Carried by strength across nearly all the company’s collections, G-III Apparel Group Ltd. reported first-quarter earnings that ran well past guidance.
In the quarter ended April 30, net income came to $9.9 million, or 20 cents a share, against a loss of $10.4 million, or 21 cents a year ago. Non-GAAP net income per diluted share was 22 cents per share against a loss of 18 cents a year ago. The company forecast a net loss between 4 to 14 cents.
Revenues improved 15.6 percent to $611.7 million, well ahead of guidance calling for revenues of $570 million.
On a conference call with analysts, Morris Goldfarb, chairman and CEO, said the wholesale business continued to drive results while the retail business performed as expected and showed some signs of recovery.
Net sales of the wholesale operation segment increased 16.5 percent to $528 million. Retail revenues gained 6.1 percent to $105 million. Same-store sales jumped 19 percent at Wilsons and dipped 2 percent at G.H. Bass.
On the wholesale side, Calvin Klein women grew double digits, led by dress and suit separates. Tommy Hilfiger women also grew double digits. Karl Lagerfeld gained 50 percent. DKNY and Donna Karan saw a strong performance across product categories and now has a significant income stream with licensing revenue.
Eliza J, Jessica Howard, and Vince Camuto dresses continued to do well. The company’s outerwear business, led by Calvin Klein, Tommy Hilfiger, DKNY and Levi’s, was “also a strong performer for us in the quarter,” said Goldfarb. Lastly, Vilebrequin, G-III’s status swimwear and resort brand, saw gains in the low-single digits.
G-III didn’t remark on the performance of the company’s sports licensing business except to note in the Q&A section that Fanatics represents about 20 percent of the segment’s sales. The team sports business includes Touch By Alyssa Milano, Starter jackets, Hands High and G-III Sports by Carl Banks.
On the retail side, Bass’ comps improved sequentially from the fourth quarter and the full year of fiscal 2018 and is expected to benefit in the second half from a larger emphasis on apparel. Wilsons’ 19 percent comp reflects a better assortment, as the chain further leveraged G-III’s historic expertise in outerwear. Overall, the retail segment is on track to close about 105 locations this year from 350 at the start of the year. Sixty have closed so far.
Said Goldfarb, “Year-over-year, we expect to achieve a reduction of roughly $10 million to $15 million in losses in our retail operation segment. We will continue to do what is necessary to eliminate operating losses from this business and ultimately return it to profitability.”
Gross margins improved to 38.5 percent compared to 38.1 percent in the prior year’s period. Wholesale margins improved to 35.4 percent compared to 34.2 percent in last year’s quarter. The gross margin was negatively affected by approximately 100 basis point due to a new accounting method related to co-op advertising expenses. Retail operation segment gross margins were down slightly to 46.3 percent, compared to 47.1 percent in the prior year’s quarter.
For the year, G-III raised the company’s guidance to sales of $2.97 billion on net income between $2.20 and $2.30 per share. Previous guidance called for sales of $2.94 billion and net income between $1.90 and $2.00. Non-GAAP income is projected between $2.27 and $2.37 per diluted share compared to previous guidance of $1.98 to $2.08 per diluted share.
For the second quarter, G-III is forecasting net sales of $590 million and net income between a loss of 7 cents a share and net income of 3 cents. Non-GAAP net income is expected between a net loss of 5 cents a share and earnings of 5 cents. In the year-ago period, G-III showed a non-GAAP loss of 15 cents on sales of $538 million.
The forecast includes expectations of growth of 2 percent in the back half due to the liquidation of Bon-Ton, which had done a big outerwear business. Outerwear is also expected to be down low-single digits for the year due to strong year-ago comparisons. Comparisons will also be impacted by the roll-out of Donna Karan in the second half of last year.
Said Goldfarb, “We continue to feel that our core company growth, absent Bon-Ton, would have been in the mid-to-high single-digit area. We see lots of strong growth continuing still in the Donna Karan business. And as we’ve mentioned, strong improvement in retail.”
Photo courtesy G-III Sports by Carl Banks