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GUESS?, Inc. and Subsidiaries
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Possible cancellation of wholesale orders.
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The success of our competitive products.
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Our inability to strengthen our inventory cost accounting controls and procedures.
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Our inability to identify and respond appropriately to changing consumer demands and fashion trends.
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A decision by the controlling owner of a group of department stores or any other significant customer to decrease the amount purchased
from us or to cease carrying GUESS? products.
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Our inability to control the quality, focus, image, financial stability or distribution of our licensed products, which could impact consumer
receptivity to our products.
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Our failure to continue to enhance operating control systems.
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The outcomes of pending and future litigation.
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Factors beyond our control, which could have a material adverse effect on our ability to expand our network of retail stores. Our
general failure to maintain and control our existing distribution and licensing arrangements or to procure additional distribution
and licensing relationships.
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Changes in the economy.
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The extended loss of the services of one or more of our principal executive officers.
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Political instability resulting in the disruption of trade with the countries in which our contractors, suppliers or customers are located,
the imposition of additional regulations relating to imports, the imposition of additional duties, taxes and other charges on imports,
significant fluctuations in the value of the dollar against foreign currencies or restrictions on the transfer of funds. Also, a substantial
increase in customs duties, which could have an adverse effect on our financial condition or results of operations. These factors may
be exacerbated by our increasing use of packaged purchase sourcing from non-United States vendors.
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The inability of a manufacturer to ship our products in a timely manner or to meet our quality standards.
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No assurance can be given that others will not assert rights in, or ownership of, trademarks and other proprietary rights of GUESS?.
In addition, the laws of certain foreign countries do not protect proprietary rights to the same extent as do the laws of the United States.
S E A S O N A L I T Y
Our business is impacted by general seasonal trends characteristic of the apparel and retail industries. Our retail operations are generally
stronger in the third and fourth quarters, while our wholesale operations generally experience stronger performance in the first and third
quarters. As the timing of the shipment of products may vary from year to year, the result for any particular quarter may not be indicative
of results for the full year. We have not had significant overhead and other costs generally associated with large seasonal variations.
I N F L A T I O N
We do not believe the relatively moderate rates of inflation experienced in the United States over the last three years have had a signifi-
cant effect on our net revenue or profitability. Although higher rates of inflation have been experienced in a number of foreign countries
in which our products are manufactured, we do not believe they have had a material adverse effect on our net revenue or profitability.
I M P A C T O F R E C E N T A C C O U N T I N G P R O N O U N C E M E N T S
In June 1998, Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities"
("SFAS 133") was issued and subsequently amended by SFAS 137. SFAS 133 establishes accounting and reporting standards for derivative
instruments and for hedging activities. It is effective for fiscal years beginning after June 15, 2000. We believe the adoption of SFAS 133
will not have a material impact on our financial reporting.
