According to a press release dated April 5, 2002, Guess?, Inc. (NYSE:GES) announced that all pending class action and derivative shareholder lawsuits against the Company and certain of its officers and directors have been dismissed, without settlement. Goldman v. Isaacs, a shareholder derivative action filed in Delaware state court, was dismissed without prejudice in February 2002. In re Guess?, Inc. Securities Litigation, a federal class action case which resulted from the consolidation of several other class action cases, was dismissed without prejudice earlier this month. Finally, the plaintiff in Bell v. Marciano, a derivative action filed in federal district court in Los Angeles, has been voluntarily dismissed by stipulation and order by the court dated March 28, 2002. The Company is not aware of any other shareholder litigation pending against it.
The original complaint charges that Guess and certain of its officers and directors with issuing false and misleading statements concerning the Company's business and financial condition. Specifically, the complaint alleges that on November 9, 2000, after defendants had sold over $2.2 million of their own Guess shares, they revealed that Guess would earn only $0.13 per share in the 3rd Quarter fiscal 2000, compared to analysts' revised estimates of $0.33 per share. The Company would early only $0.08 per share in the 4th Quarter Fiscal 2000 compared to an estimated $0.44 per share, and for Fiscal 2001, $0.95 per share compared to $1.85 per share. Defendants also revealed that Guess would record a loss of over $4.7 million related to below cost sales of inventory, and an additional charge of $5.4 million to increase reserves for impaired or worthless inventory.
Further, the complaint alleges that on January 26, 2001, defendants issued another press release which admitted that throughout the Class Period, they had artificially and improperly inflated its earnings by failing to expense costs or record accruals relating to the value of its substantially impaired inventory. As a result of the Company's accounting improprieties, Guess was forced to restate its financial results for the 1stQ, 2ndQ and 3rdQ of Fiscal 2000.