G-III Apparel Group Ltd. raised its guidance for the year after seeing third-quarter earnings easily top Wall Street’s targets with “excellent wholesale net sales across all major brands” in the period.
For the third quarter ended October 31, 2017, G-III reported that net sales increased 16 percent to $1.02 billion from $883.5 million in the year-ago period. This increase includes net sales of approximately $88.0 million of our DKNY and Donna Karan products. The company’s net income for the third quarter increased to $81.6 million, or $1.65 per diluted share, from $70.6 million, or $1.50 per diluted share, in the prior year’s comparable period. The company said it is increasing its prior guidance for the full fiscal 2018 year, noting “excellent wholesale net sales across all major brands” in the third quarter.
On an adjusted basis, excluding for the third quarter of fiscal 2018 non-cash imputed interest expense of $1.4 million related to the note issued to the seller as part of the consideration for the acquisition of Donna Karan International (“DKI”), equal to 2 cents per share, non-GAAP net income per share for the third quarter of fiscal 2018 was $1.67.
Morris Goldfarb, G-III’s chairman and chief executive officer, said, “We are pleased with our third quarter results which surpassed our plan. We have executed our strategy with well-known brands and compelling product in an environment that remains challenging across our industry. Our products are selling well as we head into the holiday season and we expect to close the year with improved results and sustained momentum.”
Goldfarb concluded, “We have a growth strategy that works. We continue to own and align with great brands, control our distribution well, approach every relationship as a partner, and deliver to the consumer a truly outstanding range of product. These commitments have served us well and will continue to illuminate our path to long term success.”
The company increased its prior net income guidance for the full fiscal year ending January 31, 2018. The company continues to forecast net sales of approximately $2.80 billion and is now forecasting net income between $66 million and $71 million, or between $1.33 and $1.43 per diluted share. The company previously forecasted net income between $56 million and $60 million, or between $1.11 and $1.21 per diluted share.
The company’s forecast includes Donna Karan-related transitional expenses of approximately $1.8 million and non-cash imputed interest expense of approximately $5.7 million. On an adjusted basis, excluding transitional and imputed interest expenses, the company now anticipates non-GAAP net income of between approximately $71 million and $76 million, or between $1.42 and $1.52 per diluted share. The company’s previous forecast was for non-GAAP net income of between approximately $64 million and $69 million, or between $1.28 and $1.38 per diluted share.
The forecasted GAAP and non-GAAP results reflect expected operating losses of approximately $23.9 million and additional interest expense of approximately $22.8 million, equal to an aggregate of $0.59 per diluted share, associated with the Donna Karan business for the full fiscal 2018 year. The per share forecasts above include the impact of the issuance of approximately 2.6 million shares of new G-III common stock to the seller of DKI on December 1, 2016.
The company is now forecasting projected full-year adjusted EBITDA for fiscal 2018 between $188 million and $196 million compared to adjusted EBITDA of $148.1 million in fiscal 2017 and compared to its previous forecast of adjusted EBITDA of between $180 million and $188 million. This adjusted EBITDA guidance includes a forecasted full-year operating loss of approximately $16.0 million associated with the Donna Karan business.
G-III is a leading manufacturer and distributor of apparel and accessories under licensed brands, owned brands and private label brands. G-III’s owned brands include Donna Karan, DKNY, Vilebrequin, G. H. Bass, Andrew Marc, Marc New York, Eliza J and Jessica Howard. G-III has fashion licenses under the Calvin Klein, Tommy Hilfiger, Karl Lagerfeld Paris, Kenneth Cole, Cole Haan, Guess?, Vince Camuto, Ivanka Trump, Kensie, Levi’s and Dockers brands. Through our team sports business, G-III has licenses with the National Football League, National Basketball Association, Major League Baseball, National Hockey League, Hands High, Touch by Alyssa Milano and more than 100 U.S. colleges and universities. G-III also operates retail stores under the DKNY, Wilsons Leather, G. H. Bass, Vilebrequin, Calvin Klein Performance and Karl Lagerfeld Paris names.