G-III Apparel Group, Ltd. reported earnings declined 33.8 percent in the third quarter as sales retreated 26.7 percent although both were well ahead of Wall Street’s targets.
Morris Goldfarb, G-III’s chairman and chief executive officer, said, “Our results reflect a significant sequential improvement in the third quarter as we effectively developed product lines that aligned with the shift in consumer demand towards casual, comfortable and functional clothing. We believe our product assortments for our portfolio of global brands are responsive to today’s market trends as we continue to gain market share.”
Goldfarb concluded, “We are very fortunate and appreciative to have an experienced and talented global team at G-III that has proactively met the extraordinary challenges presented by the pandemic. We ended the quarter with a strong financial position, with approximately $800 million of cash and availability under our revolving credit facility. We are well-positioned to complete the year in line with our expectations.”
Net sales for the third quarter ended October 31, 2020 decreased 26.7 percent to $826.6 million from $1.13 billion in the same period last year. Wall Street’s consensus estimate had been $769 million.
The company reported net income for the third quarter of $63.2 million, or $1.29 per diluted share, compared to $95.4 million, or $1.97 per diluted share, in the prior year’s comparable period. Wall Street’s consensus estimate had been 77 cents a share.
Net income per diluted share includes non-cash imputed interest expense related to the note issued to the seller as part of the consideration for the acquisition of Donna Karan International of $1.4 million in this quarter and in the third quarter last year and a $6.5 million write-off in this quarter of deferred financing costs primarily related to the company’s prior term loan facility which was refinanced in August 2020. The aggregate effect of these charges was equal to $0.11 per diluted share in the third quarter of this year and $0.02 per diluted share in the third quarter of fiscal 2020.
As previously announced, the company is restructuring its retail operations segment, which includes permanently closing 110 Wilsons Leather and 89 G.H. Bass stores. Net sales for the third quarter ended October 31, 2020 for the Wilsons Leather and G.H. Bass stores’ portion of our retail operations segment were $38.2 million compared to $59.8 million in the same period last year. The company remains on track to complete the closing of these stores by the end of fiscal 2021.
Included in the company’s results for the quarter are net losses from the Wilsons Leather and G.H. Bass store operations of $12.0 million, or $(0.25) per diluted share, compared to $4.1 million, or $(0.08) per diluted share, in the prior year’s comparable period. The results for each period reflect direct store operations including impairment charges, but do not include any allocated corporate overhead charges, shared administrative expenses or shared distribution expenses. The results for the current period also include the impact of the pandemic and the liquidation of the Wilsons Leather and G.H. Bass stores. These operating results for Wilsons Leather and G.H. Bass are presented solely to provide the historical operating results of the portion of the company’s retail operations segment that is being restructured and are not intended to be used to develop expectations for future results of the company or to indicate any future level of profitability of the company.
Outlook
The company expects net sales to decline approximately 30 percent in the fourth quarter of its fiscal year compared to the same period last year. As the developments associated with COVID-19 continues to be fluid and there is significant uncertainty related to its impact, the company is not currently providing any additional guidance.
G-III’s owned brands include DKNY, Donna Karan, Vilebrequin, G.H. Bass, Eliza J, Jessica Howard, Andrew Marc and Marc New York. G-III has fashion licenses under the Calvin Klein, Tommy Hilfiger, Karl Lagerfeld Paris, Kenneth Cole, Cole Haan, Guess?, Vince Camuto, Levi’s and Dockers brands. Through its 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. Through its retail subsidiaries, G-III operates retail stores under the DKNY, Wilsons Leather, G.H. Bass, Vilebrequin, Karl Lagerfeld Paris and Calvin Klein Performance names.
