G-III Apparel Blows Past Guidance In Q2

G-III Apparel Group Ltd. increased the company’s full-year sales and earnings guidance after reporting a profit against a loss in the second quarter.

Net sales for the second quarter of fiscal 2019 increased 16.1 percent to a second quarter record of $624.7 million, from $538.0 million in the year-ago period. The company reported net income for the second quarter of $10.1 million, or 20 cents per diluted share, compared to a net loss of $8.6 million, or 18 cents per share, in the prior year’s comparable period.

Non-GAAP net income per diluted share was 22 cents for the second quarter of this year compared to a non-GAAP net loss of 15 cents per share in the same period last year. Non-GAAP net income per diluted share and net loss per share exclude (i) non-cash imputed interest expense related to the note issued to seller as part of the consideration for the acquisition of Donna Karan International (“DKI”) of $1.2 million in this quarter and $1.4 million in the second quarter of last year and (ii) transitional expenses associated with the DKI acquisition of $700,000 in the second quarter of last year. The aggregate effect of these exclusions was equal to $0.02 per diluted share in the second quarter this year and 3 cents per share in the second quarter last year.

Results were well above Wall Street’s consensus targets of 3 cents a share on an adjusted basis on revenues of $590.1 million. G-III had forecast net sales of approximately $590 million and net income or loss between a net loss of $3.5 million and net income of $1.5 million or between a net loss of 7 cents per share and net income of 3 cents per share.

Morris Goldfarb, G-III’s chairman and chief executive officer, said, “We are pleased to report second quarter results that exceeded our expectations. Our outperformance was driven by excellent results across our wholesale businesses. We are successfully leveraging our five global power brands to deliver market relevant product that resonates with today’s consumers. We have a world class portfolio of owned and licensed brands that we believe position us for long-term growth in sales and earnings.”

Outlook

The company today increased its prior guidance for the full fiscal year ending January 31, 2019. The company now expects net sales of approximately $3.06 billion and net income between $125 million and $130 million or between $2.45 and $2.55 per diluted share. The company previously forecasted net sales of approximately $2.97 billion and net income between $112 million and $117 million, or between $2.20 and $2.30 per diluted share, for fiscal 2019. This compares to net sales of $2.81 billion and net income of $62.1 million, or $1.25 per diluted share, for fiscal 2018.

The company is anticipating non-GAAP net income for fiscal 2019 between $129 million and $134 million, or between $2.52 and $2.62 per diluted share, compared to previous guidance of non-GAAP net income for fiscal 2019 between $116 million and $121 million, or between $2.27 and $2.37 per diluted share. Non-GAAP results for fiscal 2019 exclude non-cash imputed interest expense of approximately $5.0 million, or $0.07 per diluted share, related to the note issued to the seller as part of the consideration for the DKI acquisition. This guidance compares to non-GAAP net income of $79.5 million, or $1.60 per diluted share, for fiscal 2018.

The company is projecting full-year adjusted EBITDA for fiscal 2019 between $250 million and $260 million compared to its previous forecast of adjusted EBITDA between $236 million and $246 million. This compares to full-year adjusted EBITDA of $201.3 million in fiscal 2018.

For the third quarter of fiscal 2019 ending October 31, 2018, the company is forecasting net sales of approximately $1.08 billion and net income between $85.0 million and $90.0 million, or between $1.70 and $1.80 per diluted share. This forecast compares to net sales of $1.02 billion and net income of $81.6 million, or $1.65 per diluted share, reported for the third quarter of fiscal 2018.

The third quarter forecast includes non-cash imputed interest expense of $1.2 million related to the note issued to the seller as part of the consideration for the DKI acquisition. On an adjusted basis, excluding imputed interest expense, the company is forecasting third quarter non-GAAP net income between $85.9 million and $90.9 million, or between $1.72 and $1.82 per diluted share. This compares to non-GAAP net income of $82.6 million, or $1.67 per diluted share, for the third quarter of fiscal 2018.

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 the company’s team sports business, G-III has licenses with the National Football League, National Basketball Association, Major League Baseball, National Hockey League and over 150 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.