G-III Apparel Reports Q4 Loss On Goodwill Impairment Charges; Sales Grow Mid-Teens

G-III Apparel Group, Ltd. reported that net sales for the fourth quarter ended January 31 increased 14.2 percent to $854.4 million from $748.2 million in the prior-year quarter. The company reported a net loss of $261.1 million, or $5.54 per share, for the fourth quarter, compared to net income of $48.4 million, or 98 cents per diluted share, in the prior-year quarter. This year’s quarterly results include a $291.5 million non-cash goodwill impairment charge, net of tax, equivalent to $6.19 per share. Non-GAAP net income per diluted share was 41 cents for the fourth quarter compared to $1.06 in the comparable period in the prior year.

Net sales for the fiscal year ended January 31 increased 16.6 percent to $3.23 billion from $2.77 billion in the prior year. The company reported a net loss of $133.1 million, or $2.79 per share, for the fiscal year, compared to a net income of $200.6 million, or $4.05 per diluted share, in the prior year. The full-year results include a $291.5 million non-cash goodwill impairment charge, net of tax, equivalent to $6.12 per share. Non-GAAP net income per diluted share was $2.85 for the year compared to $4.20 in the prior year.

G-III Chairman and CEO Morris Goldfarb, said, “In fiscal year 2023, we made significant progress on our strategic priorities as we leveraged G-III’s expertise and agility to capture a number of opportunities, despite a challenging environment. We successfully shifted our category focus based on market demand and expanded our brand ownership and global reach with our Karl Lagerfeld acquisition. For fiscal year 2023, we registered net sales of $3.23 billion, up 17 percent to the prior year and we reported non-GAAP net income per diluted share of $2.85.”

Goldfarb continued, “We have been directing resources toward several new opportunities and are pleased to announce two new initiatives—the re-positioning and expansion of the Donna Karan brand and a new long-term license with Authentic Brands Group for Nautica. Donna Karan and Nautica are two of the most recognized American lifestyle brands with significant opportunities in the women’s space. Our track record of having successfully grown major brands to more than $3 billion in net sales today, gives us confidence in our ability to unlock the potential of both Donna Karan and Nautica.”

Goldfarb concluded, “G-III has a proven ability to successfully drive our business forward in an ever-changing landscape, as well as being a partner of choice for brands and retailers. We ended fiscal year 2023 in a strong financial position with approximately $750 million in cash and availability. We remain confident and optimistic about the long-term runway for profitable future growth for G-III.”

New Developments

• Donna Karan
  In December 2016, the company acquired the DKNY and Donna Karan brands. The company initially re-positioned and re-launched DKNY and has grown the brand to approximately $600 million in net sales. Donna Karan had been a small business to date, and the company is now focused on the re-positioning and expansion of the brand for Spring 2024.  It is expected to be distributed in better department stores, digital channels and the company’s own Donna Karan website in North America and internationally. The company believes that consumer demand exists for the brand. This, along with its success with the DKNY brand, reinforces the opportunity for the company to capture market share.
• Nautica
  G-III signed a long-term license with Authentic Brands Group for the Nautica brand in North America. Since being acquired in 2018 by ABG, Nautica’s relevance expanded globally, and it has become one of its marquee brands. Celebrating its 40-year anniversary, Nautica is available in approximately 1,300 freestanding stores and shop-in-shops globally, along with a digital presence in more than 30 countries. G-III will produce across a number of categories, starting with jeans, which also includes a full range of corresponding products and then expand in a phased approach into additional categories including sportswear, suit separates and dresses. The new five-year license agreement, effective January 2024, includes three extensions, for five years each. First deliveries are expected to hit the floor in January 2024. The product will be distributed in better department stores, digital channels, Nautica stores, and websites in North America and franchised stores globally. G-III believes that significant opportunity exists in the better women’s apparel space in categories where G-III has strong expertise.

Outlook
The company’s fiscal year 2024 guidance anticipates the expected impact from current levels of inflationary pressure on consumers and on the company’s operations, as well as incremental costs associated with managing higher levels of inventory.

For fiscal 2024, the company expects net sales of approximately $3.23 billion and net income between $117.0 million and $122.0 million, or between $2.40 and $2.50 per diluted share. This compares to net sales of $3.23 billion and a net loss of $133.1 million, or $2.79 per share, for fiscal 2023. Fiscal 2023 results include a $291.5 million non-cash goodwill impairment charge, net of tax.

G-III is anticipating non-GAAP net income for fiscal 2024 between $125.0 million and $130.0 million, or between $2.55 and $2.65 per diluted share.

The company is projecting full-year adjusted EBITDA for fiscal 2024 between $248.0 million and $253.0 million compared to adjusted EBITDA of $266.1 million in fiscal 2023.

For the first quarter of fiscal year 2024, the company expects net sales of approximately $560.0 million compared to $688.8 million in the same period last year. Net loss for the first quarter of fiscal 2024 is expected to be in the range $10.0 million and $5.0 million, or 20 cents and 10 cents per share. This compares to net income of $30.6 million, or 62 cents per diluted share, in last year’s first quarter.

The company is anticipating a non-GAAP net loss for the first quarter of fiscal 2024 between $7.0 million and $2.0 million, or between 15 cents and 5 cents per diluted share. This compares to non-GAAP net income of $35.2 million, or 72 cents per diluted share, in last year’s first quarter.