GUESS INC ET AL/CA/, S-1, 1996-05-24

GUESS INC ET AL/CA/
S-1, 1996-05-24
WOMEN'S, MISSES', CHILDREN'S & INFANTS' UNDERGARMENTS

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<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 24, 1996

REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
GUESS ?, INC.
(Exact name of registrant as specified in its charter)

<TABLE>
<S> <C> <C>
DELAWARE 2345 95-3679695
(State or other (Primary Standard (I.R.S. Employer
jurisdiction of Industrial Identification Number)
incorporation or Classification Code Number)
organization)
</TABLE>

1444 SOUTH ALAMEDA STREET
LOS ANGELES, CALIFORNIA 90021
(213) 765-3100
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)

ROGER A. WILLIAMS
CHIEF FINANCIAL OFFICER
GUESS ?, INC.
1444 SOUTH ALAMEDA STREET
LOS ANGELES, CALIFORNIA 90021
(213) 765-3100
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
--------------------------

COPIES TO:

<TABLE>
<S> <C>
Rebecca L. Prentice, Esq. Jerome L. Coben, Esq.
Shearman & Sterling Jeffrey H. Cohen, Esq.
777 South Figueroa Street Skadden, Arps, Slate, Meagher & Flom
34th Floor 300 South Grand Avenue, Suite 3400
Los Angeles, California 90017 Los Angeles, California 90071
</TABLE>

--------------------------

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC:
AS SOON AS PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.
--------------------------

If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
--------------------------

CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>
PROPOSED MAXIMUM
NUMBER OF PROPOSED MAXIMUM AGGREGATE
TITLE OF EACH CLASS OF SHARES TO BE OFFERING PRICE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED (1) PER SHARE (2) PRICE (2) REGISTRATION FEE
<S> <C> <C> <C> <C>
Common Stock, par value $.01 per share 10,580,000 $23 $243,340,000 $83,911
</TABLE>

(1) Includes 1,380,000 shares subject to options granted to the Underwriters to
cover over-allotments, if any.

(2) Estimated solely for purposes of calculating the registration fee.
--------------------------

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.

<TABLE>
<CAPTION>
ITEM
NUMBER ITEM LOCATION IN PROSPECTUS
- --------- -------------------------------------------------- ----------------------------------------------------
<C> <S> <C>
1. Forepart of the Registration Statement and Outside
Front Cover Page of Prospectus................... Facing Page; Cross-Reference Sheet; Outside Front
Cover Page of Prospectus
2. Inside Front and Outside Back Cover Pages of
Prospectus....................................... Inside Front Cover Page of Prospectus; Additional
Information; Table of Contents; Outside Back Cover
Page of Prospectus
3. Summary Information, Risk Factors and Ratio of
Earnings to Fixed Charges........................ Prospectus Summary; Risk Factors; Selected Financial
Data
4. Use of Proceeds................................... Prospectus Summary; Use of Proceeds
5. Determination of Offering Price................... Underwriting
6. Dilution.......................................... Dilution
7. Selling Security Holders.......................... Not Applicable
8. Plan of Distribution.............................. Outside Front Cover Page of Prospectus; Underwriting
9. Description of Securities to be Registered........ Outside Front Cover Page of Prospectus; Prospectus
Summary; Description of Capital Stock
10. Interests of Named Experts and Counsel............ Not Applicable
11. Information with Respect to Registrant............ Prospectus Summary; The Company; Risk Factors;
Company History, the Reorganization and Prior S
Corporation Status; Dividend Policy;
Capitalization; Selected Financial Data; Selected
Pro Forma Financial Data; Management's Discussion
and Analysis of Financial Condition and Results of
Operations; Business; Management; Certain
Transactions; Principal Shareholders; Description
of Certain Indebtedness; Shares Eligible for Future
Sale; Description of Capital Stock; Financial
Statements
12. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities...................................... Not Applicable
</TABLE>

------------------------

This Registration Statement contains two forms of prospectus: one to be used
in connection with an offering in the United States and Canada (the "U.S.
Prospectus") and one to be used in a concurrent offering outside the United
States and Canada (the "International Prospectus"). The U.S. Prospectus and the
International Prospectus will be identical in all respects except for the front
and back cover pages and the "Underwriting" section. The U.S. Prospectus is
included herein and is followed by those pages to be used in the International
Prospectus which differ from those in the U.S. Prospectus. Each of the pages for
the International Prospectus included herein has been labeled "Alternate Page
for International Prospectus."

If required pursuant to Rule 424(b) of the General Rules and Regulations
under the Securities Act of 1933, ten copies of each of the prospectuses in the
forms in which they are used after the Registration Statement becomes effective
will be filed with the Securities and Exchange Commission.
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any state in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such state.
<PAGE>
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED MAY 24, 1996
PROSPECTUS
9,200,000 SHARES

[LOGO]

COMMON STOCK
------------------

Of the 9,200,000 shares of Common Stock of Guess ?, Inc. offered hereby,
7,360,000 shares are initially being offered in the United States and Canada by
the U.S. Underwriters and 1,840,000 shares are initially being offered outside
the United States and Canada by the International Managers. The initial public
offering price and the aggregate underwriting discount per share are identical
for each of the Offerings. See "Underwriting."

Prior to the Offerings, there has been no public market for the Common
Stock. It is currently estimated that the initial public offering price per
share of Common Stock will be between $21 and $23. See "Underwriting" for a
discussion of the factors to be considered in determining the initial public
offering price of the Common Stock.

The Company intends to make application to list the Common Stock on the New
York Stock Exchange.

SEE "RISK FACTORS" BEGINNING ON PAGE 7 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK OFFERED
HEREBY.
---------------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

<TABLE>
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT (1) COMPANY (2)
<S> <C> <C> <C>
Per Share........................... $ $ $
Total (3)........................... $ $ $
</TABLE>

(1) The Company and the Principal Stockholders have agreed to indemnify the
several Underwriters against certain liabilities, including certain
liabilities under the Securities Act of 1933, as amended. See
"Underwriting."

(2) Before deducting expenses payable by the Company estimated to be $ .

(3) The Company has granted to the U.S. Underwriters and the International
Managers options, exercisable within 30 days after the date of this
Prospectus, to purchase up to an additional 1,104,000 and 276,000 shares of
Common Stock, respectively, to cover over-allotments, if any. If all such
additional shares are purchased, the total Price to Public, Underwriting
Discount and Proceeds to Company will be $ , $ and $ ,
respectively. See "Underwriting."
------------------------

The shares of Common Stock are offered by the several Underwriters, subject
to prior sale, when, as and if issued to and accepted by them, and subject to
the approval of certain legal matters by counsel for the Underwriters and
certain other conditions. The Underwriters reserve the right to withdraw, cancel
or modify such offer and to reject orders in whole or in part. It is expected
that delivery of the shares of Common Stock will be made in New York, New York
on or about , 1996.

------------------------

MERRILL LYNCH & CO. MORGAN STANLEY & CO.
INCORPORATED
----------------------------------

The date of this Prospectus is , 1996.
<PAGE>
[PICTURES]

IN CONNECTION WITH THE OFFERINGS, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE OR
OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.

2
<PAGE>
PROSPECTUS SUMMARY

THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND FINANCIAL STATEMENTS (INCLUDING THE NOTES THERETO) APPEARING
ELSEWHERE IN THIS PROSPECTUS. UNLESS OTHERWISE NOTED, ALL COMMON STOCK SHARE
AMOUNTS, PER SHARE DATA AND OTHER INFORMATION SET FORTH IN THIS PROSPECTUS (I)
HAVE BEEN ADJUSTED TO REFLECT A FOR 1 STOCK SPLIT, WHICH WILL BE EFFECTED
PRIOR TO CONSUMMATION OF THE OFFERINGS, AND (II) ASSUME THAT THE UNDERWRITERS'
OVER-ALLOTMENT OPTIONS HAVE NOT BEEN EXERCISED. UNLESS THE CONTEXT REQUIRES
OTHERWISE, THE "COMPANY" OR "GUESS," AS USED IN THIS PROSPECTUS, MEANS GUESS ?,
INC. AND GUESS EUROPE B.V., GUESS ITALIA, S.R.L. AND RANCHE LIMITED ("GUESS
ASIA"), EACH OF WHICH IS OR WILL BECOME A CONSOLIDATED SUBSIDIARY OF GUESS ?,
INC. PRIOR TO THE CONSUMMATION OF THE OFFERINGS.

THE COMPANY

Guess ?, Inc. (the "Company" or "Guess"), founded in 1981 by the Marciano
brothers, designs, markets, distributes and licenses one of the world's leading
lifestyle collections of casual apparel, accessories and related consumer
products. The Company's apparel for men and women is inspired by an appreciation
of the American lifestyle combined with a European flair and is marketed under
the trademarks GUESS, GUESS U.S.A., GUESS? AND TRIANGLE DESIGN and GUESS
COLLECTION. The lines include full collections of denim and cotton clothing,
including jeans, pants, overalls, skirts, dresses, shorts, blouses, shirts,
jackets and knitwear. In addition, the Company has granted licenses to
manufacture and distribute a broad range of products that complement the
Company's apparel lines, including watches, clothing for infants and children,
eyewear, footwear, activewear, home products and other fashion accessories. The
Company's product quality combined with captivating advertising images have
created a global brand franchise with products that appeal to style-conscious
consumers across a broad spectrum of ages. The Company generates net revenue
from wholesale and retail operations and licensing activities, which accounted
for 56%, 35% and 9%, respectively, of net revenue in 1995. The Company's total
net revenue in 1995 was $486.7 million and pro forma net earnings (as described
herein) were $43.3 million.

The Company achieves premium pricing for its products by emphasizing
superior styling and quality. The Company maintains rigorous control over the
quality of its products by performing its own design and development work and by
closely monitoring the workmanship of its contractors and licensees. The
enduring strength of the GUESS brand name and image is reinforced by the
Company's consistent emphasis on innovative and distinctive design. Under the
direction of Maurice Marciano, the Company's design department creates full
lines of casual apparel that appeal to both men and women. During 1995, net
sales of apparel for men and for women accounted for approximately 48% and 52%,
respectively, of net revenue from the sale of apparel products. Each of the
lines consists of a broad array of basic, recurring styles, complemented by more
fashion-oriented items which reflect contemporary trends. During 1995, net sales
of basic and fashion items accounted for approximately 49% and 51%,
respectively, of the Company's net revenue from the sale of apparel products.

The Company seeks to reach a broad consumer base through multiple channels
of distribution. GUESS brand products are distributed by the Company, its
licensees and international distributors to better department stores and upscale
specialty stores, 112 stores operated by the Company (of which 65 are retail
stores and 47 are factory outlet stores) and 198 stores operated by licensees
and distributors. As a critical element of its distribution to department
stores, the Company and its licensees utilize shop-in-shops to enhance brand
recognition, permit more complete merchandising of the lines and differentiate
the presentation of GUESS products. As of December 31, 1995, the Company's and
its licensees' products were sold in approximately 1,550 shop-in-shops
worldwide. In order to protect the Guess image and enhance the exclusivity of
the brand, the Company began in 1993 to withdraw its products from certain
wholesale accounts which did not meet the Company's merchandising standards.
Sales to such discontinued accounts represented approximately $51.1 million,
$32.9 million and $3.8 million of the Company's net revenue in 1993, 1994 and
1995, respectively. The Company's own network of stores, in addition to
providing a key opportunity for growth, allows the Company to present and
merchandise its entire collection and to test market new product concepts.

3
<PAGE>
The Company intends to capitalize on the worldwide recognition of its brand
name and the breadth of Guess lifestyle products by expanding its international
operations. The Company has established Guess Europe in Italy and Guess Asia in
Hong Kong to design, source and market products in Europe and the Pacific Rim.
Although Guess is in the early stages of its international expansion, GUESS
brand products are currently sold in over 70 countries primarily through
licensees and distributors. Guess also grants licenses for the manufacture and
sale of GUESS branded products similar to the Company's in markets outside the
Company's channels of distribution, such as Canada, Argentina, Mexico, the
Philippines, South Korea, Brazil and Japan.

The desirability of the GUESS brand name among consumers has allowed the
Company to selectively expand its product offerings through licensing
arrangements. The Company believes its licensing strategy significantly broadens
the distribution of GUESS brand products while limiting the Company's capital
investment and operating expenses. The Company carefully selects its licensees,
maintains strict control over the design, advertising, marketing and
distribution of all licensed products and requires all licensees to make
significant investments in advertising, promotion and marketing in order to
maintain a consistent global GUESS brand image. The Company's 26 licensees
manufacture and distribute a broad array of related consumer products in the
United States and international markets. The Company's most significant licenses
include GUESS WATCHES, BABY GUESS, GUESS KIDS and GUESS EYEWEAR, which together
accounted for approximately 48.1% of the Company's net royalties in 1995. The
Company continues to capitalize on the GUESS brand image by granting licenses to
introduce related products. Recently, the Company licensed the GUESS HOME
COLLECTION and GUESS OUTERWEAR, as well as various accessory products.

Under Paul Marciano's direction and supervision, Guess has created a
consistent, high profile image through the use of its distinctive black and
white print ads. The Company's in-house Advertising Department, which has
garnered prestigious awards including the CLIO, BELDING and MOBIUS, directs the
placement of all advertising worldwide, including placement by its licensees. By
retaining control over its advertising programs, the Company is able to maintain
the integrity of the GUESS brand image while realizing a substantial cost
savings compared to the use of outside agencies. From 1992 through 1995, the
Company's advertising expenditures, together with amounts spent by its licensees
and its distributors (as reported to the Company by such licensees and
distributors), exceeded $160 million.

The Company's business strategy is designed to increase sales and
profitability while preserving the integrity and expanding the depth and global
reach of the GUESS brand. To provide greater management depth, the Company has
recently recruited several key executives with substantial industry experience
to faciliate implementation of its business strategy. The business strategy
consists of the following key elements: (i) to maintain high brand recognition,
(ii) to increase international operations through increasing sales to existing
and new distributors, increasing royalties from the growth of licensees'
businesses, increasing the number of retail stores and shop-in-shops and
expanding direct sales penetration through Guess Europe, (iii) to increase both
product and geographic licensing arrangements, (iv) to deepen the Company's
product offerings to include new fabrications and product lines, (v) to expand
and improve the productivity of the Company-operated retail and factory outlet
store network and (vi) to expand and upgrade domestic shop-in-shops.

COMPANY HISTORY

Maurice, Paul and Armand Marciano (the "Principal Executive Officers"),
together with their brother Georges, began in the apparel business in France in
1972 and opened their first retail apparel stores in the United States in 1978
in California. The business of GUESS was founded in 1981 by the Marciano
brothers. The Company was founded on the concept of a fashion jean with the
first GUESS product being the "three-zip Marilyn" jean, which was stone-washed
and adapted to fit the contours of a woman's body. Since that time, the
Company's product offerings have grown to include full lines of men's and
women's casual apparel. In August 1993, Georges Marciano sold his interest in
Guess to the Company and a trust for the benefit of Paul Marciano.

4
<PAGE>
THE OFFERINGS

Of the 9,200,000 shares of Common Stock, par value $.01 per share ("Common
Stock"), to be sold in the Offerings, 7,360,000 shares are initially being
offered in the United States and Canada by the U.S. Underwriters (the "U.S.
Offering") and 1,840,000 shares are initially being offered outside the United
States and Canada by the International Managers (the "International Offering,"
and together with the U.S. Offering, the "Offerings").

<TABLE>
<S> <C>
Common Stock offered by the Company hereby.......... 9,200,000 shares
Common Stock to be outstanding after the Offerings
(1)................................................ shares
Use of proceeds..................................... The estimated net proceeds to the
Company of $188.0 million will be
used to repay the S Distribution
Notes (as defined herein) (estimated
to have an aggregate principal amount
between $ million and $
million). Any remaining net proceeds
will be used to repay outstanding ad-
vances under the Company's revolving
credit facility.
Listing............................................. The Company intends to make
application to list the Common Stock
on the New York Stock Exchange
("NYSE").
</TABLE>

- ------------------------
(1) Excludes approximately shares of Common Stock reserved for issuance
under the Company's 1996 Equity Incentive Plan (the "1996 Equity Plan") and
1996 Non-Employee Directors' Stock Option Plan (the "Directors' Plan"),
including options for shares to be granted immediately prior to the
Offerings. Of such options, will have an exercise price equal to the
initial public offering price and will have an exercise price of
$ . See "Management -- Employment Agreements," "-- 1996 Equity Incentive
Plan" and "-- 1996 Non-Employee Directors' Stock Option Plan."
------------------------------

GUESS-Registered Trademark-, GUESS?-Registered Trademark-, GUESS? AND
TRIANGLE DESIGN-Registered Trademark-, BABY GUESS-TM-, GUESS KIDS-TM-, GUESS
WATCHES-Registered Trademark-, GUESS JEANS-TM-, GUESS U.S.A.-TM- and GUESS
COLLECTION-TM- are included among the Company's trademarks.

5
<PAGE>
SUMMARY FINANCIAL DATA

<TABLE>
<CAPTION>
FIRST
QUARTER ENDED
YEAR ENDED DECEMBER 31, ----------------------
----------------------------------------------------- APRIL 2, MARCH 31,
1991 1992 1993 1994 1995 1995 1996
--------- --------- --------- --------- --------- --------- -----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF EARNINGS DATA:
Net revenue (1)................................... $ 450,531 $ 512,766 $ 520,224 $ 547,812 $ 486,733 $ 124,903 $ 134,898
Earnings from operations.......................... 104,469 109,973 114,464 117,807 82,928 25,476 29,187
Earnings before income taxes...................... 102,527 111,224 105,281 101,181 66,814 21,271 25,318
Net earnings...................................... 99,832 108,368 103,471 97,641 63,919 20,712 24,047
SUPPLEMENTAL STATEMENT OF EARNINGS DATA (2):
Earnings before income taxes...................... 102,527 111,224 105,281 101,181 66,814 21,271 25,318
Income taxes...................................... 41,011 44,490 42,112 40,472 26,726 8,508 10,127
--------- --------- --------- --------- --------- --------- -----------
Net earnings...................................... $ 61,516 $ 66,734 $ 63,169 $ 60,709 $ 40,088 $ 12,763 $ 15,191
--------- --------- --------- --------- --------- --------- -----------
--------- --------- --------- --------- --------- --------- -----------
Net earnings per share (3)........................ $ $
Weighted average common shares outstanding (3)....
</TABLE>

<TABLE>
<S> <C> <C> <C>
PRO FORMA STATEMENT OF EARNINGS DATA (4):
Earnings from operations.............................................................. $ 87,985 $ 28,224 $ 31,026
Earnings before income taxes.......................................................... 72,145 24,302 27,486
Income taxes.......................................................................... 28,858 9,721 10,912
--------- --------- -----------
Net earnings.......................................................................... $ 43,287 $ 14,581 $ 16,574
--------- --------- -----------
--------- --------- -----------
Net earnings per share (3)............................................................ $ $
Weighted average common shares outstanding (3)........................................
</TABLE>

<TABLE>
<CAPTION>
AS OF MARCH 31, 1996
----------------------
AS
ADJUSTED
ACTUAL (5)
--------- -----------
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Working capital....................................................................... $ 93,870 $ 98,278
Total assets.......................................................................... 239,267 246,604
Notes payable and long-term debt...................................................... 152,508 140,808
Net stockholders' equity.............................................................. 17,470 36,507
</TABLE>

- ------------------------------

(1) Includes net revenue from sales (i) to discontinued wholesale accounts that
the Company determined did not meet its merchandising standards of $42.3
million, $51.1 million, $32.9 million and $3.8 million for 1992, 1993, 1994
and 1995, respectively, and $2.5 million and $411,000 for the quarters ended
April 2, 1995 and March 31, 1996, respectively, and (ii) of discontinued
product lines of $82.6 million, $31.7 million, $5.3 million and $1.7 million
for 1992, 1993, 1994 and 1995, respectively, and $1.1 million and $339,000
for the quarters ended April 2, 1995 and March 31, 1996, respectively. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- General."

(2) Reflects adjustments for Federal and state income taxes as if the Company
had been taxed as a C corporation rather than an S corporation.

(3) Reflects shares of Common Stock outstanding prior to the Offerings
and the assumed issuance of 7,343,955 and 7,637,000 shares of Common Stock
as of December 31, 1995 and March 31, 1996, respectively, at an assumed
initial public offering price of $22.00 per share to generate sufficient
cash to pay the S Corporation Distribution (as defined herein) in an amount
equal to retained earnings.

(4) Pro forma operating results reflect adjustments to historical operating
results for (a) the elimination of salaries and bonuses paid to the
Principal Executive Officers in excess of an aggregate of $4.9 million per
year, or $1.2 million per quarter (the estimated aggregate salaries and
bonuses to be paid to the Principal Executive Officers under their
respective employment agreements following the Offerings), (b) the decrease
in depreciation and operating costs of $2.6 million, $677,000 and $623,000
for the year ended December 31, 1995 and the quarters ended April 2, 1995
and March 31, 1996, respectively, associated with two aircraft owned by the
Company, which aircraft will be distributed to the Principal Stockholders as
part of the S Corporation Distribution prior to consummation of the
Offerings, (c) the elimination of the minority interest in Guess Italia
S.r.l. aggregating $274,000, $283,000 and $329,000 for the year ended
December 31, 1995 and the quarters ended April 2, 1995 and March 31, 1996,
respectively, associated with the Reorganization (as defined herein) and (d)
adjustments for Federal and state income taxes as if the Company had been
taxed as a C corporation rather than an S corporation. The Company expects
to enter into an operating lease of one of the aircraft under which the
Company would remain responsible for the expenses of operating and
maintaining the aircraft and would make nominal lease payments for the use
thereof. See "Company History, the Reorganization and Prior S Corporation
Status" and "Management -- Employment Agreements." For additional pro forma
statement of earnings data for 1993, 1994 and 1995 and for the quarters
ended April 2, 1995 and March 31, 1996, see "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Results of
Operations."

(5) Adjusted to give effect to the S Corporation Distribution as if it had been
made as of March 31, 1996 and the Company's S corporation status had been
terminated at such date, the sale of shares of Common Stock by the Company
hereby at the assumed initial public offering price of $22.00 per share and
the application of the estimated net proceeds therefrom to repay
indebtedness of the Company, including indebtedness under the S Distribution
Notes. No adjustment has been made to give effect to the Company's earned
and undistributed taxable S corporation earnings for the period from April
1, 1996 through the consummation of the Offerings, which earnings will be
distributed as part of the S Corporation Distribution. See "Use of Proceeds"
and "Company History, the Reorganization and Prior S Corporation Status."

6
<PAGE>
RISK FACTORS

PROSPECTIVE PURCHASERS OF THE COMMON STOCK OFFERED HEREBY SHOULD CONSIDER
CAREFULLY THE FACTORS SET FORTH BELOW, AS WELL AS OTHER INFORMATION SET FORTH IN
THIS PROSPECTUS, IN EVALUATING AN INVESTMENT IN THE COMMON STOCK.

COMPETITION AND OTHER FACTORS AFFECTING THE APPAREL AND RETAILING INDUSTRIES

The apparel industry is highly competitive, fragmented and subject to
rapidly changing consumer demands and preferences. The Company believes that its
success depends in large part upon its 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 image. Failure by the Company to
identify and respond appropriately to changing consumer demands and fashion
trends could adversely affect consumer acceptance of Guess products and may have
a material adverse effect on the Company's financial condition and results of
operations. Guess competes with numerous apparel manufacturers and distributors
(including Calvin Klein, Ralph Lauren, DKNY, Tommy Hilfiger and Nautica).
Moreover, several well-known designers have recently entered or re-entered the
designer denim market with products generally priced lower than the Company's
designer jeans products. Guess's retail and factory outlet stores face
competition from other retailers. Additionally, the Company encounters
substantial competition from department stores, including some of the Company's
major retail customers. Many of the Company's competitors have greater financial
resources than Guess. The Company's licensed apparel and accessories also
compete with a substantial number of designer and non-designer lines. Increased
competition by existing and future competitors could result in reductions in
sales or prices of Guess products that could have a material adverse effect on
the Company's financial condition and results of operations. In addition, the
apparel industry historically has been subject to substantial cyclical
variations, and a recession in the general economy or uncertainties regarding
future economic prospects that affect consumer spending habits could have a
material adverse effect on the Company's financial condition and results of
operations.

DEPENDENCE UPON CERTAIN CUSTOMERS AND LICENSEES

The Company's department store customers include major United States
retailers. The Company's three largest customers accounted for approximately
26.0% of net revenue in 1995. During 1995, Bloomingdale's, Macy's and affiliated
stores owned by Federated Department Stores together accounted for approximately
11.0% of the Company's net revenue; The May Company accounted for approximately
7.7% of the Company's net revenue; and Dillard's stores accounted for
approximately 7.3% of the Company's net revenue. Although several of the
Company's department store customers are under common ownership, no other single
customer or group of related customers accounted for more than 3.0% of the
Company's net revenue in those periods. While the Company believes that
purchasing decisions in many cases are made independently by each department
store chain under common ownership, the trend may be toward more centralized
purchasing decisions. A decision by the controlling owner of a group of
department stores or any other significant customer to decrease the amount
purchased from the Company or to cease carrying Guess products could have a
material adverse effect on the Company's financial condition and results of
operations. The retail industry has periodically experienced consolidation and
other ownership changes. In the future, the Company's wholesale customers may
consolidate, undergo restructurings or reorganizations, or realign these
affiliations, any of which could decrease the number of stores that carry the
Company's or its licensees' products or increase the ownership concentration
within the retail industry. Approximately 48.1% of the Company's net royalties
were derived from its top four licensed product lines, GUESS WATCHES (19.0% of
1995 net royalties), BABY GUESS (12.0%), GUESS KIDS (9.0%) and GUESS EYEWEAR
(8.0%). The BABY GUESS and GUESS KIDS lines are licensed to the same entity. A
substantial portion of sales of GUESS brand products by its licensees are also
made to the Company's three largest customers. The inability of the Company to
control the quality, focus, image or distribution of its licensed products could
impact consumer receptivity to the Company's products generally and, therefore,
adversely affect the Company's financial condition and results of operations.

7
<PAGE>
RISKS ASSOCIATED WITH ACHIEVING AND MANAGING GROWTH

To manage growth effectively, Guess will be required to continue to
implement changes in certain aspects of its business, continue to expand its
information systems and operations to respond to increased demand, attract and
retain qualified personnel (including management), and develop, train and manage
an increasing number of management-level and other employees. Failure to
continue to enhance operating control systems or unexpected difficulties
encountered during expansion could adversely affect the Company's financial
condition and results of operations.

As part of its operating strategy, Guess intends to continue to expand its
network of retail stores. Factors beyond the Company's control may affect the
Company's ability to expand, including general economic and business conditions
affecting consumer spending. The actual number and type of such stores to be
opened and their success will depend on various factors, including the
performance of the Company's wholesale and retail operations, the acceptance by
consumers of the Company's retail concepts, the ability of the Company to manage
such expansion and hire and train personnel, the availability of desirable
locations and the negotiation of acceptable lease terms for new locations.
Certain of these factors are also beyond the Company's control.

In addition, Guess's strategy relies heavily upon its ability to align
itself with effective distributors and licensees that are able to deliver
high-quality products consistent with the GUESS brand image in a timely fashion
and to successfully integrate such distributors and licensees into its global
distribution channels. A general failure by the Company to maintain and control
its existing distribution and licensing arrangements or to procure additional
distribution and licensing relationships could adversely affect the Company's
growth strategy, which could adversely affect the Company's financial condition
and results of operations.

The Company's strategic plan for its wholesale division depends in part on
its ability to expand and upgrade its shop-in-shop program and deepen its
product offerings. This strategy is subject to a number of factors beyond the
Company's control including general economic conditions and changing consumer
preferences. Between 1992 and 1995, net revenue from wholesale operations
decreased 32%. There can be no assurance that the Company's business strategy
will be successful in halting or reversing this decline in net revenue.

DEPENDENCE UPON KEY PERSONNEL

The success of Guess is largely dependent upon the personal efforts and
abilities of its senior management, particularly Mr. Maurice Marciano, Chairman
of the Board and Chief Executive Officer, Mr. Paul Marciano, President and Chief
Operating Officer, and Mr. Armand Marciano, Senior Executive Vice President and
Secretary. Effective upon consummation of the Offerings, Maurice, Paul and
Armand Marciano will continue to beneficially own an aggregate of % of the
Company's outstanding Common Stock and each will enter into employment
agreements with the Company. Although the Company has recently recruited several
key executives with substantial industry expertise, the extended loss of the
services of one or more of the Principal Executive Officers could have a
material adverse effect on the Company's operations. The Company does not
currently have "key man" insurance with respect to any of such individuals. See
"Management -- Employment Agreements."

FOREIGN OPERATIONS AND SOURCING; IMPORT RESTRICTIONS

During 1995, approximately 21% of the Company's purchases of raw materials,
labor and finished goods for its apparel were made in Hong Kong and other Asian
countries; approximately 4% were made in Europe; approximately 1% were made
elsewhere outside the United States; and the balance of 74% were made in the
United States, all through arrangements with independent contractors. In recent
years, Guess has been increasing its sourcing of fabrics outside of the United
States. In addition, Guess has been increasing its international sales and, in
1995, approximately 5.1% of the Company's net revenue was from product sales to
customers in international markets. As a result, the Company's operations may be
affected adversely by political instability resulting in the disruption of trade
with the countries in which the Company's contractors, suppliers, or customers
are located, the imposition of additional regulations relating to imports, the
imposition of additional duties, taxes, and other charges on imports,
significant fluctuations in the value of the dollar against foreign currencies,
or restrictions on the transfer of funds. The inability of a

8
<PAGE>
contractor to ship orders in a timely manner could cause the Company to miss the
delivery date requirements of its customers for those items, which could result
in cancellation of orders, refusal to accept deliveries, or a reduction in sales
prices. Further, since Guess is unable to return merchandise to its suppliers,
it could be faced with a significant amount of unsold merchandise, which could
have a material adverse effect on the Company's financial condition and results
of operations.

Sovereignty over Hong Kong is scheduled to be transferred from the United
Kingdom to The People's Republic of China effective July 1, 1997. If the
business climate in Hong Kong were to experience an adverse change as a result
of the transfer, the Company believes it could relocate its production and
sourcing facilities outside Hong Kong and replace the merchandise currently
produced in Hong Kong with merchandise produced elsewhere without a material
adverse effect on the Company's operations. Nevertheless, there can be no
assurance that the Company would be able to do so.

The Company's import operations are subject to constraints imposed by
bilateral textile agreements between the United States and a number of foreign
countries, including Hong Kong, China, Taiwan and South Korea. These agreements,
which have been negotiated bilaterally either under the framework established by
the Arrangement Regarding International Trade in Textiles, known as the
Multifiber Agreement, or other applicable statutes, impose quotas on the amounts
and types of merchandise which may be imported into the United States from these
countries. These agreements also allow the United States to impose restraints at
any time and on very short notice on the importation of categories of
merchandise that, under the terms of the agreements, are not currently subject
to specified limits. Imported products are also subject to United States customs
duties which comprise a material portion of the cost of the merchandise. A
substantial increase in customs duties could have an adverse effect on the
Company's operating results. The United States and the countries in which the
Company's products are produced or sold may, from time to time, impose new
quotas, duties, tariffs, or other restrictions, or adversely adjust prevailing
quota, duty, or tariff levels, any of which could have a material adverse effect
on the Company's results of operations.

PROTECTION OF TRADEMARKS

Guess believes that its trademarks and other proprietary rights are
important to its success and its competitive position. Accordingly, Guess
devotes substantial resources to the establishment and protection of its
trademarks on a worldwide basis. Nevertheless, there can be no assurance that
the actions taken by the Company to establish and protect its trademarks and
other proprietary rights will be adequate to prevent imitation of its products
by others or to prevent others from seeking to block sales of Guess products as
violative of the trademarks and proprietary rights of others. No assurance can
be given that others will not assert rights in, or ownership of, trademarks and
other proprietary rights of Guess. In addition, the laws of certain foreign
countries do not protect proprietary rights to the same extent as do the laws of
the United States. See "Business -- Trademarks."

FUTURE SALES BY PRINCIPAL STOCKHOLDERS; SHARES ELIGIBLE FOR FUTURE SALE

The Common Stock offered hereby will be freely tradeable (other than by an
"affiliate" of the Company as such term is defined in the Securities Act of
1933, as amended (the "Securities Act")) without restriction or registration
under the Securities Act. Immediately after the Offerings, trusts controlled by
and for the benefit of Maurice Marciano, Paul Marciano and Armand Marciano,
respectively (the "Principal Stockholders"), will beneficially own approximately
%, % and %, respectively, of the outstanding Common Stock. Subject to
the restrictions set forth below, the Principal Stockholders will be free to
sell such shares from time to time to take advantage of favorable market
conditions or for any other reason. Future sales of shares of Common Stock by
the Company and its stockholders could adversely affect the prevailing market
price of the Common Stock. Guess and the Principal Stockholders have entered
into lock-up agreements with Merrill Lynch, Pierce, Fenner & Smith Incorporated
("Merrill Lynch") and Morgan Stanley & Co. Incorporated, as representatives of
the U.S. Underwriters (the "U.S. Representatives"), and with Merrill Lynch
International and Morgan Stanley & Co. International Limited, as representatives
of the International Managers (the "International Representatives" and, together
with the U.S. Representatives, the "Representatives"), pursuant to which the
Company and the Principal Stockholders have agreed, subject to certain
exceptions, not to, directly or indirectly, (i) sell, grant any option to
purchase or otherwise transfer or

9
<PAGE>
dispose of any Common Stock or securities convertible into or exchangeable or
exercisable for Common Stock or file a registration statement under the
Securities Act with respect to the foregoing or (ii) enter into any swap or
other agreement or transaction that transfers, in whole or in part, the economic
consequence of ownership of the Common Stock, without the prior written consent
of Merrill Lynch, for a period of 180 days after the date of this Prospectus.
After such time, approximately shares of Common Stock will be eligible
for sale pursuant to Rule 144 promulgated under the Securities Act. In addition,
the Principal Stockholders have rights to demand or participate in future
registrations of shares of Common Stock under the Securities Act. Sales of
substantial amounts of Common Stock in the public market, or the perception that
such sales may occur, could have a material adverse effect on the market price
of the Common Stock. See "Shares Eligible for Future Sale" and "Underwriting."

CONTROL BY PRINCIPAL STOCKHOLDERS

Following the consummation of the Offerings, the Principal Stockholders will
have majority control of the Company and the ability to control the election of
directors and the results of other matters submitted to a vote of stockholders.
Such concentration of ownership, together with the anti-takeover effects of
certain provisions in the Delaware General Corporation Law and in the Company's
Certificate of Incorporation and Bylaws, may have the effect of delaying or
preventing a change in control of the Company. See "Description of Capital
Stock." The Board of Directors of the Company is expected to be comprised
entirely of designees of the Principal Stockholders. See "Management" and
"Principal Stockholders."

ABSENCE OF PUBLIC MARKET AND POSSIBLE VOLATILITY OF STOCK PRICE

Prior to the Offerings, there has been no public market for the Common
Stock, and there can be no assurance that an active trading market will develop
or be sustained. The initial public offering price of the Common Stock offered
hereby will be determined through negotiations among the Company, the Principal
Stockholders and the Representatives and may bear no relationship to the market
price for the Common Stock after the Offerings. Subsequent to the Offerings,
prices for the Common Stock will be determined by the market and may be
influenced by a number of factors, including depth and liquidity of the market
for the Common Stock, investor perceptions of the Company, changes in conditions
or trends in the Company's industry or in the industry of the Company's
significant customers, publicly traded comparable companies and general economic
and other conditions. See "Underwriting."

DILUTION

The initial public offering price is expected to be substantially higher
than the book value per share of Common Stock. Investors purchasing shares of
Common Stock in the Offerings will therefore incur immediate and substantial
dilution of $ per share, based upon the mid-point of the filing range set
forth on the cover page of this Prospectus. See "Dilution."

10
<PAGE>
COMPANY HISTORY, THE REORGANIZATION AND PRIOR S CORPORATION STATUS

Maurice, Paul and Armand Marciano, together with their brother Georges,
began in the apparel business in France in 1972 and opened their first retail
apparel stores in the United States in 1978 in California. The business of GUESS
was founded in 1981 by the Marciano brothers. The Company was founded on the
concept of a fashion jean with the first GUESS product being the "three-zip
Marilyn" jean, which was stone-washed and adapted to fit the contours of a
woman's body. Since that time, the Company's product offerings have grown to
include full lines of men's and women's casual apparel.

Guess ?, Inc. is a Delaware corporation organized in 1993 to succeed to the
business of Guess ?, Inc., a California corporation ("Guess California"), that
was organized in 1981. Guess California was the entity through which Maurice,
Paul, Armand and Georges Marciano conducted the Guess business until August
1993. At that time, Guess California was merged into Guess ?, Inc., and the
Company and a trust for the benefit of Paul Marciano repurchased the shares of
Common Stock owned by Georges Marciano, who simultaneously resigned as Chairman
and Chief Executive Officer of the Company and from its Board of Directors.
Since the inception of Guess California, Georges Marciano, together with Maurice
Marciano, had been primarily responsible for the creation of Guess California's
product. Georges Marciano was primarily responsible for design while Maurice
Marciano was responsible for product development. After the resignation of
Georges Marciano, Maurice Marciano became responsible for all aspects of design
along with his prior responsibilities for the development of the Company's
strategic focus and expansion of its business and was named Chairman and Chief
Executive Officer. See "Management."

The purchase price for the shares of Common Stock repurchased by the Company
was approximately $203.5 million. The Company financed such purchase with the
proceeds from an offering of $130.0 million principal amount of 9 1/2% Senior
Subordinated Notes due 2003 (the "Senior Subordinated Notes") and an $80.0
million short term loan (the "Bridge Loan"). The Bridge Loan was repaid in full
in December 1993. As of the date hereof, $105.0 million principal amount of the
Senior Subordinated Notes remain outstanding.

Since 1983, Guess has elected to be treated for Federal and certain state
income tax purposes as an S corporation under Subchapter S of the Internal
Revenue Code of 1986, as amended (the "Code"), and comparable state laws. As a
result, the earnings of the Company (including its predecessor) for such years
have been included in the taxable income of the Company's stockholders for
Federal and certain state income tax purposes, and the Company has generally not
been subject to income tax on such earnings, other than California and other
state franchise taxes. Prior to the consummation of the transactions related to
the Offerings (the "Closing Date"), the Company's S corporation status will be
terminated (the "S Termination Date"). Prior to the S Termination Date, the
Company will declare a distribution to its stockholders that will include all of
its previously earned and undistributed S corporation earnings through the S
Termination Date (the "S Corporation Distribution"). The S Corporation
Distribution will occur prior to the S Termination Date and will be comprised of
the Company's two aircraft (with a value of approximately $10.0 million) and
promissory notes bearing interest at 8% per annum (the "S Distribution Notes").
Guess estimates that such undistributed earnings will be between $180.0 million
and $190.0 million as of the Closing Date, including a gain expected to be
recognized upon the disposition of the Company's two aircraft. See "Use of
Proceeds." On and after the S Termination Date, the Company will no longer be
treated as an S corporation and, accordingly, will be fully subject to Federal
and state income taxes. See "Capitalization" and note 7 to the Company's
consolidated financial statements.

Prior to the consummation of the Offerings, (i) Marciano International,
Inc., a Delaware corporation owned by the Principal Stockholders and which
currently holds an interest in the subsidiaries of Guess ("Marciano
International"), will be merged with and into Guess, (ii) all of the capital
stock of Ranche, Ltd., a Hong Kong company owned by the Principal Stockholders
will be contributed to Guess Europe, (iii) the Company will effect a for 1
split of the Common Stock and (iv) as part of the S Corporation Distribution,
the Company will distribute to the Principal Stockholders two aircraft owned by
the Company. All of such transactions (together with the termination of the
Company's S corporation status described above) are referred to herein as the
"Reorganization."

The Company's principal executive offices are located at 1444 South Alameda
Street, Los Angeles, California 90021 and its telephone number is (213)
765-3100.

11
<PAGE>
USE OF PROCEEDS

The net proceeds to the Company from the sale of the shares of Common Stock
offered by the Company hereby are estimated to be approximately $188.0 million,
based on an assumed initial public offering price of $22.00 per share. The
Company intends to use such net proceeds to repay the S Distribution Notes
(estimated to have an aggregate principal amount between $ million and $
million). Any remaining net proceeds will be used to repay outstanding advances
under the Company's revolving credit facility. The S Distribution Notes will
bear interest at 8% and will mature one year from the Closing Date. As of March
31, 1996, there was $40.8 million outstanding under the revolving credit
facility, which bears interest at 6.9%. See "Company History, the Reorganization
and Prior S Corporation Status" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources."

DIVIDEND POLICY

The Company anticipates that, after payment of the S Corporation
Distribution to the Principal Stockholders in connection with the termination of
the S corporation status of the Company, all earnings will be retained for the
foreseeable future for use in the operations of the business. Purchasers of
shares of Common Stock in the Offerings will not receive any portion of the S
Corporation Distribution. Any future determination as to the payment of
dividends will be at the discretion of the Company's Board of Directors and will
depend upon the Company's results of operations, financial condition,
contractual restrictions and other factors deemed relevant by the Board of
Directors. The agreement governing the Company's revolving credit facility (the
"Credit Agreement") and the indenture pursuant to which the Senior Subordinated
Notes were issued (the "Indenture") restrict the payment of dividends by the
Company. For certain information regarding distributions made by the Company in
1993, 1994, 1995 and the quarter ended March 31, 1996, see "Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Liquidity and Capital Resources."

12
<PAGE>
CAPITALIZATION

The following table sets forth the short-term debt and capitalization of the
Company as of March 31, 1996 and as adjusted for the sale of shares of Common
Stock by the Company in the Offerings and the application of the estimated net
proceeds therefrom to repay indebtedness under the S Distribution Notes and the
Credit Agreement. The information below should be read in conjunction with the
Company's consolidated financial statements and the related notes thereto which
are included elsewhere in this Prospectus. See "Use of Proceeds."

<TABLE>
<CAPTION>
AS OF MARCH 31, 1996
------------------------
ACTUAL AS ADJUSTED
----------- -----------
(IN THOUSANDS)
<S> <C> <C>
Short-term debt:
Current installments of long-term debt................................................ $ 978 $ 978
Short-term notes payable.............................................................. 4,778 4,778
----------- -----------
Total short-term debt............................................................... $ 5,756 $ 5,756
----------- -----------
----------- -----------
Long-term debt:
Long-term debt, net of current installments........................................... $ 41,752 $ 30,052
9 1/2% Senior Subordinated Notes due 2003............................................. 105,000 105,000
----------- -----------
Total long-term debt................................................................ $ 146,752 $ 135,052
Stockholders' equity:
Preferred Stock, par value $ per share; shares authorized;
no shares issued and outstanding..................................................... -- --
Common Stock, par value $.01 per share; shares authorized, shares
issued and outstanding, shares issued and outstanding as adjusted (1)........ 35 127
Paid-in capital....................................................................... 181 179,803(2)
Retained earnings (3)................................................................. 168,014 7,337(4)
Foreign currency translation adjustment............................................... 16 16
Treasury stock, shares repurchased (5)....................................... (150,776) (150,776)
----------- -----------
Net stockholders' equity............................................................ 17,470 36,507
----------- -----------
Total capitalization................................................................ $ 164,222 $ 171,559
----------- -----------
----------- -----------
</TABLE>

- ------------------------------

(1) Excludes approximately shares of Common Stock reserved for issuance
under the 1996 Equity Plan, and the Directors' Plan, including options for
shares to be granted immediately prior to the Offerings. Of such
options, will have an exercise price equal to the initial public
offering price and will have an exercise price of $ . See
"Management -- Employment Agreements," "Management -- 1996 Equity Incentive
Plan" and "-- 1996 Non-Employee Directors' Stock Option Plan."

(2) Reflects a reduction of $8.3 million of paid-in capital for that portion of
the S Corporation Distribution which is in excess of retained earnings.

(3) No adjustment has been made to give effect to the Company's earned and
undistributed taxable S corporation earnings for the period from April 1,
1996 through the consummation of the Offerings, which earnings will be
distributed as part of the S Corporation Distribution. See "Use of
Proceeds."

(4) Reflects the establishment of net deferred tax assets of $7.3 million
resulting from the termination of the Company's S corporation status. See
note 1 to the Company's consolidated financial statements.

(5) Represents the cost in excess of the allocable portion of retained earnings
associated with the repurchase of Common Stock from a former principal
stockholder of the Company. See note 7 to the Company's consolidated
financial statements.

13
<PAGE>
DILUTION

After giving effect to the Reorganization, the net tangible book value of
the Company as of March 31, 1996 would have been approximately $16.1 million, or
$ per share of Common Stock. After giving effect to the S Corporation
Distribution as if it had been made as of March 31, 1996 and the Company's S
corporation status had terminated at such date, the sale by the Company of
shares of Common Stock in the Offerings and the application of the estimated net
proceeds therefrom to repay indebtedness under the S Distribution Notes and the
Company's Credit Agreement, the pro forma net tangible book value of the Company
as of March 31, 1996 would have been approximately $35.1 million, or $ per
share. See "Company History, the Reorganization and Prior S Corporation Status"
and "Use of Proceeds." This represents an immediate increase in net tangible
book value of $ per share to the Principal Stockholders and an immediate net
tangible book value dilution of $ per share to investors purchasing shares in
the Offerings. The following table illustrates this per share dilution:

<TABLE>
<S> <C> <C>
Assumed initial public offering price per share (1).......... $

Net tangible book value as of March 31, 1996............. $

Increase attributable to the establishment of deferred
tax assets..............................................

Decrease attributable to S Corporation Distribution......
---------

Net tangible book value per share before the Offerings...

Increase attributable to new investors in the
Offerings...............................................
---------
Pro forma net tangible book value per share after the
Offerings (2)...............................................
---------
Dilution per share to new investors.......................... $
---------
---------
</TABLE>

- ------------------------------

(1) Before deducting estimated underwriting discounts and commissions and
estimated expenses of the Offerings payable by the Company.

(2) Excludes approximately shares of Common Stock reserved for issuance
under the 1996 Equity Plan and the Directors' Plan, including options for
shares to be granted immediately prior to the Offerings. Of such
options, will have an exercise price equal to the initial public
offering price and will have an exercise price of $ . See
"Management -- Employment Agreements," "-- 1996 Equity Incentive Plan" and
"-- 1996 Non-Employee Directors' Stock Option Plan."

14
<PAGE>
SELECTED FINANCIAL DATA

The selected financial data set forth below have been derived from the
consolidated financial statements of the Company and the related notes thereto.
The statement of earnings data for the years ended December 31, 1993, 1994 and
1995 and the balance sheet data as of December 31, 1994 and 1995 are derived
from the consolidated financial statements of the Company, which have been
audited by KPMG Peat Marwick LLP, independent auditors and which are contained
elsewhere in this Prospectus. The statement of earnings data for the years ended
December 31, 1991 and 1992 and the balance sheet data as of December 31, 1991,
1992 and 1993 are derived from the consolidated financial statements of the
Company, which have been audited but are not contained herein. Financial data as
of March 31, 1996, and for the quarters ended April 2, 1995, and March 31, 1996,
are unaudited but, in the opinion of management, include all adjustments,
consisting only of normal recurring adjustments, necessary for a fair
presentation of such data. The results of operations for the quarter ended March
31, 1996 are not necessarily indicative of the results to be expected for the
entire year. The following selected financial data should be read in conjunction
with the Company's consolidated financial statements and the related notes
thereto and "Management's Discussion and Analysis of Financial Condition and
Results of Operations," which are included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
FIRST
QUARTER
ENDED
YEAR ENDED DECEMBER 31, ----------
---------------------------------------------------------- APRIL 2,
1991 1992 1993 1994 1995 1995
---------- ---------- ---------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF EARNINGS DATA:
Net revenue:
Product sales (1).............................. $ 436,398 $ 491,978 $ 491,444 $ 507,462 $ 440,359 $ 113,646
Net royalties.................................. 14,133 20,788 28,780 40,350 46,374 11,257
---------- ---------- ---------- ---------- ---------- ----------
Total net revenue............................ 450,531 512,766 520,224 547,812 486,733 124,903
Cost of sales.................................... 226,238 274,920 260,409 291,989 262,142 65,267
---------- ---------- ---------- ---------- ---------- ----------
Gross profit..................................... 224,293 237,846 259,815 255,823 224,591 59,636
Selling, general and administrative expenses..... 119,824 127,873 145,351 138,016 141,663 34,160
---------- ---------- ---------- ---------- ---------- ----------
Earnings from operations....................... 104,469 109,973 114,464 117,807 82,928 25,476
Interest, net.................................... 2,108 1,162 11,735 16,948 15,957 4,041
Non-operating (income) expense................... (166) (2,413) (2,552) (322) 157 164
---------- ---------- ---------- ---------- ---------- ----------
Earnings before income taxes................... 102,527 111,224 105,281 101,181 66,814 21,271
Income taxes..................................... 2,695 2,856 1,810 3,540 2,895 559
---------- ---------- ---------- ---------- ---------- ----------
Net earnings................................... $ 99,832 $ 108,368 $ 103,471 $ 97,641 $ 63,919 $ 20,712
---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ----------
SUPPLEMENTAL STATEMENT OF EARNINGS DATA (2):
Earnings before income taxes..................... $ 102,527 $ 111,224 $ 105,281 $ 101,181 $ 66,814 $ 21,271
Income taxes..................................... 41,011 44,490 42,112 40,472 26,726 8,508
---------- ---------- ---------- ---------- ---------- ----------
Net earnings..................................... $ 61,516 $ 66,734 $ 63,169 $ 60,709 $ 40,088 $ 12,763
---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ----------
Net earnings per share (3)....................... $
Weighted average common shares outstanding (3)...

<CAPTION>
MARCH 31,
1996
-----------
<S> <C>
STATEMENT OF EARNINGS DATA:
Net revenue:
Product sales (1).............................. $ 123,275
Net royalties.................................. 11,623
-----------
Total net revenue............................ 134,898
Cost of sales.................................... 70,479
-----------
Gross profit..................................... 64,419
Selling, general and administrative expenses..... 35,232
-----------
Earnings from operations....................... 29,187
Interest, net.................................... 3,549
Non-operating (income) expense................... 320
-----------
Earnings before income taxes................... 25,318
Income taxes..................................... 1,271
-----------
Net earnings................................... $ 24,047
-----------
-----------
SUPPLEMENTAL STATEMENT OF EARNINGS DATA (2):
Earnings before income taxes..................... $ 25,318
Income taxes..................................... 10,127
-----------
Net earnings..................................... $ 15,191
-----------
-----------
Net earnings per share (3)....................... $
Weighted average common shares outstanding (3)...
</TABLE>
<TABLE>
<CAPTION>
AS OF
MARCH 31,
1996
AS OF DECEMBER 31, ----------
----------------------------------------------------------
1991 1992 1993 1994 1995 ACTUAL
---------- ---------- ---------- ---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital.................................. $ 91,635 $ 114,732 $ 74,094 $ 83,127 $ 57,572 $ 93,870
Total assets..................................... 214,346 226,824 181,017 207,696 202,635 239,267
Notes payable and long-term debt................. 21,461 8,548 189,414 156,495 123,335 152,508
Net stockholders' equity (deficiency)............ 149,022 167,390 (50,284) 373 10,997 17,470

AS
ADJUSTED (4)
-----------

<S> <C>
BALANCE SHEET DATA:
Working capital.................................. $ 98,278
Total assets..................................... 246,604
Notes payable and long-term debt................. 140,808
Net stockholders' equity (deficiency)............ 36,507
</TABLE>

(FOOTNOTES ON THE FOLLOWING PAGE)

15
<PAGE>
(CONTINUED FROM PRIOR PAGE)

(2) Reflects adjustments for Federal and state income taxes as if the Company
had been taxed as a C corporation rather than an S corporation.

(4) Adjusted to give effect to the S Corporation Distribution as if it had been
made as of March 31, 1996 and the Company's S corporation status had been
terminated at such date, the sale of shares of Common Stock by the Company
hereby at the assumed initial public offering price of $22.00 per share and
the application of the estimated net proceeds therefrom to repay
indebtedness of the Company, including indebtedness under the S Distribution
Notes. No adjustment has been made to give effect to the Company's earned
and undistributed taxable S corporation earnings for the period from April
1, 1996 through the consummation of the Offerings, which earnings will be
distributed as part of the S Corporation Distribution. See "Use of Proceeds"
and "Company History, the Reorganization and Prior S Corporation Status."

16
<PAGE>
SELECTED PRO FORMA FINANCIAL DATA

The selected pro forma statement of earnings data set forth below are
presented for informational purposes only and may not necessarily be indicative
of the results of operations of the Company as they may be in the future. The
following selected pro forma financial data should be read in conjunction with
the Company's consolidated financial statements and the related notes thereto
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations," which are included elsewhere in this Prospectus.

Amounts reflect pro forma adjustments to historical operating results for
(a) the elimination of salaries and bonuses paid to the three Principal
Executive Officers in excess of an aggregate of $4.9 million per year, or $1.2
million per quarter (the estimated aggregate salaries and bonuses to be paid to
the Principal Executive Officers under their respective employment agreements
following the Offerings), (b) the decrease in depreciation and operating costs
of $2.6 million, $677,000 and $623,000 for the year ended December 31, 1995 and
the quarters ended April 2, 1995 and March 31, 1996, respectively, associated
with two aircraft owned by the Company, which two aircraft will be distributed
to the Principal Stockholders as part of the S Corporation Distribution prior to
consummation of the Offerings, (c) the elimination of the minority interest in
Guess Italia, S.r.l. aggregating $274,000, $283,000 and $329,000 for the year
ended December 31, 1995 and the quarters ended April 2, 1995 and March 31, 1996,
respectively, associated with the Reorganization and (d) adjustments for Federal
and state income taxes as if the Company had been taxed as a C corporation
rather than an S corporation. The Company expects to enter into an operating
lease of one of the aircraft under which the Company would remain responsible
for the expenses of operating and maintaining the aircraft and would make
nominal lease payments for the use thereof. See "Company History, the
Reorganization and Prior S Corporation Status" and "Management -- Employment
Agreements." For additional pro forma statement of earnings data for 1993, 1994
and 1995 and for the quarters ended April 2, 1995 and March 31, 1996, see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Results of Operations."

<TABLE>
<CAPTION>
FIRST QUARTER ENDED
----------------------------
YEAR ENDED APRIL 2,
DECEMBER 31, 1995 1995 MARCH 31, 1996
----------------- ------------ --------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
PRO FORMA STATEMENT OF EARNINGS DATA:
Net revenue:
Product sales............................................................. $ 440,359 $ 113,646 $ 123,275
Net royalties............................................................. 46,374 11,257 11,623
-------- ------------ --------------
Total net revenue....................................................... 486,733 124,903 134,898
Cost of sales............................................................... 262,142 65,267 70,479
-------- ------------ --------------
Gross profit................................................................ 224,591 59,636 64,419
Selling, general and administrative expenses................................ 136,606 31,412 33,393
-------- ------------ --------------
Earnings from operations.................................................. 87,985 28,224 31,026
Interest, net............................................................... 15,957 4,041 3,549
Non-operating income........................................................ 117 119 9
-------- ------------ --------------
Earnings before income taxes.............................................. 72,145 24,302 27,486
Income taxes................................................................ 28,858 9,721 10,912
-------- ------------ --------------
Net earnings.............................................................. $ 43,287 $ 14,581 $ 16,574
-------- ------------ --------------
-------- ------------ --------------
Net earnings per share (1).................................................. $ $
Weighted average common shares outstanding (1)..............................
</TABLE>

- ------------------------

(1) Amounts reflect shares of Common Stock outstanding prior to the
Offerings and the assumed issuance of 7,343,955 and 7,637,000 shares of
Common Stock as of December 31, 1995 and March 31, 1996, respectively, at an
assumed initial public offering price of $22.00 per share to generate
sufficient cash to pay the S Corporation Distribution in an amount equal to
retained earnings.

17
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATION

The following discussion and analysis should be read in conjunction with the
"Selected Financial Data" and "Selected Pro Forma Financial Data" and the
Company's consolidated financial statements and the related notes thereto which
are included elsewhere in this Prospectus.

GENERAL

The Company derives its revenue and net earnings from the worldwide sale of
GUESS brand products through its wholesale, retail and licensing operations.
Since its inception in 1982, the Company's net revenue has grown to $486.7
million in 1995. The Company has been profitable in every year of its operations
and in 1995 generated pro forma net earnings (as described herein) of $43.3
million.

The Company derives its net revenue from the sale of Guess men's and women's
apparel to wholesale customers, the sale of Guess men's and women's apparel and
its licensees' products through the Company's network of retail and factory
outlet stores and net royalties from licensing activities. The following table
sets forth the net revenue of the Company through its channels of distribution.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
YEAR ENDED DECEMBER 31, FIRST QUARTER ENDED,
-------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------
-------------------------------
MARCH 31,
1993 1994 1995 APRIL 2, 1995 1996
-------------------- -------------------- -------------------- -------------------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net revenue:
Wholesale operations... $ 348,879 67.1% $ 358,125 65.4% $ 270,931 55.7% $ 85,344 68.3% $ 83,113
Retail operations...... 142,565 27.4 149,337 27.2 169,428 34.8 28,302 22.7 40,162
--------- --------- --------- --------- --------- --------- --------- --------- ---------
Net revenue from
product sales....... 491,444 94.5 507,462 92.6 440,359 90.5 113,646 91.0 123,275
Net royalties.......... 28,780 5.5 40,350 7.4 46,374 9.5 11,257 9.0 11,623
--------- --------- --------- --------- --------- --------- --------- --------- ---------
Total net revenue.... $ 520,224 100.0% $ 547,812 100.0% $ 486,733 100.0% $ 124,903 100.0% $ 134,898
--------- --------- --------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- --------- --------- ---------

<S> <C>
Net revenue:
Wholesale operations... 61.6%
Retail operations...... 29.8
---------
Net revenue from
product sales....... 91.4
Net royalties.......... 8.6
---------
Total net revenue.... 100.0%
---------
---------
</TABLE>

WHOLESALE OPERATIONS

The Company, through its wholesale operations, designs, sources, markets and
distributes its men's and women's apparel lines to wholesale customers in the
United States and Italy, to international distributors and to the Company's
network of retail and factory outlet stores. Wholesale operations include the
Company's U.S. operations, Guess Europe and Guess Asia. Guess Europe was
established in 1993 to provide a platform for increased international growth and
to better service the Company's distributors and international licensees, and
consists of a design studio, sales office, sourcing office and warehouse in
Florence and a showroom in Milan. Guess Asia, which will become a wholly owned
subsidiary of the Company as part of the Reorganization, consists of a sales
office and sourcing office for the Company and a merchandising support operation
for the Company's distributors and licensees. In addition, Guess Europe is a 50%
joint venture partner in a sourcing agency located in Hong Kong.

Since its inception, net revenue from the Company's wholesale operations
grew to $396.9 million in 1992. Between 1992 and 1995, net revenue from
wholesale operations decreased 32%, which, to a large extent, resulted from
strategic business decisions implemented beginning in late 1992, including a
renewed focus within its wholesale operations on the sale of its core men's and
women's product lines. As a result, the Company converted the boys' product
line, the majority of the girls' product line and women's knits into licensing
arrangements, which became effective at various times throughout 1993. Net
revenue attributable to these discontinued product lines was $82.6 million,
$31.7 million, $5.3 million and $1.7 million for 1992, 1993, 1994 and 1995,
respectively. Net sales by such licensees, as reported to the Company,
aggregated $75.6 million, $109.6 million and $99.5 million for 1993, 1994 and
1995, respectively.

Beginning in late 1993, the Company made the strategic decision to curtail
distribution of its products to certain accounts which did not meet the
Company's merchandising standards in order to protect the Guess image and
enhance the exclusivity of the brand. Net sales to such discontinued accounts
represented approximately $42.3 million, $51.1 million, $32.9 million and $3.8
million of the Company's net revenue in 1992, 1993, 1994 and 1995, respectively.
In addition, the Company's net revenue declined during this period

18
<PAGE>
as a result of increased competition in branded denim apparel, the then sluggish
retail environment, the consolidation taking place among department store
retailers and financial difficulties experienced by certain of the Company's
wholesale customers.

To address the decline in net revenue from wholesale operations, the Company
is pursuing a strategy to deepen the Company's product offerings, increase the
number of shop-in-shops and increase sales to international distributors. Based
on positive consumer reaction, the Company has introduced the GUESS COLLECTION
to selected better department stores for shipment in the Fall 1996 season. In
addition, the Company intends to broaden its men's and women's lines to include
khaki and other twill products beginning with the 1996 holiday/resort season. In
November 1995 the Company introduced a new line of jeans under the "Bare Basics"
label, with unique construction and fabrications and lower price points than
traditional Guess jeans. The Company opened 18 shop-in-shops in the first
quarter of 1996. The Company intends to open a total of 75 and 100 shop-in-shops
in 1996 and 1997, respectively, and intends to support the introduction of the
GUESS COLLECTION with a unique shop-in-shop program beginning in 1997.

RETAIL OPERATIONS

The Company's retail operations include 112 Company-operated retail and
factory outlet stores primarily located in regional shopping malls in the United
States, including one Company-operated retail store located in Florence, Italy.
The Company's factory outlet stores serve as a distribution channel for
discontinued styles, slow-moving inventory, returned goods and seconds. The
domestic retail network includes 64 retail stores located in 20 states and 47
factory outlet stores located in 27 states. The Company's strategy is to
increase domestic sales by selectively expanding its network of retail stores,
increasing the comparable store sales of its existing stores and closing stores
that do not meet its financial objectives. Consistent with this strategy, the
Company has opened two retail stores in the first quarter of 1996, and intends
to open up to five additional retail stores and close one retail store during
the remainder of 1996 and to open up to 15 additional retail stores during 1997.

The Company's retail management team recently refined the Company's strategy
to improve the productivity of its retail network by establishing new models for
optimal store size, design and construction costs as well as staffing levels. In
addition, in late 1995, the Company began to improve the merchandising mix in
its stores and implement sophisticated information systems to improve inventory
control. The Company believes that the implementation of these initiatives
contributed to the increase in comparable retail and factory outlet store net
revenue of 16.7% in the first quarter of 1996.

The Company monitors the performance of each of its retail and factory
outlet stores to ensure they meet minimum operating performance standards.
Stores that do not meet these minimum standards or are unprofitable become
candidates for closure. Since the beginning of 1993, the Company has closed 16
stores, including ten that were closed in 1995. During 1995, the Company
recorded provisions for store closing expenses of $2.9 million and $1.0 million
during the third and fourth quarters, respectively.

19
<PAGE>
The following chart sets forth the store openings and closing since 1993,
total gross square footage, comparable store net revenue and net revenue per
square foot.

<TABLE>
<CAPTION>
FIRST QUARTER
ENDED
-----------------
YEAR ENDED DECEMBER 31, APRIL MARCH
--------------------------- 2, 31,
1993 1994 1995 1995 1996
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Retail stores
Beginning of Period................. 39 36 52 52 62
Opening during Period............... 1 18 15 1 2
Closed during Period................ (4) (2) (5) (2 ) --
------- ------- ------- ------- -------
End of Period....................... 36 52 62 51 64

Factory stores
Beginning of Period................. 22 43 47 47 47
Open during Period.................. 21 4 5 1 --
Closed during Period................ -- -- (5) (1 ) --
------- ------- ------- ------- -------
End of Period....................... 43 47 47 47 47
------- ------- ------- ------- -------
------- ------- ------- ------- -------

Comparable store sales increase
(decrease)............................. (4.0)% (5.4)% (7.4)% (0.1 )% 16.7 %

Total Gross Square Footage (in
thousands)............................. 397 510 636 523 607

Net revenue per gross square foot....... $ 359.1 $ 292.8 $ 266.4 $ 55.8 $ 67.7
</TABLE>

LICENSING OPERATIONS

Guess has selectively licensed the use of its trademarks since 1982. The
Company's strategy is to increase net royalties from selectively licensing the
Guess name to producers of high-quality products that complement its lifestyle
collection in the United States and other territories. The Company also grants
licenses for the manufacture and sale of GUESS products similar to the Company's
in markets currently outside the Company's channels of distribution. Licensing
both broadens the spectrum of products that can be offered and expands
distribution into new territories. Licensed products include watches, clothing
for infants and children, eyewear, footwear, activewear, home products and other
fashion accessories. In addition to licensing products which complement the
Company's apparel products, Guess also grants licenses for the manufacture and
sale of GUESS branded products similar to the Company's, including men's and
women's denim and knitwear, in markets outside the Company's channels of
distribution, such as Canada, Argentina, Mexico, the Philippines, South Korea,
Brazil and Japan. The Company's royalties, net of direct expenses, from such
sales and nonrecurring fees increased from $28.8 million in 1993 to $46.4
million in 1995. Guess has 26 licensees, all of which are currently generating
royalties. Net royalties from the four most significant licensees accounted for
approximately 48.1% and 46.4% of the Company's net royalties in 1995 and the
first quarter of 1996, respectively.

In order to maintain its reputation for quality and style and to control the
integrity of the brand name, the Company's licensing department strictly
monitors product design, development, merchandising and marketing and meets
regularly with licensees to ensure consistency with the Company's overall
strategies, and to ensure uniformity and quality control. The Company regularly
reviews the financial reports provided to it by its licensees in order to
monitor sales trends, royalty calculations and pricing policies, among other
things. All GUESS brand products, advertising, promotional and packaging
materials must be approved in advance by Guess. The Company operates centers in
Los Angeles, Hong Kong and Milan that assist in monitoring the quality of the
products and operations of its licensees and distributors in developing their
territories and products. These centers allow the Company to ensure that all
licensees and distributors comply with the strict Guess quality standards.

20
<PAGE>
RESULTS OF OPERATIONS

The following table sets forth pro forma operating results for the periods
indicated. Pro forma operating results reflect adjustments to historical
operating results for (i) the elimination of salaries and bonuses paid to the
Principal Executive Officers in excess of an aggregate of $4.9 million per year,
or $1.2 million per quarter (the estimated aggregate salaries and bonuses to be
paid to the Principal Executive Officers under their respective employment
agreements following the Offerings), (ii) the decrease in depreciation and
operating costs of $2.6 million, $677,000 and $623,000 for the year ended
December 31, 1995 and the quarters ended April 2, 1995 and March 31, 1996,
respectively, associated with two aircraft owned by the Company, which aircraft
are expected to be distributed to the Principal Stockholders as part of the S
Corporation Distribution prior to consummation of the Offerings, (iii) the
elimination of the minority interest in Guess Italia S.r.l. aggregating $24,000,
$280,000, $274,000, $283,000 and $329,000 for the years ended December 31, 1993,
1994 and 1995 and the quarters ended April 2, 1995 and March 31, 1996,
respectively, associated with the Reorganization and (iv) adjustments for
Federal and state income taxes as if the Company had been taxed as a C
corporation rather than an S corporation. The Company expects to enter into an
operating lease of one of the aircraft under which the Company would remain
responsible for the expenses of operating and maintaining the aircraft and would
make nominal lease payments for the use thereof. See "Company History, the
Reorganization and Prior S Corporation Status" and "Management -- Employment
Agreements." For additional pro forma statement of earnings data for 1993, 1994
and 1995 and for the quarters ended April 2, 1995 and March 31, 1996, see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Results of Operations."

<TABLE>
<CAPTION>
FIRST QUARTER ENDED,
YEAR ENDED DECEMBER 31, ----------------------
---------------------------------- APRIL 2, MARCH 31,
1993 1994 1995 1995 1996
---------- ---------- ---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Net revenue:
Product sales...................................... $ 491,444 $ 507,462 $ 440,359 $ 113,646 $ 123,275
Net royalties...................................... 28,780 40,350 46,374 11,257 11,623
---------- ---------- ---------- ---------- ----------
Total net revenue.............................. 520,224 547,812 486,733 124,903 134,898
Cost of sales........................................ 260,409 291,989 262,142 65,267 70,479
---------- ---------- ---------- ---------- ----------
Gross profit......................................... 259,815 255,823 224,591 59,636 64,419
Selling, general and administrative expenses......... 127,971 131,711 136,606 31,412 33,393
---------- ---------- ---------- ---------- ----------
Earnings from operations........................... 131,844 124,112 87,985 28,224 31,026
Interest expense, net................................ 11,735 16,948 15,957 4,041 3,549
Non-operating income, net............................ (2,528) (42) (117) (119) (9)
---------- ---------- ---------- ---------- ----------
Earnings before income taxes....................... 122,637 107,206 72,145 24,302 27,486
Pro forma income taxes............................... 49,055 42,882 28,858 9,721 10,912
---------- ---------- ---------- ---------- ----------
Pro forma net earnings............................. $ 73,582 $ 64,324 $ 43,287 $ 14,581 $ 16,574
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
</TABLE>

21
<PAGE>
The following table sets forth pro forma operating results as a percentage
of net revenue for the periods indicated.

<TABLE>
<CAPTION>
FIRST QUARTER ENDED
YEAR ENDED DECEMBER 31, ------------------------
------------------------------- APRIL 2, MARCH 31,
1993 1994 1995 1995 1996
--------- --------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net revenue:
Product sales........................................... 94.5% 92.6% 90.5% 91.0% 91.4%
Net royalties........................................... 5.5 7.4 9.5 9.0 8.6
--------- --------- --------- ----- -----
Total net revenue................................... 100.0 100.0 100.0 100.0 100.0
Cost of sales............................................. 50.1 53.3 53.9 52.3 52.2
--------- --------- --------- ----- -----
Gross profit.............................................. 49.9 46.7 46.1 47.7 47.8
Selling, general and administrative expenses.............. 24.6 24.0 28.0 25.1 24.8
--------- --------- --------- ----- -----
Earnings from operations................................ 25.3 22.7 18.1 22.6 23.0
Interest expense, net..................................... 2.3 3.1 3.3 3.2 2.6
Non-operating income, net................................. (0.5) (0.0) (0.0) (0.1) (0.0)
--------- --------- --------- ----- -----
Earnings before income taxes............................ 23.5 19.6 14.8 19.5 20.4
Pro forma income taxes.................................... 9.4 7.9 5.9 7.8 8.1
--------- --------- --------- ----- -----
Pro forma net earnings.................................. 14.1% 11.7% 8.9% 11.7% 12.3%
--------- --------- --------- ----- -----
--------- --------- --------- ----- -----
</TABLE>

FIRST QUARTER ENDED MARCH 31, 1996 COMPARED TO FIRST QUARTER ENDED APRIL 2,
1995

NET REVENUE. Net revenue increased $10.0 million or 8.0% to $134.9 million
in the quarter ended March 31, 1996 from $124.9 million in the quarter ended
April 2, 1995. Net revenue from wholesale operations decreased $2.2 million to
$83.1 million from $85.3 million, due principally to a $10.2 million decline in
domestic wholesale sales (including a decline of $2.1 million in off-price
revenue), partially offset by increased sales outside the United States of $8.0
million. Net revenue from retail operations increased $11.9 million to $40.2
million from $28.3 million, primarily attributable to an increase of 16.7% in
comparable store net revenue and from volume generated by two new store
openings. The increase in comparable store net revenue was primarily
attributable to a more favorable merchandise mix and the implementation of
sophisticated information systems to improve inventory control. Net royalties
increased 3.3% in the quarter ended March 31, 1996 to $11.6 million from $11.3
million in the quarter ended April 2, 1995.

GROSS PROFIT. Gross profit increased 8.0% to $64.4 million in the quarter
ended March 31, 1996 from $59.6 million in the quarter ended April 2, 1995. The
increase in gross profit resulted from increased net royalties and increased net
revenue from product sales. Gross profit from product sales increased 9.1% to
$52.8 million in the quarter ended March 31, 1996 from $48.4 million in the
quarter ended April 2, 1995. Gross profit as a percentage of net revenue
improved slightly to 47.8% in the quarter ended March 31, 1996 as compared to
47.8% in the quarter ended April 2, 1995. Excluding royalties, gross profit from
product sales as a percentage of net revenue increased to 42.8% from 42.6% in
the comparable 1995 period primarily due to an improvement in the gross profit
margins in both the retail and wholesale operations, partially offset by growth
in the retail contribution (which generally has a lower gross margin).

SG&A EXPENSES. Selling, general and administrative ("SG&A") expenses
increased 3.1% in the quarter ended March 31, 1996 to $35.2 million, or 26.1% of
net revenue, from $34.2 million, or 27.4% of net revenue, in the quarter ended
April 2, 1995. On a pro forma basis, SG&A expenses would have increased 6.3% in
the quarter ended March 31, 1996 to $33.4 million, or 24.8% of net revenue, from
$31.4 million, or 25.2% of net revenue, in the quarter ended April 2, 1995. The
increase in SG&A expense was primarily the result of increased store expenses
related to the expansion of the retail operation, partially offset by
administrative cost containment efforts. The decrease in SG&A expenses as a
percentage of net revenue was the result of cost containment efforts and fixed
expenses being spread over a larger revenue base in the 1996 period.

22
<PAGE>
EARNINGS FROM OPERATIONS. Earnings from operations increased 14.6% to $29.2
million, or 21.6% of net revenue in the quarter ended March 31, 1996, from $25.5
million, or 20.4% of net revenue, in the quarter ended April 2, 1995. On a pro
forma basis, earnings from operations would have increased 9.9% in the quarter
ended March 31, 1996 to $31.0 million, or 23.0% of net revenue, from $28.2
million, or 22.6% of net revenue, in the quarter ended April 2, 1995. This
increase resulted primarily from the increase in revenue and slightly improved
gross profit margins.

INTEREST EXPENSE, NET. Net interest expense decreased 12.2% to $3.5 million
in the quarter ended March 31, 1996 from $4.0 million in the quarter ended April
2, 1995. This decrease resulted from lower outstanding debt and lower interest
rates.

INCOME TAXES. For Federal and certain state income tax purposes, the
Company has elected to be treated as an S corporation and therefore has
generally not been subject to income tax on its earnings. The Company's income
taxes, which represent state income taxes and foreign taxes, were $1.3 million
and $0.6 million in the quarters ended March 31, 1996 and April 2, 1995,
respectively. The Company's S corporation status will terminate upon the
consummation of the Offerings and, therefore, the Company will be fully subject
to Federal, state and foreign income taxes. On a pro forma basis, income taxes
would have been $10.9 million and $9.7 million in the quarters ended March 31,
1996 and April 2, 1995.

NET EARNINGS. Net earnings increased 16.1% to $24.0 million, or 17.8% of
net revenue, in the quarter ended March 31, 1996, from $20.7 million, or 16.6%
of net revenue, in the quarter ended April 2, 1995. On a pro forma basis, net
earnings would have increased 13.7% to $16.6 million, or 12.3% of net revenue,
in the quarter ended March 31, 1996, from $14.6 million, or 11.7% of net
revenue, in the quarter ended April 2, 1995.

YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994

NET REVENUE. Net revenue decreased $61.1 million or 11.1% to $486.7 million
in 1995 from $547.8 million in 1994. Net revenue from wholesale operations
decreased $87.2 million to $271.0 million from $358.1 million, including a $22.4
million decline due to closing certain accounts, and a $2.8 million decline due
to the licensing out of certain apparel lines as described above. Excluding
these items, net revenue from wholesale operations would have decreased $61.9
million. The principal reasons for the decrease were a $56.3 million decline in
domestic sales of men's and women's apparel and a $15.5 million decrease in off-
price revenue, partially offset by increased sales outside the United States to
international distributors of $9.8 million. The Company's domestic net sales
declined during this period as a result of increased competition in branded
denim apparel, the sluggish retail environment, the consolidation taking place
among department store retailers and financial difficulties experienced by
certain of the Company's wholesale customers. Net revenue from retail operations
increased $20.1 million to $169.4 million from $149.3 million. This net increase
reflects a 37.0% increase in retail net revenue resulting from new retail store
openings, somewhat offset by a 7.4% decline in comparable store net revenue,
primarily attributable to the continued sluggish market conditions affecting the
factory outlet stores. Net royalties increased 14.9% in 1995 to $46.4 million
from $40.4 million in 1994. This increase was attributable to the continued
growth in existing licensees' businesses as well as the addition of new
licensees.

GROSS PROFIT. Gross profit decreased 12.2% to $224.6 million in 1995 from
$255.8 million in 1994. Gross profit as a percentage of net revenue decreased to
46.1% in 1995 from 46.7% in 1994. The decrease in gross profit was attributable
to a $67.1 million decrease in net revenue from product sales, partially offset
by a $6.0 million increase in net royalties. Gross profit from product sales
decreased 17.3% to $178.2 million in 1995 from $215.5 million in 1994. During
the second half of 1995, the Company recorded a provision of $3.9 million for
anticipated store closing expenses. Without this provision, gross margin would
have been 46.9% in 1995 as compared with 46.7% in 1994.

SG&A EXPENSES. SG&A expenses increased 2.6% to $141.7 million, or 29.1% of
net revenue, in 1995, from $138.0 million, or 25.2% of net revenue, in 1994. On
a pro forma basis, SG&A expenses would have increased 3.7% in 1995 to $136.6
million, or 28.0% of net revenue, from $131.7 million, or 24.0% of net revenue,
in 1994. This increase was primarily the result of the continued expansion of
the retail division, an

23
<PAGE>
increase in advertising expenses and increased expenses relating to the
installation and remodeling of twice as many shop-in-shops as were installed or
remodeled in 1994. These increases were partially offset by reduced expenses
resulting from cost containment efforts. The increase in SG&A expenses as a
percentage of net revenue was the result of the above mentioned advertising and
shop-in-shop expenditures being expensed as incurred together with fixed
expenses being spread over a smaller revenue base during the 1995 period.

EARNINGS FROM OPERATIONS. Earnings from operations decreased 29.6% to
$82.9 million, or 17.0% of net revenue in 1995, from $117.8 million, or 21.5% of
net revenue, in 1994. On a pro forma basis, earnings from operations would have
decreased 29.1% in 1995 to $88.0 million, or 18.1% of net revenue, from $124.1
million, or 22.7% of net revenue, in 1994. This decline primarily resulted from
a decrease in net revenue, which was partially offset by higher royalty income.

INTEREST EXPENSE, NET. Net interest expense decreased 5.9% to $16.0 million
for 1995 from $16.9 million in 1994. This decrease resulted from lower debt in
1995 which more than offset the effect of higher interest rates.

INCOME TAXES. Income taxes were $2.9 million and $3.5 million in 1995 and
1994, respectively. On a pro forma basis, income taxes would have been $28.9
million and $42.9 million in 1995 and 1994, respectively.

NET EARNINGS. Net earnings decreased 34.5% to $63.9 million, or 13.1% of
net revenue, in 1995, from $97.6 million, or 17.8% of net revenue, in 1994. On a
pro forma basis, net earnings would have decreased 32.7% to $43.3 million, or
8.9% of net revenue, in 1995, from $64.3 million, or 11.7% of net revenue, in
1994.

YEAR ENDED DECEMBER 31, 1994 COMPARED TO YEAR ENDED DECEMBER 31, 1993

NET REVENUE. Net revenue increased $27.6 million or 5.3% to $547.8 million
in 1994 from $520.2 million in 1993. Net revenue from wholesale operations
increased $9.2 million to $358.1 million from $348.9 million, including a $26.3
million decline due to the licensing of certain apparel lines previously
produced by the Company and a $18.2 million decline due to closing certain
accounts. Excluding these items, net revenue from wholesale operations would
have increased $53.7 million. Net revenue from retail operations increased $6.8
million to $149.3 million from $142.6 million. This increase was attributable to
new store openings, somewhat offset by a decline of $5.7 million or 5.4% in
comparable store net revenue. This decline in comparable store net revenue was
attributable to the factory outlet stores, which were affected by the severe
East Coast weather in the early part of 1994, product assortment changes which
were instituted in the fall of 1993 and sluggish factory outlet market
conditions. Net royalties increased 40.2% in 1994 to $40.4 million from $28.8
million in 1993. This increase was attributable to royalties from new licensees
including the aforementioned boys, girls, and women's knit lines, as well as
increased royalties from higher net revenue by existing licensees.

GROSS PROFIT. Gross profit decreased 1.5% to $255.8 million in 1994 from
$259.8 million in 1993. Gross profit as a percentage of net revenue decreased to
46.7% in 1994 from 49.9% in 1993. The decrease in gross profit was attributable
to a $15.6 million decrease in gross profit from product sales, partially offset
by an $11.6 million increase in net royalties. Gross profit from product sales
decreased 6.7% to $215.5 million in 1994 from $231.0 million in 1993. This
decrease reflects an increase in production costs due to changes in fabrication
and processing costs, as well as higher occupancy costs as a percentage of
revenue due to the opening of new retail stores.

SG&A EXPENSES. SG&A expenses decreased 5.1% to $138.0 million, or 25.2% of
net revenue, in 1994, from $145.4 million, or 27.9% of net revenue, in 1993. On
a pro forma basis, SG&A expenses would have increased 2.9% in 1994 to $131.7
million, or 24.0% of net revenue, from $128.0 million, or 24.6% of net revenue,
in 1993. This increase was primarily attributable to the opening of a design
studio in Florence, Italy and an increase in domestic design and selling
expenses related to the additions of new stores.

24
<PAGE>
EARNINGS FROM OPERATIONS. Earnings from operations increased 2.9% to $117.8
million, or 21.5% of net revenue in 1994, from $114.5 million, or 22.0% of net
revenue, in 1993. On a pro forma basis, earnings from operations would have
decreased 5.9% in 1994 to $124.1 million, or 22.7% of net revenue, from $131.8
million, or 25.3% of net revenue, in 1993.

NON-OPERATING INCOME. Non-operating income was $0.3 million for 1994
compared to $2.6 million in 1993. The non-operating income in 1993 was primarily
a result of a lawsuit settlement.

INTEREST EXPENSE, NET. Net interest expense increased to $16.9 million for
1994 from $11.7 million in 1993. This increase resulted from the full year
effect of financing transactions entered into in connection with the
recapitalization of the Company in August 1993, including the issuance of the
Senior Subordinated Notes and borrowing under a revolving credit facility.

INCOME TAXES. Income taxes were $3.5 million and $1.8 million in 1994 and
1993, respectively. On a pro forma basis, income taxes would have been $42.9
million and $49.1 million in 1994 and 1993, respectively.

NET EARNINGS. Net earnings decreased 5.6% to $97.6 million, or 17.8% of net
revenue, in 1994, from $103.5 million or 19.9% of net revenue, in 1993,
primarily due to the increase in interest expense. On a pro forma basis, net
earnings would have decreased 12.6% to $64.3 million, or 11.7% of net revenue,
in 1994, from $73.6 million, or 14.1% of net revenue, in 1993.

LIQUIDITY AND CAPITAL RESOURCES

The Company has relied primarily upon internally generated funds, trade
credit and bank borrowings to finance its operations, expansion, and to make
periodic distributions to its stockholders. As of March 31, 1996, the Company
had working capital of $93.9 million, compared to $57.6 million at December 31,
1995. The $36.3 million increase in working capital primarily resulted from a
$17.6 million increase in inventories and a $18.8 million increase in
receivables. The increase in inventory and receivables relates to seasonal
requirements and the buildup of initial inventories of the Company's BARE BASICS
line.

As part of the Company's management of its working capital, the Company
performs all customer credit functions internally, including extension of credit
and collections. The Company's bad debt write-offs were less than 0.5% of net
revenue for the quarter ended March 31, 1996 and year ended December 31, 1995.

The Company's Credit Agreement provides for a $100.0 million revolving
credit facility which includes a $20.0 million sublimit for letters of credit.
As of March 31, 1996, the Company had $40.8 million in outstanding borrowings
under the revolving credit facility and outstanding letters of credit of $9.0
million. As of March 31, 1996, the Company had $50.2 million available for
future borrowings under such facility. The revolving credit facility will expire
in December 1997. In addition to the revolving credit, the Company also has a
$25.0 million letter of credit facility. As of December 31, 1995, the Company
had $11.1 million outstanding under this facility.

Capital expenditures, net of lease incentives granted, totaled $21.7 million
for 1995 and $18.3 million for 1994. The Company estimates that its capital
expenditures for 1996 will be approximately $20.0 million, primarily for the
expansion of its retail stores and operations.

As a result of the Company's treatment as an S corporation for Federal and
certain state income tax purposes, the Company has provided to the Principal
Stockholders periodic distributions for the payment of income taxes, as well as
a return on their investment. The Company paid dividends, including amounts for
taxes, of $117.7 million, $47.0 million, $53.3 million and $17.6 million in
1993, 1994, 1995 and the first quarter ended March 31, 1996, respectively. Prior
to consummation of the Offerings, the Company will declare the S Corporation
Distribution and distribute the S Distribution Notes, which notes will mature
one year from the Closing Date of the Offerings. Prior to the consummation of
the Offerings, the Company's S corporation status will be terminated. The
Company anticipates that, after payment of the S Corporation Distribution
(including repayment of the remaining balance of the S Distribution Notes), any
earnings will be retained for the foreseeable future in the operations of the
business. See "Company History, the Reorganization and Prior S Corporation
Status" and "Dividend Policy."

25
<PAGE>
Subsequent to the consummation of the Offerings, the Company's cash flow
needs will decrease as a result of decreased compensation to the Principal
Executive Officers and the absence of stockholder distributions for the purposes
of tax payments. Offsetting these decreases will be increases related to the
need to apply funds to the payment of Federal and additional state income taxes.
The net effect on cash for such changes is expected to increase the Company's
cash flow.

The Company anticipates that it will be able to satisfy its ongoing cash
requirements for the foreseeable future, including retail and international
expansion plans and interest payments on the Company's Senior Subordinated
Notes, primarily with cash flow from operations, supplemented, if necessary, by
borrowings under its Credit Agreement.

SEASONALITY

The Company's business is impacted by the general seasonal trends that are
characteristic of the apparel and retail industries. The Company's wholesale
operations generally experience stronger performance in the first and third
quarters, while retail operations are generally stronger in the third and fourth
quarters. As the timing of the shipment of products may vary from year to year,
the results for any particular quarter may not be indicative of results for the
full year. The Company has not had significant overhead and other costs
generally associated with large seasonal variations.

The following table sets forth certain unaudited quarterly data for the
periods shown.

<TABLE>
<CAPTION>
1994 1995 1996
------------------------------------------ ------------------------------------------ ---------
FIRST SECOND THIRD FOURTH FIRST SECOND THIRD FOURTH FIRST
QTR. QTR. QTR. QTR. QTR. QTR. QTR. QTR. QTR.
--------- --------- --------- --------- --------- --------- --------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net revenue........ $ 122,729 $ 119,383 $ 160,783 $ 144,917 $ 124,903 $ 104,749 $ 133,129 $ 123,952 $ 134,898
Gross profit....... 59,784 53,611 79,232 63,196 59,638 49,207 59,148 56,598 64,419
</TABLE>

INFLATION

The Company does not believe that the relatively moderate rates of inflation
experienced in the United States over the last three years have had a
significant effect on its 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, the Company does not believe that they have
had a material effect on the Company's net revenue or profitability.

EXCHANGE RATES

The Company receives United States dollars for substantially all of its
product sales and its licensing revenues. Inventory purchases from offshore
contract manufacturers are primarily denominated in United States dollars;
however, purchase prices for the Company's products may be impacted by
fluctuations in the exchange rate between the United States dollar and the local
currencies of the contract manufacturers, which may have the effect of
increasing the Company's cost of goods in the future. During the last two fiscal
years, exchange rate fluctuations have not had a material impact on the
Company's inventory costs. The Company currently does not engage in hedging
activities with respect to such exchange rate risk. See "Risk Factors -- Foreign
Operations."

IMPACT OF RECENT ACCOUNTING PRONOUNCEMENTS

The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 121 ("SFAS No. 121"), "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be disposed of," in March 1995
which is effective for fiscal years beginning after December 15, 1995. SFAS No.
121 establishes accounting standards for the impairment of long-lived assets,
certain identifiable intangibles and goodwill related to these assets and
certain identifiable intangibles to be disposed of. Since the Company's current
policy is consistent with the provisions of SFAS No. 121, it does not anticipate
that the new pronouncement will impact its financial statements.

26
<PAGE>
BUSINESS

INTRODUCTION

Guess, founded in 1981 by the Marciano brothers, designs, markets,
distributes and licenses one of the world's leading lifestyle collections of
casual apparel, accessories and related consumer products. The Company's apparel
for men and women is inspired by an appreciation of the American lifestyle
combined with a European flair and is marketed under the trademarks GUESS, GUESS
U.S.A., GUESS? AND TRIANGLE DESIGN and GUESS COLLECTION. The lines include full
collections of denim and cotton clothing, including jeans, pants, overalls,
skirts, dresses, shorts, blouses, shirts, jackets and knitwear. In addition, the
Company has granted licenses to manufacture and distribute a broad range of
products that complement the Company's apparel lines, including watches,
clothing for infants and children, eyewear, footwear, activewear, home products
and other fashion accessories. The Company's product quality combined with
captivating advertising images have created a global brand franchise with
products that appeal to style-conscious consumers across a broad spectrum of
ages. The Company generates revenue from wholesale and retail operations and
licensing activities, which accounted for 56%, 35% and 9%, respectively, of net
revenue in 1995. The Company's total net revenue in 1995 was $486.7 million and
pro forma net earnings (as described herein) were $43.3 million.

The Company achieves premium pricing for its products by emphasizing
superior styling and quality. The Company maintains rigorous control over the
quality of its products by performing its own design and development work and by
closely monitoring the workmanship of its contractors and licensees. The
enduring strength of the GUESS brand name and image is reinforced by the
Company's consistent emphasis on innovative and distinctive design. Under the
direction of Maurice Marciano, the Company's design department creates full
lines of casual apparel that appeal to both men and women. During 1995, net
sales of apparel for men and for women accounted for approximately 51% and 49%,
respectively, of net revenue from the sale of apparel products. Each of the
lines consists of a broad array of basic, recurring styles, complemented by more
fashion-oriented items which reflect contemporary trends. During 1995, net sales
of basic and fashion items accounted for approximately 48% and 52%,
respectively, of the Company's net revenue from the sale of apparel products.

The Company seeks to reach a broad consumer base through multiple channels
of distribution. GUESS brand products are distributed by the Company, its
licensees and international distributors to better department stores and upscale
specialty stores, 112 stores operated by the Company (of which 65 are retail
stores and 47 are factory outlet stores) and 198 stores operated by licensees
and distributors. As a critical element of its distribution to department
stores, the Company and its licensees utilize shop-in-shops to enhance brand
recognition, permit more complete merchandising of the lines and differentiate
the presentation of GUESS products. As of December 31, 1995 the Company's and
its licensees' products were sold in approximately 1,550 shop-in-shops
worldwide. In order to protect the Guess image and enhance the exclusivity of
the brand, the Company began in 1993 to withdraw its products from certain
wholesale accounts which did not meet the Company's merchandising standards.
Sales to such discontinued accounts represented approximately $51.1 million,
$32.9 million and $3.8 million of the Company's net revenue in 1993, 1994 and
1995, respectively. The Company's own network of stores, in addition to
providing a key opportunity for growth, allows the Company to present and
merchandise its entire collection and to test market new product concepts.

The Company intends to capitalize on the worldwide recognition of its brand
name and the breadth of Guess lifestyle products by expanding its international
operations. The Company has established Guess Europe in Italy and Guess Asia in
Hong Kong to design, source and market products in Europe and the Pacific Rim.
Although Guess is in the early stages of its international expansion, GUESS
brand products are currently sold in over 70 countries primarily through
licensees and distributors. Guess also grants licenses for the manufacture and
sale of GUESS branded products similar to the Company's in markets outside the
Company's channels of distribution, such as Canada, Argentina, Mexico, the
Philippines, South Korea, Brazil and Japan.

27
<PAGE>
significantly broadens the distribution of GUESS brand products while limiting
the Company's capital investment and operating expenses. The Company carefully
selects its licensees, maintains strict control over the design, advertising,
marketing and distribution of all licensed products and requires all licensees
to make significant investments in advertising, promotion and marketing in order
to maintain a consistent global GUESS brand image. The Company's 26 licensees
manufacture and distribute a broad array of related consumer products in the
United States and international markets. The Company's most significant licenses
include GUESS WATCHES, BABY GUESS, GUESS KIDS and GUESS EYEWEAR, which together
accounted for approximately 48.1% of the Company's net royalties in 1995. The
Company continues to capitalize on the GUESS brand image by granting licenses to
introduce related products. Recently, the Company licensed the GUESS HOME
COLLECTION and GUESS OUTERWEAR, as well as various accessory products.

Under Paul Marciano's direction and supervision, Guess has created a
consistent, high profile image through the use of its distinctive black and
white print ads. The Company's in-house Advertising Department, which has
garnered prestigious awards including the CLIO, BELDING and MOBIUS, directs the
media placement of all advertising worldwide, including placement by its
licensees. By retaining control over its advertising programs, the Company is
able to maintain the integrity of the GUESS brand image while realizing a
substantial cost savings compared to the use of outside agencies. From 1992
through 1995, the Company's advertising expenditures, together with amounts
spent by its licensees and its distributors (as reported to the Company by such
licensees and distributors), exceeded $160.0 million.

BUSINESS STRATEGY

The Company's business strategy is designed to increase sales and
profitability, while preserving the integrity and expanding the product depth
and global reach of the GUESS brand. To provide greater management depth, the
Company has recently recruited several key executives with substantial industry
experience to facilitate the implementation of its business strategy, including
Ken Duane, Andrea Weiss and Michael Wallen. The key elements of the strategy
include:

MAINTAIN HIGH BRAND RECOGNITION. The Company intends to continue its
efforts to increase its revenues by enhancing consumer recognition of its
brand name and image. Under the creative leadership of Paul Marciano, the
Company's award-winning advertising has established the Guess signature
image and reinforced the lifestyle concept of Guess and Guess-licensed
products in mutually supportive marketing campaigns. In addition to the
Company's expenditures, licensees are required to spend a percentage of
total revenues in advertising. The aggregate advertising expenditures of the
Company and its distributors and licensees (as reported to the Company by
such licensees and distributors) were $50.7 million in 1995, a 16.2%
increase over 1994.

INCREASE INTERNATIONAL PRESENCE. The Company intends to capitalize on
the worldwide recognition of its brand name and the breadth of Guess
lifestyle products by continuing to expand its distribution internationally.
Over the past three years, the Company has built the infrastructure
necessary to support distribution and licensing of its products worldwide.
To further this strategy, the Company has established Guess Europe in Italy
and Guess Asia in Hong Kong to design, source and market products in Europe
and the Pacific Rim. As a result, the Company believes it is well-positioned
to capitalize on the recognition of its brand name by increasing sales to
existing and new distributors outside the United States and from increasing
royalties resulting from the growth of its licensees' businesses and
increases in the number of retail stores operated by its distributors and
licensees. The Company also intends to expand, through Guess Europe and
Guess Asia, its direct sales penetration in certain markets in Europe and
the Pacific Rim not covered by licensees or distributors.

EXPAND LICENSING ARRANGEMENTS. The Company expects to continue to
license the GUESS name selectively to producers of high quality products
that complement its lifestyle collection. Since the beginning of 1993, the
Company has added new licenses, which, in 1995 represented approximately 30%
of the Company's net royalties. To maintain its reputation for quality and
style and control the integrity of the brand name, the Company will continue
to provide design, production and technical and marketing assistance to its
licensees to ensure compliance with its strict marketing and product
standards.

28
<PAGE>
EXPAND RETAIL STORE NETWORK. The Company believes an expanded retail
network will reinforce consumer recognition of its brand name and enhance
the presentation of the complete Guess merchandise collections. Since the
beginning of 1993, the Company has opened a total of 25 retail and 25
factory outlet stores (net of store closings). The percentage of net revenue
generated by the retail network has increased from 19.3% to 38.5% of the
Company's net revenue from product sales from 1992 through 1995. The Company
plans to open six new retail stores (net of store closings) in 1996 and up
to an additional 15 stores in 1997.

DEEPEN PRODUCT OFFERINGS. The Company has recently introduced new
product lines and categories to complement its existing lines. In 1993, the
Company introduced in its retail stores the GUESS COLLECTION and has since
expanded this collection to a full line of higher priced women's apparel
that incorporates a sophisticated combination of styles and colors. In 1995
and the first quarter of 1996, the GUESS COLLECTION accounted for
approximately 11.4% and 14.6%, respectively, of net revenue from the
Company's stores. Based on positive consumer reaction, the Company has
introduced the GUESS COLLECTION to selected better department stores for
shipment in the Fall 1996 season. In addition, the Company intends to
broaden its men's and women's lines to include khaki and other twill
products beginning with the 1996 holiday/resort season. In November 1995 the
Company introduced a new line of jeans under the "Bare Basics" label, with
unique construction and fabrications and lower price points than traditional
Guess jeans.

IMPROVE PRODUCTIVITY OF THE RETAIL STORE NETWORK. The Company's retail
management team has recently refined the Company's strategy to improve the
productivity of its retail network by establishing new models for optimal
store size, design and construction costs as well as staffing levels. In
addition, in late 1995 the Company began to improve the merchandising mix in
its stores and implemented sophisticated information systems to improve
inventory management. The Company believes that the implementation of these
initiatives contributed to the increase in comparable factory outlet and
retail store net revenue of 16.7% in the first quarter of 1996.

EXPAND AND UPGRADE SHOP-IN-SHOP PROGRAM. To enhance the presence of
Guess products in department stores, the Company intends to develop
approximately 80 new shop-in-shops in 1996 and 100 in 1997, and remodel
approximately 45 additional shops in 1996 and 55 in 1997. The design of the
shops utilizes the distinctive Guess advertising to promote brand
recognition and differentiate the location from its competition. The shops
also facilitate ease of shopping by presenting a complete presentation of
the Company's merchandise. In addition, the installation of these shops
enables the Company to establish premium locations within the department
stores and, therefore, compete more effectively against other products.

GENERAL

The Company derives its net revenue from the sale of Guess men's and women's
apparel to wholesale customers and the sale of its men's and women's apparel and
its licensees' products through the Company's network of retail and factory
outlet stores. The following table sets forth the net revenue of the Company
through its channels of distribution.

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, FIRST QUARTER
---------------------------------------------------------------- ENDED
1993 1994 1995 MARCH 31, 1996
-------------------- -------------------- -------------------- --------------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Revenue:
Wholesale operations.......... $ 348,879 67.1% $ 358,125 65.4% $ 270,931 55.7% $ 83,113 61.6%
Retail operations............. 142,565 27.4 149,337 27.2 169,428 34.8 40,162 29.8
Net royalties................. 28,780 5.5 40,350 7.4 46,374 9.5 11,623 8.6
--------- --------- --------- --------- --------- --------- --------- ---------
Total net revenue........... $ 520,224 100.0% $ 547,812 100.0% $ 486,733 100.0% $ 134,898 100.0%
--------- --------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- --------- ---------
</TABLE>

29
<PAGE>
The following table sets forth the Company's net revenue from product sales
generated through such channels of distribution by product category (licensed
products represent sales of licensed products by the Company's retail and
factory outlet stores).

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------------
1993 1994 1995
----------------------- ----------------------- -----------------------
PRODUCT
- ----------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Men's apparel........................... $ 239,767 48.8% $ 250,687 49.4% $ 194,945 44.3%
Women's apparel......................... 199,405 40.6 225,268 44.4 210,945 47.9
Licensed products....................... 11,854 2.4 21,274 4.2 31,881 7.2
Discontinued apparel (1)................ 40,418 8.2 10,233 2.0 2,588 0.6
---------- ----- ---------- ----- ---------- -----
Total (2)............................. $ 491,444 100.0% $ 507,462 100.0% $ 440,359 100.0%
---------- ----- ---------- ----- ---------- -----
---------- ----- ---------- ----- ---------- -----
</TABLE>

- ------------------------------

(1) In late 1992, the Company entered into licensing agreements for the boys'
product line, the majority of the girls' product line and women's knits,
which were previously produced by the Company. While the licensing of such
products reduced net revenue in 1993, the associated reduction in earnings
from operations from such sales was substantially offset by the increase in
net royalties from the new licenses.

(2) Beginning in 1993, the Company began to withdraw its products from selected
accounts which did not meet the Company's standards for merchandising. Net
product sales to discontinued accounts represented approximately $51.1
million, $32.9 million and $3.8 million of the Company's net revenue from
product sales in 1993, 1994 and 1995, respectively.

PRODUCTS

COMPANY PRODUCTS. The GUESS brand was founded upon its core product line of
high-quality jeans and other denim casual wear. Guess has been marketing denim
apparel since its inception in 1981, and has built and maintained a global brand
franchise with products that appeal to style-conscious consumers across a broad
spectrum of ages. The Company was founded on the concept of a fashion jean with
the first Guess product being the "three-zip Marilyn" jean, which was
stone-washed and adapted to fit the contours of a woman's body. Since its
inception, the Company has expanded its products to include a broad range of
denim and cotton clothing for men and women, including jeans, pants, overalls,
skirts, dresses, shorts, blouses, shirts, jackets and knitwear.

The Company's apparel products are organized into two primary categories:
men's apparel and women's apparel (including the GUESS COLLECTION). The
following table sets forth the approximate range of current retail prices for
the Company's products:

<TABLE>
<CAPTION>
RANGE OF
SUGGESTED
RETAIL PRICES
---------------------- RANGE OF
WOMEN'S MEN'S SUGGESTED
- ----------------------------------- ------------------------------------ RETAIL PRICES
----------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Jeans.............................. $ 58 - $ 64 Jeans............................... $ 58 - $ 72
Shorts............................. 39 - 52 Shorts.............................. 39 - 56
Tops............................... 38 - 76 Woven Tops.......................... 40 - 78
Dresses............................ 72 - 82 Jackets............................. 88 - 162
Pants.............................. 60 - 68 T-Shirts............................ 22 - 88
Jackets............................ 78 - 80
Guess Collection................... 66 - 340
</TABLE>

A major portion of the Company's men's and women's apparel lines consists of
basic, recurring styles which the Company believes are less susceptible to
fashion obsolescence and are less seasonal in nature than fashion product
styles. Basic product styles provide the Company with a base of business that
usually carries over from season to season and year to year. Basic products are
primarily made of denim and include jeans, skirts, dresses, overalls and shorts
in a variety of fits, washes and styles. To take advantage of contemporary
trends, the Company complements its basic styles with more fashion-oriented
items. Fashion products range in style from contemporary sportswear to casual
apparel and include colored denim items, pants, shirts,

30
<PAGE>
jackets and knitwear, made of a variety of materials including fine cotton,
man-made fabric and leather. A limited number of best-selling fashion items in a
collection may be included in one or more subsequent collections, and a select
few may be added to the Company's basic styles.

In 1993, the Company expanded its line of women's apparel to include the
GUESS COLLECTION, a collection of women's skirts, tops, jackets, blazers and
blouses incorporating a sophisticated combination of colors and styles. The
GUESS COLLECTION was introduced through Guess stores. Based on positive consumer
reaction, the Company expanded distribution of the GUESS COLLECTION to selected
better department stores for shipment in the 1996 Fall season. The GUESS
COLLECTION appeals to the contemporary segment of the apparel market and will
generally be sold in separate selling areas from other Guess denim and casual
apparel.

LICENSED PRODUCTS. The high level of desirability of the GUESS brand name
among consumers has allowed the Company to selectively expand its product
offerings through licensing arrangements. The Company currently has 26
licensees. Sales of licensed products (as reported to the Company by its
licensees) have grown from $451.7 million in 1993 to $736.5 million in 1995. The
Company's net royalties from such sales and fees from new licensees increased
from $28.8 million in 1993 to $46.4 million in 1995. Approximately 48.1% of the
Company's net royalties was derived from its top four licensed product lines.
These product lines are GUESS WATCHES (19% of 1995 net royalties), BABY GUESS
(12%), GUESS KIDS (9%) and GUESS EYEWEAR (8%).

GUESS WATCHES have been manufactured and distributed since 1983. The GUESS
WATCH line includes approximately 408 styles of watches for men, women and
children, and clocks. Retail prices range from approximately $55 to $125. In
1996, an upscale, higher-priced line of watches is planned to be introduced at a
retail price range of $175 to $250.

The BABY GUESS and GUESS KIDS product lines include infants', boys' and
girls' clothing, accessories, infant layette items and baby hair care products.
These products retail for $4.50 to $70 and are sold domestically in
free-standing licensed stores, better department stores and through distributors
in Asia.

GUESS EYEWEAR is manufactured and distributed worldwide. The eyewear line
offers styles ranging in retail price from $37 to $200. Guess eyewear is sold
through optical specialty and department stores.

Guess also licenses a range of other products, including men's apparel,
women's knitwear, footwear, activewear, athleticwear, leather goods, neckwear,
jewelry and a home collection. Most of these licenses have been granted since
1994 and are in their early stage of development.

DESIGN

The enduring strength of the GUESS brand name and image is partially due to
the Company's consistent emphasis on innovative and distinctive design. For the
past 15 years, the Guess design teams have anticipated and adapted to changing
consumer tastes while retaining the distinctive Guess image. Under the direction
of Maurice Marciano, Guess garments are designed by an in-house staff of four
design teams (men's, women's, GUESS COLLECTION and Guess Europe) located in Los
Angeles and Florence, Italy. Guess design teams travel around the world in order
to monitor fashion trends and discover new fabrics. Fabric shows in Europe and
the United States provide additional opportunities to discover and sample new
fabrics. These fabrics, together with the trends uncovered by the Company's
designers serve as the primary source of inspiration for the Company's lines and
collections. The Company also maintains a fashion library consisting of antique
and contemporary garments as an additional source of creative concepts. In
addition, design teams regularly meet with members of the sales, merchandising
and retail operations to further refine the Company's products in order to meet
the particular needs of the Company's markets. Many Guess products are developed
using computer-aided design equipment which allows a designer to view and modify
two- and three-dimensional images of a new design. By the end of 1996, the
Company intends to link its Los Angeles and Florence design centers
electronically so that individual designs may be accessed, modified and shared
by designers in both locations. After working prototypes of each garment are
prepared and reviewed, the pattern makers oversee the final production of each
garment's pattern. As of March 31, 1996, the Company's design department
employed 130 persons, approximately 27 of whom were designers and assistant
designers.

31
<PAGE>
Licensed products are designed by both the Company and its licensees. A
separate design team of 12 associates works with the Company's licensees and all
licensee designs must be approved by the Company to ensure consistency with the
Guess image. See "-- Licensing Agreements and Terms."

DOMESTIC WHOLESALE CUSTOMERS

The Company's domestic wholesale customers consist primarily of better
department stores and select upscale specialty stores, which have the image and
merchandising expertise that Guess requires for the effective presentation of
its products. Leading wholesale customers include Federated Department Stores,
The May Department Stores Company, Dillard Department Stores, Inc., and select
upscale specialty stores. As of December 31, 1995, the Company sold its products
directly to approximately 2,700 retail locations ("doors") in the United States
and approximately 350 doors in Italy.

A key element of the Company's merchandising strategy is the shop-in-shop
merchandising format, an exclusive selling area within a department store that
presents a full array of Guess products using Guess signage and fixtures. As of
December 31, 1995, there were approximately 1,160 shop-in-shops (excluding
shop-in-shops installed by licensees) that feature Guess products (other than
the GUESS COLLECTION) and the Company intends to increase the number of
shop-in-shops by 80 by the end of 1996 and by an additional 100 by the end of
1997. Guess also intends to establish GUESS COLLECTION shop-in-shops, in
addition to existing shop-in-shops, in selected better department stores
beginning in the Spring of 1997.

The Company's close wholesale customer relationships have been achieved
through innovative and effective marketing and merchandising and superior
customer service. As of March 31, 1996, the Company had 77 sales representatives
and 81 merchandise coordinators. The sales representatives are located in the
Company's showrooms in New York, Los Angeles, Dallas, Atlanta, Chicago, Hong
Kong, Milan and Florence. They coordinate with buyers for the Company's
customers to determine the inventory level and product mix that should be
carried in each store to maximize retail sell-through and enhance the customers'
profit margins. Such inventory level and product mix are then used as the basis
for developing sales projections and product needs for each wholesale customer.
In addition, Guess sales representatives monitor the inventories of customers,
which assists the Company in scheduling production. The merchandisers work with
the store to ensure the Company's products are appropriately displayed.

Certain of the Company's domestic wholesale customers, including some under
common ownership, have accounted for significant portions of the Company's net
revenue. During 1995, Bloomingdale's, Macy's and affiliated stores owned by
Federated Department Stores, together accounted for approximately 11.0% of the
Company's net revenue. During the same period, The May Company and Dillard's
accounted for approximately 7.7% and 7.3% of the Company's net revenue,
respectively. See "Risk Factors -- Dependence on Certain Customers and
Licensees."

DOMESTIC RETAIL OPERATIONS

As of March 31, 1996, the Company's domestic retail operations consisted of
64 retail and 47 factory outlet stores operated directly by Guess in the United
States, which principally sell GUESS label products. Guess retail stores outside
the United States, with the exception of the Company-owned store in Florence,
Italy, are owned and operated by the Company's distributors and licensees. See
"-- International Business." Since the beginning of 1993, the Company has opened
a total of 25 retail and 25 factory outlet stores and has closed 11 retail and
five factory outlet stores. The percentage of net revenue generated by the
retail network has increased from 19.3% to 38.5% of the Company's net revenue
from product sales from 1992 through 1995.

The Company's retail management team has recently refined the Company's
strategy to improve the productivity of its retail network by establishing new
models for optimal store size, design and construction costs as well as staffing
levels. In addition, in late 1995, the Company began to improve the
merchandising mix in its stores and implemented sophisticated information
systems to improve inventory management. The Company believes that the
implementation of these initiatives contributed to the increase in comparable
factory outlet and retail store net revenue of 16.7% in the first quarter of
1996.

32
<PAGE>
RETAIL STORES. The Company's 64 domestic retail stores typically range in
size from approximately 3,400 to 8,500 square feet, with 61 locations in
regional shopping malls and three stand-alone stores in areas of high foot
traffic. The retail stores are located in 20 states with approximately an equal
number of stores on both the East and West Coasts. Of the retail stores on the
West Coast, 22 are located in California. The Company's retail stores carry a
full assortment of men's and women's Guess merchandise, including most of its
licensed products. Distribution through its own retail stores allows the Company
to influence the merchandising and presentation of its products and to test
market new product concepts. The Company's strategy is to increase its domestic
sales by selectively expanding its network of retail stores and by increasing
the productivity of its existing stores. Over the past year, Guess has
significantly strengthened its retail operations management through the
selective hiring of experienced well-respected retail professionals.

As of March 31, 1996, the Company had opened two retail stores in 1996. The
Company intends to open up to five additional retail stores and close one retail
store during the remainder of 1996 and to open up to 15 additional retail stores
during 1997. The Company intends to continue to locate its stores in regional
malls with a smaller number of flagship stores in major cities.

FACTORY OUTLET STORES. The Company's 47 factory outlet stores typically
range in size from approximately 2,100 to 7,500 square feet and are located in
outlet malls and strip centers outside the shopping radius of the Company's
wholesale customers and its retail stores. The factory outlet stores are located
in 27 states, with no major concentration in any one state. These stores sell
selected styles of Guess apparel and licensed products at a discount to
value-conscious customers, enabling the Company to effectively control the
distribution of its excess inventory, thereby protecting the Guess image. The
Company plans to open one and close one factory outlet store in 1996. The
Company has no plans to open additional factory outlet stores in 1996 or 1997.

INTERNATIONAL BUSINESS

Given the high level of GUESS brand awareness in countries outside the
United States, the Company believes that international distribution of GUESS
brand products represents a significant opportunity to increase revenue and
profits. This awareness is partially a result of the substantial international
advertising undertaken by the Company in advance of distributing products to
these locations. Although Guess is in the early stages of its international
expansion, GUESS brand products are currently sold in over 70 countries.

Guess derives net revenue and earnings from outside the United States from
four principal sources: (i) sales of GUESS brand apparel directly to 12 foreign
distributors who distribute such apparel to better department stores, upscale
specialty retail stores and Guess-licensed retail stores operated by Guess
distributors or licensees, (ii) royalties from licensees who manufacture and
distribute GUESS brand products outside the United States, (iii) royalties from
licensees who have been granted licenses to own and operate Guess retail stores
outside the United States and (iv) sales of GUESS brand apparel by Guess Europe
directly to upscale European retail stores.

Since 1991, the Company has been selling its products through distributors
and licensees in Asia, the Middle East and Australia. In 1993, the Company
opened a design studio, sourcing office, sales office and warehouse in Italy and
in 1994 began sourcing, marketing and distributing products in Italy and Spain.
Since the beginning of 1996, Guess has executed distribution agreements for the
United Kingdom, Austria, Belgium, Greece, Hungary, Israel and Turkey, and is in
the process of negotiating additional arrangements in Europe.

As of March 31, 1996, 175 Guess retail stores were operated internationally
by eight distributors and 13 licensees. The Company's distribution and license
agreements generally provide detailed guidelines for store fittings, fixtures,
merchandising and marketing programs and the appearance, merchandising and
service standards of these stores are closely monitored to ensure the Guess
image is maintained. The Company has been advised that its distributors and
licensees plan to establish 50 new international distributor- and
licensee-operated stores by the end of 1997. Guess also owns and operates a
flagship Guess retail store

33
<PAGE>
located in Florence, Italy. As of December 31, 1995, there were 390
shop-in-shops for GUESS brand products in stores outside the United States. See
"Risk Factors -- Foreign Operations and Sourcing -- Import Restrictions."

LICENSING AGREEMENTS AND TERMS

The Company carefully selects and maintains tight control over its
licensees. In evaluating a potential licensee, the Company considers the
experience, financial stability, manufacturing performance and marketing ability
of the proposed licensee and evaluates the marketability and compatibility of
the proposed products with other GUESS brand merchandise. The Company's license
agreements generally cover three years with an option to renew prior to
expiration for an additional multi-year period. In addition to licensing
products which complement the Company's apparel products, Guess also grants
licenses for the manufacture and sale of GUESS branded products similar to the
Company's, including men's and women's denim and knitwear, in markets outside
the Company's channels of distribution, such as Canada, Argentina, Mexico, the
Philippines, South Korea, Brazil and Japan. Licenses granted to certain
licensees which have produced high-quality products and otherwise have
demonstrated exceptional operating performance, such as GUESS WATCHES and BABY
GUESS, have been renewed repeatedly (in some cases for up to 20 years) and in
some cases expanded to include new products or markets. The typical license
agreement requires that the licensee pay the Company the greater of a royalty
based on a percentage of the licensee's net sales of licensed products or a
guaranteed minimum royalty that typically increases over the term of the license
agreement. Generally, licensees are required to spend a percentage of the net
sales of licensed products for advertising and promotion of the licensed
products. In addition, certain foreign licensees are required to contribute
toward the protection of the Company's trademarks within the territories granted
to such licensees, thereby assisting Guess in its efforts to prevent
counterfeiting and other trademark infringement in such countries.

The Company's licensing department strictly monitors product design,
development, merchandising and marketing. All GUESS brand products, advertising,
promotional and packaging materials must be approved in advance by Guess. The
licensing department meets regularly with licensees to ensure consistency with
Guess's overall marketing, merchandising and design strategies, and to ensure
uniformity and quality control. See "Risk Factors -- Dependence upon Certain
Customers and Licensees."

ADVERTISING, PUBLIC RELATIONS AND MARKETING

The Company's advertising, public relations and marketing strategy is to
promote a consistent high impact image which endures regardless of changing
consumer trends. Since the Company's inception, Paul Marciano has had principal
responsibility for the GUESS brand image and creative vision. All worldwide
advertising and promotional material is controlled through the Company's
Advertising Department based in Los Angeles, while Guess Public Relations and
Special Events are based in New York. GUESS JEANS, GUESS U.S.A. and GUESS INC.
images have been showcased in international print campaigns in dozens of major
magazines, on billboards, bus shelters and telephone kiosks, on television and
most recently in movie theaters throughout the United States.

ADVERTISING. The Company's advertising strategy is designed to promote the
Guess image rather than focus on specific products. The Company's distinctive
black and white print advertisements have garnered prestigious awards including
the CLIO, BELDING and MOBIUS. Guess has maintained a high degree of consistency
in its advertisements, using similar themes and images. From 1992 through 1995,
the Company's advertising expenditures, together with amounts spent by its
licensees and its distributors (as reported to the Company by such licensees and
distributors), exceeded $160.0 million.

The Company's in-house Advertising Department is responsible for media
placement of all advertising worldwide including that of its licensees. The
Company uses a variety of media, primarily black and white print and outdoor
advertising in various countries. The Company has focused advertisement
placement in national and international contemporary fashion/beauty and
lifestyle magazines including VOGUE, GLAMOUR, VANITY FAIR, HARPERS BAZAAR, ELLE,
W and DETAILS. By retaining control over its advertising programs, the Company
is able to maintain the integrity of the GUESS brand image while realizing
substantial cost savings compared to the use of outside agencies. The Company's
Advertising Department consisted of 12 employees as of March 31, 1996.

34
<PAGE>
PUBLIC RELATIONS. The Company's Public Relations Department is responsible
for communicating the Guess image to the public and news media worldwide. The
Public Relations Department also coordinates local publicity and special events
programs for the Company and its licensees, including in-store Guess model and
celebrity appearances and fashion shows. The Guess Public Relations Department
consisted of seven full time employees as of March 31, 1996.

MARKETING. The Company utilizes various additional marketing tools such as
corporate mailers, videos, newsletters, special events and a toll free Guess
number to assist customers worldwide in finding Guess retail locations. The
Company also produces 200,000 copies of the GUESS JOURNAL, a full color,
oversized semi-annual magazine available in retail stores worldwide or through
the Guess mailing list. The GUESS JOURNAL features trends in the arts, travel
destinations, candid celebrity profiles, philanthropic events and Guess product
information.

The Company further strengthens communications with customers through the
WORLD OF GUESS, the Company's Internet site on the World Wide Web. This global
medium enables the Company to provide timely information in an entertaining
fashion on the Company's history, Guess products and store locations to
consumers and allows the Company to receive and respond directly to customer
feedback.

SOURCING AND PRODUCT DEVELOPMENT

The Company sources products through numerous suppliers, many of whom have
established relationships with the Company. The Company seeks to achieve the
most efficient means for the timely delivery of its high quality products and
continues to rebalance its sourcing by region in response to increasing demand
within each region. The Company's fabric specialists work with fabric mills in
the United States, Europe and Asia to develop woven and knitted fabrics that
enhance the products' comfort, design and appearance. For a substantial portion
of the Company's apparel products, fabric purchases take place generally four to
five months prior to the corresponding selling season. Apparel production (cut,
manufacture and trim) generally begins after the Company has received customer
orders. Delivery of finished goods to customers occurs approximately 90 to 120
days after receipt of customers' orders.

The Company engages both domestic and foreign contractors for the production
of its products. During 1995, the Company purchased approximately 74% of its raw
materials, labor and finished goods in the United States, 21% in Hong Kong,
Taiwan, South Korea and other Asian countries, 4% in Europe, and 1% elsewhere.
The production and sourcing staffs in Los Angeles and Italy oversee all aspects
of fabric acquisition, apparel manufacturing, quality control and production, as
well as researching and developing new sources of supply. The Company operates
product sourcing and quality control offices in Los Angeles, Hong Kong and
Florence.

The Company does not own any production equipment other than cutting
machinery. The Company's apparel products are produced for the Company by
approximately 80 different contractors. None of the contractors engaged by the
Company accounted for more than 10% of the Company's total production during
1995. The Company has long-term relationships with many of its contractors,
although it does not have written agreements with them. The Company uses a
variety of raw materials, principally consisting of woven denim, woven cotton
and knitted fabrics and yarns. The Company must make commitments for a
significant portion of its fabric purchases well in advance of sales, although
the Company's risk is reduced because 50% of the Company's products are sewn in
basic denim. See "Risk Factors -- Foreign Operations and Sourcing; Import
Restrictions."

QUALITY CONTROL

The Company's quality control program is designed to ensure that all of the
Company's products meet the Company's high quality standards. The Company
monitors the quality of its fabrics prior to the production of garments and
inspects prototypes of each product before production runs are commenced. The
Company also performs 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 the Company's distribution centers. The
Company currently has 25 full-time personnel engaged in quality control located
in its Los Angeles office, five located in Hong Kong (who work for the joint
venture) and four

35
<PAGE>
in Florence, including two independent contractors. The Company believes that
its policy of inspecting its products at its distribution centers and at the
contractors' facilities is important in maintaining the quality and reputation
of its products. The Company also conducts inspections on all licensed products.

The Company permits defective garments to be authorized for return for
credit by the purchasers. Less than 0.6% of the garments shipped by the Company
during each of the last three years has been returned under this policy.

WAREHOUSE AND DISTRIBUTION CENTERS

The Company utilizes distribution centers at three strategically located
sites. Two of the distribution centers are operated by the Company and one is
operated by an independent contractor. Distribution of the Company's products in
the United States is centralized in the Los Angeles facility operated by the
Company. The Company also operates a distribution center in Florence to service
Europe. The Company utilizes a contract warehouse in Hong Kong that services the
Pacific Rim.

The Company currently intends to open a contract warehouse in Northern
Europe for distribution to portions of Europe outside of Italy. The Company
anticipates that such warehouse will become operational during the first half of
1997.

In order to ensure that each of its retail customers receives merchandise in
satisfactory condition, substantially all Company products are processed through
one of the Company's distribution centers before delivery to the retail
customer. Each customer is assigned to one of the Company's distribution
centers, depending on the customer's location.

At its distribution center in Los Angeles, the Company has also developed a
fully integrated and automated distribution system. The bar code scanning of
merchandise, picking tickets and distribution cartons, together with radio
frequency communications, provides timely, controlled, accurate and
instantaneous updates to the distribution information systems.

COMPETITION

The apparel industry is highly competitive and fragmented, and is subject to
rapidly changing consumer demands and preferences. The Company believes that its
success depends in large part upon its 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 image. Guess competes with numerous
apparel manufacturers and distributors (including Calvin Klein, Ralph Lauren,
DKNY, Tommy Hilfiger and Nautica). Moreover, several well-known designers have
recently entered or re-entered the designer denim market with products generally
priced lower than the Company's designer jeans products. The Company's retail
and factory outlet stores face competition from other retailers. Additionally,
the Company encounters substantial competition from department stores, including
some of the Company's major retail customers. The Company's licensed apparel and
accessories also compete with a substantial number of designer and non-designer
lines. Many of the Company's competitors have greater financial resources than
Guess. The Company's licensed products also compete with various other
well-known consumer brands. Although the level and nature of competition differ
among its product categories, Guess believes that it competes on the basis of
its brand image, quality of design and workmanship and product assortment.

TRADEMARKS

As of March 31, 1996, the Company had more than 1,500 U.S. and international
trademarks, including GUESS?, GUESS, GUESS? AND TRIANGLE DESIGN, BABY GUESS,
GUESS KIDS, GUESS U.S.A. and GUESS COLLECTION, registered or which have
applications pending with the trademark offices of the United States and over
137 countries around the world. From time to time, the Company adopts new
trademarks in connection with the marketing of new product lines. The Company
considers its trademarks to have significant value in the marketing of its
products and, since shortly after the Company's inception, has acted
aggressively to register and protect its trademarks worldwide.

Like many well-known brands, the Company's trademarks are subject to
infringement. Guess has a staff devoted to the monitoring and aggressive
protection of its trademarks worldwide, which uses, among other things,
available legal remedies to prevent unauthorized use of its trademarks.

36
<PAGE>
MANAGEMENT INFORMATION SYSTEMS

The Company believes that advanced information processing is essential to
maintaining its competitive position. Consequently, over the past three years
(ending December 31, 1995) the Company has invested over $20.0 million in
upgrading its management information systems. The Company is implementing
systems which allow areas of the business to be more pro-active to customer
requirements, to improve internal communication flow, to increase process
efficiency, and to support management decisions.

The Company's systems provide, among other things, comprehensive order
processing, production, accounting and management information for the marketing,
selling, manufacturing, retailing, and distribution functions of the Company's
business. The Company has developed a sophisticated software program that
enables the Company to track, among other things, orders, manufacturing
schedules, inventory and sales of Guess products. The program includes a
centralized management information system which provides the various operating
departments with integrated financial, sales, inventory and distribution related
information.

Computer-aided-design (CAD) systems are utilized within both the design and
marking and grading departments to develop fabrics and styles. The Company has
these systems in place both domestically and internationally, allowing for this
information to be shared. All style and fabric information is maintained in a
line management system which streamlines communication between the design, sales
and production departments.

The Company is a Quick Response (QR) vendor which, via electronic data
interchange (EDI), provides for customer orders to be shipped from 24 to 72
hours from the time of order receipt. The Company currently receives EDI orders
on a worldwide basis, including its Singapore and London distributors. The
Company's integrated and automated distribution system, utilizing bar code
scanning of merchandise, pick tickets and shipping cartons together with radio
frequency communications, provides controlled, accurate, and instantaneous
updates to the distribution information system.

The retail systems allow for rapid stock replenishment, concise merchandise
planning, and inventory accounting and control practices. The Company has
installed sophisticated point-of-sale registers in Guess retail and factory
outlet stores and is in the process of installing a computer network for such
stores that will enable the Company to track inventory from store receipt to
final sales.

WHOLESALE BACKLOG

The Company maintains a model stock program in its basic denim products
under which Guess can replenish a customer's inventory within 48 hours. Guess
generally receives orders for its fashion apparel three to five months prior to
the time the products are delivered to stores. The bulk of the fashion product
orders are received after test markets for the Fall and Spring seasons. As of
March 31, 1996, the Company had unfilled wholesale orders (excluding
intracompany orders), consisting primarily of orders for fashion apparel, of
approximately $65.7 million, compared to $69.5 million of such orders as of
March 31, 1995. Guess expects to fill substantially all of these orders in 1996.
The backlog of wholesale orders at any given time is affected by a number of
factors, including seasonality and the scheduling of 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.

EMPLOYEES

Guess believes that its employees ("associates") are one of its most
valuable resources. As of March 31, 1996, there were approximately 2,600
associates. Total associates include approximately 1,100 in wholesale operations
and approximately 1,500 in retail operations.

Guess is not a party to any labor agreements and none of its associates is
represented by a labor union. The Company considers its relationship with its
associates to be good and has not experienced any interruption of its operations
due to labor disputes. In addition, the Company was among the first in the
apparel industry to implement a program to monitor the compliance of
subcontractors with Federal minimum wage and overtime pay requirements.

37
<PAGE>
PROPERTIES

Certain information concerning Guess's principal facilities, all of which
are leased, is set forth below:

<TABLE>
<CAPTION>
APPROXIMATE AREA
LOCATION USE IN SQUARE FEET
- ------------------------------- ----------------------------------------------- ----------------
<S> <C> <C>
1444 South Alameda Street Principal executive and administrative offices, 514,000
Los Angeles, California design facilities, sales offices, distribution
and warehouse facilities, production control,
sourcing
1385 Broadway Administrative offices, public relations, 30,000
New York, New York showrooms
Kowloon, Hong Kong Distribution, showrooms, licensing coordination 3,000
control
Milan, Italy Showrooms 1,800
Florence, Italy Administrative offices, design facilities, 17,200
production control, sourcing, retail,
distribution and warehouse facility
</TABLE>

The Company's corporate, manufacturing and retail headquarters and its
production, warehousing and distribution facilities are located in Los Angeles,
California and consist of seven adjacent buildings totaling approximately
514,000 square feet. Certain of these facilities are leased from limited
partnerships in which the sole partners are the Principal Stockholders pursuant
to leases that expire in July 2008. The total lease payments to these limited
partnerships are $208,000 per month with aggregate minimum lease commitments at
December 31, 1995 totaling approximately $32.7 million. See "Certain
Transactions."

In addition, Guess leases its showrooms, advertising, licensing, sales and
merchandising offices, remote warehousing facility and retail and factory outlet
store locations under non-cancelable operating lease agreements expiring on
various dates through November 2007. These facilities are located principally in
the United States, with aggregate minimum lease commitments, at December 31,
1995, totaling approximately $135.8 million. The current terms of the Company's
store leases, including renewal options, expire as follows:

<TABLE>
<CAPTION>
NUMBER
YEARS LEASE TERMS EXPIRE OF STORES
- ------------------------------------------------------------------------------------ -------------
<S> <C>
1995-1997......................................................................... 3
1998-2000......................................................................... 9
2001-2003......................................................................... 22
2004-2006......................................................................... 65
2007-2009......................................................................... 11
2010-2012......................................................................... 2
</TABLE>

Guess believes that its existing facilities are well maintained, in good
operating condition and are adequate to support its present level of operations.
See "Certain Transactions." See Notes 8 and 9 of Notes to Financial Statements
for further information regarding current lease obligations.

LITIGATION

Guess is a party to various claims, complaints and other legal actions that
have arisen in the ordinary course of business from time to time. The Company
believes that the outcome of all pending legal proceedings, in the aggregate,
will not have a material adverse effect on the Company's financial condition or
results of operations.

38
<PAGE>
MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

The following table sets forth certain information as of May 1, 1996
concerning the directors and executive officers of the Company:

<TABLE>
<CAPTION>
NAME AGE POSITION
- --------------------- --- ---------------------------------------------------------------------------
<S> <C> <C>
Maurice Marciano 47 Chairman of the Board, Chief Executive Officer and Director
Paul Marciano 44 President, Chief Operating Officer and Director
Armand Marciano 51 Senior Executive Vice President, Secretary and Director
Ken Duane 39 President of Worldwide Sales -- Corporate
Roger Williams 48 Executive Vice President and Chief Financial Officer
Andrea Weiss 40 President of Retail Operations
Michael Wallen 43 President, Retail Merchandising
</TABLE>

Pursuant to the Stockholders' Agreement described herein under "Certain
Transactions," the Principal Stockholders have agreed to vote their shares of
Common Stock to elect each of Maurice, Paul and Armand Marciano, or one designee
of any such person (if such designee shall be reasonably acceptable to the other
Principal Stockholders), to the Board of Directors. Maurice, Paul and Armand
Marciano are brothers. Maurice, Paul and Armand Marciano have worked together in
the fashion industry for the last 25 years.

MAURICE MARCIANO, who was one of the founders of the Company in 1981, has
served as Chairman of the Board and Chief Executive Officer of the Company since
August 1993. Mr. Marciano had served as President of the Company from June 1990
to September 1992 and as Executive Vice President from 1981 until June 1990. Mr.
Marciano's responsibilities include the design direction of the Company, sales
and merchandising, manufacturing and production as well as financial aspects of
the Company. In addition, Mr. Marciano leads the marketing side of the business
with Mr. Paul Marciano. Mr. Marciano has been a Director of the Company since
1981 (except for the period from January 1993 to May 1993). From February 1993
to May 1993, Mr. Marciano was Chairman and Chief Executive Officer and a
Director of Pepe Clothing USA, Inc.

PAUL MARCIANO joined the Company two months after its inception in 1981 and
has served as creative director for Guess advertising worldwide since that time.
He has served as President of the Company since September 1992 and as a Director
of the Company since 1990. Mr. Marciano's responsibilities have included direct
supervisory responsibility for international expansion, licensing, the legal
department, MIS and developing the Advertising Department. Mr. Marciano is
recognized for shaping the direction and look of the Company's advertising and
creating the Company's signature image. Mr. Marciano served as Senior Executive
Vice President of the Company from August 1990 to September 1992.

ARMAND MARCIANO joined the Company two months after its inception and has
served as Senior Executive Vice President of the Company since November 1992.
Mr. Marciano has direct supervisory responsibility for the Company's domestic
retail and factory stores. In addition, Mr. Marciano is responsible for the
manufacturing, distribution, customer service and European exports aspects of
the business. Mr. Marciano has been a Director and Secretary of the Company
since 1983. From July 1988 to 1992, Mr. Marciano served as Executive Vice
President of the Company.

KEN DUANE will join the Company as President of Worldwide Sales -- Corporate
in June 1996. From July 1990 to May 1996, Mr. Duane served as Executive Vice
President Sales and Marketing for Nautica International. Mr. Duane had served as
a Senior Vice President Sales and Marketing for Hugo Boss International from
October 1985 to July 1990 and prior to that time was a Vice President and
National Sales Manager for J. Schoeneman/Burberry's beginning June 1981.

ROGER WILLIAMS has been the Executive Vice President and Chief Financial
Officer of the Company since March 1994. From October 1992 to February 1994, he
served as Executive Vice President and Chief

39
<PAGE>
Financial Officer of The Donna Karan Company. From July 1990 to October 1992, he
was Executive Vice President -- Operations and Chief Financial Officer of
Authentic Fitness Corporation, a company formed in 1990 to acquire substantially
all of the Activewear division of Warnaco, Inc., where Mr. Williams served in
various capacities (ending with Senior Vice President and Chief Financial
Officer) from May 1986 to June 1990. Since August 1994, Mr. Williams has served
as a Director of Nantucket Industries, Inc.

ANDREA WEISS joined Guess as President of Retail Operations for the Guess
Retail and Factory Division in February 1996. Ms. Weiss was Senior Vice
President and Director of Stores for Ann Taylor Stores and Ann Taylor Studio
Shoe Stores, and an officer of Ann Taylor Stores Corporation, from July 1992 to
February 1996. From April 1990 to July 1992, she was Director of Retail
Operations for the Walt Disney World Resort, a division of The Walt Disney
Company. From November 1987 to April 1990, she was Senior Vice President of
Operations for the Naragansett Clothing Company, a specialty women's apparel
retailer. Ms. Weiss sits on the Board of Common Ground, a non-profit
organization.

MICHAEL WALLEN has been President, Retail Merchandising since May 1995. From
October 1993 to April 1995, Mr. Wallen served as Executive Vice President of G.
H. Bass & Company, a division of Phillips-Van Heusen Corporation. From January
1992 to August 1993, he served as President of Merchandising of Macy's West, a
division of R. H. Macy & Co., Inc. From January 1988 to January 1992, Mr. Wallen
served as Senior Vice President of Macy's California, Inc., a subsidiary of R.
H. Macy & Co., Inc. Mr. Wallen began his professional career with R. H. Macy &
Co., Inc. in New York and spent 19 years with the firm.

BOARD OF DIRECTORS

The Company's Board of Directors is currently comprised of Maurice, Paul and
Armand Marciano. Shortly following the consummation of the Offerings, the
Company intends to appoint two directors who are neither officers nor employees
of the Company or its affiliates and within one year following consummation of
the Offerings to appoint an additional two such directors.

Upon the appointment of the first two additional directors, the Board of
Directors will establish an Audit Committee and a Compensation Committee. The
Audit Committee will be responsible for recommending to the Board of Directors
the engagement of the independent auditors of the Company and reviewing with the
independent auditors the scope and results of the audits, the internal
accounting controls of the Company, audit practices and the professional
services furnished by the independent auditors. The Compensation Committee will
be responsible for reviewing and approving all compensation arrangements for
officers of the Company, and will also be responsible for administering the
Equity Plan.

The Delaware General Corporation Law provides that a company may indemnify
its directors and officers as to certain liabilities. The Company's Certificate
of Incorporation and Bylaws provide for the indemnification of its directors and
officers to the fullest extent permitted by law, and the Company intends to
enter into separate indemnification agreements with each of its directors and
officers to effectuate these provisions and to purchase directors' and officers'
liability insurance. The effect of such provisions is to indemnify, to the
fullest extent permitted by law, the directors and officers of the Company
against all costs, expenses and liabilities incurred by them in connection with
any action, suit or proceeding in which they are involved by reason of their
affiliation with the Company.

COMPENSATION OF DIRECTORS

Directors who are employees of the Company receive no compensation for
serving on the Board of Directors. It is expected that directors who are not
employees of the Company will receive a retainer fee of $ per year for
their services. All directors are reimbursed for expenses incurred in connection
with attendance at board or committee meetings.

In addition, pursuant to the Directors' Plan, each non-employee director of
the Company, upon joining the Board of Directors, will receive non-qualified
options to purchase shares of Common Stock and will receive
non-qualified options to purchase an additional shares of Common Stock
on the first day of each fiscal year thereafter. The exercise price of such
options will be equal to the fair market

40
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value of the Common Stock on the respective date of grant, the term of the
options will be ten years, and the options will become exercisable in 25%
installments on each of the first four anniversaries of the date of grant. See
"-- 1996 Non-Employee Directors' Stock Option Plan."

EXECUTIVE COMPENSATION

The following table sets forth each component of compensation paid or
awarded to, or earned by, the Chief Executive Officer and the four most highly
compensated executive officers other than the Chief Executive Officer serving as
of December 31, 1995 (the "Named Executive Officers") for the fiscal years ended
December 31, 1993, 1994 and 1995.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
ANNUAL COMPENSATION
----------------------------------------------------------
OTHER ANNUAL ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION (1) COMPENSATION (2)
- ------------------------------------ --------- ------------ ------------ ------------------- -------------------
<S> <C> <C> <C> <C> <C>
Maurice Marciano 1995 $ 2,000,000 $ 1,200,000 $ 378,230 $ 2,250
Chairman of the Board and Chief 1994 2,000,000 1,950,000 254,902 2,250
Executive Officer (3) 1993 653,846 728,097 -- 2,250
Paul Marciano 1995 1,560,000 900,000 192,464 2,250
President and Chief Operating 1994 1,560,000 2,250,000 231,291 2,250
Officer 1993 1,560,000 3,700,485 33,302 2,250
Armand Marciano 1995 742,306 900,000 202,512 2,250
Senior Executive Vice President 1994 600,000 1,800,000 170,926 2,250
1993 599,997 3,700,485 32,743 2,250
Roger Williams 1995 450,000 -- 30,620 2,250
Executive Vice President and Chief 1994 342,308 100,000 147,152 --
Financial Officer
Michael Wallen (4) 1995 246,154 25,000 55,792 --
President, Retail Merchandising
</TABLE>

- ------------------------

(1) Amounts of 1995 Other Annual Compensation in excess of 25% of the total
indicated for such executive officer include the following: (i) $192,256,
$55,720 and $65,230 for transportation for Maurice Marciano, Paul Marciano
and Armand Marciano, respectively, (ii) $179,000, $130,000, $130,000 and
$18,400 for life insurance for Maurice Marciano, Paul Marciano, Armand
Marciano and Roger Williams, respectively, and (iii) $55,701 for relocation
and other housing related expenses for Michael Wallen.

Amounts of 1994 Other Annual Compensation in excess of 25% of the total
indicated for such executive officer include the following: (i) $248,103
and $89,012 for transportation for Maurice Marciano and Paul Marciano,
respectively, (ii) $100,000 and $100,000 for life insurance for Paul
Marciano and Armand Marciano, respectively, and (iii) $119,059 for
relocation and other housing related expenses for Roger Williams.

Amounts of 1993 Other Annual Compensation in excess of 25% of the total
indicated for such executive officer include $33,302 and $32,743 for
transportation for Paul Marciano and Armand Marciano, respectively.

(2) Includes contributions to the Company's 401(k) Savings Plan dated January
1, 1992, by the Company for such executive officers.

(3) Mr. Marciano rejoined the Company in August 1993.

(4) Michael Wallen joined the Company in May 1995.

EMPLOYMENT AGREEMENTS

The Company has entered into individual employment agreements (the
"Executive Employment Agreements") with each of Maurice Marciano, Paul Marciano
and Armand Marciano (the "Executives"). The term of the Executive Employment
Agreements begins on the date of this Prospectus (the "Effective

41
<PAGE>
Date") and will terminate on the third anniversary of the Effective Date. The
Executive Employment Agreements will automatically extend after the initial term
for successive one-year terms, unless notice not to extend is given by either
party at least 90 days prior to the end of the effective term. The Executive
Employment Agreements provide for an annual base salary of $900,000, $900,000
and $650,000 for Maurice Marciano, Paul Marciano and Armand Marciano,
respectively, which may be increased based on annual reviews by the Compensation
Committee. In addition, the Executive Employment Agreements provide for annual
bonuses to be determined in accordance with a bonus plan to be approved by the
Compensation Committee, with a minimum expected target bonus equal to 100% of
base salary. Commencing on the expiration of the term of the Executive
Employment Agreement, or earlier should the Executive Employment Agreement be
terminated other than for cause (as defined in the agreements), the Company and
Maurice Marciano, Paul Marciano or Armand Marciano, as the case may be, will
enter into a two-year consulting agreement under which such Executive will
render certain consulting services for which the Company will pay an annual
consulting fee, the amount of which will be determined at the time the
consulting agreements are entered into. In addition, each Executive is entitled
to certain fringe benefits, including access to vehicles and aircraft leased or
owned by the Company and full Company-paid health and life insurance for himself
and his immediate family during his lifetime. If any of the Executives is
terminated without cause or resigns for good reason (as such terms are defined
in the Executive Employment Agreements), then such Executive will receive as
severance his then current base salary and annual bonus for the remainder of his
term of employment. The Executive will also continue to participate in
Company-sponsored health, life insurance and other fringe benefit plans and
programs during the severance period, unless the Executive is entitled to
substantially equivalent benefits from a subsequent employer. Each Executive
Employment Agreement further provides that upon the death or disability of an
Executive, such Executive (or his beneficiary) will receive a pro rata portion
of his annual bonus for the year in which the Executive's death or disability
occurs. The Executive Employment Agreements also include certain noncompetition,
nonsolicitation and confidentiality provisions.

The Company entered into an employment agreement, dated as of May 14, 1996
(the "Duane Agreement"), with Ken Duane as President of Worldwide
Sales-Corporate for a term of three years. Under the Duane Agreement, Mr. Duane
is entitled to (i) a base salary of $550,000, $600,000 and $650,000 in the
first, second and third years of the term, respectively; (ii) a guaranteed bonus
of $250,000 in the first year of the term, a performance bonus ranging from
$100,000 to $300,000 in the second year of the term and a performance bonus
ranging from $100,000 to $325,000 in the third year of the term; and (iii)
participation in various health, life insurance and other fringe benefit plans
and programs maintained by the Company. Immediately prior to the Offerings, Mr.
Duane will be granted nonqualified options to purchase shares of Common
Stock, consisting of options to purchase shares at an exercise price of
$ per share and options to purchase shares at an exercise price equalling
the greater of $ per share or the price per share at which shares are sold in
the Offerings. On the date of the Offerings, Mr. Duane will be fully vested in
options to purchase shares at an exercise price of $ per share. Mr. Duane
may elect to receive a cash payment of $1.0 million prior to the Offerings. If
Mr. Duane elects to receive such cash payment, the exercise price of
options described above will be $ per share. If the Company terminates Mr.
Duane's employment other than for cause (as defined in the Duane Agreement), he
will be entitled to the balance of the compensation described above, subject to
mitigation.

The Company's employment agreement with Roger Williams (the "Williams
Agreement"), pursuant to which Mr. Williams serves as Executive Vice President
and Chief Financial Officer of the Company, expires on March 1, 1999. Under the
Williams Agreement, Mr. Williams is entitled to (i) a base salary (currently
$450,000), subject to increase based upon an annual performance review by the
Board, (ii) an annual performance bonus based upon the profitability of the
Company of up to 50% of his base salary for such year and (iii) participation in
various health, life insurance and other fringe benefit plans and programs
maintained by the Company. Immediately prior to the Offerings, Mr. Williams will
be granted nonqualified stock options fully exercisable after March 1, 1999 to
purchase shares of Common Stock at an exercise price of $ per
share. Portions of Mr. Williams's stock options will vest each February 28 from
1997 through 1999. Certain termination and change of control events set forth in
his employment agreement will accelerate the vesting of his stock options or
enable Mr. Williams to immediately exercise his stock options to

42
<PAGE>
the extent then vested. In addition, if Mr. Williams's employment is terminated
by the Company other than for cause, or if he resigns for good reason (as such
terms are defined in the Williams Agreement), he will be entitled (i) to receive
a lump sum cash payment equal to his base salary and his performance bonus for
one year and (ii) to continue for the one-year period following his termination
to be covered, together with his spouse and dependents, at the Company's expense
by all medical, health and accident insurance or other such health care
arrangement maintained for his benefit immediately prior to such termination.
Mr. Williams's employment agreement also includes certain noncompetition,
nonsolicitation and confidentiality provisions.

The Company entered into an employment agreement, dated January 22, 1996,
with Andrea Weiss, pursuant to which Ms. Weiss will serve as President of Retail
Operations of the Company for a term of two years. Under the agreement, Ms.
Weiss is entitled to (i) a base salary (currently $375,000); (ii) an annual
performance bonus ranging from $125,000 to $325,000, depending on the
performance of the Retail Division of the Company; and (iii) participation in
various health, life insurance and other fringe benefit plans and programs
maintained by the Company. Guess has an option to extend the term of employment
for an additional two years. Upon consummation of the Offerings, Ms. Weiss will
be entitled to participate in the 1996 Equity Plan. If Ms. Weiss's employment is
terminated by Guess other than for cause at any time during the first two years
of her employment, she will be entitled to the balance of her salary for the two
years plus up to an additional six months' salary.

1996 EQUITY INCENTIVE PLAN

Prior to the consummation of the Offerings, the Company intends to adopt the
1996 Equity Plan. The 1996 Equity Plan will be administered by the Compensation
Committee, which will be comprised exclusively of non-employee Directors, each
of whom will be a "disinterested" person within the meaning of Rule 16b-3
promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange
Act") and, to the extent applicable, an "outside director" for the purpose of
Section 162(m) of the Code. The 1996 Equity Plan provides for the granting of
incentive stock options (within the meaning of Section 422 of the Code) and
nonqualified stock options, stock appreciation rights, restricted stock,
performance units, and performance shares (individually, an "Award" or
collectively, "Awards") to those officers or other key employees, or
consultants, with potential to contribute to the future success of the Company
or its subsidiaries; PROVIDED, that only employees may be granted incentive
stock options. The Compensation Committee has discretion to select the persons
to whom Awards will be granted (from among those eligible), to determine the
type, size and terms and conditions applicable to each Award and the authority
to interpret, construe and implement the provisions of the 1996 Equity Plan;
PROVIDED, that in accordance with the requirements under Section 162(m) of the
Code, no participant will receive a grant of stock options or stock appreciation
rights with respect to more than shares of Common Stock in any Plan
year. The Compensation Committee's decisions are binding on the Company and
persons eligible to participate in the 1996 Equity Plan and all other persons
having any interest in the 1996 Equity Plan. It is presently anticipated that
approximately individuals will initially participate in the 1996 Equity
Plan.

The total number of shares of Common Stock that may be subject to Awards
under the 1996 Equity Plan is 10% of the outstanding Common Stock as of the
first business day following the Closing Date, or approximately shares,
including Awards granted concurrently with the Offerings, subject to adjustment
in accordance with the terms of the 1996 Equity Plan. Common Stock issued under
the 1996 Equity Plan may be either authorized but unissued shares, treasury
shares or any combination thereof. To the fullest extent permitted under Rule
16b-3 under the Exchange Act and Sections 162(m) and 422 of the Code, any shares
of Common Stock subject to an Award which lapses, expires or is otherwise
terminated prior to the issuance of such shares may become available for new
Awards.

The Company intends to grant Awards of options under the 1996 Equity Plan
with respect to an aggregate of shares of Common Stock to certain current
employees who have been employed by the Company or any of its subsidiaries for
more than five years. The date of grant of such Awards will be the date

43
<PAGE>
of the Offerings and the exercise price per share will be the initial public
offering price of the Common Stock in the Offerings. Each such Award will be
immediately exercisable and will expire five years after the date of grant.

Set forth below is a description of the types of Awards which may be granted
under the 1996 Equity Plan:

STOCK OPTIONS. Options (each, an "Option") to purchase shares of Common
Stock, which may be nonqualified or incentive stock options, may be granted
under the 1996 Equity Plan at an exercise price (the "Option Price") determined
by the Compensation Committee in its discretion, PROVIDED that the Option Price
of incentive stock options may be no less than the fair market value of the
underlying Common Stock on the date of grant (110% of fair market value in the
case of an incentive stock option granted to a ten percent shareholder).

Options will expire not later than ten years after the date on which they
are granted (five years in the case of an incentive stock option granted to a
ten percent shareholder). Options become exercisable at such times and in such
installments as determined by the Compensation Committee, PROVIDED that all such
Options will be fully exercisable within five years after the date on which they
are granted, and such exercisability will generally be based on (i) length of
service or (ii) the attainment of performance goals established by the
Compensation Committee, PROVIDED that no Option granted to a person who is
subject to Section 16 of the Exchange Act may be exercised within the first six
months following the date of grant. The Compensation Committee may also
accelerate the period for the exercise of any or all Options held by an
optionee. Payment of the Option Price must be made in full at the time of
exercise in cash, certified or bank check, or other instrument acceptable to the
Compensation Committee. As determined by the Compensation Committee, payment in
full or in part may also be made by tendering to the Company shares of Common
Stock having a fair market value equal to the Option Price (or such portion
thereof), by a "cashless exercise" procedure to be approved by the Compensation
Committee or by withholding shares of Common Stock that would otherwise have
been received by the optionee.

STOCK APPRECIATION RIGHTS. A stock appreciation right ("SAR") is an Award
entitling the recipient to receive an amount equal to (or subject to certain
limitations, less than, if the Compensation Committee so determines at the time
of grant) the excess of the fair market value of a share of Common Stock on the
date of exercise over the exercise price per share specified for the SAR,
multiplied by the number of shares of Common Stock with respect to which the SAR
was exercised. An SAR granted in connection with an Option will be exercisable
to the extent that the related Option is exercisable. Upon the exercise of an
SAR related to an Option, the Option related thereto will be cancelled to the
extent of the number of shares covered by such exercise and such shares will no
longer be available for grant under the 1996 Equity Plan. Upon the exercise of a
related Option, the SAR will be cancelled automatically to the extent of the
number of shares covered by the exercise of the Option. SARs unrelated to an
Option will contain such terms and conditions as to exercisability, vesting and
duration as the Compensation Committee may determine, but such duration will not
be greater than ten years. The Compensation Committee may accelerate the period
for the exercise of an SAR unrelated to an Option. Payment upon exercise of an
SAR will be made, at the election of the Compensation Committee, in cash, in
shares of Common Stock or a combination thereof.

The Compensation Committee may grant limited stock appreciation rights (an
"LSAR") under the 1996 Equity Plan. An LSAR is an SAR which becomes exercisable
only in the event of a "change in control" (as defined below). Any such LSAR
will be settled solely in cash. An LSAR must be exercised within the 30-day
period following a change in control.

RESTRICTED STOCK. An Award of restricted stock ("Restricted Stock") is an
Award of Common Stock which is subject to such restrictions as the Compensation
Committee deems appropriate, including forfeiture conditions and restrictions
against transfer for a period specified by the Compensation Committee.
Restricted Stock Awards may be granted under the 1996 Equity Plan for or without
consideration. Restrictions on Restricted Stock may lapse in installments based
on factors selected by the Compensation Committee. The Compensation Committee,
in its sole discretion, may waive or accelerate the lapsing of restrictions in
whole or in part. Prior to the expiration of the restricted period, except as
otherwise provided by the

44
<PAGE>
Compensation Committee, a grantee who has received a Restricted Stock Award has
the rights of a shareholder of the Company, including the right to vote and to
receive cash dividends on the shares subject to the Award. Stock dividends
issued with respect to shares covered by a Restricted Stock Award will be
treated as additional shares under such Award and will be subject to the same
restrictions and other terms and conditions that apply to the shares with
respect to which such dividends are issued.

PERFORMANCE SHARES; PERFORMANCE UNITS. A performance share Award (a
"Performance Share") is an Award which represents the right to receive a
specified number of shares of Common Stock upon satisfaction of certain
specified performance criteria, subject to such other terms and conditions as
the Compensation Committee deems appropriate. A performance unit (a "Performance
Unit") is an Award of a number of units entitling the recipient to receive an
amount equal to (or subject to certain limitations, less than, if the
Compensation Committee so determines at the time of grant) the excess of the
fair market value of a share of Common Stock on the date of exercise over the
exercise price per share specified for the Performance Unit, multiplied by the
number of Units, upon satisfaction of certain specified performance criteria,
subject to such other terms and conditions as the Compensation Committee deems
appropriate. Performance objectives will be established before, or as soon as
practicable after, the commencement of the performance period (the "Performance
Period") and may be based on net earnings, operating earnings or income,
absolute and/or relative return on equity or assets, earnings per share, cash
flow, pre-tax profits, earnings growth, revenue growth, comparisons to peer
companies, any combination of the foregoing and/or such other measures,
including individual measures of performance, as the Compensation Committee
deems appropriate. Prior to the end of a Performance Period, the Compensation
Committee, in its discretion and only under conditions which do not affect the
deductibility of compensation attributable to Performance Shares or Performance
Units, as the case may be, under Section 162(m) of the Code, may adjust the
performance objectives to reflect an event which may materially affect the
performance of the Company, a subsidiary or a division, including, but not
limited to, market conditions or a significant acquisition or disposition of
assets or other property by the Company, a subsidiary or a division. The extent
to which a grantee is entitled to payment in settlement of a Performance Share
Award or a Performance Unit Award at the end of the Performance Period will be
determined by the Compensation Committee, in its sole discretion, based on
whether the performance criteria have been met.

Payment in settlement of a Performance Share Award or a Performance Unit
Award will be made as soon as practicable following the last day of the
Performance Period, or at such other time as the Compensation Committee may
determine, in shares of Common Stock or cash, respectively.

ADDITIONAL INFORMATION. Under the 1996 Equity Plan, if there is any change
in the outstanding shares of Common Stock by reason of any stock dividend,
recapitalization, merger, consolidation, stock split, combination or exchange of
shares or other form of reorganization, or any other change involving the Common
Stock, such proportionate adjustments as may be necessary (in the form
determined by the Compensation Committee) to reflect such change will be made to
prevent dilution or enlargement of the rights with respect to the aggregate
number of shares of Common Stock for which Awards in respect thereof may be
granted under the 1996 Equity Plan, the number of shares of Common Stock covered
by each outstanding Award and the price per share in respect thereof. Generally,
an individual's rights under the 1996 Equity Plan may not be assigned or
transferred (except in the event of death).

In the event of a change in control and except as the Compensation Committee
(as constituted prior to such change in control) may expressly provide
otherwise: (i) all Stock Options or SARs then outstanding will become fully
exercisable as of the date of the change in control, whether or not then
exercisable; (ii) all restrictions and conditions of all Restricted Stock Awards
then outstanding will lapse as of the date of the change in control; (iii) all
Performance Share Awards and Performance Unit Awards will be deemed to have been
fully earned as of the date of the change in control and (iv) in the case of a
change in control involving a merger of, or consolidation involving, the Company
in which the Company is not the surviving corporation (the "Surviving Entity"),
each outstanding option granted under the Plan and not exercised (a "Predecessor
Option") will be converted into an option (a "Substitute Option") to acquire
common stock of the Surviving Entity, which Substitute Option will have the same
terms and conditions as the Predecessor Option, with

45
<PAGE>
appropriate adjustments as to the number and kind of shares and exercise prices.
The above notwithstanding, any Award granted to a person who is subject to
Section 16 of the Exchange Act within six (6) months of a change in control will
not be afforded any such acceleration as to exercise, vesting and payment rights
or lapsing as to conditions or restrictions. For purposes of the 1996 Equity
Plan, a "change in control" shall have occurred when (A) any person (other than
(x) the Company, any subsidiary of the Company, any employee benefit plan of the
Company or of any subsidiary of the Company, or any person or entity organized,
appointed or established by the Company or any subsidiary of the Company for or
pursuant to the terms of any such plans or (y) Maurice Marciano, Paul Marciano
or Armand Marciano), alone or together with its affiliates and associates
(collectively, an "Acquiring Person")), shall become the beneficial owner of 20%
or more of the then outstanding shares of Common Stock or the combined voting
power of the Company's then outstanding voting securities (except pursuant to an
offer for all outstanding shares of Common Stock at a price and upon such terms
and conditions as a majority of the Continuing Directors (as defined below)
determine to be in the best interests of the Company and its shareholders (other
than an Acquiring Person on whose behalf the offer is being made)), (B) during
any period of two consecutive years, individuals who at the beginning of such
period constitute the Board of Directors and any new director (other than a
director who is a representative or nominee of an Acquiring Person) whose
election by the Board of Directors or nomination for election by the Company's
shareholders was approved by a vote of at least a majority of the directors then
still in office who either were directors at the beginning of the period or
whose election or nomination for election was previously so approved
(collectively, the "Continuing Directors"), no longer constitute a majority of
the Board of Directors, (C) the shareholders of the Company approve a merger or
consolidation of the Company with any other corporation, other than a merger or
consolidation which would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
Surviving Entity) at least 80% of the combined voting power of the voting
securities of the Company or such Surviving Entity outstanding immediately after
such merger or consolidation; or (D) the shareholders of the Company approve a
plan of reorganization (other than a reorganization under the United States
Bankruptcy Code) or complete liquidation of the Company or an agreement for the
sale or disposition by the Company of all or substantially all of the Company's
assets; PROVIDED, HOWEVER, that a change in control shall not be deemed to have
occurred in the event of (x) a sale or conveyance in which the Company continues
as a holding company of an entity or entities that conduct the business or
businesses formerly conducted by the Company or (y) any transaction undertaken
for the purpose of reincorporating the Company under the laws of another
jurisdiction, if such transaction does not materially affect the beneficial
ownership of the Company's capital stock.

The 1996 Equity Plan will remain in effect until terminated by the Board of
Directors and thereafter until all Awards granted thereunder are satisfied by
the issuance of shares of Common Stock or the payment of cash or otherwise
terminated pursuant to the terms of the 1996 Equity Plan or under any Award
agreements. Notwithstanding the foregoing, no Awards may be granted under the
1996 Equity Plan after the tenth anniversary of the effective date of the 1996
Equity Plan. The Board of Directors may at any time terminate, modify or amend
the 1996 Equity Plan; PROVIDED, HOWEVER, that no such amendment, modification or
termination may adversely affect an optionee's or grantee's rights under any
Award theretofore granted under the 1996 Equity Plan, except with the consent of
such optionee or grantee, and no such amendment or modification will be
effective unless and until the same is approved by the shareholders of the
Company where such shareholder approval is required to comply with Rule 16b-3
under the Exchange Act, or other applicable law, regulation or Nasdaq National
Market or stock exchange rule.

CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF OPTIONS. Certain of the Federal
income tax consequences to optionees and the Company of Options granted under
the 1996 Equity Plan should generally be as set forth in the following summary.

An employee to whom an incentive stock option ("ISO") which qualifies under
Section 422 of the Code is granted will not recognize income at the time of
grant or exercise of such Option. No Federal income tax deduction will be
allowable to the employee's employer upon the grant or exercise of such ISO.
However, upon the exercise of an ISO, any excess in the fair market price of the
Common Stock over the Option Price

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<PAGE>
constitutes a tax preference item which may have alternative minimum tax
consequences for the employee. When the employee sells such shares more than one
year after the date of transfer of such shares and more than two years after the
date of grant of such ISO, the employee will normally recognize a long-term
capital gain or loss equal to the difference, if any, between the sale prices of
such shares and the Option Price. If the employee does not hold such shares for
the required period, when the employee sells such shares, the employee will
recognize ordinary compensation income and possibly capital gain or loss
(long-term or short-term, depending on the holding period of the stock sold) in
such amounts as are prescribed by the Code and the regulations thereunder and
the Company will generally be entitled to a Federal income tax deduction in the
amount of such ordinary compensation income.

An employee to whom a nonqualified stock option ("NSO") is granted will not
recognize income at the time of grant of such Option. When such employee
exercises such NSO, the employee will recognize ordinary compensation income
equal to the excess, if any, of the fair market value, as of the date of Option
exercise, of the shares the employee receives over the Option Price paid. The
tax basis of such shares to such employee will be equal to the Option Price paid
plus the amount includible in the employee's gross income, and the employee's
holding period for such shares will commence on the date on which the employee
recognized taxable income in respect of such shares. Gain or loss upon a
subsequent sale of any Common Stock received upon the exercise of a nonqualified
stock option generally would be taxed as capital gain or loss (long-term or
short-term, depending upon the holding period of the stock sold). Certain
additional rules apply if the exercise price for an option is paid in shares
previously owned by the participant. Subject to the applicable provisions of the
Code and regulations thereunder, the Company will generally be entitled to a
Federal income tax deduction in respect of a NSO in an amount equal to the
ordinary compensation income recognized by the employee.

1996 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN

Prior to the consummation of the Offerings, the Company intends to adopt the
Directors' Plan. The purposes of the Directors' Plan are to attract and retain
as non-employee directors individuals with superior training, experience and
ability and to provide additional incentives to such individuals by giving them
an opportunity to participate in the ownership of the Company. All directors who
are not employees of the Company are eligible to participate in the Directors'
Plan. It is presently anticipated that approximately four individuals will
participate in the Directors' Plan.

Under the Directors' Plan, any person who is not an employee of the Company
and who becomes a director either on or after the date of the Offerings will
receive a non-qualified option to purchase shares of Common Stock on the
date he or she becomes a director. In addition, on the first business day of
each fiscal year of the Company, commencing January 1, 1997, while the
Directors' Plan is in effect (each, an "Eligibility Date"), each non-employee
director who has not been an employee of the Company during the previous twelve
months will receive a non-qualified option to purchase additional shares
of Common Stock.

The aggregate number of shares of Common Stock that may be issued or
transferred under the Directors' Plan is , subject to adjustment in
accordance with the terms of the Directors' Plan. Common Stock issued under the
Directors' Plan may be either authorized but unissued shares, treasury shares or
a combination thereof. To the fullest extent permitted under Rule 16b-3 under
the Exchange Act, any shares of Common Stock subject to an award which lapses,
expires or is otherwise terminated without the issuance of such shares may
become available for new Awards.

All options will vest and become exercisable in 25% installments in each of
the first four anniversaries of the date of grant; PROVIDED that the participant
may not exercise any option as to less than 100 shares at any one time or, if
the total remaining number of shares is less than 100, the participant must
exercise the entire remaining shares covered by the option. However, in the
event of a change in control of the Company (as defined below), (i) all options
then outstanding will become fully exercisable and (ii) in the case of a change
in control involving a merger of, or consolidation involving, the Company in
which the Company is not the Surviving Entity each Predecessor Option will be
converted into a Substitute Option to acquire common stock of the Surviving
Entity, which Substitute Option will have the same terms and conditions as the

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<PAGE>
Predecessor Option, with appropriate adjustments as to the number and kind of
shares and exercise prices. For purposes of the Directors' Plan, a "change in
control" will be deemed to have occurred when (A) any person (other than (x) the
Company, any subsidiary of the Company, any employee benefit plan of the Company
or of any subsidiary of the Company, or any person or entity organized,
appointed or established by the Company or any subsidiary of the Company for or
pursuant to the terms of any such plans or (y) Maurice Marciano, Paul Marciano
or Armand Marciano), alone or together with its affiliates and associates
(collectively, an "Acquiring Person")), shall become the beneficial owner of 20%
or more of the then outstanding shares of Common Stock, or the combined voting
power of the Company's then outstanding voting securities (except pursuant to an
offer for all outstanding shares of Common Stock at a price and upon such terms
and conditions as a majority of the Continuing Directors (as defined below)
determine to be in the best interests of the Company and its shareholders (other
than an Acquiring Person on whose behalf the offer is being made)), (B) during
any period of two consecutive years, individuals who at the beginning of such
period constitute the Board of Directors and any new director (other than a
director who is a representative or nominee of an Acquiring Person) whose
election by the Board of Directors or nomination for election by the Company's
shareholders was approved by a vote of at least a majority of the directors then
still in office who either were directors at the beginning of the period or
whose election or nomination for election was previously so approved
(collectively, the "Continuing Directors"), no longer constitute a majority of
the Board of Directors, (C) the shareholders of the Company approve a merger or
consolidation of the Company with any other corporation, other than a merger or
consolidation which would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
Surviving Entity) at least 80% of the combined voting power of the voting
securities of the Company or such Surviving Entity outstanding immediately after
such merger or consolidation; or (D) the shareholders of the Company approve a
plan of reorganization (other than a reorganization under the United States
Bankruptcy Code) or complete liquidation of the Company or an agreement for the
sale or disposition by the Company of all or substantially all of the Company's
assets; PROVIDED, HOWEVER, that a change in control shall not be deemed to have
occurred in the event of (x) a sale or conveyance in which the Company continues
as a holding company of an entity or entities that conduct the business or
businesses formerly conducted by the Company or (y) any transaction undertaken
for the purpose of reincorporating the Company under the laws of another
jurisdiction, if such transaction does not materially affect the beneficial
ownership of the Company's capital stock.

The price of the shares of Common Stock purchased upon exercise of an option
will be the fair market value of the Common Stock as of the date of grant. The
exercise price must be paid in full at the time of exercise in cash, certified
or bank check, or other instrument acceptable to the Board of Directors. As
determined by the Board of Directors, payment in full or in part may also be
made by tendering to the Company shares of Common Stock having a fair market
value equal to the exercise price (or such portion thereof), by a "cashless
exercise" procedure to be approved by the Board of Directors or by withholding
shares of Common Stock that would otherwise have been received by the optionee.

ADDITIONAL INFORMATION. Options granted or to be granted under the
Directors' Plan are nontransferable. Each option granted will expire ten years
from the date of grant and cannot be exercised after that time. In addition, if
any participant ceases to be an eligible director for any reason other than
death or disability, any option held by such participant may thereafter be
exercised, to the extent it was exercisable at the time of termination, for a
period of six months from the time of termination or the expiration of the
stated term of such option, whichever period is shorter; PROVIDED, HOWEVER, that
if such participant dies within such six-month period, any unexercised options
held by such participant will be exercisable, to the extent exercisable at the
time of death, for a period of one year from the date of such death or until the
expiration of the stated term of any such option, whichever period is shorter.
If any participant ceases to be an eligible director by reason of death or
disability, any option held by such participant may thereafter be exercised, to
the extent it was exercisable at the time of termination, for a period of one
year from the date of such termination or until the expiration of the stated
term of such option, whichever period is shorter; PROVIDED, that if a
participant who is disabled dies within such one-year period, any unexercised
option held by such participant will thereafter be exercisable, to the extent it
was exercisable at the time of death, for a period of one year from the date of
such death or until the expiration of the stated term of such option, whichever
period is shorter.

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<PAGE>
Unless it is terminated at an earlier date by the Board of Directors, the
Directors' Plan shall terminate ten years after the date options are first
granted under the Plan.

The Board of Directors has full and exclusive discretionary authority to
revise administrative rules and guidelines governing the Directors' Plan, to
interpret the terms of the Directors' Plan and related agreements, to delegate
its responsibility and authority under the Directors' Plan, and to generally
supervise the administration of the Directors' Plan. In addition, the Board of
Directors may amend, alter or discontinue the Directors' Plan at any time;
PROVIDED that the Board of Directors may not act to impair the rights of plan
participants pursuant to options previously granted under the Directors' Plan
and any amendment, suspension, modification or termination will not affect any
participant's right to the shares of stock already purchased.

CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF OPTIONS. Although no Federal
income tax liability accrues to a participant at the time a non-qualified stock
option is granted, the participant must recognize ordinary income in the year in
which the option is exercised equal to the amount by which the fair market value
of the purchased shares on the date of exercise exceeds the exercise price. The
tax basis of such shares to such participant will be equal to the exercise price
paid plus the amount includible in the participant's gross income, and the
participant's holding period for such shares will commence on the date on which
the participant recognized taxable income in respect of such shares. Gain or
loss upon a subsequent sale of any Common Stock received upon the exercise of a
nonqualified stock option generally would be taxed as capital gain or loss
(long-term or short-term, depending upon the holding period of the stock sold).
Certain additional rules apply if the exercise price for an option is paid in
shares previously owned by the participant.

Subject to the applicable provisions of the Code and regulations thereunder,
the Company will generally be entitled to an income tax deduction equal to the
amount of ordinary income the participant recognizes in connection with the
exercise of any option. The deduction will, in general, be allowed for the
taxable year of the Company in which the participant recognizes such ordinary
income.

401(K) SAVINGS PLAN

On January 1, 1992, the Company established the Guess ? Inc. Savings Plan
(the "Savings Plan") under Section 401(k) of the Code. Under the Savings Plan,
associates may contribute up to 15% of their compensation per year subject to
the elective limits as defined by guidelines of the Internal Revenue Service
(the "IRS") and the Company may make matching contributions in amounts not to
exceed 1.5% of the associates' annual compensation. The Company's contributions
to the Savings Plan during the years ended December 31, 1993, 1994 and 1995
aggregated $221,000, $213,000 and $261,000, respectively. Contributions to the
Savings Plan during the first quarters ended April 2, 1995 and March 31, 1996
aggregated $73,000 and $78,000, respectively.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The Company did not have a Compensation Committee during 1995, but each of
Maurice, Paul and Armand Marciano (each of whom also served as an executive
officer of the Company during 1995) participated in deliberations concerning
executive compensation. See "Certain Transactions" immediately below for
information regarding related-party transactions involving each of Maurice, Paul
and Armand Marciano.

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<PAGE>
CERTAIN TRANSACTIONS

The Company is engaged in various transactions with entities affiliated with
the Principal Stockholders. The Company believes that each of the transactions
discussed below was entered into on terms no less favorable to the Company than
could have been obtained from an unaffiliated third party.

DISTRIBUTION OF AIRCRAFT

As a part of the S Corporation Distribution, the Company intends to
distribute two aircraft to the Principal Stockholders and lease back one of the
aircraft from a company controlled by them ("Lessor"). Such lease is for a term
of years, renewable at the option of the Company and the Lessor. The Company
will bear all costs and expenses of operating and maintaining the aircraft while
under lease. The base rent during the initial lease term will be nominal.

LICENSE ARRANGEMENTS AND LICENSEE TRANSACTIONS

On January 1, 1995, the Company entered into a licensing agreement with
Charles David of California ("Charles David"). This new agreement superseded a
prior license agreement dated September 28, 1990 and amended in May 1993. The
Principal Stockholders and Nathalie Marciano (the spouse of Maurice Marciano)
together own 50% of Charles David, and the remaining 50% is owned by the
father-in-law of Maurice Marciano. The license agreement grants Charles David
the rights to manufacture worldwide and distribute worldwide (except Japan)
men's, women's and some children's leather and rubber footwear, excluding
athletic footwear, which bear the GUESS logo and trademark. The license also
includes related shoe care products and accessories. Gross royalties earned by
the Company under such license agreement for the fiscal years ended December 31,
1993, 1994 and 1995, and for the quarter ended March 31, 1996, was $1.7 million,
$1.8 million, $2.1 million and $416,000, respectively. In the same respective
periods, the Company purchased $3.7 million, $4.8 million, $6.4 million and $1.2
million of products from Charles David for resale in the Company's retail
stores.

On September 1, 1994, the Company entered into a licensing agreement with
California Sunshine Active Wear, Inc. ("California Sunshine"), granting it the
rights to manufacture and distribute certain men's and women's activewear, which
bear the GUESS logo and trademark, in the United States. The Principal
Stockholders together own 51% of California Sunshine. Gross royalties earned by
the Company under such license agreement for the fiscal years ended December 31,
1994 and 1995, and for the quarter ended March 31, 1996, was $0, $342,000 and
$103,000, respectively. In the same respective periods, the Company purchased
$0, $254,000 and $68,000 of products from California Sunshine for resale in the
Company's retail stores.

Effective January 1, 1995, the Company entered into a licensing agreement
with Guess Italia, S.r.l. ("Guess Italia"), granting it the exclusive right in
Italy and non-exclusive right in other parts of Europe to manufacture and
distribute men's and women's apparel and accessories that bear the GUESS logo
and trademark. Guess Italia is owned 79% by the Company and 21% by Marciano
International, a company wholly owned by the Principal Stockholders that is to
be merged into the Company as part of the Reorganization. Gross royalties earned
by the Company under such license agreement for the fiscal year ended December
31, 1995 and for the quarter ended March 31, 1996 was $480,000 and $292,000,
respectively. During 1993, 1994 and 1995 and the quarter ended March 31, 1996,
the Company purchased $0, $0, $511,000 and $204,000 of products from Guess
Italia for resale in the retail division's stores, and sold $0, $1.1 million,
$399,000 and $72,000 of products, respectively.

During 1993 and 1994, the Company made advances to Guess Italia S.r.l. of
$193,199 and $988,517, respectively. These advances were subsequently recorded
as additional paid-in capital.

On December 1, 1992, the Company entered into a licensing agreement with
Nantucket Industries, Inc. ("Nantucket Industries") granting it the right to
distribute and manufacture men's and women's innerwear, which bear the GUESS
logo and trademark, in the United States. The Principal Stockholders together
own 8.9% of Nantucket Industries. Gross royalties earned by the Company under
such license agreement for the fiscal years ended December 31, 1993, 1994 and
1995, and for the quarter ended March 31, 1996, was

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<PAGE>
$417,000, $214,000, $264,000 and $80,000, respectively. In the same respective
periods, the Company purchased $23,000, $201,000, $505,000 and $241,000 of
products from Nantucket Industries for resale in the Company's retail stores.

PURCHASING AGENCY AGREEMENT

On May 3, 1994, the Company entered into an agreement with Ranche to serve
as a non-exclusive buying agent for the Company in Hong Kong, which agreement
was terminated in the first quarter of 1996 when certain of Ranche's assets were
transferred to Newtimes Guess Ltd., a Hong Kong corporation ("Newtimes") in
which the Principal Stockholders, through their ownership of Marciano
International, and the Company hold indirect ownership interests of 25% and 25%,
respectively. The Principal Executive Officers together own 100% of Ranche.
Prior to consummation of the Offerings, the ownership of Ranche will be
transferred from the Principal Executive Officers to the Company as part of the
Reorganization. In the fiscal year ended December 31, 1995, and in the quarter
ended March 31, 1996, Ranche earned commission income from the Company of $1.3
million and $192,000, respectively, in connection with supplying product. In
addition, Ranche operates under a licensing arrangement to distribute product to
authorized distributors. Gross royalties earned by the Company under such
license for the fiscal year ended December 31, 1995, and for the quarter ended
March 31, 1996, was $240,000 and $84,000, respectively.

In February 1996, the Company entered into a buying agency agreement with
Newtimes. Pursuant to such agreement, the Company pays Newtimes a commission
based upon the price of all raw materials purchased for the Company by Newtimes.
As of May 4, 1996, the Company had paid Newtimes aggregate commissions of
$110,921. In connection with the Reorganization, the Principal Stockholders'
indirect interest in Newtimes will be transferred to the Company.

SALE/LEASEBACK TRANSACTION

On July 29, 1992, the Company sold its corporate and distribution facility
in Los Angeles to a limited partnership in which the sole partners were the then
existing stockholders under a sale/leaseback arrangement. The facility was sold
for $24 million, of which $13 million was received in cash upon closing of
escrow. The balance of $11 million was paid by issuance of a promissory note due
in July 1994. The note was repaid in February 1993. The limited partnership
obtained additional financing for its purchase of the facility through a loan
from an institutional third party lender. The loan is secured by the
partnership's interest in the facility and in the lease with the Company.
Pursuant to the lease, the Company has agreed to indemnify the partnership
against certain losses that may be incurred in connection with such loan. In
August 1993, the partnership acquired and retired Georges Marciano's beneficial
interest in such partnership, and the corporate general partner in such
partnership redeemed Georges Marciano's beneficial interest in the corporate
general partner.

LEASES

The Company leases manufacturing, warehouse and administrative facilities
and one retail administrative facility from partnerships affiliated with the
Principal Stockholders. The leases will expire in July 2008. Aggregate lease
payments under such leases for the fiscal years ended December 31, 1993, 1994
and 1995 and the fiscal quarter ended March 31, 1996 were $2.1 million, $2.6
million, $2.8 million and $625,000, respectively.

LOANS TO EXECUTIVE OFFICERS

In 1995, the Company loaned Mr. Wallen the sum of $200,000 at an annual
interest rate of 7% in connection with certain moving expenses. This loan is
scheduled to be repaid in five annual installments commencing September 1, 1996.

In 1994, the Company loaned Mr. Williams the sum of $400,000 in connection
with certain moving expenses. The loan has been repaid in full.

OTHER TRANSACTION

On December 31, 1993, the Company wrote off a current note receivable
(including accrued interest) in the amount of $521,000 from G&C Entertainment,
Inc. ("G&C"), a corporation engaged in television and

51
<PAGE>
record production development. The Company acquired its 51% interest in equity
of G&C from trusts for the benefit of Georges Marciano and Paul Marciano who
were G&C's sole stockholders prior to such acquisition. G&C was dissolved in
1994.

STOCKHOLDERS' AGREEMENT

Prior to consummation of the Offerings, the Principal Stockholders and the
Company will amend and restate the Amended and Restated Shareholders' Agreement
dated November 12, 1993 (the "Stockholders' Agreement"). Pursuant to the
Stockholders' Agreement, the Principal Stockholders have agreed to vote their
shares of Common Stock to elect each of Maurice, Paul and Armand Marciano, or
one designee of any such person (if such designee shall be reasonably acceptable
to the other Principal Stockholders) to the Board of Directors. The
Stockholders' Agreement provides that each of the Principal Stockholders has
granted to each other and to the Company rights of first refusal with respect to
the sale of any shares of the Company's outstanding Common Stock (with certain
limited exceptions).

PURCHASE AGREEMENT

On August 23, 1993, the Company repurchased 95% of the shares of Common
Stock then held by Georges Marciano for a price of $203.5 million and a trust
for the benefit of Paul Marciano purchased the remaining 5% of such shares for a
price of $10.7 million. The purchase price for such shares was determined by
negotiation among the Company, the Principal Stockholders and Georges Marciano.
Among the factors considered in determining the purchase price were the past and
present operations of the Company, the prospects for future earnings of the
Company and other relevant factors. In connection with such repurchase, the
Company and the Principal Stockholders agreed to release and indemnify Georges
Marciano and the Georges Marciano Trust from and against any claims relating to
certain specified matters, including the Company, its management, financing,
operations and personnel, and the offer and sale of the Company's Senior
Subordinated Notes. Any claim for such indemnity will be in the first instance
the responsibility of the Company. As consideration for such indemnity and
release, Georges Marciano and the Georges Marciano Trust released the Company
and the Principal Stockholders from any claim relating to certain specified
matters, including the Company, its management, financing, operations and
personnel (other than certain excluded matters). In addition, the Company
canceled the existing license agreement between it and an affiliate of Georges
Marciano with respect to the GEORGES MARCIANO-Registered Trademark- trademarks,
effective August 23, 1994, and agreed to assign to such affiliate all of the
Company's right, title and interest in the GEORGES
MARCIANO-Registered Trademark- trademarks, but reserved the right to use such
trademarks until August 23, 1994. As consideration for such assignment, Georges
Marciano agreed to refrain from any use of the GEORGES
MARCIANO-Registered Trademark- trademarks until August 23, 1995.

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<PAGE>
PRINCIPAL STOCKHOLDERS

The following table and the notes thereto set forth information, as of the
date of this Prospectus, relating to beneficial ownership (as defined in Rule
13d-3 of the Exchange Act) of the Company's equity securities and each Principal
Stockholder:

<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP BENEFICIAL OWNERSHIP
OF COMMON STOCK OF COMMON STOCK
PRIOR TO THE AFTER THE
OFFERINGS (1) OFFERINGS (1)
-------------------- --------------------
NAME OF BENEFICIAL OWNERS NUMBER PERCENT NUMBER PERCENT
- ---------------------------------------------------------------------- ----------- ------- ----------- -------
<S> <C> <C> <C> <C>
Maurice Marciano (2).................................................. 44.8% %
Paul Marciano (3)..................................................... 35.5
Armand Marciano (4)................................................... 19.7
All directors and executive officers as a group
(7 persons).......................................................... 100.0% %
</TABLE>

- ------------------------------
(1) The address of each person listed above is c/o Guess ?, Inc., 1444 South
Alameda Street, Los Angeles, California 90021. Subject to the Amended and
Restated Stockholders' Agreement dated , 1996 and applicable
community property laws and similar laws, each person listed above has sole
voting and investment power with respect to such shares.

(2) All of the shares beneficially owned by Maurice Marciano are held through
the Maurice Marciano Trust (1995 Restatement).

(3) All of the shares beneficially owned by Paul Marciano are held through the
Paul Marciano Trust under Trust dated February 20, 1986.

(4) All of the shares beneficially owned by Armand Marciano are held through the
Armand Marciano Trust under Trust dated February 20, 1986.

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<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE

Upon the consummation of the Offerings, the Company will have shares
of Common Stock outstanding. Of these shares, the shares of Common Stock
sold by the Company in the Offerings will be freely tradeable without
restriction or further registration under the Securities Act, unless held by an
"affiliate" of the Company (as that term is defined below). Any such affiliate
will be subject to the resale limitations of Rule 144 adopted under the
Securities Act. The remaining shares of Common Stock outstanding are
"restricted securities" for purposes of Rule 144 and are held by "affiliates" of
the Company within the meaning of Rule 144 under the Securities Act. Restricted
securities may not be resold in a public distribution except in compliance with
the registration requirements of the Securities Act or pursuant to an exemption
therefrom, including the exemption provided by Rule 144. The Principal
Stockholders have contractual rights to demand or participate in future
registrations of shares of Common Stock under the Securities Act.

In general under Rule 144 as currently in effect, a person (or persons whose
shares are aggregated), including a person who may be deemed to be an
"affiliate" of the Company as that term is defined under the Securities Act, is
entitled to sell within any three-month period a number of shares beneficially
owned for at least two years that does not exceed the greater of (i) 1% of the
then outstanding shares of Common Stock or (ii) the average weekly trading
volume of the outstanding shares of Common Stock during the four calendar weeks
preceding such sale. Sales under Rule 144 are also subject to certain
requirements as to the manner of sale, notice and the availability of current
public information about the Company. However, a person (or persons whose shares
are aggregated) who is not an "affiliate" of the Company during the 90 days
preceding a proposed sale by such person and who has beneficially owned
"restricted securities" for at least three years is entitled to sell such shares
under Rule 144 without regard to the volume, manner of sale or notice
requirements. As defined in Rule 144, an "affiliate" of an issuer is a person
that directly or indirectly controls, or is controlled by, or is under common
control with such issuer.

The Company and the Principal Stockholders have agreed, subject to certain
exceptions, not to, directly or indirectly, (i) sell, grant any option to
purchase or otherwise transfer or dispose of any Common Stock or securities
convertible into or exchangeable or exercisable for Common Stock or file a
registration statement under the Securities Act with respect to the foregoing or
(ii) enter into any swap or other agreement or transaction that transfers, in
whole or in part, the economic consequence of ownership of the Common Stock,
without the prior written consent of Merrill Lynch, for a period of 180 days
after the date of this Prospectus.

Effective upon the consummation of the Offerings, the Company intends to
grant immediately exercisable options covering approximately shares of
its Common Stock to certain of its employees pursuant to the 1996 Equity Plan.
Options covering approximately shares will be exercisable immediately
following consummation of the Offerings. After such grant, an aggregate of
approximately shares will remain available for future option grants and
other equity awards under the 1996 Equity Plan and the Directors' Plan. See
"Management -- 1996 Equity Incentive Plan" and "-- 1996 Non-Employee Directors'
Stock Option Plan." The Company intends to file a registration statement under
the Securities Act to register all of the shares of Common Stock reserved for
issuance under the 1996 Equity Plan and Directors' Plan. Such registration
statement is expected to be filed as soon as practicable after the date of the
Offerings and will automatically become effective upon filing. Shares issued
under the 1996 Equity Plan and the Directors' Plan after the registration
statement is filed may thereafter be sold in the open market, subject, in the
case of the various holders, to the Rule 144 volume limitations applicable to
affiliates.

Prior to the Offerings, there has been no public market for the Common
Stock. No predictions can be made of the effect, if any, that future sales of
shares of Common Stock, and options to acquire shares of Common Stock, or the
availability of shares for future sale, will have on the market price prevailing
from time to time. Sales of substantial amounts of Common Stock in the public
market, or the perception that such sales may occur, could have a material
adverse effect on the market price of the Common Stock. See "Risk Factors --
Future Sales by Principal Stockholders; Shares Eligible for Future Sale."

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<PAGE>
DESCRIPTION OF CAPITAL STOCK

The following summary description of the capital stock of the Company is
qualified in its entirety by reference to the form of Restated Certificate of
Incorporation of the Company (the "Restated Certificate") and form of Restated
Bylaws of the Company, a copy of each of which is filed as an exhibit to the
Registration Statement of which this Prospectus forms a part.

The authorized capital stock of the Company consists of shares of
Common Stock, par value $.01 per share, and shares of Preferred Stock,
par value $.01 per share (the "Preferred Stock") par value.

COMMON STOCK

Holders of Common Stock are entitled to one vote for each share held on all
matters submitted to a vote of the shareholders, including the election of
directors. Accordingly, holders of a majority of the shares of Common Stock
entitled to vote in any election of directors may elect all of the directors
standing for election. The Restated Certificate does not provide for cumulative
voting in the election of directors. Subject to preferences that may be
applicable to any Preferred Stock outstanding at the time, holders of Common
Stock are entitled to receive ratably such dividends, if any, as may be declared
from time to time by the Board of Directors out of funds legally available
therefor. See "Dividend Policy." In the event of a liquidation, dissolution or
winding up of the Company, holders of Common Stock are entitled to share ratably
in all assets remaining after payment of the Company's liabilities and the
liquidation preference, if any, of any outstanding shares of Preferred Stock.
Holders of Common Stock have no preemptive rights and no rights to convert their
Common Stock into any other securities and there are no redemption provisions
with respect to such shares. All of the outstanding shares of Common Stock are
fully paid and non-assessable. The rights, preferences and privileges of holders
of Common Stock are subject to, and may be adversely affected by, the rights of
the holders of shares of any series of Preferred Stock which the Company may
designate and issue in the future.

At present there is no established trading market for the Common Stock. The
Company has applied to have the Common Stock listed on the NYSE.

The transfer agent and registrar for the Common Stock is
.

PREFERRED STOCK

The Restated Certificate provides that the Board of Directors, without
further action by the stockholders, may issue shares of the Preferred Stock in
one or more series and may fix or alter the relative, participating, optional or
other rights, preferences, privileges and restrictions, including the voting
rights, redemption provisions (including sinking fund provisions), dividend
rights, dividend rates, liquidation preferences and conversion rights, and the
description of and number of shares constituting any wholly unissued series of
Preferred Stock. The Board of Directors, without further stockholder approval,
can issue Preferred Stock with voting and conversion rights which could
adversely affect the voting power of the holders of Common Stock. No shares of
Preferred Stock presently are outstanding and the Company currently has no plans
to issue shares of Preferred Stock. The issuance of Preferred Stock in certain
circumstances may have the effect of delaying or preventing a change of control
of the Company without further action by the stockholders, may discourage bids
for the Company's Common Stock at a premium over the market price of the Common
Stock and may adversely affect the market price and the voting and other rights
of the holders of Common Stock.

CERTAIN CERTIFICATE OF INCORPORATION, BYLAWS AND STATUTORY PROVISIONS AFFECTING
STOCKHOLDERS

SPECIAL MEETING OF STOCKHOLDERS; STOCKHOLDER ACTION BY WRITTEN CONSENT. The
Restated Certificate provides that any action required or permitted to be taken
by the Company's stockholders may be effected at a duly called annual or special
meeting of stockholders or by written consent. Additionally, the Restated
Certificate and Bylaws provide that special meetings of the stockholders of the
Company may be called only by a majority of the Board of Directors or an
authorized committee thereof.

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<PAGE>
ADVANCE NOTICE REQUIREMENTS FOR STOCKHOLDER PROPOSALS AND DIRECTOR
NOMINATIONS. The Company's Bylaws provide that stockholders seeking to bring
business before or to nominate directors at any meeting of stockholders, must
provide timely notice thereof in writing. To be timely, a stockholder's notice
must be delivered to, or mailed and received at, the principal executive offices
of the Company not less than (i) with respect to an annual meeting, 120 calendar
days in advance of the date that the Company's proxy statement was released to
stockholders in connection with the previous year's annual meeting, except that
if no annual meeting was held in the previous year or if the date of the annual
meeting has been changed by more than 30 calendar days from the date
contemplated at the time of the previous year's proxy statement, such notice
must be received by the Company a reasonable time before the Company's proxy
statement is to be released and (ii) with respect to a special meeting of
stockholders, a reasonable time before the Company's proxy statement is to be
released. The Bylaws also specify certain requirements for a stockholder's
notice to be in proper written form. These provisions may preclude some
stockholders from bringing matters before the stockholders or from making
nominations for directors.

DIRECTOR AND OFFICER INDEMNIFICATION. The General Corporation Law of
Delaware (the "Delaware Corporation Law") provides that a Delaware corporation
may include provisions in its articles of incorporation relieving each of its
directors of monetary liability arising out of his or her conduct as a director
for breach of his or her fiduciary duty except liability for (i) any breach of
such director's duty of loyalty to the corporation or its stockholders, (ii)
acts or omissions that are not in good faith or involve intentional misconduct
or a knowing violation of law, (iii) conduct violating Section 174 of the
Delaware Corporation Law (which section relates to unlawful distributions) or
(iv) any transaction from which a director derived an improper personal benefit.
The Company's Restated Certificate includes such provisions.

The Company's Restated Certificate and Bylaws provide that the Company
shall, to the fullest extent permitted by the Delaware Corporation Law, as
amended from time to time, indemnify and advance expenses to each of its
currently acting and former directors and officers, and may so indemnify and
advance expenses to each of its current and former employees and agents. The
Company believes the foregoing provisions are necessary to attract and retain
qualified persons as directors and officers. Prior to the consummation of the
Offerings, the Company intends to enter into separate indemnification agreements
with each of its directors and executive officers in order to effectuate such
provisions.

56
<PAGE>
CERTAIN UNITED STATES FEDERAL TAX CONSEQUENCES
TO NON-UNITED STATES HOLDERS

The following is a general discussion of certain United States Federal tax
consequences of the acquisition, ownership, and disposition of Common Stock by a
holder that, for United States Federal income tax purposes, is not a "United
States person" (a "Non-United States Holder"). This discussion is based upon the
United States Federal tax law now in effect, which is subject to change,
possibly retroactively. For purposes of this discussion, a "United States
person" means a citizen or resident of the United States; a corporation, a
partnership, or other entity created or organized in the United States or under
the laws of the United States or of any political subdivision thereof; or an
estate or trust whose income is includible in gross income for United States
Federal income tax purposes regardless of its source. This discussion does not
consider any specific facts or circumstances that may apply to a particular
Non-United States Holder. Prospective investors are urged to consult their tax
advisors regarding the United States Federal tax consequences of acquiring,
holding, and disposing of Common Stock, as well as any tax consequences that may
arise under the laws of any foreign, state, local, or other taxing jurisdiction.

DIVIDENDS

Dividends paid to a Non-United States Holder will generally be subject to
withholding of United States Federal income tax at the rate of 30% (or at a
reduced tax treaty rate), unless the dividend is effectively connected with the
conduct of a trade or business within the United States by the Non-United States
Holder, in which case the dividend will be subject to the United States Federal
income tax on net income on the same basis that applies to United States persons
generally. In the case of a Non-United States Holder which is a corporation,
such effectively connected income also may be subject to the branch profits tax.
Non-United States Holders should consult their own tax advisors concerning any
applicable income tax treaties that may provide for a lower rate of withholding
or other rules different from those described above. A Non-United States Holder
will, if certain proposed regulations become final, be required to satisfy
certain certification requirements in order to claim treaty benefits or
otherwise claim a reduction of or exemption from withholding under the foregoing
rules.

GAIN ON DISPOSITION

A Non-United States Holder will generally not be subject to United States
Federal income tax on gain recognized on a sale or other disposition of Common
Stock unless (i) the gain is effectively connected with the conduct of a trade
or business within the United States by the Non-United States Holder, (ii) in
the case of a Non-United States Holder who is a nonresident alien individual and
holds the Common Stock as a capital asset, such holder is present in the United
States for 183 or more days in the taxable year of disposition and either such
individual has a "tax home" in the United States or the gain is attributable to
an office or other fixed place of business maintained by such individual in the
United States or (iii) the Company is or has been a "U.S. real property holding
corporation" for United States Federal income tax purposes (which the Company
does not believe that it is or is likely to become) and the Non-United States
Holder holds or has held, directly or indirectly, at any time during the
five-year period ending on the date of disposition, more than 5 percent of the
Common Stock. Gain that is effectively connected with the conduct of a trade or
business within the United States by the Non-United States Holder will be
subject to the United States Federal income tax on net income on the same basis
that applies to United States persons generally (and, with respect to corporate
holders, under certain circumstances, the branch profits tax) but will not be
subject to withholding. Non-United States Holders should consult their own tax
advisors concerning any applicable treaties that may provide for different
rules.

FEDERAL ESTATE TAXES

Common Stock owned or treated as owned by an individual who is not a citizen
or resident (for United States estate tax purposes) of the United States at the
date of death will be included in such individual's estate for United States
Federal estate tax purposes, unless an applicable estate tax treaty provides
otherwise.

57
<PAGE>
INFORMATION REPORTING AND BACKUP WITHHOLDING

The Company generally must report annually to the Internal Revenue Service
and to each Non-United States Holder the amount of dividends paid to, and the
tax withheld with respect to, such holder, regardless of whether any tax was
actually withheld. This information may also be made available to the tax
authorities of a country in which the Non-United States Holder resides.

Under current United States Treasury regulations, dividends paid to an
address in a foreign country are presumed to be paid to a resident of that
country (unless the payor has knowledge to the contrary) for purposes of the
withholding discussed above and, under the current interpretation of United
States Treasury regulations, for purposes of determining the applicability of a
tax treaty rate. Under recently proposed United States Treasury regulations that
are proposed to be effective for payments made after December 31, 1997 (the
"Proposed Regulations"), however, a Non-United States Holder of Common Stock who
wishes to claim the benefit of an applicable treaty rate would be required to
satisfy applicable certification requirements. Under the Proposed Regulations,
dividend payments would also be made subject to information reporting and backup
withholding unless these applicable certification requirements are satisfied. In
addition, under the Proposed Regulations, in the case of Common Stock held by a
foreign partnership, (x) the certification requirement would generally be
applied to the partners of the partnership and (y) the partnership would be
required to provide certain information, including a United States taxpayer
identification number. The Proposed Regulations also provide look-through rules
for tiered partnerships. There can be no assurance that the Proposed Regulations
will be adopted or as to the provisions that they will include if and when
adopted in temporary or final form.

Payments by a United States office of a broker of the proceeds of a sale of
the Common Stock is subject to both backup withholding at a rate of 31% and
information reporting unless the holder certifies its Non-United States Holder
status under penalties of perjury or otherwise establishes an exemption.
Information reporting requirements (but not backup withholding) will also apply
to payments of the proceeds of sales of the Common Stock by foreign offices of
United States brokers, or foreign brokers with certain types of relationships to
the United States, unless the broker has documentary evidence in its records
that the holder is a Non-United States Holder and certain other conditions are
met, or the holder otherwise establishes an exemption.

Backup withholding is not an additional tax. Any amounts withheld under the
backup withholding rules will be refunded or credited against the Non-United
States Holder's United States Federal income tax liability, provided that the
required information is furnished to the Internal Revenue Service.

58
<PAGE>
UNDERWRITING

Subject to the terms and conditions set forth in a purchase agreement (the
"U.S. Purchase Agreement") among the Company and each of the underwriters named
below (the "U.S. Underwriters"), and concurrently with the sale of shares
of Common Stock to the International Managers (as defined below), the Company
has agreed to sell to each of the U.S. Underwriters, and each of the U.S.
Underwriters severally has agreed to purchase from the Company, the number of
shares of Common Stock set forth opposite its name below.

<TABLE>
<CAPTION>
NUMBER
U.S. UNDERWRITERS OF SHARES
-----------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated................................................
Morgan Stanley & Co. Incorporated.....................................
-----------
Total....................................................... 7,360,000
-----------
-----------
</TABLE>

Merrill Lynch, Pierce, Fenner & Smith Incorporated and Morgan Stanley & Co.
Incorporated are acting as representatives (the "U.S. Representatives") of the
U.S. Underwriters.

The Company has also entered into a purchase agreement (the "International
Purchase Agreement" and, together with the U.S. Purchase Agreement, the
"Purchase Agreements") with certain underwriters outside the United States and
Canada (collectively, the "International Managers," and together with the U.S.
Underwriters, the "Underwriters"), for whom Merrill Lynch International and
Morgan Stanley & Co. International Limited are acting as representatives (the
"International Representatives" and, together with the U.S. Representatives, the
"Representatives"). Subject to the terms and conditions set forth in the
International Purchase Agreement, and concurrently with the sale of 7,360,000
shares of Common Stock to the U.S. Underwriters pursuant to the U.S. Purchase
Agreement, the Company has agreed to sell to the International Managers and the
International Managers have severally agreed to purchase from the Company, an
aggregate of 1,840,000 shares of Common Stock. The initial public offering price
per share of Common Stock and the underwriting discount per share of Common
Stock are identical under the U.S. Purchase Agreement and the International
Purchase Agreement.

In the U.S. Purchase Agreement and the International Purchase Agreement, the
several U.S. Underwriters and the several International Managers, respectively,
have agreed, subject to the terms and conditions set forth therein, to purchase
all of the shares of Common Stock being sold pursuant to each such Agreement if
any of the shares of Common Stock being sold pursuant to such Agreement are
purchased. Under certain circumstances, the commitments of non-defaulting U.S.
Underwriters or International Managers (as the case may be) may be increased.
The purchase of shares of Common Stock by the U.S. Underwriters is conditioned
upon the purchase of shares of Common Stock by the International Managers, and
vice versa.

The U.S. Underwriters and the International Managers have entered into an
intersyndicate agreement (the "Intersyndicate Agreement") providing for the
coordination of their activities. The Underwriter's are permitted to sell shares
of Common Stock to each other for purposes of resale at the initial public
offering price, less an amount not greater than the selling concession. Under
the terms of the Intersyndicate Agreement, the U.S. Underwriters and any dealer
to whom they sell shares of Common Stock will not offer to sell or sell shares
of Common Stock to persons who are non-U.S. or non-Canadian persons or to
persons they believe intend to resell to persons who are non-U.S. or
non-Canadian persons, and the International

59
<PAGE>
Managers and any dealer to whom they sell shares of Common Stock will not offer
to sell or sell shares of Common Stock to U.S. persons or to Canadian persons or
to persons they believe intend to resell to U.S. persons or Canadian persons,
except in the case of transactions pursuant to the Intersyndicate Agreement.

The U.S. Representatives have advised the Company that the U.S. Underwriters
propose initially to offer the shares of Common Stock to the public at the
initial public offering price set forth on the cover page of this Prospectus,
and to certain dealers at such price less a concession not in excess of $ per
share of Common Stock on sales to certain other dealers. The U.S. Underwriters
may allow, and such dealers may reallow, a discount not in excess of $ per
share of Common Stock on sales to certain other dealers. After the initial
public offering, the public offering price, concession and discount may be
changed.

At the request of the Company, the Underwriters have reserved up to 460,000
shares of Common Stock for sale at the initial public offering price to
directors, officers, employees, business associates and related persons of the
Company. The number of shares of Common Stock available for sale to the general
public will be reduced to the extent such persons purchase such reserved shares.
Any reserved shares which are not so purchased will be offered by the
Underwriters to the general public on the same basis as the other shares offered
hereby. Certain individuals purchasing reserved shares may be required to agree
not to sell, offer or otherwise dispose of any shares of Common Stock for a
period of three months after the date of this Prospectus.

The Company,the Principal Stockholders and certain executive officers have
agreed, subject to certain exceptions, not to, directly or indirectly, (i) sell,
grant any option to purchase or otherwise transfer or dispose of any Common
Stock or securities convertible into or exchangeable or exercisable for Common
Stock or file a registration statement under the Securities Act with respect to
the foregoing or (ii) enter into any swap or other agreement or transaction that
transfers, in whole or in part, the economic consequence of ownership of the
Common Stock, without the prior written consent of Merrill Lynch, for a period
of 180 days after the date of this Prospectus.

The Company has granted an option to the U.S. Underwriters, exercisable
within 30 days after the date of this Prospectus, to purchase up to an aggregate
of 1,104,000 additional shares of Common Stock at the initial public offering
price set forth on the cover page of this Prospectus, less the underwriting
discount. The U.S. Underwriters may exercise this option only to cover
over-allotments, if any, made on the sale of the Common Stock offered hereby. To
the extent that the U.S. Underwriters exercise this option, each U.S.
Underwriter will be obligated, subject to certain conditions, to purchase a
number of additional shares of Common Stock proportionate to such U.S.
Underwriter's initial amount reflected in the foregoing table. The Company also
has granted an option to the International Managers, exercisable within 30 days
after the date of this Prospectus, to purchase up to an aggregate of 276,000
additional shares of Common Stock to cover over-allotments, if any, on terms
similar to those granted to the U.S. Underwriters.

Prior to the Offerings, there has been no public market for the shares of
Common Stock of the Company. The initial public offering price has been
determined through negotiations between the Company and the Representatives.
Among the factors considered in determining the initial public offering price,
in addition to prevailing market conditions, are price-earnings ratios of
publicly traded companies that the Representatives believe to be comparable to
the Company, certain financial information of the Company, the history of, and
the prospects for, the Company and the industry in which it competes, an
assessment of the Company's management, its past and present operations, the
prospects for, and timing of, future revenues of the Company, the present state
of the Company's development, and the above factors in relation to market values
and valuation measures of other companies engaged in activities similar to the
Company. There can be no assurance that an active trading market will develop
for the Common Stock or that the Common Stock will trade in the public market
subsequent to the Offerings at or above the initial public offering price.

The Underwriters do not intend to confirm sales of the Common Stock offered
hereby to any accounts over which they exercise discretionary authority.

The Company and the Principal Stockholders have agreed to indemnify the
several Underwriters against certain liabilities, including liabilities under
the Securities Act, or to contribute to payments the Underwriters may be
required to make in respect thereof.

60
<PAGE>
LEGAL MATTERS

The validity of the Common Stock offered hereby will be passed upon for the
Company by Shearman & Sterling, Los Angeles, California. Certain legal matters
relating to the Offerings will be passed upon for the Underwriters by Skadden,
Arps, Slate, Meagher & Flom, Los Angeles, California. Shearman & Sterling has
from time to time represented certain of the Underwriters in connection with
unrelated legal matters. Skadden, Arps, Slate, Meagher & Flom has from time to
time represented the Company in connection with unrelated legal matters.

EXPERTS

The consolidated financial statements and schedule of Guess as of December
31, 1994 and 1995, and for each of the years in the three year period ended
December 31, 1995, have been included herein and in the registration statement
in reliance upon the report of KPMG Peat Marwick LLP, independent certified
public accountants appearing elsewhere herein, and upon the authority of said
firm as experts in accounting and auditing.

ADDITIONAL INFORMATION

The Company is subject to the informational requirements of the Exchange Act
and, in accordance therewith, files reports, information statements and other
information with the Securities and Exchange Commission. Such reports,
information statements and other information filed by the Company may be
inspected without charge at the Securities and Exchange Commission's principal
office in Washington, D.C., and at the following regional offices of the
Commission: Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661-2511 and at Seven World Trade Center, Suite 1300, New
York, New York 10048. Copies of all or any part thereof may be obtained from the
Public Reference Section, Securities and Exchange Commission, 450 Fifth Street,
N.W., Washington, D.C. 20549 upon payment of the prescribed fees. Upon listing
of the Common Stock on the NYSE, such reports, proxy and information statements
and other information can also be inspected at the offices of the NYSE, 20 Broad
Street, New York, New York 10005.

The Company has filed with the Securities and Exchange Commission a
Registration Statement on Form S-1 under the Securities Act with respect to the
Common Stock offered hereby. This Prospectus does not contain all of the
information set forth in the Registration Statement and the exhibits and
schedules thereto. For further information with respect to the Company or such
Common Stock, reference is made to the Registration Statement and the schedules
and exhibits filed as a part thereof. Statements contained in this Prospectus
regarding the contents of any contract or any other document are not necessarily
complete and, in each instance, reference is hereby made to the copy of such
contract or other document filed as an exhibit to such Registration Statement.
The Registration Statement, including exhibits thereto, may be inspected without
charge office of the Securities and Exchange Commission. Copies of all or any
part thereof may be obtained upon payment of the prescribed fees.

The Company intends to furnish its stockholders with annual reports
containing financial statements audited by independent certified public
accountants and with quarterly reports containing unaudited financial
information for each of the first three quarters of each fiscal year.

61
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<S> <C>
Independent Auditors' Report.................................................... F-2

Consolidated Balance Sheets at December 31, 1994, 1995 (audited) and March 31,
1996 and pro forma March 31, 1996 (unaudited).................................. F-3

Consolidated Statements of Earnings for the Years Ended December 31, 1993, 1994,
1995 (audited) and the first quarters ended April 2, 1995 and March 31, 1996
(unaudited).................................................................... F-4

Consolidated Statements of Stockholders' Equity for the Years Ended December 31,
1993, 1994, 1995 (audited) and first quarters ended April 2, 1995 and March 31,
1996 (unaudited)............................................................... F-5

Consolidated Statements of Cash Flows for the Years Ended December 31, 1993,
1994, 1995 (audited) and first quarters ended April 2, 1995 and March 31, 1996
(unaudited).................................................................... F-6

Notes to Consolidated Financial Statements...................................... F-7
</TABLE>

F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT

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

We have audited the accompanying consolidated financial statements of Guess
?, Inc. and Subsidiaries as listed in the accompanying index. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. 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 financial position of Guess ?,
Inc. and Subsidiaries as of December 31, 1994 and 1995 and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 1995 in conformity with generally accepted accounting
principles.

KPMG PEAT MARWICK LLP

Los Angeles, California
March 1, 1996

F-2
<PAGE>
GUESS ?, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1994 AND 1995, MARCH 31, 1996 AND PRO FORMA MARCH 31, 1996
(IN THOUSANDS, EXCEPT SHARE DATA)

ASSETS

<TABLE>
<CAPTION>
PRO FORMA
MARCH 31,
MARCH 31, 1996 (NOTE
1994 1995 1996 1)
---------- ---------- ---------- ------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Current assets:
Cash........................................................... $ 5,994 $ 6,417 $ 8,583 $ 8,583
Receivables:
Trade receivables, net of reserves aggregating, $10,391,
$10,849 and $7,563 at December 31, 1994 and 1995 and March
31, 1996, respectively...................................... 23,505 22,886 43,005 43,005
Royalties.................................................... 9,728 9,975 9,540 9,540
Other........................................................ 5,267 4,040 3,163 3,163
---------- ---------- ---------- ------------
38,500 36,901 55,708 55,708
Inventories (note 3)........................................... 83,772 72,889 90,472 90,472
Prepaid expenses............................................... 4,837 5,557 5,508 5,508
Deferred tax assets............................................ -- -- -- 4,408
---------- ---------- ---------- ------------
Total current assets....................................... 133,103 121,764 160,271 164,679

Property and equipment, at cost, net of accumulated depreciation
and amortization (note 4)....................................... 59,725 68,199 66,528 66,528
Long-term investments (note 2)................................... 3,136 3,394 3,404 3,404
Deferred tax assets.............................................. -- -- -- 2,929
Other assets, at cost, net of accumulated amortization of $1,800
and $2,279, $2,361 at December 31, 1994 and 1995 and March 31,
1996, respectively (note 7)..................................... 11,732 9,278 9,064 9,064
---------- ---------- ---------- ------------
$ 207,696 $ 202,635 $ 239,267 $ 246,604
---------- ---------- ---------- ------------
---------- ---------- ---------- ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current installments of notes payable and long-term debt (notes
5 and 7)...................................................... $ 4,696 $ 4,123 $ 5,756 $ 5,756
Accounts payable............................................... 29,840 40,701 43,739 43,739
Accrued expenses............................................... 14,431 18,332 14,978 14,978
Income taxes payable (note 6).................................. 1,009 1,036 1,928 1,928
S corporation distribution notes............................... -- -- -- 168,014
---------- ---------- ---------- ------------
Total current liabilities.................................. 49,976 64,192 66,401 234,415

Notes payable and long-term debt, net of current installments
(notes 5 and 7)................................................. 151,799 119,212 146,752 146,752
Minority interest................................................ 53 75 417 417
Other liabilities................................................ 5,495 8,159 8,227 8,227
---------- ---------- ---------- ------------
207,323 191,638 221,797 389,811
Stockholders' equity (notes 7 and 13):
Common stock, $.01 par value. Authorized 2,000,000 shares;
issued 1,613,650, outstanding 1,000,525, 613,225 shares held
in Treasury................................................... 35 35 35 35
Paid-in capital................................................ 181 181 181 181
Retained earnings.............................................. 150,948 161,567 168,014 7,337
Foreign currency translation adjustment........................ (15) (10) 16 16
Treasury stock, 613,225 shares repurchased..................... (150,776) (150,776) (150,776) (150,776)
---------- ---------- ---------- ------------
Net stockholders' equity (deficiency)........................ 373 10,997 17,470 (143,207)
---------- ---------- ---------- ------------
Commitments, contingencies and subsequent events (notes 5, 9 and
13).............................................................
---------- ---------- ---------- ------------
$ 207,696 $ 202,635 $ 239,267 $ 246,604
---------- ---------- ---------- ------------
---------- ---------- ---------- ------------
</TABLE>

See accompanying notes to consolidated financial statement

F-3
<PAGE>
GUESS ?, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
AND FIRST QUARTERS ENDED APRIL 2, 1995 AND MARCH 31, 1996
(IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
APRIL 2, MARCH 31,
1993 1994 1995 1995 1996
--------- --------- --------- --------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net revenue:
Product sales.......................................... $ 491,444 $ 507,462 $ 440,359 $ 113,646 $ 123,275
Net royalties.......................................... 28,780 40,350 46,374 11,257 11,623
--------- --------- --------- --------- -----------
520,224 547,812 486,733 124,903 134,898
Cost of sales (note 8)................................... 260,409 291,989 262,142 65,267 70,479
--------- --------- --------- --------- -----------
Gross profit............................................. 259,815 255,823 224,591 59,636 64,419
Selling, general and administrative expenses (note 8).... 145,351 138,016 141,663 34,160 35,232
--------- --------- --------- --------- -----------
Earnings from operations............................... 114,464 117,807 82,928 25,476 29,187

Non-operating income (expense):
Interest, net.......................................... (11,735) (16,948) (15,957) (4,041) (3,549)
Other, net............................................. 2,552 322 (157) (164) (320)
--------- --------- --------- --------- -----------
(9,183) (16,626) (16,114) (4,205) (3,869)

Earnings before income taxes........................... 105,281 101,181 66,814 21,271 25,318

Income taxes (note 6).................................... 1,810 3,540 2,895 559 1,271
--------- --------- --------- --------- -----------
Net earnings........................................... $ 103,471 $ 97,641 $ 63,919 $ 20,712 $ 24,047
--------- --------- --------- --------- -----------
--------- --------- --------- --------- -----------

Supplemental pro forma financial information (note 1):
Earnings before income taxes, as presented............... $ 105,281 $ 101,181 $ 66,814 $ 21,271 $ 25,318
Pro forma provision for income taxes (unaudited)......... 42,112 40,472 26,726 8,508 10,127
--------- --------- --------- --------- -----------
Pro forma net earnings (unaudited)....................... $ 63,169 $ 60,709 $ 40,088 $ 12,763 $ 15,191
--------- --------- --------- --------- -----------
--------- --------- --------- --------- -----------
</TABLE>

See accompanying notes to consolidated financial statements

F-4
<PAGE>
GUESS ?, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)
YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
AND THE FIRST QUARTER ENDED MARCH 31, 1996
(IN THOUSANDS)

<TABLE>
<CAPTION>
FOREIGN
CURRENCY
COMMON PAID-IN RETAINED TRANSLATION TREASURY
STOCK CAPITAL EARNINGS ADJUSTMENT STOCK TOTAL
------------- ----------- ---------- ------------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1992................ $ 35 $ 181 $ 167,174 $ -- $ -- $ 167,390
Net earnings.............................. -- -- 103,471 -- -- 103,471
Stockholder distributions................. -- -- (117,656) -- -- (117,656)
Foreign currency translation adj.......... -- -- -- (31) -- (31)
Repurchase of treasury stock.............. -- -- (52,682) -- (150,776) (203,458)
--- ----- ---------- --- ---------- ----------
Balance at December 31, 1993................ 35 181 100,307 (31) (150,776) (50,284)
Net earnings.............................. -- -- 97,641 -- -- 97,641
Stockholder distributions................. -- -- (47,000) -- -- (47,000)
Foreign currency translation adj.......... -- -- -- 16 -- 16
--- ----- ---------- --- ---------- ----------
Balance at December 31, 1994................ 35 181 150,948 (15) (150,776) 373
Net earnings.............................. -- -- 63,919 -- -- 63,919
Stockholder distributions................. -- -- (53,300) -- -- (53,300)
Foreign currency translation adj.......... -- -- -- 5 -- 5
--- ----- ---------- --- ---------- ----------
Balance at December 31, 1995................ 35 181 161,567 (10) (150,776) 10,997
Net earnings (unaudited).................. -- -- 24,047 -- -- 24,047
Stockholder distributions
(unaudited).............................. -- -- (17,600) -- -- (17,600)
Foreign currency translation adj.
(unaudited).............................. -- -- -- 26 -- 26
--- ----- ---------- --- ---------- ----------
Balance at March 31, 1996
(unaudited)................................ $ 35 $ 181 $ 168,014 $ 16 $ (150,776) $ 17,470
--- ----- ---------- --- ---------- ----------
--- ----- ---------- --- ---------- ----------
</TABLE>

See accompanying notes to consolidated financial statement

F-5
<PAGE>
GUESS ?, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995 AND FIRST QUARTERS ENDED
APRIL 2, 1995 AND MARCH 31, 1996 (IN THOUSANDS)

<TABLE>
<CAPTION>
APRIL 2, MARCH 31,
1993 1994 1995 1995 1996
--------- --------- --------- --------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net earnings.............................................. $ 103,471 $ 97,641 $ 63,919 $ 20,712 $ 24,047
Adjustments to reconcile net earnings to net cash provided
by (used in) operating activities:
Depreciation and amortization of property and
equipment.............................................. 10,322 12,070 14,277 3,326 4,282
Amortization of deferred charges........................ 251 515 1,373 496 247
(Gain) loss on disposition of property and equipment.... (223) 726 814 247 16
Foreign currency translation adjustment................. (31) (5) (14) 28 15
Contributions from minority interest.................... 29 24 22 31 342
Undistributed equity method earnings.................... -- (72) (117) (46) (9)
(Increase) decrease in:
Receivables........................................... 46,708 (14,628) 1,599 (12,748) (18,807)
Inventories........................................... (20,357) (3,353) 10,884 10,795 (17,583)
Prepaid expenses...................................... (245) (1,516) (720) 74 49
Other assets.......................................... (1,620) 180 1,858 112 85
Increase (decrease) in:
Accounts payable...................................... (9,259) 8,043 10,861 (6,536) 3,038
Accrued expenses...................................... 1,303 (1,337) 3,658 (3,084) (3,416)
Income taxes payable.................................. (2,380) 795 22 475 892
--------- --------- --------- --------- -----------
Net cash provided by (used in) operating
activities......................................... 127,969 99,083 108,436 13,882 (6,802)
--------- --------- --------- --------- -----------
Cash flows from investing activities:
Net decrease in short-term investments.................... 22,782 5,000 -- -- --
Purchases of property and equipment....................... (14,965) (19,779) (23,757) (5,479) (2,629)
Proceeds from the disposition of property and equipment... 2,425 172 192 11 2
Lease incentives granted.................................. 1,573 1,503 2,015 305 11
Purchase of long-term investments......................... -- (3,136) (23) (122) --
--------- --------- --------- --------- -----------
Net cash provided by (used in) investing
activities......................................... 11,815 (16,240) (21,573) (5,285) (2,616)
--------- --------- --------- --------- -----------
Cash flows from financing activities:
Proceeds from notes payable and long-term debt............ 280,520 222,040 131,193 36,743 55,857
Proceeds from Bridge Loan................................. 80,000 -- -- -- --
Repayment of notes payable and long-term debt............. (99,655) (254,959) (164,353) (30,169) (26,684)
Repayments of Bridge Loan................................. (80,000) -- -- -- --
Distributions to stockholders............................. (117,656) (47,000) (53,300) (17,000) (17,600)
Repurchase of treasury stock.............................. (203,458) -- -- -- --
--------- --------- --------- --------- -----------
Net cash provided by (used in) financing
activities......................................... (140,249) (79,919) (86,460) (10,426) 11,573
--------- --------- --------- --------- -----------
Effect of exchange rates on cash............................ -- 20 20 (28) 11
Net increase (decrease) in cash..................... (465) 2,944 423 (1,857) 2,166
Cash at beginning of period................................. 3,515 3,050 5,994 5,994 6,417
--------- --------- --------- --------- -----------
Cash at end of period....................................... $ 3,050 $ 5,994 $ 6,417 $ 4,137 $ 8,583
--------- --------- --------- --------- -----------
--------- --------- --------- --------- -----------
Supplemental disclosures:
Cash paid during the period for:
Interest................................................ $ 7,189 $ 16,380 $ 15,396 $ 6,665 $ 5,619
Income taxes............................................ 4,259 2,879 1,925 244 357
--------- --------- --------- --------- -----------
--------- --------- --------- --------- -----------
</TABLE>

See accompanying notes to consolidated financial statements

F-6
<PAGE>
GUESS ?, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994 AND 1995 AND MARCH 31, 1996

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Guess ?, Inc. (the "Company") designs, develops and markets quality
contemporary jeans and other casual wear for men and women. The Company
distributes it products through major department stores, specialty retailers,
foreign distributors and its network of Company-owned and -operated retail and
factory outlet stores.

BASIS OF PRESENTATION

The consolidated financial statements include the accounts of the Company
and its foreign subsidiaries, Guess Italia, S.r.l. and Guess Europe, BV. The
Company has a 79% and 50% interest in Guess, Italia, S.r.l. and Guess Europe,
BV, respectively. The remaining 21% of Guess Italia, Srl and 50% of Guess ?
Europe, BV is owned by Marciano International, Inc. ("Marciano International"),
a related party, which is wholly-owned by the stockholders of the Company.
Accordingly, all references herein to "Guess ?, Inc." include the consolidated
results of the Company and its subsidiaries. All intercompany accounts and
transactions have been eliminated in consolidation.

INTERIM FINANCIAL DATA

The interim consolidated financial data as of March 31, 1996 and for the
quarters ended April 2, 1995 and March 31, 1996 is unaudited. This information
reflects all adjustments, consisting of normal recurring adjustments, that in
the opinion of management, are necessary to present fairly the financial
position and results of operations of the Company for the periods indicated.
Results of operations for the interim periods are not necessarily indicative of
the results of operations for the full year.

INVENTORIES

Inventories are valued at the lower of cost (first-in, first-out) or market.

TRADE AND ROYALTY RECEIVABLES

The Company extends trade credit to its customers in the ordinary course of
business. None of the receivables due from customers at December 31, 1994 and
1995 and March 31, 1996 involved factored accounts or other contingencies
relating to third-party risk, except to the extent that the Company has chosen
to insure certain accounts from risk of loss under a catastrophic loss policy.

The Company has licensing arrangements with 26 licensees for use of its name
and trademark. Royalty payments received by the Company are generally on a
percentage of the licensees' net sales and require that minimum royalty payments
be made if specified minimum sales levels are not obtained. Royalty income is
net of direct expenses aggregating $2,387,000, $2,813,000, $2,331,000, $477,000
and $522,000 for 1993, 1994, 1995 and the quarters ended April 2, 1995 and March
31, 1996, respectively. The licensing agreements expire on various dates through
December 2003.

REVENUE RECOGNITION

The Company recognizes revenue from the sale of merchandise upon shipment.
The Company accrues for estimated sales returns and allowances in the period in
which the related revenue is recognized. Royalty income is based upon licensees'
net sales.

F-7
<PAGE>
GUESS ?, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1994 AND 1995 AND MARCH 31, 1996

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
SIGNIFICANT CUSTOMERS

Individual customers aggregating in excess of 10% of net revenue for the
years ended December 31, 1993, 1994 and 1995 and the first quarters ended April
2, 1995 and March 31, 1996 are summarized as follows:

<TABLE>
<CAPTION>
FIRST QUARTER ENDED,
YEAR ENDED DECEMBER 31,
--------------------------
------------------------------- APRIL 2, MARCH 31,
1993 1994 1995 1995 1996
--------- --------- --------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Customer A................................................... 11.5% 10.3% 11.0% 12.2% 9.0%
</TABLE>

DEPRECIATION AND AMORTIZATION

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

<TABLE>
<S> <C>
18 to 31
Building and building improvements................................... years
Land improvements.................................................... 5 years
Machinery and equipment.............................................. 3 to 5 years
Corporate aircraft................................................... 5 to 10 years
Corporate vehicles................................................... 3 years
</TABLE>

Leasehold improvements are amortized over the lesser of the estimated useful
life of the asset or the term of the lease. Construction in progress is not
depreciated until the related asset is completed.

FOREIGN CURRENCY TRANSLATION

In accordance with the Financial Accounting Standards Board Statement No.
52, balance sheet accounts 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 the consolidated balance sheet.

INCOME TAXES

The Company has elected to be treated for Federal and certain state income
tax purposes as an S corporation under Subchapter S of the Internal Revenue Code
and comparable state laws. As a result, the earnings of the Company have been
included in the taxable income of the Company's stockholders for Federal and
certain state income tax purposes, and the Company has generally not been
subject to income tax on such earnings, other than California and other state
franchise taxes.

In February, 1992, the Financial Accounting Standards Board issued Statement
No. 109, "Accounting for Income Taxes." One of the provisions of Statement No.
109 enables companies to record deferred tax assets for the future benefit to be
derived from certain deductible temporary differences. The Company has adopted
the provisions of Statement No. 109 effective January 1, 1993; however, as
differences giving rise to deferred tax assets are immaterial, the Company has
not recorded any deferred tax assets at December 31, 1994 and 1995.

PRO FORMA NET EARNINGS

Pro forma net earnings represents the results of operations adjusted to
reflect a provision for income taxes on historical earnings before income taxes,
which gives effect to the change in the Company's income tax status to a C
corporation as a result of the public sale of its common stock. When the Company
terminates its S corporation status, which is expected to occur just prior to
the consummation of the Offerings, it will record an earnings benefit resulting
from the establishment of net deferred tax assets. The

F-8
<PAGE>
GUESS ?, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1994 AND 1995 AND MARCH 31, 1996

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
amount of the benefit to be recorded (approximately $7,337,000) at March 31,
1996 will be dependent upon temporary differences existing at the date of
termination of the Company's S corporation status. The principal difference
between the pro forma income tax rate and Federal statutory rate of 35% relates
primarily to state income taxes.

PRO FORMA BALANCE SHEET INFORMATION

Pro forma balance sheet information as of March 31, 1996 has been presented
to reflect i) the S corporation distribution to be made in an amount equal to
the previously earned and undistributed taxable S corporation earnings through
the date of termination of the Company's S corporation status as if such
distribution had been made at March 31, 1996 and the Company's S corporation
status had been terminated at such date and ii) an estimated $7,337,000 of net
deferred tax assets that would have been recorded had the Company's S
corporation status been terminated on March 31, 1996.

CREDIT RISK

The Company sells its merchandise principally to customers throughout the
United States and Europe. Management performs regular evaluations concerning the
ability of its customers to satisfy their obligations and records a provision
for doubtful accounts based upon these evaluations. The Company's credit losses
for the periods presented are insignificant and have not exceeded management's
estimates.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying amount of the Company's financial instruments, which
principally include cash, short and long-term investments, trade receivables,
accounts payable and accrued expenses, approximates fair value due to the
relatively short maturity of such instruments.

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 December 31, 1994 and 1995 and March 31, 1996, the carrying
value of all financial instruments was not materially different from fair value.

USE OF ESTIMATES

Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure of
contingent assets and liabilities to prepare these consolidated financial
statements in conformity with generally accepted accounting principles. Actual
results could differ from these estimates.

RECLASSIFICATIONS

Certain reclassifications have been made to the 1993, 1994 and 1995
financial statements to conform to the March 31, 1996 presentation.

2. INVESTMENTS
Long-term investments consist of equity securities aggregating $3,136,000,
$3,394,000 and $3,404,000 at December 31, 1994 and 1995 and March 31, 1996,
respectively.

F-9
<PAGE>
GUESS ?, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1994 AND 1995 AND MARCH 31, 1996

3. INVENTORIES
Inventories at December 31, 1994 and 1995 and March 31, 1996 are summarized
as follows (in thousands):

<TABLE>
<CAPTION>
1994 1995
--------- --------- MARCH 31,
1996
-----------
(UNAUDITED)
<S> <C> <C> <C>
Raw materials........................................................ $ 17,047 $ 9,788 $ 12,695
Work in process...................................................... 14,032 11,264 12,687
Finished goods....................................................... 52,693 51,837 65,090
--------- --------- -----------
$ 83,772 $ 72,889 $ 90,472
--------- --------- -----------
--------- --------- -----------
</TABLE>

4. PROPERTY AND EQUIPMENT
Property and equipment at December 31, 1994 and 1995 and March 31, 1996 is
summarized as follows (in thousands):

<TABLE>
<CAPTION>
1994 1995
--------- --------- MARCH 31,
1996
-----------
(UNAUDITED)
<S> <C> <C> <C>
Land and land improvements........................................... $ 5,725 $ 5,729 $ 5,729
Building and building improvements................................... 8,435 8,446 8,446
Leasehold improvements............................................... 25,470 36,059 37,007
Machinery and equipment.............................................. 40,389 48,279 49,446
Corporate aircraft................................................... 18,324 19,138 20,306
Construction in progress............................................. 363 2,269 1,450
--------- --------- -----------
98,706 119,920 122,384
Less accumulated depreciation and amortization....................... 38,981 51,721 55,856
--------- --------- -----------
$ 59,725 $ 68,199 $ 66,528
--------- --------- -----------
--------- --------- -----------
</TABLE>

Construction in progress at December 31, 1994 and 1995 and March 31, 1996
represents the costs associated with the construction of buildings and
improvements used in the Company's operations and other capitalizable expenses
for projects in progress.

F-10
<PAGE>
GUESS ?, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1994 AND 1995 AND MARCH 31, 1996

5. NOTES PAYABLE AND LONG-TERM DEBT
Notes payable and long-term debt at December 31, 1994 and 1995 and March 31,
1996 are summarized as follows (in thousands):

<TABLE>
<CAPTION>
1994 1995
---------- ---------- MARCH 31,
1996
-----------
(UNAUDITED)
<S> <C> <C> <C>
9 1/2% Senior Subordinated Notes due 2003 (see note 7)...................... $ 115,000 $ 105,000 $ 105,000
Advances under secured $100,000,000 long-term line of credit with a
syndicate of banks, interest is variable, with an average annual effective
rate of 6.42% in 1994 and 7.94% in 1995, 6.86% in the quarter ended March
31, 1996 and payable monthly............................................... 35,000 13,000 40,800
Note payable, secured by corporate aircraft, bearing interest at 10.59% per
year, due in quarterly installments of $665,385 through December 1995...... 1,895 -- --
Note payable, secured by corporate aircraft, bearing interest at 8.23% per
year, payable in quarterly installments of $221,003 through March 1998..... 2,499 1,799 1,615
Other, including capitalized leases......................................... 2,101 3,536 5,093
---------- ---------- -----------
156,495 123,335 152,508
Less current installments................................................... 4,696 4,123 5,756
---------- ---------- -----------
$ 151,799 $ 119,212 $ 146,752
---------- ---------- -----------
---------- ---------- -----------
</TABLE>

Aggregate maturities of notes payable and long-term debt at December 31,
1995 are summarized as follows:

<TABLE>
<S> <C>
December 31, (in thousands):
1996.................................................................... $ 4,123
1997.................................................................... 13,995
1998.................................................................... 217
1999.................................................................... --
2000.................................................................... --
Thereafter.............................................................. 105,000
---------
$ 123,335
---------
---------
</TABLE>

The Company had outstanding letters of credit aggregating $9.0 at December
31, 1995 under its $100 million long term line of credit. Additionally, the
Company has a $25 million letter of credit facility pursuant to which $11.1
million in letters of credit were outstanding at December 31, 1995.

During 1994 and 1995, the Company repurchased $15.0 million and $10.0
million of the Senior Subordinated Notes, respectively. Additionally, the
related deferred financing costs of $468,000 and $281,000 were written off to
interest expense during 1994 and 1995, respectively.

F-11
<PAGE>
GUESS ?, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1994 AND 1995 AND MARCH 31, 1996

6. INCOME TAXES
The provision for state income taxes for the years ended December 31, 1993,
1994 and 1995 consists of the following (in thousands):

<TABLE>
<CAPTION>
APRIL 2, MARCH 31,
1993 1994 1995 1995 1996
--------- --------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Current income tax.................................. $ 3,014 $ 3,540 $ 2,895 $ 559 $ 1,271
Deferred tax benefit................................ (1,204) -- -- -- --
--------- --------- --------- ----- -----------
$ 1,810 $ 3,540 $ 2,895 $ 559 $ 1,271
--------- --------- --------- ----- -----------
--------- --------- --------- ----- -----------
</TABLE>

Deferred income tax benefits in 1993 resulted from timing differences in the
recognition of revenue and expense for financial reporting purposes and income
tax purposes. These differences related principally to a lawsuit settlement,
depreciation expense and officers' compensation.

7. STOCK REPURCHASE
On August 23, 1993, the Company and certain of its stockholders completed
the purchase of all of the common stock owned by a selling stockholder. The
Company purchased 613,225 shares, representing 38% of the then outstanding
shares, from the selling stockholder (the "Company Purchased Shares"). The total
purchase price for the Company Purchased Shares aggregated $203.5 million. To
consummate the acquisition of the Company Purchased Shares, the Company used
proceeds from the sale of Senior Subordinated Notes aggregating $130.0 million
principal amount and a Bridge Loan of $80.0 million.

The Senior Subordinated Notes have a maturity date of August 15, 2003 and
accrue interest, payable semiannually, at an original rate of interest of 10%.
On February 7, 1994, the Company exchanged these Notes for publicly registered
notes which reduced this interest rate to 9 1/2%, until maturity. The notes are
redeemable at the option of the Company, in whole or in part, on or after August
15, 1998, at various redemption prices. Additionally, the Company may redeem up
to 35% of the original aggregate principal amount of the Senior Subordinated
Notes at any time on or prior to August 15, 1996 in the event of a Public Equity
Offering in which the Company receives proceeds of not less than $30.0 million,
at a redemption price of 109% of the principal amount of the notes redeemed.

In connection with the purchase of the Company Purchased Shares, the Company
charged retained earnings $52.7 million, representing the allocable portion of
retained earnings as of August 23, 1993, the purchase date. The remaining cost
of the acquired shares, or $150.8 million, representing purchase price in excess
of the selling stockholder's allocated retained earnings, was recorded as
treasury stock in the accompanying consolidated financial statements.

Deferred financing costs totaling $3.3 million were incurred in connection
with the sale of the Senior Subordinated Notes, and $2.4 million were incurred
in connection with the Bridge Loan. Such deferred financing costs, plus expenses
of the offering of the Senior Subordinated Notes and Bridge Loan, have been
capitalized as deferred financing costs and will be amortized over the
respective terms of the related indebtedness. The costs related to the Bridge
Loan were fully amortized upon the repayment of the Bridge Loan and recorded as
interest expense in the accompanying Consolidated Statement of Earnings. See
also note 5.

8. RELATED PARTY TRANSACTIONS
The Company is engaged in various transactions with entities affiliated with
the Principal Executive Officers. The Company believes that each of the
companies, in which the Existing Stockholders have an investment, and related
party transactions discussed below were entered into on terms no less favorable
to the Company than could have been obtained from an unaffiliated third party.

F-12
<PAGE>
GUESS ?, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1994 AND 1995 AND MARCH 31, 1996

8. RELATED PARTY TRANSACTIONS (CONTINUED)
LICENSE ARRANGEMENTS AND LICENSEE TRANSACTIONS

On January 1, 1995, the Company entered into a licensing agreement with
Charles David of California ("Charles David"). This new agreement superseded a
prior license agreement dated September 28, 1990 and amended in May 1993. The
Principal Stockholders and Nathalie Marciano (the spouse of Maurice Marciano)
together own 50% of Charles David, and the remaining 50% is owned by the
father-in-law of Maurice Marciano. The license agreement grants Charles David
the rights to manufacture worldwide and distribute worldwide (except Japan)
men's, women's and some children's leather and rubber footwear, excluding
athletic footwear, which bear the GUESS logo and trademark. The license also
includes related shoe care products and accessories. Gross royalties earned by
the Company under such license agreement for the fiscal years ended December 31,
1993, 1994 and 1995, and for the quarter ended March 31, 1996, was $1,707,000,
$1,893,000, $2,117,000 and $416,000, respectively. In the same respective
periods, the Company purchased $3,715,000, $4,814,000, $6,375,000 and $1,192,000
of products from Charles David for resale in the retail division's stores.

Effective January 1, 1995, the Company entered into a licensing agreement
with Guess Italia, S.r.l. ("Guess Italia"), granting it the exclusive right in
Italy and non-exclusive right in other parts of Europe to manufacture and
distribute men's and women's apparel and accessories that bear the GUESS logo
and trademark. Guess Italia is owned 79% by the Company and 21% by Marciano
International, Inc., a company wholly owned by the Principal Stockholders, and
being merged into the Company as a part of the Reorganization. Gross royalties
earned by the Company under such license agreement for the fiscal year ended
December 31, 1995, and for the quarter ended March 31, 1996, was $480,000 and
$292,000, respectively. During 1993, 1994 and 1995 and the quarter ended March
31, 1996, the Company purchased $0, $0, $511,000 and $204,000 of products from
Guess Italia for resale in the retail division's stores, and sold $0,
$1,100,000, $399,000 and $72,000 of products, respectively.

On May 3, 1994, the Company entered into an agreement with Ranche Ltd.
("Ranche") to serve as a non-exclusive buying agent for the Company in Hong
Kong, which agreement was terminated in the first quarter of 1996. The Principal
Stockholders together own 100% of Ranche. At the time of the Offerings, the
ownership of Ranche will be transferred from the Principal Stockholders to the
Company. In the fiscal year ended December 31, 1995, and in the quarter ended
March 31, 1996, Ranche earned commission income from the Company of $1,334,000
and $192,000, respectively, in connection with supplying product. In addition,
Ranche operates under a licensing arrangement to distribute product to
authorized distributors. Aggregate royalty income earned by the Company under
such license for the fiscal year ended December 31, 1995, and for the quarter
ended March 31, 1996, was $240,000 and $84,000, respectively.

F-13
<PAGE>
GUESS ?, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1994 AND 1995 AND MARCH 31, 1996

8. RELATED PARTY TRANSACTIONS (CONTINUED)
$417,000, $214,000, $264,000 and $80,000, respectively. In the same respective
periods, the Company purchased $23,000, $201,000, $505,000 and $241,000 of
products from Nantucket Industries for resale in the retail division's stores.

LEASES

The Company leases manufacturing, warehouse and administrative facilities
and one retail administrative facility from partnerships affiliated with the
principal stockholders. The leases will expire in July 2008. Aggregate lease
payments under such leases for the fiscal years ended December 31, 1993, 1994
and 1995 and the quarters ended April 2, 1995 and March 31, 1996 were
$2,065,000, $2,610,000, $2,803,000, $625,000 and $625,000, respectively.

9. COMMITMENTS AND CONTINGENCIES

LEASES

The Company leases its showrooms and retail store locations under operating
lease agreements expiring on various dates through July 2008. Some of these
leases require the Company to make periodic payments for property taxes and
common area operating expenses. Certain leases include rent abatements and
scheduled rent escalations, for which the effects are being amortized and
recorded over the lease term. The Company also leases some of its equipment
under operating lease agreements expiring at various dates through May, 1999.

Future minimum rental payments under noncancelable operating leases at
December 31, 1995 are as follows:

<TABLE>
<S> <C>
Year ending December 31, (in thousands):
1996.................................................................... $ 19,784
1997.................................................................... 20,525
1998.................................................................... 19,205
1999.................................................................... 17,481
2000.................................................................... 16,509
Thereafter.............................................................. 74,964
---------
$ 168,468
---------
---------
</TABLE>

Rental expense for all operating leases during the years ended December 31,
1993, 1994, and 1995 aggregated $13,276,000, $16,295,000, and $21,940,000
respectively. Rental expenses for the first quarters ended April 2, 1995 and
March 31, 1996 aggregated $4,822,000 and $6,186,000, respectively.

INCENTIVE BONUSES

Certain officers of the Company are entitled to incentive bonuses based on
the Company's profits.

LITIGATION

The Company is a party to various claims, complaints, and other legal
actions that have arisen in the ordinary course of business from time to time.
The Company believes that the outcome of all pending legal proceedings, in the
aggregate, will not have a material adverse effect on the Company's financial
position or the results of its operations.

10. SAVINGS PLAN
On January 1, 1992, the Company established the Guess ? Inc. Savings Plan
(the "Plan") under Section 401(k) of the Internal Revenue Code. Under the Plan,
associates may contribute up to 15% of their compensation per year subject to
the elective limits as defined by IRS guidelines and the Company may

F-14
<PAGE>
GUESS ?, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1994 AND 1995 AND MARCH 31, 1996

10. SAVINGS PLAN (CONTINUED)
make matching contributions in amounts not to exceed 1.5% of the associates'
annual compensation. The Company's contributions to the Plan during the years
ended December 31, 1993, 1994 and 1995 aggregated $221,000, $213,000 and
$261,000, respectively. Contributions to the Plan during the first quarters
ended April 2, 1995 and March 31, 1996 aggregated $73,000 and $78,000,
respectively.

11. QUARTERLY INFORMATION (UNAUDITED)
The following is a summary of the unaudited quarterly financial information
for the years ended December 31, 1994 and 1995 (in thousands):

<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
1994
Net revenue............................................ $ 122,729 $ 119,383 $ 160,783 $ 144,917
Gross profit........................................... 59,784 53,611 79,232 63,196
Earnings before income taxes........................... 24,186 16,627 36,591 23,777
Net earnings........................................... 23,479 16,064 35,333 22,765
SUPPLEMENTAL PRO FORMA EARNINGS:
Earnings before income taxes........................... 24,186 16,627 36,591 23,777
Net earnings........................................... 14,512 9,976 21,955 14,266
1995
Net revenue............................................ 124,903 104,749 133,129 123,952
Gross profit........................................... 59,638 49,207 59,148 56,598
Earnings before income taxes........................... 21,271 12,998 17,322 15,223
Net earnings........................................... 20,712 12,282 16,484 14,441
SUPPLEMENTAL PRO FORMA EARNINGS:
Earnings before income taxes........................... 21,271 12,998 17,323 15,222
Net earnings........................................... 12,763 7,799 10,394 9,132
</TABLE>

12. INTERNATIONAL REVENUE
Net revenue is summarized as follows for the years ended December 31, 1993,
1994 and 1995 and the first quarters ended April 2, 1995 and March 31, 1996:

<TABLE>
<CAPTION>
FIRST QUARTER ENDED
----------------------
APRIL 2, MARCH 31,
1993 1994 1995 1995 1996
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Domestic................................... $ 506,301 $ 527,296 $ 452,944 $ 115,831 $ 116,226
International.............................. 13,923 20,516 33,789 9,072 18,672
---------- ---------- ---------- ---------- ----------
$ 520,224 $ 547,812 $ 486,733 $ 124,903 $ 134,898
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
</TABLE>

International revenue includes domestic sales to international markets,
sales of product from international subsidiaries and net royalties from foreign
licenses.

13. SUBSEQUENT EVENTS
In May 1996, the Board of Directors authorized the filing of a registration
statement for an initial public offering of the Company's common stock.

F-15
<PAGE>
GUESS ?, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1994 AND 1995 AND MARCH 31, 1996

13. SUBSEQUENT EVENTS (CONTINUED)
a Hong Kong company owned by the Principal Stockholders, will be contributed to
Guess Europe, (iii) the Company will effect a stock split of the Common Stock
and (iv) as part of the S Corporation Distribution (as defined herein), the
Company will distribute to the Principal Stockholders two aircraft owned by the
Company. All of such transactions are referred to as the "Reorganization".

Prior to the consummation of the transactions related to the Offerings (the
"Closing Date"), the Company's S corporation status will be terminated (the "S
Termination Date"). Prior to the S Termination Date, the Company will declare a
distribution to its stockholders that will include all of its previously earned
and undistributed S corporation earnings through the date of termination of the
Company's S corporation status (the "S Corporation Distribution"). The S
Corporation Distribution will occur prior to the S Termination Date and will be
comprised of the Company's two aircraft (with a value of approximately $10
million) and promissory notes bearing interest at 8% per annum (the "S
Distribution Notes"). Guess estimates that such undistributed earnings will be
between $180.0 million and $190.0 million as of the Closing Date, including a
gain expected to be recognized upon the disposition of the Company's two
aircraft. On and after the S Termination Date of such termination, the Company
will no longer be treated as an S corporation and, accordingly, will be fully
subject to Federal and state income taxes.

F-16
<PAGE>
- -------------------------------------------
-------------------------------------------
- -------------------------------------------
-------------------------------------------

NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFERING COVERED BY THIS PROSPECTUS. IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY OR THE UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER
TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, THE COMMON STOCK IN ANY
JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER
OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS
NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS OR IN THE AFFAIRS
OF THE COMPANY SINCE THE DATE HEREOF.

--------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Prospectus Summary............................. 3
Risk Factors................................... 7
Company History, the Reorganization and Prior S
Corporation Status............................ 11
Use of Proceeds................................ 12
Dividend Policy................................ 12
Capitalization................................. 13
Dilution....................................... 14
Selected Financial Data........................ 15
Selected Pro Forma Financial Data.............. 17
Management's Discussion and Analysis of
Financial Condition and Results of
Operations.................................... 18
Business....................................... 27
Management..................................... 39
Certain Transactions........................... 50
Principal Stockholders......................... 53
Shares Eligible for Future Sale................ 54
Description of Capital Stock................... 55
Certain United States Federal Tax Consequences
to Non-United States Holders.................. 57
Underwriting................................... 59
Legal Matters.................................. 61
Experts........................................ 61
Additional Information......................... 61
Index to Financial Statements.................. F-1
</TABLE>

--------------

UNTIL , 1996 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING
IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS DELIVERY
REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS
WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.

9,200,000 SHARES

[LOGO]

COMMON STOCK

-------------------

PROSPECTUS

-------------------

MERRILL LYNCH & CO.
MORGAN STANLEY & CO.
INCORPORATED

, 1996

- -------------------------------------------
-------------------------------------------
- -------------------------------------------
-------------------------------------------
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any state in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such state.
<PAGE>
[ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS]

SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED MAY 24, 1996
PROSPECTUS
9,200,000 SHARES

[LOGO]

COMMON STOCK
------------------

Of the 9,200,000 shares of Common Stock of Guess ?, Inc. offered hereby,
1,840,000 shares are initially being offered outside the United States and
Canada by the International Managers and 7,360,000 shares are initially being
offered in the United States and Canada by the U.S. Underwriters. The initial
public offering price and the aggregate underwriting discount per share are
identical for each of the Offerings. See "Underwriting."

The Company intends to make application to list the Common Stock on the New
York Stock Exchange.

SEE "RISK FACTORS" BEGINNING ON PAGE 7 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK OFFERED
HEREBY.
------------------------

<TABLE>
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT (1) COMPANY (2)
<S> <C> <C> <C>
Per Share........................... $ $ $
Total (3)........................... $ $ $
</TABLE>

(2) Before deducting expenses payable by the Company estimated to be $ .

(3) The Company has granted to the International Managers and the U.S.
Underwriters options, exercisable within 30 days after the date of this
Prospectus, to purchase up to an additional 276,000 and 1,104,000 shares of
Common Stock, respectively, to cover over-allotments, if any. If all such
additional shares are purchased, the total Price to Public, Underwriting
Discount and Proceeds to Company will be $ , $ and $ ,
respectively. See "Underwriting."

------------------------

MERRILL LYNCH INTERNATIONAL MORGAN STANLEY & CO.
INTERNATIONAL
----------------------------------------

The date of this Prospectus is , 1996.
<PAGE>
[ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS]

UNDERWRITING

Subject to the terms and conditions set forth in an international purchase
agreement (the "International Purchase Agreement") among the Company and each of
the underwriters named below (the "International Managers"), and concurrently
with the sale of shares of Common Stock to the U.S. Underwriters (as
defined below), the Company has agreed to sell to each of the International
Managers, and each of the International Managers severally has agreed to
purchase from the Company, the number of shares of Common Stock set forth
opposite its name below.

<TABLE>
<CAPTION>
NUMBER
INTERNATIONAL MANAGERS OF SHARES
-----------
<S> <C>
Merrill Lynch International...........................................
Morgan Stanley & Co. International Limited............................
-----------
Total....................................................... 1,840,000
-----------
-----------
</TABLE>

Merrill Lynch International and Morgan Stanley & Co. International Limited
are acting as representatives (the "International Representatives") of the
International Managers.

The Company has also entered into a purchase agreement (the "U.S. Purchase
Agreement" and, together with the International Purchase Agreement, the
"Purchase Agreements") with certain underwriters in the United States and Canada
(collectively, the "U.S. Underwriters," and together with the International
Managers, the "Underwriters"), for whom Merrill Lynch, Pierce, Fenner & Smith
Incorporated and Morgan Stanley & Co. Incorporated are acting as representatives
(the "U.S. Representatives" and, together with the International
Representatives, the "Representatives"). Subject to the terms and conditions set
forth in the U.S. Purchase Agreement, and concurrently with the sale of
1,840,000 shares of Common Stock to the International Managers pursuant to the
International Purchase Agreement, the Company has agreed to sell to the U.S.
Underwriters, and the U.S. Underwriters have severally agreed to purchase from
the Company, an aggregate of 7,360,000 shares of Common Stock. The initial
public offering price per share of Common Stock and the underwriting discount
per share of Common Stock are identical under the International Purchase
Agreement and the U.S. Purchase Agreement.

In the International Purchase Agreement and the U.S. Purchase Agreement, the
several International Managers and the several U.S. Underwriters, respectively,
have agreed, subject to the terms and conditions set forth therein, to purchase
all of the shares of Common Stock being sold pursuant to each such Agreement if
any of the shares of Common Stock being sold pursuant to such Agreement are
purchased. Under certain circumstances, the commitments of non-defaulting
International Managers or U.S. Underwriters (as the case may be) may be
increased. The purchase of shares of Common Stock by the International Managers
is conditioned upon the purchase of shares of Common Stock by the U.S.
Underwriters and vice versa.

The International Managers and the U.S. Underwriters have entered into an
intersyndicate agreement (the "Intersyndicate Agreement") providing for the
coordination of their activities. The Underwriters are permitted to sell shares
of Common Stock to each other for purposes of resale at the initial public
offering price, less an amount not greater than the selling concession. Under
the terms of the Intersyndicate Agreement, the International Managers and any
dealer to whom they sell shares of Common Stock will not offer to sell or sell
shares of Common Stock to persons who are U.S. or Canadian persons or to persons
they believe intend to resell to persons who are U.S. or Canadian persons, and
the U.S. Underwriters and any dealer to whom they sell shares of Common Stock
will not offer to sell or sell shares of Common Stock to non-U.S. persons or to
non-Canadian persons or to persons they believe intend to resell to non-U.S.
persons or non-Canadian persons, except in the case of transactions pursuant to
the Intersyndicate Agreement. The International Representatives have advised the
Company that the International Managers propose initially

59
<PAGE>
to offer the shares of Common Stock to the public at the initial public offering
price set forth on the cover page of this Prospectus, and to certain selected
dealers at such price less a concession not in excess of $
per share of Common Stock. The International Managers may allow, and such
dealers may reallow, a discount not in excess of $ per share of Common Stock
on sales to certain other dealers. After the initial public offering, the public
offering price, concession and discount may be changed.

Each International Manager has agreed that (i) it has not offered or sold,
and will not for a period of six months following consummation of the Offerings
offer or sell, in the United Kingdom by means of any document, any shares of
Common Stock offered hereby, other than to persons whose ordinary activities
involve them in acquiring, holding, managing or disposing of investments (as
principal or agent) for the purpose of their businesses or otherwise in
circumstances that do not constitute an offer to the public within the meaning
of the Public Offers of Securities Regulations 1995; (ii) it has complied with
and will comply with all applicable provisions of the Financial Services Act of
1986 with respect to anything done by it in relation to the shares of Common
Stock in, from or otherwise involving the United Kingdom and (iii) it has only
issued or passed on and will only issue or pass on to any person in the United
Kingdom any document received by it in connection with the issue of the shares
of Common Stock if that person is of a kind described in Article [9(3)/11(3)] of
the Financial Services Act 1986 (Investment Advertisements) (Exemptions) Order
1995, as amended, or is a person to whom the document may otherwise lawfully be
issued or passed on.

Purchasers of the shares hereby may be required to pay stamp taxes and other
charges in accordance with the laws and practices of the country of purchase, in
addition to the offering price set forth on the cover page hereby.

The Company, the Principal Stockholders and certain executive officers have
agreed, subject to certain exceptions, not to, directly or indirectly, (i) sell,
grant any option to purchase or otherwise transfer or dispose of any Common
Stock or securities convertible into or exchangeable or exercisable for Common
Stock or file a registration statement under the Securities Act with respect to
the foregoing or (ii) enter into any swap or other agreement or transaction that
transfers, in whole or in part, the economic consequence of ownership of the
Common Stock, without the prior written consent of Merrill Lynch, for a period
of 180 days after the date of this Prospectus.

The Company has granted an option to the International Managers, exercisable
within 30 days after the date of this Prospectus, to purchase up to an aggregate
of additional shares of Common Stock at the initial public offering
price set forth on the cover page of this Prospectus, less the underwriting
discount. The International Managers may exercise this option only to cover
over-allotments, if any, made on the sale of the Common Stock offered hereby. To
the extent that the International Managers exercise this option, each
International Manager will be obligated, subject to certain conditions, to
purchase a number of additional shares of Common Stock proportionate to such
International Manager's initial amount reflected in the foregoing table. The
Company also has granted an option to the U.S. Underwriters, exercisable within
30 days after the date of this Prospectus, to purchase up to an aggregate of
additional shares of Common Stock to cover over-allotments, if any, on
terms similar to those granted to the International Managers.

60
<PAGE>
Representatives believe to be comparable to the Company, certain financial
information of the Company, the history of, and the prospects for, the Company
and the industry in which it competes, an assessment of the Company's
management, its past and present operations, the prospects for, and timing of,
future revenues of the Company, the present state of the Company's development,
and the above factors in relation to market values and valuation measures of
other companies engaged in activities similar to the Company. There can be no
assurance that an active trading market will develop for the Common Stock or
that the Common Stock will trade in the public market subsequent to the
Offerings at or above the initial public offering price.

The Underwriters do not intend to confirm sales of the Common Stock offered
hereby to any accounts over which they exercise discretionary authority.

61
<PAGE>
[ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS]
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

--------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Prospectus Summary............................. 3
Risk Factors................................... 7
The Reorganization and Prior S Corporation
Status........................................ 11
Use of Proceeds................................ 12
Dividend Policy................................ 12
Capitalization................................. 13
Dilution....................................... 14
Selected Financial Data........................ 15
Selected Pro Forma Financial Data.............. 17
Management's Discussion and Analysis of
Financial Condition and Results of
Operations.................................... 18
Business....................................... 27
Management..................................... 39
Certain Transactions........................... 50
Principal Stockholders......................... 53
Shares Eligible for Future Sale................ 54
Description of Capital Stock................... 55
Certain United States Federal Tax Consequences
to Non-United States Holders.................. 57
Underwriting................................... 59
Legal Matters.................................. 61
Experts........................................ 61
Additional Information......................... 61
Index to Financial Statements.................. F-1
</TABLE>

--------------

9,200,000 SHARES

[LOGO]

COMMON STOCK

-------------------

PROSPECTUS

-------------------

MERRILL LYNCH INTERNATIONAL
MORGAN STANLEY & CO.
INTERNATIONAL

, 1996

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

<TABLE>
<S> <C>
SEC registration fee.............................................. $ 83,911
NASD fee.......................................................... 24,834
NYSE listing fee.................................................. *
Blue sky fees..................................................... *
Printing and engraving expenses................................... *
Accountants' fees and expenses.................................... *
Attorneys' fees and expenses...................................... *
Transfer agent fees............................................... *
Miscellaneous..................................................... *
---------
Total........................................................... $ *
---------
---------
</TABLE>

- ------------------------
*To be provided by amendment.

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

Pursuant to Section 145 of the General Corporation Law of Delaware (the
"Delaware Corporation Law"), Article VI of the Restated Bylaws of the
Registrant, a copy of which is filed as Exhibit 3.2 to this Registration
Statement, provides that the Registrant shall indemnify any person in connection
with the defense or settlement of any threatened, pending or completed legal
proceeding (other than a legal proceeding by or in the right of the Registrant)
by reason of the fact that he is or was a director or officer of the Registrant
or is or was a director or officer of the Registrant serving at the request of
the Registrant as a director, officer, employee or agent of another corporation,
partnership or other enterprise against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
in connection with the defense or settlement of such legal proceeding if he
acted in good faith and in a manner that he reasonably believes to be in or not
opposed to the best interests of the Registrant, and, with respect to any
criminal action or proceeding, if he had no reasonable cause to believe that his
conduct was unlawful. If the legal proceeding, however, is by or in the right of
the Registrant, the director or officer may be indemnified by the Registrant
against expenses (including attorneys' fees) actually and reasonably incurred in
connection with the defense or settlement of such legal proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the Registrant and except that he may not be indemnified
in respect of any claim, issue or matter as to which he shall have been adjudged
to be liable to the Registrant unless a court determines otherwise.

Article VI of the Registrant's Bylaws allows the Registrant to maintain
director and officer liability insurance on behalf of any person who is or was a
director or officer of the Registrant or such person who serves or served as
director, officer, agent, or employee, at another corporation, partnership or
other enterprise at the request of the Registrant.

Pursuant to Section 102(b)(7) of the Delaware Corporation Law, Article Fifth
of the Restated Certificate of Incorporation of the Registrant, a copy of which
is filed as Exhibit 3.1 to this Registration Statement, provides that no
director of the Registrant shall be personally liable to the Registrant or its
stockholders for monetary damages for any breach of his fiduciary duty as a
director; provided, however, that such clause shall not apply to any liability
of a director (1) for any breach of this duty of loyalty to the Registrant or
its stockholders, (2) for acts or omissions that are not in good faith or
involve intentional misconduct or a knowing violation of the law, (3) under
Section 174 of the Delaware Corporation Law, or (4) for any transaction from
which the director derived an improper personal benefit. The aforesaid provision
also eliminates the liability of any stockholder for managerial acts or
omissions, pursuant to Section 350 of the Delaware Corporation Law of any other
provision of Delaware law, to the same extent that such liability is limited for
a director.

II-1
<PAGE>
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.

In connection with the organization of the Registrant in August 1993, Armand
Marciano purchased 100 shares of common stock of the Registrant. On August 23,
1993, Armand Marciano sold such shares to Guess ?, Inc., a California
corporation ("Guess California"), the Registrant's predecessor. Thereafter, in
connection with the merger of Guess California with and into the Registrant
pursuant to an Agreement and Plan of Merger between the Registrant and Guess
California, all of the then outstanding shares of common stock of the Registrant
were cancelled and retired, and all of the then outstanding shares of the common
stock of Guess California were converted into and became shares of common stock
of the Registrant. In addition, on August 23, 1993, Guess California sold $130.0
million principal amount of 9 1/2% Senior Subordinated Notes due 2003 (the "Old
Notes") to Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith,
Incorporated ("Merrill Lynch") at 100% of the principal amount thereof (less
aggregate discounts of $3.25 million). Each of such transactions was exempt from
the registration requirements of the Securities Act of 1933, as amended (the
"Act"), in reliance on Section 4(2) of the Act on the basis that such
transaction did not involve a public offering. In accordance with the agreement
pursuant to which Merrill Lynch purchased the Old Notes, Merrill Lynch agreed to
offer and sell the Old Notes only to "qualified institutional buyers" (as
defined in Rule 144A under the Act), a limited number of institutional
"accredited investors" (as defined in Rule 501(a)(1), (2), (3) or (7) under the
Act) and pursuant to offers and sales that occur outside the United States
within the meaning of Regulation S under the Act. Except for the transactions
referred to above, there have not been any recent sales of unregistered
securities by the Registrant.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) Exhibits

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- --------- ----------------------------------------------------------------------
<C> <S>
*1.1. Form of U.S. Purchase Agreement.
*1.2. Form of International Purchase Agreement.
*3.1. Restated Certificate of Incorporation of the Registrant.
*3.2. Restated Bylaws of the Registrant.
4.1. Indenture, dated August 23, 1993, between the Registrant and First
Trust National Association, as Trustee. (1)
4.2. First Supplemental Indenture, dated August 23, 1993, between the
Registrant and First Trust National Association, as Trustee. (1)
*4.3. Specimen stock certificate.
*5.1. Opinion of Shearman & Sterling.
*10.1. Form of Amended and Restated Stockholders' Agreement, dated
, 1996.
10.2. Letter Agreement, dated July 9, 1993, among the Registrant, Georges
Marciano, Maurice Marciano, Paul Marciano, Armand Marciano and trusts
for their respective benefit. (1)
10.3. Employment Agreement dated March 1, 1994 between the Registrant and
Roger A. Williams. (3)
*10.4. Letter Agreement dated January 22, 1996 between the Registrant and
Andrea Weiss.
*10.5. Employment Agreement dated as of May 14, 1996 between the Registrant
and Francis K. Duane.
10.6. General Release and Indemnity Agreement, dated August 23, 1993, among
Maurice, Paul and Armand Marciano, their respective trusts, the
Registrant, Georges Marciano and his trust. (1)
10.7. General Release Agreement, dated August 23, 1993, among Maurice, Paul
and Armand Marciano, their respective trusts, the Registrant, and
Georges Marciano and his trust. (1)
</TABLE>

II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- --------- ----------------------------------------------------------------------
<C> <S>
10.8. Cancellation and Reassignment Agreement, dated August 23, 1993, among
the Registrant, MSKMarciano, Inc., Georges Marciano, Inc. and Georges
Marciano. (1)
10.9. Alameda Lease, dated July 29, 1992, among the Registrant and 1444
Partners, Ltd. (1)
10.10. Revolving Credit Agreement, dated as of December 20, 1993, between the
Registrant and The First National Bank of Boston, as agent, and Sanwa
Bank California, as co-agent, and the group of financial institution
party thereto (the "Revolving Credit Agreement"). (3)
10.11. Security Agreement, dated December 20, 1993, between the Registrant
and the First National Bank of Boston, as agent for itself and for
certain lenders. (3)
10.12. Amendment No. 1 to the Revolving Credit Agreement, dated January 20,
1994, among the parties thereto. (4)
10.13. Amendment No. 2 to the Revolving Credit Agreement, dated April 1,
1994, among the parties thereto. (4)
10.14. Amendment No. 3 to the Revolving Credit Agreement, dated July 18,
1994, among the parties thereto. (4)
10.15. Amendment No. 4 to the Revolving Credit Agreement, dated October 24,
1994, among the parties thereto. (4)
10.16. Amendment No. 5 to the Revolving Credit Agreement, dated February 13,
1995, among the parties thereto. (5)
10.17. Amendment No. 6 to the Revolving Credit Agreement, dated September 14,
1995, among the parties thereto. (5)
10.18. Amendment No. 7 to the Revolving Credit Agreement, dated December 22,
1995, among the parties thereto. (5)
*10.19. Amendment No. 8 to the Revolving Credit Agreement, dated February 13,
1996, among the parties thereto.
10.20. Agreement as to Consignment of Documents and Related Matters between
the Registrant and The First National Bank of Boston, dated December
22, 1995. (5)
*10.21. 1996 Equity Incentive Plan.
*10.22. 1996 Non-Employee Directors' Stock Option Plan.
*10.23. Aircraft lease agreement.
*21.1. List of Subsidiaries.
23.1. Consent of KPMG Peat Marwick LLP, independent certified public
accountants.
23.2. Consent of Shearman & Sterling (included in Exhibit 5.1).
24.1. Power of Attorney (contained on page II-5).
</TABLE>

(b) Financial Statement Schedule:

<TABLE>
<CAPTION>
DESCRIPTION
------------------------------------------------------------------------------
<C> <S>
* Schedule II Valuation and Qualifying Accounts
</TABLE>

- ------------------------
* To be provided by amendment.

(1) Incorporated by reference from the Registration Statement on Form S-1
(Registration No. 33-69236) originally filed by the Company on September 22,
1993.

(2) Incorporated by reference from Amendment No. 1 to the Registration Statement
on Form S-1 (File No. 33-69236) filed by the Company on November 24, 1993.

II-3
<PAGE>
(3) Incorporated by reference from the Company's Quarterly Report on Form 10-Q
for the quarter ended March 27, 1994.

(4) Incorporated by reference from the Company's Annual Report on Form 10-K for
the year ended December 31, 1994.

(5) Incorporated by reference from the Company's Annual Report on Form 10-K for
the year ended December 31, 1995.

ITEM 17. UNDERTAKINGS.

(a) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the Common Stock
being registered, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.

(b) The undersigned registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4)
or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial BONA FIDE offering thereof.

(c) The undersigned Registrant hereby undertakes to provide to the
Underwriters at the closing specified in the underwriting agreements,
certificates in such denominations and registered in such names as required by
the Underwriters to permit prompt delivery to each purchaser.

II-4
<PAGE>
POWER OF ATTORNEY

Each person whose signature appears below constitutes and appoints Maurice
Marciano, Paul Marciano and Roger A. Williams his or her true and lawful
attorneys-in-fact and agents, each acting alone, with full powers of
substitution and resubstitution, for him or her and in his or her name, place
and stead, in any and all capacities, to sign any and all amendments (including
post-effective amendments) to this Registration Statement or any related
registration statement filed pursuant to Rule 462(b), and to file the same, with
all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, each acting alone, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he or she might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, each acting alone, or his or her substitute or substitutes, may lawfully
do or cause to be done by virtue hereof.

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Los Angeles, State of
California, on May 23, 1996.

GUESS ?, INC.

By: /s/ MAURICE MARCIANO

-----------------------------------
Name: Maurice Marciano
Title: CHIEF EXECUTIVE OFFICER

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.

SIGNATURE TITLE DATE
- ----------------------------------- ------------------------- ----------------

Chairman of the Board,
/s/ MAURICE MARCIANO Chief Executive Officer
- ----------------------------------- and Director (Principal May 23, 1996
Maurice Marciano Executive Officer)

/s/ PAUL MARCIANO President, Chief
- ----------------------------------- Operating Officer and May 23, 1996
Paul Marciano Director

/s/ ARMAND MARCIANO Senior Executive Vice
- ----------------------------------- President, Secretary and May 23, 1996
Armand Marciano Director

/s/ ROGER A. WILLIAMS Chief Financial Officer
- ----------------------------------- (Principal Financial and May 23, 1996
Roger A. Williams Accounting Officer)

II-5
<PAGE>
SCHEDULE II
GUESS ?, INC. & SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED DECEMBER 31, 1993, 1994, AND 1995
(IN THOUSANDS)

<TABLE>
<CAPTION>
BALANCE AT CHARGED TO DEDUCTIONS BALANCE
BEGINNING COSTS AND AND AT END
DESCRIPTION OF PERIOD EXPENSES WRITE-OFFS OF PERIOD
- ------------------------------------------------------------------ ----------- ------------- ----------- ---------
<S> <C> <C> <C> <C>
As of December 31, 1993
Allowance for obsolescence...................................... $ 1,026 -- $ (26) $ 1,000
Accounts receivable............................................. 9,235 7,505 (834) 15,906

As of December 31, 1994
Allowance for obsolescence...................................... 1,000 1,400 -- 2,400
Accounts receivable............................................. 15,906 758 (6,273) 10,391

As of December 31, 1995
Allowance for obsolescence...................................... 2,400 2,352 (392) 4,360
Accounts receivable............................................. 10,391 5,147 (4,689) 10,849
</TABLE>

S-1
<PAGE>
EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT SEQUENTIALLY
NUMBER DESCRIPTION NUMBER PAGE
- --------- ------------------------------------------------------------------------------------- -------------
<C> <S> <C>
*1.1. Form of U.S. Purchase Agreement.
*1.2. Form of International Purchase Agreement.
*3.1. Restated Certificate of Incorporation of the Registrant.
*3.2. Restated Bylaws of the Registrant.
4.1. Indenture, dated August 23, 1993, between the Registrant and First Trust National
Association, as Trustee. (1)
4.2. First Supplemental Indenture, dated August 23, 1993, between the Registrant and First
Trust National Association, as Trustee. (1)
*4.3. Specimen stock certificate.
*5.1. Opinion of Shearman & Sterling.
*10.1. Form of Amended and Restated Stockholders' Agreement, dated , 1996.
10.2. Letter Agreement, dated July 9, 1993, among the Registrant, Georges Marciano, Maurice
Marciano, Paul Marciano, Armand Marciano and trusts for their respective benefit.
(1)
10.3. Employment Agreement dated March 1, 1994 between the Registrant and Roger A.
Williams. (3)
*10.4. Letter Agreement dated January 22, 1996 between the Registrant and Andrea Weiss.
*10.5. Employment Agreement dated as of May 14, 1996 between the Registrant and Francis K.
Duane.
10.6. General Release and Indemnity Agreement, dated August 23, 1993, among Maurice, Paul
and Armand Marciano, their respective trusts, the Registrant, Georges Marciano and
his trust. (1)
10.7. General Release Agreement, dated August 23, 1993, among Maurice, Paul and Armand
Marciano, their respective trusts, the Registrant, and Georges Marciano and his
trust. (1)
10.8. Cancellation and Reassignment Agreement, dated August 23, 1993, among the Registrant,
MSKMarciano, Inc., Georges Marciano, Inc. and Georges Marciano. (1)
10.9. Alameda Lease, dated July 29, 1992, among the Registrant and 1444 Partners, Ltd. (1)
10.10. Revolving Credit Agreement, dated as of December 20, 1993, between the Registrant and
The First National Bank of Boston, as agent, and Sanwa Bank California, as co-agent,
and the group of financial institution party thereto (the "Revolving Credit
Agreement"). (3)
10.11. Security Agreement, dated December 20, 1993, between the Registrant and the First
National Bank of Boston, as agent for itself and for certain lenders. (3)
10.12. Amendment No. 1 to the Revolving Credit Agreement, dated January 20, 1994, among the
parties thereto. (4)
10.13. Amendment No. 2 to the Revolving Credit Agreement, dated April 1, 1994, among the
parties thereto. (4)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIALLY
NUMBER DESCRIPTION NUMBER PAGE
- --------- ------------------------------------------------------------------------------------- -------------
10.14. Amendment No. 3 to the Revolving Credit Agreement, dated July 18, 1994, among the
parties thereto. (4)
<C> <S> <C>
10.15. Amendment No. 4 to the Revolving Credit Agreement, dated October 24, 1994, among the
parties thereto. (4)
10.16. Amendment No. 5 to the Revolving Credit Agreement, dated February 13, 1995, among the
parties thereto. (5)
10.17. Amendment No. 6 to the Revolving Credit Agreement, dated September 14, 1995, among
the parties thereto. (5)
10.18. Amendment No. 7 to the Revolving Credit Agreement, dated December 22, 1995, among the
parties thereto. (5)
*10.19. Amendment No. 8 to the Revolving Credit Agreement, dated February 13, 1996, among the
parties thereto.
10.20. Agreement as to Consignment of Documents and Related Matters between the Registrant
and The First National Bank of Boston, dated December 22, 1995. (5)
*10.21. 1996 Equity Incentive Plan.
*10.22. 1996 Non-Employee Directors' Stock Option Plan.
*10.23. Aircraft lease agreement.
*21.1. List of Subsidiaries.
23.1. Consent of KPMG Peat Marwick LLP, independent certified public accountants.
23.2. Consent of Shearman & Sterling (included in Exhibit 5.1).
24.1. Power of Attorney (contained on page II-5).
</TABLE>

- ------------------------
* To be provided by amendment.

(1) Incorporated by reference from the Registration Statement on Form S-1
(Registration No. 33-69236) originally filed by the Company on September 22,
1993.

(2) Incorporated by reference from Amendment No. 1 to the Registration Statement
on Form S-1 (File No. 33-69236) filed by the Company on November 24, 1993.

(3) Incorporated by reference from the Company's Quarterly Report on Form 10-Q
for the quarter ended March 27, 1994.

(4) Incorporated by reference from the Company's Annual Report on Form 10-K for
the year ended December 31, 1994.

(5) Incorporated by reference from the Company's Annual Report on Form 10-K for
the year ended December 31, 1995.

<PAGE>
EXHIBIT 23.1

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

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

The audits referred to in our report dated March 1, 1996 included the
related financial statement schedule as of and for each of the years in the
three-year period ended December 31, 1995, included in the registration
statement. This financial statement schedule is the responsibility of the
Company's management. Our responsibility is to express an opinion on this
financial statement schedule based on our audits. In our opinion, such 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.

We consent to the use of our reports included herein and to the reference to
our firm under the heading "Experts" in the prospectus.

KPMG PEAT MARWICK LLP

Los Angeles, California
May 24, 1996