entered into a five-year senior secured asset-based revolving credit facility with Bank of America, N.A. and the other lenders party thereto (the “Credit Facility”). The Credit Facility provides for a borrowing capacity in an amount up to $150 million, including a Canadian sub-facility up to $50 million, subject to a borrowing base. Based on applicable accounts receivable, inventory and eligible cash balances as of August 1, 2015, the Company could have borrowed up to $150 million under the Credit Facility. The Credit Facility has an option to expand the borrowing capacity by up to $150 million subject to certain terms and conditions, including the willingness of existing or new lenders to assume such increased amount. The Credit

14

Table of Contents

Facility is available for direct borrowings and the issuance of letters of credit, subject to certain letters of credit sublimits, and may be used for working capital and other general corporate purposes. The Credit Facility replaces the Company’s previous $300 million credit facility, which was scheduled to mature in July 2016. No principal or interest was outstanding or accrued and unpaid under the prior credit facility on its termination date. 
All obligations under the Credit Facility are unconditionally guaranteed by the Company and the Company’s existing and future domestic and Canadian subsidiaries, subject to certain exceptions, and are secured by a first priority lien on substantially all of the assets of the Company and such domestic and Canadian subsidiaries, as applicable. 
Direct borrowings under the Credit Facility made by the Company and its domestic subsidiaries shall bear interest at the U.S. base rate plus an applicable margin (varying from 0.25% to 0.75%) or at LIBOR plus an applicable margin (varying from 1.25% to 1.75%). The U.S. base rate is based on the greater of (i) the U.S. prime rate, (ii) the federal funds rate, plus 0.5%, and (iii) LIBOR for a 30 day interest period, plus 1.0%. Direct borrowings under the Credit Facility made by the Company’s Canadian subsidiaries shall bear interest at the Canadian prime rate plus an applicable margin (varying from 0.25% to 0.75%) or at the Canadian BA rate plus an applicable margin (varying from 1.25% to 1.75%). The Canadian prime rate is based on the greater of (i) the Canadian prime rate, (ii) the Bank of Canada overnight rate, plus 0.5%, and (iii) the Canadian BA rate for a one month interest period, plus 1.0%. The applicable margins are calculated quarterly and vary based on the average daily availability of the aggregate borrowing base. The Company is also obligated to pay certain commitment, letter of credit and other fees customary for a credit facility of this size and type. As of August 1, 2015, the Company had $1.7 million in outstanding standby letters of credit, no outstanding documentary letters of credit and no outstanding borrowings under the Credit Facility. 
The Credit Facility requires the Company to comply with a fixed charge coverage ratio on a trailing four-quarter basis if a default or an event of default occurs under the Credit Facility or if the borrowing capacity falls below certain levels. In addition, the Credit Facility contains customary covenants, including covenants that limit or restrict the Company and certain of its subsidiaries’ ability to: incur liens, incur indebtedness, make investments, dispose of assets, make certain restricted payments, merge or consolidate and enter into certain transactions with affiliates. Upon the occurrence of an event of default under the Credit Facility, the lenders may cease making loans, terminate the Credit Facility and declare all amounts outstanding to be immediately due and payable. The Credit Facility specifies a number of events of default (some of which are subject to applicable grace or cure periods), including, among other things, non-payment defaults, covenant defaults, cross-defaults to other material indebtedness, bankruptcy and insolvency defaults and material judgment defaults. The Credit Facility allows for both secured and unsecured borrowings outside of the Credit Facility up to specified amounts.  
The Company, through its European subsidiaries, maintains short-term uncommitted borrowing agreements, primarily for working capital purposes, with various banks in Europe. The majority of the borrowings under these agreements are secured by specific accounts receivable balances. Based on the applicable accounts receivable balances as of August 1, 2015, the Company could have borrowed up to $80.8 million under these agreements. As of August 1, 2015, the Company had no outstanding borrowings and $3.0 million in outstanding documentary letters of credit under these agreements. The agreements are denominated primarily in euros and provide for annual interest rates ranging from 0.9% to 6.8%. The maturities of any short-term borrowings under these arrangements are generally linked to the credit terms of the underlying accounts receivable that secure the borrowings. With the exception of one facility for up to $38.4 million that has a minimum net equity requirement, there are no other financial ratio covenants. 
Other
From time-to-time, the Company will obtain other financing in foreign countries for working capital to finance its local operations. 

15

Table of Contents
 	 	
(10)	Share-Based Compensation	
The following table summarizes the share-based compensation expense recognized under all of the Company’s stock plans during the three and six months ended August 1, 2015 and August 2, 2014 (in thousands): 

 	Three Months Ended	 	Six Months Ended	
 	Aug 1, 2015	 	Aug 2, 2014	 	Aug 1, 2015	 	Aug 2, 2014	
Stock options	$	439	
 	 	$	620	
 	 	$	920	
 	 	$	1,076	
 	
Stock awards/units	3,950	
 	 	3,439	
 	 	7,037	
 	 	6,377	
 	
Employee Stock Purchase Plan	51	
 	 	97	
 	 	95	
 	 	160	
 	
Total share-based compensation expense	$	4,440	
 	 	$	4,156	
 	 	$	8,052	
 	 	$	7,613	
 	
Unrecognized compensation cost, adjusted for estimated forfeitures, related to nonvested stock options and nonvested stock awards/units totaled approximately $5.1 million and $29.3 million, respectively, as of August 1, 2015. This cost is expected to be recognized over a weighted average period of 1.7 years. The weighted average grant date fair value of options granted was $3.71 and $6.23 during the six months ended August 1, 2015 and August 2, 2014, respectively. 
Grants
On July 7, 2015, in connection with a new employment agreement entered into between the Company and Victor Herrero (the “Herrero Employment Agreement”), who became the Company’s Chief Executive Officer on August 1, 2015, the Company granted Mr. Herrero 600,000 stock options and 250,000 nonvested stock units. Mr. Herrero was also granted 150,000 restricted stock units which are considered contingently returnable as a result of certain service conditions set forth in the Herrero Employment Agreement.
On April 2, 2015, the Company made an annual grant of 577,700 stock options and 401,700 nonvested stock awards/units to its employees. On April 2, 2014, the Company made an annual grant of 365,600 stock options and 301,200 nonvested stock awards/units to its employees.
Performance-Based Awards
As discussed above, on July 7, 2015, the Company granted certain nonvested stock units to Mr. Herrero in connection with the Herrero Employment Agreement. The nonvested stock units are scheduled to vest in increments of one-fourth of the shares granted on each anniversary from the date of grant, subject to the achievement of certain performance-based vesting conditions during the last two quarters of fiscal 2016 as well as continued service requirements through each of the vesting periods.
The Company has granted certain nonvested stock units to Paul Marciano, the Company’s former Chief Executive Officer and current Executive Chairman of the Board and Chief Creative Officer, in connection with an employment agreement entered into between the Company and Mr. Marciano during fiscal 2014. Each award of nonvested stock units has an initial vesting period from the date of the grant through the end of the first fiscal year followed by two annual vesting periods. The nonvested stock units are subject to the achievement of certain performance-based vesting conditions during the first fiscal year of the grant as well as continued service requirements through each of the vesting periods.
The Company has also granted a target number of nonvested stock units to Mr. Marciano in connection with his employment agreement. The number of shares that may ultimately vest with respect to each award will equal 0% to 150% of the target number of shares, subject to the achievement of certain performance-based vesting conditions during the first fiscal year of the grant as well as continued service requirements through the vesting date. Any shares that are ultimately issued are scheduled to vest at the end of the third fiscal year following the grant date.

16

Table of Contents

The following table summarizes the activity for nonvested performance-based awards during the six months ended August 1, 2015:

 	Number of
Units	 	Weighted
Average
Grant Date
Fair Value	
Nonvested at January 31, 2015	413,834	
 	 	$	29.66	
 	
Granted	425,866	
 	 	19.39	
 	
Vested	(33,333	)	 	27.86	
 	
Forfeited	(159,700	)	 	27.86	
 	
Nonvested at August 1, 2015	646,667	
 	 	$	23.44	
 	
Market-Based Awards
On May 1, 2015, the Company also granted a target of 183,368 nonvested stock units to Mr. Marciano in connection with his employment agreement. The number of shares that may ultimately vest will equal 0% to 150% of the target number of shares, subject to the performance of the Company’s total stockholder return (“TSR”) relative to the TSR of a select group of peer companies over a three-year period. Vesting is also subject to continued service requirements through the vesting date. Any shares that are ultimately issued are scheduled to vest in fiscal 2019. The grant date fair value for such nonvested stock units was estimated using a Monte Carlo simulation that incorporates option-pricing inputs covering the period from the grant date through the end of the performance period. Compensation expense is recognized on a straight-line basis over the vesting period.
 	 	
(11)	Related Party Transactions	
The Company and its subsidiaries periodically enter into transactions with other entities or individuals that are considered related parties, including certain transactions with entities affiliated with trusts for the respective benefit of Paul Marciano, who is an executive of the Company, Maurice Marciano, Chairman Emeritus of the Board, Armand Marciano, their brother and former executive of the Company, and certain of their children (the “Marciano Trusts”).
Leases
The Company leases warehouse and administrative facilities, including the Company’s corporate headquarters in Los Angeles, California, from partnerships affiliated with the Marciano Trusts and certain of their affiliates. There were three of these leases in effect as of August 1, 2015 with expiration dates ranging from calendar years 2015 to 2020.
Aggregate rent, common area maintenance charges and property tax expense recorded under these related party leases for the six months ended August 1, 2015 and August 2, 2014 was $2.7 million and $3.0 million, respectively. The Company believes the related party lease terms have not been significantly affected by the fact that the Company and the lessors are related.
Aircraft Arrangements
The Company periodically charters aircraft owned by MPM Financial, LLC (“MPM Financial”), an entity affiliated with the Marciano Trusts, through informal arrangements with MPM Financial and independent third party management companies contracted by MPM Financial to manage its aircraft. The total fees paid under these arrangements for the six months ended August 1, 2015 and August 2, 2014 were approximately $0.3 million and $0.7 million, respectively.

17

Table of Contents

Consulting Arrangement
After serving for over 30 years as an executive and leader for Guess?, Inc., co-founder Maurice Marciano retired from his position as executive Chairman of the Board and as an employee of the Company upon the expiration of his employment agreement on January 28, 2012. In connection with his retirement and under the terms of his previously existing employment agreement, the Company and Mr. Marciano entered into a two-year consulting agreement, subsequently extended for a third year (the “Marciano Consulting Agreement”), under which Mr. Marciano provided certain consulting services to the Company. The Marciano Consulting Agreement provided for consulting fees of $500,000 per year and continued automobile use in a manner consistent with past practice. The Marciano Consulting Agreement expired on January 28, 2015 and was not renewed. However, Mr. Marciano continues to serve the Company as a director and the Chairman Emeritus of the Board. The Company elected to continue to provide for automobile use subsequent to the expiration of the term of the Marciano Consulting Agreement based on Mr. Marciano’s continuing substantial contributions to the Company. There were no expenses incurred related to the Marciano Consulting Agreement during the six months ended August 1, 2015. Total expenses incurred with respect to the Marciano Consulting Agreement were approximately $0.3 million for the six months ended August 2, 2014.
Other Transactions
From time-to-time, the Company utilizes a third party agent named Harmony Collection, LLC to produce specific apparel products on behalf of the Company. Armand Marciano, brother of Maurice and Paul Marciano, is part owner and an executive of the parent company of Harmony Collection, LLC. There were no payments made by the Company under this arrangement for the six months ended August 1, 2015. The total payments made by the Company under this arrangement for the six months ended August 2, 2014 were approximately $0.7 million.
These related party disclosures should be read in conjunction with the disclosure concerning related party transactions in the Company’s Annual Report on Form 10-K for the year ended January 31, 2015.
 	 	
(12)	Commitments and Contingencies	
Leases
The Company leases its showrooms, advertising, licensing, sales and merchandising offices, remote distribution and warehousing facilities and retail and factory outlet store locations under operating lease agreements expiring on various dates through September 2031. Some of these leases require the Company to make periodic payments for property taxes, utilities and common area operating expenses. Certain retail store leases provide for rents based upon the minimum annual rental amount and a percentage of annual sales volume, generally ranging from 2% to 12%, when specific sales volumes are exceeded. Some leases include lease incentives, rent abatements and fixed rent escalations, which are amortized and recorded over the initial lease term on a straight-line basis. The Company also leases some of its equipment under operating lease agreements expiring at various dates through March 2020. As discussed in further detail in Note 9, the Company leases a building in Florence, Italy under a capital lease which provides for minimum lease payments through May 1, 2016.
In March 2014, the Company amended its lease with respect to its primary U.S. distribution center based in Louisville, Kentucky to extend the term for an additional ten years, to 2024. The amendment also provides for two extension options for an additional period of five years each.
Litigation
On May 6, 2009, Gucci America, Inc. filed a complaint in the U.S. District Court for the Southern District of New York against Guess?, Inc. and certain third party licensees for the Company asserting, among other things, trademark and trade dress law violations and unfair competition. The complaint sought injunctive relief, compensatory damages, including treble damages, and certain other relief. Complaints similar to those in the above action have also been filed by Gucci entities against the Company and certain of its subsidiaries in the Court of Milan, Italy, the Intermediate People’s Court of Nanjing, China and the Court of Paris, France. The three-week bench trial in the U.S. matter concluded on April 19, 2012, with the court issuing a preliminary ruling on

18

Table of Contents

May 21, 2012 and a final ruling on July 19, 2012. Although the plaintiff was seeking compensation in the U.S. matter in the form of damages of $26 million and an accounting of profits of $99 million, the final ruling provided for monetary damages of $2.3 million against the Company and $2.3 million against certain of its licensees. The court also granted narrow injunctions in favor of the plaintiff for certain of the claimed infringements. On August 20, 2012, the appeal period expired without any party having filed an appeal, rendering the judgment final. On May 2, 2013, the Court of Milan ruled in favor of the Company in the Milan, Italy matter. In the ruling, the Court rejected all of the plaintiff’s claims and ordered the cancellation of three of the plaintiff’s Italian and four of the plaintiff’s European Community trademark registrations. On June 10, 2013, the plaintiff appealed the Court’s ruling in the Milan matter. On September 15, 2014, the Court of Appeal of Milan affirmed the majority of the lower Court’s ruling in favor of the Company, but overturned the lower Court’s finding with respect to an unfair competition claim. The matter has now entered into a damages phase based on the ruling. In the China matter, the Intermediate People’s Court of Nanjing, China issued a ruling on November 8, 2013 granting an injunction in favor of the plaintiff for certain of the claimed infringements on handbags and small leather goods and awarding the plaintiff statutory damages in the amount of approximately $80,000. The Company strongly disagrees with the Court’s decision and has appealed the ruling. The judgment in the China matter is stayed pending the appeal, which was heard in May 2014. On January 30, 2015, the Court of Paris ruled in favor of the Company, rejecting all of the plaintiff’s claims and partially canceling two of the plaintiff’s community trademark registrations and one of the plaintiff’s international trademark registrations. On February 17, 2015, the plaintiff appealed the Court of Paris’ ruling.
On August 25, 2006, Franchez Isaguirre, a former employee of the Company, filed a complaint in the Superior Court of California, County of Los Angeles alleging violations by the Company of California wage and hour laws. The complaint was subsequently amended, adding a second former employee as an additional named party. The plaintiffs purport to represent a class of similarly situated employees in California who allegedly had been injured by not being provided adequate meal and rest breaks. The complaint seeks unspecified compensatory damages, statutory penalties, attorney’s fees and injunctive and declaratory relief. On June 9, 2009, the Court certified the class but immediately stayed the case pending the resolution of a separate California Supreme Court case on the standards of class treatment for meal and rest break claims. Following the Supreme Court ruling, the Superior Court denied the Company’s motions to decertify the class and to narrow the class in January 2013 and June 2013, respectively. The Company subsequently petitioned to have the Court’s decision not to narrow the class definition reviewed. That petition was ultimately denied by the California Supreme Court in April 2014. In July 2015, the parties entered into a Memorandum of Understanding to settle the matter for $5.25 million, subject to certain limited offsets. Once a formal settlement agreement is finalized by the parties, the settlement will be subject to the review and approval of the Court. 
The Company has received customs tax assessment notices from the Italian Customs Agency regarding its customs tax audit of one of the Company’s European subsidiaries for the period from July 2010 through December 2012. Such assessments totaled €9.8 million ($10.8 million), including potential penalties and interest. The Company strongly disagrees with the positions that the Italian Customs Agency has taken and therefore filed appeals with the Milan First Degree Tax Court (“MFDTC”). On May 5, 2015, the MFDTC issued a judgment in favor of the Company in relation to the first set of appeals (covering the period through September 2010) and canceled the related assessments totaling €1.7 million ($1.8 million). While the ruling was favorable to the Company, there can be no assurances that the Company’s remaining appeals for October 2010 through December 2012 will be successful or that the Italian Customs Agency will not appeal the favorable MFDTC judgment. It also continues to be possible that the Company will receive similar or even larger assessments for periods subsequent to December 2012 or other claims or charges related to the matter in the future.
Although the Company believes that it has a strong position and will continue to vigorously defend each of the remaining matters, it is unable to predict with certainty whether or not these efforts will ultimately be successful or whether the outcomes will have a material impact on the Company’s financial position or results of operations.

19

Table of Contents

The Company is also involved in various other claims and other matters incidental to the Company’s business, the resolutions of which are not expected to have a material adverse effect on the Company’s financial position or results of operations.
 	 	
(13)	Defined Benefit Plans	
Supplemental Executive Retirement Plan
On August 23, 2005, the Board of Directors of the Company adopted a Supplemental Executive Retirement Plan (“SERP”) which became effective January 1, 2006. The SERP provides select employees who satisfy certain eligibility requirements with certain benefits upon retirement, termination of employment, death, disability or a change in control of the Company, in certain prescribed circumstances.
In July 2015, the SERP was amended in connection with Paul Marciano’s planned transition from Chief Executive Officer to Executive Chairman of the Board and Chief Creative Officer. The amendment effectively eliminated any future salary progression by finalizing compensation levels for future benefits. Mr. Marciano will continue to be eligible to receive SERP benefits in the future in accordance with the amended terms of the SERP. Subsequent to the amendment, there are no employees that would be considered actively participating under the terms of the SERP.  
As a result, during the three and six months ended August 1, 2015, the Company included an actuarial gain of $11.4 million before taxes in accumulated other comprehensive income (loss). In addition, the Company also recognized a curtailment gain of $1.7 million before taxes related to the accelerated amortization of the remaining prior service credit during the three and six months ended August 1, 2015.
As a non-qualified pension plan, no dedicated funding of the SERP is required; however, the Company has 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. The cash surrender values of the insurance policies were $55.9 million and $53.6 million as of August 1, 2015 and January 31, 2015, respectively, and were included in other assets in the Company’s condensed consolidated balance sheets. As a result of changes in the value of the insurance policy investments, the Company recorded unrealized gains (losses) of $(0.3) million and $1.6 million in other income and expense during the three and six months ended August 1, 2015, respectively, and unrealized gains of $0.7 million and $2.2 million in other income during the three and six months ended August 2, 2014, respectively. During the six months ended August 1, 2015, the Company also recorded realized gains of $0.7 million in other income resulting from payout on the insurance policies. The realized gains were recorded during the three months ended May 2, 2015. The projected benefit obligation was $50.6 million and $61.9 million as of August 1, 2015 and January 31, 2015, respectively, and was included in accrued expenses and other long-term liabilities in the Company’s condensed consolidated balance sheets depending on the expected timing of payments. SERP benefit payments of $0.4 million and $0.8 million were made during the three and six months ended August 1, 2015, respectively. SERP benefit payments of $0.3 million were made during the three and six months ended August 2, 2014.

20

Table of Contents

The components of net periodic defined benefit pension (credit) cost for the three and six months ended August 1, 2015 and August 2, 2014 related to the SERP are as follows (in thousands):     

 	Three Months Ended	 	Six Months Ended	
 	Aug 1, 2015	 	Aug 2, 2014	 	Aug 1, 2015	 	Aug 2, 2014	
Interest cost	$	495	
 	 	$	572	
 	 	$	991	
 	 	$	1,144	
 	
Net amortization of unrecognized prior service credit	(39	)	 	(58	)	 	(97	)	 	(116	)	
Net amortization of actuarial losses	290	
 	 	235	
 	 	718	
 	 	469	
 	
Curtailment gain	(1,651	)	 	—	
 	 	(1,651	)	 	—	
 	
Net periodic defined benefit pension (credit) cost	$	(905	)	 	$	749	
 	 	$	(39	)	 	$	1,497	
 	
Swiss Pension Plan
In accordance with local regulations, the Company also maintains a pension plan in Switzerland for certain of its employees. The plan is a government-mandated defined contribution plan that provides employees with a minimum investment return determined annually by the Swiss government, and as such, is treated under pension accounting in accordance with authoritative guidance. Under the plan, both the Company and certain of its employees with annual earnings in excess of government determined amounts are required to make contributions into a fund managed by an independent investment fiduciary. The Company’s contributions must be made in an amount at least equal to the employee’s contribution. Minimum employee contributions are based on the respective employee’s age, salary and gender. As of August 1, 2015 and January 31, 2015, the plan had a projected benefit obligation of CHF14.5 million (US$15.0 million) and CHF13.9 million (US$15.1 million), respectively, and plan assets held at the independent investment fiduciary of CHF12.1 million (US$12.5 million) and CHF11.5 million (US$12.5 million), respectively. The net liability of CHF2.4 million (US$2.5 million) and CHF2.4 million (US$2.6 million) was included in other long-term liabilities in the Company’s condensed consolidated balance sheets as of August 1, 2015 and January 31, 2015, respectively. During the three and six months ended August 1, 2015, the Company recognized net periodic defined benefit pension cost of CHF0.4 million (US$0.5 million) and CHF0.9 million (US$0.9 million), respectively, resulting from service cost and net amortization of actuarial losses related to the Swiss pension plan.
 	 	
(14)	Fair Value Measurements	
Authoritative guidance defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The guidance establishes a fair value hierarchy, which prioritizes the inputs used in measuring fair value into three broad levels as follows:
Level 1—Inputs are unadjusted quoted prices in active markets for identical assets or liabilities that can be accessed at the measurement date.
Level 2—Inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (i.e. interest rates, yield curves, etc.) and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market corroborated inputs).
Level 3—Unobservable inputs that reflect assumptions about what market participants would use in pricing the asset or liability. These inputs would be based on the best information available, including the Company’s own data.

21

Table of Contents

The following table presents the fair value hierarchy for those assets and liabilities measured at fair value on a recurring basis as of August 1, 2015 and January 31, 2015 (in thousands):

 	 	Fair Value Measurements at Aug 1, 2015	 	Fair Value Measurements at Jan 31, 2015	
Recurring Fair Value Measures	 	Level 1	 	Level 2	 	Level 3	 	Total	 	Level 1	 	Level 2	 	Level 3	 	Total	
Assets:	 	 	

 	 	 	

 	 	 	

Foreign exchange currency contracts	 	$	—	
 	 	$	8,446	
 	 	$	—	
 	 	$	8,446	
 	 	$	—	
 	 	$	15,542	
 	 	$	—	
 	 	$	15,542	
 	
Available-for-sale securities	 	23	
 	 	—	
 	 	—	
 	 	23	
 	 	36	
 	 	—	
 	 	—	
 	 	36	
 	
Total	 	$	23	
 	 	$	8,446	
 	 	$	—	
 	 	$	8,469	
 	 	$	36	
 	 	$	15,542	
 	 	$	—	
 	 	$	15,578	
 	
Liabilities:	 	 	 	 	 	 	 	 	

Foreign exchange currency contracts	 	$	—	
 	 	$	207	
 	 	$	—	
 	 	$	207	
 	 	$	—	
 	 	$	—	
 	 	$	—	
 	 	$	—	
 	
Interest rate swap	 	—	
 	 	165	
 	 	—	
 	 	165	
 	 	—	
 	 	270	
 	 	—	
 	 	270	
 	
Deferred compensation obligations	 	—	
 	 	11,213	
 	 	—	
 	 	11,213	
 	 	—	
 	 	9,133	
 	 	—	
 	 	9,133	
 	
Total	 	$	—	
 	 	$	11,585	
 	 	$	—	
 	 	$	11,585	
 	 	$	—	
 	 	$	9,403	
 	 	$	—	
 	 	$	9,403	

There were no transfers of financial instruments between the three levels of fair value hierarchy during the six months ended August 1, 2015 or during the year ended January 31, 2015.
The fair values of the Company’s available-for-sale securities are based on quoted prices. The fair value of the interest rate swaps are based upon inputs corroborated by observable market data. Foreign exchange forward contracts are entered into by the Company principally to hedge the future payment of inventory and intercompany transactions by non-U.S. subsidiaries. Periodically, the Company may also use foreign currency forward contracts to hedge the translation and economic exposures related to its net investments in certain of its international subsidiaries. The fair values of the Company’s foreign exchange forward contracts are based on quoted foreign exchange forward rates at the reporting date. Deferred compensation obligations to employees are adjusted based on changes in the fair value of the underlying employee-directed investments. Fair value of these obligations is based upon inputs corroborated by observable market data.
Available-for-sale securities, which consist of marketable equity securities, are recorded at fair value and are included in other assets in the accompanying condensed consolidated balance sheets. As of August 1, 2015 and January 31, 2015, available-for-sale securities were minimal. Unrealized gains (losses), net of taxes, are included as a component of stockholders’ equity and comprehensive income (loss). As of August 1, 2015 and January 31, 2015, the accumulated unrealized losses, net of taxes, included in accumulated other comprehensive income (loss) related to available-for-sale securities owned by the Company were minimal. During the six months ended August 2, 2014, the Company received proceeds of $0.6 million from the sale of marketable equity securities which were classified as available-for-sale securities. The sale of marketable equity securities was made during the three months ended May 3, 2014. The cost of securities sold was based on the specific identification method. Gains recognized during the six months ended August 2, 2014 were $0.1 million as a result of this sale and were included in other income.
The carrying amount of the Company’s remaining financial instruments, which principally include cash and cash equivalents, trade receivables, accounts payable and accrued expenses, approximates fair value due to the relatively short maturity of such instruments. The fair values of the Company’s debt instruments (see Note 9) are based on the amount of future cash flows associated with each instrument discounted using the Company’s incremental borrowing rate. As of August 1, 2015 and January 31, 2015, the carrying value of all financial instruments was not materially different from fair value, as the interest rates on variable-rate debt including the capital lease obligation approximated rates currently available to the Company. 

22

Table of Contents

Long-Lived Assets
Long-lived assets, such as property and equipment, and purchased intangibles subject to amortization, are reviewed for impairment quarterly or whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company considers each individual store or concession as an asset group for impairment testing, which is the lowest level at which individual cash flows can be identified. The asset group includes leasehold improvements, furniture, fixtures and equipment, computer hardware and software and certain long-term security deposits and lease acquisition costs. The Company reviews retail locations in penetrated markets for impairment risk once the locations have been opened for at least one year in their current condition, or sooner as changes in circumstances require. The Company believes that waiting one year allows a store or concession to reach a maturity level where a more comprehensive analysis of financial performance can be performed. The Company evaluates impairment risk for retail locations in new markets, where the Company is in the early stages of establishing its presence, once the locations have been opened for at least two years. The Company believes that waiting two years allows for brand awareness to be established. The Company also evaluates impairment risk for retail locations that are expected to be closed in the foreseeable future.
An asset is considered to be impaired if the Company determines that the carrying value may not be recoverable based upon its assessment of the asset’s ability to continue to generate earnings from operations and positive cash flow in future periods or if significant changes in the Company’s strategic business objectives and utilization of the assets occurred. If the carrying amount of an asset exceeds its estimated undiscounted future cash flows, an impairment charge is recognized in the amount by which the carrying amount of the asset exceeds the estimated fair value, which is determined based on discounted future cash flows. 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. Future expected cash flows for store and concession assets are based on management’s estimates of future cash flows over the remaining lease period or expected life, if shorter. For expected store and concession closures, the Company will evaluate whether it is necessary to shorten the useful life for any of the assets within the respective asset group. The Company will use this revised useful life when estimating the asset group’s future cash flows. The Company considers historical trends, expected future business trends and other factors when estimating the future cash flow for each retail location. The Company also considers factors such as: the local environment for each retail location, including mall traffic and competition; the Company’s ability to successfully implement strategic initiatives; and the ability to control variable costs such as cost of sales and payroll and, in some cases, renegotiate lease costs. The estimated cash flows used for this nonrecurring fair value measurement are considered a Level 3 input as defined above. If actual results are not consistent with the assumptions and judgments used in estimating future cash flows and asset fair values, there may be additional exposure to future impairment losses that could be material to the Company’s results of operations.
The Company recorded impairment charges of $0.7 million and $1.8 million during the three and six months ended August 1, 2015, respectively, and $4.6 million and $4.8 million during the three and six months ended August 2, 2014, respectively. The impairment charges related primarily to the impairment of certain retail stores in North America and Europe resulting from under-performance or the exercise of kick-out options during each of the respective periods. These impairment charges were included in selling, general and administrative expenses in the Company’s condensed consolidated statements of income for each of the respective periods.
 	 	
(15)	Derivative Financial Instruments	
Hedging Strategy
The Company operates in foreign countries, which exposes it to market risk associated with foreign currency exchange rate fluctuations. The Company has entered into certain forward contracts to hedge the risk of foreign currency rate fluctuations. The Company has elected to apply the hedge accounting rules in accordance with authoritative guidance for certain of these hedges.
The Company’s primary objective is to hedge the variability in forecasted cash flows due to the foreign currency risk. Various transactions that occur primarily in Europe, Canada, South Korea and Mexico are

23

Table of Contents

denominated in U.S. dollars and British pounds and thus are exposed to earnings risk as a result of exchange rate fluctuations when converted to their functional currencies. These types of transactions include U.S. dollar denominated purchases of merchandise and U.S. dollar and British pound denominated intercompany liabilities. In addition, certain operating expenses, tax liabilities and pension-related liabilities are denominated in Swiss francs and are exposed to earnings risk as a result of exchange rate fluctuations when converted to the functional currency. The Company enters into derivative financial instruments, including forward exchange contracts, to offset some but not all of the exchange risk on certain of these anticipated foreign currency transactions.
Periodically, the Company may also use foreign currency forward contracts to hedge the translation and economic exposures related to its net investments in certain of its international subsidiaries. 
The impact of the credit risk of the counterparties to the derivative contracts is considered in determining the fair value of the foreign currency forward contracts. As of August 1, 2015, credit risk has not had a significant effect on the fair value of the Company’s foreign currency contracts.
The Company also has interest rate swap agreements, which are not designated as hedges for accounting purposes, to effectively convert its floating-rate debt to a fixed-rate basis. The principal objective of these contracts is to eliminate or reduce the variability of the cash flows in interest payments associated with the Company’s variable-rate capital lease obligation, thus reducing the impact of interest rate changes on future interest payment cash flows. Refer to Note 9 for further information. 
Hedge Accounting Policy
U.S. dollar forward contracts are used to hedge forecasted merchandise purchases over specific months. Changes in the fair value of these U.S. dollar 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. The Company also hedges forecasted intercompany royalties over specific months. Changes in the fair value of these U.S. dollar 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 other income and expense in the period in which the royalty expense is incurred. 
The Company has also used U.S. dollar forward contracts to hedge the net investments of certain of the Company’s international subsidiaries over specific months. 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 until the sale or liquidation of the hedged net investment. 
The Company also has foreign currency contracts that are not designated as hedging instruments for accounting purposes. Changes in fair value of foreign currency contracts not designated as hedging instruments are reported in net earnings as part of other income and expense. 

24

Table of Contents

Summary of Derivative Instruments
The fair value of derivative instruments in the condensed consolidated balance sheets as of August 1, 2015 and January 31, 2015 is as follows (in thousands):

 	 	Derivative
Balance Sheet
Location	 	Fair Value at
Aug 1, 2015	 	Fair Value at
Jan 31, 2015	
ASSETS:	 	 	 	 	

Derivatives designated as hedging instruments:	 	 	 	 	

Foreign exchange currency contracts:	 	 	 	 	 	 	
   Cash flow hedges	 	Other current assets/
Other assets	 	$	4,454	
 	 	$	6,597	
 	
Derivatives not designated as hedging instruments:	 	 	 	 	 	 	
 	
Foreign exchange currency contracts	 	Other current assets	 	3,992	
 	 	8,945	
 	
Total	 	 	 	$	8,446	
 	 	$	15,542	
 	
LIABILITIES:	 	 	 	 	

Derivatives designated as hedging instruments:	 	 	 	 	

Foreign exchange currency contracts:	 	 	 	 	 	 	
   Cash flow hedges	 	Accrued expenses	 	$	76	
 	 	$	—	
 	
Derivatives not designated as hedging instruments:	 	 	 	 	

Foreign exchange currency contracts	 	Accrued expenses	 	131	
 	 	—	
 	
Interest rate swaps	 	Accrued expenses/
Other long-term liabilities	 	165	
 	 	270	
 	
Total derivatives not designated as hedging instruments	 	 	 	296	
 	 	270	
 	
Total	 	 	 	$	372	
 	 	$	270	
 	
Derivatives Designated as Hedging Instruments 
Cash Flow Hedges 
During the six months ended August 1, 2015, the Company purchased U.S. dollar forward contracts in Europe and Canada totaling US$82.2 million and US$43.8 million, respectively, to hedge forecasted merchandise purchases and intercompany royalties that were designated as cash flow hedges. As of August 1, 2015, the Company had forward contracts outstanding for its European and Canadian operations of US$92.9 million and US$43.8 million, respectively, which are expected to mature over the next 18 months.

25

Table of Contents

The following table summarizes the gains (losses) before taxes recognized on the derivative instruments designated as cash flow hedges in OCI and net earnings for the three and six months ended August 1, 2015 and August 2, 2014 (in thousands): 

 	Gain
Recognized in
OCI	 	Location of
Gain (Loss)
Reclassified from
Accumulated OCI
into Earnings(1)	 	Gain (Loss)
Reclassified from
Accumulated OCI into
Earnings	 	
 	Three Months Ended	 	 	 	Three Months Ended	 	 	
 	Aug 1, 2015	 	Aug 2, 2014	 	 	 	Aug 1, 2015	 	Aug 2, 2014	 	 	
Derivatives designated as cash flow hedges:	 	

 	 	 	
 	 	 	
Foreign exchange currency contracts	$	5,343	
 	 	$	1,866	
 	 	Cost of product sales	 	$	3,193	
 	 	$	(265	)	 	 	
Foreign exchange currency contracts	$	378	
 	 	$	1	
 	 	Other income/expense	 	$	330	
 	 	$	(25	)	 	 	

 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	Gain (Loss)
Recognized in
OCI	 	Location of
Gain (Loss)
Reclassified from
Accumulated OCI
into Earnings(1)	 	Gain (Loss)
Reclassified from
Accumulated OCI into
Earnings	 	
 	Six Months Ended	 	 	 	Six Months Ended	 	 	
 	Aug 1, 2015	 	Aug 2, 2014	 	 	 	Aug 1, 2015	 	Aug 2, 2014	 	 	
Derivatives designated as cash flow hedges:	 	

 	 	 	
 	 	 	
Foreign exchange currency contracts	$	4,196	
 	 	$	(706	)	 	Cost of product sales	 	$	4,943	
 	 	$	(759	)	 	 	
Foreign exchange currency contracts	$	230	
 	 	$	(106	)	 	Other income/expense	 	$	816	
 	 	$	(56	)	 	 	
 __________________________________
 	 	
(1)	The ineffective portion was immaterial during the three and six months ended August 1, 2015 and August 2, 2014 and was recorded in net earnings and included in interest income/expense.	
As of August 1, 2015, accumulated other comprehensive income (loss) included a net unrealized gain of approximately $5.9 million, net of tax, of which $4.6 million will be recognized in cost of product sales or other income over the following 12 months, at the then current values on a pre-tax basis, which can be different than the current quarter-end values.
The following table summarizes net after-tax derivative activity recorded in accumulated other comprehensive income (loss) (in thousands):

 	Three Months Ended	 	Six Months Ended	
 	Aug 1, 2015	 	Aug 2, 2014	 	Aug 1, 2015	 	Aug 2, 2014	
Beginning balance gain (loss)	$	4,296	
 	 	$	(1,667	)	 	$	7,157	
 	 	$	(113	)	
Net gains (losses) from changes in cash flow hedges	4,584	
 	 	1,352	
 	 	3,658	
 	 	(706	)	
Net (gains) losses reclassified to earnings	(3,012	)	 	681	
 	 	(4,947	)	 	1,185	
 	
Ending balance gain	$	5,868	
 	 	$	366	
 	 	$	5,868	
 	 	$	366	
 	
At January 31, 2015, the Company had forward contracts outstanding for its European and Canadian operations of US$50.8 million and US$24.5 million, respectively, that were designated as cash flow hedges. 
Derivatives Not Designated as Hedging Instruments
As of August 1, 2015, the Company had euro foreign currency contracts to purchase US$81.9 million expected to mature over the next 12 months and Canadian dollar foreign currency contracts to purchase US$14.3 million expected to mature over the next seven months.

26

Table of Contents

The following table summarizes the gains before taxes recognized on the derivative instruments not designated as hedging instruments in other income for the three and six months ended August 1, 2015 and August 2, 2014 (in thousands):

 	 	Location of
Gain
Recognized in
Earnings	 	Gain
Recognized in Earnings	 	Gain
Recognized in Earnings	 	
 	 	 	 	Three Months Ended	 	Six Months Ended	 	 	
 	 	 	 	Aug 1, 2015	 	Aug 2, 2014	 	Aug 1, 2015	 	Aug 2, 2014	 	 	
Derivatives not designated as hedging instruments:	 	 	 	 	

Foreign exchange currency contracts	 	Other income/expense	 	$	2,860	
 	 	$	3,984	
 	 	$	2,159	
 	 	$	1,195	
 	 	 	
Interest rate swaps	 	Other income/expense	 	$	47	
 	 	$	57	
 	 	$	96	
 	 	$	132	
 	 	 	
At January 31, 2015, the Company had euro foreign currency contracts to purchase US$59.3 million and Canadian dollar foreign currency contracts to purchase US$19.9 million.
 	 	
(16)	Subsequent Events	
On August 26, 2015, the Company announced a regular quarterly cash dividend of $0.225 per share on the Company’s common stock. The cash dividend will be paid on September 25, 2015 to shareholders of record as of the close of business on September 9, 2015.

27

Table of Contents
 	 	
ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	
General
Unless the context indicates otherwise, when we refer to “we,” “us,” “our” or the “Company” in this Form 10-Q, we are referring to Guess?, Inc. (“GUESS?”) and its subsidiaries on a consolidated basis.
Important Factors Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q, including documents incorporated by reference herein, contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements may also be contained in the Company’s other reports filed under the Securities Exchange Act of 1934, as amended, in its press releases and in other documents. In addition, from time-to-time, the Company through its management may make oral forward-looking statements. These statements relate to analyses and other information based on forecasts of future results and estimates of amounts not yet determinable. These statements also relate to our goals, future prospects and proposed new products, services, developments or business strategies and initiatives (including those identified by the Company’s new Chief Executive Officer, Victor Herrero). These forward-looking statements are identified by their use of terms and phrases such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “goal,” “intend,” “may,” “outlook,” “pending,” “plan,” “predict,” “project,” “strategy,” “will,” “would,” and other similar terms and phrases, including references to assumptions.
Although we believe that the expectations reflected in any of our forward-looking statements are reasonable, actual results could differ materially from those projected or assumed. These forward-looking statements may include, among other things, statements relating to our expected results of operations, the accuracy of data relating to, and anticipated levels of, future inventory and gross margins, anticipated cash requirements and sources, cost containment efforts, restructuring charges, estimated charges, plans regarding store openings, closings and remodels, plans regarding business growth, international expansion and capital allocation, plans regarding supply chain efficiencies and global planning and allocation, e-commerce and omni-channel initiatives, business seasonality, results of litigation, industry trends, consumer demands and preferences, competition, currency fluctuations and related impacts, estimated tax rates, results of tax audits and other regulatory proceedings, raw material and other inflationary cost pressures, consumer confidence and general economic conditions. We do not intend, and undertake no obligation, to update our forward-looking statements to reflect future events or circumstances. Such statements involve risks and uncertainties, which may cause actual results to differ materially from those set forth in these statements. Important factors that could cause or contribute to such differences include those discussed under “Part I, Item 1A. Risk Factors” contained in the Company’s most recent Annual Report on Form 10-K for the fiscal year ended January 31, 2015 and in our other filings made from time-to-time with the Securities and Exchange Commission (“SEC”) after the date of this report.
Business Segments
The Company’s businesses are grouped into five reportable segments for management and internal financial reporting purposes: Americas Retail, Europe, Asia, Americas Wholesale and Licensing. Beginning in the second quarter of fiscal 2016, the Company changed the names of its “North American Retail” and “North American Wholesale” segments to “Americas Retail” and “Americas Wholesale” to better reflect that these segments are inclusive of its operations in North America as well as Central and South America. There have been no changes to the underlying reporting in either segment. The Company’s operating segments are the same as its reportable segments. Management evaluates segment performance based primarily on revenues and earnings (loss) from operations before restructuring charges, if any. The Company believes this segment reporting reflects how its five business segments are managed and how each segment’s performance is evaluated by the Company’s chief operating decision maker to assess performance and make resource allocation decisions. The Americas Retail segment includes the Company’s retail and e-commerce operations in North and Central America and its retail operations in South America. The Europe segment includes the Company’s wholesale, retail and e-commerce operations in Europe and the Middle East. The Asia segment includes the Company’s wholesale, retail and e-commerce operations in Asia. The Americas Wholesale segment includes the Company’s wholesale operations in the Americas. The Licensing segment includes the worldwide licensing operations of the Company. The business

28

Table of Contents

segment operating results exclude corporate overhead costs, which consist of shared costs of the organization, and restructuring charges. These costs are presented separately and generally include, among other things, the following unallocated corporate costs: accounting and finance, executive compensation, facilities, global advertising and marketing, human resources, information technology and legal. Information regarding these segments is summarized in Note 8 to the Condensed Consolidated Financial Statements.
Products
We derive our net revenue from the sale of GUESS?, G by GUESS, GUESS Kids and MARCIANO apparel and our licensees’ products through our worldwide network of retail stores, wholesale customers and distributors, as well as our online sites. We also derive royalty revenue from worldwide licensing activities.
Global Economic Conditions
Economic and market conditions have continued to be volatile and uncertain in many markets around the world and consumer behavior remains cautious. The retail environment has been impacted by highly promotional conditions and softer mall traffic which may persist for some time. In Europe, government austerity programs and bank credit issues have impacted the capital markets of numerous European countries, resulting in reduced consumer confidence and lower discretionary spending in those countries. These circumstances have had, and could in the future have, a negative impact on our business, particularly in our more mature markets in Southern Europe. When these conditions occur, the impact is greater in our multi-brand wholesale channel, particularly in Italy, where many customers are relatively small and are not well capitalized. While the economic environment in Southern Europe has shown signs of improvement, the recovery is still vulnerable. In addition, the geopolitical tension in Russia and Ukraine has impacted economic sentiment and could continue to negatively impact our business. We are also seeing evidence of a more cautious consumer in Greater China and South Korea due to the macro-economic conditions in these countries.
Foreign Currency Volatility
Since the majority of our international operations are conducted in currencies other than the U.S. dollar (primarily the euro, Canadian dollar, Korean won and Mexican peso), currency fluctuations can have a significant impact on the translation of our international revenues and earnings into U.S. dollar amounts.
In addition, some of our transactions that occur primarily in Europe, Canada, South Korea and Mexico are denominated in U.S. dollars, Swiss francs and British pounds, exposing them to exchange rate fluctuations when these transactions (such as inventory purchases) are converted to their functional currencies. As a result, fluctuations in exchange rates can impact the operating margins of our foreign operations and reported earnings, largely dependent on the transaction timing and magnitude during the period that the currency fluctuates. When these foreign exchange rates weaken versus the U.S. dollar at the time U.S. dollar denominated inventory is purchased relative to the purchases of the comparable period, our product margins could be unfavorably impacted if the relative sales prices do not change.
During the first half of fiscal 2016, the average U.S. dollar rate was stronger against the euro, the Canadian dollar and the Korean won compared to the average rate in the same prior-year period. As a result, our product margins in Europe and Canada were negatively impacted by exchange rate fluctuations for the six months ended August 1, 2015 compared to the same prior-year period. There was also an overall negative impact on the translation of our international revenues and earnings from operations for the six months ended August 1, 2015 compared to the same prior-year period.
If the U.S. dollar remains strong relative to the respective fiscal 2015 foreign exchange rates, we expect that foreign exchange will continue to have a significant negative impact on our revenues and operating results as well as our international cash and other balance sheet items, particularly in Europe and Canada during the remainder of fiscal 2016.
The Company enters into derivative financial instruments to offset some but not all of the exchange risk on foreign currency transactions. For additional discussion regarding our exposure to foreign currency risk, forward

29

Table of Contents

contracts designated as hedging instruments and forward contracts not designated as hedging instruments, refer to “Item 3. Quantitative and Qualitative Disclosures About Market Risk.”
Recent Developments
On July 7, 2015, the Company entered into an employment agreement with Victor Herrero that provided for his transition to become the Company’s Chief Executive Officer effective as of August 1, 2015 (the “Transition Date”). On the Transition Date, Paul Marciano, the Company’s former Chief Executive Officer and Vice Chairman of the Board of Directors, assumed the role of Executive Chairman of the Board and Chief Creative Officer.
Although Mr. Herrero is still in the process of assessing the strategic direction of the Company, he has identified several initiatives focused on driving shareholder value which we plan to implement through two separate phases. The first phase will focus on (i) elevating the quality of our sales organization and merchandising strategy to match the quality of our product and marketing; (ii) building a major business in Asia by unlocking the potential of the GUESS? brand in the region; and (iii) creating a culture of purpose and accountability throughout the entire Company by implementing a more centralized organizational structure that reinforces our focus on sales and profitability. The following provides further details on the planned implementation of these three initiatives:
Sales Organization and Merchandising Strategy. We plan to elevate the quality of our sales organization and merchandising strategy by: (1) elevating the product knowledge of our sales force; (2) building a more strategic and operational online organization in order to increase millennials’ engagement with our brand through digital marketing and social media; (3) taking steps such as investing in key stores and developing stronger replenishment, visual, stockroom and cost-control standards in order to improve our overall field and store structure; (4) implementing a more effective yearly retail calendar to better enable each store to fully capture local opportunities; (5) using feedback from our sales force to improve our collections and increase the number and effectiveness of our SKU’s; and (6) implementing a global pricing system with greater clarity and simplicity.
Building our Asia Business. We believe there continues to be significant potential in this region, particularly in mainland China, and intend to allocate sufficient resources to fuel future growth.
Transform our Company’s Culture. In order to generate global synergies, major decisions (including logistics, finance, communication and stock allocation) will become more centralized in the Company’s management team in Los Angeles. The organization will be structured to reinforce the focus on sales and profitability as well as to foster an environment of accountability and execution measured through key performance metrics.
The second phase of Mr. Herrero’s initiatives is in development, but is expected to focus on improving our cost structure (including supply chain and overhead) and revitalizing our wholesale business. Initially, we will be looking at the following areas to develop our supply chain initiatives: improving replenishment inside our stores, optimizing vendor proximity to our main markets, and creating a fabric platform and reinforcing open-to-buys.
Other Ongoing Strategies
Store Portfolio Rationalization.  We plan to increase the profitability for our brick-and-mortar locations by improving the productivity and performance of our existing stores. As discussed above, we will review our field and store structure and define stores by their current performance along with a plan for improvement. We will also invest in key stores to elevate their image and bring our latest store layouts to the end customer. In Americas Retail, in light of recent performance trends and our new initiatives, we now plan to extend the leases on certain stores previously planned for closure by one to two years in order to allow more time to evaluate the financial performance of these locations. We now expect to close approximately 40 stores during fiscal year 2016 through a combination of lease expirations and kick-outs. Including these stores, approximately half of our leases in Americas Retail are up for renewal or have lease exit options over the next three years, providing us with the flexibility to further optimize our retail footprint as appropriate in the coming years.

30

Table of Contents

Business Portfolio.  We plan to continue to evaluate the different businesses in our global portfolio, reducing the size and cost structure of the less profitable ones, while directing capital investments to those with more profit potential. As discussed above, we plan to allocate sufficient resources to fuel future growth in Asia. In addition, we plan to resume expansion of our G by GUESS concept in the Americas and will target growth in other markets such as Russia and Turkey where we believe the GUESS? brand is underpenetrated.
Omni-Channel Strategy. We continue to execute our global omni-channel strategy that allows customers to shop seamlessly in retail stores, online and through mobile devices. We have already deployed certain initiatives in the U.S. including “reserve online, pick-up in stores” and “order from store” as well as mobile optimized commerce sites and smartphone applications. We have also developed our in-store fulfillment capabilities which optimize inventory located in our U.S. and Canadian retail stores. In the U.S. and Canada, e-commerce orders may be fulfilled from our distribution centers, or from our retail stores, or both, and retail store sales may be fulfilled from one of our numerous retail store locations or from our distribution centers. We have begun to deploy similar omni-channel strategies in certain international markets, leveraging our existing technology and experience.
Capital Allocation
The Company’s investments in capital for the full fiscal year 2016 are planned between $55 million and $65 million (after deducting estimated lease incentives of approximately $6 million). The planned investments in capital are primarily for store remodeling programs, targeted new store openings and investments in maintaining and improving our infrastructure (primarily information and operating systems). 
Comparable Store Sales
The Company reports National Retail Federation (“NRF”) calendar comparable store sales on a quarterly basis for our retail businesses which include the combined results from our brick-and-mortar retail stores and our e-commerce sites. We also separately report the impact of e-commerce sales on our comparable store sales metric. As a result of our omni-channel strategy, our e-commerce business has become strongly intertwined with our brick-and-mortar retail store business. Therefore, we believe that the inclusion of e-commerce sales in our comparable store sales metric provides a more meaningful representation of our retail results.
Sales from our brick-and-mortar retail stores include purchases that are initiated, paid for and fulfilled at our retail stores and directly operated concessions or shop-in-shops as well as merchandise that is reserved online but paid for and picked-up at our retail stores. Sales from our e-commerce sites include purchases that are initiated and paid for online and shipped from either our distribution centers or our retail stores as well as purchases that are initiated in a retail store, but due to inventory availability at the retail store, are ordered and paid for online and shipped from our distribution centers or picked-up from a different retail store.
Store sales are considered comparable after the store has been open for 13 full 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 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 months. E-commerce sales are considered comparable after the online site has been operational in a country for 13 full months and exclude any related revenue from shipping fees.    
Definitions and calculations of comparable store sales used by the Company may differ from similarly titled measures reported by other companies.
Other
The Company operates on a 52/53-week fiscal year calendar, which ends on the Saturday nearest to January 31 of each year. The three and six months ended August 1, 2015 had the same number of days as the three and six months ended August 2, 2014.

31

Table of Contents

Executive Summary
Overview 
Net earnings attributable to Guess?, Inc. decreased 16.7% to $18.3 million, or diluted earnings of $0.21 per common share, for the quarter ended August 1, 2015, compared to net earnings attributable to Guess?, Inc. of $22.0 million, or diluted earnings of $0.26 per common share, for the quarter ended August 2, 2014.
Highlights of the Company’s performance for the quarter ended August 1, 2015 compared to the same prior-year period are presented below, followed by a more comprehensive discussion under “Results of Operations”:
Operations
 	 	
•	Total net revenue decreased 10.2% to $546.3 million for the quarter ended August 1, 2015, compared to $608.6 million in the same prior-year period. In constant currency, net revenue decreased by 0.6%.	
 	 	
•	Gross margin (gross profit as a percentage of total net revenue) increased 70 basis points to 36.3% for the quarter ended August 1, 2015, compared to 35.6% in the same prior-year period.	
 	 	
•	Selling, general and administrative (“SG&A”) expenses as a percentage of total net revenue (“SG&A rate”) increased by 80 basis points to 31.5% for the quarter ended August 1, 2015, compared to 30.7% in the same prior-year period. SG&A expenses decreased 8.0% to $171.9 million for the quarter ended August 1, 2015, compared to $186.9 million in the same prior-year period.	
 	 	
•	Operating margin was relatively flat at 4.8% for the quarter ended August 1, 2015, compared to 4.9% in the same prior-year period. Earnings from operations decreased 12.2% to $26.2 million for the quarter ended August 1, 2015, compared to $29.9 million in the same prior-year period.	
 	 	
•	Other income, net (including interest income and expense), totaled $3.2 million for the quarter ended August 1, 2015, compared to $4.3 million in the same prior-year period.	
 	 	
•	The effective income tax rate increased 240 basis points to 37.2% for the quarter ended August 1, 2015, compared to 34.8% in the same prior-year period.	
Key Balance Sheet Accounts
 	 	
•	The Company had $470.9 million in cash and cash equivalents as of August 1, 2015. There were no short-term investments as of August 1, 2015. This compares to cash and cash equivalents and short-term investments of $466.5 million at August 2, 2014.	
 	 	
•	Accounts receivable, which relates primarily to the Company’s wholesale business in Europe, and to a lesser extent, to its wholesale businesses in the Americas and Asia and its international licensing business, decreased by $35.2 million, or 15.0%, to $198.7 million as of August 1, 2015, compared to $233.9 million at August 2, 2014. On a constant currency basis, accounts receivable decreased by $0.6 million, or 0.3%.	
 	 	
•	Inventory decreased by $56.9 million, or 14.5%, to $335.5 million as of August 1, 2015, compared to $392.4 million at August 2, 2014. On a constant currency basis, inventory decreased by $13.0 million, or 3.3%.	
Global Store Count
In the second quarter of fiscal 2016, together with our partners, we opened 24 new stores worldwide, consisting of 13 stores in Europe and the Middle East, four stores in the U.S. and Canada, four stores in Asia and three stores in South America. Together with our partners, we closed 68 stores worldwide, consisting of 25 stores in Asia, 24 stores in Europe and the Middle East, 18 stores in the U.S. and Canada and one store in Central America.

32

Table of Contents

We ended the second quarter of fiscal 2016 with 1,623 stores worldwide, comprised as follows:

Region	 	Total Stores	 	Directly
Operated Stores	 	Licensee Stores	
United States and Canada	 	456	
 	 	456	
 	 	—	
 	
Europe and the Middle East	 	594	
 	 	266	
 	 	328	
 	
Asia	 	478	
 	 	50	
 	 	428	
 	
Central and South America	 	95	
 	 	43	
 	 	52	
 	
Total	 	1,623	
 	 	815	
 	 	808	
 	
This store count does not include 480 concessions located primarily in South Korea and Greater China, which have been excluded because of their smaller store size in relation to our standard international store size. Of the total 1,623 stores, 1,226 were GUESS? stores, 241 were GUESS? Accessories stores, 80 were G by GUESS stores and 76 were MARCIANO stores.
Results of Operations
Three Months Ended August 1, 2015 and August 2, 2014
Consolidated Results
Net Revenue.   Net revenue decreased by $62.3 million, or 10.2%, to $546.3 million for the quarter ended August 1, 2015, from $608.6 million for the quarter ended August 2, 2014. In constant currency, net revenue decreased by 0.6% as currency translation fluctuations relating to our foreign operations unfavorably impacted net revenue by $58.6 million compared to the same prior-year period.
Gross Margin.   Gross margin increased 70 basis points to 36.3% for the quarter ended August 1, 2015, from 35.6% in the same prior-year period, of which 60 basis points was due to higher overall product margins. Product margins increased due primarily to higher initial mark-ups in Europe and Americas Retail and less markdowns in Americas Retail. These increases were partially offset by the negative impact from currency exchange rate fluctuations on product margins.
Gross Profit.Gross profit decreased by $18.7 million, or 8.6%, to $198.1 million for the quarter ended August 1, 2015, from $216.8 million in the same prior-year period. Currency translation fluctuations relating to our foreign operations unfavorably impacted gross profit by $21.4 million.
The Company includes inbound freight charges, purchasing costs and related overhead, retail store occupancy costs, including rent and depreciation, and a portion of the Company’s distribution costs related to its retail business in cost of product sales. The Company’s gross margin may not be comparable to that of other entities since some entities include all of the costs related to their distribution in cost of product sales and others, like the Company, generally exclude wholesale-related distribution costs from gross margin, including them instead in SG&A expenses. Additionally, some entities include retail store occupancy costs in SG&A expenses and others, like the Company, include retail store occupancy costs in cost of product sales.
SG&A Rate.   The Company’s SG&A rate increased by 80 basis points to 31.5% for the quarter ended August 1, 2015, from 30.7% in the same prior-year period, due primarily to the unfavorable impact from charges related to legal matters of $7.0 million during the quarter ended August 1, 2015, partially offset by lower asset impairment charges.
Selling, General and Administrative Expenses.   SG&A expenses decreased by $15.0 million, or 8.0%, to $171.9 million for the quarter ended August 1, 2015, from $186.9 million in the same prior-year period. The decrease was driven by the favorable impact from currency translation fluctuations and lower asset impairment charges, partially offset by charges related to legal matters of $7.0 million during the quarter ended August 1, 2015. Currency translation fluctuations relating to our foreign operations favorably impacted SG&A expenses by $17.0 million.

33

Table of Contents

Operating Margin. Operating margin was relatively flat at 4.8% for the quarter ended August 1, 2015, compared to 4.9% in the same prior-year period. Operating margin was negatively impacted by a higher SG&A rate, offset mostly by higher overall gross margins compared to the same prior-year period.
Earnings from Operations.   Earnings from operations decreased by $3.7 million, or 12.2%, to $26.2 million for the quarter ended August 1, 2015, from $29.9 million in the same prior-year period. Currency translation fluctuations relating to our foreign operations unfavorably impacted earnings from operations by $4.4 million.
Interest Expense, Net.   Interest expense, net was flat at $0.5 million for the quarter ended August 1, 2015, compared to the quarter ended August 2, 2014 and includes the impact of hedge ineffectiveness of foreign currency forward contracts designated as cash flow hedges.
Other Income, Net.   Other income, net was $3.7 million for the quarter ended August 1, 2015, compared to $4.8 million in the same prior-year period. Other income, net in the quarter ended August 1, 2015 consisted primarily of net unrealized and realized mark-to-market revaluation gains on foreign currency contracts. Other income, net in the quarter ended August 2, 2014 consisted primarily of net unrealized and realized mark-to-market revaluation gains on foreign currency contracts and net unrealized gains on non-operating assets.
Income Tax Expense.  Income tax expense for the quarter ended August 1, 2015 was $10.9 million, or a 37.2% effective tax rate, compared to $11.9 million, or a 34.8% effective tax rate, in the same prior-year period. Generally, income taxes for the interim periods are computed using the effective tax rate estimated to be applicable for the full fiscal year which is subject to ongoing review and evaluation by management. The increase in effective tax rate was due primarily to a larger mix of taxable income in higher taxable jurisdictions and higher non-deductible compensation costs compared to the same prior-year period.
Net Earnings Attributable to Noncontrolling Interests.   Net earnings attributable to noncontrolling interests for the quarter ended August 1, 2015 was $0.2 million, net of taxes, compared to $0.3 million, net of taxes, in the same prior-year period.
Net Earnings Attributable to Guess?, Inc.   Net earnings attributable to Guess?, Inc. decreased by $3.7 million, or 16.7%, to $18.3 million for the quarter ended August 1, 2015, from $22.0 million in the same prior-year period. Diluted earnings per share decreased to $0.21 per share for the quarter ended August 1, 2015, compared to $0.26 per share for the quarter ended August 2, 2014. We estimate that the negative impact from currency fluctuations on diluted earnings per common share for the quarter ended August 1, 2015 was approximately $0.10 per share.

34

Table of Contents

Information by Business Segment
The following table presents our net revenue and earnings (loss) from operations by segment for the three months ended August 1, 2015 and August 2, 2014 (dollars in thousands):

 	Three Months Ended	 	 	 	 	
 	Aug 1, 2015	 	Aug 2, 2014	 	Change	 	% Change	
Net revenue:	 	 	 	 	 	 	 	
Americas Retail(1)	$	232,456	
 	 	$	244,000	
 	 	$	(11,544	)	 	(4.7	%)	
Europe	199,375	
 	 	235,260	
 	 	(35,885	)	 	(15.3	)	
Asia	56,745	
 	 	64,267	
 	 	(7,522	)	 	(11.7	)	
Americas Wholesale(1)	32,361	
 	 	38,252	
 	 	(5,891	)	 	(15.4	)	
Licensing	25,327	
 	 	26,792	
 	 	(1,465	)	 	(5.5	)	
Total net revenue	$	546,264	
 	 	$	608,571	
 	 	$	(62,307	)	 	(10.2	%)	
Earnings (loss) from operations:	 	 	 	 	 	 	 	
Americas Retail(1)	$	5,244	
 	 	$	(4,662	)	 	$	9,906	
 	 	212.5	%	
Europe	18,186	
 	 	24,513	
 	 	(6,327	)	 	(25.8	)	
Asia	887	
 	 	2,264	
 	 	(1,377	)	 	(60.8	)	
Americas Wholesale(1)	4,872	
 	 	5,167	
 	 	(295	)	 	(5.7	)	
Licensing	22,415	
 	 	24,909	
 	 	(2,494	)	 	(10.0	)	
Corporate Overhead	(25,403	)	 	(22,333	)	 	(3,070	)	 	13.7	
 	
Total earnings from operations	$	26,201	
 	 	$	29,858	
 	 	$	(3,657	)	 	(12.2	%)	
Operating margins:	 	 	 	 	 	 	 	
Americas Retail(1)	2.3	%	 	(1.9	%)	 	 	 	 	
Europe	9.1	%	 	10.4	%	 	 	 	 	
Asia	1.6	%	 	3.5	%	 	 	 	 	
Americas Wholesale(1)	15.1	%	 	13.5	%	 	 	 	 	
Licensing	88.5	%	 	93.0	%	 	 	 	 	
Total Company	4.8	%	 	4.9	%	 	 	 	 	
__________________________________
 	 	
(1)	Beginning in the second quarter of fiscal 2016, the Company changed the names of its “North American Retail” and “North American Wholesale” segments to “Americas Retail” and “Americas Wholesale” to better reflect that these segments are inclusive of its operations in North America as well as Central and South America. There have been no changes to the underlying reporting in either segment.	
Americas Retail
Net revenue from our Americas Retail segment decreased by $11.5 million, or 4.7%, to $232.5 million for the quarter ended August 1, 2015, from $244.0 million in the same prior-year period. In constant currency, net revenue decreased by 1.5%, driven primarily by the negative impact of store closures. Comparable store sales (including e-commerce) in the U.S. and Canada decreased 2.8% in U.S. dollars and increased 0.2% in constant currency, which excludes the unfavorable translation impact of currency fluctuations relating to our Canadian retail stores and e-commerce sites. E-commerce sales increased by $3.0 million, or 20.1%, to $18.2 million for the quarter ended August 1, 2015, from $15.2 million in the same prior-year period. The inclusion of our e-commerce sales improved the comparable store sale percentage by 1.8% in U.S. dollars and 1.9% in constant currency. The store base for the U.S. and Canada decreased by an average of 29 net stores during the quarter ended August 1, 2015 compared to the same prior-year period, resulting in a 4.6% net decrease in average square footage. Currency translation fluctuations relating to our non-U.S. retail stores and e-commerce sites unfavorably impacted net revenue by $7.8 million.
Operating margin increased 420 basis points to 2.3% for the quarter ended August 1, 2015, compared to negative 1.9% in the same prior-year period, driven by higher gross margins and a lower SG&A rate. The higher gross margins were driven primarily by less markdowns and higher initial mark-ups, partially offset by the unfavorable impact from currency exchange rate fluctuations in Canada. The lower SG&A rate was due primarily to lower asset impairment charges during the quarter ended August 1, 2015 compared to the same prior-year period.

35

Table of Contents

Earnings from operations from our Americas Retail segment was $5.2 million for the quarter ended August 1, 2015, compared to loss from operations of $4.7 million in the same prior-year period. The improvement reflects the impact on earnings from higher product margins, lower asset impairment charges and lower store occupancy costs during the quarter ended August 1, 2015 compared to the same prior-year period.
In the second quarter of fiscal 2016, we opened four new stores and closed 18 stores in the U.S. and Canada. As of August 1, 2015, we directly operated 456 stores in the U.S. and Canada, comprised of 159 full-priced GUESS? retail stores, 145 GUESS? factory outlet stores, 63 G by GUESS stores, 46 GUESS? Accessories stores and 43 MARCIANO stores. This compares to 488 stores at August 2, 2014.
Europe
Net revenue from our Europe segment decreased by $35.9 million, or 15.3%, to $199.4 million for the quarter ended August 1, 2015, from $235.3 million in the same prior-year period. In constant currency, net revenue increased by 3.7%, driven primarily by the favorable impact on revenue from productivity improvements in our directly operated retail stores versus the same prior-year period. As of August 1, 2015, we directly operated 266 stores in Europe compared to 264 stores at August 2, 2014, excluding concessions, which represents a 0.8% increase over the prior-year second quarter end. Currency translation fluctuations relating to our European operations unfavorably impacted net revenue by $44.6 million.
Operating margin decreased 130 basis points to 9.1% for the quarter ended August 1, 2015, compared to 10.4% in the same prior-year period, driven primarily by lower gross margins. Gross margins were negatively impacted by currency exchange rate fluctuations, partially offset by higher initial mark-ups.
Earnings from operations from our Europe segment decreased by $6.3 million, or 25.8%, to $18.2 million for the quarter ended August 1, 2015, from $24.5 million in the same prior-year period. Currency translation fluctuations relating to our European operations unfavorably impacted earnings from operations by $4.1 million.
Asia 
Net revenue from our Asia segment decreased by $7.5 million, or 11.7%, to $56.7 million for the quarter ended August 1, 2015, from $64.3 million in the same prior-year period. In constant currency, net revenue decreased by 6.0%, driven primarily by negative comparable store sales in South Korea versus the same prior-year period. As of August 1, 2015, we and our partners operated 478 stores and 456 concessions in Asia, compared to 495 stores and 500 concessions at August 2, 2014. Currency translation fluctuations relating to our Asian operations unfavorably impacted net revenue by $3.7 million.
Operating margin decreased 190 basis points to 1.6% for the quarter ended August 1, 2015, compared to 3.5% in the same prior-year period. The decrease in operating margin was driven primarily by lower gross margins in South Korea and a higher SG&A rate due primarily to an overall deleveraging of expenses.
Earnings from operations from our Asia segment decreased by $1.4 million, or 60.8%, to $0.9 million for the quarter ended August 1, 2015, from $2.3 million in the same prior-year period. The decrease was driven by the negative impact on earnings from negative comparable store sales in South Korea and lower overall product margins, partially offset by lower store occupancy costs and lower SG&A expenses.
Americas Wholesale
Net revenue from our Americas Wholesale segment decreased by $5.9 million, or 15.4%, to $32.4 million for the quarter ended August 1, 2015, from $38.3 million in the same prior-year period. In constant currency, net revenue decreased by 9.0% compared to the same prior-year period, driven primarily by lower shipments in our U.S. wholesale business. Currency translation fluctuations relating to our non-U.S. wholesale businesses unfavorably impacted net revenue by $2.4 million.
Operating margin increased 160 basis points to 15.1% for the quarter ended August 1, 2015, compared to 13.5% in the same prior-year period. The increase in operating margin was driven by higher gross margins, partially offset by an overall deleveraging of SG&A expenses.

36

Table of Contents

Earnings from operations from our Americas Wholesale segment decreased by $0.3 million, or 5.7%, to $4.9 million for the quarter ended August 1, 2015, from $5.2 million in the same prior-year period. Currency translation fluctuations relating to our non-U.S. wholesale businesses unfavorably impacted earnings from operations by $0.4 million.
Licensing
Net royalty revenue from our Licensing segment decreased by $1.5 million, or 5.5%, to $25.3 million for the quarter ended August 1, 2015, from $26.8 million in the same prior-year period. The decrease was driven primarily by lower sales in our bag and watch categories.
Earnings from operations from our Licensing segment decreased by $2.5 million, or 10.0%, to $22.4 million for the quarter ended August 1, 2015, from $24.9 million in the same prior-year period. The decrease was driven primarily by the unfavorable impact to earnings from lower revenue and higher expenses.
Corporate Overhead
Unallocated corporate overhead increased by $3.1 million to $25.4 million for the quarter ended August 1, 2015, from $22.3 million in the same prior-year period. The increase was driven primarily by charges related to legal matters of $7.0 million during the quarter ended August 1, 2015, partially offset by lower compensation costs.

Six months ended August 1, 2015 and August 2, 2014
Consolidated Results
Net Revenue.   Net revenue decreased by $106.0 million, or 9.4%, to $1.03 billion for the six months ended August 1, 2015, from $1.13 billion for the six months ended August 2, 2014. In constant currency, net revenue decreased by 0.3% as currency translation fluctuations relating to our foreign operations unfavorably impacted net revenue by $102.1 million compared to the same prior-year period.
Gross Margin. Gross margin increased 80 basis points to 35.5% for the six months ended August 1, 2015, from 34.7% in the same prior-year period, of which 50 basis points was due to higher overall product margins and 30 basis points was due to a lower occupancy rate. Product margins increased due primarily to higher initial mark-ups in Europe and Americas Retail and less markdowns in Americas Retail, partially offset by the negative impact from currency exchange rate fluctuations on product margins. The lower occupancy rate was due primarily to lower store occupancy costs, partially offset by the negative impact on the Company’s fixed cost structure resulting from negative comparable store sales in Americas Retail.
Gross Profit.Gross profit decreased by $29.4 million, or 7.5%, to $363.6 million for the six months ended August 1, 2015, from $393.0 million in the same prior-year period. Currency translation fluctuations relating to our foreign operations unfavorably impacted gross profit by $36.5 million.
SG&A Rate. The Company’s SG&A rate increased by 30 basis points to 32.5% for the six months ended August 1, 2015, from 32.2% in the same prior-year period, due primarily to the unfavorable impact from charges related to legal matters of $7.0 million during the six months ended August 1, 2015.
Selling, General and Administrative Expenses.   SG&A expenses decreased by $32.1 million, or 8.8%, to $333.0 million for the six months ended August 1, 2015, from $365.1 million in the same prior-year period. The decrease was driven by the favorable impact from currency translation fluctuations, partially offset by charges related to legal matters of $7.0 million during the six months ended August 1, 2015. Currency translation fluctuations relating to our foreign operations favorably impacted SG&A expenses by $33.3 million.
Operating Margin. Operating margin increased 50 basis points to 3.0% for the six months ended August 1, 2015, compared to 2.5% in the same prior-year period. The increase in operating margin was driven by higher overall gross margins, partially offset by a higher SG&A rate compared to the same prior-year period.

37

Table of Contents

Earnings from Operations.   Earnings from operations increased by $2.7 million, or 9.6%, to $30.6 million for the six months ended August 1, 2015, from $27.9 million in the same prior-year period. Currency translation fluctuations relating to our foreign operations unfavorably impacted earnings from operations by $3.2 million.
Interest Expense, Net.   Interest expense, net was $0.7 million for the six months ended August 1, 2015, compared to $0.6 million for the six months ended August 2, 2014 and includes the impact of hedge ineffectiveness of foreign currency forward contracts designated as cash flow hedges.
Other Income, Net.   Other income, net was $6.3 million for the six months ended August 1, 2015, compared to $3.6 million in the same prior-year period. Other income, net in the six months ended August 1, 2015 consisted primarily of net unrealized and realized mark-to-market revaluation gains on foreign currency contracts and net unrealized and realized gains on non-operating assets. Other income, net in the six months ended August 2, 2014 consisted primarily of net unrealized gains on non-operating assets and net unrealized mark-to-market revaluation gains on foreign currency contracts.
Income Tax Expense.  Income tax expense for the six months ended August 1, 2015 was $13.8 million, or a 38.0% effective tax rate, compared to $10.9 million, or a 35.1% effective tax rate, in the same prior-year period. Generally, income taxes for the interim periods are computed using the effective tax rate estimated to be applicable for the full fiscal year which is subject to ongoing review and evaluation by management. The increase in effective tax rate was due primarily to a larger mix of taxable income in higher taxable jurisdictions and higher non-deductible compensation costs during the six months ended August 1, 2015 compared to the same prior-year period. 
Net Earnings Attributable to Noncontrolling Interests.   Net earnings attributable to noncontrolling interests for the six months ended August 1, 2015 was $0.8 million, net of taxes, compared to $0.2 million, net of taxes, in the same prior-year period.
Net Earnings Attributable to Guess?, Inc.   Net earnings attributable to Guess?, Inc. increased by $1.7 million, or 9.0%, to $21.6 million for the six months ended August 1, 2015, from $19.9 million in the same prior-year period. Diluted earnings per share increased to $0.25 per share for the six months ended August 1, 2015, compared to $0.23 per share for the six months ended August 2, 2014. We estimate that the negative impact from currency fluctuations on diluted earnings per common share for the six months ended August 1, 2015 was approximately $0.11 per share.

38

Table of Contents

Information by Business Segment
The following table presents our net revenue and earnings (loss) from operations by segment for the six months ended August 1, 2015 and August 2, 2014 (dollars in thousands):

 	Six Months Ended	 	 	 	 	
 	Aug 1, 2015	 	Aug 2, 2014	 	Change	 	% Change	
Net revenue:	 	 	 	 	 	 	 	
Americas Retail(1)	$	446,705	
 	 	$	472,344	
 	 	$	(25,639	)	 	(5.4	%)	
Europe	336,772	
 	 	394,418	
 	 	(57,646	)	 	(14.6	)	
Asia	120,780	
 	 	134,385	
 	 	(13,605	)	 	(10.1	)	
Americas Wholesale(1)	69,639	
 	 	77,560	
 	 	(7,921	)	 	(10.2	)	
Licensing	51,192	
 	 	52,405	
 	 	(1,213	)	 	(2.3	)	
Total net revenue	$	1,025,088	
 	 	$	1,131,112	
 	 	$	(106,024	)	 	(9.4	%)	
Earnings (loss) from operations:	 	 	 	 	 	 	 	
Americas Retail(1)	$	(1,965	)	 	$	(13,061	)	 	$	11,096	
 	 	85.0	%	
Europe	14,518	
 	 	17,881	
 	 	(3,363	)	 	(18.8	)	
Asia	5,500	
 	 	5,617	
 	 	(117	)	 	(2.1	)	
Americas Wholesale(1)	11,619	
 	 	12,920	
 	 	(1,301	)	 	(10.1	)	
Licensing	45,440	
 	 	47,630	
 	 	(2,190	)	 	(4.6	)	
Corporate Overhead	(44,558	)	 	(43,106	)	 	(1,452	)	 	3.4	
 	
Total earnings from operations	$	30,554	
 	 	$	27,881	
 	 	$	2,673	
 	 	9.6	%	
Operating margins:	 	 	 	 	 	 	 	
Americas Retail(1)	(0.4	%)	 	(2.8	%)	 	 	 	 	
Europe	4.3	%	 	4.5	%	 	 	 	 	
Asia	4.6	%	 	4.2	%	 	 	 	 	
Americas Wholesale(1)	16.7	%	 	16.7	%	 	 	 	 	
Licensing	88.8	%	 	90.9	%	 	 	 	 	
Total Company	3.0	%	 	2.5	%	 	 	 	 	
__________________________________
 	 	
(1)	Beginning in the second quarter of fiscal 2016, the Company changed the names of its “North American Retail” and “North American Wholesale” segments to “Americas Retail” and “Americas Wholesale” to better reflect that these segments are inclusive of its operations in North America as well as Central and South America. There have been no changes to the underlying reporting in either segment.	
Americas Retail
Net revenue from our Americas Retail segment decreased by $25.6 million, or 5.4%, to $446.7 million for the six months ended August 1, 2015, from $472.3 million in the same prior-year period. In constant currency, net revenue decreased by 2.6%, driven primarily by negative comparable store sales and store closures. Comparable store sales (including e-commerce) in the U.S. and Canada decreased 4.3% in U.S. dollars and 1.8% in constant currency, which excludes the unfavorable translation impact of currency fluctuations relating to our Canadian retail stores and e-commerce sites. E-commerce sales increased by $5.2 million, or 16.9%, to $36.4 million for the six months ended August 1, 2015, from $31.2 million in the same prior-year period. The inclusion of our e-commerce sales improved the comparable store sale percentage by 1.9% in U.S. dollars and constant currency. The store base for the U.S. and Canada decreased by an average of 22 net stores during the six months ended August 1, 2015 compared to the same prior-year period, resulting in a 3.4% net decrease in average square footage. Currency translation fluctuations relating to our non-U.S. retail stores and e-commerce sites unfavorably impacted net revenue by $13.2 million.
Operating margin increased 240 basis points to negative 0.4% for the six months ended August 1, 2015, compared to negative 2.8% in the same prior-year period, driven primarily by higher gross margins. The higher gross margins were driven primarily by less markdowns and higher initial mark-ups, partially offset by the negative impact on the fixed cost structure resulting from negative comparable store sales and the unfavorable impact from currency exchange rate fluctuations in Canada.

39

Table of Contents

Loss from operations from our Americas Retail segment decreased by $11.1 million, or 85.0%, to $2.0 million for the six months ended August 1, 2015, from $13.1 million in the same prior-year period. The improvement reflects the impact on earnings from higher product margins and lower store occupancy costs, partially offset by the negative impact on earnings from negative comparable store sales.
Europe
Net revenue from our Europe segment decreased by $57.6 million, or 14.6%, to $336.8 million for the six months ended August 1, 2015, from $394.4 million in the same prior-year period. In constant currency, net revenue increased by 5.3%, driven primarily by the favorable impact on revenue from productivity improvements in our directly operated retail stores versus the same prior-year period and higher shipments in our European wholesale business. Our European wholesale business was favorably impacted by a shift in orders which benefited the six months ended August 1, 2015. Currency translation fluctuations relating to our European operations unfavorably impacted net revenue by $78.4 million.
Operating margin decreased 20 basis points to 4.3% for the six months ended August 1, 2015, compared to 4.5% in the same prior-year period. The decrease in operating margin was driven by lower gross margins due primarily to the negative impact from currency exchange rate fluctuations, partially offset by higher initial mark-ups.
Earnings from operations from our Europe segment decreased by $3.4 million, or 18.8%, to $14.5 million for the six months ended August 1, 2015, from $17.9 million in the same prior-year period. Currency translation fluctuations relating to our European operations unfavorably impacted earnings from operations by $3.0 million.
Asia
Net revenue from our Asia segment decreased by $13.6 million, or 10.1%, to $120.8 million for the six months ended August 1, 2015, from $134.4 million in the same prior-year period. In constant currency, net revenue decreased by 6.0%, driven primarily by negative comparable store sales in South Korea versus the same prior-year period. Currency translation fluctuations relating to our Asian operations unfavorably impacted net revenue by $5.6 million.
Operating margin increased 40 basis points to 4.6% for the six months ended August 1, 2015, compared to 4.2% in the same prior-year period. The increase was driven primarily by a lower SG&A rate, partially offset by lower overall gross margins. The lower SG&A rate was due primarily to overall leveraging of expenses as we phase out of our G by GUESS concept in South Korea. The lower overall gross margins were driven by lower product margins in South Korea.
Earnings from operations from our Asia segment decreased by $0.1 million, or 2.1%, to $5.5 million for the six months ended August 1, 2015, from $5.6 million in the same prior-year period.
Americas Wholesale
Net revenue from our Americas Wholesale segment decreased by $7.9 million, or 10.2%, to $69.6 million for the six months ended August 1, 2015, from $77.6 million in the same prior-year period. In constant currency, net revenue decreased by 3.8% compared to the same prior-year period, driven primarily by lower shipments in our U.S. wholesale business. Currency translation fluctuations relating to our non-U.S. wholesale businesses unfavorably impacted net revenue by $5.0 million.
Operating margin was flat at 16.7% for the six months ended August 1, 2015, compared to the same prior-year period.
Earnings from operations from our Americas Wholesale segment decreased by $1.3 million, or 10.1%, to $11.6 million for the six months ended August 1, 2015, from $12.9 million in the same prior-year period. Currency translation fluctuations relating to our non-U.S. wholesale businesses unfavorably impacted earnings from operations by $0.9 million.

40

Table of Contents

Licensing
Net royalty revenue from our Licensing segment decreased by $1.2 million, or 2.3%, to $51.2 million for the six months ended August 1, 2015, from $52.4 million in the same prior-year period. The decrease was driven primarily by lower sales in our watch category.
Earnings from operations from our Licensing segment decreased by $2.2 million, or 4.6%, to $45.4 million for the six months ended August 1, 2015, from $47.6 million in the same prior-year period. The decrease was driven primarily by the unfavorable impact to earnings from lower revenue and higher expenses.
Corporate Overhead
Unallocated corporate overhead increased by $1.5 million to $44.6 million for the six months ended August 1, 2015, from $43.1 million in the same prior-year period. The increase was driven primarily by charges related to legal matters of $7.0 million during the six months ended August 1, 2015, partially offset by lower compensation costs and fewer events.
Non-GAAP Measures
The Company’s reported financial results are presented in accordance with GAAP. Our discussion and analysis herein also includes certain “non-GAAP” constant currency financial information. The Company believes that these “non-GAAP” financial measures are useful as an additional means for investors to evaluate the comparability of the Company’s operating results when reviewed in conjunction with the Company’s GAAP financial statements. The non-GAAP measures are provided in addition to, and not as alternatives for, the Company’s reported GAAP results. 
Foreign currency exchange rate fluctuations affect the amount reported from translating the Company’s foreign revenue, expenses and balance sheet amounts into U.S. dollars. These rate fluctuations can have a significant effect on reported operating results under GAAP. The Company provides constant currency information to enhance the visibility of underlying business trends, excluding the effects of changes in foreign currency translation rates. To calculate revenues, comparable store sales and earnings (loss) from operations on a constant currency basis, operating results for the current-year period are translated into U.S. dollars at the average exchange rates in effect during the comparable period of the prior year. To calculate balance sheet amounts on a constant currency basis, the current period balance sheet amount is translated into U.S. dollars at the exchange rate in effect at the comparable prior-year period end. The constant currency calculations do not adjust for the impact of revaluing specific transactions denominated in a currency that is different to the functional currency of that entity when exchange rates fluctuate. The constant currency information presented may not be comparable to similarly titled measures reported by other companies.
Liquidity and Capital Resources
We need liquidity primarily to fund our working capital, the remodeling and expansion of our retail stores, shop-in-shop programs, concessions, systems, infrastructure, other existing operations, international growth, potential acquisitions, potential share repurchases and payment of dividends to our stockholders. During the six months ended August 1, 2015, the Company relied primarily on trade credit, available cash, real estate and other operating leases, short-term lines of credit and internally generated funds to finance our operations, dividends and expansion. The Company anticipates that we will be able to satisfy our ongoing cash requirements during the next twelve months for working capital, capital expenditures, interest and principal payments on our debt, potential acquisitions, potential share repurchases and any dividend payments to stockholders, primarily with cash flow from operations and existing cash balances supplemented by borrowings, as necessary, under our existing Credit Facility and bank facilities in Europe, as described below under “—Credit Facilities.”
As of August 1, 2015, the Company had cash and cash equivalents of $470.9 million. Approximately 64% of the Company’s cash and cash equivalents were held outside of the U.S. As of August 1, 2015, we have not provided for U.S. federal and state income taxes on the undistributed earnings of our foreign subsidiaries, since such earnings are considered indefinitely reinvested outside the U.S. If in the future we decide to repatriate such earnings, we would incur incremental U.S. federal and state income taxes, reduced by allowable foreign tax

41

Table of Contents

credits. However, our intent is to keep these funds indefinitely reinvested outside of the U.S. and our current plans do not indicate a need to repatriate them to fund our U.S. operations. Due to the complexities associated with the hypothetical calculation, including the availability of foreign tax credits, it is not practicable to determine the unrecognized deferred tax liability related to the undistributed earnings.
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 three diversified money market funds. The money market funds are AAA rated by national credit rating agencies and are generally comprised of high-quality, liquid investments. Please see “—Important Factors Regarding Forward-Looking Statements” and “Part I, Item 1A. Risk Factors” contained in the Company’s most recent Annual Report on Form 10-K for the fiscal year ended January 31, 2015 for a discussion of risk factors which could reasonably be likely to result in a decrease of internally generated funds available to finance capital expenditures and working capital requirements.
The Company has presented below the cash flow performance comparison of the six months ended August 1, 2015, versus the six months ended August 2, 2014.
Operating Activities
Net cash provided by operating activities was $56.7 million for the six months ended August 1, 2015, compared to $30.4 million for the six months ended August 2, 2014, or an increase of $26.3 million. The increase was driven primarily by the favorable impact of changes in working capital for the six months ended August 1, 2015 versus the same prior-year period. The change in working capital was driven primarily by the favorable impact from timing of payments and improved inventory management, partially offset by the negative impact from timing of European wholesale shipments during the six months ended August 1, 2015 compared to the same prior-year period.
Investing Activities
Net cash used in investing activities was $17.2 million for the six months ended August 1, 2015, compared to $32.6 million for the six months ended August 2, 2014. Cash used in investing activities related primarily to capital expenditures incurred on existing store remodeling programs and new store openings. In addition, the cost of any business acquisitions, the settlement of forward currency contracts designated as hedging instruments and proceeds from the sale of investments are also included in cash flows used in investing activities.
The decrease in cash used in investing activities was driven primarily by net cash receipts for settlement of forward contracts during the six months ended August 1, 2015 compared to net cash payments for settlement of forward contracts during the same prior-year period and a lower level of spending on existing store remodeling programs during the six months ended August 1, 2015. During the six months ended August 1, 2015, the Company opened 22 directly operated stores compared to 19 directly operated stores that were opened in the comparable prior-year period. During the six months ended August 1, 2015, the Company also acquired one store from one of its European licensees compared to four stores from certain of its European licensees in the comparable prior-year period.
Financing Activities
Net cash used in financing activities was $44.4 million for the six months ended August 1, 2015, compared to $40.6 million for the six months ended August 2, 2014. Cash used in financing activities related primarily to the payment of dividends and capital distributions to noncontrolling interests. In addition, payments related to the issuance of common stock under our equity plans, debt issuance costs, capital lease obligations and other borrowings and proceeds from borrowings and excess tax benefits from share-based compensation are also included in cash flows used in financing activities.
The increase in cash used in financing activities was driven primarily by capital distributions to noncontrolling interests during the six months ended August 1, 2015.

42

Table of Contents

Effect of Exchange Rates on Cash and Cash Equivalents
During the six months ended August 1, 2015, changes in foreign currency translation rates decreased our reported cash and cash equivalents balance by $7.6 million. This compares to an increase of $1.4 million in cash and cash equivalents driven by changes in foreign currency translation rates during the six months ended August 2, 2014.
Working Capital
As of August 1, 2015, the Company had net working capital (including cash and cash equivalents) of $770.9 million compared to $809.4 million at January 31, 2015 and $842.1 million at August 2, 2014. The Company’s primary working capital needs are for accounts receivable and inventory. Accounts receivable as of August 1, 2015 amounted to $198.7 million, down $35.2 million, compared to $233.9 million at August 2, 2014. The accounts receivable balance relates primarily to the Company’s wholesale business in Europe, and to a lesser extent, to its wholesale businesses in the Americas and Asia and its international licensing business. On a constant currency basis, accounts receivable decreased by $0.6 million, or 0.3%, when compared to August 2, 2014. As of August 1, 2015, approximately 49% of our total net trade receivables and 61% of our European net trade receivables were subject to credit insurance coverage, certain bank guarantees or letters of credit for collection purposes. Our credit insurance coverage contains certain terms and conditions specifying deductibles and annual claim limits. Inventory as of August 1, 2015 decreased to $335.5 million, or 14.5%, compared to $392.4 million at August 2, 2014. On a constant currency basis, inventory decreased by $13.0 million, or 3.3%, when compared to August 2, 2014.
Dividends
During the first quarter of fiscal 2008, the Company announced the initiation of a quarterly cash dividend of $0.06 per share of the Company’s common stock. Since that time, the Company has continued to pay a quarterly cash dividend, which has subsequently increased to $0.225 per common share.
On August 26, 2015, the Company announced a regular quarterly cash dividend of $0.225 per share on the Company’s common stock. The cash dividend will be paid on September 25, 2015 to shareholders of record as of the close of business on September 9, 2015. 
The payment of cash dividends in the future will be at the discretion of our Board of Directors and 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 liquidity.
Capital Expenditures
Gross capital expenditures totaled $25.0 million, before deducting lease incentives of $4.1 million, for the six months ended August 1, 2015. This compares to gross capital expenditures of $32.3 million, before deducting lease incentives of $3.2 million, for the six months ended August 2, 2014. The Company’s investments in capital for the full fiscal year 2016 are planned between $55 million and $65 million (after deducting estimated lease incentives of approximately $6 million). The planned investments in capital are primarily for store remodeling programs, targeted new store openings and investments in maintaining and improving our infrastructure (primarily information and operating systems).
In addition, we periodically evaluate strategic acquisitions and alliances and pursue those that we believe will support and contribute to our overall growth initiatives.
Credit Facilities
On June 23, 2015, the Company entered into a five-year senior secured asset-based revolving credit facility with Bank of America, N.A. and the other lenders party thereto (the “Credit Facility”). The Credit Facility provides for a borrowing capacity in an amount up to $150 million, including a Canadian sub-facility up to $50 million, subject to a borrowing base. Based on applicable accounts receivable, inventory and eligible cash balances as of August 1, 2015, the Company could have borrowed up to $150 million under the Credit Facility. The Credit Facility has an option to expand the borrowing capacity by up to $150 million subject to certain terms and conditions, including the willingness of existing or new lenders to assume such increased amount. The Credit

43

Table of Contents

Facility is available for direct borrowings and the issuance of letters of credit, subject to certain letters of credit sublimits, and may be used for working capital and other general corporate purposes. The Credit Facility replaces the Company’s previous $300 million credit facility, which was scheduled to mature in July 2016. No principal or interest was outstanding or accrued and unpaid under the prior credit facility on its termination date.
All obligations under the Credit Facility are unconditionally guaranteed by the Company and the Company’s existing and future domestic and Canadian subsidiaries, subject to certain exceptions, and are secured by a first priority lien on substantially all of the assets of the Company and such domestic and Canadian subsidiaries, as applicable.  
Direct borrowings under the Credit Facility made by the Company and its domestic subsidiaries shall bear interest at the U.S. base rate plus an applicable margin (varying from 0.25% to 0.75%) or at LIBOR plus an applicable margin (varying from 1.25% to 1.75%). The U.S. base rate is based on the greater of (i) the U.S. prime rate, (ii) the federal funds rate, plus 0.5%, and (iii) LIBOR for a 30 day interest period, plus 1.0%. Direct borrowings under the Credit Facility made by the Company’s Canadian subsidiaries shall bear interest at the Canadian prime rate plus an applicable margin (varying from 0.25% to 0.75%) or at the Canadian BA rate plus an applicable margin (varying from 1.25% to 1.75%). The Canadian prime rate is based on the greater of (i) the Canadian prime rate, (ii) the Bank of Canada overnight rate, plus 0.5%, and (iii) the Canadian BA rate for a one month interest period, plus 1.0%. The applicable margins are calculated quarterly and vary based on the average daily availability of the aggregate borrowing base. The Company is also obligated to pay certain commitment, letter of credit and other fees customary for a credit facility of this size and type. As of August 1, 2015, the Company had $1.7 million in outstanding standby letters of credit, no outstanding documentary letters of credit and no outstanding borrowings under the Credit Facility. 
The Credit Facility requires the Company to comply with a fixed charge coverage ratio on a trailing four-quarter basis if a default or an event of default occurs under the Credit Facility or if the borrowing capacity falls below certain levels. In addition, the Credit Facility contains customary covenants, including covenants that limit or restrict the Company and certain of its subsidiaries’ ability to: incur liens, incur indebtedness, make investments, dispose of assets, make certain restricted payments, merge or consolidate and enter into certain transactions with affiliates. Upon the occurrence of an event of default under the Credit Facility, the lenders may cease making loans, terminate the Credit Facility and declare all amounts outstanding to be immediately due and payable. The Credit Facility specifies a number of events of default (some of which are subject to applicable grace or cure periods), including, among other things, non-payment defaults, covenant defaults, cross-defaults to other material indebtedness, bankruptcy and insolvency defaults and material judgment defaults. The Credit Facility allows for both secured and unsecured borrowings outside of the Credit Facility up to specified amounts.
The Company, through its European subsidiaries, maintains short-term uncommitted borrowing agreements, primarily for working capital purposes, with various banks in Europe. The majority of the borrowings under these agreements are secured by specific accounts receivable balances. Based on the applicable accounts receivable balances as of August 1, 2015, the Company could have borrowed up to $80.8 million under these agreements. As of August 1, 2015, the Company had no outstanding borrowings and $3.0 million in outstanding documentary letters of credit under these agreements. The agreements are denominated primarily in euros and provide for annual interest rates ranging from 0.9% to 6.8%. The maturities of any short-term borrowings under these arrangements are generally linked to the credit terms of the underlying accounts receivable that secure the borrowings. With the exception of one facility for up to $38.4 million that has a minimum net equity requirement, there are no other financial ratio covenants. 
The Company leases a building in Florence, Italy under a capital lease which provides for minimum lease payments through May 1, 2016. As of August 1, 2015, the capital lease obligation was $4.8 million. The Company entered into a separate interest rate swap agreement designated as a non-hedging instrument that resulted in a swap fixed rate of 3.55%. This interest rate swap agreement matures on February 1, 2016 and converts the nature of the capital lease obligation from Euribor floating-rate debt to fixed-rate debt. The fair value of the interest rate swap liability as of August 1, 2015 was approximately $0.2 million. 

44

Table of Contents

From time-to-time, the Company will obtain other financing in foreign countries for working capital to finance its local operations.
Share Repurchases
On June 26, 2012, the Company’s Board of Directors authorized a program to repurchase, from time-to-time and as market and business conditions warrant, up to $500 million of the Company’s common stock (the “2012 Share Repurchase Program”). Repurchases under the program 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, which may be discontinued at any time, without prior notice. As of August 1, 2015, the Company had remaining authority under the 2012 Share Repurchase Program to purchase $495.8 million of its common stock. There were no share repurchases during the three and six months ended August 1, 2015 and August 2, 2014.
Supplemental Executive Retirement Plan
On August 23, 2005, the Board of Directors of the Company adopted a Supplemental Executive Retirement Plan (“SERP”) which became effective January 1, 2006. The SERP provides select employees who satisfy certain eligibility requirements with certain benefits upon retirement, termination of employment, death, disability or a change in control of the Company, in certain prescribed circumstances.
In July 2015, the SERP was amended in connection with Paul Marciano’s planned transition from Chief Executive Officer to Executive Chairman of the Board and Chief Creative Officer. The amendment effectively eliminated any future salary progression by finalizing compensation levels for future benefits. Mr. Marciano will continue to be eligible to receive SERP benefits in the future in accordance with the amended terms of the SERP. Subsequent to the amendment, there are no employees that would be considered actively participating under the terms of the SERP.     
As a result, during the three and six months ended August 1, 2015, the Company included an actuarial gain of $11.4 million before taxes in accumulated other comprehensive income (loss). In addition, the Company also recognized a curtailment gain of $1.7 million before taxes related to the accelerated amortization of the remaining prior service credit during the three and six months ended August 1, 2015.
As a non-qualified pension plan, no dedicated funding of the SERP is required; however, the Company has 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. The cash surrender values of the insurance policies were $55.9 million and $53.6 million as of August 1, 2015 and January 31, 2015, respectively, and were included in other assets in the Company’s condensed consolidated balance sheets. As a result of changes in the value of the insurance policy investments, the Company recorded unrealized gains (losses) of $(0.3) million and $1.6 million in other income and expense during the three and six months ended August 1, 2015, respectively, and unrealized gains of $0.7 million and $2.2 million in other income during the three and six months ended August 2, 2014, respectively. During the six months ended August 1, 2015, the Company also recorded realized gains of $0.7 million in other income resulting from payout on the insurance policies. The realized gains were recorded during the three months ended May 2, 2015. The projected benefit obligation was $50.6 million and $61.9 million as of August 1, 2015 and January 31, 2015, respectively, and was included in accrued expenses and other long-term liabilities in the Company’s condensed consolidated balance sheets depending on the expected timing of payments. SERP benefit payments of $0.4 million and $0.8 million were made during the three and six months ended August 1, 2015, respectively. SERP benefit payments of $0.3 million were made during the three and six months ended August 2, 2014.
Inflation
The Company does not believe that inflation trends in the U.S. and internationally over the last three years have had a significant effect on net revenue or profitability.

45

Table of Contents

Seasonality
The Company’s business is impacted by the general seasonal trends characteristic of the apparel and retail industries. The retail operations in the Americas and Europe are generally stronger during the second half of the fiscal year, and the wholesale operations in the Americas generally experience stronger performance from July through November. The European wholesale businesses operate with two primary selling seasons: the Spring/Summer season, which ships from November to April and the Fall/Winter season, which ships from May to October. The Company’s goal in the European wholesale business is to take advantage of early-season demand and potential reorders by offering a pre-collection assortment which ships at the beginning of each season. Customers retain the ability to request early shipment of backlog orders or delay shipment of orders depending on their needs.
Wholesale Backlog
We generally receive orders for fashion apparel three to six months prior to the time the products are delivered to our customers’ stores. The backlog of wholesale orders at any given time is affected by various factors, including seasonality, cancellations, the scheduling of market weeks, the timing of the receipt of orders and the timing of the shipment of orders and may include orders for multiple seasons. Accordingly, a comparison of backlogs of wholesale orders from period-to-period is not necessarily meaningful and may not be indicative of eventual actual shipments.
U.S. and Canada Backlog.Our U.S. and Canadian wholesale backlog as of August 31, 2015, consisting primarily of orders for fashion apparel, was $49.6 million, compared to $56.0 million in constant currency at September 1, 2014, a decrease of 11.4%.
Europe Backlog. As of August 30, 2015, the European wholesale backlog was €205.8 million, compared to €229.4 million at August 31, 2014, a decrease of 10.3%. The backlog as of August 30, 2015 is comprised of sales orders for the Fall/Winter 2015 and Spring/Summer 2016 seasons.
Application of Critical Accounting Policies
Our critical accounting policies reflecting our estimates and judgments are described in “Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in our Annual Report on Form 10-K for the year ended January 31, 2015 filed with the SEC on March 27, 2015. There have been no significant changes to our critical accounting policies during the six months ended August 1, 2015.
Recently Issued Accounting Guidance
In May 2014, the Financial Accounting Standards Board (“FASB”) issued a comprehensive new revenue recognition standard which will supersede previous existing revenue recognition guidance. The standard creates a five-step model for revenue recognition that requires companies to exercise judgment when considering contract terms and relevant facts and circumstances. The five-step model includes (1) identifying the contract, (2) identifying the separate performance obligations in the contract, (3) determining the transaction price, (4) allocating the transaction price to the separate performance obligations and (5) recognizing revenue when each performance obligation has been satisfied. The standard also requires expanded disclosures surrounding revenue recognition. The standard is effective for fiscal periods beginning after December 15, 2017, which will be the Company’s first quarter of fiscal 2019, and allows for either full retrospective or modified retrospective adoption. Early adoption is permitted for fiscal periods beginning after December 15, 2016, which will be the Company’s first quarter of fiscal 2018. The Company is currently evaluating the impact of the adoption of this standard on its consolidated financial statements, including the choice of application method upon adoption. 
In August 2014, the FASB issued authoritative guidance that requires an entity’s management to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity’s ability to continue as a going concern and requires additional disclosures if certain criteria are met. This guidance is effective for fiscal periods ending after December 15, 2016, which will be the Company’s fourth quarter of

46

Table of Contents

fiscal 2017, with early adoption permitted. The adoption of this guidance is not expected to impact the Company’s consolidated financial statements or related disclosures.
In February 2015, the FASB issued authoritative guidance which modifies existing consolidation guidance for reporting organizations that are required to evaluate whether they should consolidate certain legal entities. This guidance is effective for fiscal periods beginning after December 15, 2015, which will be the Company’s first quarter of fiscal 2017, and allows for either full retrospective or modified retrospective adoption, with early adoption permitted. The Company is currently evaluating the impact of the adoption of this standard on its consolidated financial statements, including the choice of application method upon adoption. 
In April 2015, the FASB issued authoritative guidance to simplify the presentation of debt issuance costs by requiring such costs to be presented as a deduction from the corresponding debt liability. This guidance is effective for fiscal years beginning after December 15, 2015, which will be the Company’s first quarter of fiscal 2017, and requires retrospective adoption, with early adoption permitted. The adoption of this guidance is not expected to have a material impact on the Company’s consolidated financial statements or related disclosures.
In April 2015, the FASB issued authoritative guidance which would permit an entity to measure its defined benefit plan assets and obligations using the calendar month-end that is closest to the entity’s fiscal period-end for interim and annual periods. This guidance is effective for fiscal years beginning after December 15, 2015, which will be the Company’s first quarter of fiscal 2017, and requires prospective adoption, with early adoption permitted. The Company is currently evaluating whether it will adopt this guidance, but if adopted, this guidance is not expected to have a material impact on the Company’s consolidated financial statements or related disclosures.
In July 2015, the FASB issued authoritative guidance to simplify the subsequent measurement of inventories by replacing the lower of cost or market test with a lower of cost and net realizable value test. This guidance is effective for fiscal years beginning after December 15, 2016, which will be the Company’s first quarter of fiscal 2018, and requires prospective adoption, with early adoption permitted. The adoption of this guidance is not expected to have a material impact on the Company’s consolidated financial statements or related disclosures.
 	 	
ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk.	
Exchange Rate Risk
More than half of product sales and licensing revenue recorded for the six months ended August 1, 2015 were denominated in currencies other than the U.S. dollar. The Company’s primary exchange rate risk relates to operations in Europe, Canada, South Korea and Mexico. Changes in currencies affect our earnings in various ways. For further discussion on currency related risk, please refer to our risk factors under “Part I, Item 1A. Risk Factors” contained in the Company’s most recent Annual Report on Form 10-K for the fiscal year ended January 31, 2015.
Various transactions that occur primarily in Europe, Canada, South Korea and Mexico are denominated in U.S. dollars and British pounds and thus are exposed to earnings risk as a result of exchange rate fluctuations when converted to their functional currencies. These types of transactions include U.S. dollar denominated purchases of merchandise and U.S. dollar and British pound denominated intercompany liabilities. In addition, certain operating expenses, tax liabilities and pension-related liabilities are denominated in Swiss francs and are exposed to earnings risk as a result of exchange rate fluctuations when converted to the functional currency. The Company is also subject to certain translation and economic exposures related to its net investment in certain of its international subsidiaries. The Company enters into derivative financial instruments to offset some but not all of its exchange risk. 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.

47

Table of Contents

Derivatives Designated as Hedging Instruments 
Cash Flow Hedges
During the six months ended August 1, 2015, the Company purchased U.S. dollar forward contracts in Europe and Canada totaling US$82.2 million and US$43.8 million, respectively, to hedge forecasted merchandise purchases and intercompany royalties that were designated as cash flow hedges. As of August 1, 2015, the Company had forward contracts outstanding for its European and Canadian operations of US$92.9 million and US$43.8 million, respectively, which are expected to mature over the next 18 months. The Company’s derivative financial instruments are recorded in its condensed consolidated balance sheet at fair value based on quoted market rates. 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 intercompany royalties, are recorded as a component of accumulated other comprehensive income (loss) within stockholders’ equity and are recognized in other income and expense in the period in which the royalty expense is incurred.
As of August 1, 2015, accumulated other comprehensive income (loss) included a net unrealized gain of approximately $5.9 million, net of tax, of which $4.6 million will be recognized in cost of product sales or other income over the following 12 months, at the then current values on a pre-tax basis, which can be different than the current quarter-end values. As of August 1, 2015, the net unrealized gain of the remaining open forward contracts recorded in the Company’s condensed consolidated balance sheet was approximately $4.4 million.
At January 31, 2015, the Company had forward contracts outstanding for its European and Canadian operations of US$50.8 million and US$24.5 million, respectively, that were designated as cash flow hedges. At January 31, 2015, the net unrealized gain of these open forward contracts recorded in the Company’s condensed consolidated balance sheet was approximately $6.6 million.
Derivatives Not Designated as Hedging Instruments
The Company also has foreign currency contracts that are not designated as hedging instruments for accounting purposes. Changes in fair value of foreign currency contracts not designated as hedging instruments are reported in net earnings as part of other income and expense. For the six months ended August 1, 2015, the Company recorded a net gain of $2.2 million for its euro and Canadian dollar foreign currency contracts not designated as hedges, which has been included in other income. As of August 1, 2015, the Company had euro foreign currency contracts to purchase US$81.9 million expected to mature over the next 12 months and Canadian dollar foreign currency contracts to purchase US$14.3 million expected to mature over the next seven months. As of August 1, 2015, the net unrealized gain of these open forward contracts recorded in the Company’s condensed consolidated balance sheet was approximately $3.9 million.
At January 31, 2015, the Company had euro foreign currency contracts to purchase US$59.3 million and Canadian dollar foreign currency contracts to purchase US$19.9 million. At January 31, 2015, the net unrealized gain of these open forward contracts recorded in the Company’s condensed consolidated balance sheet was approximately $8.9 million.
Sensitivity Analysis
As of August 1, 2015, 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$232.9 million, the fair value of the instruments would have decreased by $25.9 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 $21.2 million. Any resulting changes in the fair value of the hedged instruments may be partially offset by changes in the fair value of certain balance sheet positions (primarily U.S. dollar denominated liabilities in our foreign operations) impacted by the change in the foreign currency rate. The ability to reduce the exposure of currencies

48

Table of Contents

on earnings depends on the magnitude of the derivatives compared to the balance sheet positions during each reporting cycle.
Interest Rate Risk
As of August 1, 2015, approximately 70% of the Company’s total indebtedness related to a capital lease obligation, which is covered by a separate interest rate swap agreement with a swap fixed interest rate of 3.55% that matures on February 1, 2016. Changes in the related interest rate that result in an unrealized gain or loss on the fair value of the swap are reported in other income or expense. The change in the unrealized fair value of the interest swap increased other income, net by $0.1 million during the six months ended August 1, 2015. The majority of the Company’s remaining indebtedness is at variable rates of interest. Accordingly, changes in interest rates would impact the Company’s results of operations in future periods. A 100 basis point increase in interest rates would have had an insignificant effect on interest expense for the six months ended August 1, 2015.
The fair value of the Company’s debt instruments are based on the amount of future cash flows associated with each instrument discounted using the Company’s incremental borrowing rate. As of August 1, 2015 and January 31, 2015, the carrying value of all financial instruments was not materially different from fair value, as the interest rate on the Company’s debt approximates rates currently available to the Company.
ITEM 4. Controls and Procedures.
Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended. Based on this evaluation, our principal executive officer and our principal financial officer concluded that our disclosure controls and procedures were effective as of the end of the quarterly period covered by this report.
There was no change in our internal control over financial reporting during the second quarter of fiscal 2016 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

49

Table of Contents

PART II.  OTHER INFORMATION
 	 	
ITEM 1.	Legal Proceedings.	
On May 6, 2009, Gucci America, Inc. filed a complaint in the U.S. District Court for the Southern District of New York against Guess?, Inc. and certain third party licensees for the Company asserting, among other things, trademark and trade dress law violations and unfair competition. The complaint sought injunctive relief, compensatory damages, including treble damages, and certain other relief. Complaints similar to those in the above action have also been filed by Gucci entities against the Company and certain of its subsidiaries in the Court of Milan, Italy, the Intermediate People’s Court of Nanjing, China and the Court of Paris, France. The three-week bench trial in the U.S. matter concluded on April 19, 2012, with the court issuing a preliminary ruling on May 21, 2012 and a final ruling on July 19, 2012. Although the plaintiff was seeking compensation in the U.S. matter in the form of damages of $26 million and an accounting of profits of $99 million, the final ruling provided for monetary damages of $2.3 million against the Company and $2.3 million against certain of its licensees. The court also granted narrow injunctions in favor of the plaintiff for certain of the claimed infringements. On August 20, 2012, the appeal period expired without any party having filed an appeal, rendering the judgment final. On May 2, 2013, the Court of Milan ruled in favor of the Company in the Milan, Italy matter. In the ruling, the Court rejected all of the plaintiff’s claims and ordered the cancellation of three of the plaintiff’s Italian and four of the plaintiff’s European Community trademark registrations. On June 10, 2013, the plaintiff appealed the Court’s ruling in the Milan matter. On September 15, 2014, the Court of Appeal of Milan affirmed the majority of the lower Court’s ruling in favor of the Company, but overturned the lower Court’s finding with respect to an unfair competition claim. The matter has now entered into a damages phase based on the ruling. In the China matter, the Intermediate People’s Court of Nanjing, China issued a ruling on November 8, 2013 granting an injunction in favor of the plaintiff for certain of the claimed infringements on handbags and small leather goods and awarding the plaintiff statutory damages in the amount of approximately $80,000. The Company strongly disagrees with the Court’s decision and has appealed the ruling. The judgment in the China matter is stayed pending the appeal, which was heard in May 2014. On January 30, 2015, the Court of Paris ruled in favor of the Company, rejecting all of the plaintiff’s claims and partially canceling two of the plaintiff’s community trademark registrations and one of the plaintiff’s international trademark registrations. On February 17, 2015, the plaintiff appealed the Court of Paris’ ruling.
On August 25, 2006, Franchez Isaguirre, a former employee of the Company, filed a complaint in the Superior Court of California, County of Los Angeles alleging violations by the Company of California wage and hour laws. The complaint was subsequently amended, adding a second former employee as an additional named party. The plaintiffs purport to represent a class of similarly situated employees in California who allegedly had been injured by not being provided adequate meal and rest breaks. The complaint seeks unspecified compensatory damages, statutory penalties, attorney’s fees and injunctive and declaratory relief. On June 9, 2009, the Court certified the class but immediately stayed the case pending the resolution of a separate California Supreme Court case on the standards of class treatment for meal and rest break claims. Following the Supreme Court ruling, the Superior Court denied the Company’s motions to decertify the class and to narrow the class in January 2013 and June 2013, respectively. The Company subsequently petitioned to have the Court’s decision not to narrow the class definition reviewed. That petition was ultimately denied by the California Supreme Court in April 2014. In July 2015, the parties entered into a Memorandum of Understanding to settle the matter for $5.25 million, subject to certain limited offsets. Once a formal settlement agreement is finalized by the parties, the settlement will be subject to the review and approval of the Court. 
The Company has received customs tax assessment notices from the Italian Customs Agency regarding its customs tax audit of one of the Company’s European subsidiaries for the period from July 2010 through December 2012. Such assessments totaled €9.8 million ($10.8 million), including potential penalties and interest. The Company strongly disagrees with the positions that the Italian Customs Agency has taken and therefore filed appeals with the Milan First Degree Tax Court (“MFDTC”). On May 5, 2015, the MFDTC issued a judgment in favor of the Company in relation to the first set of appeals (covering the period through September 2010) and canceled the related assessments totaling €1.7 million ($1.8 million). While the ruling was favorable to the

50

Table of Contents

Company, there can be no assurances that the Company’s remaining appeals for October 2010 through December 2012 will be successful or that the Italian Customs Agency will not appeal the favorable MFDTC judgment. It also continues to be possible that the Company will receive similar or even larger assessments for periods subsequent to December 2012 or other claims or charges related to the matter in the future.
Although the Company believes that it has a strong position and will continue to vigorously defend each of the remaining matters, it is unable to predict with certainty whether or not these efforts will ultimately be successful or whether the outcomes will have a material impact on the Company’s financial position or results of operations. 
The Company is also involved in various other claims and other matters incidental to the Company’s business, the resolutions of which are not expected to have a material adverse effect on the Company’s financial position or results of operations.
ITEM 1A. Risk Factors.
There have not been any material changes from the Risk Factors as previously disclosed in our Annual Report on Form 10-K for the year ended January 31, 2015, filed with the SEC on March 27, 2015.
 	 	
ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	
Items (a) and (b) are not applicable.
Item (c).  Issuer Purchases of Equity Securities

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	
May 3, 2015 to May 30, 2015	 	 	 	 	 	 	 	
Repurchase program(1)	—	
 	 	—	
 	 	—	
 	 	$	495,786,484	
 	
Employee transactions(2)	—	
 	 	—	
 	 	—	
 	 	 	
May 31, 2015 to July 4, 2015	 	 	 	 	 	 	 	
Repurchase program(1)	—	
 	 	—	
 	 	—	
 	 	$	495,786,484	
 	
Employee transactions(2)	420	
 	 	$	19.79	
 	 	—	
 	 	 	
July 5, 2015 to August 1, 2015	 	 	 	 	 	 	 	
Repurchase program(1)	—	
 	 	—	
 	 	—	
 	 	$	495,786,484	
 	
Employee transactions(2)	71,645	
 	 	$	20.05	
 	 	—	
 	 	 	
Total	 	 	 	 	 	 	 	
Repurchase program(1)	—	
 	 	—	
 	 	—	
 	 	 	
Employee transactions(2)	72,065	
 	 	$	20.04	
 	 	—	

________________________________
 	 	
(1) 	On June 26, 2012, the Company’s Board of Directors authorized a program to repurchase, from time-to-time and as market and business conditions warrant, up to $500 million of the Company’s common stock. Repurchases under the program 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, which may be discontinued at any time, without prior notice.	
 	 	
(2) 	Consists of shares surrendered to, or withheld by, the Company in satisfaction of employee tax withholding obligations that occur upon vesting of restricted stock awards/units granted under the Company’s 2004 Equity Incentive Plan, as amended.	

51

Table of Contents
 	 	
ITEM 6.	Exhibits.	

 	 	 	
Exhibit
Number	 	Description	
3.1.	 	Restated Certificate of Incorporation of the Registrant (incorporated by reference from Amendment No. 3 to the Registrant’s Registration Statement on Form S-1 (Registration No. 333-4419) filed July 30, 1996).	
3.2.	 	Second Amended and Restated Bylaws of the Registrant (incorporated by reference from the Registrant’s Current Report on Form 8-K filed December 4, 2007).	
4.1.	 	Specimen Stock Certificate (incorporated by reference from Amendment No. 3 to the Registrant’s Registration Statement on Form S-1 (Registration No. 333-4419) filed July 30, 1996).	
10.1.	 	Loan, Guaranty and Security Agreement dated as of June 23, 2015, among Guess?, Inc., Guess? Retail, Inc., Guess.com, Inc., Guess? Canada Corporation, the guarantors party thereto, the lenders party thereto and Bank of America, N.A., as agent for the lenders (incorporated by reference from the Registrant’s Current Report on Form 8-K filed June 24, 2015).	
10.2.	 	Guess?, Inc. 2015 Annual Incentive Bonus Plan (incorporated by reference from the Registrant’s Current Report on Form 8-K filed June 25, 2015).*	
10.3.	 	Executive Employment Agreement dated July 7, 2015 between the Registrant and Victor Herrero (incorporated by reference from the Registrant’s Current Report on Form 8-K filed July 14, 2015).*	
10.4.	 	Letter Agreement dated July 7, 2015 between the Registrant and Paul Marciano (incorporated by reference from the Registrant’s Current Report on Form 8-K filed July 14, 2015).*	
†10.5.	 	Restricted Stock Unit Agreement dated as of July 7, 2015 between the Registrant and Victor Herrero.*	
†10.6.	 	Nonqualified Stock Option Agreement dated as of July 7, 2015 between the Registrant and Victor Herrero.*	
†10.7.	 	Restricted Stock Unit Agreement dated as of July 7, 2015 between the Registrant and Victor Herrero.*	
†31.1.	 	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.	
†31.2.	 	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.	
†32.1.	 	Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.	
†32.2.	 	Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.	
†101.INS	 	XBRL Instance Document	
†101.SCH	 	XBRL Taxonomy Extension Schema Document	
†101.CAL	 	XBRL Taxonomy Extension Calculation Linkbase Document	
†101.DEF	 	XBRL Taxonomy Extension Definition Linkbase Document	
†101.LAB	 	XBRL Taxonomy Extension Label Linkbase Document	
†101.PRE	 	XBRL Taxonomy Extension Presentation Linkbase Document	
_______________________________________________________________________________

*	Management Contract or Compensatory Plan	
†	Filed herewith	

52

Table of Contents

SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 	 	Guess?, Inc.	
 	 	 	 	
Date:	September 3, 2015	By:	/s/ VICTOR HERRERO	
 	 	 	Victor Herrero	
 	 	 	Chief Executive Officer	
 	 	 	 	
Date:	September 3, 2015	By:	/s/ SANDEEP REDDY	
 	 	 	Sandeep Reddy	
 	 	 	Chief Financial Officer	
 	 	 	(Principal Financial Officer)	

53

Exhibit 10.5

RESTRICTED STOCK UNIT AGREEMENT

This RESTRICTED STOCK UNIT AGREEMENT (this “Agreement”), dated as of July 7, 2015  (the “ Date of Grant ”), is entered into by and between GUESS?, INC., a Delaware corporation (the “ Company ”), and  Victor Herrero Amigo  (the “ Grantee ”).

RECITALS

WHEREAS, the Company maintains the Guess?, Inc. 2004 Equity Incentive Plan (as Amended and Restated as of May 20, 2014) (the “ Plan ”).

WHEREAS, the Compensation Committee of the Company’s Board of Directors (the “ Committee ”) has determined to grant a restricted stock unit award (this “ Award ”) to the Grantee under the Plan in order to increase Grantee’s participation in the success of the Company;

NOW, THEREFORE, the parties hereto agree as follows:
 	 	
1.	Definitions; Incorporation of Plan Terms. Capitalized terms used herein without definition shall have the meanings assigned to them in the Plan, except where a capitalized term is defined in the Executive Employment Agreement between the Company and the Grantee, effective July 7, 2015 (the “ Employment Agreement ”), and this Agreement indicates the definition used in the Employment Agreement shall apply for purposes of this Agreement as well. This Award and all rights of the Grantee under this Agreement are subject to, and the Grantee agrees to be bound by, all of the terms and conditions of the Plan, incorporated herein by this reference. Except as specifically provided in this Agreement, in the event of any conflict or inconsistency between the Plan and this Agreement, the Plan shall govern.	
 	 	
2.	Grant of Restricted Stock Units. The Company hereby grants to the Grantee as of the Date of Grant (set forth above) a right to receive  150,000  shares of the Company’s common stock subject to the terms, conditions, and restrictions set forth herein (the “ Restricted Stock Units ”). As used herein, the term “Restricted Stock Unit” shall mean a non-voting unit of measurement which is deemed for bookkeeping purposes to be equivalent to one outstanding share of the Company’s common stock, par value $0.01 per share (the “ Common Stock ”), solely for purposes of the Plan and this Agreement. The Restricted Stock Units shall be used solely as a device for the determination of the number of shares of Common Stock to be delivered to the Grantee pursuant to this Agreement. The Restricted Stock Units shall not be treated as property or as a trust fund of any kind. The Grantee shall have no rights as a stockholder of the Company, no dividend rights (except as expressly provided in Section 4 with respect to Dividend Equivalent Rights) and no voting rights with respect to the Restricted Stock Units and any shares of Common Stock underlying or issuable in respect of such Restricted Stock Units (“ Award Shares ”) until such shares of Common Stock are actually issued to and held of record by the Grantee. This Award is in complete satisfaction of the Grantee’s right to receive a “Signing Restricted Stock Unit Award” (as such term is defined in the Employment Agreement) pursuant to Section 4 of the Employment Agreement.	

 	 	
3.	Vesting. This Award shall be fully vested as of the Date of Grant; provided, however, that in the event the Grantee’s Service with the Company is terminated by the Grantee other than for “Good Reason” (as defined in the Employment Agreement) at any time prior to the first anniversary of the Date of Grant, this Award and the Restricted Stock Units subject hereto shall, regardless of the number of days the Grantee was employed by or provided services to the Company prior to the date of such termination of the Grantee’s Service, terminate and be cancelled as of the date of such termination of Service, and the Executive shall be required to immediately return the Award Shares issued in respect of such Restricted Stock Units to the Company (as to any such Award Shares theretofore sold, the Grantee shall be required to return to the Company the amount of the proceeds from the sale thereof) together with the amount of any dividends or other distributions theretofore received with respect to such Award Shares. Sections 14(a) and 14(b) of the Plan shall not apply to the Award. As used herein, the term “ Service ” means employment by the Company or a Subsidiary.	
 	 	
4.	Dividend Equivalents. If a cash dividend is paid with respect to the Common Stock while any Restricted Stock Units subject to the Award are outstanding, the Grantee shall be credited with an amount in cash equal to the dividends the Grantee would have received if he had been the owner of the shares of Common Stock subject to such outstanding Restricted Stock Units; provided, however, that no amount shall be credited with respect to shares that have been delivered to the Grantee as of the applicable dividend record date. Any amounts credited under this Section 4 (“ Dividend Equivalents ”) shall be subject to the same terms and conditions as the Restricted Stock Units to which they relate and shall be paid (or, if applicable, be forfeited) at the same time as the Restricted Stock Units to which they relate.	
 	 	
5.	Delivery of Shares. Except as otherwise provided in Section 7 below with respect to a Change in Control, the Company shall deliver or cause to be delivered to the Grantee the number of Award Shares subject to this Award on (or within three business days following) the Date of Grant. Any Dividend Equivalents described in Section 4 above related to such Award Shares shall be paid in cash at the same time as the delivery of the Award Shares under this Section 5.	
 	 	
6.	Adjustments Upon Specified Events. Upon the occurrence of certain events relating to the Company’s Common Stock contemplated by Section 16(b) of the Plan, the Committee will make adjustments, if appropriate, in the number of Restricted Stock Units and the number and kind of securities subject to the Award.	
 	 	
7.	Change in Control. Notwithstanding anything to the contrary in Section 3 or Section 5 of this Agreement or any provision of the Plan, the following provisions shall apply upon a Change in Control (as defined in the Employment Agreement):	
 	 	
A.	If a Change in Control occurs and the then-outstanding portion of this Award is not continued following such event or assumed or converted into restricted stock units of any successor entity to the Company or a parent thereof (the “ Successor Entity ”), the forfeiture provision set forth under Section 3 of this Award shall no longer apply and such Restricted Stock Units shall be settled at the time(s) otherwise provided in Section 5; provided that if such Change in Control constitutes a “change in the ownership or effective control” of the Company, or a	

2

change “in the ownership of a substantial portion of the assets” of the Company within the meaning of Section 409A of the Code (a “ Section 409A Change in Control ”), outstanding Restricted Stock Units and related Dividend Equivalents shall be settled upon or as soon as practicable after the date of such Change in Control to the extent such acceleration of payment can be made in accordance with Treas. Reg. §1.409A-3(j)(4)(ix) (or other exemption from the general prohibitions on accelerations of payments under Section 409A of the Code) and not result in any tax, penalty or interest under Section 409A of the Code. In connection with any such Change in Control where payment of outstanding Restricted Stock Units subject to the Award will not be made in connection with the Change in Control, the Committee may make provision for such Restricted Stock Units to become payable in cash based on the Fair Market Value of a share of Common Stock at the time of such Change in Control (with interest for the period from the date of such Change in Control to the applicable payment date at such rate as determined by the Committee based on the interest earned by interest bearing, FDIC insured deposits) as opposed to being payable in securities.
 	 	
B.	If the then-outstanding portion of this Award is continued following such event or is assumed or converted into restricted stock units of any Successor Entity, the forfeiture provision set forth under Section 3 above shall continue to apply following such Change in Control, and the Award (to the extent not forfeited in accordance with Section 3) shall be settled as provided in Section 5 of this Agreement.	
Section 17 of the Plan shall not apply with respect to the Award.
 	 	
8.	Restrictions on Transfer. The Grantee may not sell, assign, transfer, pledge, encumber or otherwise alienate, hypothecate or dispose of this Award or the Grantee’s right hereunder to receive Award Shares, except as otherwise provided in the Committee’s sole discretion consistent with the Plan and applicable securities laws.	
 	 	
9.	Taxes.	
 	 	
A.	The settlement of this Award is conditioned on the Grantee making arrangements reasonably satisfactory to the Company for the withholding of all applicable federal, state, local or foreign taxes as may be required under applicable law.	
 	 	
B.	It is intended that any amounts payable under this Agreement shall either be exempt from or comply with Section 409A of the Code (including the Treasury regulations and other published guidance relating thereto) (“ Code Section 409A ”) so as not to subject the Grantee to payment of any additional tax, penalty or interest imposed under Code Section 409A. The provisions of this Agreement shall be construed and interpreted to avoid the imputation of any such additional tax, penalty or interest under Code Section 409A yet preserve (to the nearest extent reasonably possible) the intended benefit payable to the Grantee.	
 	 	
C.	If the Grantee is a “specified employee” within the meaning of Treasury Regulation Section 1.409A-1(i) as of the date of the Grantee’s “separation from service” (as such term is defined for purposes of Code Section 409A), the Grantee shall not be entitled to any payment or benefit pursuant to this Award until the	

3

earlier of (i) the date which is six (6) months after the Grantee’s separation from service for any reason other than death, or (ii) the date of the Grantee’s death. The provisions of this Section 9(C) shall only apply if, and to the extent, required to avoid the imputation of any tax, penalty or interest pursuant to Code Section 409A. Any amounts otherwise payable to the Grantee upon or in the six (6) month period following the Grantee’s separation from service that are not so paid by reason of this Section 9(C) shall be paid (without interest, except as otherwise provided for in Section 7(A)) as soon as practicable (and in all events within thirty (30) days) after the date that is six (6) months after the Grantee’s separation from service (or, if earlier, as soon as practicable, and in all events within thirty (30) days, after the date of the Grantee’s death). For avoidance of doubt, Dividend Equivalents under Section 4 shall continue to be credited during the period of such six-month delay until the Restricted Stock Units are actually settled.
 	 	
10.	Compliance. The Grantee hereby agrees to cooperate with the Company, regardless of Grantee’s employment status with the Company, to the extent necessary for the Company to comply with applicable state and federal laws and regulations relating to the Restricted Stock Units.	
 	 	
11.	Notices. Any notice required or permitted under this Agreement shall be deemed given when personally delivered, or when deposited in a United States Post Office, postage prepaid, addressed, as appropriate, to the Grantee either at the address on record with the Company or such other address as may be designated by Grantee in writing to the Company; or to the Company, Attention: Stock Plan Administration, 1444 South Alameda Street, Los Angeles, California 90021, or such other address as the Company may designate in writing to the Grantee.	
 	 	
12.	Failure to Enforce Not a Waiver. The failure of the Company or the Grantee to enforce at any time any provision of this Agreement shall in no way be construed to be a waiver of such provision or of any other provision hereof.	
 	 	
13.	Governing Law. This Agreement shall be governed by and construed according to the laws of the State of Delaware, without regard to Delaware or other laws that might cause other law to govern under applicable principles of conflicts of law.  For purposes of litigating any dispute that arises under this Agreement, the parties hereby submit to and consent to the jurisdiction of the State of California, and agree that such litigation shall be conducted in the courts of Los Angeles County, or the federal courts for the United States for the Central District of California, and no other courts, where this Agreement is made and/or to be performed.	
 	 	
14.	Electronic Delivery. The Company may, in its sole discretion, decide to deliver any documents related to the Restricted Stock Units awarded under the Plan or future restricted stock or restricted stock units that may be awarded under the Plan by electronic means or request Grantee’s consent to participate in the Plan by electronic means. Grantee hereby consents to receive such documents by electronic delivery and agrees to participate in the Plan through an on-line or electronic system established and maintained by the Company or another third party designated by the Company.	

4

 	 	
15.	Severability. The provisions of this Agreement are severable and if any one or more provisions are determined to be illegal or otherwise unenforceable, in whole or in part, the remaining provisions shall nevertheless be binding and enforceable.	
 	 	
16.	Amendments. This Agreement may be amended or modified at any time by an instrument in writing signed by both parties.	
 	 	
17.	Agreement Not a Contract of Employment. Neither the grant of the Restricted Stock Units, this Agreement nor any other action taken in connection herewith shall constitute or be evidence of any agreement or understanding, express or implied, that the Grantee is an employee of the Company or any subsidiary of the Company.	
 	 	
18.	Committee’s Powers. No provision contained in this Agreement shall in any way terminate, modify or alter, or be construed or interpreted as terminating, modifying or altering any of the powers, rights or authority vested in the Committee or, to the extent delegated, in its delegate pursuant to the terms of the Plan or resolutions adopted in furtherance of the Plan, including, without limitation, the right to make certain determinations and elections with respect to the Restricted Stock Units.	
 	 	
19.	Termination of this Agreement. Upon termination of this Agreement, all rights of the Grantee hereunder shall cease.	
 	 	
20.	Clawback Policy. This Award is subject to the terms of the Company’s recoupment, clawback or similar policy as it may be in effect from time to time, as well as any similar provisions of applicable law, any of which could in certain circumstances require repayment or forfeiture of the Award or any shares of Common Stock or other cash or property received with respect to the Award (including any value received from a disposition of the shares acquired in respect of the Award).	

5

IN WITNESS WHEREOF, the Company has caused this Agreement to be executed on its behalf by a duly authorized officer and the Grantee has hereunto set his or her hand as of the date and year first above written.

 	 	GUESS?, INC.,
	
 	 	a Delaware corporation

 	 	 	 	 	
 	 	By:	/s/ Jason T. Miller	
 	 	 	 	 	
 	 	Print Name:	Jason T. Miller	
 	 	 	 	 	
 	 	Its:	Secretary	
 	 	 	 	 	
 	 	GRANTEE

 	 	/s/ Victor Herrero Amigo	
 	 	Signature	
 	 	 	 	 	
 	 	Victor Herrero Amigo	
 	 	Print Name	

6

Exhibit 10.6

GUESS?, INC.
2004 EQUITY INCENTIVE PLAN
NONQUALIFIED STOCK OPTION AGREEMENT
 
THIS NONQUALIFIED STOCK OPTION AGREEMENT (this “Option Agreement”) dated  July 7, 2015  by and between Guess?, Inc., a Delaware corporation (the “ Company ”), and Victor Herrero Amigo  (the “ Grantee ”) evidences the nonqualified stock option (the “ Option ”) granted by the Company to the Grantee as to the number of shares of the Company’s Common Stock first set forth below.

 	 	 	 	
 	 	
 	Number of Shares of Common Stock: (1)	600,000	Award Date:  July 7, 2015	
 	 	
 	Exercise Price per Share:(1)	$20.03	Expiration Date:(1)(2) July 7, 2025	
 	 	
 	Vesting(1)(2)  The Option shall become vested in accordance with the vesting requirements set forth in Section 1 of the Terms and Conditions of Nonqualified Stock Option (the “ Terms ”) attached to this Option Agreement incorporated herein by this reference).	

 	 	 	 	

The Option is granted under the Guess?, Inc. 2004 Equity Incentive Plan (as Amended and Restated as of May 20, 2014) (the “ Plan ”) and subject to the Terms (incorporated herein by this reference) and to the Plan.  The Option has been granted to the Grantee in addition to, and not in lieu of, any other form of compensation otherwise payable or to be paid to the Grantee.  Capitalized terms used herein without definition shall have the meanings assigned to them in the Plan, except where a capitalized term is defined in the Executive Employment Agreement between the Company and the Grantee, effective July 7, 2015 (the “ Employment Agreement ”), and this Option Agreement indicates the definition used in the Employment Agreement shall apply for purposes of this Option Agreement as well.  The parties agree to the terms of the Option set forth herein.  The Grantee acknowledges receipt of a copy of the Terms, the Plan and the Prospectus for the Plan. This Option is in complete satisfaction of the Grantee’s right to receive an award of “Stock Options” (as such term is defined in the Employment Agreement) pursuant to Section 6(a) of the Employment Agreement.

 	 	 	 	 	 	 	 	
“GRANTEE”	 	GUESS?, INC.
a Delaware corporation	 	

 /s/ Victor Herrero Amigo	 	By:	/s/ Jason T. Miller	 	
Signature	 	 	 	
 	 	Print Name:	Jason T. Miller	 	
 Victor Herrero Amigo	 	 	 	
Print Name	 	Its:	Secretary	 	

1

TERMS AND CONDITIONS OF NONQUALIFIED STOCK OPTION
 	 	
1.	Vesting.	
A.Vesting in General. Except as otherwise expressly provided in this Section 1 and in Sections 5 and 8, the Option shall become vested as to 25% of the total number of shares of Common Stock subject to the Option (subject to adjustment under Section 16 of the Plan) on the first, second, third and fourth anniversaries of the Award Date (each such date is referred to herein as a “ Vesting Date ”), provided that the Grantee has been continuously in Service with the Company from the Award Date through each applicable Vesting Date. As used herein, the term “ Service ” means employment by the Company or a Subsidiary (the date that the Grantee’s Service with the Company terminates is referred to as the “ Severance Date ”).
B.Disability or Death. Notwithstanding anything contained herein or in the Plan to the contrary, in the event of the Grantee’s “Disability” (as defined in the Employment Agreement) or death while in Service before the fourth anniversary of the Award Date, the Option shall become vested as to a pro-rata portion of the then outstanding and otherwise unvested portion of the Option that was otherwise scheduled to vest on the next regularly scheduled Vesting Date under Section 1(A) after the Grantee’s Severance Date determined by multiplying (1) the total number of such shares subject to the Option that were otherwise scheduled to vest on the next regularly scheduled Vesting Date under Section 1(A) after the Severance Date by (2) the Pro-Rata Fraction. As used herein, the “ Pro-Rata Fraction ” means the fraction obtained by dividing (i) the total number of days the Grantee was in Service with the Company following the last regularly scheduled Vesting Date under Section 1(A) (or, if there is no prior Vesting Date in the circumstances, following the Award Date) that occurred prior to the Grantee’s Severance Date through and including the Severance Date, by (ii) the total number of calendar days following the last regularly scheduled Vesting Date under Section 1(A) (or, if there is no prior Vesting Date in the circumstances, following the Award Date) through and including the Vesting Date that was next scheduled to occur after the Grantee’s Severance Date. Notwithstanding the foregoing, this Section 1(B) shall not apply to the Option if the Grantee’s Severance Date occurs on a Vesting Date. Any shares subject to the Option hereto as of the Severance Date that are not vested after giving effect to the foregoing provisions of this Section 1(B) shall terminate and be cancelled as of the Severance Date.
C.Termination without Cause or for Good Reason Outside of a Change in Control Window. Notwithstanding anything contained herein or in the Plan to the contrary (but subject to Section 1(D) below), in the event that the Grantee’s employment by the Company is terminated (a) by the Company without “Cause” (as defined in the Employment Agreement), (b) by the Grantee for “Good Reason” (as defined in the Employment Agreement), or (c) upon expiration of the “Employment Term” (as defined in the Employment Agreement) then in effect by reason of the Company’s delivery of a non-renewal notice pursuant to Section 2 of the Employment Agreement if the Company did not have Cause to deliver such non-renewal notice, in any case before the fourth anniversary of the Award Date and outside of a “Change in Control Window” (as defined below) (such termination of employment under (a), (b) or (c) above, a

2

“Qualifying Termination”), the then outstanding and otherwise unvested portion of the Option shall become vested and exercisable as to a pro-rata portion of the number of shares subject to the Option that were otherwise scheduled to vest on the next regularly scheduled Vesting Date under Section 1(A) after the Grantee’s Severance Date determined by multiplying (1) the total number of such shares subject to the Option that were otherwise scheduled to vest on the next regularly scheduled Vesting Date under Section 1(A) after the Severance Date by (2) the Pro-Rata Fraction. The foregoing provisions of this Section 1(C) shall not apply to the Option if the Grantee’s Severance Date occurs on a Vesting Date. Any shares subject to the Option hereto as of the Severance Date that are not vested after giving effect to the foregoing provisions of this Section 1(C) shall be subject to Sections 1(D) and 5. As used herein, a “ Change in Control Window ” means the period beginning twelve (12) months prior to and ending two (2) years after a Change in Control.
D.Termination without Cause or for Good Reason During a Change in Control Window. Notwithstanding anything contained herein or in the Plan to the contrary, in the event that the Grantee has a Qualifying Termination that occurs before the fourth anniversary of the Award Date and during a Change in Control Window (a “ CIC Qualifying Termination ”), the then outstanding and otherwise unvested portion of the Option shall become fully vested and exercisable in its entirety. For purposes of clarity, if the Grantee has a Qualifying Termination before the fourth anniversary of the Award Date and the Option (or portion thereof), to the extent outstanding and unvested on the Severance Date, otherwise purports to terminate on the Severance Date, such termination shall not be effective until the end of the 12-month period following the Severance Date and, if such Qualifying Termination becomes a CIC Qualifying Termination because a Change in Control occurs within such period of time, such purported termination shall not be effective and such award shall be subject to the accelerated vesting rules set forth above in this Section 1(D) with any additional accelerated vesting occurring pursuant to this sentence effective as of (or, as necessary to give effect to the acceleration, immediately prior to ) the Change in Control, and, notwithstanding Section 5 below, the Grantee shall have sixty (60) days from the date of the Change in Control to exercise such portion of the Option that accelerated upon (or immediately prior to, as the case may be) the Change in Control, such sixty (60) day period subject to the Committee’s ability to terminate the Option in connection with such Change in Control (in which case the Grantee shall, if the Options are not to be settled in the transaction, be given a reasonable opportunity to exercise such accelerated portion of the Option before it terminates, with any such exercise prior to the Change in Control to be contingent upon and effective as of the Change in Control or immediately prior to the Change in Control).
E.Release of Claims. Notwithstanding the foregoing, the accelerated vesting provisions of Sections 1(C) and 1(D) are subject to the Grantee’s satisfaction of the Release requirement of Section 9(e) of the Employment Agreement in connection with the termination of his Service and, if such requirement is not timely satisfied, Section 5 shall apply.

3

 	 	
2.	Limits on Exercise; Incentive Stock Option Status .	
The Option may be exercised only to the extent the Option is vested and exercisable.
 	 	
•	Cumulative Exercisability. To the extent that the Option is vested and exercisable, the Grantee has the right to exercise the Option (to the extent not previously exercised), and such right shall continue, until the expiration or earlier termination of the Option.	
 	 	
•	No Fractional Shares. Fractional share interests shall be disregarded, but may be cumulated.	
 	 	
•	Minimum Exercise. No fewer than 100 shares of Common Stock (subject to adjustment under Section 16 of the Plan) may be purchased at any one time, unless the number purchased is the total number at the time exercisable under the Option.	
 	 	
•	Nonqualified Stock Option. The Option is a nonqualified stock option and is not, and shall not be, an incentive stock option within the meaning of Section 422 of the Code.	
 	 	
3.	Continuance of Employment Required; No Employment/Service Commitment .	
Except as expressly provided in Section 1 of this Option Agreement, the vesting schedule requires continued Service through each applicable vesting date as a condition to the vesting of the applicable installment of the Option and the rights and benefits under this Option Agreement.  Service for only a portion of the vesting period, even if a substantial portion, will not (except as expressly provided in Section 1) entitle the Grantee to any proportionate vesting or avoid or mitigate a termination of rights and benefits upon or following a termination of Services as provided in Section 5 below or under the Plan.
Nothing contained in this Option Agreement or the Plan constitutes a continued employment or service commitment by the Company or any of its Subsidiaries, affects the Grantee’s status, if he is an employee, as an employee at will who is subject to termination without cause, confers upon the Grantee any right to remain employed by or in service to the Company or any Subsidiary or interferes in any way with the right of the Company or any Subsidiary at any time to terminate such employment or service.
 	 	
4.	Method of Exercise of Option .	
The Option shall be exercisable by the delivery to the Secretary of the Company (or such other person as the Committee may require pursuant to such administrative exercise procedures as the Committee may implement from time to time) of:
 	 	
•	a written notice stating the number of shares of Common Stock to be purchased pursuant to the Option or by the completion of such other administrative exercise	

4

procedures as the Committee may require from time to time;
 	 	
•	payment in full for the Exercise Price of the shares to be purchased (a) in cash, cashier’s or bank check to the Company, or (b) (subject to compliance with all applicable laws, rules, regulations and listing requirements and further subject to such rules as the Committee may adopt as to any non-cash payment) in shares of Common Stock already owned by the Grantee, valued at their Fair Market Value on the exercise date, or (c) through a “cashless exercise” procedure by notice and third party payment in such manner as may be authorized by the Committee pursuant to Section 8(f) of the Plan;	
 	 	
•	any written statements or agreements required pursuant to Section 19(g) of the Plan; and	
 	 	
•	satisfaction of the tax withholding provisions of Section 19(a) of the Plan.	
 	 	
5.	Termination of Option upon a Termination of Grantee’s Employment .	
Subject to earlier termination on the Expiration Date of the Option and subject to Section 1 above, if the Grantee’s Service terminates, the following rules shall apply:
 	 	
•	if the Grantee’s Service terminates due to his death, Disability (as defined in the Employment Agreement) or Retirement, then (a) the Grantee, his personal representative or beneficiary will have twelve (12) months from the Severance Date to exercise the Option (or any portion thereof) to the extent that it was exercisable on the Severance Date; provided that if the Grantee’s employment terminates as a result of Disability or Retirement and he dies during such 12-month period, his beneficiary will have one year from the date of the Grantee’s death to exercise the Option (or any portion thereof) to the extent it was vested on the Grantee’s Severance Date, (b) the Option, to the extent not exercisable on the Severance Date, shall terminate on the Severance Date, and (c) the Option, to the extent exercisable for the 12-month period following the Severance Date (or, if applicable, the 12-month period following the Grantee’s subsequent death) and not exercised during such period, shall terminate at the close of business on the last day of such 12-month period.	
 	 	
•	if the Grantee’s Service terminates for any reason other than his death, Disability or Retirement, then (a) the Grantee will have sixty (60) days from the Severance Date to exercise the Option (or portion thereof) to the extent that it was exercisable on the Grantee’s Severance Date, (b) the Option, to the extent not exercisable on the Severance Date, shall terminate on the Severance Date, and (c) the Option, to the extent exercisable for the sixty (60) day period following the Severance Date and not exercised during such period, shall terminate at the close of business on the last day of the 60-day period.	

5

In all events the Option is subject to earlier termination on the Expiration Date of the Option.  The Committee shall be the sole judge of whether the Grantee continues to render Service for purposes of this Option Agreement.
 	 	
6.	Non-Transferability.	
The Option and any other rights of the Grantee under this Option Agreement or the Plan are nontransferable and exercisable only by the Grantee, except as set forth in Section 15 of the Plan.
 	 	
7.	Adjustments Upon Specified Events .	
Upon the occurrence of certain events relating to the Company’s Common Stock contemplated by Section 16(b) of the Plan, the Committee will make adjustments, if appropriate, in the number of shares subject to the Option, the Exercise Price, and the number and kind of securities subject to the Option.
 	 	
8.	Change in Control .	
Notwithstanding anything to the contrary in Sections 1 or 5 of this Agreement or any provision of the Plan, the following provisions shall apply upon a Change in Control:
A.    The Company may terminate the Option effective upon (or, as necessary to give effect to such termination, immediately prior to, a Change in control), or may provide in connection with a Change in Control for any then-outstanding portion of the Option to be assumed or converted into an option to acquire common stock of any surviving or successor entity to the Company or a parent thereof (the “ Successor Entity ” and any such assumed Option a “ Substitute Option ”). If a Change in Control occurs and the then-outstanding portion of the Option is to be terminated and not assumed by a Successor Entity as a Substitute Option: (i) the Option, to the extent then outstanding and unvested, shall be deemed to be fully vested upon (or, as necessary to give effect to such acceleration, immediately prior to) the Change in Control, and (ii) the Grantee shall, if the Option is not to be settled in the transaction, be given a reasonable opportunity to exercise such Option before it terminates, with any such exercise prior to the Change in Control to be contingent upon and effective as of but subject to the actual occurrence of the Change in Control or immediately prior to the Change in Control.
B.    Any Substitute Option will have substantially the same terms and conditions as the Predecessor Option, with appropriate adjustments as to the number and kind of shares and exercise price subject thereto.

6

 	 	
9.	Compliance.	
The Grantee hereby agrees to cooperate with the Company, regardless of the Grantee’s employment status with the Company, to the extent necessary for the Company to comply with applicable state and federal laws and regulations relating to the Option.
 	 	
10.	Notices.	
Any notice required or permitted under this Option Agreement shall be deemed given when personally delivered, or when deposited in a United States Post Office, postage prepaid, addressed, as appropriate, to the Grantee either at the address on record with the Company or such other address as may be designated by Grantee in writing to the Company; or to the Company, Attention: Stock Plan Administration, 1444 South Alameda Street, Los Angeles, California 90021, or such other address as the Company may designate in writing to the Grantee.
 	 	
11.	Failure to Enforce Not a Waiver .	
The failure of the Company or the Grantee to enforce at any time any provision of this Option Agreement shall in no way be construed to be a waiver of such provision or of any other provision hereof.
 	 	
12.	Plan.	
The Option and all rights of the Grantee under this Option Agreement are subject to, and the Grantee agrees to be bound by, all of the terms and conditions of the Plan, incorporated herein by this reference.  In the event of a conflict or inconsistency between the terms and conditions of this Option Agreement and of the Plan, the terms and conditions of the Plan shall govern.  The Grantee agrees to be bound by the terms of the Plan and this Option Agreement (including these Terms).  The Grantee acknowledges having read and understood the Plan, the Prospectus for the Plan, and this Option Agreement.  Unless otherwise expressly provided in other sections of this Option Agreement, provisions of the Plan that confer discretionary authority on the Board or the Committee do not and shall not be deemed to create any rights in the Grantee unless such rights are expressly set forth herein or are otherwise in the sole discretion of the Board or the Committee so conferred by appropriate action of the Board or the Committee under the Plan  after  the date hereof.
 	 	
13.	Entire Agreement .	
This Option Agreement (including these Terms) and the Plan together constitute the entire agreement and supersede all prior understandings and agreements, written or oral, of the parties hereto with respect to the subject matter hereof.  The Plan and this Option Agreement may be amended pursuant to Section 18 of the Plan.  Such amendment must be in writing and signed by the Company.  The Company may, however, unilaterally waive any provision hereof in writing to the extent such waiver does not adversely affect the interests of the Grantee

7

hereunder, but no such waiver shall operate as or be construed to be a subsequent waiver of the same provision or a waiver of any other provision hereof.
 	 	
14.	Governing Law .	
This Option Agreement shall be governed by and construed according to the laws of the State of Delaware, without regard to Delaware or other laws that might cause other law to govern under applicable principles of conflicts of law.  For purposes of litigating any dispute that arises under this Option Agreement, the parties hereby submit to and consent to the jurisdiction of the State of California, and agree that such litigation shall be conducted in the courts of Los Angeles County, or the federal courts for the United States for the Central District of California, and no other courts, where this Option Agreement is made and/or to be performed.
 	 	
15.	Electronic Delivery .	
The Company may, in its sole discretion, decide to deliver any documents related to the Option awarded under the Plan or future stock options that may be awarded under the Plan by electronic means or request the Grantee’s consent to participate in the Plan by electronic means. The Grantee hereby consents to receive such documents by electronic delivery and agrees to participate in the Plan through an on-line or electronic system established and maintained by the Company or another third party designated by the Company.
 	 	
16.	Effect of this Agreement .	
This Option Agreement shall be assumed by, be binding upon and inure to the benefit of any successor or successors to the Company.
 	 	
17.	Counterparts.	
This Option Agreement may be executed simultaneously in any number of counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument.
 	 	
18.	Committee’s Powers .	
No provision contained in this Option Agreement shall in any way terminate, modify or alter, or be construed or interpreted as terminating, modifying or altering any of the powers, rights or authority vested in the Committee or, to the extent delegated, in its delegate pursuant to the terms of the Plan or resolutions adopted in furtherance of the Plan, including, without limitation, the right to make certain determinations and elections with respect to the Options.
 	 	
19.	Section Headings .	
The section headings of this Option Agreement are for convenience of reference only and shall not be deemed to alter or affect any provision hereof.

8

 	 	
20.	Clawback Policy .	
The Option is subject to the terms of the Company’s recoupment, clawback or similar policy as it may be in effect from time to time, as well as any similar provisions of applicable law, any of which could in certain circumstances require forfeiture of the Option and repayment or forfeiture of any shares of Common Stock or other cash or property received with respect to the Option (including any value received from a disposition of the shares acquired upon exercise of the Option).

9

Exhibit 10.7

RESTRICTED STOCK UNIT AGREEMENT

This RESTRICTED STOCK UNIT AGREEMENT (this “Agreement”), dated as of July 7, 2015  (the “ Date of Grant ”), is entered into by and between GUESS?, INC., a Delaware corporation (the “ Company ”), and  Victor Herrero Amigo  (the “ Grantee ”).

RECITALS

WHEREAS, the Company maintains the Guess?, Inc. 2004 Equity Incentive Plan (as Amended and Restated as of May 20, 2014) (the “ Plan ”).

WHEREAS, the Compensation Committee of the Company’s Board of Directors (the “ Committee ”) has determined to grant a restricted stock unit award (this “ Award ”) to the Grantee under the Plan in order to increase Grantee’s participation in the success of the Company;

NOW, THEREFORE, the parties hereto agree as follows:
 	 	
1.	Definitions; Incorporation of Plan Terms. Capitalized terms used herein without definition shall have the meanings assigned to them in the Plan, except where a capitalized term is defined in the Executive Employment Agreement between the Company and the Grantee, effective  July 7, 2015  (the “ Employment Agreement ”), and this Agreement indicates the definition used in the Employment Agreement shall apply for purposes of this Agreement as well. This Award and all rights of the Grantee under this Agreement are subject to, and the Grantee agrees to be bound by, all of the terms and conditions of the Plan, incorporated herein by this reference. Except as specifically provided in this Agreement, in the event of any conflict or inconsistency between the Plan and this Agreement, the Plan shall govern.	
 	 	
2.	Grant of Restricted Stock Units. The Company hereby grants to the Grantee as of the Date of Grant (set forth above) a right to receive  250,000  shares of the Company’s common stock subject to the terms, conditions, and restrictions set forth herein (the “ Restricted Stock Units ”). As used herein, the term “Restricted Stock Unit” shall mean a non-voting unit of measurement which is deemed for bookkeeping purposes to be equivalent to one outstanding share of the Company’s common stock, par value $0.01 per share (the “ Common Stock ”), solely for purposes of the Plan and this Agreement. The Restricted Stock Units shall be used solely as a device for the determination of the number of shares of Common Stock to eventually be delivered to the Grantee if such Restricted Stock Units vest pursuant to this Agreement. The Restricted Stock Units shall not be treated as property or as a trust fund of any kind. The Grantee shall have no rights as a stockholder of the Company, no dividend rights (except as expressly provided in Section 4 with respect to Dividend Equivalent Rights) and no voting rights with respect to the Restricted Stock Units and any shares of Common Stock underlying or issuable in respect of such Restricted Stock Units (“ Award Shares ”) until such shares of Common Stock are actually issued to and held of record by the Grantee. This Award is in complete satisfaction of the Grantee’s right to receive an “Initial Restricted Stock Unit Award” (as	

such term is defined in the Employment Agreement) pursuant to Section 6(b) of the Employment Agreement.
 	 	
3.	Vesting.	
 	 	
A.	Subject to the performance condition set forth in Section 3(B) below and except as otherwise expressly provided in Sections 7 and 8 herein, this Award shall vest as to (i) 25% of the Restricted Stock Units on the first anniversary of the Date of Grant (the “ First Tranche ”), (ii) 25% Restricted Stock Units on the second anniversary of the Date of Grant (the “ Second Tranche ”), (iii) 25% Restricted Stock Units on the third anniversary of the Date of Grant (the “ Third Tranche ”), and (iv) 25% Restricted Stock Units on the fourth anniversary of the Date of Grant (the “ Fourth Tranche ” and, together with the First Tranche, the Second Tranche and the Third Tranche, the “ Tranches ); provided that Grantee has been continuously in Service with the Company from the Date of Grant through each applicable vesting date. The applicable date on which each Tranche vests pursuant to the foregoing sentence is referred to as a “ Vesting Date .” Except as specifically provided herein, employment or service for only a portion of the vesting period, even if a substantial portion, will not entitle the Grantee to any proportionate vesting. As used herein, the term “ Service ” means employment by the Company or a Subsidiary (the date that the Grantee’s Service with the Company terminates is referred to as the “ Severance Date ”).	
 	 	
B.	No portion of this Award shall vest notwithstanding satisfaction of the continued Service requirement for vesting described in Section 3(A) above unless the Committee certifies, following the end of the Company’s 2016 fiscal year, that the Company achieved Earnings from Operations (as defined below) for the last two quarters of the Company’s 2016 fiscal year (the “ Performance Period ”) equal to or above the level established by the Committee with respect to the Award in connection with the grant of the Award; provided, however, that if either a “Change in Control” (as defined in the Employment Agreement) or the death or “Disability” (as defined in the Employment Agreement) of the Grantee occurs before the last day of the Performance Period, the performance requirement of this Section 3(B) shall be deemed met as of the date of such event. If such performance requirement is not met (and no such Change in Control, death or Disability occurs before the last day of the Performance Period), this Award and the Restricted Stock Units subject hereto shall terminate and be cancelled as of the last day of the Performance Period.	
 	 	
C.	For purposes of this Award, “Earnings from Operations” means: the Company’s earnings from operations for the Performance Period as calculated in accordance with generally accepted accounting principles (“ GAAP ”), but adjusted (without duplication and to the extent that the particular item would have otherwise impacted Earnings from Operations for such period) to exclude the financial statement impact of the following items:	
 	 	
i.	any charges or accruals incurred for the Performance Period for litigation matters, but only where such charges or accruals for any particular matter exceed $500,000 for the Performance Period;	

2

 	 	
ii.	restructuring charges incurred for the Performance Period related to employee severance related costs, store closure related costs and other real estate closure related costs;	
 	 	
iii.	any new changes in accounting standards announced during the Performance Period that are required to be applied during the Performance Period in accordance with GAAP; and	
 	 	
iv.	acquisitions and costs associated with such acquisitions and the costs incurred in connection with potential acquisitions that are required to be expensed under GAAP.	
 	 	
4.	Dividend Equivalents. If a cash dividend is paid with respect to the Common Stock while any Restricted Stock Units subject to the Award are outstanding, the Grantee shall be credited with an amount in cash equal to the dividends the Grantee would have received if he had been the owner of the shares of Common Stock subject to such outstanding Restricted Stock Units; provided, however, that no amount shall be credited with respect to shares that have been delivered to the Grantee as of the applicable dividend record date. Any amounts credited under this Section 4 (“ Dividend Equivalents ”) shall be subject to the same terms and conditions as the Restricted Stock Units to which they relate and shall vest and be paid (or, if applicable, be forfeited) at the same time as the Restricted Stock Units to which they relate.	
 	 	
5.	Delivery of Shares. Except as otherwise provided in Section 8 below with respect to a Change in Control, the Company shall deliver or cause to be delivered to the Grantee the number of Award Shares subject to the First Tranche that vest pursuant to the terms hereof within ten days following certification by the Committee of the satisfaction of the performance criteria set forth in Section 3(B) (and in no event later than 74 days following the end of the Performance Period), the number of Award Shares subject to the Second Tranche that vest pursuant to the terms hereof on (or within three business days following) the second anniversary of the Date of Grant, the number of Award Shares subject to the Third Tranche that vest pursuant to the terms hereof on (or within three business days following) the third anniversary of the Date of Grant, and the number of Award Shares subject to the Fourth Tranche that vest pursuant to the terms hereof on (or within three business days following) the fourth anniversary of the Date of Grant. Any Dividend Equivalents described in Section 4 above related to such Award Shares shall be paid in cash at the same time as the delivery of the Award Shares under this Section 5. Notwithstanding the foregoing: (a) in the event of the Grantee’s death or Disability (as such term is defined for purposes of Section 409A of the Code), then such shares shall be settled as soon as administratively practicable after (and in all events within 90 days after) such event; and (b) in the event of the Grantee’s “separation from service” (as such term is defined for purposes of Code Section 409A) upon or within two years following a Section 409A Change in Control (as such term is defined in Section 8(A)), then such shares shall be settled as soon as administratively possible after (and in all events within ten days after) such event (subject to Section 10(C)).	
 	 	
6.	Adjustments Upon Specified Events. Upon the occurrence of certain events relating to the Company’s Common Stock contemplated by Section 16(b) of the Plan, the	

3

Committee will make adjustments, if appropriate, in the number of Restricted Stock Units and the number and kind of securities subject to the Award.
 	 	
7.	Effect of Certain Cessations of Service .	
 	 	
A.	Death or Disability. In the event of the Grantee’s “Disability” (as defined in the Employment Agreement) or death while in Service before the fourth anniversary of the Date of Grant, the continued Service vesting requirement set forth under Section 3(A) of this Award shall be deemed to be satisfied, and any then-outstanding Restricted Stock Units shall be deemed vested (subject to Section 3(B) of this Award), as to a pro-rata portion of the Restricted Stock Units subject to this Award that were otherwise scheduled to vest on the next regularly scheduled Vesting Date under Section 3(A) after the Grantee’s Severance Date determined by multiplying (1) the total number of such Restricted Stock Units subject to this Award that were otherwise scheduled to vest on the next regularly scheduled Vesting Date under Section 3(A) after the Grantee’s Severance Date by (2) the Pro-Rata Fraction. As used herein, the “ Pro-Rata Fraction ” means the fraction obtained by dividing (i) the total number of days the Grantee was in Service with the Company following the last regularly scheduled Vesting Date under Section 3(A) (or, if there is no prior Vesting Date in the circumstances, following the Date of Grant) that occurred prior to the Grantee’s Severance Date through and including the Severance Date, by (ii) the total number of calendar days following the last regularly scheduled Vesting Date under Section 3(A) (or, if there is no prior Vesting Date in the circumstances, following the Date of Grant) through and including the Vesting Date that was next scheduled to occur after the Grantee’s Severance Date. Notwithstanding the foregoing, this Section 7(A) shall not apply to this Award if the Grantee’s Severance Date occurs on a Vesting Date. For purposes of clarity, any Restricted Stock Units that vest pursuant to the preceding sentence shall still be paid at the applicable time set forth in Section 5. Any Restricted Stock Units subject hereto as of the Severance Date that are not vested after giving effect to the foregoing provisions of this Section 7(A) shall terminate and be cancelled as of the Severance Date.	
 	 	
B.	Termination without Cause or for Good Reason. In the event that the Grantee’s employment by the Company is terminated (a) by the Company without “Cause” (as defined in the Employment Agreement), (b) by the Grantee for “Good Reason” (as defined in the Employment Agreement), or (c) upon expiration of the “Employment Term” (as defined in the Employment Agreement) then in effect by reason of the Company’s delivery of a non-renewal notice pursuant to Section 2 of the Employment Agreement if the Company did not have Cause to deliver such non-renewal notice, the continued Service vesting requirement set forth under Section 3(A) of this Award shall be deemed to be satisfied and any then-outstanding Restricted Stock Units shall be deemed vested (subject to Section 3(B) of this Award); provided, however, that in the event such termination of employment occurs prior to the end of the Performance Period, this Award shall remain outstanding following the Severance Date until the end of the Performance Period and, if the performance condition set forth in Section 3(B) is satisfied, any then-outstanding Restricted Stock Units shall be deemed vested following	

4

certification by the Committee of the satisfaction of the performance criteria set forth in Section 3(B) and, if such performance condition is not satisfied, such Restricted Stock Units shall terminate and be cancelled. For purposes of clarity, any Restricted Stock Units that vest pursuant to the preceding sentence shall still be paid at the applicable time set forth in Section 5. Notwithstanding the foregoing, the accelerated vesting provisions of this Section 7(B) are subject to the Grantee’s satisfaction of the Release requirement of Section 9(e) of the Employment Agreement in connection with the termination of his Service and, if such requirement is not timely satisfied, Section 7(C) shall apply.
 	 	
C.	Other Termination of Service. If the Grantee’s Service terminates for any other reason, this Award and the Restricted Stock Units subject hereto, to the extent outstanding and unvested as of the Severance Date, shall terminate and be cancelled as of the Severance Date. Sections 14(a) and 14(b) of the Plan shall not apply to the Award	
 	 	
8.	Change in Control. Notwithstanding anything to the contrary in Section 3, Section 5 or Section 7 of this Agreement or any provision of the Plan, the following provisions shall apply upon a Change in Control (as defined in the Employment Agreement):	
 	 	
A.	If a Change in Control occurs and the then-outstanding and unvested portion of this Award is not continued following such event or assumed or converted into restricted stock units of any successor entity to the Company or a parent thereof (the “ Successor Entity ”), the continued Service vesting requirement set forth under Section 3(A) of this Award shall be deemed to be satisfied, the outstanding Restricted Stock Units subject to such portion shall be deemed vested, and such Restricted Stock Units shall be settled at the time(s) otherwise provided in Section 5; provided that if such Change in Control constitutes a “change in the ownership or effective control” of the Company, or a change “in the ownership of a substantial portion of the assets” of the Company within the meaning of Section 409A of the Code (a “ Section 409A Change in Control ”), outstanding and vested Restricted Stock Units (including any that vest pursuant to the foregoing provisions of this sentence) and related Dividend Equivalents shall be settled upon or as soon as practicable after the date of such Change in Control to the extent such acceleration of payment can be made in accordance with Treas. Reg. §1.409A-3(j)(4)(ix) (or other exemption from the general prohibitions on accelerations of payments under Section 409A of the Code) and not result in any tax, penalty or interest under Section 409A of the Code. In connection with any such Change in Control where payment of outstanding Restricted Stock Units subject to the Award will not be made in connection with the Change in Control, the Committee may make provision for such Restricted Stock Units to become payable in cash based on the Fair Market Value of a share of Common Stock at the time of such Change in Control (with interest for the period from the date of such Change in Control to the applicable payment date at such rate as determined by the Committee based on the interest earned by interest bearing, FDIC insured deposits) as opposed to being payable in securities.	
 	 	
B.	If the then-outstanding and unvested portion of this Award is continued following such event or is assumed or converted into restricted stock units of any Successor	

5

Entity, the continued Service requirement set forth in Section 3(A) above (and the accelerated vesting provisions set forth in Section 7 above) shall continue to apply following such Change in Control, and any portion of the Award that vests pursuant to such provisions shall be settled as provided in Section 5 of this Agreement.
Section 17 of the Plan shall not apply with respect to the Award.
 	 	
9.	Restrictions on Transfer. The Grantee may not sell, assign, transfer, pledge, encumber or otherwise alienate, hypothecate or dispose of this Award or the Grantee’s right hereunder to receive Award Shares, except as otherwise provided in the Committee’s sole discretion consistent with the Plan and applicable securities laws.	
 	 	
10.	Taxes.	
 	 	
A.	The settlement of this Award is conditioned on the Grantee making arrangements reasonably satisfactory to the Company for the withholding of all applicable federal, state, local or foreign taxes as may be required under applicable law.	
 	 	
B.	It is intended that any amounts payable under this Agreement shall either be exempt from or comply with Section 409A of the Code (including the Treasury regulations and other published guidance relating thereto) (“ Code Section 409A ”) so as not to subject the Grantee to payment of any additional tax, penalty or interest imposed under Code Section 409A. The provisions of this Agreement shall be construed and interpreted to avoid the imputation of any such additional tax, penalty or interest under Code Section 409A yet preserve (to the nearest extent reasonably possible) the intended benefit payable to the Grantee.	
 	 	
C.	If the Grantee is a “specified employee” within the meaning of Treasury Regulation Section 1.409A-1(i) as of the date of the Grantee’s “separation from service” (as such term is defined for purposes of Code Section 409A), the Grantee shall not be entitled to any payment or benefit pursuant to this Award until the earlier of (i) the date which is six (6) months after the Grantee’s separation from service for any reason other than death, or (ii) the date of the Grantee’s death. The provisions of this Section 10(C) shall only apply if, and to the extent, required to avoid the imputation of any tax, penalty or interest pursuant to Code Section 409A. Any amounts otherwise payable to the Grantee upon or in the six (6) month period following the Grantee’s separation from service that are not so paid by reason of this Section 10(C) shall be paid (without interest, except as otherwise provided for in Section 8(A)) as soon as practicable (and in all events within thirty (30) days) after the date that is six (6) months after the Grantee’s separation from service (or, if earlier, as soon as practicable, and in all events within thirty (30) days, after the date of the Grantee’s death). For avoidance of doubt, Dividend Equivalents under Section 4 shall continue to be credited during the period of such six-month delay until the vested Restricted Stock Units are actually settled.	
 	 	
D.	It is intended that this Award qualify as “performance-based compensation” for purposes of Section 162(m) of the Code and the provisions of this Agreement shall be construed and interpreted consistent with that intent.	

6

 	 	
11.	Compliance. The Grantee hereby agrees to cooperate with the Company, regardless of Grantee’s employment status with the Company, to the extent necessary for the Company to comply with applicable state and federal laws and regulations relating to the Restricted Stock Units.	
 	 	
12.	Notices. Any notice required or permitted under this Agreement shall be deemed given when personally delivered, or when deposited in a United States Post Office, postage prepaid, addressed, as appropriate, to the Grantee either at the address on record with the Company or such other address as may be designated by Grantee in writing to the Company; or to the Company, Attention: Stock Plan Administration, 1444 South Alameda Street, Los Angeles, California 90021, or such other address as the Company may designate in writing to the Grantee.	
 	 	
13.	Failure to Enforce Not a Waiver. The failure of the Company or the Grantee to enforce at any time any provision of this Agreement shall in no way be construed to be a waiver of such provision or of any other provision hereof.	
 	 	
14.	Governing Law. This Agreement shall be governed by and construed according to the laws of the State of Delaware, without regard to Delaware or other laws that might cause other law to govern under applicable principles of conflicts of law.  For purposes of litigating any dispute that arises under this Agreement, the parties hereby submit to and consent to the jurisdiction of the State of California, and agree that such litigation shall be conducted in the courts of Los Angeles County, or the federal courts for the United States for the Central District of California, and no other courts, where this Agreement is made and/or to be performed.	
 	 	
15.	Electronic Delivery. The Company may, in its sole discretion, decide to deliver any documents related to the Restricted Stock Units awarded under the Plan or future restricted stock or restricted stock units that may be awarded under the Plan by electronic means or request Grantee’s consent to participate in the Plan by electronic means. Grantee hereby consents to receive such documents by electronic delivery and agrees to participate in the Plan through an on-line or electronic system established and maintained by the Company or another third party designated by the Company.	
 	 	
16.	Severability. The provisions of this Agreement are severable and if any one or more provisions are determined to be illegal or otherwise unenforceable, in whole or in part, the remaining provisions shall nevertheless be binding and enforceable.	
 	 	
17.	Amendments. This Agreement may be amended or modified at any time by an instrument in writing signed by both parties.	
 	 	
18.	Agreement Not a Contract of Employment. Neither the grant of the Restricted Stock Units, this Agreement nor any other action taken in connection herewith shall constitute or be evidence of any agreement or understanding, express or implied, that the Grantee is an employee of the Company or any subsidiary of the Company.	
 	 	
19.	Committee’s Powers. No provision contained in this Agreement shall in any way terminate, modify or alter, or be construed or interpreted as terminating, modifying or altering any of the powers, rights or authority vested in the Committee or, to the extent delegated, in its delegate pursuant to the terms of the Plan or resolutions adopted in	

7

furtherance of the Plan, including, without limitation, the right to make certain determinations and elections with respect to the Restricted Stock Units.
 	 	
20.	Termination of this Agreement. Upon termination of this Agreement, all rights of the Grantee hereunder shall cease.	
 	 	
21.	Clawback Policy. This Award is subject to the terms of the Company’s recoupment, clawback or similar policy as it may be in effect from time to time, as well as any similar provisions of applicable law, any of which could in certain circumstances require repayment or forfeiture of the Award or any shares of Common Stock or other cash or property received with respect to the Award (including any value received from a disposition of the shares acquired in respect of the Award).	

8

IN WITNESS WHEREOF, the Company has caused this Agreement to be executed on its behalf by a duly authorized officer and the Grantee has hereunto set his or her hand as of the date and year first above written.

 	 	GUESS?, INC.,
	
 	 	a Delaware corporation

 	 	 	 	 	
 	 	By:	/s/ Jason T. Miller	
 	 	 	 	 	
 	 	Print Name:	Jason T. Miller	
 	 	 	 	 	
 	 	Its:	Secretary	
 	 	 	 	 	
 	 	GRANTEE

 	 	/s/ Victor Herrero Amigo	
 	 	Signature	
 	 	 	 	 	
 	 	Victor Herrero Amigo	
 	 	Print Name	

9

Exhibit 31.1
 
I, Victor Herrero, certify that:
 	 	
1.	I have reviewed this quarterly report on Form 10-Q of Guess?, Inc.;	
 	 	
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;	
 	 	
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;	
 	 	
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:	
 	 	
a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;	
 	 	
b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;	
 	 	
c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and	
 	 	
d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and	
 	 	
5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):	
 	 	
a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and	
 	 	
b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.	

 	
 	 	 	 	
Date:	September 3, 2015	By:	/s/ VICTOR HERRERO	
 	 	 	Victor Herrero
Chief Executive Officer	

Exhibit 31.2
 
I, Sandeep Reddy, certify that:
 	 	
1.	I have reviewed this quarterly report on Form 10-Q of Guess?, Inc.;	
 	 	
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;	
 	 	
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;	
 	 	
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:	
 	 	
a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;	
 	 	
b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;	
 	 	
c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and	
 	 	
d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and	
 	 	
5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):	
 	 	
a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and	
 	 	
b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.	

 	
 	 	 	 	
Date:	September 3, 2015	By:	/s/ SANDEEP REDDY	
 	 	 	Sandeep Reddy
Chief Financial Officer	

Exhibit 32.1
 
CERTIFICATION PURSUANT TO 
18 U.S.C. SECTION 1350 
AS ADOPTED PURSUANT TO SECTION 906 
OF THE SARBANES-OXLEY ACT OF 2002
I, Victor Herrero, Chief Executive Officer of Guess?, Inc. (the “Company”), do hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:
 	 	
•	the Quarterly Report on Form 10-Q of the Company for the period ended August 1, 2015, as filed with the Securities and Exchange Commission (the “Report”), fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and	
 	 	
•	the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.  	

 	 	 	 	
Date:	September 3, 2015	By:	/s/ VICTOR HERRERO	
 	 	 	Victor Herrero
Chief Executive Officer	

Exhibit 32.2
 
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO SECTION 906 
OF THE SARBANES-OXLEY ACT OF 2002
I, Sandeep Reddy, Chief Financial Officer of Guess?, Inc. (the “Company”), do hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:
 	 	
•	the Quarterly Report on Form 10-Q of the Company for the period ended August 1, 2015, as filed with the Securities and Exchange Commission (the “Report”), fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and	
 	 	
•	the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. 	

 	 	 	 	
Date:	September 3, 2015	By:	/s/ SANDEEP REDDY	
 	 	 	Sandeep Reddy
Chief Financial Officer