G-III Apparel Group, Ltd. reported a strong gain in earnings on an adjusted basis in the fourth quarter ended January 31 despite a 1.6 percent dip in revenues. The company, a major supplier of fan apparel, is not providing guidance for the year due to the coronavirus outbreak.

For the fourth quarter ended January 31, 2020, net sales decreased by 1.6 percent to $754.6 million from $766.8 million in the fourth quarter last year. The company reported GAAP net income of $25.3 million, or 52 cents per diluted share, in the fourth quarter compared to $24.1 million, or 48 cents per diluted share, in the fourth quarter last year.

Non-GAAP net income per diluted share was $0.75 for the fourth quarter of fiscal 2020 compared to 55 cents per share in the fourth quarter last year. Non-GAAP net income per diluted share excludes (i) non-cash imputed interest expense of $1.4 million in the fourth quarter of fiscal 2020 and $1.3 million in the fourth quarter of fiscal 2019 related to the Seller Note, (ii) asset impairments primarily related to leasehold improvements and furniture and fixtures at certain of our retail stores of $21.7 million in fiscal 2020 and $2.8 million in fiscal 2019 and (iii) a non-cash income tax gain of $6.7 million primarily from foreign tax rate changes in fiscal 2020. The aggregate effect of these exclusions was equal to 23 cents per diluted share in the fourth quarter of fiscal 2020 and 7 cents per diluted share in the fourth quarter of fiscal 2019.

Net sales for the fiscal year ended January 31, 2020 increased 2.7 percent to $3.16 billion from $3.08 billion in the prior year. The company reported GAAP net income for the fiscal year of $143.8 million, or $2.94 per diluted share, compared to $138.1 million, or $2.75 per diluted share, in the prior year.

Non-GAAP net income per diluted share was $3.19 for fiscal 2020 compared to $2.86 in the prior fiscal year. Non-GAAP net income per diluted share excludes (i) non-cash imputed interest expense of $5.4 million in fiscal 2020 and $5.0 million in fiscal 2019 related to the note issued to the seller (the “Seller Note”) as part of the consideration for the acquisition of Donna Karan International, (ii) asset impairments primarily related to leasehold improvements and furniture and fixtures at certain of our retail stores, net gain on lease terminations, of $19.4 million in fiscal 2020 and $2.8 million in fiscal 2019 and (iii) a non-cash income tax gain of $6.7 million primarily from foreign tax rate changes in fiscal 2020. The aggregate effect of these exclusions was equal to 25 cents per diluted share in fiscal 2020 and 11 cents per diluted share in fiscal 2019.

Morris Goldfarb, G-III’s chairman and chief executive officer, said, “The coronavirus outbreak has sent shockwaves through our industry and country. The health and welfare of our associates are of utmost importance to us. We have closed our retail stores and corporate offices and continue to work remotely or from safe spaces in order to remain operational.”

Goldfarb continued, “We currently have approximately $800 million of cash and availability under our bank facilities. This strong financial position is important as we move forward and strategically plan the balance of our year. We remain confident in our ability to adjust and adapt to the challenges and opportunities that lie ahead.”

Goldfarb concluded, “We continue towards the restructuring of our retail operations. We are focused on significantly reducing the number of stores we operate and remain committed to substantially reducing the losses from our retail operations as swiftly and efficiently as possible. We reported another year of growth driven by our wholesale segment. Our success remains anchored by our five global power brands: DKNY, Donna Karan, Calvin Klein, Tommy Hilfiger, and Karl Lagerfeld. We are confident our solid wholesale business, along with a more streamlined retail operation, creates a strong foundation for continued growth.”

Outlook
The company is closely monitoring the developments associated with the coronavirus outbreak and its impact on our sales, results of operations and supply chain. It is difficult to forecast the effects of the outbreak on our fiscal 2021 results. As a result, the company is not currently providing any guidance and expects to provide additional information when it releases results for its first quarter of fiscal 2021.

Photo courtesy G-III Apparel Group