Guess?, Inc. has recently released its 10-K report, providing a comprehensive overview of its business operations. The company designs, markets, distributes, and licenses lifestyle collections of apparel and accessories for men, women, and children. It operates through five segments: Americas Retail, Americas Wholesale, Europe, Asia, and Licensing. Guess? sells its products through direct-to-consumer, wholesale, and licensing distribution channels, as well as through its retail websites. The company also grants licenses to design, manufacture, and distribute various products that complement its apparel lines, such as eyewear, watches, handbags, footwear, and other fashion accessories.
In its 10-K report, Guess? highlighted various risk factors, including exposure to earnings risk due to exchange rate fluctuations in transactions denominated in U.S. dollars, British pounds, Russian roubles, and Swiss francs. The company uses derivative financial instruments to offset some but not all of its exchange risk. Additionally, Guess? entered into U.S. dollar forward contracts in Europe totaling $320.0 million in fiscal 2025, which were designated as cash flow hedges. As of February 1, 2025, the net unrealized gain of these open forward contracts recorded in the consolidated balance sheets was approximately $7.5 million.
The report also discussed the company's exposure to interest rate risk on its floating-rate debt and its use of interest rate swap agreements to effectively convert floating-rate debt to a fixed-rate basis. Guess? issued various types of notes in private offerings and entered into interest rate swap agreements to manage interest rate risk. The fair value of the notes and equity-linked derivatives associated with the 2028 Notes is subject to interest rate risk and market risk due to the conversion feature of the notes.
Furthermore, Guess? provided a sensitivity analysis of changes in foreign currencies when measured against the U.S. dollar, indicating the potential impact of a 10% uniform weakening or strengthening of the U.S. dollar against all U.S. dollar-denominated foreign exchange derivatives. The company also assessed the fair values of equity-linked derivatives using a binomial lattice model, considering changes in expected volatility and credit spread.
The 10-K report also addressed the effectiveness of the company's disclosure controls and procedures, with management concluding that the disclosure controls and procedures were effective at the reasonable assurance level as of the end of the reporting period. Additionally, Guess? provided an assessment of the effectiveness of its internal control over financial reporting, noting the completion of the acquisition of rag & bone and the exclusion of rag & bone from its evaluation of internal control over financial reporting for the year ended February 1, 2025.
Following these announcements, the company's shares moved 0.5%, and are now trading at a price of $9.94. If you want to know more, read the company's complete 10-K report here.
