G-III Apparel Group Ltd. said fourth-quarter net sales from the company’s retail operations segment are expected to be less than anticipated due to unseasonably warm weather in the first part of the quarter, persistent lower traffic as compared to last year, issues with respect to the design and merchandising of accessories sold at the Wilsons stores and an overall challenging retail environment.
The company was anticipating positive comparative-sales increases in the low single digits for both the Wilsons and Bass retail chains. The company now anticipates comparative sales to be down low double digits for Wilsons and down mid single digits for G.H. Bass. In addition, gross margin will be adversely impacted due to higher-than-planned promotional activity in the retail operations segment. As a result, the company expects the retail operations segment to experience a decrease in net sales of approximately $20 million and a decrease in net income of approximately $10 million, equal to 20 cents per diluted share, in the fourth quarter compared to the anticipated results for the segment previously included in the company’s forecast. The forecast for the wholesale operations segment remains consistent with the company’s prior expectations.
For the full fiscal year ending January 31, 2017, the company is now forecasting net sales of approximately $2.41 billion and net income between $57 million and $62 million, or a range between $1.21 and $1.31 per diluted share, compared to the previous guidance of net sales of approximately $2.43 billion and net income between $67 million and $72 million, or a range between $1.41 and $1.51 per diluted share. The full-year forecast continues to include estimated net sales of approximately $25 million and operating losses and additional interest expense of approximately $21 million, before taxes, equal to 28 cents per diluted share, associated with the acquisition of Donna Karan International Inc. The current year’s forecast also continues to include professional fees of approximately $15 million, before taxes, equal to approximately 20 cents per diluted share, in connection with the acquisition and the impact of the issuance of approximately 2.6 million shares of new G-III common stock to the seller.
Excluding professional fees associated with the acquisition of Donna Karan in fiscal 2017 and other income in fiscal 2016, the company is now forecasting non-GAAP net income per diluted share of between $1.41 and $1.51, for the full 2017 fiscal year compared to $2.44 for the 2016 fiscal year. The non-GAAP forecast includes the estimated operating losses and additional interest expense of approximately $21 million, before taxes, equal to 28 cents per diluted share, related to the Donna Karan business and the issuance of additional shares associated with the acquisition of Donna Karan.
The company is now projecting adjusted EBITDA for fiscal 2017 of between approximately $148 million and $155 million compared to adjusted EBITDA of $210.1 million in fiscal 2016 and to its previous forecast of adjusted EBITDA of between approximately $163 million and $171 million. The current projection includes estimated operating losses of $14 million of the post-acquisition Donna Karan business, but excludes professional fees associated with the acquisition of Donna Karan.
Non-GAAP net income per diluted share and adjusted EBITDA should be evaluated in light of the company’s financial results prepared in accordance with U.S. GAAP. Reconciliations of forecasted and actual GAAP net income per share to forecasted and actual non-GAAP net income per share and of GAAP net income to adjusted EBITDA are included in tables accompanying the condensed financial statements in this release.
G-III’s owned brands include Donna Karan, DKNY, Vilebrequin, Andrew Marc, Marc New York, Bass, G.H. Bass, Weejuns, G-III Sports by Carl Banks, Eliza J, Black Rivet and Jessica Howard. G-III has fashion licenses under the Calvin Klein, Tommy Hilfiger, Karl Lagerfeld, Kenneth Cole, Cole Haan, Guess, Jones New York, Jessica Simpson, Vince Camuto, Ivanka Trump, Ellen Tracy, 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 Donna Karan, Wilsons Leather, Bass, G.H. Bass & Co., Vilebrequin and Calvin Klein Performance names.
