G-III Apparel Group Ltd. on Wednesday lowered its outlook for the fiscal year after reporting net sales for the fiscal third quarter ended October 31 increased 5.2 percent to $1.13 billion from $1.07 billion a year ago but missed analysts’ expectations by $40 million.
The company reported earnings per share of $1.99, which beat Wall Street’s estimates by 5 cents. G-III, which owns a sizeable sports licensing business but whose main business is Calvin Klein, Tommy Hilfiger and Donna Karen apparel, updated its revenue, EPS and EBITDA guidance.
The company reported GAAP net income for the third quarter of $95.4 million, or $1.97 per diluted share, compared to $94 million, or $1.86 per diluted share, in the prior year’s comparable period.
Non-GAAP net income per diluted share was $1.99 for the third quarter of this year compared to $1.88 in the same period last year. Non-GAAP net income per diluted share excludes (i) non-cash imputed interest expense of $1.4 million in this quarter related to the note issued to seller (the “Seller Note”) as part of the consideration for the acquisition of Donna Karan International compared to $1.2 million in the third quarter last year and (ii) a $0.1 million gain on lease terminations in the current quarter. The aggregate effect of these exclusions was equal to 2 cents per diluted share in each of the third quarter of this year and the prior year.
Morris Goldfarb, G-III’s chairman and CEO, said, “We are pleased to report third quarter results that exceeded our bottom-line expectations. We maintained good momentum in our wholesale business, in spite of the challenging retail and macro environment. Our merchants did a good job managing product costs, as we benefitted from accelerated inventory receipts and support from our Chinese vendor base to mitigate some of the impact of the tariffs that were imposed.”
Goldfarb concluded, “We remain focused on continuing to grow our business in multiple categories and elevating our position as a supplier-of-choice for our retail partners. We remain confident in our future growth expectations, powered by the strength of our global power brands: DKNY, Donna Karan, Calvin Klein, Tommy Hilfiger and Karl Lagerfeld.”
Outlook
G-III Apparel Group issued revised guidance for the fiscal year ending January 31, 2020. This forecast also incorporates the expected impact of the additional tariffs implemented effective September 1, 2019.
For fiscal 2020, the company is now forecasting net sales of approximately $3.20 billion and net income between $147 million and $152 million, or between $3.01 and $3.11 per diluted share. This compares to net sales of $3.08 billion and net income of $138.1 million, or $2.75 per diluted share for fiscal 2019.
The company is anticipating non-GAAP net income for fiscal 2020 between $149 million and $154 million, or between $3.06 and $3.16 per diluted share. Non-GAAP guidance excludes (i) non-cash imputed interest expense of approximately $5.4 million related to the Seller Note and (ii) a $2.3 million gain on lease terminations. The aggregate effect of these exclusions is equal to $0.05 per diluted share.
This guidance compares to non-GAAP net income of $143.9 million, or $2.86 per diluted share, for fiscal 2019. Non-GAAP results for fiscal 2019 exclude non-cash imputed interest expense of $5.0 million related to the Seller Note and asset impairments primarily related to leasehold improvements and furniture and fixtures at certain of our retail stores of $2.8 million. The aggregate effect of these exclusions was equal to $0.11 per diluted share in fiscal 2019.
The company is projecting full-year adjusted EBITDA for fiscal 2020 between $283 million and $288 million compared to adjusted EBITDA of $269.4 million in fiscal 2019.
