G-III Apparel’s Q1 Profits Hits High End Of Guidance

G-III Apparel Group Ltd. reported a modest gain in first-quarter earnings that arrived at the upper end of guidance. Sales increased 3.6 percent. The company reaffirmed its outlook for the year.

Net sales for the first quarter ended April 30, 2019 increased 3.6 percent to $633.6 million from $611.7 million in the same period last year. The company reported GAAP net income for the first quarter of $12.0 million, or $0.24 per diluted share, compared to $9.9 million, or $0.20 per diluted share, in the prior year’s comparable period.

Non-GAAP net income per diluted share was $0.25 for the first quarter of this year compared to $0.22 in the same period last year. Non-GAAP net income per diluted share excludes non-cash imputed interest expense related to the note issued to seller (Seller Note) as part of the consideration for the acquisition of Donna Karan International of $1.3 million in this quarter compared to $1.2 million in the first quarter last year and a $0.8 million gain on lease terminations in the current quarter. The aggregate effect of these exclusions was equal to $0.01 per diluted share in the first quarter of this year and $0.02 per diluted share in fiscal 2019.

Company guidance had called for net sales of approximately $650.0 million and net income between $7.0 million and $12.0 million, or between 13 and 23 cents. Adjusted EPS was expected to come between 15 and 25 cents.

Morris Goldfarb, G-III’s chairman and chief executive officer, said, “We are pleased to have reported first quarter net income per diluted share that was at the high end of our expectations. Our results were once again fueled by strong performance in our wholesale business led by our five global power brands DKNY, Donna Karan, Calvin Klein, Tommy Hilfiger and Karl Lagerfeld.”

Goldfarb concluded, “We know disruption in the retail industry has never been greater, but we remain confident in our ability to adapt to unique challenges. We are well positioned for a solid year and I am confident we are poised to achieve significant growth over the next several years.”

Outlook

G-III Apparel Group reaffirmed guidance for the fiscal year ending January 31, 2020, which incorporates the impact on certain of the company’s products, of the current 25 percent tariffs imposed on nearly $200 billion of total goods imported from China into the U.S. However, the company has not incorporated any future increases in tariffs on additional goods imported from China into the US in its fiscal 2020 guidance.

For fiscal 2020, the company is forecasting net sales of approximately $3.28 billion and net income between $163 million and $168 million, or between $3.19 and $3.29 per diluted share.

The company is anticipating non-GAAP net income for fiscal 2020 between $167 million and $172 million, or between $3.25 and $3.35 per diluted share. Non-GAAP guidance excludes non-cash imputed interest expense related to the Seller Note of approximately $5.4 million and a $0.8 million gain on lease terminations. The aggregate effect of these exclusions is equal to $0.06 per diluted share.

The company is projecting full-year adjusted EBITDA for fiscal 2020 between $307 million and $313 million compared to adjusted EBITDA of $269.4 million in fiscal 2019.

For the second fiscal quarter ending July 31, 2020, the company is forecasting net sales of approximately $660.0 million and net income between $8.0 million and $13.0 million, or between $0.15 and $0.25 per diluted share. This forecast compares to net sales of $624.7 million and net income of $10.1 million, or $0.20 per diluted share, reported in the second quarter of fiscal 2019. Non-GAAP guidance excludes non-cash imputed interest expense related to the Seller Note of approximately $1.3 million, or $0.02 per share, in the second quarter of fiscal 2020, and $1.2 million, or $0.02 per share, in the second quarter of prior year. On an adjusted basis, excluding non-cash imputed interest, the company is forecasting non-GAAP net income between $0.17 and $0.27 per diluted share. This compares to non-GAAP net income of $0.22 per diluted share in second quarter of fiscal year 2019.

G-III designs, sources and markets apparel and accessories under owned, licensed and private label brands. G-III’s owned brands include DKNY, Donna Karan, Vilebrequin, G. H. Bass, Andrew Marc, Marc New York, Eliza J and Jessica Howard. 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. G-III also operates retail stores under the DKNY, Wilsons Leather, G. H. Bass, Vilebrequin, Karl Lagerfeld Paris and Calvin Klein Performance names.