UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

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FORM 10-K

|                                                              | ýAnnual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934    
|------------------------------------------------------------- | -----------------------------------------------------------------------------------------
|For the Fiscal Year Ended February 2, 2008                   
|OR                                                           
|                                                              | oTransition 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

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GUESS?, INC.(Exact name of registrant as specified in its charter)

Delaware(State or other jurisdiction
of incorporation or organization)

95-3679695(I.R.S. Employer
Identification Number)1444 South Alameda Street
Los Angeles, California 90021
(213) 765-3100(Address, including zip code, and telephone number, including area code)


Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class

Name of Each Exchange
on Which Registeredcommon stock, par value $0.01 per share

New York Stock Exchange


Securities
registered pursuant to Section 12(g) of the Act: None

Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes o    No ý

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the
Act. Yes o    No ý

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 ý    No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter)
is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. o

Indicate by check mark whether 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. (Check one):

|Large accelerated filer ý                                            |  | Accelerated filer o        
|-------------------------------------------------------------------- |  | ---------------------------
|Non-accelerated filer o(Do not check if a smaller reporting company) |  | Smaller reporting company o

Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act). Yes o    No ý

As of the close of business on August 4, 2007, the last business day of the registrant's most recently completed second fiscal quarter, the aggregate market
value of the voting and non-voting common equity stock held by non-affiliates of the registrant was $2,598,719,474 based upon the closing price of $46.37 on the New York Stock
Exchange composite tape on such date. For this computation, the registrant has excluded the market value of all shares of its common stock reported as beneficially owned by executive officers and
directors of the registrant. Such exclusion shall not be deemed to constitute an admission that any such person is an "affiliate" of the registrant.

As
of the close of business on March 24, 2008, the registrant had 94,348,118 shares of common stock outstanding.

DOCUMENTS INCOPORATED BY REFERENCE

Portions of the proxy statement for the registrant's 2008 Annual Meeting of Stockholders are incorporated by reference into Part III herein.



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TABLE OF CONTENTS

|Item |  | Description                                                                                                  |  | Page
|---- |  | ------------------------------------------------------------------------------------------------------------ |  | ----
|     |  | PART I                                                                                                       |  |     
|1    |  | Business                                                                                                     |  | 1   
|1A   |  | Risk Factors                                                                                                 |  | 14  
|1B   |  | Unresolved Staff Comments                                                                                    |  | 21  
|2    |  | Properties                                                                                                   |  | 22  
|3    |  | Legal Proceedings                                                                                            |  | 23  
|4    |  | Submission of Matters to a Vote of Security Holders                                                          |  | 24  
|     |  | PART II                                                                                                      |  |     
|5    |  | Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities |  | 25  
|6    |  | Selected Financial Data                                                                                      |  | 27  
|7    |  | Management's Discussion and Analysis of Financial Condition and Results of Operations                        |  | 28  
|7A   |  | Quantitative and Qualitative Disclosures About Market Risk                                                   |  | 46  
|8    |  | Financial Statements and Supplementary Data                                                                  |  | 48  
|9    |  | Changes in and Disagreements With Accountants on Accounting and Financial Disclosure                         |  | 48  
|9A   |  | Controls and Procedures                                                                                      |  | 48  
|9B   |  | Other Information                                                                                            |  | 50  
|     |  | PART III                                                                                                     |  |     
|10   |  | Directors, Executive Officers and Corporate Governance                                                       |  | 50  
|11   |  | Executive Compensation                                                                                       |  | 50  
|12   |  | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters               |  | 50  
|13   |  | Certain Relationships and Related Transactions, and Director Independence                                    |  | 50  
|14   |  | Principal Accountant Fees and Services                                                                       |  | 50  
|     |  | PART IV                                                                                                      |  |     
|15   |  | Exhibits, Financial Statement Schedules                                                                      |  | 51  

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IMPORTANT FACTORS REGARDING FORWARD-LOOKING STATEMENTS

Throughout this Annual Report on Form 10-K, including documents incorporated by reference herein, we make "forward-looking" statements, which
are not historical facts, but are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements may also be 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 future prospects and proposed new products, services, developments or business strategies. These forward-looking statements are identified by their use of terms and phrases such as
"anticipate", "believe", "could", "estimate", "expect", "intend", "may", "plan", "predict", "project", "will", "continue", 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 the Company's 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, estimated charges, plans regarding store openings and closings, plans regarding business growth, plans
regarding international expansion, e-commerce, business seasonality, industry trends, consumer demands and preferences, competition 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 difference include those discussed under "Item 1A. Risk Factors" contained herein.

RECENT EVENTS

On January 18, 2007, the Board of Directors of Guess?, Inc. (the "Company") approved a change in the Company's fiscal year end from
December 31 to the Saturday nearest January 31 of each year. The fiscal year change was effective beginning with the Company's 2008 fiscal year, which began February 4, 2007 and
ended February 2, 2008. As a result of the change, the Company had a January 2007 fiscal month
transition period which began January 1, 2007 and ended February 3, 2007. The unaudited results of the transition period were reported in the Company's Form 10-Q filed
for the new fiscal first quarter ended May 5, 2007 and the audited results are presented herein. Because the fiscal year change was not effective until after the completion of the Company's
December 31, 2006 fiscal year, the prior year comparative financial and other information reported in the Financial Statements herein continues to be presented based on the Company's prior
December 31 fiscal year end calendar. However, for comparative analysis purposes, the Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") presented
herein compares the audited results for the twelve months ended February 2, 2008 ("fiscal 2008") to the unaudited results for the twelve months ended February 3, 2007 ("fiscal 2007").

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PART I

ITEM 1.    Business.

General

Unless the context indicates otherwise, the terms "we," "us" or the "Company" in this Form 10-K, are referring to Guess?, Inc.
("GUESS?") and its subsidiaries on a consolidated basis.

We
design, market, distribute and license one of the world's leading lifestyle collections of contemporary apparel and accessories for men, women and children that reflect the American
lifestyle and European fashion sensibilities. Our apparel is marketed under numerous trademarks including GUESS, GUESS?, GUESS U.S.A., GUESS Jeans, GUESS? and Triangle Design, Question Mark and
Triangle Design, a stylized G, GUESS Kids, Baby GUESS, YES, G by GUESS, GUESS by MARCIANO and MARCIANO. The lines include full collections of denim and cotton clothing, including jeans, pants,
overalls, skirts, dresses, shorts, blouses, shirts, jackets and knitwear. We also selectively grant licenses to manufacture and distribute a broad range of products that complement our apparel lines,
including eyewear, watches, handbags, footwear, kids' and infants' apparel, leather apparel, swimwear, fragrance, jewelry and other fashion accessories.

Our
products are sold through three primary distribution channels: in our own stores, to a network of wholesale accounts and through the Internet. GUESS? branded products, some of which
are produced
under license, are also sold internationally through a series of licensees and distributors. Our core customer is a style-conscious consumer primarily between the ages of 18 and 32. These consumers
are part of a highly desirable demographic group that we believe has significant disposable income. We also appeal to customers outside this group through specialty product lines that include
MARCIANO, a more sophisticated fashion line targeted to women, and GUESS Kids, targeted to boys and girls ages six to twelve.

We
were founded in 1981 and currently operate as a Delaware corporation.

Business Segments

The business segments of the Company are retail, wholesale, European and licensing. The Company believes this segment reporting reflects how its four business
segments are managed and each segment's performance is evaluated. The retail segment includes the Company's retail operations in North America. The wholesale segment includes the wholesale operations
in North America and our Asian operations. The European segment includes both wholesale and retail operations in Europe. The licensing segment includes the worldwide licensing operations of the
Company. The business segments' results exclude corporate overhead costs, which consist of shared costs of the organization. These costs are presented separately and generally include, among other
things, the following corporate costs: information technology, human resources, accounting and finance, executive compensation, facilities and legal. Financial information about each segment, together
with certain geographical information, for the fiscal years ended February 2, 2008, December 31, 2006 and December 31, 2005 and one month ended February 3, 2007 are
included under Note 15 to the Consolidated Financial Statements contained herein.

In
the fiscal year ended February 2, 2008, 49.3% of our net revenue was generated from retail operations, 14.8% from wholesale operations, 30.7% from European operations and 5.2%
from licensing operations. Our total net revenue in fiscal 2008 was $1.75 billion and net earnings were $186.5 million.

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Business Strengths

We believe we have several business strengths which help us to successfully execute our strategies. These business strengths include:

Brand Equity.We believe that our brand name is one of the most familiar in fashion and is one of our most valuable assets.
We believe the enduring strength of the GUESS? brand name and image is due mainly to our consistent emphasis on innovative and distinctive product designs that stand for exceptional styling and
quality. Our industry is highly competitive and subject to rapidly changing consumer preferences and tastes. The success of our brand depends on our ability to anticipate the fashion preferences of
our customers. We have a team of designers who seek to identify global fashion trends and interpret them for the style-conscious consumer while retaining the distinctive GUESS? image.

Through
our award-winning advertising, under the creative leadership and vision of Paul Marciano, our Chief Executive Officer, we have achieved worldwide recognition of the GUESS? brand
name. We have developed the "GUESS? signature image" and "GUESS? lifestyle concept" through the use of our strong and distinctive images, merchandising display themes, logos and trademarks which are
registered in approximately 170 countries.

Advertising and Marketing.We control all of our worldwide advertising, marketing activities and promotional materials from
our headquarters in Los Angeles. GUESS by MARCIANO, GUESS? and Triangle Design and GUESS?, Inc. images have been showcased globally in dozens of major publications as well as in outdoor and
broadcast media.

We
communicate the GUESS? image through the use of our signature black and white print advertisements, as well as color print advertisements, designed by our in-house
advertising department. We have maintained a high degree of consistency in our advertisements by using similar themes and images. We require our licensees and distributors to invest a percentage of
their net sales of licensed products and net purchases of GUESS? products in Company-approved advertising, promotion and marketing.

Global Diversity.The global success of the brand has reduced the reliance on any particular region. This allows the Company
to continue to grow during regional economic slowdowns. For the year ended February 2, 2008, roughly half of the revenues were generated outside of the U.S. Refer to Note 15 to the
Consolidated Financial Statements contained herein for a geographical breakdown of worldwide revenues.

Multiple Distribution Channels.The Company utilizes retail, wholesale and licensing distribution channels to sell its
products. The Company has retail and wholesale networks established in each major region in which we operate. This flexibility allows the Company to adapt more quickly to changes in the distribution
environment in any particular region.



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Business Growth Strategies

We regularly evaluate and implement initiatives that we believe will build brand equity, grow our business and enhance profitability. Our key growth strategies
are as follows:

Leveraging the GUESS? Brand.We believe the GUESS? brand is an integral part of our business, a significant strategic asset
and a primary source of sustainable competitive advantage. It communicates a distinctive image that is fun, fashionable and sexy. Brand loyalty, name awareness, perceived quality, strong brand images,
public relations, publicity, promotional events and trademarks all contribute to brand integrity. Our design teams visit the world's premier fashion locations in order to identify important style
trends and to discover new fabrics. We will continue this practice while promoting our innovative designs through stylish advertising campaigns that advance the GUESS? image. Our marketing programs
are designed to convey a uniform style image for the brand and are aimed at increasing the desire of the target group to join our GUESS? customer group.

North American Retail Store Strategy and Expansion Plans.Our retail growth strategy is to increase retail sales and
profitability by expanding our network of retail stores and improving the performance of

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existing
stores. During fiscal 2008, we opened a total of 49 new stores in the U.S. and Canada consisting of 16 new full-price retail stores, five factory outlet stores, 14 G by GUESS
stores, 13 MARCIANO stores and one GUESS Accessories store. We closed ten stores and converted 20 stores to G by GUESS stores.

Our
retail locations build brand awareness and contribute to market penetration and growth of the brand. In fiscal 2008, we increased our retail average square footage by 5.3% to a total
of 1,759,000 square feet in the U.S. and Canada. We continue to be very selective with new store locations and expect to open approximately 60 new stores in fiscal 2009, consisting of eleven
full-price
retail, six factory outlets, ten G by GUESS, 12 MARCIANO, 16 GUESS Accessories stores, and five footwear stores through our new joint venture with our footwear licensee. In addition, we plan to close
approximately three stores in fiscal 2009.

In
fiscal 2008, total sales in the U.S. and Canada at our stores open for at least one year increased by 14.6% from fiscal 2007 levels. We believe this increase is attributable to our
commitment to several ongoing initiatives, including leadership in new product development, a more fashion-focused product mix, the introduction of new product categories, improvements in
merchandising and visual presentation, the remodeling of select stores to promote a consistent brand image, an improved retail store inventory allocation system, the continued development of the
MARCIANO and Accessories lines and the development of a motivated team of sales professionals to service our customers and provide a favorable shopping experience.

We
continue to emphasize our Accessories line, our MARCIANO line and our G by GUESS line. This includes greater focus on our Accessories line in our existing stores as well as continuing
to develop and open additional Accessories, MARCIANO and G by GUESS stores which exclusively feature these products. We shall continue to monitor the performance of these store concepts carefully.

During
fiscal 2008, we opened 13 MARCIANO and one Guess Accessories stores. These store concepts leverage our brand recognition and the reputation we have for sexy, contemporary styling
to extend the appeal of our brand. The MARCIANO brand is attracting a slightly older, more sophisticated customer, while the Accessories stores are enabling us to build a more meaningful presence in
this product category. We are targeting customers who already shop GUESS? stores but are looking for an expanded accessories presentation, as well as new customers who did not shop at GUESS? in the
past.

As
part of our retail growth strategy, in fiscal 2008 we launched our new brand store concept, which we called G by GUESS. We currently have 34 G by GUESS stores in North America. G by
GUESS is aimed to capture a market demographic that shops price points between factory and retail. The G by GUESS brand is distributed only in G by GUESS stores and carries apparel, accessories and
footwear for both men and women that is aspirational, timeless and fun. The stores have a fresh feel, directed toward a full customer experience, with fashion-forward, but not cutting edge fashion.
The stores have a slightly smaller footprint than Guess? stores.

International Expansion.We believe there are significant opportunities to continue our international growth, particularly in
Europe and Asia, where the GUESS? brand is well recognized but under-penetrated. The Company has made several key acquisitions in Europe during the past few years, as discussed under "Acquisition
Strategy" below. In South Korea at the end of fiscal 2008, our products were sold directly in approximately 98 stores, of which 52 are jeans concessions that are owned and operated by us through
leased spaces in major department stores and 46 are free-standing licensed stores. We opened a showroom in Hong Kong in 2006 and opened approximately 21 free-standing stores in
China during fiscal 2008, with flagship stores in Beijing and Shanghai, as well as free standing stores in Hong Kong and Macau. In addition, our joint venture in Mexico is currently distributing
through three major department store chains,
Liverpool, El Palacio de Hierro and Tiendas, with 56 shop-in-shop locations and seven GUESS? free-standing stores.

Our
business will also grow as our partners open new licensed stores internationally. In fiscal 2008, we, along with our distributors and licensees, opened 184 stores in all concepts
combined outside of the U.S.

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and
Canada, bringing the total number of such stores to 579 at year end. This store count does not include 82 jean and accessory concessions located in South Korea and China because of their smaller
store size in relation to our standard international store size. We plan to open approximately 185 new retail stores in fiscal 2009 outside the U.S. and Canada primarily through our international
licensees and distributors. We are working closely with our international distributors and licensees to develop these opportunities and to expand the availability of the GUESS? brand throughout the
world.

Continue to Develop Licensee Portfolio.One of our primary objectives is to maintain the quality and reputation of the GUESS?
brand. In order to accomplish this goal, we will continue to strategically reposition our licensing portfolio by constantly monitoring and evaluating the performance of our licensees worldwide and
their strengths and capabilities to appropriately represent our brand. As part of this process, we will consider bringing apparel licenses in-house, where appropriate. If we determine that
licensees are performing inadequately, we will, from time to time, discontinue the existing relationship and seek out a stronger replacement licensee.

In
2006, we entered into a joint venture with Adivina S.A. de. C.V. to oversee the revitalization and expansion of the GUESS? brand in Mexico. We also signed a new license with a
European licensee to develop and manufacture lingerie and swimwear under the GUESS? trademark in Europe and certain other countries. In 2005, we successfully renegotiated license agreements with our
existing licensees for watches, handbags and eyewear on terms that were significantly improved over our prior arrangements and began shipping our new fragrance line. In addition, in 2004, we signed a
new shoe license with Marc Fisher LLC to develop, manufacture and distribute athletic and fashion footwear under the GUESS? trademark in the U.S. and several countries worldwide and began
shipping footwear products in 2005. Recently, we also completed a joint venture arrangement with Marc Fisher LLC to open a small number of new footwear concept stores in North America. We
believe these are important steps in expanding our presence both domestically and globally. We will continue to examine strategic opportunities to expand our licensee portfolio by developing new
licensees that can expand our brand penetration and complement the GUESS? image.

Acquisition Strategy.We evaluate strategic acquisitions and alliances and pursue those that we believe will support and
contribute to our overall growth initiatives. In January 2008, the Company finalized the acquisition of our former European licensee of children's apparel, BARN S.r.l. ("BARN"), an Italian
corporation that was owned by two key employees of the Company's wholly-owned subsidiary, GUESS? Italia, S.r.l.

In
December 2006, we acquired 75% of the outstanding shares of Focus Europe, S.r.l. ("Focus"), as well as the leases and assets of four retail stores in Italy. Focus, based in
Italy, had served as the licensee, manufacturer, distributor and retailer of GUESS by MARCIANO contemporary apparel for men and women in Europe for 10 years. The agreement included the purchase
of inventory, certain fixed assets and the transfer of leases for the retail locations.

In
January 2005, we completed the acquisition of the remaining 90% of Maco Apparel, S.p.A. ("Maco"), the Italian licensee of GUESS jeanswear for men and women in Europe, that the
Company did not already own from Fingen S.p.A. and Fingen Apparel N.V., as well as the assets and leases of ten retail stores in Europe. The agreement included the purchase of inventory
and receivables, the assumption of certain liabilities and the transfer of leases for the GUESS retail locations. The stores are located in Rome, Milan, Paris, Amsterdam, London, and certain other
European cities.

With
the BARN, Focus and Maco acquisitions, we now directly manage our adult and children apparel businesses in Europe. We believe the combination of the manufacture and distribution of
all our European apparel lines under the GUESS? umbrella allows us to take advantage of economies of scale and provides an opportunity to further expand our wholesale and retail operations in this
region.

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Improved Product Sourcing.In fiscal 2008 we continued to refine our worldwide Supply Chain processes in support of a more
globalized product offering and a calendar that supports three major global markets a season.

We
also continued to re-define calendars, streamline processes and build core competencies within our product areas as part of our Product Lifecycle Management system
("PLM"). These new processes are providing calendar alignment and timely delivery to our western hemisphere retail and wholesale divisions, while also incorporating the development calendars and
market timing of our Asian and European businesses. This globalization of operations will enable us to begin integrating our European, North American and Asian-based supply chains. This, in turn,
supports our long term strategy of developing a global core product assortment, through collaboration between our U.S. and Italian based design teams. To better support the design process, we formed
new Global Markets and Product Development teams responsible for driving calendar deadlines, assortment plans and financial goals throughout the design process. In addition, the Product Development
team is responsible for fabric research and development, working directly with global textile mills and suppliers, in order to drive innovation, ensure quality and increase value within our product
lines.

We
have also developed a Product Integrity group to better support our brand integrity worldwide. The team is headquartered in the U.S. and has presence in Asia and Italy. In fiscal
2008, the group was able to create standards around color, fabric testing, and quality control.

While
we continue to expand our sourcing operations in Asia, we expect that Los Angeles will remain the hub of denim development, as well as speed-based development and wholesale
replenishment program management.

e-Commerce.Our websites, www.guess.com, www.gbyguess.com, www.marciano.com and www.guess.ca are virtual
storefronts that promote our brands. Designed as customer shopping centers, these sites showcase our products in an easy-to-navigate format, allowing customers to see and
purchase our collections of casual apparel and accessories. Not only have these virtual stores become an additional retail distribution channel, but also they have improved customer service and are
fun and entertaining alternative-shopping environments. These sites also provide fashion information and a mechanism for customer feedback and they promote customer loyalty and enhance our brand
identity through interactive content. In fiscal 2008, www.gbyguess.com was launched to promote the new G by GUESS retail format. In fiscal 2008, these combined sites experienced continued growth and
generated net sales in excess of the top retail GUESS? store in the chain.

Product Categories

Apparel Products.Our apparel products are organized into two primary categories: women's and men's apparel. To take
advantage of contemporary trends, we complement our core basic styles with more fashion-oriented items. We add new styles, treatments and finishes to our denim assortment on a continuous basis.

These
products are primarily sold under the GUESS? brand. However, our line of women's apparel also includes the MARCIANO product line, a full collection of better women's apparel
incorporating a sophisticated, high fashion combination of colors and styles. In fiscal 2008, we also launched our G by GUESS line of women's and men's products to complement our GUESS? and MARCIANO
brands.

Licensed Products.The high level of desirability of the GUESS? brand among consumers has allowed us to selectively expand
our product categories into other lines that include handbags, watches, footwear, fragrance, eyewear, jewelry and swimwear. The design and manufacturing of our accessories and footwear lines are
licensed to third parties who distribute these products under licensing arrangements with the Company. We recorded net royalties of $90.7 million in fiscal 2008.

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Distribution Channels

We derive net revenue from the following primary sources:



The
following table sets forth our net revenue from our business segments:

|                     |                                | Year Ended(1) |        
|-------------------- | ------------------------------ | ------------- | -------
|
|
|Net revenue:         |                                |               |        
|Retail operations    |                                | $             | 862,381
|Wholesale operations |                                |               | 258,445
|European operations  |                                |               | 538,358
|                     |                                |               |        
|                     | Net revenue from product sales |               |        
|Licensing operations |                                |               | 90,732 
|                     |                                |               |        
|                     | Total net revenue              |               | $      
|                     |                                |               |        

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U.S. and Canada Retail Operations

At February 2, 2008, our U.S and Canada retail operations, which comprise directly operated stores in both the U.S. and Canada, consisted of 187
full-price retail, 97 factory outlet, 34 G by GUESS, 38

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MARCIANO,
and 17 Accessories stores which sell GUESS?, MARCIANO and G by GUESS labeled apparel and accessory products. Below is a summary of store statistics.

Feb. 2,
2008

Feb. 3,
2007

Dec. 31, 2006

Dec. 31, 2005GUESS? Retail stores:U.S.


140


148


149


152Canada


47


43


43


39187


191


192


191GUESS? Factory stores:U.S.


81


88


89


85Canada


16


14


14


1497


102


103


99G by GUESS stores:U.S.


34








Canada











34








MARCIANO stores:U.S.


26


18


18


9Canada


12


7


7


538


25


25


14GUESS? Accessories stores:U.S.


13


12


12


11Canada


4


4


4


17


16


16


11Total


373


334


336


315Square footage at fiscal year end


1,759,000


1,610,000


1,621,000


1,563,000Sales per average annual square foot

$
504

$
458

$
447

$
401


GUESS? Retail Stores.At February 2, 2008, our full price North American retail stores occupied approximately 922,000
square feet and ranged in size from approximately 2,000 to 13,500 square feet, with most stores between 3,000 and 6,000 square feet. Our retail stores carry a full assortment of men's and women's
GUESS? merchandise, including most of our licensed products. In addition, roughly one quarter of our full-price GUESS? retail stores offer our MARCIANO line that is carried almost
exclusively in our company operated stores. In fiscal 2008, we opened 16 new retail stores, closed ten stores and converted ten full-price retail stores to G by GUESS stores. Sales
per square foot for our full price U.S. and Canada retail stores, not including factory outlet or new concept stores, increased from $441 in fiscal 2007 to $515 in fiscal 2008.

GUESS? Factory Outlet Stores.At February 2, 2008, our U.S. and Canada factory outlet stores occupied approximately
523,000 square feet and ranged in size from approximately 3,400 to 10,700 square feet, with most stores between 4,000 and 6,500 square feet. They are primarily located in outlet malls generally
operating outside the shopping radius of our wholesale customers and our full-price retail stores. These stores sell selected styles of GUESS? apparel and licensed products at lower price
points. We also use the factory outlet stores to liquidate excess inventory and thereby protect the GUESS? image. In fiscal 2008, we opened five new factory stores and converted ten factory stores to
G by GUESS stores. Sales per

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square
foot for our U.S. and Canada factory outlet stores increased from $455 in fiscal 2007 to $509 in fiscal 2008.

G by GUESS Stores.At February 2, 2008 our G by GUESS stores occupied approximately 182,000 square feet and ranged in
size from approximately 3,800 to 10,000 square feet, with most stores between 4,500 and 5,000 square feet. G by GUESS is aimed to capture a market demographic that shops price points between factory
and retail and carries apparel for both men and women and a full line of accessories and footwear that is aspirational, timeless and fun. The stores have a fresh feel, directed toward a full customer
experience, with fashion-forward, but not cutting edge fashion.

MARCIANO Stores.At February 2, 2008, our MARCIANO stores occupied approximately 103,000 square feet and ranged in
size from approximately 1,500 to 4,500 square feet, with most stores between 2,000 and 3,500 square feet. In fiscal 2008, we opened 13 MARCIANO stores. This concept leverages the name recognition of
the MARCIANO brand and the reputation we have for sexy, contemporary styling to extend the appeal of our brand. The MARCIANO brand is attracting a slightly older, more sophisticated customer. Sales
per square foot for our MARCIANO stores were $606 in fiscal 2008.

GUESS? Accessories Stores.At February 2, 2008, our Accessories concept stores occupied approximately 29,000 square
feet and ranged in size from approximately 700 to 3,200 square feet, with most stores between 1,000 and 2,500 square feet. In fiscal 2008, we opened one Accessories store. The Accessories stores
enable us to build a more meaningful presence and variety in our retail segment. Sales per square foot for our Accessories stores increased to $738 in fiscal 2008.

Wholesale Customers

The majority of our revenues reported in our wholesale segment are generated from our U.S. wholesale customers that consist primarily of better department stores
and select specialty retailers and upscale boutiques. Leading domestic wholesale customers include Macy's, Inc. and Dillard's, Inc. During fiscal 2008, our products were sold directly to
consumers through approximately 1,006 major doors in the U.S. Our wholesale merchandising strategy is to focus on trend-right products supported by key fashion basics.

We
have sales representatives in New York and Los Angeles. They coordinate with customers to determine the inventory level and product mix that should be carried in each store to
maximize retail sell-throughs and enhance the customers' profit margins. The inventory level and product mix are then used as the basis for developing sales projections and product needs
for each wholesale customer and for scheduling production. Additionally, we use merchandise coordinators who work with the stores to ensure that our products are displayed appropriately.

A
few of our domestic wholesale customers, including some under common ownership, have accounted for significant portions of our net revenue. During fiscal 2008, Macy's, Inc. was
our largest domestic wholesale customer and accounted for approximately 4.4% of our consolidated net revenue. During the past year, we continued to see our domestic wholesale operations become a
smaller proportion of our overall business as our international businesses expanded.

Our
European wholesale business relies on a large number of smaller regional distributors and agents to distribute our products. Our Asian wholesale customer base is primarily comprised
of a small number of selected distributors with which we have contractual distribution arrangements.

International Stores

The Company's international retail network is comprised of a mix of directly operated and licensee operated GUESS? and GUESS by MARCIANO retail and outlet stores.
Our retail store license agreements generally provide detailed guidelines for store fixtures and merchandising programs. The

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appearance,
merchandising and service standards of these stores, which are typically smaller than our standard North American stores, are closely monitored to ensure that our image and brand integrity
are maintained at the same level as our directly operated stores in the U.S. and Canada.

For
the year ended February 2, 2008, together with our partners we opened 184 new stores, including 83 in Europe, 93 in Asia and eight in Mexico, Central and South America. We
ended the year with 579 stores outside of the U.S. and Canada, of which 421 were GUESS? stores, 36 were GUESS by MARCIANO stores, and 122 were GUESS? Accessories stores. Of the 579 stores, 60 were
operated by the Company and 519 were operated by licensees or distributors. This store count does not include 82 jean and accessory concessions located in South Korea and China because of their
smaller store size in relation to our standard international store size.

License Agreements and Terms

Our trademark license agreements customarily provide for a three- to five-year initial term with a possible option to renew prior to expiration for an
additional multi-year period. In addition to licensing trademarks for products which complement our apparel products, we have granted trademark licenses for the manufacture and sale of
GUESS? branded products similar to ours, including men's and women's denim and knitwear, in markets such as Europe, the Philippines, South Africa and Mexico. Licenses granted to certain licensees that
have produced high-quality products and have demonstrated solid operating performance, such as for GUESS? watches, GUESS? handbags and GUESS? eyewear, have been renewed and in some cases
expanded to include new products or markets. The typical license agreement requires that the licensee pay us the greater of a royalty based on a percentage of the licensee's net sales of licensed
products or a guaranteed annual minimum royalty that typically increases over the term of the license agreement. In addition, several of our key license agreements provide for specified, fixed cash
rights payments over and above our normal, ongoing royalty payments. Generally, licensees are required to spend a percentage of the net sales of licensed products for advertising and promotion of the
licensed products and in many cases we place the ads on behalf of the licensee and are reimbursed. In addition, to protect and increase the value of our trademarks, our license agreements include
strict quality control and manufacturing standards.

Our
licensing personnel in the U.S., Europe and Asia meet regularly with licensees to ensure consistency with our overall merchandising and design strategies, to monitor quality control
and to protect the GUESS? trademark and brand. The licensing department approves in advance all GUESS? licensed products, advertising, promotional and packaging materials.

Design

GUESS?, G by GUESS and MARCIANO products are designed by an in-house staff of four design teams (men's, women's, G by GUESS and MARCIANO) located in
Los Angeles, California and Florence and Bologna, Italy. The U.S. and European teams work closely to share ideas and develop products that can sell in both markets and our other international markets.
Our design teams travel throughout the world in order to monitor fashion trends and discover new fabrics. Fabric shows in Europe, Asia and the U.S. provide additional opportunities to discover and
sample new
fabrics. These fabrics, together with the trends observed by our designers, serve as the primary source of inspiration for our lines and collections. We also maintain a fashion library consisting of
antique and contemporary garments as another source of creative concepts. In addition, our design teams regularly meet with members of the sales, merchandising and retail operations teams to further
refine our products to meet the particular needs of our markets.

Advertising and Marketing

Our advertising, public relations and marketing strategy is designed to promote a consistent high impact image which endures regardless of changing consumer
trends. Since our inception, Paul Marciano

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has
had principal responsibility for the GUESS? brand image and creative vision. All worldwide advertising and promotional material is controlled through our advertising department based in Los
Angeles. GUESS Jeans, GUESS U.S.A. and GUESS?, Inc. images have been showcased globally in dozens of major publications as well as in outdoor and broadcast media.

Our
advertising strategy promotes the GUESS? image and products, with an emphasis on brand image. Our signature black and white print advertisements, as well as color print
advertisements, have garnered prestigious awards, including Clio, Belding and Mobius awards for creativity and excellence. These awards, which we have received on numerous occasions in our history,
are generally given based on the judgment of prominent members of the advertising industry. We have maintained a high degree of consistency in our advertisements, using similar themes and images. We
require our licensees and distributors to invest a percentage of their net sales of licensed products into advertising, promotion and marketing.

Our
advertising department is responsible for all worldwide advertising, which includes approval of all advertising strategies and media placements from our licensees and distributors.
We use a variety of media with an emphasis on print and outdoor advertising. We have focused advertisement placement in national and international contemporary fashion/beauty, lifestyle, and celebrity
magazines including Vanity Fair, Marie Claire, Elle, W and Vogue. By retaining control over our advertising programs, we are able to maintain the integrity of our brands while realizing substantial
cost savings compared to outside agencies.

We
further strengthen communications with customers through our websites (www.guess.com, www.marciano.com, www.gbyguess.com and www.guess.ca). These global media enable us to provide
timely information in an entertaining fashion to consumers about our history, products and store locations, and allow us to receive and respond directly to customer feedback.

Sourcing and Product Development

We source products through numerous suppliers, many of whom have established long-term relationships with us. We seek to achieve the most efficient
means for timely delivery of our products. In recent years we have increasingly sourced our finished products globally. Almost all our products are acquired as package purchases where we supply the
design and fabric selection and the vendor delivers the finished product. Although we have long-term relationships with many of our vendors, we do not have long-term written
agreements with them.

Quality Control

Our quality control program is designed to ensure that products meet our high quality standards. We monitor the quality of our fabrics prior to the production of
garments and inspect prototypes of each product before production runs commence. We also perform random in-line quality control checks during and after production before the garments leave
the contractor. Final random inspections occur when the garments are received in our distribution centers. We believe that our policy of inspecting our products at our distribution centers and at the
vendors' facilities is important to maintain the quality, consistency and reputation of our products.

Logistics

We utilize distribution centers at strategically located sites. The Company's primary distribution center is based in Louisville, Kentucky. At our 506,000
square-foot facility in Kentucky, we use fully integrated and automated distribution systems. The bar code scanning of merchandise, picking tickets and distribution cartons, together with
radio frequency communications, provide timely, controlled, accurate and instantaneous updates to the distribution information systems. As of February 2, 2008, this facility was approximately
60% utilized. Distribution of our products in Canada is handled from a distribution center in Montreal, Quebec that we lease from a related party. Our European business primarily utilizes two

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independent
distributors with four locations in Italy as well as one Company operated distribution center in Italy. Additionally, we utilize three contract warehouses in Hong Kong, Korea and China
that service the Pacific Rim.

Competition

The apparel industry is highly competitive and fragmented, and is subject to rapidly changing consumer demands and preferences. We believe that our success
depends in large part upon our ability to anticipate, gauge and respond to changing consumer demands and fashion trends in a timely manner and upon the continued appeal to consumers of the GUESS?
brand. We compete with numerous apparel manufacturers and distributors, both domestically and internationally, as well as several well-known designers. Our retail and factory outlet stores
face competition from other retailers, including some of our major wholesale customers. Our licensed apparel and accessories also compete with a substantial number of well-known brands.
Many of our competitors, including The Gap, Abercrombie & Fitch and Polo Ralph Lauren, among others, have greater financial resources than we do. Although the level and nature of competition
differ among our product categories and geographic regions, we believe that we compete on the basis of our brand image, quality of design, workmanship and product assortment.

Information Systems

We believe that high levels of automation and technology are essential to maintain our competitive position and support our strategic objectives and we continue
to invest in computer hardware, system applications and networks. Our computer information systems consist of a full range of financial, distribution, merchandising, in-store, supply chain
and other systems. During fiscal 2008, we implemented new financial and operational systems in Asia to align with our global IT standards, accommodate future growth and provide operating efficiencies.
In addition, a PLM system was deployed to provide supply chain efficiencies and global visibility and a Customer Relationship Management ("CRM") system was implemented to support the launch of the
Marciano Loyalty program. We are currently upgrading our point of sale system in North America to the latest generation of technology to provide increased functionality and greater store level
efficiencies.

Trademarks

We own numerous trademarks, including GUESS, GUESS?, GUESS U.S.A., GUESS Jeans, GUESS? and Triangle Design, MARCIANO, Question Mark and Triangle Design, a
stylized G and a stylized M, Baby GUESS, YES, G by GUESS, GUESS by MARCIANO and GUESS Collection. As of February 2, 2008, we had approximately 2,300 U.S. and internationally registered
trademarks or trademark applications pending with the trademark offices in approximately 170 countries around the world, including the U.S. From time to time, we adopt new trademarks in connection
with the marketing of new product lines. We consider our trademarks to have significant value in the marketing of our products and act aggressively to register and protect our trademarks worldwide.

Like
many well-known brands, our trademarks are subject to infringement. We have staff devoted to the monitoring and aggressive protection of our trademarks worldwide.

Wholesale Backlog

The backlog of wholesale orders at any given time is affected by various factors, including seasonality, cancellations, the scheduling of market weeks and
manufacturing and shipment of products. 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.

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U.S. Backlog.The Company maintains a model stock program in its basic denim products which generally allows replenishment of
a customer's inventory within 48 hours. The Company generally receives orders for fashion apparel 90 to 120 days prior to the time the products are delivered to stores. Regarding our
U.S. wholesale backlog, the scheduling of market weeks can affect the amount of orders booked in the backlog compared to the same date in the prior year. This year's backlog for product at
March 22, 2008, as an example, reflected a shorter shipping period of three months for men's product and two months for women's product compared to last year's backlog at March 24, 2007.
We estimate that if we were to normalize the orders for last year's backlog to make the comparison consistent with the current year, then the current backlog would be up about 3.6% from the prior
year. Not taking into account the impact of this change, our U.S. wholesale backlog as of March 22, 2008, consisting primarily of orders for fashion apparel was approximately
$55.4 million, compared to $72.7 million for such orders at March 24, 2007, or down 23.8%.

Europe Backlog.Our European business operates with two primary wholesale selling seasons. The Spring/Summer season, which
ships mostly in January, February and March and the Fall/Winter season, which ships mostly in July, August and September. Generally, the other months are relatively small shipping months. However,
customers have the ability to request early shipment of backlog orders or delay shipment of orders depending on their needs. Accordingly, a certain amount of orders in the backlog may be shipped
outside of the traditional shipping months. As of March 24, 2008, the European operations backlog was approximately €181.3 million, compared to
€109.7 million at March 24, 2007, or up approximately 65.2%. The backlog as of March 24, 2008 comprises sales orders for the Spring/Summer and Fall/Winter 2008
seasons for both the existing European operations and our Focus and BARN operations. As discussed above, these orders are subject to cancellation and may not be indicative of eventual actual
shipments. In addition, the earlier receipt of handbag orders this year has favorably impacted the amount of orders booked in the backlog as of March 24, 2008. If we excluded the incremental
handbag orders from this year's backlog, the total backlog would be up about 27.2%.

Employees

We strongly believe that our employees ("associates") are our most valuable resources. As of February 2008, we had approximately 9,900 associates, including
approximately 8,300 associates in our retail operations, 1,000 in our corporate operations and 600 in our European operations.

Except
for approximately 58 employees in Italy who are represented by labor unions, none of our associates are represented by labor unions, and we are not a party to any labor
agreements. We consider our relationship with our associates to be good.

Initiation of Quarterly Dividend and Approval of Stock Split

On February 12, 2007, the Board of Directors of the Company declared a quarterly cash dividend of $0.12 per share on the Company's common stock and
approved a two-for-one stock split of the Company's common stock, each to be paid on or about March 12, 2007 to shareholders of record as of the close of business on
February 26, 2007. Because the record date for the initial cash dividend preceded the March 12, 2007 stock split distribution date, the cash dividend was paid on only
pre-split shares. The following three quarters, the Company declared quarterly dividends of $0.06 for the quarter ended August 4, 2008 and $0.08 for the quarters ended
November 1, 2007 and February 2, 2008. 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 requirements, cash paid for income taxes, earnings, share repurchases and liquidity.

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Environmental Matters

We are subject to federal, state and local laws, regulations and ordinances that govern activities or operations that may have adverse environmental effects (such
as emissions to air, discharges to water, and the generation, handling, storage and disposal of solid and hazardous wastes). We are also subject to laws, regulations and ordinances that impose
liability for the costs of clean up or other remediation of contaminated property, including damages from spills, disposals or other releases of hazardous substances or wastes, in certain
circumstances without regard to fault. Certain of our operations routinely involve the handling of chemicals and wastes, some of which are or may become regulated as hazardous substances. We have not
incurred, and do not expect to incur, any significant expenditures or liabilities for environmental matters. As a result, we believe that our environmental obligations will not have a material adverse
effect on our consolidated financial condition or results of operations.

Financial Information About Geographic Areas

See Note 15 to the Consolidated Financial Statements for a discussion regarding our domestic and foreign operations.

Website Access to Our Periodic SEC Reports

We make available free of charge at www.guessinc.com our annual reports on Form 10-K, quarterly reports on Form 10-Q,
current reports on Form 8-K, and amendments to those reports filed or furnished to the SEC pursuant to Section 13(a) or 15(d) of the Exchange Act, as soon as reasonably
practicable after we electronically file them with, or furnish them to, the SEC. In addition, the charters of our Board of Directors' Audit, Compensation and Nominating and Governance Committees as
well as the Board of Directors' Governance Guidelines and our Code of Conduct are posted on our website. We may from time to time provide important disclosures to our investors, including amendments
or waivers to our Code of Conduct, by posting them in the "Investor's Info" section of the www.guessinc.com website, as allowed by SEC rules. Printed copies of these documents may be obtained by
writing or telephoning us at Guess?, Inc., 1444 South Alameda Street, Los Angeles, California 90021, Attention: Investor Relations, (213) 765-5578.

ITEM 1A.    Risk Factors.

You should carefully consider the following factors and other information in this Annual Report on Form 10-K.
Additional risks which we do not presently consider material, or of which we are not currently aware, may also have an adverse impact on us. Please also see "Important Factors Regarding
Forward-Looking Statements" on page (ii).

Demand for our merchandise may decrease and the appeal of our brand image may diminish if we fail to identify and rapidly respond to consumers' fashion
tastes.

The apparel industry is subject to rapidly evolving fashion trends and shifting consumer demands. Accordingly, our brand image and our profitability are heavily
dependent upon both the priority our target customers place on fashion and on our ability to anticipate, identify and capitalize upon emerging fashion trends. Current fashion tastes place significant
emphasis on a fashionable look. In the past, this emphasis has increased and decreased through fashion cycles. If we fail to anticipate, identify
or react appropriately, or in a timely manner, to fashion trends, we could experience reduced consumer acceptance of our products, a diminished brand image and higher markdowns. These factors could
result in lower selling prices and sales volumes for our products and could have a material adverse effect on our results of operations and financial condition.

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The apparel industry is highly competitive, and we may face difficulties competing successfully in the future.

We operate in a highly competitive and fragmented industry with low barriers to entry. We compete with many apparel manufacturers and distributors, both
domestically and internationally, as well as many well-known designers, some of whom have substantially greater resources than we do and some of whose products are priced lower than ours.
Our retail and factory outlet stores compete with many other retailers, including department stores, some of whom are our major wholesale customers. Our licensed apparel and accessories compete with
many well-known brands. Within each of our geographic markets, we also face significant competition from global and regional branded apparel companies, as well as retailers that market
apparel under their own labels. These and other competitors pose significant challenges to our market share in our existing major domestic and foreign markets. In addition, our larger competitors may
be better equipped than us to adapt to changing conditions that affect the competitive market. Also, the industry's low barriers to entry allow the introduction of new products or new competitors at a
fast pace. Any of these factors could result in reductions in sales or prices of our products and could have a material adverse effect on our results of operations and financial condition.

Changes in the economy and trends in consumer confidence may adversely affect the fashion industry as well as our operating results.

The industry in which we operate is cyclical. Purchases of apparel and related merchandise are generally discretionary and therefore tend to decline during
recessionary periods and also may decline at other times. Reduced levels of consumer spending, both domestically and internationally, can also result from (i) increases in interest rates,
(ii) declines in the availability of consumer credit, (iii) increases in taxation rates, (iv) decreases in consumer confidence in future economic conditions and
(v) reductions in levels of consumer disposable income resulting from any number of factors such as the subprime mortgage crisis and the continued increases in oil prices. Due to these cyclical
factors in the retail industry, we may not be able to maintain our growth in revenues or earnings, or remain profitable in the future, particularly during economic downturns or periods of economic
instability.

Actual
or potential terrorist acts and other conflicts in recent periods have also created significant instability and uncertainty in the world and may have additional effects in the
future. These may include causing consumers to defer purchases or preventing our suppliers and service providers from
providing required services or materials to us. These or other impacts could materially and adversely affect our operating results.

We could find that we are carrying excess inventories if we fail to anticipate consumer demand, if our international vendors do not supply quality
products on a timely basis, if our merchandising strategies fail or if we do not open new and remodel existing stores on schedule.

Because we must place orders with our vendors for most of our products a season or more in advance, we could end up carrying excess inventories if we fail to
correctly anticipate fashion trends or consumer demand. Even if we correctly anticipate consumer fashion trends and demand, our vendors could fail to supply the quality products and materials we
require at the time we need them. Moreover, we could fail to effectively market or merchandise these products once we receive them. In addition, we could fail to open new or remodeled stores on
schedule, and inventory purchases made in anticipation of such store openings could remain unsold. Any of the above factors could cause us to experience excess inventories and higher markdowns, which
in turn could have a material adverse effect on our results of operations and financial condition.

Our success depends on maintaining good working relationships with our suppliers and manufacturers.

We do not own or operate any production facilities equipment, and we depend on independent contractors to supply our fabrics and to manufacture our products to
our specifications. We do not have long-term contracts with any suppliers or manufacturers, and our business is dependent on continued good

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relations
with our vendors. In addition, none of our suppliers or manufacturers supplies or manufactures our products exclusively. As a result, we compete with other companies for the production
capacity of independent manufacturers and international import quota capacity. If our vendors or manufacturers fail to ship our fabrics or products on time or to meet our quality standards or are
unable to fill our orders, we might not be able to deliver products to our retail stores and wholesale customers on time or at all.

Moreover,
our manufacturers have at times been unable to deliver finished products in a timely fashion. This has led, from time to time, to an increase in our inventory, creating
potential markdowns and a resulting decrease in our profitability. As there are a limited number of qualified offshore manufacturers, it could take significant time to find alternative manufacturers,
which could result in our missing retailing seasons or our wholesale customers' canceling orders, refusing to accept deliveries or requiring that we lower selling prices. Since we cannot return
merchandise to our manufacturers, we could also have a significant amount of unsold merchandise. Any of these problems could harm our financial condition and results of operations.

Our North American wholesale business is highly concentrated. The decision by any of our large customers to decrease their purchases of our products or
stop carrying our products could have a material adverse effect on our results of operations and financial condition.

In fiscal 2008, 4.4% of our consolidated net revenue came from Macy's, Inc. No other single customer or group of related customers accounted for more than
5% of our net revenue in fiscal 2008. Continued consolidation in the retail industry could further decrease the number of, or concentrate the ownership of, stores that carry our and our licensees'
products. Also, as we expand the number of our retail stores, we run the risk that our wholesale customers will perceive that we are increasingly competing directly with them, which may lead them to
reduce or terminate purchases of our products. In addition, in recent years there has been a significant increase in the number of designer brands seeking placement in department stores, which makes
any one brand potentially less attractive to department stores. If any one of our major wholesale customers decides to decrease purchases from us, to stop carrying GUESS? products or to carry our
products only on terms less favorable to us, our sales and profitability could significantly decrease. This could have a material adverse effect on our results of operations and financial condition.

Since we do not control our licensees' actions and we depend on our licensees for a substantial portion of our earnings from operations, their conduct
could harm our business.

We license to others the rights to produce and market certain products that are sold with our trademarks. While we retain significant control over our licensees'
products and advertising, we rely on our licensees for, among other things, operational and financial control over their businesses. If the quality, focus, image or distribution of our licensed
products diminish, consumer acceptance of and demand for the GUESS? brand and products could decline. This could materially and adversely affect our business and results of operations. In fiscal 2008,
approximately 80% of our net royalties were derived from our top five licensed product lines. A decrease in customer demand for any of these product lines could have a material adverse effect on our
results of operations and financial condition. Although we believe that in most circumstances we could replace existing licensees if necessary, our inability to do so for any period of time could
adversely affect our revenues and results of operations.

We depend on our intellectual property, and our methods of protecting it may not be adequate.

Our success and competitive position depend significantly upon our trademarks and other proprietary rights. We take steps to establish and protect our trademarks
worldwide. Despite any precautions we may take to protect our intellectual property, policing unauthorized use of our intellectual property is difficult, expensive and time consuming, and we may be
unable to adequately protect our intellectual property or to determine the extent of any unauthorized use, particularly in those foreign countries where the laws do not protect proprietary rights as
fully as in the United States. We also place significant value on our trade dress and the overall appearance and image of our products. However, we cannot assure you that we can prevent

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imitation
of our products by others or prevent others from seeking to block sales of GUESS? products for violating their trademarks and proprietary rights. We also cannot assure you that others will
not assert rights in, or ownership of, trademarks and other proprietary rights of GUESS?, that our proprietary rights would be upheld if challenged or that we would, in that event, not be prevented
from using our trademarks, any of which could have a material adverse effect on our financial condition and results of operations. Further, we could incur substantial costs in legal actions relating
to our use of intellectual property or the use of our intellectual property by others. Even if we are successful in such actions, the costs we incur could have a material adverse effect on us.

We are subject to periodic litigation and other regulatory proceedings, which could result in unexpected expense of time and resources.

We are a defendant from time to time in lawsuits and regulatory actions relating to our business. Due to the inherent uncertainties of litigation and regulatory
proceedings, we cannot accurately predict the ultimate outcome of any such proceedings. An unfavorable outcome could have an adverse impact on our business, financial condition and results of
operations. In addition, any significant litigation in the future, regardless of its merits, could divert management's attention from our operations and result in substantial legal fees. See also
"Item 3. Legal Proceedings" for further discussion of the Company's legal matters.

If we fail to successfully execute our growth initiatives, including through acquisitions, our business and results of operations could be harmed.

As part of our business growth initiatives, we regularly open new stores, in both existing and new store concepts, in the United States and Canada. We also
regularly evaluate strategic acquisitions and alliances and pursue those that we believe will support and contribute to our overall growth initiatives. For instance, we completed the acquisition of
our former European jeanswear licensee during 2005, the acquisition of 75% of the outstanding shares of our former European licensee of GUESS by MARCIANO apparel in December 2006 and the acquisition
of our former European licensee of children's apparel in January 2008. We have also continued our international expansion by opening new
stores outside the U.S., primarily in the form of stores owned by our international licensees and distributors, but also through Company-owned stores and concessions. We plan to continue opening new
stores in the U.S. and internationally. This expansion effort places increased demands on our managerial, operational and administrative resources that could prevent or delay the successful opening of
new stores, adversely impact the performance of our existing stores and adversely impact our overall results of operations. In addition, acquired businesses may not provide us with increased business
opportunities, or result in the growth that we anticipate. Furthermore, integrating acquired operations is a complex, time-consuming and expensive process. Failing to acquire and
successfully integrate complementary businesses, or failing to achieve the business synergies or other anticipated benefits of acquisitions, could materially adversely affect our business and results
of operations.

We may be unsuccessful in implementing our planned North America retail expansion, which could harm our business and negatively affect our results of
operations.

To open and operate new stores successfully, we must:



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Any
of these challenges could delay our store openings, prevent us from completing our store opening plans or hinder the operations of stores we do open. We cannot be sure that we can
successfully complete our planned expansion or that our new stores will be profitable. Such things as unfavorable economic and business conditions and changing consumer preferences could also
interfere with our plans to expand.

Failure to successfully develop and manage our new store concepts could adversely affect our results of operations.

In addition to our core GUESS? retail and factory stores, we continue to develop and refine the MARCIANO, GUESS? Accessories, G by GUESS and new footwear store
concepts. The introduction and growth of several new store concepts as part of our overall growth strategy could strain our financial and management resources. Additionally, successfully developing
new brands is subject to a number of risks, including customer acceptance, product differentiation, competition and obtaining desirable locations. There can be no assurance that these concepts will
achieve or maintain sales and profitability levels that justify the required investments. If we are unable to successfully develop and manage these multiple store concepts, or if consumers are not
receptive to the products or store concepts, our results of operations and financial results could be adversely affected.

Much of our business is international and can be disrupted by factors beyond our control.

We have been reducing our reliance on domestic contractors and expanding our use of direct sourced offshore manufacturers as a cost-effective means to
produce our products. During fiscal 2008, we sourced a significant amount of our finished products through third-party suppliers located outside the United States and we continued to purchase fabrics
outside the United States. As we focus strategically on progressively more direct sourcing, we are expanding our Hong Kong office infrastructure to allow us to develop, engineer and source directly
from overseas factories.

In
addition, we have been increasing our international sales of product outside of the United States. In fiscal 2008, approximately 51.5% of our consolidated net revenue was generated by
sales from outside of the United States. We anticipate that these international revenues will continue to grow as a percentage of our total business.

As
a result of our increasing international operations, we face the possibility of greater losses from a number of risks inherent in doing business in international markets and from a
number of factors which are beyond our control. Such factors that could harm our results of operations and financial condition include, among other things:



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Our
imports are limited by textile agreements between the United States and some foreign jurisdictions, most notably China. These agreements impose quotas on the amounts and types of
merchandise that may be imported into the United States from these countries. These agreements also allow the United States to limit the importation of categories of merchandise that are not now
subject to specified limits. The United States and the countries in which our products are produced or sold may also, from time to time, impose new quotas, duties, tariffs or other restrictions, or
adversely adjust prevailing quota, duty or tariff levels. If we are unable to obtain our raw materials and finished apparel from the countries where we wish to purchase them, either because of
capacity constraints or visa availability under the required quota category or for any other reason, or if the cost of doing so should increase, it could have a material adverse effect on our results
of operations and financial condition.

Domestic and foreign currency fluctuations could adversely impact our financial condition and results of operations.

We generally purchase our products in U.S. dollars. However, we source most of our products overseas. As a result, the cost of these products may be affected by
changes in the value of the applicable currencies. Changes in currency exchange rates may also affect the U.S. dollar value of the foreign currency denominated prices at which our international
businesses sell products. Furthermore, our international sales and some of our licensing revenue is generally derived from sales in foreign currencies, including the Canadian Dollar and the Euro. This
revenue, when translated into U.S. dollars for consolidated reporting purposes, could be materially affected by the strengthening of the U.S. dollar, negatively impacting our results of operations and
the Company's ability to generate revenue growth.

Furthermore,
since some of our hedging activities are designed to reduce volatility of fluctuating exchange rates, they not only reduce the negative impact of a stronger U.S. dollar, but
they also reduce the positive impact of a weaker U.S. dollar. Our future financial results could be significantly affected
by the values of the U.S. dollar in relation to the foreign currencies in which we conduct business. In addition, while the hedges are designed to reduce volatility over the forward contract period,
these contracts can create volatility during the period. The degree to which our financial results are affected for any given time period will depend in part upon our hedging activities. See also
"Note 20 to our Consolidated Financial Statements" and "Item 7A. Quantitative and Qualitative Disclosures About
Market Risk."

A significant disruption at our Louisville, Kentucky distribution center or our other international distribution facilities could have a material
adverse impact on our business and operating results.

We primarily rely on a single distribution center located in Louisville, Kentucky to receive, store and distribute merchandise to all of our stores and wholesale
customers in the U.S. We also operate a distribution center in Canada, utilize two independent distributors with four locations and one Company operated location in Italy which service Europe, and
utilize three contract warehouses in Hong Kong, China and Korea that service the Pacific Rim. Any significant interruption in the operation of our Kentucky distribution center or any of our other
foreign facilities due to natural disasters, accidents, system failures or other unforeseen causes could have a material adverse effect on our business and operating results.

Our two most senior executive officers own a significant percentage of our common stock. Their interests may differ from the interests of our other
stockholders.

Maurice Marciano and Paul Marciano, our Chairman of the Board and Chief Executive Officer, respectively, collectively beneficially own over 38% of our outstanding
shares of common stock. These individuals may have different interests than our other stockholders and, accordingly, they may direct the

19

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operations
of our business in a manner contrary to the interests of our other stockholders. As long as these individuals own a significant percentage of our common stock, they may effectively be able
to:



Their
stock ownership, together with the anti-takeover effects of certain provisions of applicable Delaware law and our Restated Certificate of Incorporation or Bylaws, may
discourage acquisition bids or allow the Marcianos to delay or prevent a change in control that may be favored by our other stockholders, which in turn could reduce our stock price or prevent our
stockholders from realizing a premium over our common stock price.

Our failure to attract and retain our existing senior management team and other key personnel could adversely affect our business.

Our business requires disciplined execution at all levels of our organization in order to ensure the timely delivery of desirable merchandise in appropriate
quantities to our stores and our wholesalers' stores. This execution requires experienced and talented management in design, production, merchandising and advertising. Our success depends upon the
personal efforts and abilities of our senior management, particularly Maurice Marciano and Paul Marciano, and other key personnel. Although we believe we have a strong management team with relevant
industry expertise, the extended loss of the services of one or both of the Marcianos or other key personnel could materially harm our business. Although we are the beneficiary of a $10 million
"key man" insurance policy on the life of Paul Marciano, we do not have any other "key man" insurance with respect to either of the Marcianos or other key employees, and any of them may leave us at
any time, which could severely disrupt our business and future operating results.

Fluctuations in our quarterly results of operations, comparable store sales, sales per square foot, wholesale operations or royalty net revenue or other
factors could have a material adverse effect on our results of operations and our stock price.

Our quarterly results of operations for our individual stores, our wholesale operations and our royalty net revenue have fluctuated in the past and can be
expected to fluctuate in the future. Further, if our retail store expansion plans, both domestically and internationally, fail to meet our expected results, our overhead and other related expansion
costs would increase without an offsetting increase in sales and net revenue. This could have a material adverse effect on our results of operations and financial condition.

Our
net revenue and operating results have historically been lower in the first half of our fiscal year due to general seasonal trends in the apparel and retail industries. The Company
recently changed its
fiscal year to the end of January but expects the historical trend described above to continue. Our comparable store sales and quarterly results of operations are affected by a variety of factors,
including:



20

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An
unfavorable change in any of the above factors could have a material adverse effect on our results of operations and our stock price.

Violation of labor laws and practices by our licensees or suppliers could harm our business.

We require our licensing partners and suppliers to operate in compliance with applicable laws and regulations. While our internal and vendor operating guidelines
promote ethical business practices, we do not control our licensees or suppliers or their labor practices. The violation of labor or other laws by any of our licensees or suppliers, or divergence of a
licensee's or supplier's labor practices from those generally accepted as ethical in the United States, could interrupt or otherwise disrupt the shipment of our products, harm the value of our
trademarks, damage our reputation or expose us to potential liability for their wrongdoings.

We rely on third parties and our own personnel for upgrading and maintaining our management information systems. If these parties do not perform these
functions appropriately, our business could be disrupted and adversely impacted.

The efficient operation of our business is very dependent on our information systems. In particular, we rely heavily on the merchandise management and ERP systems
used to track sales and inventory and manage our supply chain. We depend on our vendors to maintain and periodically upgrade these systems to support our business as we expand. The software programs
supporting the processing of our inventory management information are licensed to us by independent software developers. The inability of these developers to continue to maintain and upgrade our
software programs could result in incorrect information being supplied to management, inefficient ordering and replenishment of products and disruption of our operations. The failure of these systems
to operate effectively, problems with transitioning to upgraded or replacement systems, difficulty in integrating new systems or systems of acquired businesses or a breach in security of these systems
could adversely impact the business. Significant expenditures could be required to remediate any such failure, problem or breach.

The Company could experience liquidity issues associated with its cash balances in excess of FDIC insurance limits held by various financial
institutions and its significant investment of excess cash in a single municipal money market fund.

Cash used primarily for working capital purposes is maintained with various major financial institutions in amounts which are in excess of the FDIC insurance
limits. In addition, excess cash and cash equivalents, which represent the majority of our outstanding cash and cash equivalents balance, are held primarily in one diversified municipal money market
fund. Although the fund, which is rated AAA by Fitch, is comprised of high-quality, liquid instruments, if the financial markets trading the underlying assets in this fund experience a disruption, the
Company may need to temporarily rely on other forms of liquidity, including borrowings under the Credit Agreement.

ITEM 1B.    Unresolved Staff Comments.

None.

21

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ITEM 2.    Properties.

Certain information concerning our principal facilities, all of which are leased at February 2, 2008, is set forth below:

|Location                                          |  | Use                                                                                                                                                                                                                           |  | Approximate
Area in
Square Feet
|------------------------------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------------------------
|1444 South Alameda Street
Los Angeles, California |  | Principal executive and administrative offices, design facilities, sales offices, distribution and warehouse facilities, production control, and sourcing used by our Wholesale and Retail segments, and our Corporate
groups |  | 355,000                        
|144 S. Beverly Drive
Beverly Hills, California    |  | Administrative offices used by our Corporate group.                                                                                                                                                                           |  | 1,200                          
|1610 Freeport Drive
Louisville, Kentucky          |  | Distribution and warehousing facility used by our Wholesale and Retail segments                                                                                                                                               |  | 506,000                        
|119/264 W. 40th Street
New York, New York         |  | Administrative offices, public relations, and showrooms used by our Wholesale segment                                                                                                                                         |  | 13,400                         
|Montreal/Toronto, Canada                          |  | Administrative offices, showrooms and warehouse facilities used by our Wholesale and Retail segments                                                                                                                          |  | 111,000                        
|Florence/Milan/Crevalcore, Italy                  |  | Administrative offices, showrooms and warehouse used by our European segment                                                                                                                                                  |  | 222,000                        
|Lugano, Switzerland                               |  | Administrative, sales and marketing offices used by our European segment                                                                                                                                                      |  | 29,400                         
|Kowloon, Hong Kong                                |  | Administrative offices, showrooms, sourcing, distribution and licensing coordination facilities used by our Wholesale segment.                                                                                                |  | 23,600                         
|Seoul, Korea                                      |  | Administrative offices and showrooms used by our Wholesale segment                                                                                                                                                            |  | 11,700                         
|Shanghai, China                                   |  | Administrative offices and warehouse facility used by our Wholesale segment                                                                                                                                                   |  | 14,500                         

Our
corporate, wholesale and retail headquarters and certain warehousing facilities are located in Los Angeles, California and in Beverly Hills, California, consisting of five buildings
totaling approximately 356,200 square feet. All of these properties are leased by us, primarily from limited partnerships in which the sole partners are trusts controlled by and for the benefit of
Maurice Marciano and Paul Marciano (the "Principal Stockholders"), Armand Marciano, their brother and former executive of the Company, and their families pursuant to leases that expire in July 2008
and February 2009. The total lease payments to these limited partnerships are approximately $0.3 million per month with aggregate minimum lease commitments to these partnerships at
February 2, 2008, totaling approximately $1.6 million.

In
addition, the Company, through a wholly-owned Canadian subsidiary, leases warehouse and administrative facilities in Montreal, Quebec from a partnership affiliated with the Principal
Stockholders. The lease expires in December 2014. The monthly lease payment is $44,200 Canadian (US $44,500) with aggregate minimum lease commitments through the term of the lease totaling
approximately $3.7 million Canadian (US $3.7 million) at February 2, 2008.

See
Note 11 to the Consolidated Financial Statements for further information regarding related party transactions.

22

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Through
early 2000, distribution of our products in the U.S. was centralized in our Los Angeles, California facility. In 2000, we leased an automated distribution center in Louisville,
Kentucky, to replace the distribution center in Los Angeles as our primary distribution center. Our Canadian business operates a distribution facility located in Montreal, Canada. Our European
business utilizes two independent distributors with four locations and one Company operated location in Italy. Additionally, we utilize three contract warehouses in Hong Kong, Korea and China that
service the Pacific Rim.

We
lease our showrooms, advertising, licensing, sales and merchandising offices, remote distribution and warehousing facilities and retail and factory outlet store locations under
non-cancelable operating lease agreements expiring on various dates through January 2022. These facilities are located principally in the U.S., with aggregate minimum lease commitments, at
February 2, 2008, totaling approximately $640.6 million excluding related party commitments. In addition, in 2005 we started leasing a building in Florence, Italy for our Italian
operations under a capital lease agreement. We opened the Florence facility in June 2006. The capital lease obligation, including build-outs, amounted to $20.4 million as of
February 2, 2008.

The
current terms of our store leases, excluding renewal options, expire as follows:

Number of StoresYears Lease Terms Expire

U.S. and Canada

Asia

Europe

MexicoFiscal 2009-2011

98

75

20

2Fiscal 2012-2014

78

1

7

5Fiscal 2015-2017

116



11

Fiscal 2018-2020

81



1

Thereafter





1

373

76

40

7


We
believe our existing facilities are well maintained, in good operating condition and are adequate to support our present level of operations. See Notes 11 and 12 to the
Consolidated Financial Statements for further information regarding current lease obligations.

ITEM 3.    Legal Proceedings.

On February 1, 2005, a complaint was filed by Michele Evets against the Company in the Superior Court of the State of California for the County of San
Francisco. The complaint purported to be a class action filed on behalf of current and former GUESS? store managers in California. Plaintiffs sought overtime wages and a preliminary and permanent
injunction. The parties executed a settlement agreement in February 2007, which became effective upon final court approval on November 1, 2007. As of February 2, 2008, the Company paid
$0.8 million related to the net charges in connection with the full and final settlement of this matter.

In
2006, the Officers of the Florence Customs Authorities ("Customs Authorities") began an import customs audit with respect to the Company's Italian subsidiary, Maco
Apparel S.p.A. ("Maco"), in Florence, Italy, acquired on January 3, 2005. Maco was the Italian licensee of GUESS? jeanswear for men and women in Europe. As part of the audit, the Customs
Authorities considered whether the Italian subsidiary should have included the royalty expense payable to Guess?, Inc., the parent company, as part of the cost of the product subject to customs
duties. The Customs Authorities have subsequently reviewed specific transactions which occurred in 2003, 2004 and 2005 and provided a preliminary assessment that the royalty expenses are subject to
customs duties and related penalties. The Company is disputing the Customs Authorities assessment and intends to vigorously defend its position. In addition, under the terms of the Maco purchase
agreement, the seller is required to indemnify the Company for 90% of any loss with respect to Maco for periods prior to the acquisition. The Custom Authorities have filed several claims

23

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which
are heard independently within various sections of the Florence Provincial Tax Commission. Each claim represents a portion of the period under review. The first hearings with the Florence
Provincial Tax Commission commenced on October 29, 2007. Judgments for two claims have been received that were favorable to the Company on certain aspects of the claims and unfavorable on other
aspects of the claims. The Company will appeal the unfavorable aspects of the judgments. The Company has concluded that the amount of any possible loss would not be material to the Company's
consolidated earnings before income taxes and that the likelihood of incurring a loss is less than probable. Accordingly, no liability related to this matter has been accrued.

The
Company is also involved in various other employment-related claims and other matters incidental to the Company's business, the resolution of which is not expected to have a material
adverse effect on the Company's consolidated results of operations or financial position. With the exception of the class action accrual at February 3, 2007 discussed above, no material amounts
were accrued as of February 2, 2008 and February 3, 2007, related to any of the Company's other legal proceedings.

ITEM 4.    Submission of Matters to a Vote of Security Holders.

No matters were submitted to a vote of our shareholders during the fourth quarter of fiscal year 2008.

24

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PART II

ITEM 5.    Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Since August 8, 1996, the Company's common stock has been listed on the New York Stock Exchange under the symbol 'GES.' The following table sets forth, for
the periods indicated, the high and low sales prices of the Company's Common Stock, and the dividends paid with respect thereto, in each case, as adjusted to reflect the
two-for-one stock split announced February 14, 2007 and effective March 13, 2007:

Market PriceDividends
PaidHigh

LowFiscal year ended February 3, 2007First Quarter Ended April 29, 2006

$
23.10

$
17.18


Second Quarter Ended July 29, 2006


23.35


19.73


Third Quarter Ended October 28, 2006


28.24


20.40


Fourth Quarter Ended February 3, 2007


37.43


28.08


Fiscal year ended February 2, 2008First Quarter Ended May 5, 2007

$
42.99

$
37.54

$
0.06Second Quarter Ended August 4, 2007


52.61


38.43


0.06Third Quarter Ended November 1, 2007


54.98


44.27


0.08Fourth Quarter Ended February 2, 2008


49.52


32.59


0.08


On
March 24, 2008, the closing sales price per share of the Company's common stock, as reported on the New York Stock Exchange Composite Tape, was $39.92. On March 24, 2008
there were 170 holders of record of the Company's common stock.

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 requirements, cash paid for income taxes, earnings, share repurchases and liquidity. Prior to the initiation of a quarterly dividend on
February 12, 2007, we had not declared any dividends on our common stock since our initial public offering in 1996. The agreement governing our Credit Facility limits our ability to pay
dividends unless immediately after giving effect thereto the aggregate amount of unrestricted cash and cash equivalents held by Guess?, Inc. and its Canadian subsidiary is at least
$50 million. At February 2, 2008, Guess?, Inc. and its Canadian subsidiary had approximately $230 million in unrestricted cash and cash equivalents.

25

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Performance Graph

The Stock Price Performance Graph below compares the cumulative shareholder return of the Company with that of the S&P 500 Index (a broad equity market
index) and the S&P 1500 Apparel Retail Index (a published industry index) over the five fiscal year period beginning December 31, 2002. The graph also includes information with respect
to February 3, 2007, the last day of the fiscal month transition period which resulted from the change in our fiscal year end from December 31 to the Saturday nearest January 31
of each year. The return on investment is calculated based on an investment of $100 on December 31, 2002, with dividends, if any, reinvested.

GRAPHIC

|                              |  | 12/31/02 |  | 12/31/03 |  | 12/31/04 |  | 12/31/05 |  | 12/31/06 |  | 02/03/07 |  | 02/02/08
|----------------------------- |  | -------- |  | -------- |  | -------- |  | -------- |  | -------- |  | -------- |  | --------
|Guess?, Inc.                  |  | 100.00   |  | 288.07   |  | 299.52   |  | 849.64   |  | 1513.84  |  | 1731.50  |  | 1796.62 
|S&P 1500 Apparel Retail Index |  | 100.00   |  | 137.06   |  | 161.27   |  | 175.93   |  | 192.78   |  | 199.90   |  | 162.70  
|S&P 500 Index                 |  | 100.00   |  | 128.68   |  | 142.69   |  | 149.70   |  | 173.34   |  | 177.20   |  | 174.01  

Stock Split

On February 12, 2007, our Board of Directors approved a two-for-one stock split of the Company's common stock to be effected in the
form of a 100% stock dividend. Each shareholder of record at the close of business on February 26, 2007 was issued one additional share of common stock for every share of common stock owned as
of that time. The additional shares were distributed on or about March 12, 2007, and the Company's common stock began trading on the New York Stock Exchange on a post-split basis on
March 13, 2007. All share and per share amounts in this Annual Report on Form 10-K have been adjusted to reflect the 2007 stock split.

Share Repurchase Authorization

On March 19, 2008, the Company announced that our Board of Directors has authorized a program to repurchase, from time-to-time and
as market and business conditions warrant, up to $200 million of the Company's common stock. Repurchases 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 and the program may be discontinued at any
time, without prior notice.

26

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ITEM 6.    Selected Financial Data.

The selected financial data set forth below have been derived from the audited consolidated financial statements of the Company and the related notes thereto
(except for the unaudited selected statement
of income financial data presented for the fiscal year ended February 3, 2007). All share and per share amounts included in the following consolidated financial data have been adjusted to
reflect the two-for-one stock split which became effective on March 13, 2007. The following selected financial data should be read in conjunction with the Company's
Consolidated Financial Statements and the related Notes contained herein and with "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" for information
regarding accounting changes, acquisitions and other items affecting comparability.

|                                                             |                              | Year Ended(1)
|------------------------------------------------------------ | ---------------------------- | -------------
|
|
|
|Statement of income data:                                    |                              |              
|                                                             | Net revenue                  |              
|                                                             | Earnings from operations     |              
|                                                             | Income taxes                 |              
|                                                             | Net earnings                 |              
|Earnings per share:                                          |                              |              
|                                                             | Basic                        |              
|                                                             | Diluted                      |              
|                                                             | Dividends declared per share |              
|Weighted average shares outstandingbasic                    |                              |              
|Weighted average shares outstandingdiluted                  |                              |              
|                                                             |                              |              
|
|
|Balance sheet data:                                          |                              |              
|Working capital                                              |                              | $            
|Total assets                                                 |                              |              
|Borrowings and capital lease, excluding current installments |                              |              
|Stockholders' equity                                         |                              |              

---

27

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ITEM 7.    Management's Discussion and Analysis of Financial Condition and Results of Operations.

Summary

The business segments of the Company are retail, wholesale, European and licensing operations. Information relating to these segments is summarized in
Note 15 to the Consolidated Financial Statements. The Company believes this segment reporting reflects how its four business segments are managed and each segment's performance is evaluated.
The retail segment includes the Company's retail operations in North America. The wholesale segment includes the wholesale operations in North America and our Asian operations. The European segment
includes both wholesale and retail operations in Europe. The licensing segment includes the worldwide licensing operations of the Company. The business segments operating results exclude corporate
overhead costs, which consist of shared costs of the organization. These costs are presented separately and generally include, among other things, the following unallocated corporate costs:
information technology, human resources, accounting and finance, executive compensation, facilities and legal.

We
derive our net revenue from the sale of GUESS? men's and women's apparel, MARCIANO women's apparel, G by GUESS men's and women's apparel, GUESS by MARCIANO men's and women's apparel,
and our licensees' products through our worldwide network of retail stores, wholesale customers and distributors, as well as our on-line stores. We also derive royalty revenues from
worldwide licensing activities.

Unless
the context indicates otherwise, when we refer to "we," "us" or the "Company" in this Form 10-K, we are referring to Guess?, Inc. and its subsidiaries on
a consolidated basis.

On
January 18, 2007, the Board of Directors of the Company approved a change in the Company's fiscal year end from December 31 to the Saturday nearest January 31 of
each year. The change, which
aligned the Company's reporting cycle with the National Retail Federation ("NRF") fiscal calendar and is expected to provide for more consistent year-to-year comparisons, is
effective for the Company's 2008 fiscal year. The Company's 2008 fiscal year began on February 4, 2007 and ended on February 2, 2008, resulting in a one-month transition
period that began January 1, 2007 and ended February 3, 2007. The audited results for the one month ended February 3, 2007 are included in ITEM 15. Exhibits and Financial
Statements.

Unless
specifically indicated otherwise, any reference to "fiscal 2008" relates to the twelve-months ended February 2, 2008 and any reference to "fiscal 2007" relates to the
unaudited twelve months ended February 3, 2007.

For
purposes of this MD&A, the Company has presented the financial performance comparison of the 2008 fiscal year versus the 2007 fiscal year. The Company has also presented the
financial performance between the one-month audited transition period ended February 3, 2007 and the comparable one-month unaudited period ended January 28, 2006.
Finally, the Company has presented the financial performance between the twelve-months ended December 31, 2006 and the twelve-months ended December 31, 2005.

Fiscal
years 2008 and 2007 include 52 weeks and 53 weeks, respectively.

The
Company reports NRF calendar comparable store sales on a quarterly basis for its full-price retail and factory outlet stores in the U.S. and Canada. A store is considered
comparable after it 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 is
removed from the comparable store base until it has been opened at its new size, in its new location or under its new concept for 13 full months.

28

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Executive Summary

The Company

The Company's operations generated net earnings of $186.5 million, or diluted earnings of $1.99 per share, for the year ended February 2, 2008,
compared to net earnings of $131.2 million, or diluted earnings of $1.42 per share, for the year ended February 3, 2007.

Total
net revenues increased 39.7% to $1,749.9 million for the year ended February 2, 2008, from $1,252.7 million for the year ended February 3, 2007. All of
our business segments contributed to this growth. The European segment was the largest contributor to the growth in revenues representing roughly half of the consolidated revenue growth. The revenue
growth also reflected higher comparable store sales and retail store expansion in the retail segment. In addition, our wholesale segment increased revenues, driven by our new South Korea operation and
stronger product performance in our North American wholesale business, while our licensing business increased revenues across all key accessories categories and footwear.

Gross
margin increased 120 basis points to 45.3% for the year ended February 2, 2008, compared to the same prior year period. The improvement in the overall gross margin was
attributable to a higher mix of European net revenues, which generated a relatively higher gross margin than the other businesses, higher mark-ups in our wholesale segment, higher product
margins in our retail segment and the recognition of gift card breakage. This improvement was partially offset by the lower product margin in Europe.

Selling,
general and administrative ("SG&A") expenses increased 39.4% to $483.6 million for the year ended February 2, 2008 compared to $347.0 million for the year
ended February 3, 2007. This increase in SG&A expenses was driven by investments in our new businesses, higher variable costs to support the higher sales in our existing businesses, higher
performance-based expenses and investments in infrastructure in Europe. As a percentage of revenues, SG&A expense decreased 10 basis points to 27.6% for the year ended February 2, 2008,
compared to the prior-year.

Overall,
the higher gross margin and the decrease in SG&A spending as a percentage of net revenues, resulted in an increase in the Company's operating margin to 17.7% for the year ended
February 2, 2008, up 130 basis points from 16.4% for the year ended February 3, 2007.

Net
interest income increased $4.1 million for the year ended February 2, 2008 primarily due to the early redemption of the Company's 6.75% secured notes of
$32.8 million at the end of 2006 and higher average invested cash balances. The Secured Notes were redeemed in December 2006 resulting in $1.9 million related to the
write-off of debt issuance costs and payment of redemption premium, which are included in interest expense for the year ended February 3, 2007.

Other
expense was $1.8 million for the year ended February 2, 2008, versus other income of $4.7 million for the year ended February 3, 2007. Other expense in
the year ended February 2, 2008 was primarily due to net losses related to changes in foreign exchange rates on forward contracts and other foreign currency transactions. Other income in the
prior year period comprised gains on sale of land and other long-term investments.

Our
effective income tax rate increased 260 basis points to 39.8% for the year ended February 2, 2008 compared to 37.2% in the prior year primarily due to a higher mix of profits
in higher tax jurisdictions and a change to the Italian tax rate effective in fiscal 2009 that unfavorably impacted our net deferred tax asset position at the end of fiscal 2008.

The
Company had $275.6 million in cash and cash equivalents as of February 2, 2008, compared to $207.6 million as of February 3, 2007. Total debt, including
capital lease obligations, as of February 2, 2008, was $54.0 million, up $15.9 million from $38.1 million as of February 3, 2007. The increase in debt was driven
primarily by the increase in short-term borrowings from GUESS? Europe. Accounts receivable

29

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increased
by $111.7 million, or 78.3%, to $254.4 million at February 2, 2008, compared to $142.7 million at February 3, 2007. The increase in accounts receivable
primarily supported the revenue growth in Europe, South Korea and Greater China. Accounts receivable also increased due to the acquisition of BARN in January 2008. Currency translation fluctuations
accounted for $24.3 million of the increase in accounts receivable. Inventory increased by $58.5 million, or 33.7%, to $232.2 million as of February 2, 2008, compared to
$173.7 million as of February 3, 2007. Approximately $31.0 million of this increase was attributable to new businesses including Focus, BARN, our new South Korea operation, our
Mexico and Greater China operations and our new G by GUESS store concept. The remaining inventory increase was related to anticipated sales growth in our existing European and North American
operations. Currency fluctuations resulted in a higher translation impact on the current year's ending inventory of approximately $15.7 million compared to the year ago amount.

Retail

Our retail segment, comprising North American full-priced retail and factory outlet stores and e-commerce, generated net sales of
$862.4 million during the year ended February 2, 2008, an increase of 16.4% from $741.1 million in the prior year period. This growth was driven by a comparable store sales
increase of 14.6% and a larger store base, which represented a net 5.3% increase in average square footage compared to the year ended February 3, 2007. All of our product categories contributed
to this growth. Retail earnings from operations increased by $23.0 million to $128.5 million for the year ended February 2, 2008, compared to $105.5 million for the year
ended February 3, 2007. This increase was primarily driven by higher sales volume, higher product margin and occupancy leverage, partially offset by increased investments in infrastructure to
support our new G by GUESS brand concept and higher advertising expense. Operating margin increased 70 basis points to 14.9% in the year ended February 2, 2008, compared to 14.2% in the year
ended February 3, 2007.

In
the year ended February 2, 2008, we opened 49 new stores and closed ten underperforming stores in the U.S. and Canada. At February 2, 2008, we operated 373 stores in the
U.S. and Canada, comprised of 187 full-priced retail stores, 97 factory outlet stores, 38 Marciano stores, 17 GUESS? Accessories stores and 34 G by GUESS stores. This compares to
334 stores as of February 3, 2007. We have continued to develop our new concept stores, which includes our Marciano branded stores and our G by GUESS stores, and we believe that over time these
concepts can grow to become significant chains in North America. The MARCIANO brand, a contemporary line that commands higher price points, is also available in approximately a quarter of our
full-price GUESS? retail stores in the U.S. and Canada. G by GUESS, which launched in early 2007, is a new brand and store concept that offers a full line of apparel for women and men and
a full line of accessories and footwear to support the lifestyle of this customer and is aimed to capture a market demographic that is younger and shops price points between our factory and
full-priced retail stores.

Wholesale

Wholesale segment revenues increased by $105.8 million, or 69.3%, to $258.4 million for the year ended February 2, 2008, from
$152.6 million for the year ended February 3, 2007. The increase in net revenues was primarily due to international expansion, including South Korea (which we began to operate directly
in January 2007), coupled with growth in the North American wholesale business. Earnings from operations for the wholesale segment improved by $24.7 million, or 98.3%, to $49.9 million
for the year ended February 2, 2008, from $25.2 million for the prior year period. This improvement was driven by increased sales in Asia and North America and higher gross margin as a
result of higher mark-ups in the North American wholesale business, partially offset by increased spending on infrastructure to support the growth of the new businesses in Asia. Operating
margin increased 280 basis points to 19.3% in the year ended February 2, 2008, compared to 16.5% for the year ended February 3, 2007.

30

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Europe

In Europe, revenues increased by $246.6 million, or 84.5%, to $538.4 million for the year ended February 2, 2008, compared to
$291.8 million for the year ended February 3, 2007. The majority of the revenue growth was generated by the European wholesale business, driven by growth in both our existing accessories
and apparel businesses and our acquisition of a 75% equity interest in Focus on December 31, 2006, the Company's licensee for GUESS by MARCIANO contemporary apparel for women and men in Europe,
the Middle East and Asia. In addition, at February 2, 2008, we directly operated 40 stores in Europe, which includes the four stores acquired as part of the Focus acquisition, compared to 24
stores in the prior year. Earnings from operations from our European segment increased by $47.6 million, or 65.1%, to $120.8 million for the year ended February 2, 2008, from
$73.2 million for the year ended February 3, 2007. Operating margin decreased 270 basis points to 22.4%
in the year ended February 2, 2008, compared to 25.1% for the year ended February 3, 2007 due to lower product margin and increased spending to support the growth of our infrastructure
in the European region, including our investment in the new European headquarters based in Lugano, Switzerland.

Licensing

Our licensing business revenues increased by $23.6 million, or 35.1%, to $90.7 million for the year ended February 2, 2008, from
$67.1 million for the year ended February 3, 2007. This increase was driven by growth in sales of several product categories, especially handbags, footwear and watches, and the increased
recognition of licensing revenues as a result of the amortization of fixed cash rights payments received from licensees in connection with previously renegotiated contracts based on the periods these
contracts represent. The increase in net royalties was partially offset by the loss of royalty revenue from our GUESS by MARCIANO and South Korean licensees, both of which we now operate directly and
are, therefore, no longer a part of the licensing segment. Licensing segment earnings from operations increased $19.3 million, or 32.9%, to $77.9 million for the year ended
February 2, 2008, from $58.7 million for the year ended February 3, 2007. Operating margin decreased 150 basis points to 85.9% for the year ended February 2, 2008 compared
to 87.4% for the year ended February 3, 2007 due to higher spending in advertising and higher performance based compensation expense for the year compared to the prior year period.

Outside
of the U.S. and Canada, in the year ended February 2, 2008, together with our partners we opened 184 new stores, including 83 in Europe, 93 in Asia and eight stores in
Mexico, Central and South America. We ended the year with 579 stores outside of the U.S. and Canada, of which 421 were GUESS? stores, 36 were GUESS by MARCIANO stores, and 122 were GUESS? Accessories
stores. Of the 579 stores, 60 were operated by the Company and 519 were operated by licensees or distributors. This store count does not include 82 jean and accessory concessions located in South
Korea and China because of their smaller store size in relation to our standard international store size.

Corporate Overhead

Corporate overhead increased by $11.0 million, or 19.3%, to $68.0 million in the year ended February 2, 2008, from $57.0 million for
the year ended February 3, 2007. This increase was primarily due to increased performance-based compensation costs, including share based payment expense.

Application of Critical Accounting Policies

The Consolidated Financial Statements are prepared in conformity with accounting principles generally accepted in the U.S., which require management to make
estimates and assumptions that affect the reported amounts of the assets and liabilities and disclosures of contingent assets and liabilities as of the date of the financial statements and the
reported amounts of revenue and expenses during the reporting period. Management bases its estimates and judgments on its historical experience and other

31

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relevant
factors, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Management evaluates
its estimates and judgments on an ongoing basis including those related to the valuation of inventories, accounts receivable allowances, sales return allowances, the useful life of assets for
depreciation, restructuring expense and accruals, evaluation of impairment, recoverability of deferred taxes, workers compensation accruals, litigation accruals, pension obligations and stock-based
compensation.

The
Company believes that the following significant accounting policies involve a higher degree of judgment and complexity. In addition to the accounting policies mentioned below, see
Note 1 to the Consolidated Financial Statements for other significant accounting policies.

Accounts receivable reserves

In the normal course of business, the Company grants credit directly to certain wholesale customers after a credit analysis based on financial and other criteria
is performed. Accounts receivable are recorded net of an allowance for doubtful accounts. The Company maintains allowances for doubtful accounts for estimated losses that result from the inability of
its wholesale customers to make their required payments. The Company bases its allowances through analysis of the aging of accounts receivable at the date of the financial statements, assessments of
historical collection trends and an evaluation of the impact of current economic conditions.

Costs
associated with customer markdowns are recorded as a reduction to net revenues, and are included in the allowance for accounts receivable. Historically, these markdown allowances
resulted from seasonal negotiations with the Company's wholesale customers, as well as historical trends and the evaluation of the impact of the economic conditions. During fiscal 2008, the Company
renegotiated its arrangements with its major customers in the U.S. to fix the percentage of sales that will be expensed as markdown allowances. The negotiation of a fixed rate allows the Company to
process credit memos against the outstanding balance immediately which has resulted in a reduction of our outstanding markdown allowance accrual relative to the prior year.

Sales returns reserves

The Company accrues for estimated sales returns in the period in which the related revenue is recognized. To recognize the financial impact of sales returns, the
Company estimates the amount of goods that will be returned based on historical experience and reduces sales and cost of sales accordingly based on historical return experience. The Company's policy
allows retail customers a 30 day period to return merchandise following the date of sale. Substantially all of these returns are considered to be resalable at a price that exceeds the cost of
the merchandise.

Inventory reserves

Inventories are valued at the lower of cost (primarily weighted average method) or market. The Company continually evaluates its inventories by assessing slow
moving product as well as prior seasons' inventory. Market value of aged inventory is estimated based on historical sales trends for this category of inventory of the Company's individual product
lines, the impact of market trends, an evaluation of economic conditions and the value of current orders relating to the future sales of this type of inventory. The Company closely monitors its
off-price sales to ensure the actual results closely match initial estimates. Estimates are regularly updated based upon this continuing review.

Valuation of goodwill, intangible and other long-lived assets

The Company assesses the impairment of its long-lived assets (i.e., goodwill, intangible assets and property and equipment), which requires the
Company to make assumptions and judgments regarding the carrying value of these assets on an annual basis, or more frequently if events or changes in circumstances

32

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indicate
that the assets might be impaired. 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 income 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 assets (other than goodwill) are assessed to be recoverable, they are depreciated or amortized over the periods benefited. If the assets are considered to be impaired, the impairment
recognized is the amount by which the carrying value of the assets exceeds the fair value of those assets. Fair value is determined based upon the discounted cash flows derived from the underlying
asset. See Note 1 of the Consolidated Financial Statements for further discussion.

Pension benefit plan actuarial assumptions

The Company's pension obligations and related costs are calculated using actuarial concepts, within the framework of the amendment of Statement of Financial
Accounting Standards No. 87 "Employer's Accounting for Pensions." The discount rate is an important element of expense and/or liability measurement. We evaluate this critical assumption
annually which enables us to state expected future payments for benefits as a present value on the measurement date. Refer to Note 10 for Supplemental Executive Retirement Plan related
information.

Litigation reserves

Estimated amounts for claims that are probable and can be reasonably estimated are recorded as liabilities in our consolidated balance sheet. The likelihood of a
material change in these estimated reserves would be dependent on new claims as they may arise and the favorable or unfavorable outcome of the particular litigation. Both the amount and range of loss
on any remaining pending litigation is uncertain. As additional information becomes available, the Company will assess the potential liability related to pending litigation and will revise estimates
as appropriate. Such revisions in estimates of the potential liability could materially impact the results of operations and financial position.

Stock-based compensation

Effective January 1, 2006, the Company adopted the fair value recognition provisions of SFAS 123R using the modified prospective transition method.
Under this method, compensation cost recognized for the year ended December 31, 2006 included: (a) compensation expense for all stock-based payments granted prior to, but not yet vested
as of, December 31, 2005, based on the grant date fair value estimated in accordance with the original provisions of SFAS 123, "Accounting for Stock-Based Compensation," ("FAS123") and
(b) compensation expense for all stock-based payments granted on or after January 1, 2006, based on the grant date fair value estimated in accordance with the provisions of
SFAS 123R. The fair value of each stock option is estimated on the grant date using the Black-Scholes option-pricing model with the following weighted-average assumptions used for new grants.
The risk-free interest rate is based on the U.S. Treasury yield curve in effect for the expected term of the option at the time of grant. The expected volatility is determined based on an
average of both historical volatility and implied volatility. Implied volatility is derived from exchange traded options on the Company's common stock. The expected life used prior to November 2007
was based on the "simplified" method described in the SEC Staff Accounting Bulletin No. 107. For options granted beginning November 2007, the expected term is determined based on historical
trends. The dividend yield for the one month period ended February 3, 2007 and prior years was zero. In the first quarter of fiscal 2008, the Board of Directors authorized and approved the
initiation of a quarterly dividend. The expected forfeiture rate is determined based on historical data. Compensation expense for new stock
options and nonvested stock awards is recognized on a straight-line basis over the vesting period. In accordance with the modified prospective transition method, results for prior periods
have not been restated.

33

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Taxes

The Company adopted FASB Interpretation 48 ("FIN 48"), Accounting for Uncertainty in Income Taxes, in January 2007. FIN 48 clarifies the accounting
for uncertainty in income taxes recognized in an enterprise's financial statements in accordance with SFAS 109 and prescribes a recognition threshold and measurement attribute for the financial
statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 also provides guidance on derecognition, classification, interest and penalties,
accounting in interim periods, disclosure, and transition. The adoption of FIN 48 did not have a material impact on the Company's financial position and results of operations. The Company's
continuing practice is to recognize interest and penalties related to income tax matters in income tax expense. See Note 9 to the Condensed Consolidated Financial Statements for further
information regarding the adoption of FIN 48.

Hedge Accounting

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 and swaps to hedge the risk of foreign currency rate fluctuations. The Company has elected to apply the hedge accounting rules as required by SFAS No. 133
("SFAS 133"), "Accounting for Derivative Instruments and Hedging Activities," for certain of these hedges. The Company's objective is to hedge the variability in forecasted cash flow due to the
foreign currency risk (USD/Canadian exchange rate) associated with certain anticipated inventory purchases on a first dollar basis for specific months. Changes in the fair value of forward contracts
designated as cash-flow hedges are recorded as a component of accumulated other comprehensive earnings within stockholders' equity, and are recognized in cost of goods sold in the period
which approximates the time the hedged merchandise inventory is sold.

The
Company has foreign currency contracts that are not designated as hedges for accounting purposes. Changes in fair value of foreign currency contracts not qualifying as cash flow
hedges are reported in net earnings as part of other income and expenses.

Gift Card Breakage

The Company completed its analysis of unredeemed electronic gift card liabilities in the quarter ended August 4, 2007 for the U.S. retail business. Gift
card breakage is income recognized due to the non-redemption of a portion of gift cards sold by the Company for which a liability was recorded in prior periods. Beginning with the quarter
ended August 4, 2007, these amounts are accounted for under the redemption recognition method and are classified as additional net revenues as the gift cards are redeemed. The Company
determined a gift card breakage rate of approximately 6.5% in the quarter ended August 4, 2007 based upon historical redemption patterns, which represented the cumulative estimated amount of
gift card breakage from the inception of the electronic gift card program in late 2002. Based upon historical redemption trends, the Company recognizes estimated gift card breakage as a component of
net revenue in proportion to actual gift card redemptions, over the period that remaining gift card values are redeemed. As of February 2, 2008, the Company has recognized $3.5 million
gift card breakage to revenue, of which $3.1 million, or $0.02 per diluted share, was a one-time cumulative adjustment recognized in the quarter ended August 4, 2007. Any
future revisions to the estimated breakage rate may result in changes in the amount of breakage income recognized in future periods.

34

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RESULTS OF OPERATIONS

The following table sets forth actual operating results for the 2008, 2007, 2006 and 2005 fiscal years and one-month periods ended February 3,
2007 and January 28, 2006 as a percentage of net revenue:

Year Ended

One Month Ended

Year EndedFeb. 2,
2008

Feb. 3,
2007

Feb. 3,
2007

Jan. 28,
2006

Dec. 31,
2006

Dec. 31,
2005Product sales

94.8
%
94.6
%
95.0
%
92.9
%
94.5
%
94.8
%Net royalties

5.2

5.4

5.0

7.1

5.5

5.2Total net revenue

100.0

100.0

100.0

100.0

100.0

100.0Cost of product sales

54.7

55.9

59.0

67.0

56.2

59.3Gross profit

45.3

44.1

41.0

33.0

43.8

40.7Selling, general and administrative expenses

27.6

27.7

31.8

33.0

27.5

29.8Earnings from operations

17.7

16.4

9.2



16.3

10.9Interest expense

0.2

0.6

0.5

0.6

0.6

0.7Interest income

(0.4
)
(0.5
)
(0.5
)
(0.6
)
(0.4
)
(0.2
)Other, net

0.1

(0.4
)
(0.2
)


(0.4
)
Earnings before income taxes

17.8

16.7

9.4



16.5

10.4Income taxes

7.1

6.2

3.6



6.1

4.1Minority interest





(0.1
)




Net earnings

10.7
%
10.5
%
5.9
%

%
10.4
%
6.3
%


Year Ended February 2, 2008 Compared to Year Ended February 3, 2007.

NET REVENUE.Net revenue for the year ended February 2, 2008 increased by $497.2 million, or 39.7%, to
$1,749.9 million, from $1,252.7 million for the year ended February 3, 2007. All segments contributed to this revenue growth with double-digit percentage increases. The largest
contribution to this revenue growth was generated by our European segment.

Net
revenue from retail operations increased by $121.3 million, or 16.4%, to $862.4 million for the year ended February 2, 2008, from $741.1 million for the
year ended February 3, 2007. The increase was driven by a comparable store sales growth of 14.6% and an average of 26 net additional stores during the year ended February 2, 2008
resulting in a 5.3% increase in average square footage compared to the
prior year period. Currency translation fluctuations accounted for $14.3 million of the increase in net revenue relating to our Canadian retail stores.

Net
revenue from wholesale operations increased by $105.8 million, or 69.3%, to $258.4 million for the year ended February 2, 2008, from $152.6 million for
the year ended February 3, 2007. Approximately 80.0% of this revenue growth was generated outside of the U.S., primarily in Asia. Our North American wholesale net revenue growth was primarily
attributable to strong product performance. Our products were sold in the U.S. in approximately 1,006 major doors as of February 2, 2008, compared to 961 major doors at the end of the prior
year period. Currency translation fluctuations accounted for $2.8 million of the increase in net revenue relating to our Canadian wholesale business.

Net
revenue from European operations increased by $246.6 million, or 84.5%, to $538.4 million for the year ended February 2, 2008, from $291.8 million for the
year ended February 3, 2007. The majority of the revenue growth was generated by the European wholesale business, driven by our continued growth in both our existing accessories and apparel
businesses and our acquisition of a 75% equity interest in Focus on December 31, 2006. The growth is also attributable to same store sales growth in our existing retail

35

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stores
and the addition of new retail stores. Currency translation fluctuations accounted for $48.1 million of the increase in net revenue relating to our European operations.

Net
royalty revenue from licensing operations increased by $23.6 million, or 35.1%, to $90.7 million for the year ended February 2, 2008, from $67.1 million
for the year ended February 3, 2007. The increase was the result of the strength of the accessories business, particularly handbags, footwear and watches, and the increased recognition of
licensing revenues as a result of the amortization of fixed cash rights payments received from licensees in connection with previously renegotiated contracts based on the periods these contracts
represent. Licensing revenues in the current year did not include any royalty revenue from our GUESS by MARCIANO and South Korean licensees, both of which we now operate directly, as the associated
sales are now reported as revenue in the European and wholesale segments, respectively.

GROSS PROFIT.Gross profit increased by $240.3 million, or 43.5%, to $792.8 million for the year ended February 2,
2008, from $552.5 million in the prior period. The increase in gross profit primarily resulted from sales growth in all segments.



Gross
margin (gross profit as a percentage of total net revenues) increased 120 basis points to 45.3% for the year ended February 2, 2008, from 44.1% for the year ended
February 3, 2007. The improvement in the overall gross margin was attributable to a higher mix of European net revenues, which generated a relatively higher gross margin than the other
businesses, higher mark-ups in our wholesale segment, and higher product margins in our retail segment due to higher mark-ups and gift card breakage income. This improvement
was partially offset by the lower product margin in Europe compared to the prior year.

The
Company's gross margin may not be comparable to other entities since some entities include all of the costs related to their distribution in cost of product sales and others, like
the Company, exclude the wholesale related distribution costs from gross margin, including them instead in selling, general and administrative expenses.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES.SG&A expenses increased by $136.6 million, or 39.4%, to $483.6 million for the
year ended February 2, 2008, from $347.0 million for the year ended February 3, 2007. Approximately $68.0 million of the increase was attributable to incremental spending
required to support new businesses including Focus, our new European headquarters in Lugano, Switzerland, the new G by GUESS brand initiative, the South Korea operation, expansion in Greater China and
Mexico, and BARN in Europe. In addition, the increase was also attributable to growth in store selling, merchandising and distribution costs of $41.8 million, incremental compensation expenses
(primarily performance-based) of $12.5 million, and additional advertising and marketing spending in our

36

---



existing
businesses of $8.3 million. As a percentage of net revenue, SG&A expenses improved to 27.6% for the year ended February 2, 2008, compared to 27.7% for the prior year period.

EARNINGS FROM OPERATIONS.Earnings from operations increased by $103.6 million, or 50.4%, to $309.1 million for the year
ended February 2, 2008, compared with earnings from operations of $205.5 million for the year ended February 3, 2007.



The
higher gross margin and lower SG&A spending as a percentage of net revenues resulted in an increase in operating margin of 130 basis points to 17.7% for the year ended
February 2, 2008 from 16.4% for the prior year period.

INTEREST EXPENSE AND INTEREST INCOME.Interest expense decreased to $3.4 million for the year ended February 2, 2008,
compared to $7.7 million for the year ended February 3, 2007, primarily due to the early redemption of the Company's 6.75% secured notes of $32.8 million at the end of 2006. The
Secured Notes were redeemed in December 2006 resulting in a $1.4 million write-off of debt issuance costs and a $0.5 million redemption premium, which are included in
interest expense for the year ended February 3, 2007. On a comparable basis, the average debt balance for the year ended February 2, 2008

37

---



was
$48.6 million versus an average debt balance of $79.4 million, for the year ended February 3, 2007. Interest income increased to $7.5 million for the year ended
February 2, 2008, compared to $6.2 million for the year ended February 3, 2007, due to higher average invested cash balances.

OTHER INCOME, NET.Other expense was $1.8 million for the year ended February 2, 2008, versus income of $4.7 million
for the year ended February 3, 2007. Other expense in the year ended February 2, 2008 was primarily due to net losses related to changes in foreign exchange rates on forward contracts
and other foreign currency transactions. Other income in the prior year period comprised gains on sale of land and other long-term investments.

INCOME TAXES.Income tax expense for the year ended February 2, 2008 was $124.1 million, or a 39.8% effective tax rate,
compared to income tax expense of $77.6 million, or a 37.2% effective tax rate, for the year ended February 3, 2007. This year's higher tax rate was due to a higher mix of profits in
higher tax jurisdictions, the utilization of capital loss carryforwards in the prior year, favorable tax audit settlements last year and a recent decline in the Italian statutory tax rate, effective
in fiscal 2009, that resulted in a devaluation of deferred tax assets in the current year.

MINORITY INTEREST.The minority interest expense of $0.9 million, net of taxes, primarily represents the portion of earnings of
Focus for the year ended February 2, 2008 allocated to the minority interest shareholders. The Company acquired a 75% interest in Focus on December 31, 2006.

NET EARNINGS.Net earnings increased by $55.3 million, or 42.2%, to $186.5 million for the year ended February 2,
2008, from $131.2 million for the year ended February 3, 2007. Diluted earnings per share increased to $1.99 per share for the year ended February 2, 2008 compared to $1.42 per
share for the year ended February 3, 2007.

One-Month Audited Transition Period Ended February 3, 2007 ("January 2007") Compared to the One-Month Unaudited Period Ended January 28,
2006 ("January 2006").

The Company reported net earnings of $8.0 million, or diluted earnings of $0.09 per share, for January 2007 (which included 34 days), compared to
$0.00 per share for January 2006 (which included 28 days). Net revenue for January 2007 increased by $67.5 million, or 98.6%, to $136.0 million, from $68.5 million for
January 2006. Gross profit increased by $33.1 million, or 146.6%, to $55.7 million for January 2007, from $22.6 million for January 2006. SG&A expenses increased by
$20.6 million, or 91.2%, to $43.3 million for January 2007, from $22.6 million for January 2006. Earnings from operations increased by $12.5 million to $12.5 million
for January 2007, compared to the approximately break-even results from operations for January 2006. These results reflect the impact of the significant growth in our existing European
operations, the comparable store sales growth of 12.7% in our retail store operations in North America for January 2007 compared to the prior-year period, the greater number of days in the
one month ended January 2007 compared to the prior-year period and the acquisition of a 75% majority interest in Focus, our European GUESS by MARCIANO licensee, in late 2006.

Year Ended December 31, 2006 Compared to Year Ended December 31, 2005.

NET REVENUE.Net revenue increased $249.1 million, or 26.6%, to $1,185.2 million for the year ended December 31, 2006,
from $936.1 million for the year ended December 31, 2005. All segments contributed to this growth, with the largest contributions from our retail and European segments.

Net
revenue from retail operations increased $108.4 million, or 17.7%, to $721.3 million for the year ended December 31, 2006, from $612.9 million for the
year ended December 31, 2005. The increase was driven by sales for stores that were open for more than one year which grew 12.8% and accounted for $67.9 million of the increase and a
$40.5 million increase due to an average of 24 net new stores during 2006 with a 5.3% increase in average square footage compared to 2005. While the majority of this $67.9 million
increase was generated in our U.S. stores, the most significant store sales rate increases were

38

---



in
our Canadian retail stores. Currency fluctuations accounted for $7.5 million of the increase in net revenue relating to our Canadian retail stores.

Net
revenue from wholesale operations increased $25.2 million, or 20.8%, to $146.3 million for the year ended December 31, 2006, from $121.1 million for the
year ended December 31, 2005. U.S. wholesale net revenue increased $16.4 million, or 19.4%, to $101.1 million in 2006 from $84.7 million in 2005. The increase in U.S.
wholesale revenue was primarily attributable to strong product performance which drove higher sales volume and lower markdown allowances as a percentage of revenue. Our products were sold domestically
in approximately 970 and 965 major doors at the end of 2006 and 2005, respectively. Approximately 44.7% of this revenue growth was generated outside of the U.S., primarily in Asia. Currency
fluctuations accounted for $1.5 million of the increase in net revenue relating to our Canadian wholesale business.

Net
revenue from European operations increased $98.6 million, or 64.1%, to $252.4 million for the year ended December 31, 2006, from $153.8 million for the
year ended December 31, 2005. The increase was due to growth in our accessories and footwear businesses, higher sales in our apparel wholesale business, and additional sales in our owned retail
stores. Currency fluctuations accounted for $1.1 million of the increase in net revenue relating to our European operations.

Net
royalties from licensing operations increased by $16.9 million, or 35.0%, to $65.2 million for the year ended December 31, 2006, from $48.3 million for
the year ended December 31, 2005. The increase was the result of the strength of the accessories business, particularly handbags, watches, and the impact of incremental sales from our new
footwear and fragrance licensees. The number of licensees remained consistent in 2006 as compared to 2005.

GROSS PROFIT.Gross profit increased $138.5 million, or 36.4%, to $519.4 million for the year ended December 31, 2006,
from $380.9 million for the year ended December 31, 2005. The increase in gross profit primarily resulted from increased sales in all segments and improved gross margin in the European,
wholesale and retail segments. Gross profit for the retail segment increased $55.5 million, or
26.0%, to $269.4 million primarily due to higher retail sales volumes and higher margins due to increases in average selling price partially offset by the additional occupancy cost of operating
an incremental average 24 net new stores. Gross profit for the wholesale segment increased $12.8 million, or 32.4%, to $52.4 million as a result of increased sales volume and lower
markdown allowances. Gross profit for our European operations increased $53.2 million to $132.4 million primarily attributable to the increase in sales. Higher licensing revenue
increased overall gross profit by $17.0 million.

Gross
margin (gross profit as a percentage of total net revenues) increased 310 basis points to 43.8% for the year ended December 31, 2006, from 40.7% for the year ended
December 31, 2005. The improvement in the overall gross margin was attributable to a higher mix of European and licensing segment revenues, both of which generate higher gross margin than our
retail and wholesale segments. Gross margin improved in both Europe and retail due to better product margins and improved occupancy leverage. Gross margin improved in our wholesale business, due
mainly to lower markdown allowances.

The
Company's gross margins may not be comparable to other entities since some entities include all of the costs related to their distribution in cost of product sales and others, like
the Company, exclude the wholesale related distribution costs from gross margin, including them instead in selling, general and administrative expenses.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES.SG&A expenses increased $47.3 million, or 16.9%, to $326.4 million for the year
ended December 31, 2006, from $279.1 million, for the year ended December 31, 2005. The increase was primarily attributable to a $17.1 million increase in our European
operations driven by selling and distribution costs, growth in North America for store selling, merchandising and distribution costs of $12.9 million, incremental compensation expenses
(primarily performance-based) of $13.5 million, and additional advertising and marketing spending in our existing

39

---



businesses
of $1.7 million, a $1.4 million increase in professional fees, and a $1.0 million accrual for the settlement of a class action lawsuit. As a percentage of net revenue,
SG&A expenses decreased 230 basis points to 27.5% in 2006 from 29.8% in 2005 reflecting lower expenses in the wholesale and licensing segments and improved leverage in both our European and retail
segments. The licensing segment included a special performance bonus in 2005 of $4.6 million which did not reoccur in 2006.

EARNINGS FROM OPERATIONS.Earnings from operations increased $91.2 million, or 89.6%, to $193.0 million for the year ended
December 31, 2006 from $101.8 million for the year ended December 31, 2005 as a result of improved profitability in all of our segments. The retail segment generated earnings from
operations of $100.4 million in 2006 versus earnings from operations of $65.3 million in 2005. The increase in earnings from operations for the retail segment was due to higher sales,
improved gross margin and better expense leverage. Earnings from operations for the wholesale segment were $24.0 million in 2006 compared to $7.3 million in 2005. This increase was
principally due to higher U.S. wholesale sales and gross margin, and lower operating expenses. The European segment increased its earnings from operations to $64.2 million in 2006 from
$28.1 million in 2005 primarily due
to increased sales, improved gross margin and better expense leverage. Earnings from operations for the licensing segment increased to $57.2 million in 2006 from $37.8 million in 2005
due primarily to higher revenues generated by our accessories and footwear licensees and lower SG&A costs. The cost of unallocated corporate overhead increased to $52.8 million in 2006 from
$36.7 million in 2005 mainly due to higher compensation related costs including stock-based compensation expense. The combination of higher sales, increased gross margin and lower SG&A expense
rate resulted in an increase in operating margin of 540 basis points from 10.9% to 16.3%.

INTEREST EXPENSE AND INTEREST INCOME.Interest expense increased 10.5% to $7.5 million for the year ended December 31, 2006
from $6.7 million for the year ended December 31, 2005. Total debt at December 31, 2006 was $52.4 million which comprised approximately $32.9 million and
$19.5 million of bank debt and capital lease obligations in our European operations, respectively, compared to total debt of $88.3 million at December 31, 2005 which included
$45.9 million of European borrowings and $40.7 million of the Company's 6.75% Secured Notes. The Secured Notes were redeemed in December 2006 resulting in a $1.4 million
write-off of debt issuance costs and a $0.5 million redemption premium which are included in interest expense. On a comparable basis, the average debt balance for the year ended
December 31, 2006 was $86.5 million, versus an average debt balance of $91.1 million for the year ended December 31, 2005. Interest income increased to $5.9 million
in 2006 from $2.6 million in 2005 due to higher average invested cash balances and higher interest rates on this invested cash.

OTHER INCOME, NET.Other income was $4.5 million for the year ended December 31, 2006 versus zero for the year ended
December 31, 2005. Other income in the year ended December 31, 2006 was primarily due to gain on the sale of long-term investments, gain on the sale of land, increase in cash
surrender value of long-term investments and unrealized gain from interest rate swap contracts.

INCOME TAXES.Income tax for the year ended December 31, 2006 was $72.7 million, or a 37.1% effective tax rate, compared to
income tax of $38.9 million, or a 39.8% effective tax rate, for the year ended December 31, 2005. The change in the effective tax rate compared to the prior year was due to the lower
impact of permanent tax differences as a result of increased earnings, the generation of capital gains which allowed the Company to realize capital loss carryforwards and favorable tax audit
settlements.

NET EARNINGS.Net earnings increased by $64.4 million, or 109.4%, to $123.2 million for the year ended December 31,
2006, from earnings of $58.8 million for the year ended December 31, 2005.

LIQUIDITY AND CAPITAL RESOURCES

We need liquidity primarily to fund our working capital in Europe, the expansion and remodeling of our retail stores, shop-in-shop
programs, systems, infrastructure, other existing operations, international growth, potential acquisitions, potential share repurchases, and payment of dividends to our shareholders. During the year
ended February 2, 2008, the Company relied on trade credit, available cash, short-term

40

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borrowings
from our European bank facilities, real estate leases and internally generated funds to finance its operations and expansion. The Company anticipates that it will be able to satisfy its
ongoing cash requirements during the next twelve months for working capital, capital expenditures, interest and principal payments on its debt, potential acquisitions, potential share repurchases and
dividend payments to shareholders, primarily with cash flow from operations supplemented by borrowings, if necessary, under the Credit Facility (defined below) and bank facilities in Europe. As of
February 2, 2008, the Company had cash and cash equivalents of $275.6 million. Excess cash and cash equivalents, which represent the majority of our outstanding cash and cash equivalents
balance, are held primarily in one diversified municipal money market fund. The fund, which is AAA rated, is comprised of high-quality, liquid investments. As of February 2, 2008, the Company
does not have any exposure to auction-rate security investments in this fund. Please see "Important Notice Regarding Forward-Looking Statements" 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 2008 fiscal year versus the 2007 fiscal year.

Operating Activities

Net cash provided by operating activities was $175.5 million for the year ended February 2, 2008, compared to $141.7 million for the year
ended February 3, 2007, or an increase of $33.8 million. The increase was driven by a $55.3 million growth in net income for the year ended February 2, 2008 versus the
prior year period, the increase in non-cash items of $34.3 million such as depreciation, share-based compensation expense, deferred taxes and other items. The increase was partially
offset by net investments in working capital including increases in accounts receivable to support growth in Europe and Asia, increases in inventory which were offset by increases in accounts payable,
and the timing of tax payments.

At
February 2, 2008, the Company had working capital (including cash and cash equivalents) of $426.4 million compared to $283.9 million at February 3, 2007.
The Company's primary working capital needs are for inventory and accounts receivable. Accounts receivable at February 2, 2008 amounted to
$254.4 million, up $111.7 million, compared to $142.7 million at February 3, 2007. Approximately $57.1 million of the increase resulted from the growth in accounts
receivable related to our existing European business, which totaled $141.8 million at February 2, 2008, versus $84.7 million at February 3, 2007. Approximately
$69.8 million of this $141.8 million of European receivables were insured for collection purposes. Our new Focus, BARN, South Korea, Mexico and Greater China operations accounted for
approximately $36.8 million of the remaining growth in receivables, of which $13.3 million was insured. Currency translation fluctuations accounted for $24.3 million of the
increase in accounts receivable. The Company's inventory increased $58.5 million to $232.2 million at February 2, 2008 from $173.7 million at February 3, 2007.
Approximately $31.0 million of this increase was attributed to the Company's new businesses, including Focus, BARN, our new South Korea, Greater China and Mexico operations, and our new G by
GUESS store concept, with the remaining increase driven by our existing North American retail, European and other international operations to support anticipated sales growth in fiscal 2009.

Investing Activities

Net cash used in investing activities increased to $111.9 million for the year ended February 2, 2008, compared to $75.7 million for the year
ended February 3, 2007, or an increase of $36.2 million. The increase in net cash used in investing activities was driven by the opening of 49 new stores in North America during the 2008
fiscal year compared to 33 new stores that were opened in the comparable prior year period, the conversion of 20 stores to the new G by GUESS concept, retail store remodeling programs, expansion in
Europe and Asia, investments in information systems and enhancements in other infrastructure during the 2008 fiscal year. The increase in cash used in investing activities was partially

41

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offset
by the net proceeds received related to the assignment of an aircraft purchase agreement in fiscal 2008.

Financing Activities

Net cash used in financing activities decreased to $0.1 million for the year ended February 2, 2008, compared to $25.9 million for the year
ended February 3, 2007, or a decrease of $25.8 million. The decrease in net cash used in financing activities was primarily due to the payments relating to the Company's 6.75% secured
notes in the prior year period, partially offset by the payment of cash dividends of $26.3 million during the year ended February 2, 2008.

Contractual Obligations and Commitments

The following table summarizes the Company's contractual obligations at February 2, 2008 and the effects such obligations are expected to have on liquidity
and cash flow in future periods (dollars in thousands):

|                                |       | Payments due by period
|------------------------------- | ----- | ----------------------
|
|Contractual Obligations:        |       |                       
|Short-term borrowings           |       | $                     
|Debt obligations(1)             |       |                       
|Capital lease obligations(1)    |       |                       
|Operating lease obligations(2)  |       |                       
|Purchase obligations            |       |                       
|Benefit obligations (3)         |       |                       
|Other long-term liabilities (4) |       |                       
|                                |       |                       
|                                | Total |                       
|                                |       |                       
|Other commercial commitments(5) |       | $                     
|                                |       |                       

---

Dividend Policy

During the first quarter of fiscal 2008, the Company announced a quarterly cash dividend of $0.06 per share on the Company's common stock. Since that time, the
Company has continued to pay a quarterly cash dividend, with a $0.06 per share dividend paid in the second quarter of fiscal 2008 and an $0.08 per share dividend paid in each subsequent fiscal
quarter.

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In
continuation of this practice, on March 19, 2008, the Company announced a quarterly cash dividend of $0.08 per share on the Company's common stock. The dividend will be payable
on April 18, 2008 to shareholders of record at the close of business on April 2, 2008.

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 requirements, cash paid for income taxes, earnings, share repurchases and liquidity.

Capital Expenditures

Gross capital expenditures totaled $100.2 million, before deducting lease incentives of $11.0 million for the year ended February 2, 2008.
This compares to gross capital expenditures of $52.3 million, before deducting lease incentives of $5.2 million, for the year ended February 3, 2007. The Company's capital
expenditures for the full fiscal year 2009 are planned at approximately $137.0 million (before deducting estimated lease incentives of approximately $11.0. million) primarily for retail store
expansion of
approximately 60 stores in the U.S. and Canada, store remodeling programs, expansion in Europe and Asia, investments in information systems and enhancements in other infrastructure.

The
Company evaluates strategic acquisitions and alliances and pursues those that we believe will support and contribute to our overall growth initiatives. The combined purchase price
for Focus and Focus Spain was finalized in October 2007 in the amount of €19.4 million ($25.6 million) which included an initial payment of
€10.0 million in cash, €2.0 in GUESS? common stock and €7.4 in final payments after resolving certain purchase price adjustments and other
contingencies with the Seller.

Effective
January 16, 2008, the Company, through a subsidiary, acquired 100% of the capital stock of BARN for a purchase price of approximately
€5.0 million ($7.4 million), subject to certain purchase price adjustments which are expected to be finalized as part of the pending audit of the acquired balance sheet.
The acquisition included inventory, trade receivables, payables, debt and certain long term assets used to operate the business including leasehold interests related to four GUESS KIDS stores.

Credit Facilities

On September 19, 2006, the Company and certain of its subsidiaries entered into a credit facility led by Bank of America, N.A., as administrative agent for
the lenders (the "Credit Facility"). The Credit Facility provides for an $85 million revolving multicurrency line of credit and is available for direct borrowings and the issuance of letters of
credit, subject to certain letters of credit sublimits. The Credit Facility is scheduled to mature on September 30, 2011. The Credit Facility replaced the (a) Amended and Restated Loan
and Security Agreement by and among Wachovia Capital Finance Corporation (Western) (formerly known as Congress Financial Corporation (Western)) and Guess, Guess? Retail, Inc. and
Guess.com, Inc., dated as of December 20, 2002, as amended, and (b) Canadian Loan and Security Agreement by and among Wachovia Capital Finance Corporation (Canada) (formerly known
as Congress Financial Corporation (Canada)) and Guess Canada, dated as of December 20, 2002, as amended (together, the "Prior Credit Facility").

The
obligations under the Credit Facility are guaranteed by certain of the Company's existing and future domestic subsidiaries, and such obligations, including the guarantees, are
secured by (a) substantially all present and future property and assets of the Company and each guarantor and (b) the equity interests of certain of the Company's direct and indirect
U.S. subsidiaries and 65% of the equity interests of the Company's first tier foreign subsidiaries.

Direct
borrowings under the Credit Facility will be made, at the Company's option, as (a) Eurodollar Rate Loans, which shall bear interest at the published LIBOR rate for the
respective interest period plus an applicable margin (which was 0.75% at February 2, 2008) based on the Company's leverage ratio at the time, or (b) Base Rate Loans, which shall bear
interest at the higher of (i) for domestic loans, 0.50% in

43

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excess
of the federal funds rate, and for Canadian loans, 0.50% in excess of the average rate for 30 day Canada dollar bankers' acceptances, or (ii) the rate of interest as announced by
Bank of America as its "prime rate," in each case as in effect from time to time, plus an applicable margin (which was 0.0% at February 2, 2008) based on the Company's leverage ratio at the
time. 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. At February 2, 2008, the Company had
$23.8 million in outstanding standby letters of credit, $15.2 million in outstanding documentary letters of credit and no outstanding borrowings under the Credit Facility.

The
Credit Facility requires the Company to comply with a leverage ratio and a fixed charge coverage ratio. In addition, the Credit Facility contains customary covenants, including
covenants that limit or restrict the Company and 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
Company, through its European subsidiaries, maintains short-term borrowing agreements, primarily for working capital purposes, with various banks in Europe. Under these
agreements, which are generally secured by specific accounts receivable balances, the Company can borrow up to $222.3 million, limited by accounts receivable balances at the time of borrowing,
except for one borrowing agreement which is secured by a $15.0 million standby letter of credit issued under the Company's Credit Facility. Based on the applicable accounts receivable balances
at February 2, 2008, the Company could have borrowed up to approximately $194.6 million under these agreements. However, the Company's ability to borrow through foreign subsidiaries is
generally limited to $185.0 million under the terms of our Credit Facility. At February 2, 2008, the Company had $32.1 million of outstanding borrowings and $1.7 million in
outstanding documentary letters of credit under these agreements. The agreements are denominated in Euros, have no financial ratio covenants and provide for annual interest rates ranging from 4.6% to
6.1%. The maturities of the short-term borrowings are linked to the credit terms of the underlying accounts receivable that secure the borrowings.

The
Company entered into a capital lease of approximately $16.0 million in December 2005 for a new building in Florence, Italy, with subsequent build-outs which were
completed in 2006. Key functions related to the Company's Italian operation are located in this building, including design and merchandising. This transaction resulted in a capital lease obligation of
$20.4 million as of February 2, 2008. The Company entered into separate interest rate swap agreements designated as
non-hedging instruments resulting in a fixed rate of 3.55%. These interest rate swap agreements mature through 2016 and convert the nature of the capital lease obligation from Euribor
floating rate debt to fixed rate debt. The fair value of the interest rate swap asset as of February 2, 2008 was approximately $0.5 million.

From
time to time the Company will obtain other short term financing in foreign countries for working capital to finance its local operations.

Other

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. The initial participants in the SERP are Maurice Marciano, Chairman of the Board, Paul Marciano, Chief Executive Officer and Vice
Chairman of the Board, and Carlos Alberini, President and Chief Operating Officer. As a non-qualified pension plan, no funding of the SERP is required; however, the Company

44

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expects
to make annual payments into an insurance policy held in a rabbi trust to fund the expected obligations arising under the SERP. The cash surrender value of the insurance policy was
$13.3 million and $7.7 million, respectively, as of February 2, 2008 and February 3, 2007 and is included in other assets. The amount of future payments may vary, depending
on the future years of service, future annual compensation of the participants and investment performance of the trust.

In
January 2002, the Company established a qualified employee stock purchase plan ("ESPP"), the terms of which allow for qualified employees (as defined) to participate in the purchase
of designated shares of the Company's common stock at a price equal to 85% of the lower of the closing price at the beginning or end of each quarterly stock purchase period. On January 23,
2002, the Company filed with the SEC a Registration Statement on Form S-8 registering 4,000,000 shares of common stock for the ESPP. During the year ended February 2, 2008,
32,659 shares of the Company's common stock were issued out of its treasury shares and 21,584 shares were issued out of its common shares pursuant to the ESPP at an average price of $33.18 per share
for a total of $1.8 million.

In
March 2008, the Company's Board of Directors terminated the previously authorized 2001 share repurchase program and authorized a new program to repurchase, from
time-to-time and as market and business conditions warrant, up to $200 million of our common stock. Repurchases 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 and the program may be discontinued at any time, without prior notice.

SEASONALITY

The Company's business is impacted by the general seasonal trends characteristic of the apparel and retail industries. U.S. retail operations are generally
stronger from July through December, and U.S. wholesale operations generally experience stronger performance in July, August and September. The European operations are largely wholesale driven and
operate with two primary selling seasons. Spring/Summer primarily ships in January, February and March and Fall/Winter primarily ships in July, August and September. The remaining months of the year
are relatively small shipping months in Europe. Due to the seasonality of the business, the results for any particular quarter may not be indicative of results for the full year.

INFLATION

The Company does not believe that the relatively moderate rates of inflation experienced in the U.S. and Europe over the last three years have had a significant
effect on net revenue or profitability. Although higher rates of inflation have been experienced in a number of foreign countries in which the Company's products are manufactured and sold, management
does not believe that foreign rates of inflation have had a material adverse effect on the Company's net revenue or profitability.

IMPACT OF RECENT ACCOUNTING PRONOUNCEMENTS

In September 2006, the FASB issued SFAS No. 157 ("SFAS 157"), "Fair Value Measurement", which defines fair value, establishes a framework for
measuring fair value in accordance with GAAP and expands disclosures about fair value measurements. The provisions of SFAS 157 are effective for fiscal years beginning after November 15,
2007. In February 2008, the FASB issued FSP SFAS 157-1 and FSP SFAS 157-2. FSP 157-1 amends SFAS 157 to exclude SFAS No. 13, "Accounting
for Leases", and its related interpretive accounting pronouncements that address leasing transactions. FSP FAS 157-2 will delay the effective date of SFAS 157 for all
nonfinancial assets and nonfinancial liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually). FSP
FAS 157-2 partially defers the effective date of SFAS 157 to fiscal years beginning after November 15, 2008, and interim periods within those fiscal years for items
within the scope of FSP 157-2. Effective for fiscal 2009, the Company will adopt SFAS 157 except as it applies to those nonfinancial assets and nonfinancial

45

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liabilities
as noted in FSP FAS 157-2. The Company is currently evaluating the potential effect that the adoption of SFAS 157 could have on its financial position and results
of operations.

In
February 2007, the FASB issued SFAS No. 159 ("SFAS 159"), "The Fair Value Option for Financial Assets and Financial Liabilities", which permits entities to voluntarily
choose to measure many financial instruments and certain other items at fair value. SFAS 159 provides entities an opportunity to mitigate volatility in reported earnings that is caused by
measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. SFAS 159 is effective for fiscal years beginning after November 15, 2007
and will be effective for the Company beginning on February 3, 2008. The Company is currently evaluating the potential effect that the adoption of SFAS 159 could have on its financial
position and results of operations.

In
December 2007, the FASB issued SFAS No. 141 (revised 2007), ("SFAS 141R"), "Business Combinations", which replaces FASB Statement 141. SFAS 141R establishes
principles and requirements for how an acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, any non controlling interest in the
acquiree and the goodwill acquired. SFAS 141(R) also modifies the recognition for preacquisition contingencies, such as environmental or legal issues, restructuring plans and acquired research
and development value in purchase accounting. SFAS 141(R) amends SFAS No. 109, "Accounting for Income Taxes", to require the acquirer to recognize changes in the amount of its deferred
tax benefits that are recognizable because of a business combination either in income from continuing operations in the period of the combination or directly in contributed capital, depending on the
circumstances. SFAS 141R also establishes disclosure requirements which will enable users to evaluate the nature and financial effects of the business combination. SFAS 141R is effective
as of the beginning of an entity's fiscal year that begins after December 15, 2008. The Company is currently evaluating the potential impact, if any, of the adoption of SFAS 141R on the
Company's consolidated financial statements relating to potential future acquisitions.

In
December 2007, the FASB issued SFAS No. 160 ("SFAS 160") "Accounting for Noncontrolling Interests", which clarifies the classification of noncontrolling interests in
consolidated statements of financial position and the accounting for and reporting of transactions between the reporting entity and holders of such noncontrolling interests. SFAS 160 will be
effective for fiscal years beginning after December 15, 2008. The Company is currently evaluating the potential impact, if any, of the adoption of SFAS 160 on the Company's consolidated
financial statements.

In
March 2008, the FASB issued SFAS No. 161 ("SFAS 161"), "Disclosures about Derivative Instruments and Hedging Activities," which amends SFAS 133 and expands
disclosures to include information about the fair value of derivatives, related credit risks and a company's strategies and objectives for using derivatives. SFAS 161 is effective for fiscal
periods beginning on or after November 15, 2008. Early adoption is encouraged. The Company is currently evaluating the potential impact of the adoption of SFAS 161 on its disclosures in
the Company's consolidated financial statements.

ITEM 7A.    Quantitative and Qualitative Disclosures About Market Risk.

Exchange Rate Risk

Approximately half of product sales and licensing revenue recorded for the year ended February 2, 2008 were denominated in United States dollars. The
Company's primary exchange rate risk relates to operations in Canada and Europe. The Company enters into derivative financial instruments, including forward exchange contracts and currency swaps, to
manage exchange risk on foreign currency transactions. The Company does not hedge all transactions denominated in foreign currency.

During
the year ended February 2, 2008, the Company purchased U.S. dollar forward contracts in Canada totaling US$52.0 million to hedge forecasted merchandise purchases
that were designated as cash-flow hedges. As of February 2, 2008, approximately US$27.0 million were outstanding and are expected to mature over the next eleven months. Our
derivative financial instruments are recorded on the

46

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consolidated
balance sheet at fair value based on quoted market rates. These forward contracts are used to hedge forecasted merchandise purchases over specific months. Changes in the fair value of
forward contracts designated as cash-flow hedges are recorded as a component of accumulated other comprehensive earnings within stockholders' equity, and are recognized in cost of goods
sold in the period which approximates the time the hedged merchandise inventory is sold.

An
unrealized loss of approximately US$1.5 million, net of tax, primarily relating to contracts that have already matured, has been recorded in accumulated other comprehensive
income at February 2, 2008 and will be recognized as a charge to cost of goods sold on a pre-tax basis over the next five months. At February 2, 2008, the unrealized gain of
the remaining open forward contracts recorded on the balance sheet was approximately US$0.1 million.

Also,
the Company has foreign currency contracts that are not designated as hedges for accounting purposes. Changes in fair value of foreign currency contracts not qualifying as cash
flow hedges are reported in net earnings as part of other income and expenses. For the year ended February 2, 2008, the Company recorded losses for the Canadian and Euro foreign currency
contracts of US$1.9 million and US$5.5 million, respectively, which has been included in other income and expenses. At February 2, 2008, the Company had Canadian dollar foreign
currency contracts to purchase US$26.0 million, expected to mature over the next eleven months and Euro foreign currency contracts to purchase US$87.6 million, expected to mature over
the next nine months. At February 2, 2008, the unrealized losses of these Canadian and Euro forward contracts were approximately $3.3 million, primarily relating to the Euro forward
contracts, and were recorded in current liabilities on the consolidated balance sheet.

At
February 2, 2008, a sensitivity analysis to changes in the 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 foreign exchange derivatives, the fair value of the instruments would have decreased by US$16.0 million. Conversely, if the U.S. dollar uniformly strengthened by 10%
against all of the foreign exchange derivatives, the fair value of these instruments would have increased by US$13.1 million. Any resulting changes in the fair value of the hedged instruments
would have been partially offset by changes in the fair value of certain balance sheet positions impacted by the change in the foreign currency rate.

At
December 31, 2006, the Company had Canadian dollar currency exchange contracts to purchase US$3.0 million and Euro currency exchange contracts to purchase
US$50.0 million. The value of those contracts at December 31, 2006 were US$2.9 million and US$51.5 million, respectively, resulting in a net unrealized loss of
US$1.4 million.

Interest Rate Risk

At February 2, 2008, approximately 38.8% of the Company's indebtedness related to a capital lease obligation which is covered by interest rate swap
agreements resulting in a fixed interest rate of 3.55% over the life of the lease obligation. 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 expenses. The change in the unrealized fair value of the interest swap had an immaterial impact during the year ended February 2, 2008. Substantially all of
the Company's remaining indebtedness, principally consisting of short-term borrowings under the short-term European borrowing agreements, 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 increased interest expense for the
year ended February 2, 2008 by approximately $0.5 million.

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 borrowing rate. At
February 2, 2008, 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.

47

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ITEM 8.    Financial Statements and Supplementary Data.

The information required by this Item is incorporated herein by reference to the Consolidated Financial Statements and Supplementary Data listed in Item 15
of Part IV of this report.

ITEM 9.    Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.

None.

ITEM 9A.    Controls and Procedures.

Conclusion Regarding the Effectiveness of Disclosure 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 (the "Exchange Act"). 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 period covered by this annual report.

Management's Report on Internal Control Over Financial Reporting

The SEC, as directed by Section 404 of the Sarbanes-Oxley Act of 2002, adopted rules which require the Company to include in its Annual Reports on
Form 10-K, an assessment by management of the effectiveness of the Company's internal control over financial reporting as defined in Rule 13a-15(f) under the
Exchange Act. In addition, the Company's independent auditors must attest to and report on the effectiveness of the Company's internal control over financial reporting.

Management
of the Company is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) under the
Exchange Act. The Company's internal control over financial reporting is designed to provide reasonable assurance to the Company's management and Board of Directors regarding the preparation and fair
presentation of published financial statements.

Because
of its inherent limitations, internal control over financial reporting may not prevent or detect all misstatements. Therefore, even those systems determined to be effective can
provide only reasonable assurance with respect to financial statement preparation and presentation.

The
Company's management carried out an evaluation, under the supervision and with the participation of the Company's principal executive officer and principal financial officer, of the
effectiveness of the Company's internal control over financial reporting based on the framework inInternal ControlIntegrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission. Based upon this evaluation, under the framework inInternal ControlIntegrated
Framework, our management concluded that our internal control over financial reporting was effective as of February 2, 2008.

Ernst &
Young LLP, the independent registered public accounting firm that audited the Company's financial statements as of and for the fiscal year ended February 2,
2008 included in this Annual Report on Form 10-K has issued an attestation report on the Company's internal control over financial reporting, which is set forth below.

Changes in Internal Control Over Financial Reporting

There has been no change in our internal control over financial reporting during the fourth quarter of fiscal 2008 that has materially affected, or is reasonably
likely to materially affect, our internal control over financial reporting.

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Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting

The
Board of Directors and Stockholders of Guess?, Inc.

We
have audited Guess?, Inc.'s internal control over financial reporting as of February 2, 2008, based on criteria established in Internal ControlIntegrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). Guess?, Inc.'s management is responsible for maintaining effective internal control
over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management's Report on Internal Control Over Financial
Reporting. Our responsibility is to express an opinion on the company's internal control over financial reporting based on our audit.

We
conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control
over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and
performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A
company's internal control over financial reporting is a process designed 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. A company's internal control over financial reporting includes those policies and procedures
that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide
reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide
reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

Because
of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In
our opinion, Guess?, Inc. maintained, in all material respects, effective internal control over financial reporting as of February 2, 2008, based on the COSO criteria.

We
also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of Guess?, Inc. as of
February 2, 2008, and the related consolidated statements of income, stockholders' equity and comprehensive income, and cash flows for the year ended February 2, 2008 of
Guess?, Inc. and our report dated March 27, 2008, expressed an unqualified opinion thereon.

| |  | /s/ ERNST & YOUNG LLP
| |  | ---------------------

Los
Angeles, California
March 27, 2008

49

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ITEM 9B.    Other Information.

None.

PART III

ITEM 10.    Directors, Executive Officers and Corporate Governance.

The information required by this item can be found under the captions "Directors and Executive Officers," "Corporate Governance and Board Matters," and
"Section 16(a) Beneficial Ownership Reporting Compliance" in the Company's Proxy Statement (the "Proxy Statement") to be filed with the Securities and Exchange Commission not later than
120 days after the end of our fiscal year and is incorporated herein by reference.

ITEM 11.    Executive Compensation.

The information required by this item can be found under the caption "Executive and Director Compensation," excluding the Compensation Committee Report on
Executive Compensation, in the Proxy Statement and is incorporated herein by reference.

ITEM 12.    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

The information required by this item can be found under the captions "Equity Compensation Plan Information" and "Security Ownership of Certain Beneficial Owners
and Management" in the Proxy Statement and is incorporated herein by reference.

ITEM 13.    Certain Relationships and Related Transactions, and Director Independence.

The information required by this item can be found under the captions "Certain Relationships and Related Transactions" and "Corporate Governance and Board
MattersBoard Independence, Structure and Committee Composition" in the Proxy Statement and is incorporated herein by reference.

ITEM 14.    Principal Accountant Fees and Services.

The information required by this item can be found under the caption "Relationship with Independent Auditors" in the Proxy Statement and is incorporated herein by
reference.

50

---



PART IV

ITEM 15.    Exhibits, Financial Statement Schedules.

Documents Filed with Report









51

---







Guess?, Inc.  Form 10-K

Index to Consolidated Financial Statements and Financial Statement Schedule

|1 |  | Report of Independent Registered Public Accounting FirmErnst & Young LLP(1)                                                                                                                   |                                                                                                                                                                                             | F-2 
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----
|2 |  | Reports of Independent Registered Public Accounting FirmKPMG LLP(1)                                                                                                                           |                                                                                                                                                                                             | F-3 
|3 |  | Consolidated Financial Statements                                                                                                                                                              |                                                                                                                                                                                             |     
|  |  |                                                                                                                                                                                                | Consolidated Balance Sheets at February 2, 2008 and February 3, 2007                                                                                                                        |     
|  |  |                                                                                                                                                                                                | Consolidated Statements of Income for the Years Ended February 2, 2008, December 31, 2006 and December 31, 2005 and One Month Ended February 3, 2007                                        |     
|  |  |                                                                                                                                                                                                | Consolidated Statements of Stockholders' Equity and Comprehensive Income for the Years Ended February 2, 2008, December 31, 2006 and December 31, 2005 and One Month Ended February 3, 2007 |     
|  |  |                                                                                                                                                                                                | Consolidated Statements of Cash Flows for the Years Ended February 2, 2008, December 31, 2006 and December 31, 2005 and One Month Ended February 3, 2007                                    |     
|  |  |                                                                                                                                                                                                | Notes to Consolidated Financial Statements                                                                                                                                                  |     
|4 |  | Consolidated Financial Statement ScheduleValuation and Qualifying Accounts for the Years Ended February 2, 2008, December 31, 2006 and December 31, 2005 and One Month Ended February 3, 2007 |                                                                                                                                                                                             | F-46

---

F-1

---





REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The
Board of Directors and Stockholders of Guess?, Inc.

We
have audited the accompanying consolidated balance sheet of Guess?, Inc. as of February 2, 2008, and the related consolidated statements of income, stockholders' equity
and comprehensive income, and cash flows for the year ended February 2, 2008. Our audit also included the financial statement schedule listed in the Index at Item 15(2). These financial
statements and schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedule based on our audit.

We
conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our opinion.

In
our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Guess?, Inc. at February 2,
2008, and the consolidated results of its operations and its cash flows for the year ended February 2, 2008, in conformity with U.S. generally accepted accounting principles. Also, in our
opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth
therein.

As
discussed in Notes 1 and 9 to the consolidated financial statements, in the one month ended February 3, 2007 the Company changed its method of accounting for income
taxes. As discussed in Notes 1 and 10 to the consolidated financial statements, in 2006 the Company changed its method of
accounting for pension and postretirement benefits. As discussed in Notes 1 and 17 to the consolidated financial statements, in 2006 the Company changed its method of accounting for stock based
compensation.

We
also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of Guess?, Inc.'s internal control over
financial reporting as of February 2, 2008, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission
and our report dated March 27, 2008 expressed an unqualified opinion thereon.

| |  | /s/ ERNST & YOUNG LLP
| |  | ---------------------

Los
Angeles, California
March 27, 2008

F-2

---



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The
Board of Directors and Stockholders
Guess?, Inc.:

We
have audited the consolidated balance sheet of Guess?, Inc. and subsidiaries, as of February 3, 2007, and the related consolidated statements of income, stockholders'
equity and comprehensive income, and cash flows for the one-month period ended February 3, 2007. In connection with our audit of the consolidated financial statements, we also have
audited the related financial statement schedule for the one-month period ended February 3, 2007. These consolidated financial statements and financial statement schedule are the
responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedule based on our audit.

We
conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our opinion.

In
our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Guess?, Inc. and subsidiaries as of
February 3, 2007, and the results of their operations and their cash flows for the one-month period ended February 3, 2007, in conformity with U.S. generally accepted
accounting principles. Also in our opinion, the related financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in
all material respects, the information set forth therein.

As
discussed in Note 1 to the consolidated financial statements, Guess?, Inc. adopted FASB Interpretation No. 48, "Accounting for Uncertainty in Income Taxes,"
effective January 1, 2007. Also, as discussed in Note 1 to the consolidated financial statements, Guess?, Inc. adopted Statement of Financial Accounting Standards
No. 123(R), "Share-Based Payment," effective January 1, 2006 and Statement of Financial Accounting Standards No. 158, "Employers' Accounting for Defined Benefit Pension and Other
Postretirement Plans," as of December 31, 2006.

/s/
KPMG LLP

Los
Angeles, California
May 25, 2007

F-3

---



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The
Board of Directors and Stockholders
Guess?, Inc.:

We
have audited the consolidated statements of income, stockholders' equity and comprehensive income, and cash flows, for each of the years in the two-year period ended
December 31, 2006, of Guess?, Inc. and subsidiaries. In connection with our audits of the consolidated financial statements, we also have audited the financial statement schedule for
each of the years in the two-year period ended December 31, 2006. These consolidated financial statements and financial statement schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedule based on our audits.

We
conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our opinion.

In
our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the results of operations and cash flows of Guess?, Inc. and
subsidiaries for each of the years in the two-year period ended December 31, 2006, in conformity with U.S. generally accepted accounting principles. Also in our opinion, the related
financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

As
discussed in Note 1 to the consolidated financial statements, Guess?, Inc. adopted Statement of Financial Accounting Standards No. 123(R), "Share-Based Payment,"
effective January 1, 2006 and Statement of Financial Accounting Standards No. 158, "Employers' Accounting for Defined Benefit Pension and Other Postretirement Plansan
amendment to FASB Statements No. 87, 88, 106 and 132(R)," as of December 31, 2006.

/s/
KPMG LLP

Los
Angeles, California
February 28, 2007

F-4

---





GUESS?, INC. AND SUBSIDIARIES  CONSOLIDATED BALANCE SHEETS  (in thousands, except share data)

|                                                                                |                                                                                                                                                                                                       | February 2,
2008 |           | February 3,
2007 |  
|------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---------------- | --------- | ---------------- | -
|ASSETS                                                                          |                                                                                                                                                                                                       |                  |           |                  |  
|Current assets:                                                                 |                                                                                                                                                                                                       |                  |           |                  |  
|                                                                                | Cash and cash equivalents                                                                                                                                                                             |                  | $         | 275,595          |  
|                                                                                | Accounts receivable, net                                                                                                                                                                              |                  |           | 254,400          |  
|                                                                                | Inventories                                                                                                                                                                                           |                  |           | 232,159          |  
|                                                                                | Prepaid expenses and other current assets                                                                                                                                                             |                  |           | 31,411           |  
|                                                                                | Deferred tax assets                                                                                                                                                                                   |                  |           | 21,174           |  
|                                                                                |                                                                                                                                                                                                       |                  |           |                  |  
|                                                                                | Total current assets                                                                                                                                                                                  |                  |           | 814,739          |  
|Property and equipment, net                                                     |                                                                                                                                                                                                       |                  | 229,917   |                  |  
|Goodwill                                                                        |                                                                                                                                                                                                       |                  | 29,431    |                  |  
|Other intangible assets, net                                                    |                                                                                                                                                                                                       |                  | 23,708    |                  |  
|Long-term deferred tax assets                                                   |                                                                                                                                                                                                       |                  | 57,726    |                  |  
|Other assets                                                                    |                                                                                                                                                                                                       |                  | 30,707    |                  |  
|                                                                                |                                                                                                                                                                                                       |                  |           |                  |  
|                                                                                |                                                                                                                                                                                                       | $                | 1,186,228 |                  | $
|                                                                                |                                                                                                                                                                                                       |                  |           |                  |  
|LIABILITIES AND STOCKHOLDERS' EQUITY                                            |                                                                                                                                                                                                       |                  |           |                  |  
|Current liabilities:                                                            |                                                                                                                                                                                                       |                  |           |                  |  
|                                                                                | Current portion of borrowings and capital lease obligations                                                                                                                                           |                  | $         | 35,254           |  
|                                                                                | Accounts payable                                                                                                                                                                                      |                  |           | 210,258          |  
|                                                                                | Accrued expenses                                                                                                                                                                                      |                  |           | 142,779          |  
|                                                                                |                                                                                                                                                                                                       |                  |           |                  |  
|                                                                                | Total current liabilities                                                                                                                                                                             |                  |           | 388,291          |  
|Borrowings and capital lease obligations                                        |                                                                                                                                                                                                       |                  | 18,724    |                  |  
|Long-term deferred rent and lease incentives                                    |                                                                                                                                                                                                       |                  | 40,036    |                  |  
|Long-term deferred royalties                                                    |                                                                                                                                                                                                       |                  | 27,062    |                  |  
|Other long-term liabilities                                                     |                                                                                                                                                                                                       |                  | 49,152    |                  |  
|                                                                                |                                                                                                                                                                                                       |                  |           |                  |  
|                                                                                |                                                                                                                                                                                                       |                  | 523,265   |                  |  
|Minority interests.                                                             |                                                                                                                                                                                                       |                  | 5,989     |                  |  
|Commitments and contingencies (Note 12)                                         |                                                                                                                                                                                                       |                  |           |                  |  
|Stockholders' equity:                                                           |                                                                                                                                                                                                       |                  |           |                  |  
|                                                                                | Preferred stock, $0.01 par value. Authorized 10,000,000 shares; no shares issued and outstanding                                                                                                      |                  |           |                 |  
|                                                                                | Common stock, $0.01 par value. Authorized 150,000,000 shares; issued 135,051,396 and 133,883,942 shares at 2008 and 2007, outstanding 94,337,674 and 93,105,488 shares at 2008 and 2007, respectively |                  |           | 943              |  
|Paid-in capital                                                                 |                                                                                                                                                                                                       |                  | 255,486   |                  |  
|Retained earnings                                                               |                                                                                                                                                                                                       |                  | 542,856   |                  |  
|Accumulated other comprehensive income (loss)                                   |                                                                                                                                                                                                       |                  | 9,529     |                  |  
|Treasury stock, 40,713,722 and 40,778,454 shares at 2008 and 2007, respectively |                                                                                                                                                                                                       |                  | (151,840  | )                |  
|                                                                                |                                                                                                                                                                                                       |                  |           |                  |  
|Total stockholders' equity                                                      |                                                                                                                                                                                                       |                  | 656,974   |                  |  
|                                                                                |                                                                                                                                                                                                       |                  |           |                  |  
|                                                                                |                                                                                                                                                                                                       | $                | 1,186,228 |                  | $
|                                                                                |                                                                                                                                                                                                       |                  |           |                  |  

See
accompanying notes to consolidated financial statements

F-5

---





GUESS?, INC. AND SUBSIDIARIES  CONSOLIDATED STATEMENTS OF INCOME  (in thousands, except per share data)

|                                                          |                              | Year
Ended
Feb. 2, 2008 |           | One Month
Ended
Feb. 3, 2007 |   | Year
Ended
Dec. 31, 2006 |         | Year
Ended
Dec. 31, 2005 |          
|--------------------------------------------------------- | ---------------------------- | ----------------------- | --------- | ---------------------------- | - | ------------------------ | ------- | ------------------------ | ---------
|Net revenue:                                              |                              |                         |           |                              |   |                          |         |                          |          
|                                                          | Product sales                |                         | $         | 1,659,184                    |   | $                        | 129,220 |                          | $        
|                                                          | Net royalties                |                         |           | 90,732                       |   |                          | 6,732   |                          |          
|                                                          |                              |                         |           |                              |   |                          |         |                          |          
|                                                          |                              |                         | 1,749,916 |                              |   | 135,952                  |         |                          | 1,185,184
|Cost of product sales                                     |                              |                         | 957,147   |                              |   | 80,216                   |         |                          | 665,805  
|                                                          |                              |                         |           |                              |   |                          |         |                          |          
|Gross profit                                              |                              |                         | 792,769   |                              |   | 55,736                   |         |                          | 519,379  
|Selling, general and administrative expenses              |                              |                         | 483,630   |                              |   | 43,258                   |         |                          | 326,356  
|                                                          |                              |                         |           |                              |   |                          |         |                          |          
|Earnings from operations                                  |                              |                         | 309,139   |                              |   | 12,478                   |         |                          | 193,023  
|Other expense (income):                                   |                              |                         |           |                              |   |                          |         |                          |          
|                                                          | Interest expense             |                         |           | 3,442                        |   |                          | 636     |                          |          
|                                                          | Interest income              |                         |           | (7,546                       | ) |                          | (663    | )                        |          
|                                                          | Other, net                   |                         |           | 1,780                        |   |                          | (215    | )                        |          
|                                                          |                              |                         |           |                              |   |                          |         |                          |          
|                                                          |                              |                         | (2,324    | )                            |   | (242                     | )       |                          | (2,974   
|                                                          |                              |                         |           |                              |   |                          |         |                          |          
|Earnings before income tax expense and minority interests |                              |                         | 311,463   |                              |   | 12,720                   |         |                          | 195,997  
|Income tax expense                                        |                              |                         | 124,099   |                              |   | 4,885                    |         |                          | 72,715   
|Minority interests                                        |                              |                         | 892       |                              |   | (145                     | )       |                          | 114      
|                                                          |                              |                         |           |                              |   |                          |         |                          |          
|Net earnings                                              |                              | $                       | 186,472   |                              | $ | 7,980                    |         | $                        | 123,168  
|                                                          |                              |                         |           |                              |   |                          |         |                          |          
|Earnings per share (Note 1)                               |                              |                         |           |                              |   |                          |         |                          |          
|                                                          | Basic                        |                         | $         | 2.02                         |   | $                        | 0.09    |                          | $        
|                                                          | Diluted                      |                         | $         | 1.99                         |   | $                        | 0.09    |                          | $        
|                                                          | Dividends declared per share |                         | $         | 0.28                         |   |                          |        |                          |          
|Weighted average shares outstanding (Note 1)              |                              |                         |           |                              |   |                          |         |                          |          
|                                                          | Basic                        |                         |           | 92,307                       |   |                          | 91,668  |                          |          
|                                                          | Diluted                      |                         |           | 93,695                       |   |                          | 93,120  |                          |          

See
accompanying notes to consolidated financial statements

F-6

---





GUESS?, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
AND COMPREHENSIVE INCOME

|                                                                             |                                                           | Compre-
hensive
Income |   | Common
Stock |   | Paid-in
Capital |   | Deferred
Compensation |         | Retained
Earnings |   | Accumulated
Other
Comprehensive
Income (Loss) |   | Treasury
Stock |         | Total   |  
|---------------------------------------------------------------------------- | --------------------------------------------------------- | ---------------------- | - | ------------ | - | --------------- | - | --------------------- | ------- | ----------------- | - | --------------------------------------------- | - | -------------- | ------- | ------- | -
|
|Balance at December 31, 2004                                                 |                                                           |                        |   |              | $ | 886             |   | $                     | 177,680 |                   | $ | (1,093                                        | ) | $              | 192,748 |         | $
|Comprehensive income:                                                        |                                                           |                        |   |              |   |                 |   |                       |         |                   |   |                                               |   |                |         |         |  
|                                                                             | Net earnings                                              |                        | $ | 58,813       |   |                 |  |                       |         |                  |   |                                               |  |                |         | 58,813  |  
|                                                                             | Foreign currency translation adjustment                   |                        |   | (2,588       | ) |                 |  |                       |         |                  |   |                                               |  |                |         |        |  
|                                                                             | Unrealized gain on investments, net of tax effect         |                        |   | 27           |   |                 |  |                       |         |                  |   |                                               |  |                |         |        |  
|                                                                             |                                                           |                        |   |              |   |                 |   |                       |         |                   |   |                                               |   |                |         |         |  
|                                                                             | Total comprehensive income                                |                        | $ | 56,252       |   |                 |   |                       |         |                   |   |                                               |   |                |         |         |  
|                                                                             |                                                           |                        |   |              |   |                 |   |                       |         |                   |   |                                               |   |                |         |         |  
|Issuance of common stock under stock compensation plans including tax effect |                                                           |                        |   |              |   | 14              |   |                       | 10,187  |                   |   |                                              |   |                |        |         |  
|Issuance of stock under Employee Stock Purchase Plan                         |                                                           |                        |   |              |   |                |   |                       | 252     |                   |   |                                              |   |                |        |         |  
|Deferred compensation                                                        |                                                           |                        |   |              |   |                |   |                       | 1,034   |                   |   | (296                                          | ) |                |        |         |  
|                                                                             |                                                           |                        |   |              |   |                 |   |                       |         |                   |   |                                               |   |                |         |         |  
|Balance at December 31, 2005                                                 |                                                           |                        |   |              | $ | 900             |   | $                     | 189,153 |                   | $ | (1,389                                        | ) | $              | 251,561 |         | $
|Comprehensive income:                                                        |                                                           |                        |   |              |   |                 |   |                       |         |                   |   |                                               |   |                |         |         |  
|                                                                             | Net earnings                                              |                        | $ | 123,168      |   |                 |  |                       |         |                  |   |                                               |  |                |         | 123,168 |  
|                                                                             | Foreign currency translation adjustment                   |                        |   | 2,874        |   |                 |  |                       |         |                  |   |                                               |  |                |         |        |  
|                                                                             | Unrealized loss on investments, net of tax effect         |                        |   | (263         | ) |                 |  |                       |         |                  |   |                                               |  |                |         |        |  
|                                                                             | Supplemental Executive Retirement Plan, net of tax effect |                        |   | (1,188       | ) |                 |  |                       |         |                  |   |                                               |  |                |         |        |  
|                                                                             |                                                           |                        |   |              |   |                 |   |                       |         |                   |   |                                               |   |                |         |         |  
|                                                                             | Total comprehensive income                                |                        | $ | 124,591      |   |                 |   |                       |         |                   |   |                                               |   |                |         |         |  
|                                                                             |                                                           |                        |   |              |   |                 |   |                       |         |                   |   |                                               |   |                |         |         |  
|Supplemental Executive Retirement Plan, net of tax effect                    |                                                           |                        |   |              |   |                |   |                       |        |                   |   |                                              |   |                |        |         |  
|Issuance of common stock under stock compensation plans including tax effect |                                                           |                        |   |              |   | 21              |   |                       | 23,290  |                   |   |                                              |   |                |        |         |  
|Issuance of stock under Employee Stock Purchase Plan                         |                                                           |                        |   |              |   |                |   |                       | 703     |                   |   |                                              |   |                |        |         |  
|Stock-based compensation                                                     |                                                           |                        |   |              |   |                |   |                       | 6,739   |                   |   |                                              |   |                |        |         |  
|Deferred compensation                                                        |                                                           |                        |   |              |   |                |   |                       | (1,389  | )                 |   | 1,389                                         |   |                |        |         |  
|Issuance of common stock for Focus acquisition                               |                                                           |                        |   |              |   |                |   |                       | 2,316   |                   |   |                                              |   |                |        |         |  
|                                                                             |                                                           |                        |   |              |   |                 |   |                       |         |                   |   |                                               |   |                |         |         |  
|Balance at December 31, 2006                                                 |                                                           |                        |   |              | $ | 921             |   | $                     | 220,812 |                   | $ |                                              |   | $              | 374,729 |         | $
|Comprehensive income:                                                        |                                                           |                        |   |              |   |                 |   |                       |         |                   |   |                                               |   |                |         |         |  
|                                                                             | Net earnings                                              |                        | $ | 7,980        |   |                 |  |                       |         |                  |   |                                               |  |                |         | 7,980   |  
|                                                                             | Foreign currency translation adjustment                   |                        |   | (2,127       | ) |                 |  |                       |         |                  |   |                                               |  |                |         |        |  
|                                                                             | Unrealized gain on investments, net of tax effect         |                        |   | 28           |   |                 |  |                       |         |                  |   |                                               |  |                |         |        |  
|                                                                             | Supplemental Executive Retirement Plan, net of tax effect |                        |   | 134          |   |                 |  |                       |         |                  |   |                                               |  |                |         |        |  
|                                                                             |                                                           |                        |   |              |   |                 |   |                       |         |                   |   |                                               |   |                |         |         |  
|                                                                             | Total comprehensive income                                |                        | $ | 6,015        |   |                 |   |                       |         |                   |   |                                               |   |                |         |         |  
|                                                                             |                                                           |                        |   |              |   |                 |   |                       |         |                   |   |                                               |   |                |         |         |  
|Issuance of common stock under stock compensation plans including tax effect |                                                           |                        |   |              |   | 10              |   |                       | (3,784  | )                 |   |                                              |   |                |        |         |  
|Stock-based compensation                                                     |                                                           |                        |   |              |   |                |   |                       | 1,585   |                   |   |                                              |   |                |        |         |  
|                                                                             |                                                           |                        |   |              |   |                 |   |                       |         |                   |   |                                               |   |                |         |         |  
|Balance at February 3, 2007                                                  |                                                           |                        |   |              | $ | 931             |   | $                     | 218,613 |                   | $ |                                              |   | $              | 382,709 |         | $
|Comprehensive income:                                                        |                                                           |                        |   |              |   |                 |   |                       |         |                   |   |                                               |   |                |         |         |  
|                                                                             | Net earnings                                              |                        | $ | 186,472      |   |                 |  |                       |         |                  |   |                                               |  |                |         | 186,472 |  
|                                                                             | Foreign currency translation adjustment                   |                        |   | 22,101       |   |                 |  |                       |         |                  |   |                                               |  |                |         |        |  
|                                                                             | Unrealized loss on hedges, net of tax effect              |                        |   | (1,475       | ) |                 |  |                       |         |                  |   |                                               |  |                |         |        |  
|                                                                             | Unrealized loss on investments, net of tax effect         |                        |   | (183         | ) |                 |  |                       |         |                  |   |                                               |  |                |         |        |  
|                                                                             | Supplemental Executive Retirement Plan, net of tax effect |                        |   | 534          |   |                 |  |                       |         |                  |   |                                               |  |                |         |        |  
|                                                                             |                                                           |                        |   |              |   |                 |   |                       |         |                   |   |                                               |   |                |         |         |  
|                                                                             | Total comprehensive income                                |                        | $ | 207,449      |   |                 |   |                       |         |                   |   |                                               |   |                |         |         |  
|                                                                             |                                                           |                        |   |              |   |                 |   |                       |         |                   |   |                                               |   |                |         |         |  
|Issuance of common stock under stock compensation plans including tax effect |                                                           |                        |   |              |   | 12              |   |                       | 15,676  |                   |   |                                              |   |                |        |         |  
|Issuance of stock under Employee Stock Purchase Plan                         |                                                           |                        |   |              |   |                |   |                       | 1,678   |                   |   |                                              |   |                |        |         |  
|Stock-based compensation                                                     |                                                           |                        |   |              |   |                |   |                       | 19,519  |                   |   |                                              |   |                |        |         |  
|Dividends                                                                    |                                                           |                        |   |              |   |                |   |                       |        |                   |   |                                              |   |                | (26,325 | )       |  
|                                                                             |                                                           |                        |   |              |   |                 |   |                       |         |                   |   |                                               |   |                |         |         |  
|Balance at February 2, 2008                                                  |                                                           |                        |   |              | $ | 943             |   | $                     | 255,486 |                   | $ |                                              |   | $              | 542,856 |         | $
|                                                                             |                                                           |                        |   |              |   |                 |   |                       |         |                   |   |                                               |   |                |         |         |  

See accompanying notes to consolidated financial statements

F-7

---





GUESS?, INC. AND SUBSIDIARIES  CONSOLIDATED STATEMENTS OF CASH FLOWS  (in thousands)

|                                                                                   |                                                                                     | Year
Ended
Feb. 2, 2008 |         | One Month
Ended
Feb. 3, 2007 |   | Year
Ended
Dec. 31, 2006 |         | Year
Ended
Dec. 31, 2005 |        
|---------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------- | ----------------------- | ------- | ---------------------------- | - | ------------------------ | ------- | ------------------------ | -------
|Cash flows from operating activities:                                              |                                                                                     |                         |         |                              |   |                          |         |                          |        
|                                                                                   | Net earnings                                                                        |                         | $       | 186,472                      |   | $                        | 7,980   |                          | $      
|                                                                                   | Adjustments to reconcile net earnings to net cash provided by operating activities: |                         |         |                              |   |                          |         |                          |        
|                                                                                   | Depreciation and amortization of property and equipment                             |                         |         | 44,538                       |   |                          | 4,272   |                          |        
|                                                                                   | Amortization of intangible assets                                                   |                         |         | 6,041                        |   |                          | 320     |                          |        
|                                                                                   | Stock-based compensation expense                                                    |                         |         | 19,519                       |   |                          | 1,585   |                          |        
|                                                                                   | Deferred income taxes                                                               |                         |         | (12,369                      | ) |                          | (3,636  | )                        |        
|                                                                                   | Loss (gain) on disposition of long-term assets and property and equipment           |                         |         | 4,015                        |   |                          | 14      |                          |        
|                                                                                   | Other items, net                                                                    |                         |         | 8,881                        |   |                          | (680    | )                        |        
|                                                                                   | Minority interests                                                                  |                         |         | 892                          |   |                          | (145    | )                        |        
|Changes in operating assets and liabilities, net of effect of acquired businesses: |                                                                                     |                         |         |                              |   |                          |         |                          |        
|                                                                                   | Accounts receivable                                                                 |                         |         | (89,481                      | ) |                          | (9,253  | )                        |        
|                                                                                   | Inventories                                                                         |                         |         | (53,376                      | ) |                          | (8,436  | )                        |        
|                                                                                   | Prepaid expenses and other assets                                                   |                         |         | (20,008                      | ) |                          | 3,012   |                          |        
|                                                                                   | Accounts payable and accrued expenses                                               |                         |         | 67,027                       |   |                          | 13,494  |                          |        
|                                                                                   | Long-term deferred rent and lease incentives                                        |                         |         | 9,080                        |   |                          | (280    | )                        |        
|                                                                                   | Long-term deferred royalties                                                        |                         |         | (7,375                       | ) |                          | (571    | )                        |        
|                                                                                   | Other long-term liabilities                                                         |                         |         | 11,604                       |   |                          | (562    | )                        |        
|                                                                                   |                                                                                     |                         |         |                              |   |                          |         |                          |        
|                                                                                   | Net cash provided by operating activities                                           |                         |         | 175,460                      |   |                          | 7,114   |                          |        
|                                                                                   |                                                                                     |                         |         |                              |   |                          |         |                          |        
|Cash flows from investing activities:                                              |                                                                                     |                         |         |                              |   |                          |         |                          |        
|                                                                                   | Purchases of property and equipment                                                 |                         |         | (100,178                     | ) |                          | (2,750  | )                        |        
|                                                                                   | Proceeds from dispositions of long-term assets and property and equipment           |                         |         | 17,248                       |   |                          |        |                          |        
|                                                                                   | Acquisition of businesses, net of cash acquired                                     |                         |         | (12,129                      | ) |                          |        |                          |        
|                                                                                   | Purchases of long-term investments and deposits on property and equipment           |                         |         | (16,799                      | ) |                          | (2,303  | )                        |        
|                                                                                   |                                                                                     |                         |         |                              |   |                          |         |                          |        
|                                                                                   | Net cash used in investing activities                                               |                         |         | (111,858                     | ) |                          | (5,053  | )                        |        
|                                                                                   |                                                                                     |                         |         |                              |   |                          |         |                          |        
|Cash flows from financing activities:                                              |                                                                                     |                         |         |                              |   |                          |         |                          |        
|                                                                                   | Certain short-term borrowings, net                                                  |                         |         | 5,647                        |   |                          |        |                          |        
|                                                                                   | Proceeds from borrowings                                                            |                         |         | 3,894                        |   |                          | 7,142   |                          |        
|                                                                                   | Repayment of borrowings and capital lease obligations                               |                         |         | (1,937                       | ) |                          | (21,377 | )                        |        
|                                                                                   | Dividends paid                                                                      |                         |         | (26,295                      | ) |                          |        |                          |        
|                                                                                   | Minority interest capital contributions                                             |                         |         | 490                          |   |                          |        |                          |        
|                                                                                   | Issuance of common stock                                                            |                         |         | 6,047                        |   |                          | (364    | )                        |        
|                                                                                   | Excess tax benefits from stock-based compensation                                   |                         |         | 12,068                       |   |                          | 428     |                          |        
|                                                                                   |                                                                                     |                         |         |                              |   |                          |         |                          |        
|                                                                                   | Net cash used in financing activities                                               |                         |         | (86                          | ) |                          | (14,171 | )                        |        
|                                                                                   |                                                                                     |                         |         |                              |   |                          |         |                          |        
|Effect of exchange rates on cash and cash equivalents                              |                                                                                     |                         | 4,462   |                              |   | (617                     | )       |                          | 1,268  
|                                                                                   |                                                                                     |                         |         |                              |   |                          |         |                          |        
|Net increase (decrease) in cash and cash equivalents                               |                                                                                     |                         | 67,978  |                              |   | (12,727                  | )       |                          | 48,795 
|Cash and cash equivalents at beginning of period                                   |                                                                                     |                         | 207,617 |                              |   | 220,344                  |         |                          | 171,549
|                                                                                   |                                                                                     |                         |         |                              |   |                          |         |                          |        
|Cash and cash equivalents at end of period                                         |                                                                                     | $                       | 275,595 |                              | $ | 207,617                  |         | $                        | 220,344
|                                                                                   |                                                                                     |                         |         |                              |   |                          |         |                          |        
|Supplemental disclosures of non-cash investing and financing activities:           |                                                                                     |                         |         |                              |   |                          |         |                          |        
|Capital lease obligation incurred                                                  |                                                                                     | $                       |        |                              | $ |                         |         | $                        | 4,619  
|Shares issued for Focus acquisition                                                |                                                                                     |                         |        |                              |   |                         |         |                          | 2,639  
|Supplemental cash flow data:                                                       |                                                                                     |                         |         |                              |   |                          |         |                          |        
|                                                                                   | Interest paid                                                                       |                         |         | 2,705                        |   |                          | 623     |                          |        
|                                                                                   | Income taxes paid                                                                   |                         |         | 133,126                      |   |                          | 294     |                          |        

See accompanying notes to consolidated financial statements

F-8

---



GUESS?, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) Summary of Significant Accounting Policies and Practices

Description of the Business

Guess?, Inc. (the "Company" or "GUESS?") designs, markets, distributes and licenses a leading lifestyle collection of contemporary apparel and accessories
for men, women and children that reflect the American lifestyle and European fashion sensibilities. The Company's designs are sold in GUESS? owned stores, to a network of wholesale accounts that
includes primarily better department stores, selected specialty retailers and upscale boutiques and through the Internet. GUESS? branded products, some of which are produced under license, are also
sold internationally through a series of licensees and distributors.

Fiscal Year Change

On January 18, 2007, the Board of Directors of the Company approved a change in the Company's fiscal year end from December 31 to the Saturday
nearest January 31 of each year. Previously the Company's fiscal year ended on December 31. The change, which aligned the Company's reporting cycle with the National Retail Federation
fiscal calendar and provided for more consistent quarter-to-quarter comparisons, was effective with the Company's 2008 fiscal year. The Company's 2008 fiscal year began on
February 4, 2007 and ended February 2, 2008, resulting in a one-month transition period ("January 2007") that began January 1, 2007 and ended February 3, 2007.

The
Company's fiscal years are designated in the financial statements by the calendar year in which the fiscal year ends. Typically a fiscal year represents a fifty-two week
year, but occasionally includes an additional week, resulting in a fifty-three week year. All references herein to "fiscal 2007" represent the results of the 53-week fiscal year ended
February 3, 2007, and references to "fiscal 2008" represent the results of the 52-week fiscal year ended February 2, 2008. In addition, all references herein to "fiscal 2009"
represent the 52-week fiscal year ending January 31, 2009.

Classification of Certain Costs and Expenses

The Company includes inbound freight charges, purchasing costs, retail store occupancy costs and a portion of the Company's distribution costs related to its
retail business in costs of product sales. Distribution costs related to the wholesale business are included in selling, general and administrative expenses and amounted to $24.5 million,
$15.4 million, $7.8 million and $1.8 million for the fiscal years ended February 2, 2008, December 31, 2006 and December 31, 2005 and the
one-month period ended February 3, 2007, respectively. The Company includes store selling, selling and merchandising, advertising, wholesale distribution costs, design and other
corporate overhead costs as a component of selling, general and administrative expenses.

The
Company classifies amounts billed to customers for shipping fees as revenues, and classifies costs related to shipping as cost of product sales in the accompanying consolidated
statements of income.

Principles of Consolidation

The consolidated financial statements include the accounts of Guess?, Inc., its wholly-owned direct and indirect subsidiaries and its majority-owned
subsidiaries. Accordingly, all references herein to "Guess?, Inc." include the consolidated results of the Company and its subsidiaries. All intercompany accounts and transactions are
eliminated during the consolidation process.

F-9

---



GUESS?, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(1) Summary of Significant Accounting Policies and Practices (Continued)

Stock Split

On February 12, 2007, our Board of Directors approved a two-for-one stock split of the Company's common stock which was effected in
the form of a 100% stock dividend. Each shareholder of record at the close of business on February 26, 2007 was issued one additional share of common stock for every share of common stock owned
as of that time. The additional shares were distributed on or about March 12, 2007. All share and per share amounts in this Annual Report on Form 10-K have been adjusted to
reflect the 2007 stock split.

Use of Estimates

The preparation of the financial statements in conformity with accounting principles generally accepted in the United States of America requires management to
make estimates and assumptions that affect the amounts reported in the financial statements and disclosed in the accompanying notes. Significant areas requiring the use of management estimates relate
to the valuation of inventories, accounts receivable allowances, sales return allowances, pension obligations, the useful life of assets for depreciation, evaluation of asset impairment, litigation
accruals, recoverability of deferred taxes, workers compensation and medical self-insurance expense and accruals, stock-based compensation, and evaluation of net recoverable amounts and
accruals for the sublet of certain lease obligations. Actual results could differ from those estimates.

Reclassifications

The Company has made certain reclassifications to prior years' consolidated financial statements to conform to classifications used in the current year. These
reclassifications had no impact on previously reported results of operations.

Business Segment Reporting

Where applicable, the Company reports information about business segments and related disclosures about products and services, geographic areas and major
customers. The business segments of the Company are retail, wholesale, European and licensing. Information regarding these segments is summarized in Note 15 to these Consolidated Financial
Statements. The Company believes this segment reporting reflects how its four business segments are managed and each segment's performance is evaluated. The retail segment includes the Company's
retail operations in North America. The wholesale segment includes the wholesale operations in North America and our Asian operations. The European segment includes both wholesale and retail
operations in Europe. The licensing segment includes the worldwide licensing operations of the Company.

Revenue Recognition



The Company recognizes retail operations revenue at the point of sale and wholesale operations revenue from the sale of merchandise when products are shipped and
the customer takes title and assumes risk of loss, collection of relevant receivable is reasonably assured, pervasive evidence of an arrangement exists, and the sales price is fixed or determinable.
The Company accrues for estimated sales returns and other allowances in the period in which the related revenue is recognized. To recognize the financial

F-10

---



GUESS?, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(1) Summary of Significant Accounting Policies and Practices (Continued)

impact
of sales returns, the Company estimates the amount of goods that will be returned based on historical experience and reduces sales and cost of sales accordingly based on historical return
experience.



Royalty revenue is based upon a percentage, as defined in the underlying agreement, of the licensee's actual net sales or minimum net sales, whichever is greater.
The Company may receive special payments in consideration of the grant of license rights. These payments are recognized ratably as revenue over the term of the license agreement. The unrecognized
portion of upfront payments is included in deferred royalties and accrued expenses depending on the long or short-term nature of the payments to be recognized. During 2005, the Company
successfully renegotiated license agreements for certain significant product categories comprising watches, handbags and eyewear. The renewal terms call for certain fixed, cash rights payments which
are over-and-above our normal, ongoing royalty payments. During 2005, the Company received $42.7 million in cash for these significant renewals and recorded the same
amount as deferred royalties. The Company recognized revenues relating to these fixed cash rights payments of $8.5 million, $1.5 million, $1.5 million and $0.7 million in
the fiscal years ended February 2, 2008, December 31, 2006 and December 31, 2005 and the one-month period ended February 3, 2007, respectively.



The Company completed its analysis of unredeemed electronic gift card liabilities in the quarter ended August 4, 2007 for the U.S. retail business. Gift
card breakage is income recognized due to the non-redemption of a portion of gift cards sold by the Company for which a liability was
recorded in prior periods. Beginning with the quarter ended August 4, 2007, these amounts are accounted for under the redemption recognition method and are classified as additional net revenues
as the gift cards are redeemed. The Company determined a gift card breakage rate of approximately 6.5% in the quarter ended August 4, 2007 based upon historical redemption patterns, which
represented the cumulative estimated amount of gift card breakage from the inception of the electronic gift card program in late 2002. Based upon historical redemption trends, the Company recognizes
estimated gift card breakage as a component of net revenue in proportion to actual gift card redemptions, over the period that remaining gift card values are redeemed. As of February 2, 2008,
the Company has recognized $3.5 million gift card breakage to revenue, of which $3.1 million, or $0.02 per diluted share, was a one-time cumulative adjustment recognized in
the quarter ended August 4, 2007. Any future revisions to the estimated breakage rate may result in changes in the amount of breakage income recognized in future periods.

Advertising Costs

The Company expenses the cost of advertising as incurred. Advertising expenses charged to operations for the fiscal years ended February 2, 2008,
December 31, 2006 and December 31, 2005 and the one-month period ended February 3, 2007 were $37.1 million, $22.4 million, $19.8 million and
$1.0 million, respectively.

Share-based Compensation

Effective January 1, 2006, the Company adopted the fair value recognition provisions of SFAS 123R, "Share-Based Payments," using the modified
prospective transition method. Under this method,

F-11

---



GUESS?, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(1) Summary of Significant Accounting Policies and Practices (Continued)

compensation
cost recognized in 2006 included: (a) compensation expense for all stock-based payments granted prior to, but not yet vested as of, December 31, 2005, based on the grant
date fair value estimated in accordance with the original provisions of SFAS 123, "Accounting for Stock-Based Compensation," and (b) compensation expense for all stock-based awards
granted to employees on or after January 1, 2006, based on the grant date fair value estimated in accordance with the provisions of SFAS 123R. The fair value of each stock option was
estimated on the grant date using the Black-Scholes option-pricing model.

See
Note 17 to the Consolidated Financial Statements for further information regarding stock-based compensation.

Foreign Currency

The local currency is the functional currency for all of our significant international operations. In accordance with SFAS No. 52, "Foreign Currency
Translation," assets and liabilities of the Company's foreign operations are translated from foreign currencies into U.S. dollars at year-end rates, while income and expenses are
translated at the weighted-average exchange rates for the year. The related translation adjustments are reflected as a foreign currency translation adjustment in accumulated other comprehensive income
(loss) as a separate component of stockholders' equity. Transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the local
functional currency, including gains and losses on foreign currency contracts, are included in the Consolidated Statements of Income. The foreign currency translation adjustment increased accumulated
other comprehensive income by $22.1 million, from $6.4 million as of February 3, 2007 to $28.5 million as of February 2, 2008. Net foreign currency transaction
losses included in the determination of net earnings were $2.8 million, $0.8 million, $0.7 million and $0.3 million for the fiscal years ended February 2, 2008,
December 31, 2006 and December 31, 2005 and the one-month period ended February 3, 2007, respectively.

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 and swaps to hedge the risk of foreign currency rate fluctuations. The Company has elected to apply the hedge accounting rules as required by SFAS No. 133 ("SFAS 133"),
"Accounting for Derivative Instruments and Hedging Activities," for certain of these hedges. The Company's objective is to hedge the variability in forecasted cash flow due to the foreign currency
risk (USD/Canadian exchange rate) associated with certain anticipated inventory purchases on a first dollar basis for specific months. Changes in the fair value of forward contracts designated as
cash-flow hedges are recorded as a component of accumulated other comprehensive earnings within stockholders' equity, and are recognized in cost of goods sold in the period which
approximates the time the hedged merchandise inventory is sold.

Also,
the Company has foreign currency contracts that are not designated as hedges for accounting purposes. Changes in fair value of foreign currency contracts not qualifying as cash
flow hedges are reported in net earnings as part of other income and expenses.

Income Taxes

The Company uses the asset and liability method of accounting for income taxes. Under this method, deferred income taxes are recognized for the future tax
consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are
measured using enacted tax rates expected to be applied to taxable

F-12

---



GUESS?, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(1) Summary of Significant Accounting Policies and Practices (Continued)

income
in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred taxes of a change in tax rates is recognized in income in the period that
includes the enactment date.

In
June 2006, the FASB issued FASB Interpretation No. 48 ("FIN 48"), "Accounting for Uncertainty in Income Taxes," which is an interpretation of SFAS No. 109
("SFAS 109"), "Accounting for Income Taxes." FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise's financial statements in accordance with
SFAS 109 and prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax
return. FIN 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. FIN 48 is effective for fiscal
years beginning after December 15, 2006. The Company adopted FIN 48 in January 2007. The adoption of FIN 48 did not have a material impact on the Company's financial position and
results of operations.

Earnings per Share

Basic earnings per share represents net earnings divided by the weighted-average number of shares of common stock outstanding for the period. Diluted earnings per
share represents net earnings divided by the weighted-average number of shares outstanding, inclusive of the dilutive impact of common stock equivalents such as stock options and other nonvested
awards, calculated using the treasury stock method.

The
reconciliation of basic to diluted weighted average shares is as follows (in thousands):

Year
Ended
Feb. 2, 2008

One Month
Ended
Feb. 3, 2007

Year
Ended
Dec. 31, 2006

Year
Ended
Dec. 31, 2005Weighted average shares used in basic computations

92,307

91,668

90,618

88,774Dilutive equity awards

1,388

1,452

1,456

1,344Weighted average shares used in diluted computations

93,695

93,120

92,074

90,118


For
the fiscal years ended February 2, 2008, December 31, 2006 and December 31, 2005 and the one-month period ended February 3, 2007, the
difference between basic and diluted earnings per share was due to the potential dilutive impact of options to purchase common stock and other nonvested equity awards. Options for 309,324, 473,220,
145,094 and 132,287, of the Company's shares, respectively, were outstanding during fiscal years ended February 2, 2008, December 31, 2006 and December 31, 2005 and the
one-month period ended February 2, 2007 but were excluded from the computation of diluted weighted average common shares and common share equivalents outstanding because their
effect would have been anti-dilutive. The Company also initially excluded one million nonvested stock awards granted to Paul Marciano on January 1, 2007 and 150,000 nonvested stock
awards granted to Carlos Alberini on August 6, 2007 from the computation of diluted weighted average common shares and common share equivalents outstanding, because they are subject to certain
performance-based vesting conditions measured over a five-year period and a four and one-half year term, respectively. For the period ended February 2, 2008, the first
annual performance criteria for Paul Marciano and Carlos Alberini were achieved, resulting in a dilutive impact of approximately 108,798 and 7,307 shares, respectively.

F-13

---



GUESS?, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(1) Summary of Significant Accounting Policies and Practices (Continued)

Fair Value of Financial Instruments

The carrying amount of the Company's 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. Investments are recorded at fair value.

The
fair values of the Company's debt instruments (See Note 8) are based on the amount of future cash flows associated with each instrument discounted using the Company's
borrowing rate. At February 2, 2008 and February 3, 2007, 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.

Cash and Cash Equivalents

Cash and cash equivalents consist of cash on hand and marketable securities with original maturities of three months or less.

Investment Securities

The Company accounts for its investment securities in accordance with Financial Accounting Standards Board ("FASB") Statement of Financial Accounting Standards
No. 115, "Accounting for Certain Investments in Debt and Equity Securities" ("SFAS 115"). SFAS 115 requires investments to be classified into one of three categories based on
management's intent: held-to-maturity securities, available-for-sale securities and trading securities. Held-to-maturity
securities are recorded at their amortized cost. Available-for-sale securities are recorded at fair value with unrealized gains and losses reported as a separate component of
stockholders' equity. Trading securities are recorded at market value with unrealized gains and losses reported in operations. The Company accounts for its long-term investment securities
as available-for-sale.

Concentration of Credit and Liquidity Risk

The Company's financial instruments that are exposed to concentrations of credit risk consist primarily of accounts receivable. In addition, cash used primarily
for working capital purposes is maintained with various major financial institutions. The Company performs evaluations of the relative credit standing of these financial institutions in order to limit
the amount of asset and liquidity exposure with any institution. Excess cash and cash equivalents, which represent the majority of our outstanding cash and cash equivalents balance, are held primarily
in one diversified municipal money market fund. The fund, which is AAA rated, is comprised of high-quality, liquid instruments.

The
Company extends credit to corporate customers based upon an evaluation of the customer's financial condition and credit history and generally requires no collateral. The Company
maintains allowances for doubtful accounts for estimated losses that result from the inability of its wholesale customers to make their required payments. The Company bases its allowances on analysis
of the aging of accounts receivable at the date of the financial statements, assessments of historical collections trends and an evaluation of the impact of current economic conditions. The Company's
corporate customers are principally located throughout North America, Europe, and Asia, and their ability to pay amounts due to the Company may be dependent on the prevailing economic conditions of
their geographic region. However, such credit risk is considered limited due to the Company's large customer base. Management

F-14

---



GUESS?, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(1) Summary of Significant Accounting Policies and Practices (Continued)

performs
regular evaluations concerning the ability of its customers to satisfy their obligations and records a provision for doubtful accounts based on these evaluations. The Company's credit losses
for the periods presented are insignificant and have not significantly exceeded management's estimates. One of the Company's domestic wholesale customers has accounted for approximately 4.4%, 5.5%,
5.8%, and 3.8% of the Company's consolidated net revenue in the fiscal years ended February 2, 2008, December 31, 2006 and December 31, 2005 and the one-month period
ended February 3, 2007, respectively. The Company does not have significant credit exposure to any one European or Asian customer.

Inventories

Inventories are valued at the lower of cost (primarily weighted average method) or market. The Company continually evaluates its inventories by assessing slow
moving product as well as prior seasons' inventory. Market value of aged inventory is estimated based on historical sales trends for this category of inventory of the Company's individual product
lines, the impact of market trends, an evaluation of economic conditions and the value of current orders relating to the future sales of this type of inventory.

Depreciation and Amortization

Depreciation and amortization of property and equipment are provided using the straight-line method over the following useful lives:

Building and building improvements including properties under capital lease

10 to 33 yearsLand improvements

5 yearsMachinery and equipment

3 to 10 yearsCorporate aircraft

5 yearsCorporate vehicles

4 to 5 yearsShop fixtures

2 to 5 years


Leasehold
improvements are amortized over the lesser of the estimated useful life of the asset or the term of the lease, unless the renewal is reasonably assured. Construction in
progress is not depreciated until the related asset is completed and placed in service.

Long-Lived Assets

In accordance with Statement of Financial Accounting Standards No. 144 ("SFAS 144"), "Accounting for the Impairment or Disposal of
Long-Lived Assets," long-lived assets, such as property, plant, and equipment, and purchased intangibles subject to amortization, are reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an
asset to the estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is
recognized in the amount by which the carrying amount of the asset exceeds the estimated discounted future cash flows. The Company recorded charges related to store impairment of
$0.6 million, $2.4 million and $0.6 million, respectively, for the fiscal years ended February 2, 2008, December 31, 2006 and December 31, 2005. There were no
impairment charges recorded during the one-month period ended February 3, 2007.

F-15

---



GUESS?, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(1) Summary of Significant Accounting Policies and Practices (Continued)

Other
intangible assets as of February 2, 2008 primarily consisted of lease and license acquisition costs related to the three recent European acquisitions. See Note 19 for
further information regarding intangible assets acquired from the Focus acquisition and Note 21 for the BARN acquisition. Gross intangible assets were $37.7 million and
$24.2 million at February 2, 2008 and February 3, 2007, respectively. The accumulated amortization of intangible assets with finite useful lives was $14.0 million and
$6.5 million at February 2, 2008 and February 3, 2007, respectively. For these assets, amortization expense is expected to be approximately $8.7 million in fiscal 2009,
$7.7 million in fiscal 2010, $3.3 million in fiscal 2011, $0.8 million in fiscal 2012 and $0.7 million in fiscal 2013.

Goodwill

Goodwill is tested annually for impairment or more frequently if events and circumstances indicate that the asset might be impaired. An impairment loss is
recognized to the extent that the carrying amount exceeds the asset's fair value. This determination is made at the reporting unit level and consists of two steps. First, the Company determines the
fair value of a reporting unit and compares it to its carrying amount. Second, if the carrying amount of a reporting unit exceeds its fair value, an impairment loss is recognized for any excess of the
carrying amount of the reporting unit's goodwill and other intangibles over the implied fair value. The implied fair value is determined by allocating the fair value of the reporting unit in a manner
similar to a purchase price allocation, in accordance with SFAS No. 141, "Business Combinations." The Company had goodwill of approximately $29.4 million and $24.7 million at
February 2, 2008 and February 3, 2007, respectively. During the one-month period ended February 3, 2007, goodwill was reduced by $3.0 million as a result of a
purchase price allocation adjustment relating to the Focus acquisition. No goodwill impairments have been recognized for the fiscal years ended February 2, 2008, December 31, 2006 and
December 31, 2005 and the one-month period ended February 3, 2007.

Supplemental Executive Retirement Plan

Effective December 31, 2006, the Company adopted Statement of Financial Accounting Standards No. 158 ("SFAS 158"), "Employers' Accounting for
Defined Benefit Pension and Other Postretirement Plansan amendment of FASB Statements No. 87, 88, 106, and 132(R)." Under SFAS 158, an asset for a plan's overfunded status
or a liability for a plan's underfunded status is recognized in the
consolidated balance sheet; plan assets and obligations that determine the plan's funded status are measured as of the end of the Company's fiscal year, and changes in the funded status of defined
benefit postretirement plans are recognized in the year in which they occur. Such changes are reported in other comprehensive income and as a separate component of stockholders' equity. As a result of
adopting SFAS 158, the Company reduced other assets by $14.7 million, increased deferred tax assets by $9.6 million, recorded an incremental liability of $10.3 million and
recorded incremental charges to accumulated other comprehensive income (loss) of $15.4 million, net of taxes.

See
Note 10 to the Consolidated Financial Statements for further information regarding the Supplemental Executive Retirement Plan.

Deferred Rent and Lease Incentives

When a lease includes lease incentives (such as a rent holiday or reimbursement of certain lessee construction costs) or requires fixed escalations of the minimum
lease payments, rental expense is recognized on a straight-line basis over the term of the lease and the difference between the average rental

F-16

---



GUESS?, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(1) Summary of Significant Accounting Policies and Practices (Continued)

amount
charged to expense and amounts payable under the lease is included in deferred rent and lease incentives in the accompanying consolidated balance sheets.

Litigation Reserves

Estimated amounts for claims that are probable and can be reasonably estimated are recorded as liabilities in the consolidated balance sheets. The likelihood of a
material change in these estimated reserves would be dependent on new claims as they may arise and the favorable or unfavorable outcome of the particular litigation. As additional information becomes
available, the Company assesses the potential liability related to pending litigation and revises estimates as appropriate. Such revisions in estimates of the potential liability could materially
impact the results of operations and financial position.

Statement of Stockholders' Equity and Comprehensive Income

The consolidated statement of stockholders' equity and comprehensive income for the year ended December 31, 2006 included an incorrect presentation of the
adoption of FASB Statement No. 158 ("FAS 158"), "Employers' Accounting for Defined Benefit Pension and Other Postretirement PlansAn Amendment of FASB Statements
No. 87, 88, 106 and 132(R)." That presentation included a $15.4 million charge for the impact of the adoption as a component of current-period comprehensive income, rather than
displaying the adoption impact as a separate component of accumulated other comprehensive income.

The
Company corrected the consolidated statement of stockholders' equity and comprehensive income for the year ended December 31, 2006 in this Annual Report on
Form 10-K. The immaterial revision had no impact on net income, total accumulated other comprehensive income, total assets or cash flows for the year ended December 31, 2006.

Comprehensive Income

Comprehensive income consists of net earnings, Supplemental Executive Retirement Plan ("SERP") related prior service cost and valuation loss amortization,
unrealized gains or losses on investments available for sale, foreign currency translation adjustments and the effective portion of the change in the fair value of cash flow hedges. Comprehensive
income is presented in the consolidated statements of stockholders' equity and comprehensive income.

(2) New Accounting Standards

In September 2006, the FASB issued SFAS No. 157, ("SFAS 157"), Fair Value Measurement, which defines fair value, establishes a framework for
measuring fair value in accordance with GAAP and expands disclosures about fair value measurements. The provisions of SFAS 157 are effective for fiscal years beginning after November 15,
2007. In February 2008, the FASB issued FSP SFAS 157-1 and FSP SFAS 157-2. FSP 157-1 amends SFAS 157 to exclude SFAS No. 13, "Accounting
for Leases", and its related interpretive accounting pronouncements that address leasing transactions. FSP FAS 157-2 will delay the effective date of SFAS 157 for all
nonfinancial assets and nonfinancial liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually). FSP
FAS 157-2 partially defers the effective date of SFAS 157 to fiscal years beginning after November 15, 2008, and interim periods within those fiscal years for items
within the scope of FSP 157-2. Effective for fiscal 2009, the Company will adopt SFAS 157 except as it applies to those nonfinancial assets and nonfinancial

F-17

---



GUESS?, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(2) New Accounting Standards (Continued)

liabilities
as noted in FSP FAS 157-2. The Company is currently evaluating the potential effect that the adoption of SFAS 157 could have on its financial position and results
of operations.

In
February 2007, the FASB issued SFAS No. 159, ("SFAS 159"), "The Fair Value Option for Financial Assets and Financial Liabilities", which permits entities to voluntarily
choose to measure many financial instruments and certain other items at fair value. SFAS 159 provides entities an opportunity to mitigate volatility in reported earnings that is caused by
measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. SFAS 159 is effective for fiscal years beginning after November 15,
2007. SFAS 159 will be effective for the Company beginning on February 3, 2008. The Company is currently evaluating the potential effect that the adoption of SFAS 159 could have
on its financial position and results of operations.

In
December 2007, the FASB issued SFAS No. 141 (revised 2007), ("SFAS 141R"), "Business Combinations", which replaces FASB Statement 141. SFAS 141R establishes
principles and requirements for how an acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, any non controlling interest in the
acquiree and the goodwill acquired. SFAS 141(R) also modifies the recognition for preacquisition contingencies, such as environmental or legal issues, restructuring plans and acquired research
and development value in purchase accounting. SFAS 141(R) amends SFAS No. 109, "Accounting for Income Taxes", to require the acquirer to recognize changes in the amount of its deferred
tax benefits that are recognizable because of a business
combination either in income from continuing operations in the period of the combination or directly in contributed capital, depending on the circumstances. SFAS 141R also establishes
disclosure requirements which will enable users to evaluate the nature and financial effects of the business combination. SFAS 141R is effective as of the beginning of an entity's fiscal year
that begins after December 15, 2008. The Company is currently evaluating the potential impact, if any, of the adoption of SFAS 141R on the Company's consolidated financial statements
relating to potential future acquisitions.

In
December 2007, the FASB issued SFAS No. 160 ("SFAS 160") "Accounting for Noncontrolling Interests", which clarifies the classification of noncontrolling interests in
consolidated statements of financial position and the accounting for and reporting of transactions between the reporting entity and holders of such noncontrolling interests. SFAS 160 will be
effective for fiscal years beginning after December 15, 2008. The Company is currently evaluating the potential impact, if any, of the adoption of SFAS 160 on the Company's consolidated
financial statements.

In
March 2008, the FASB issued SFAS No. 161 ("SFAS 161"), "Disclosures about Derivative Instruments and Hedging Activities," which amends SFAS 133 and expands
disclosures to include information about the fair value of derivatives, related credit risks and a company's strategies and objectives for using derivatives. SFAS 161 is effective for fiscal
periods beginning on or after November 15, 2008. Early adoption is encouraged. The Company is currently evaluating the potential impact of the adoption of SFAS 161 on its disclosures in
the Company's consolidated financial statements.

(3) Investment Securities

Long-term investments consist of certain marketable equity securities of $0.9 million and $1.2 million at February 2, 2008 and
February 3, 2007, respectively, and are included in other assets in the accompanying consolidated balance sheets. Unrealized gains (losses), net of taxes are included as a component of
stockholders' equity and comprehensive income (loss). Unrealized losses related to

F-18

---



GUESS?, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(3) Investment Securities (Continued)

marketable
equity securities at February 2, 2008 and February 3, 2007 were $0.3 million and $0.5 million, respectively.

(4) Accounts Receivable

Accounts receivable consists of trade receivables primarily relating to the Company's wholesale businesses in Europe and North America. The Company provided for
allowances relating to these receivables of $20.3 million and $16.6 million, at February 2, 2008 and February 3, 2007, respectively. In addition, accounts receivable
includes royalty receivables relating to licensing operations, for which, the Company recorded an allowance for doubtful accounts of $0.3 million and $0.3 million at February 2,
2008 and February 3, 2007, respectively. The accounts receivable allowance includes allowances for doubtful accounts, wholesale markdowns and sales returns. Retail sales returns allowances are
included in accrued expenses.

(5) Inventories

Inventories are summarized as follows (in thousands):

Feb. 2, 2008

Feb. 3, 2007Raw materials

$
6,506

$
3,151Work in progress


5,596


3,166Finished goodsEurope


87,459


63,114Finished goodsRetail


92,965


78,097Finished goodsWholesale


39,633


26,140$
232,159

$
173,668


At
February 2, 2008 and February 3, 2007, the carrying amount of inventories had been written down to the lower of cost or market by $21.2 million and
$14.1 million, respectively.

(6) Property and Equipment

Property and equipment is summarized as follows (in thousands):

Feb. 2,
2008

Feb. 3,
2007Land and land improvements

$
3,057

$
3,057Building and building improvements


4,084


3,445Leasehold improvements


194,478


161,273Machinery and equipment


214,076


183,917Corporate aircraft


1,175


803Shop fixtures


35,554


36,464Construction in progress


16,004


6,309Properties under capital lease


25,804


22,409494,232


417,677Less accumulated depreciation and amortization


264,315


255,122$
229,917

$
162,555


F-19

---



GUESS?, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(6) Property and Equipment (Continued)

Construction in progress at February 2, 2008 and February 3, 2007 represents the costs associated with the construction in progress of leasehold
improvements to be used in the Company's operations, primarily for new and remodeled stores in retail operations. During the fiscal years ended February 2, 2008, December 31, 2006 and
December 31, 2005 and the one-month period ended February 3, 2007, interest costs capitalized in construction in progress amounted to $137,000, $145,000, $172,000 and $2,000,
respectively.

See
Notes 8 and 12 to the Consolidated Financial Statements for further information regarding capital lease obligations.

(7) Accrued Expenses

Accrued expenses are summarized as follows (in thousands):

Feb. 2,
2008

Feb. 3,
2007Accrued compensation and benefits

$
49,241

$
39,071Income taxes


19,724


25,503Deferred royalties


12,610


12,710Store credits and gift cards


11,635


10,044Construction costs


9,791


3,735Deferred rent and lease incentives


8,518


5,581Sales and use taxes, property taxes, and other taxes


6,218


5,396Focus acquisition remaining payment





8,530Professional fees


3,649


2,514Advertising


2,676


Security deposit


1,639


215Legal accrual





914Retail sales returns


1,128


905Other


15,950


13,082$
142,779

$
128,200


(8) Borrowings and Capital Lease Obligations

Borrowings and capital lease obligations are summarized as follows (in thousands):

Feb. 2,
2008

Feb. 3,
2007Short term loans with European banks

$
32,742

$
18,831European capital lease


20,422


19,309Other loans


814


53,978


38,140Less current installments


35,254


20,804Long-term borrowings and capital lease obligations

$
18,724

$
17,336


F-20

---



GUESS?, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(8) Borrowings and Capital Lease Obligations (Continued)

On
September 19, 2006, the Company and certain of its subsidiaries entered into a credit facility led by Bank of America, N.A., as administrative agent for the lenders (the
"Credit Facility"). The Credit Facility provides for an $85 million revolving multicurrency line of credit and is available for direct borrowings and the issuance of letters of credit, subject
to certain letters of credit sublimits. The Credit Facility is scheduled to mature on September 30, 2011. The Credit Facility replaced the (a) Amended and Restated Loan and Security
Agreement by and among Wachovia Capital Finance Corporation (Western) (formerly known as Congress Financial Corporation (Western)) and Guess?, Inc., Guess? Retail, Inc. and
Guess.com, Inc., dated as of December 20, 2002, as amended, and (b) Canadian Loan and Security Agreement by and among Wachovia Capital Finance Corporation (Canada) (formerly known
as Congress Financial Corporation (Canada)) and Guess Canada, dated as of December 20, 2002, as amended (together, the "Prior Credit Facility").

The
obligations under the Credit Facility are guaranteed by certain of the Company's existing and future domestic subsidiaries, and such obligations, including the guarantees, are
secured by (a) substantially all present and future property and assets of the Company and each guarantor and (b) the equity interests of certain of the Company's direct and indirect
U.S. subsidiaries and 65% of the equity interests of the Company's first tier foreign subsidiaries.

Direct
borrowings under the Credit Facility will be made, at the Company's option, as (a) Eurodollar Rate Loans, which shall bear interest at the published LIBOR rate for the
respective interest period plus an applicable margin (which was 0.75% at February 2, 2008) based on the Company's leverage ratio at the time, or (b) Base Rate Loans, which shall bear
interest at the higher of (i) for domestic loans, 0.50% in excess of the federal funds rate, and for Canadian loans, 0.50% in excess of the average rate for 30 day Canada dollar bankers'
acceptances, or (ii) the rate of interest as announced by Bank of America as its "prime rate," in each case as in effect from time to time, plus an applicable margin (which was 0.0% at
February 2, 2008) based on the Company's leverage ratio at the time. 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. At February 2, 2008, the Company had $23.8 million in outstanding standby letters of credit, $15.2 million in outstanding documentary letters of credit and no
outstanding borrowings under the Credit Facility.

The
Credit Facility requires the Company to comply with a leverage ratio and a fixed charge coverage ratio. In addition, the Credit Facility contains customary covenants, including
covenants that limit or restrict the Company and 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
Company, through its European subsidiaries, maintains short-term borrowing agreements, primarily for working capital purposes, with various banks in Europe. Under these
agreements, which are generally secured by specific accounts receivable balances, the Company can borrow up to $222.3 million, limited by accounts receivable balances at the time of borrowing,
except for one borrowing agreement which is secured by a $15.0 million standby letter of credit issued under the Company's Credit Facility. Based on the applicable accounts receivable balances
at February 2, 2008, the Company could have

F-21

---



GUESS?, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(8) Borrowings and Capital Lease Obligations (Continued)

borrowed
up to approximately $194.6 million under these agreements. However, the Company's ability to borrow through foreign subsidiaries is generally limited to $185.0 million under the
terms of our Credit Facility. At February 2, 2008, the Company had $32.1 million of outstanding borrowings and $1.7 million in outstanding documentary letters of credit under
these agreements. The agreements are denominated in Euros, have no financial ratio covenants and provide for annual interest rates ranging from 4.6% to 6.1%. The maturities of the
short-term borrowings are linked to the credit terms of the underlying accounts receivable that secure the borrowings.

The
Company entered into a capital lease of approximately $16.0 million in December 2005 for a new building in Florence, Italy, with subsequent build-outs which were
completed in 2006. Key functions related to the Company's Italian operation are located in this building, including design
and merchandising. This transaction resulted in a capital lease obligation of $20.4 million as of February 2, 2008. The Company entered into separate interest rate swap agreements
designated as non-hedging instruments resulting in a fixed rate of 3.55%. These interest rate swap agreements mature through 2016 and convert the nature of the capital lease obligation
from Euribor floating rate debt to fixed rate debt. The fair value of the interest rate swap asset as of February 2, 2008 was approximately $0.5 million.

From
time to time the Company will obtain other short term financing in foreign countries for working capital to finance its local operations.

Maturities
of debt and capital lease obligations at February 2, 2008 are as follows (in thousands):

Capital Lease

Debt

TotalFiscal 2009

$
2,229

$
33,025

$
35,254Fiscal 2010


1,721


531


2,252Fiscal 2011


1,774





1,774Fiscal 2012


1,827





1,827Thereafter


12,871





12,871$
20,422

$
33,556

$
53,978


F-22

---



GUESS?, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(9) Income Taxes

Income tax expense (benefit) is summarized as follows (in thousands):

Year
Ended
Feb. 2, 2008

One Month
Ended
Feb. 3, 2007

Year
Ended
Dec. 31, 2006

Year
Ended
Dec. 31, 2005Federal:Current

$
67,291

$
2,127

$
44,101

$
45,039Deferred


(3,333
)

(1,605
)

(686
)

(20,944
)State:Current


9,831


802


4,811


7,012Deferred


550


(525
)

(1,142
)

(3,655
)Foreign:Current


60,222


5,558


29,201


12,489Deferred


(9,586
)

(1,506
)

(3,613
)

(1,059
)Minority interests


(876
)

34


43


Total

$
124,099

$
4,885

$
72,715

$
38,882


In
fiscal 2008, foreign current tax expense of $1.7 million was recorded relating to a prospective change to the Italian tax rate.

Except
where required by U.S. tax law, no provision was made for U.S. income taxes on the undistributed earnings of the foreign subsidiaries as the Company intends to utilize those
earnings in the foreign operations for an indefinite period of time or repatriate such earnings only when tax-effective to do so. That portion of accumulated undistributed earnings of
foreign subsidiaries at fiscal year-end February 2, 2008 and February 3, 2007 was approximately $120 million and $60 million, respectively.

Actual
income tax expense differs from expected income tax expense obtained by applying the statutory Federal income tax rate to earnings before income taxes as follows (in thousands):

Year
Ended
Feb. 2, 2008

One Month
Ended
Feb. 3, 2007

Year
Ended
Dec. 31, 2006

Year
Ended
Dec. 31, 2005Computed "expected" tax expense

$
109,012

$
4,452

$
68,599

$
34,193State taxes, net of Federal expense


6,747


180


2,701


2,182Incremental foreign taxes in excess of Federal statutory rates


11,054


642


4,024


2,343Exempt interest


(1,883
)

(152
)

(1,491
)

(271
)Other


45


(271
)

(1,161
)

435Minority interests


(876
)

34


43


Total

$
124,099

$
4,885

$
72,715

$
38,882


F-23

---



GUESS?, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(9) Income Taxes (Continued)

Total
income tax expense (benefit) was allocated as follows (in thousands):

Year
Ended
Feb. 2, 2008

One Month
Ended
Feb. 3, 2007

Year
Ended
Dec. 31, 2006

Year
Ended
Dec. 31, 2005Operations

$
124,099

$
4,885

$
72,715

$
38,882Stockholders' equity


(11,714
)

(295
)

(23,557
)

(3,914
)Total income taxes

$
112,385

$
4,590

$
49,158

$
34,968


The
tax effects of the components of other comprehensive income were allocated as follows (in thousands):

Year
Ended
Feb. 2, 2008

One Month
Ended
Feb. 3, 2007

Year
Ended
Dec. 31, 2006

Year
Ended
Dec. 31, 2005Foreign currency translation adjustment

$
88

$
33

$
307

$
98Unrealized gain (loss) on investments


(117
)

18


(163
)

16SERP


290


82


(10,306
)

Total income tax expense


261

$
133

$
(10,162
)
$
114


Total
pretax income was comprised of the following (in thousands):

Year
Ended
Feb. 2, 2008

One Month
Ended
Feb. 3, 2007

Year
Ended
Dec. 31, 2006

Year
Ended
Dec. 31, 2005Domestic operations

$
200,873

$
2,882

$
134,263

$
71,733Foreign operations


110,590


9,838


61,734


25,962Total pretax income

$
311,463

$
12,720

$
195,997

$
97,695


F-24

---



GUESS?, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(9) Income Taxes (Continued)

The
tax effects of temporary differences that give rise to significant portions of current and non-current deferred tax assets and deferred tax liabilities at
February 2, 2008 and February 3, 2007 are presented below (in thousands):

Feb. 2, 2008

Feb. 3, 2007Deferred tax assets:Fixed assets basis difference

$
12,832

$
14,273Deferred compensation


11,270


3,463Bad debt reserve


7,439


4,026Deferred lease incentives





1,406Uniform capitalization


1,774


1,883Rent expense


6,631


6,109Net operating loss


2,778


1,611Inventory valuation


5,627


4,653Facility closure reserve


238


418Unrealized loss on investment


836


717Deferred income


18,427


19,249SERP


13,131


11,667Other


5,399


7,014Total deferred assets


86,382


76,489Deferred tax liabilities:Goodwill amortization


(5,250
)

(4,403
)Other


(402
)

(2,763
)Valuation allowance


(1,830
)

(1,097
)Net deferred tax assets

$
78,900

$
68,226


Included
above at February 2, 2008 and February 3, 2007, are $21.2 million and $20.0 million for current deferred tax assets, respectively, and
$57.7 million and $48.2 million in non-current deferred tax assets at February 2, 2008 and February 3, 2007, respectively. At February 2, 2008, the
Company's US, China and certain retail operations within Europe had net operating loss carryforwards totaling $2.8 million. Based on the historical earnings of these companies, management
believes that it is more likely than not that the expected results of these operations will not generate sufficient income to utilize all of the net operating loss. Therefore the Company has recorded
a valuation allowance of $1.8 million, which is an increase of $0.7 million from the prior year.

Based
on the historical earnings of the Company and projections of future taxable income, management believes it is more likely than not that the results of operations will generate
sufficient taxable earnings to realize net deferred tax assets.

The
Company adopted FIN 48, Accounting for Uncertainty in Income Taxes, at the beginning of fiscal year 2007. At February 2, 2008, the Company had approximately
$6.0 million of total gross unrecognized tax benefits. Of this total, $3.2 million (net of the federal benefit on state issues) represents the amount of unrecognized tax benefits that,
if recognized, would favorably affect the effective income tax rate in any future periods.

F-25

---



GUESS?, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(9) Income Taxes (Continued)

The
Company and its subsidiaries are subject to U.S. federal and foreign income tax as well as income tax of multiple state and foreign local jurisdictions. The Company has substantially
concluded all U.S. federal income tax matters for years through 2002. Substantially all material state and local, and foreign income tax matters have been concluded for years through 2000.

The
Company's continuing practice is to recognize interest and/or penalties related to income tax matters in income tax expense. The Company had $2.6 million accrued for interest
and $0.2 million accrued for penalties at February 2, 2008.

The
following changes occurred in the amount of unrecognized tax benefits during the year (in thousands):

Balance at February 3, 2007

$
5,846Additions:Tax positions related to the current year


Tax positions related to the prior year


554Reductions:Tax positions related to the prior year


Expiration of statutes of limitation


(366
)Settlements


Balance at February 2, 2008

$
6,034


(10) 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. The initial participants in the SERP are Maurice Marciano, Chairman of the Board, Paul Marciano, Chief Executive Officer and Vice Chairman of the Board, and Carlos Alberini, President
and Chief Operating Officer. As a non-qualified pension plan, no funding of the SERP is required; however, the Company expects to make annual payments into an insurance policy held in a
rabbi trust to fund the expected obligations arising under the non-qualified SERP. The cash surrender value of the insurance policy was $13.3 million and $7.7 million,
respectively, as of February 2, 2008 and February 3, 2007 and is included in other assets. The amount of future payments may vary, depending on the future years of service, future annual
compensation of the participants and investment performance of the trust.

Effective
December 31, 2006, the Company adopted SFAS 158. Under SFAS 158, an asset for a plan's overfunded status or a liability for a plan's underfunded status is
recognized in the consolidated balance sheet; plan assets and obligations that determine the plan's funded status are measured as of the end of the Company's fiscal year, and changes in the funded
status of defined benefit postretirement plans are recognized in the year in which they occur. Such changes are reported in comprehensive income and as a separate component of stockholders' equity.

F-26

---



GUESS?, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(10) Supplemental Executive Retirement Plan (Continued)

The
components of net periodic pension cost to comprehensive income for the fiscal years ended February 2, 2008, and December 31, 2006 and the one-month period
ended February 3, 2007 are (in thousands):

|                                                                |  | Year
Ended
Feb. 2, 2008 |        | One Month
Ended
Feb. 3, 2007 |   | Year
Ended
Dec. 31, 2006 |  
|--------------------------------------------------------------- |  | ----------------------- | ------ | ---------------------------- | - | ------------------------ | -
|Service cost                                                    |  | $                       | 213    |                              | $ | 20                       |  
|Interest cost                                                   |  |                         | 1,724  |                              |   | 161                      |  
|Net amortization of unrecognized prior service cost             |  |                         | 1,743  |                              |   | 162                      |  
|Net amortization of actuarial losses                            |  |                         | 579    |                              |   | 54                       |  
|                                                                |  |                         |        |                              |   |                          |  
|Net periodic defined benefit pension cost                       |  | $                       | 4,259  |                              | $ | 397                      |  
|                                                                |  |                         |        |                              |   |                          |  
|Unrecognized prior service cost charged to comprehensive income |  | $                       | 1,743  |                              | $ | 162                      |  
|Unrecognized net actuarial loss charged to comprehensive income |  |                         | 579    |                              |   | 54                       |  
|Actuarial losses                                                |  |                         | (1,498 | )                            |   |                         |  
|Additional minimum pension liability adjustment                 |  |                         |       |                              |   |                         |  
|Related tax impact                                              |  |                         | (290   | )                            |   | (82                      | )
|                                                                |  |                         |        |                              |   |                          |  
|Total periodic costs and other charges to comprehensive income  |  | $                       | 534    |                              | $ | 134                      |  
|                                                                |  |                         |        |                              |   |                          |  

Accumulated
other comprehensive income, before tax, as of February 2, 2008 consists of the following amounts that have not yet been recognized in net periodic benefit cost (in
thousands):

Feb. 2, 2008

Feb. 3, 2007Unrecognized prior service cost

$
16,044

$
17,787Unrecognized net actuarial loss


9,830


8,913Net balance sheet impact

$
25,874

$
26,700


The
following chart summarizes the SERP's funded status and amounts recognized in the Company's consolidated balance sheets, pursuant to SFAS 158 (in thousands):

Feb. 2, 2008

Feb. 3, 2007Projected benefit obligation

$
(33,593
)
$
(30,159
)Plan assets at fair value(1)





Net liability (included in other long-term liabilities)

$
(33,593
)
$
(30,159
)


---

The
Company assumed a discount rate of 6.50% at February 2, 2008 compared to 5.75% at February 3, 2007, as part of the actuarial valuation performed to calculate the
projected benefit obligation disclosed above, based on the timing of cash flows expected to be made in the future to the participants, applied to high quality yield curves. The assumed rate of
increase in future compensation level was 3.0% as

F-27

---



GUESS?, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(10) Supplemental Executive Retirement Plan (Continued)

of
February 2, 2008 and February 3, 2007. At February 2, 2008, amounts included in comprehensive income that are expected to be recognized as components of net periodic defined
benefit pension cost in fiscal 2009 consist of prior service costs of $1.7 million and actuarial losses of $0.7 million. No benefits are expected to be paid in any of the next five
fiscal years. Aggregate benefits projected to be paid in the subsequent five fiscal years amount to $9.1 million.

(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 Maurice and Paul Marciano, who are executives of the Company, Armand Marciano, their brother and former executive of the
Company, and certain of their children (the "Marciano Trusts").

License Agreements and Licensee Transactions

On January 3, 2005, the Company, through a subsidiary, acquired the remaining 90% of Maco Apparel, S.p.a. ("Maco") that the Company did not already own.
Prior to the acquisition, the Company owned a 10% interest in Maco, which at the time was the Company's licensee for the manufacture and distribution of certain men's and women's jeanswear apparel in
certain parts of Europe.

On
January 1, 2003, the Company entered into a license agreement with BARN S.r.l. ("BARN"), an Italian corporation, under which the Company granted BARN the right to
manufacture and distribute children's clothing in certain territories of Europe for a term of three years. The license agreement was amended as of June 19, 2006 to, among other things, extend
the term until December 31, 2009. The license agreement had terms substantially similar to the Company's other license agreements. Two key employees of the Company's wholly-owned subsidiary,
GUESS? Italia, S.r.l., owned BARN. During the fiscal years ended February 2, 2008, December 31, 2006 and December 31, 2005 and the one-month period ended
February 3, 2007, the Company recorded $1.4 million, $1.2 million, $0.9 million and $0.1 million in revenues, respectively, related to this license. At
February 3, 2007, the Company had $0.2 million royalty receivables due from BARN.

On
January 16, 2008, the Company, through a subsidiary, acquired 100% of the capital stock of BARN for a purchase price of approximately €5.0 million
($7.4 million), subject to certain purchase price adjustments which are expected to be finalized as part of the pending audit of the acquired balance sheet. See Note 21 for further
information regarding the acquisition.

Leases

The Company leases manufacturing, warehouse and administrative facilities from partnerships affiliated with the Marciano Trusts and certain of their affiliates.
There were three of these leases in effect at February 2, 2008, with expiration dates in July 2008, February 2009 and December 2014.

Aggregate
rent expense under these related party leases was $3.5 million, $2.9 million $2.6 million and $0.2 million, respectively, for the fiscal years ended
February 2, 2008, December 31, 2006 and December 31, 2005 and the one-month period ended February 3, 2007. See also lease commitments to related parties in
Note 12 to the Consolidated Financial Statements. The Company believes the related party lease terms have not been significantly affected by the fact that the Company and the lessors are
related.

F-28

---



GUESS?, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(11) Related Party Transactions (Continued)

Aircraft Arrangements

The Company periodically charters aircraft owned by MPM Financial, LLC ("MPM Financial"), an entity affiliated with the Marciano Trusts, through an
independent third party management company
contracted by MPM Financial to manage its aircraft. Pursuant to the original arrangements with MPM Financial and the Air Group, Inc. (the "Air Group"), MPM Financial's original third party
aircraft management company, the Company was entitled to receive a 10% discount from the standard hourly charter rates charged by the Air Group. The arrangements among the Company, MPM Financial and
the Air Group were subsequently terminated and a new independent third party, Avjet Corporation ("Avjet"), has been engaged by MPM Financial to manage its aircraft. Under an informal arrangement with
MPM Financial and Avjet, the Company has and may from time to time continue to charter aircraft owned by MPM Financial through Avjet at a discount from Avjet's preferred customer hourly charter rates.
The total fees paid under these arrangements for the fiscal years ended February 2, 2008, December 31, 2006 and December 31, 2005 and the one-month period ended
February 3, 2007 were approximately $1.4 million, $1.1 million, $0.4 million and $13,000, respectively.

In
May 2006, the Company entered into an agreement to acquire a new corporate aircraft with a scheduled delivery date in December 2007. The Company made down payments of
$16.5 million toward the $18.9 million aggregate purchase price for the aircraft. The Company was considering entering into a sale and leaseback arrangement on completion of construction
of the aircraft. However, after a further review of the Company's investment options and related expenses, the Company concluded that it would be more cost effective and beneficial if a third party
were to acquire the aircraft and make the aircraft available for charter use to the Company on a similar basis as described above. As a result of this determination, Maurice Marciano and Paul Marciano
were approached and agreed to have the aircraft purchase agreement assigned to MPM Financial in exchange for payment to the Company of an amount equal to the full $16.5 million in down payments
made by the Company plus certain other related costs incurred by the Company. The aircraft purchase agreement was assigned to MPM Financial during the fourth quarter of fiscal 2008, and resulted in a
gain to the Company of approximately $0.5 million, related to interest income on the deposits.

(12) Commitments and Contingencies

Leases

The Company leases its showrooms and retail store locations under operating lease agreements expiring on various dates through January 2022. 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 3% to 6%, 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 November, 2012.

The
Company entered into a capital lease of approximately $16.0 million in December 2005 for a new building in Florence, Italy, with subsequent build-outs, which were
completed in 2006. Key functions related to the Company's Italian operations are located in this building, including design and merchandising. This transaction resulted in a capital lease obligation
of $20.4 million as of February 2, 2008. The Company entered into interest rate swap agreements designated as non-hedging instruments

F-29

---



GUESS?, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(12) Commitments and Contingencies (Continued)

resulting
in a fixed rate of 3.55%. These interest rate swap agreements mature through 2016 and convert the nature of the capital lease obligation from Euribor floating rate debt to fixed rate debt.
The fair value of the interest rate swap asset as of February 2, 2008 was approximately $0.5 million.

Future
minimum property lease payments under capital lease and non-cancelable operating leases at February 2, 2008 are as follows (in thousands):

Operating LeasesCapital Lease

Non-
Related
Parties

Related
Parties

TotalFiscal 2009

$
2,868

$
99,336

$
2,117

$
104,321Fiscal 2010


2,508


93,002


539


96,049Fiscal 2011


2,481


81,068


534


84,083Fiscal 2012


2,454


72,354


534


75,342Fiscal 2013


2,426


67,951


534


70,911Thereafter


12,117


226,881


1,068


240,066Total minimum lease payments

$
24,854

$
640,592

$
5,326

$
670,772Less interest


(4,432
)Capital lease obligations

$
20,422Less current portion


(2,229
)Long-term capital lease obligations

$
18,193


Rental
expense for all operating leases during the fiscal years ended February 2, 2008, December 31, 2006 and December 31, 2005 and one-month period
ended February 3, 2007 aggregated $122.3 million, $84.6 million, $73.1 million and $7.4 million, respectively, including percentage rent of $23.1 million,
$4.0 million, $2.3 million and $0.3 million, respectively.

Purchase Commitments

Inventory purchase commitments as of February 2, 2008 were $122.7 million.

Incentive Bonuses

Certain officers and key employees of the Company are entitled to incentive bonuses, primarily based on net earnings of the Company or earnings of the particular
operations impacted by these key employees. In addition, on September 27, 2005 the Compensation Committee of the Board of Directors of the Company approved performance criteria for the payment
of special bonuses to Paul Marciano, Chief Executive Officer and Vice Chairman of the Board of the Company, under the Company's 2004 Equity Incentive Plan if the performance targets with respect to
future earnings from operations for the Company's licensing segment are met. The Company recorded bonus related expense of $1.6 million and $0.1 million, respectively, including payroll
taxes, in the fiscal year ended February 2, 2008 and the one month period ended February 3, 2007 related to these special licensing bonuses. If the pre-established licensing
performance targets are achieved in calendar 2008 and the Company receives a fixed cash rights payment of $35.0 million due in 2012 from one of its licensees, the Company will record an expense
of

F-30

---



GUESS?, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(12) Commitments and Contingencies (Continued)

$3.5 million
in special bonus, plus applicable payroll taxes, which will be payable to Paul Marciano through January 2012.

Litigation

On February 1, 2005, a complaint was filed by Michele Evets against the Company in the Superior Court of the State of California for the County of San
Francisco. The complaint purported to be a class action filed on behalf of current and former GUESS? store managers in California. Plaintiffs sought overtime wages and a preliminary and permanent
injunction. The parties executed a settlement agreement in February 2007, which became effective upon final court approval on November 1, 2007. As of February 2, 2008, the Company paid
$0.8 million related to the net charges in connection with the full and final settlement of this matter.

In
2006, the Officers of the Florence Customs Authorities ("Customs Authorities") began an import customs audit with respect to the Company's Italian subsidiary, Maco
Apparel S.p.A. ("Maco"), in Florence, Italy, acquired on January 3, 2005. Maco was the Italian licensee of GUESS? jeanswear for men and women in Europe. As part of the audit, the Customs
Authorities considered whether the Italian subsidiary should have included the royalty expense payable to Guess?, Inc., the parent company, as part of the cost of the product subject to customs
duties. The Customs Authorities have subsequently reviewed specific transactions which occurred in 2003, 2004 and 2005 and provided a preliminary assessment that the royalty expenses are subject to
customs duties and related penalties. The Company is disputing the Customs Authorities assessment and intends to vigorously defend its position. In addition, under the terms of the Maco purchase
agreement, the seller is required to indemnify the Company for 90% of any loss with respect to Maco for periods prior to the acquisition. The Custom Authorities have filed several claims which are
heard independently within various sections of the Florence Provincial Tax Commission. Each claim represents a portion of the period under
review. The first hearings with the Florence Provincial Tax Commission commenced on October 29, 2007. Judgments for two claims have been received that were favorable to the Company on certain
aspects of the claims and unfavorable on other aspects of the claims. The Company will appeal the unfavorable aspects of the judgments. The Company has concluded that the amount of any possible loss
would not be material to the Company's consolidated earnings before income taxes and that the likelihood of incurring a loss is less than probable. Accordingly, no liability related to this matter has
been accrued.

The
Company is also involved in various other employment-related claims and other matters incidental to the Company's business, the resolution of which is not expected to have a material
adverse effect on the Company's consolidated results of operations or financial position. With the exception of the class action accrual at February 3, 2007 discussed above, no material amounts
were accrued as of February 2, 2008 and February 3, 2007.

(13) Savings Plan

The Company established the Guess?, Inc. Savings Plan (the "Savings Plan") under Section 401(k) of the Internal Revenue Code. Under the Savings
Plan, employees ("associates") may contribute up to 100% of their compensation per year subject to the elective limits as defined by IRS guidelines, and the Company may make matching contributions in
amounts not to exceed 3.0% of the associates' annual compensation. Investment selections consist of mutual funds and do not include any Company common stock. The Company's contributions to the Savings
Plan for the fiscal years ended February 2, 2008, December 31,

F-31

---



GUESS?, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(13) Savings Plan (Continued)

2006
and December 31, 2005 and the one-month period ended February 3, 2007 amounted to $0.5 million, $0.4 million, $0.3 million and $40,000,
respectively.

In
January 2002, the Company established a qualified employee stock purchase plan ("ESPP"), the terms of which allow for qualified employees (as defined) to participate in the purchase
of designated shares of the Company's common stock at a price equal to 85% of the lower of the closing price at the beginning or end of each quarterly stock purchase period. See Note 17 for
further details.

Effective
January 1, 2006, the Company adopted a Non-qualified Deferred Compensation Plan (the "DCP"). Under the DCP, select employees who satisfy certain eligibility
requirements and members of the Board of Directors may make annual irrevocable elections to defer a portion of their base compensation and/or bonuses. The deferred amounts and earnings thereon are
payable to participants at specified future distribution dates, upon termination of employment, retirement, disability, death or change in control of the Company, in a lump sum or installments,
pursuant to elections under the rules of the DCP. The DCP is not funded by the Company, and participants have an unsecured contractual commitment by the Company to pay the amounts due under the DCP.
The Company has purchased corporate-owned life insurance to offset this liability which is held in a rabbi trust. The assets held in the rabbi trust are not available for general corporate purposes
except in the event of bankruptcy of the Company. All earnings and expenses of the rabbi trust are reported in the Company's consolidated statement of income. The deferred compensation liability as of
February 2, 2008 and February 3, 2007 was $8.7 million and $2.5 million, respectively. The related long-term asset as of February 2, 2008, and
February 3, 2007 was $8.0 million and $4.6 million, respectively.

(14) Quarterly Information (Unaudited)

The following is a summary of the unaudited quarterly financial information for the fiscal years ended February 2, 2008 and December 31, 2006 (in
thousands, except per share data):

Year ended February 2, 2008

First
Quarter

Second
Quarter

Third
Quarter

Fourth
QuarterNet revenue

$
377,949

$
388,287

$
469,079

$
514,601Gross profit


167,582


173,352


218,481


233,523Net earnings


35,527


37,482


58,274


55,189Earnings per share:Basic

$
0.39

$
0.41

$
0.63

$
0.60Diluted

$
0.38

$
0.40

$
0.62

$
0.59


|
|

Year ended December 31, 2006

First
Quarter

Second
Quarter

Third
Quarter

Fourth
QuarterNet revenue

$
258,978

$
231,037

$
348,748

$
346,421Gross profit


103,632


92,453


163,831


159,463Net earnings


15,396


13,734


48,355


45,683Earnings per share:Basic

$
0.17

$
0.15

$
0.53

$
0.50Diluted

$
0.17

$
0.15

$
0.52

$
0.49


F-32

---



GUESS?, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(15) Segment Information

In accordance with the requirements of SFAS 131, "Disclosures about Segments of an Enterprise and Related Information," the Company's reportable business
segments and respective accounting policies of the segments are the same as those described in Note 1. Management evaluates segment performance based primarily on revenue and earnings from
operations. Corporate overhead, interest
income, interest expense and other income and expense are evaluated on a consolidated basis and not allocated to the Company's business segments.

Segment
information is summarized as follows (in thousands):

Year Ended
Feb. 2,
2008

One Month
Ended
Feb. 3,
2007

Year Ended
Dec. 31,
2006

Year Ended
Dec. 31,
2005Net revenue:Retail operations

$
862,381

$
58,681

$
721,262

$
612,862Wholesale operations


258,445


14,684


146,320


121,103European operations


538,358


55,855


252,363


153,817Licensing operations


90,732


6,732


65,239


48,310$
1,749,916

$
135,952

$
1,185,184

$
936,092Earnings (loss) from operations:Retail operations

$
128,523

$
174

$
100,436

$
65,274Wholesale operations


49,894


1,518


23,963


7,325European operations


120,818


12,346


64,211


28,103Licensing operations


77,941


6,293


57,189


37,804Corporate overhead


(68,037
)

(7,853
)

(52,776
)

(36,696
)$
309,139

$
12,478

$
193,023

$
101,810Capital expenditures:Retail operations

$
64,821

$
1,393

$
35,733

$
37,569Wholesale operations


8,170


1,236


1,253


3,194European operations


17,741


41


8,436


5,565Licensing operations











67Corporate overhead


9,445


80


4,859


2,399$
100,177

$
2,750

$
50,281

$
48,794


|
|

Feb. 2,
2008

Feb. 3,
2007Total assets:Retail operations

$
275,599

$
206,455Wholesale operations


144,891


89,542European operations


435,315


254,871Licensing operations


17,236


13,797Corporate overhead


313,187


278,657$
1,186,228

$
843,322


F-33

---



GUESS?, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(15) Segment Information (Continued)

The
European operations segment includes net revenue and earnings from the BARN licensee acquisition commencing in January 2008. Prior to the BARN acquisition, licensing royalty income
received from BARN was included in the licensing operations segment for the fiscal years ended February 2, 2008, December 31, 2006 and December 31, 2005 and the
one-month period ended February 3, 2007 and amounted to $1.4 million, $1.2 million, $0.9 million and $0.1 million, respectively. The Focus acquisition
was effective December 31, 2006. The licensing royalty income received from Focus prior to the acquisition of the Focus business was included in the licensing operations segment for the years
ended December 31, 2006 and 2005 and amounted to $4.0 million and $2.7 million, respectively. See Note 19 for details on the Focus acquisition.

The
table below presents information related to geographic areas in which the Company operated. In fiscal year 2008, the Company changed its net revenues presentation by geographic areas
from the previous presentation based on the country where the Company's applicable sales organization or licensee is based to the new presentation where net revenue is based on the country where the
Company's or its licensees' customers are located. This change is intended to better reflect the diversification of sales to a broader number of countries. Historical information presented related to
the Company's geographic areas has been reclassified to conform with its current geographic presentation.

Net
revenue is primarily classified based on the country where the Company's customer is located (in thousands):

Year Ended
Feb. 2,
2008

One Month
Ended
Feb. 3,
2007

Year Ended
Dec. 31,
2006

Year Ended
Dec. 31,
2005Net revenue:U.S.

$
848,354

$
58,158

$
719,317

$
626,628Italy


291,976


28,922


156,147


101,850Other European Countries


267,022


28,483


111,781


63,186Canada


220,130


13,129


156,779


113,961Asia


98,650


5,646


26,022


21,419Mexico


8,855


442


2,809


133South America


3,839


328


2,336


2,827Middle East


3,165


233


4,589


3,430Australia


3,048


226


1,508


911South Africa


2,338


196


1,548


1,466Other


2,539


189


2,348


281$
1,749,916

$
135,952

$
1,185,184

$
936,092


F-34

---



GUESS?, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(15) Segment Information (Continued)

|
|

Feb. 2, 2008

Feb. 3, 2007Long-lived assets:U.S.

$
139,311

$
114,515Italy


67,094


49,327Canada


35,070


21,913Other European Countries


9,011


4,854Asia


9,436


2,897Mexico


2,158


477$
262,080

$
193,983


(16) Transition Period Financial Information

On January 18, 2007, the Company's fiscal year end was changed from December 31 to the Saturday closest to January 31 of each year.
Accordingly, the Company is presenting audited financial statements for the one-month transition period ended February 3, 2007. The following table provides certain unaudited
comparative financial information of the same period of the prior year. The one-month transition period ended February 3, 2007 included 34 days compared to 28 days for
the one month ended January 28, 2006:

One Month Ended(in thousands, except per share data)

Feb. 3,
2007

Jan. 28,
2006(unaudited)Statement of income data:Net revenue

$
135,952

$
68,472Gross profit


55,736


22,606Earnings (loss) from operations


12,478


(18
)Income taxes (benefit)


4,885


(15
)Net earnings (loss)


7,980


(24
)Earnings (loss) per share:Basic

$
0.09

$
0.00Diluted

$
0.09

$
0.00Weighted average number of shares outstandingbasic


91,668


89,666Weighted average number of shares outstandingdiluted


93,120


89,666


|
|

Feb. 3,
2007

Jan. 28,
2006(unaudited)Balance sheet data:Working capital

$
283,938

$
193,459Total assets


843,322


637,556Borrowings and capital lease obligations


17,336


52,563Stockholders' equity


438,724


287,774


F-35

---



GUESS?, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(17) Stock-Based Compensation

The Company has four stock-based compensation plans. The Guess?, Inc. 2004 Equity Incentive Plan (the "Plan") provides that the Board of Directors may
grant stock options to officers, key employees and certain consultants and advisors to the Company or any of its subsidiaries. The Plan authorizes grants of options to purchase up to 20,000,000
authorized but unissued shares of common stock. At February 2, 2008 and February 3, 2007 there were 16,064,600 and 16,769,500 shares available for grant under the Plan, respectively.
Stock options granted under the Plan have ten-year terms and typically vest and become fully exercisable in increments of one-fourth of the shares granted on each anniversary
from the date of grant. The three most recent annual grants had a vesting period of three years and ten months, three years and ten months, and three years and nine months,
with an initial vesting period of ten months, ten months and nine months, respectively, followed by three annual vesting periods. The Guess?, Inc. Employee Stock Purchase Plan ("ESPP") allows
for qualified employees to participate in the purchase of designated shares of the Company's common stock at a price equal to 85% of the lower of the closing price at the beginning or end of each
quarterly stock purchase period. The Guess?, Inc. 2006 Non-Employee Directors' Stock Grant and Stock Option Plan (the "Director Plan") provides for the grant of certain stock and
stock options to non-employee directors. The Director Plan authorizes grants of options to purchase up to 2,000,000 authorized but unissued shares of common stock which consists of the
1,000,000 shares that were initially approved for issuance on July 30, 1996 plus an additional 1,000,000 shares that were approved for issuance effective May 9, 2006. At
February 2, 2008 and February 3, 2007 there were 1,054,988 and 1,025,870 shares available for grant under this plan, respectively. In addition, the Guess?, Inc. 1996 Equity
Incentive Plan, under which equity grants have not been permitted since the approval of the Plan in 2004, continues to govern outstanding awards previously made thereunder.

Prior
to January 1, 2006, the Company accounted for those plans under the recognition and measurement principles of APB 25, and related interpretations. No stock-based
employee compensation cost for stock options was reflected in net earnings, as all options granted under those plans had an exercise price equal to the market value of the underlying common stock on
the date of grant. In addition, no compensation expense was recognized for common stock purchases under the Employee Stock Purchase Plan. The Company recorded compensation expense related to its
nonvested stock awards at the market price of the underlying stock on the date of grant as unearned compensation and amortized this amount to expense over the vesting period.

On
June 20, 2005, the Compensation Committee and the Board of Directors approved the immediate acceleration of vesting of options to purchase 750,000 shares of common stock of the
Company, of which 375,000 were held by each of Maurice Marciano and Paul Marciano, then Co-Chairmen of the Board and Co-Chief Executive Officers. The accelerated stock options,
which were originally granted on February 26, 2004 under the Company's 1996 Equity Incentive Plan, have an exercise price of $7.80 per share. The closing price of the Company's common stock on
the New York Stock Exchange on the date of acceleration was $8.68 per share. The purpose of the acceleration of vesting was to enable the Company to avoid recognizing compensation expense associated
with these options in future periods in its income statement, as is required under FAS 123R. The Company strongly believes that given the substantial share ownership of Maurice Marciano and
Paul Marciano in the Company, accelerating the vesting had and will continue to have no impact with respect to their retention.

Effective
January 1, 2006, the Company adopted the fair value recognition provisions of SFAS 123R using the modified prospective transition method. Under this method,
compensation cost recognized included: (a) compensation expense for all stock-based payments granted prior to, but not yet vested as of, December 31, 2005, based on the grant date fair
value estimated in accordance with the original provisions

F-36

---



GUESS?, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(17) Stock-Based Compensation (Continued)

of
SFAS 123 and (b) compensation expense for all stock-based payments granted on or after January 1, 2006, based on the grant date fair value estimated in accordance with the
provisions of SFAS 123R.

The
fair value of each stock option is estimated on the grant date using the Black-Scholes option-pricing model with the following weighted-average assumptions used for new grants. The
risk-free interest rate is based on the U.S. Treasury yield curve in effect for the expected term of the option at the time of grant. The expected volatility is determined based on an
average of both historical volatility and implied volatility. Implied volatility is derived from exchange traded options on the Company's common stock. The expected life used prior to November 2007
was based on the "simplified" method described in the SEC Staff Accounting Bulletin No. 107. For options granted beginning November 2007, the expected term is determined based on historical
trends. The dividend yield for 2006 and prior years was assumed to be zero since the Company had not historically declared and did not have a current plan to declare dividends on an ongoing basis
until the Board of Directors authorized and approved the initiation of quarterly dividends in February, 2007. The expected dividend yield starting from 2007 is based on the Company's history and
expectations of dividend payouts. The expected forfeiture rate is determined based on historical data.

Compensation
expense for new stock options and nonvested stock awards is recognized on a straight-line basis over the vesting period. In accordance with the modified
prospective transition method, results for prior periods have not been restated. SFAS 123R also requires the Company to estimate forfeitures in calculating the expense relating to stock-based
compensation as opposed to recognizing forfeitures as an expense reduction as they occur. The adjustment to apply estimated forfeitures to previously recognized stock-based compensation was considered
immaterial and as such was not classified as a cumulative effect of a change in accounting principle. On January 1, 2006, the Company also reclassified the balance in unearned compensation to
paid-in capital in the consolidated balance sheet in accordance with the provisions of SFAS 123R.

The
following table illustrates the pro-forma effect on net earnings and earnings per share for the year ended December 31, 2005 as if the Company had applied the fair
value recognition provisions of SFAS 123 to stock-based employee compensation (in thousands, except per share data):

Year ended
Dec. 31, 2005Net earnings, as reported

$
58,813Add: Stock-based employee compensation expense included in reported net earnings, net of related tax effects


708Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects


(4,290
)Pro forma net earnings

$
55,231Earnings per share:Basicas reported

$
0.66Basicpro forma

$
0.62Dilutedas reported

$
0.65Dilutedpro forma

$
0.61


F-37

---



GUESS?, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(17) Stock-Based Compensation (Continued)

The
fair value of stock options used to compute the pro-forma net earnings and earnings per common share disclosures above for the year ended December 31, 2005 is the
estimated value at the grant date using the Black-Scholes option-pricing model. The following weighted-average assumptions were used for the valuation of the grants in 2005: risk-free
interest rates of 4.05%; expected volatility of 57%; no expected dividend yield; and a weighted-average expected life of 5 years. The risk-free interest rate was based on the U.S.
Treasury yield curve in effect for the expected term of the option at the time of grant. The expected volatility was determined based on an average of the historical volatility for the expected term.
The dividend yield and expected life were based on historical data. Using the Black-Scholes option-pricing model, the weighted-average fair value of each option granted during 2005 was $4.84.

The
following table summarizes the stock compensation expense under all of the Company's stock plans during the fiscal years ended February 2, 2008 and December 31, 2006
and the one-month period ended February 3, 2007 (in thousands):

Year
Ended
Feb. 2, 2008

One-Month
Ended
Feb. 3, 2007

Year
Ended
Dec. 31, 2006Stock options

$
5,623

$
556

$
4,192Nonvested stock awards/units


13,345


1,008


2,155ESPP


551


21


392$
19,519

$
1,585

$
6,739


F-38

---



GUESS?, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(17) Stock-Based Compensation (Continued)

Stock options

The following table summarizes the stock option activity under all of the Company's stock plans during the one-month period ended February 3,
2007 and the fiscal year ended February 2, 2008:

|                                                             |           | Number of
Shares |          | Weighted-
Average
Exercise
Price |       | Weighted-
Average
Remaining
Contractual
Term (Years) |      | Aggregate
Intrinsic
Value
($000's)
|------------------------------------------------------------ | --------- | ---------------- | -------- | -------------------------------- | ----- | ---------------------------------------------------- | ---- | ----------------------------------
|Options outstanding at December 31, 2006                     |           | 2,931,944        |          | $                                | 10.34 |                                                      |      |                                   
|                                                             | Granted   |                  | 35,656   |                                  |       | 32.54                                                |      |                                   
|                                                             | Forfeited |                  | (6,000   | )                                |       | (17.72                                               | )    |                                   
|                                                             |           |                  |          |                                  |       |                                                      |      |                                   
|Options outstanding at February 3, 2007                      |           | 2,961,600        |          | $                                | 10.59 |                                                      | 7.76 |                                   
|                                                             |           |                  |          |                                  |       |                                                      |      |                                   
|Exercisable at February 3, 2007                              |           | 1,175,666        |          | $                                | 7.51  |                                                      | 7.03 |                                   
|                                                             |           |                  |          |                                  |       |                                                      |      |                                   
|Options exercisable and expected to vest at February 3, 2007 |           | 2,747,247        |          | $                                | 9.27  |                                                      | 7.76 |                                   
|                                                             |           |                  |          |                                  |       |                                                      |      |                                   
|Options outstanding at February 3, 2007                      |           | 2,961,600        |          | $                                | 10.59 |                                                      |      |                                   
|                                                             | Granted   |                  | 270,417  |                                  |       | 41.35                                                |      |                                   
|                                                             | Exercised |                  | (824,911 | )                                |       | (8.10                                                | )    |                                   
|                                                             | Forfeited |                  | (108,999 | )                                |       | (19.28                                               | )    |                                   
|                                                             | Expired   |                  | (5,650   | )                                |       | (8.00                                                | )    |                                   
|                                                             |           |                  |          |                                  |       |                                                      |      |                                   
|Options outstanding at February 2, 2008                      |           | 2,292,457        |          | $                                | 14.71 |                                                      | 7.13 |                                   
|                                                             |           |                  |          |                                  |       |                                                      |      |                                   
|Exercisable at February 2, 2008                              |           | 1,192,338        |          | $                                | 10.27 |                                                      | 6.46 |                                   
|                                                             |           |                  |          |                                  |       |                                                      |      |                                   
|Options exercisable and expected to vest at February 2, 2008 |           | 2,219,801        |          | $                                | 12.33 |                                                      | 7.13 |                                   
|                                                             |           |                  |          |                                  |       |                                                      |      |                                   

The
fair value of each stock option was estimated on the grant date using the Black-Scholes option-pricing model with the following weighted-average assumptions used for grants during
the one-month period ended February 3, 2007: a risk-free interest rate of 4.60%, no expected dividend yield, an expected volatility of 49.6%, an expected forfeiture rate
of 17.97%, and an expected life of 6.25 years.

The
fair value of each stock option was estimated on the grant date using the Black-Scholes option-pricing model with the following weighted-average assumptions used for grants during
the year ended February 2, 2008: a risk-free interest rate of 4.63%, an expected dividend yield of 0.60%, an expected volatility of 46.2%, an expected forfeiture rate of 15.05%, and
an expected life of 6.25 years. For options grants from November 2007 onwards, an expected life of 3.7 years was used.

The
weighted-average grant-date fair value of options granted was $17.57 during the one-month period ended February 3, 2007. There were no stock options
exercised during the month ended February 3, 2007. The compensation expense recognized was $0.6 million before the recognized income tax benefit of $0.2 million during the
one-month period ended February 3, 2007. As of February 3, 2007, there was approximately $10.0 million of unrecognized compensation cost, net of estimated forfeitures,
related to nonvested stock options. This cost is expected to be recognized over a weighted-average period of 1.4 years.

F-39

---



GUESS?, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(17) Stock-Based Compensation (Continued)

The
weighted-average grant-date fair value of options granted was $19.96 and $11.92 during the year ended February 2, 2008 and December 31, 2006, respectively.
The total intrinsic value of stock options exercised during the years ended February 2, 2008, December 31, 2006 and December 31, 2005 was $31.7 million,
$31.0 million and $12.3 million, respectively. The intrinsic value of stock options is defined as the difference between the Company's stock price on the exercise date and the
grant-date exercise price. The total cash received from option exercises was $6.7 million, $11.0 million and $6.3 million during the years ended February 2,
2008, December 31, 2006 and December 31, 2005, respectively. The excess tax benefit realized for the tax deductions from these option exercises for fiscal 2008 was $9.9 million
and is included in cash flows from financing activities for the year ended February 2, 2008. The compensation expense recognized was $5.6 million before the recognized income tax benefit
of $2.3 million during the year ended February 2, 2008. As of February 2, 2008, there was approximately $9.3 million of unrecognized compensation cost, net of estimated
forfeitures, related to nonvested stock options. This cost is expected to be recognized over a weighted-average period of 1.2 years.

Nonvested stock awards/units

The following table summarizes the nonvested stock awards/units activity under all of the Company's stock plans during the one-month period ended
February 3, 2007 and the fiscal year ended February 2, 2008:

Number of
Shares/Units

Weighted-
Average
Grant-Date
Fair ValueNonvested at December 31, 2006

580,286

$
17.86Granted

1,014,190


31.71Vested

(86,500
)

(17.72
)Forfeited or expired

(1,050
)

(18.10
)Nonvested at February 3, 2007

1,506,926

$
27.19Granted

549,394


44.55Vested

(294,811
)

(20.38
)Forfeited or expired

(32,030
)

(23.91
)Nonvested at February 2, 2008

1,729,479

$
33.92


The
weighted-average grant-date fair value of nonvested stock awards/units granted during the year ended December 31, 2006 was $20.96. The weighted-average
grant-date fair value of nonvested stock awards/units granted during the month ended February 3, 2007 was $31.71. The total fair value at grant date of previously nonvested stock
awards/units that were vested during the one-month period ended February 3, 2007 was $1.5 million. During the one-month period ended February 3, 2007, the
total intrinsic value of nonvested stock awards/units that vested was $2.8 million. The excess tax benefit realized for the tax deductions from these vested shares one-month period
ended February 3, 2007 was $0.5 million and has been included in cash flows from financing activities. The total intrinsic value of nonvested stock awards/units outstanding and unvested
at February 3, 2007 was $54.7 million. The compensation expense included in SG&A recognized during January 2007 was $1.0 million, before the recognized income tax benefit of
$0.4 million. As of February 3, 2007, there was approximately $37.4 million of total unrecognized

F-40

---



GUESS?, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(17) Stock-Based Compensation (Continued)

compensation
cost, net of estimated forfeitures, related to nonvested stock awards/units. This cost is expected to be recognized over a weighted-average period of 3.8 years.

The
weighted-average grant-date fair value of nonvested stock awards/units granted during the fiscal year ended February 2, 2008 was $44.55. The total fair value at
grant date of previously nonvested stock awards/units that were vested during fiscal 2008, 2006 and 2005 was $6.0 million, $1.0 million and $0.8 million, respectively. During
fiscal 2008, 2006 and 2005, the total intrinsic value of nonvested stock awards/units that vested was $11.9 million, $2.9 million and $1.5 million, respectively. The excess tax
benefit realized for the tax deductions from these vested shares for fiscal 2008 was $2.2 million and has been included in cash flows from financing activities for the year ended
February 2, 2008. The excess tax shortfall of $0.1 million was included in cash flows from operating activities for the year ended February 2, 2008. The total intrinsic value of
nonvested stock awards/units outstanding and unvested at February 2, 2008 was $64.7 million. The compensation expense included in SG&A recognized during fiscal 2008 was
$13.3 million, before the recognized income tax benefit of $5.3 million. As of February 2, 2008, there was approximately $46.5 million of total unrecognized compensation
cost, net of estimated forfeitures, related to nonvested stock awards/units. This cost is expected to be recognized over a weighted-average period of 2.2 years.

ESPP

In January 2002, the Company established an ESPP, the terms of which allow for qualified employees (as defined) to participate in the purchase of designated
shares of the Company's common stock at a price equal to 85% of the lower of the closing price at the beginning or end of each quarterly stock purchase period. The ESPP is a straight purchase plan and
is not subject to any holding period, however all Company employees are subject to the terms of the Company's securities trading policy which generally prohibits the purchase or sale of any Company
securities during the two weeks before the end of each fiscal quarter through two days after the public announcement by the Company of its earnings for that period. On January 23, 2002, the
Company filed with the SEC a Registration Statement on Form S-8 registering 4,000,000 shares of common stock for the ESPP.

During
the fiscal years ended February 2, 2008, December 31, 2006, and December 31, 2005, 54,243, 54,846 and 73,288 shares of the Company's common stock were issued
pursuant to the ESPP at an average price of $33.18, $16.55 and $7.17 per share, respectively.

The
fair value of stock compensation expense associated with our ESPP was estimated on the date of grant using the Black-Scholes option-pricing valuation model and the following
weighted-average assumptions for grants during fiscal years 2008, 2006 and 2005 and one-month period ended February 3, 2007.

Valuation Assumptions

Year
ended
Feb. 2,
2008

One
month
ended
Feb. 3,
2007

Year
ended
Dec. 31,
2006

Year
ended
Dec. 31,
2005Risk-free interest rate

4.60
%
4.77
%
4.77
%
3.14
%Expected stock price volatility

48.5
%
43.0
%
43.0
%
51.0
%Expected dividend yield

0.65
%




Expected life of ESPP options (in months)

3

3

3

3


F-41

---



GUESS?, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(17) Stock-Based Compensation (Continued)

The
weighted-average grant-date fair value of ESPP options granted during the one-month period ended February 3, 2007 was $7.15.

The
weighted-average grant-date fair value of ESPP options granted during fiscal 2008, 2006 and 2005 was $11.44, $7.15 and $4.86, respectively.

(18) Share Repurchase Program

In March 2008, the Company's Board of Directors terminated the previously authorized 2001 share repurchase program and authorized a new program to repurchase,
from time-to-time and as market and business conditions warrant, up to $200 million of the Company's common stock. Repurchases 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 and the program may be discontinued at any time, without prior notice.

(19) Acquisition of Focus Europe S.r.l. ("Focus")

Effective December 31, 2006, Guess?, Inc., through its wholly-owned subsidiary, GUESS? Europe, B.V. ("Purchaser"), completed the acquisition
of 75% of the equity interest of Focus Europe S.r.l. ("Focus") from Focus Pull S.p.A. ("Seller"). The Focus agreement also provided for the acquisition of 75% of the equity interest of
Focus Spain S.A. ("Focus Spain").

Since
1997, the Company has licensed to Focus the right to manufacture, distribute and retail "GUESS by MARCIANO" contemporary apparel for women and men in Europe, the Middle East and
Asia. The acquisition of the licensee is expected to further accelerate the Company's expansion in Europe.

The
combined Focus and Focus Spain purchase price was finalized in October 2007 in the amount of €19.4 million ($25.6 million) after resolving certain
purchase price adjustments and other contingencies with the Seller. The assets included in the Focus entity acquired at closing comprised inventories not older than one year, certain long term assets
used to operate the business including leasehold interests related to four GUESS by MARCIANO stores and approximately €1.1 million ($1.5 million) in cash to pay for
certain acquired obligations. These obligations, that included certain royalties payable to the Company under the pre-existing license agreement and certain amounts due under a loan
agreement, were explicitly limited to the €1.1 million ($1.5 million) cash acquired. The Purchaser did not assume any trade receivables, other payables or other debt as
part of the Focus acquisition.

At
closing, the Purchaser paid approximately €10.0 million ($13.2 million) in cash and the Company issued €2.0 million
($2.6 million) in Guess?, Inc. common stock based on the stock price at the closing date. After resolving the purchase price contingencies, final payments totaling
€7.4 million ($9.8 million) were made to the Seller.

The
agreement also provides that at specific times during 2008, 2009 and 2010, the Seller may require the Purchaser to acquire the remaining 25% of equity interests in Focus and Focus
Spain for cash based upon a multiple of their combined net income for the immediately preceding fiscal year. The agreement further provides that, at a specific time in 2011, the Purchaser will have
the option to purchase the remaining 25% of equity interest in Focus and Focus Spain for cash based upon a multiple of their consolidated net income for the immediately preceding fiscal year.

F-42

---



GUESS?, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(19) Acquisition of Focus Europe S.r.l. ("Focus") (Continued)

The
following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the date of acquisition of Focus and Focus Spain (in thousands):

Current assets

$
33,159Property and equipment, net


2,168Goodwill


5,092Intangible assets


8,740Total assets acquired


49,159Current liabilities


(19,813
)Deferred tax liabilities


(4,547
)Minority interest


(4,476
)Net assets acquired, excluding cash of $5.4 million

$
20,323


The
$8.7 million of acquired intangible assets primarily represents the acquisition value of the pre-existing Focus license arrangement and lease acquisition costs,
both of which are subject to amortization. The intangible assets acquired from Focus have a weighted-average useful life of approximately four years. The remaining annual amortization expense for the
Focus acquired intangible assets is estimated to be approximately $2.2 million each year for fiscal 2009 through fiscal 2011 and is recorded as an expense in the European operations segment.
Goodwill associated with this acquisition is recorded in the European operations segment and is non-deductible for tax purposes.

(20) Foreign Currency Derivative Financial Instruments

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 and swaps to hedge the risk of foreign currency rate fluctuations. The Company has elected to apply the hedge accounting rules as required by SFAS 133 for certain
of these hedges. The Company's objective is to hedge the variability in forecasted cash flow due to the foreign currency risk (USD/Canadian exchange rate) associated with certain anticipated inventory
purchases on a first dollar basis for specific months.

During
the year ended February 2, 2008, the Company purchased U.S. dollar forward contracts in Canada totaling US$52.0 million to hedge forecasted merchandise purchases
that were designated as cash-flow hedges. As of February 2, 2008, approximately US$27.0 million were outstanding and are expected to mature over the next eleven months. Our
derivative financial instruments are recorded on the consolidated balance sheet at fair value based on quoted market rates. These forward contracts are used to hedge forecasted merchandise purchases
over specific months. Changes in the fair value of forward contracts designated as cash-flow hedges are recorded as a component of accumulated other comprehensive earnings within
stockholders' equity, and are recognized in cost of goods sold in the period which approximates the time the hedged merchandise inventory is sold.

An
unrealized loss of approximately US$1.5 million, net of tax, primarily relating to contracts that have already matured, has been recorded in accumulated other comprehensive
income at February 2, 2008 and will be recognized as a charge to cost of goods sold on a pre-tax basis over the next five months. At February 2, 2008, the unrealized gain of
the remaining open forward contracts recorded on the balance sheet was approximately US$0.1 million. The ineffectiveness was immaterial during the year ended February 2, 2008 and it was
recorded to earnings.

F-43

---



GUESS?, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(20) Foreign Currency Derivative Financial Instruments (Continued)

The
following table summarizes net after-tax derivative activity recorded in accumulated other comprehensive income (in thousands):

Year
Ended
Feb. 2, 2008Beginning Balance

$
Losses from changes in cash flow hedges


(2,439
)Losses reclassified to income


964Ending Balance

$
(1,475
)


Also,
the Company has foreign currency contracts that are not designated as hedges for accounting purposes. Changes in fair value of foreign currency contracts not qualifying as cash
flow hedges are reported in net earnings as part of other income and expense. For the year ended February 2, 2008, the Company recorded losses for the Canadian and Euro foreign currency
contracts of US$1.9 million and US$5.5 million, respectively, which have been included in other income and expense. At February 2, 2008, the Company had Canadian dollar foreign
currency contracts to purchase US$26.0 million, expected to mature over the next eleven months and Euro foreign currency contracts to purchase US$87.6 million, expected to mature over
the next nine months. At February 3, 2007, the Company had Canadian dollar foreign currency contracts to purchase US$2.0 million and Euro foreign currency contracts to purchase
US$43.0 million. Net unrealized losses on these Canadian and Euro forward contracts were $3.3 million (primarily related to our Euro forward contracts), $1.4 million,
$0.1 million and $0.4 million for the fiscal years ended February 2, 2008, December 31, 2006 and December 31, 2005 and the one-month period ended
February 3, 2007, respectively, and were recorded in current liabilities on the consolidated balance sheet.

(21) Acquisition of BARN S.r.l. ("BARN")

Effective January 16, 2008, the Company, through a subsidiary, acquired 100% of the capital stock of BARN for a purchase price of approximately
€5.0 million ($7.4 million), subject to certain purchase price adjustments which are expected to be finalized as part of the pending audit of the acquired balance sheet.

In
2003, the Company licensed to BARN the right to manufacture and distribute children's clothing in certain territories of Europe for a term of three years. The license agreement was
amended as of June 19, 2006 to, among other things, extend the term until December 31, 2009. The acquisition of the licensee increases the assortment of apparel products under direct
management of the Company and is expected to add to the Company's expansion plans in Europe.

The
assets and liabilities included in the acquired entity at closing comprised inventory, trade receivables, payables, debt and certain long term assets used to operate the business
including leasehold interests related to four GUESS KIDS stores.

F-44

---



GUESS?, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(21) Acquisition of BARN S.r.l. ("BARN") (Continued)

The
following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the date of acquisition of BARN. These amounts are considered preliminary as
the Company is still in the process of finalizing the valuations, and hence, these amounts are subject to change (in thousands):

Current assets

$
14,077Property and equipment, net


984Goodwill


3,583Intangible assets


4,968Total assets acquired


23,612Current liabilities


(14,378
)Long-term debt


(578
)Deferred tax liabilities


(1,432
)Net assets acquired, excluding cash of $0.3 million


7,224


The
$5.0 million of acquired intangible assets primarily represents the acquisition value of the pre-existing BARN license arrangement and lease acquisition costs,
both of which are subject to amortization. The license reacquired from BARN has a weighted-average useful life of approximately 2.3 years. The license, which represents the largest intangible
asset class, has a useful life of two years. The total annual amortization of all intangible assets (excluding goodwill) over the next two years is approximately $2.7 million and
$1.7 million for fiscal 2009 and 2010, respectively. Goodwill associated with this acquisition is recorded in the European operations segment and is non-deductible for tax purposes.

(22) Subsequent Events

On March 19, 2008, the Company announced a regular quarterly cash dividend of $0.08 per share on the Company's common stock. The dividend will be payable
on April 18, 2008 to shareholders of record at the close of business on April 2, 2008.

F-45

---





SCHEDULE II  GUESS?, INC. & SUBSIDIARIES  VALUATION AND QUALIFYING ACCOUNTS  Years ended February 2, 2008, February 3, 2007, December 31, 2006 and December 31, 2005  (in
thousands)

|                        |                                    | Balance at
beginning
of period |   | Costs
charged /
credited to
expenses |  | Deductions
and
write-offs |        | Balance
at end
of period
|----------------------- | ---------------------------------- | ------------------------------ | - | ------------------------------------ |  | ------------------------- | ------ | ------------------------
|Description             |                                    |                                |   |                                      |  |                           |        |                         
|As of February 2, 2008  |                                    |                                |   |                                      |  |                           |        |                         
|                        | Allowance for accounts receivable  |                                | $ | 12,653                               |  | $                         | 36,049 |                         
|                        | Allowance for royalties receivable |                                |   | 276                                  |  |                           | 49     |                         
|                        | Allowance for sales returns        |                                |   | 4,806                                |  |                           | 27,793 |                         
|As of February 3, 2007  |                                    |                                |   |                                      |  |                           |        |                         
|                        | Allowance for accounts receivable  |                                | $ | 11,481                               |  | $                         | 2,949  |                         
|                        | Allowance for royalties receivable |                                |   | 284                                  |  |                           | (8     | )                       
|                        | Allowance for sales returns        |                                |   | 6,465                                |  |                           | 8,798  |                         
|As of December 31, 2006 |                                    |                                |   |                                      |  |                           |        |                         
|                        | Allowance for accounts receivable  |                                | $ | 9,123                                |  | $                         | 25,636 |                         
|                        | Allowance for royalties receivable |                                |   | 650                                  |  |                           | (366   | )                       
|                        | Allowance for sales returns        |                                |   | 2,737                                |  |                           | 16,080 |                         
|As of December 31, 2005 |                                    |                                |   |                                      |  |                           |        |                         
|                        | Allowance for accounts receivable  |                                | $ | 8,206                                |  | $                         | 25,883 |                         
|                        | Allowance for royalties receivable |                                |   | 709                                  |  |                           | (59    | )                       
|                        | Allowance for sales returns        |                                |   | 472                                  |  |                           | 6,208  |                         

F-46

---





SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.
| |  | ------------
| |  | By:         
| |  |             

Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the Registrant and in the capacities and on the
dates indicated.

|/s/PAUL MARCIANOPaul Marciano                   |  | Chief Executive Officer,
Vice Chairman of the Board and Director
(Principal Executive Officer)               |  | April 1, 2008
|----------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------ |  | -------------
|/s/MAURICE MARCIANOMaurice Marciano             |  | Chairman of the Board and Director                                                                           |  | April 1, 2008
|/s/CARLOS ALBERINICarlos Alberini               |  | President, Chief Operating Officer and Director                                                              |  | April 1, 2008
|/s/DENNIS R. SECORDennis R. Secor               |  | Senior Vice President and
Chief Financial Officer
(Principal Financial Officer and
Chief Accounting Officer) |  | April 1, 2008
|/s/JUDITH BLUMENTHALJudith Blumenthal           |  | Director                                                                                                     |  | April 1, 2008
|/s/ANTHONY CHIDONIAnthony Chidoni               |  | Director                                                                                                     |  | April 1, 2008
|/s/KAY ISAACSON-LEIBOWITZKay Isaacson-Leibowitz |  | Director                                                                                                     |  | April 1, 2008
|/s/ALICE KANEAlice Kane                         |  | Director                                                                                                     |  | April 1, 2008
|/s/ALEX YEMENIDJIANAlex Yemenidjian             |  | Director                                                                                                     |  | April 1, 2008

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Exhibit Index

|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 on
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 on July 30, 1996).                                                       
|*10.1.         |  | 1996 Equity Incentive Plan (incorporated by reference from Amendment No. 3 to the Registrant's Registration Statement on Form S-1 (Registration No. 333-4419) filed on July 30, 1996).                                                       
|*10.2.        |  | First Amendment to the 1996 Equity Incentive Plan.                                                                                                                                                                                           
|*10.3.         |  | 2004 Equity Incentive Plan (incorporated by reference from Appendix A to the Registrant's Definitive Proxy Statement on Form 14A filed April 14, 2004).                                                                                      
|*10.4.         |  | First Amendment to the 2004 Equity Incentive Plan (incorporated by reference from the Registrant's Quarterly Report on Form 10-Q for the quarter ended April 1, 2006).                                                                       
|*10.5.         |  | Second Amendment to the 2004 Equity Incentive Plan (incorporated by reference from the Registrant's Quarterly Report on Form 10-Q for the quarter ended November 3, 2007).                                                                   
|*10.6.        |  | Third Amendment to the 2004 Equity Incentive Plan.                                                                                                                                                                                           
|*10.7.         |  | 2006 Non-Employee Directors' Stock Grant and Stock Option Plan (As Amended and Restated Effective September 28, 2007) (incorporated by reference from the Registrant's Quarterly Report on Form 10-Q for the
quarter ended November 3, 2007).
|*10.8.        |  | First Amendment to the 2006 Non-Employee Directors' Stock Grant and Stock Option Plan (As Amended and Restated Effective September 28, 2007).                                                                                                
|*10.9.         |  | Annual Incentive Bonus Plan (As Amended and Restated January 18, 2007) (incorporated by reference from the Registrant's Annual Report on Form 10-K for the year ended December 31, 2006).                                                    
|*10.10.        |  | 2002 Employee Stock Purchase Plan (incorporated by reference from the Registrant's Registration Statement on Form S-8 (Registration No. 333-81274) filed on January 23, 2002).                                                               
|*10.11.       |  | First Amendment to the 2002 Employee Stock Purchase Plan.                                                                                                                                                                                    
|*10.12.        |  | Executive Employment Agreement dated January 1, 2007 between the Registrant and Maurice Marciano (incorporated by reference from the Registrant's Annual Report on Form 10-K for the year ended December 31,
2006).                          
|*10.13.        |  | Executive Employment Agreement dated January 1, 2007 between the Registrant and Paul Marciano (incorporated by reference from the Registrant's Annual Report on Form 10-K for the year ended December 31,
2006).                             
|*10.14.        |  | Executive Employment Agreement dated August 6, 2007 between the Registrant and Carlos Alberini (incorporated by reference from the Registrant's Quarterly Report on Form 10-Q for the quarter ended August 4,
2007).                         
|*10.15.        |  | Employment Letter Agreement dated August 16, 2002 between the Registrant and Nancy Shachtman (incorporated by reference from the Registrant's Annual Report on Form 10-K for the year ended December 31,
2002).                              
|*10.16.        |  | Employment Agreement between the Registrant and Stephen Pearson, effective as of January 31, 2006 (incorporated by reference from the Registrant's Current Report on Form 8-K filed February 13,
2006).                                      
|*10.17.       |  | Separation Agreement and General Release of All Claims between the Registrant and Stephen Pearson, dated as of January 30, 2008.                                                                                                             
|*10.18.        |  | Employment Letter Agreement dated February 20, 2004 between the Registrant and Michael Relich (incorporated by reference from the Registrant's Quarterly Report on Form 10-Q for the quarter ended July 1,
2006).                            

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|*10.19. |  | Employment Letter Agreement dated June 8, 2006 between the Registrant and Dennis Secor (incorporated by reference from the Registrant's Quarterly Report on Form 10-Q for the quarter ended July 1,
2006).                                                                                                                                                                                                                                                                                           
|------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|*10.20. |  | Written Description of Performance-Based Bonus Criteria for Paul Marciano (incorporated by reference from the Registrant's Quarterly Report on Form 10-Q for the quarter ended October 1, 2005).                                                                                                                                                                                                                                                                                                     
|*10.21. |  | Written Description of Performance-Based Cash and Equity Award Criteria for Named Executive Officers with Respect to the Registrant's Fiscal Year Ending December 31, 2006 (incorporated by reference from the
Registrant's Annual Report on Form 10-K for the year ended December 31, 2005).                                                                                                                                                                                                        
|*10.22. |  | Written Description of Performance-Based Cash and Equity Award Criteria for Named Executive Officers with Respect to the Registrant's Fiscal Year Ending February 2, 2008 (incorporated by reference from the
Registrant's Quarterly Report on Form 10-Q for the quarter ended May 5, 2007).                                                                                                                                                                                                         
|*10.23. |  | Restricted Stock Agreement dated as of January 1, 2007 between the Registrant and Paul Marciano (incorporated by reference from the Registrant's Annual Report on Form 10-K for the year ended December 31,
2006).                                                                                                                                                                                                                                                                                   
|*10.24. |  | Restricted Stock Agreement dated as of August 6, 2007 between the Registrant and Carlos Alberini (incorporated by reference from the Registrant's Quarterly Report on Form 10-Q for the quarter ended August 4,
 2007).                                                                                                                                                                                                                                                                              
|*10.25. |  | Form of Nonqualified Stock Option Agreement (incorporated by reference from the Registrant's Current Report on Form 8-K filed May 16, 2005).                                                                                                                                                                                                                                                                                                                                                         
|*10.26. |  | Form of Restricted Stock Award Agreement (incorporated by reference from the Registrant's Current Report on Form 8-K filed May 16, 2005).                                                                                                                                                                                                                                                                                                                                                            
|*10.27. |  | Indemnification Agreements between the Registrant and certain executives and directors (incorporated by reference from the Registrant's Annual Report on Form 10-K for the year ended December 31,
1996).                                                                                                                                                                                                                                                                                            
|*10.28. |  | Nonqualified Deferred Compensation Plan (incorporated by reference from the Registrant's Registration Statement on Form S-8 (Registration No. 333-129349) filed on November 1, 2005).                                                                                                                                                                                                                                                                                                                
|*10.29. |  | Supplemental Executive Retirement Plan (incorporated by reference from the Registrant's Quarterly Report on Form 10-Q for the quarter ended October 1, 2005).                                                                                                                                                                                                                                                                                                                                        
|10.30.  |  | Lease Agreement between the Registrant and Robert Pattillo Properties, Inc. (incorporated by reference from the Registrant's Annual Report on Form 10-K for the year ended December 31, 1999).                                                                                                                                                                                                                                                                                                       
|10.31.  |  | Lease Agreement between the Registrant and MAP Properties, Ltd. (incorporated by reference from the Registrant's Annual Report on Form 10-K for the year ended December 31, 2001).                                                                                                                                                                                                                                                                                                                   
|10.32.  |  | Licensing Contribution Agreement dated as of April 28, 2003, by and between Guess? Licensing, Inc. and Guess? IP Holder L.P. (incorporated by reference from the Registrant's Quarterly Report on
Form 10-Q for the quarter ended March 29, 2003).                                                                                                                                                                                                                                                   
|10.33.  |  | Guess? License Agreement dated as of April 28, 2003, by and between Guess? IP Holder L.P. and the Registrant (incorporated by reference from the Registrant's Quarterly Report on Form 10-Q for the quarter
ended March 29, 2003).                                                                                                                                                                                                                                                                   
|10.34.  |  | Purchase Agreement among the Registrant, Guess Italia S.r.l., Fingen S.p.A. and Fingen Apparel N.V. dated December 31, 2004 (incorporated by reference from the Registrant's Current Report on
Form 8-K filed January 5, 2005).                                                                                                                                                                                                                                                                      
|10.35.  |  | Credit Agreement by and among the Registrant and Guess? Canada Corporation, as Borrowers, lenders from time to time party thereto, Bank of America, N.A., as Domestic Administrative Agent and Domestic L/C Issuer, and Bank
of America, N.A., acting through its Canada Branch, as Canadian Administrative Agent and Canadian L/C Issuer, dated as of September 19, 2006 ("Credit Agreement") (incorporated by reference from the Registrant's Current Report on Form 8-K
filed September 25, 2006).

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|10.36. |  | Amendment No. 1 to Credit Agreement, dated as of March 29, 2007 (incorporated by reference from the Registrant's Quarterly Report on Form 10-Q for the quarter ended May 5, 2007). 
|------ |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.37. |  | Amendment No. 2 to Credit Agreement, dated as of July 5, 2007 (incorporated by reference from the Registrant's Quarterly Report on Form 10-Q for the quarter ended August 4, 2007).
|21.1. |  | List of Subsidiaries.                                                                                                                                                              
|23.1. |  | Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm.                                                                                                       
|23.2. |  | Consent of KPMG LLP, Independent Registered Public Accounting Firm.                                                                                                                
|31.1. |  | Certification of Chief Executive Officer and Vice Chairman of the Board pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                 
|31.2. |  | Certification of President and Chief Operating Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                  
|31.3. |  | Certification of Senior Vice President and Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                      
|32.1. |  | Certification of Chief Executive Officer and Vice Chairman of the Board pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                 
|32.2. |  | Certification of President and Chief Operating Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                  
|32.3. |  | Certification of Senior Vice President and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                      

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