G-III Apparel Group, Ltd. reported earnings rose 16 percent in the first quarter on a 32.5 percent revenue gain. The company raised its outlook as sales and EPS both exceeded expectations.

Morris Goldfarb, G-III’s chairman and CEO said, “Our strong momentum continued in the first quarter of fiscal 2023, exceeding both our top and bottom-line guidance, despite a challenging environment. Consumers are refreshing their wardrobes as they return to work and resume social activities, driving demand for our products. Our globally recognized power brands, DKNY, Donna Karan, Calvin Klein, Tommy Hilfiger and Karl Lagerfeld, combined with our ability to quickly pivot resources to respond to trends and deliver the right merchandise, position us well to capitalize on the demand for products in the marketplace.”

Goldfarb concluded, “We remain extremely focused on our strategic priorities to deliver continued long-term profitable growth. Our recent Karl Lagerfeld acquisition has further expanded our portfolio of owned brands and our global presence. Our experienced senior leadership, world-class teams and well-developed supply chain infrastructure set the stage for another strong year of market share gains and our ability to deliver on our raised outlook.”

Net sales for the first quarter ended April 30, 2022 increased 32.5 percent to $688.8 million from $519.9 million in the prior year’s quarter. The company reported net income for the first quarter of $30.6 million, or $0.62 per diluted share, compared to $26.3 million, or $0.53 per diluted share, in the prior year’s quarter.

Non-GAAP net income per diluted share was $0.72 for the first quarter of this year compared to $0.56 in the same period last year. Non-GAAP net income per diluted share excludes:

  1. Non-cash imputed interest expense of $1.7 million in this quarter related to the note issued to the seller as part of the consideration for the acquisition of Donna Karan International compared to $1.5 million in the first quarter last year; and 
  2. $4.2 million in one-time expenses related to the Karl Lagerfeld transaction. The aggregate effect of these exclusions was equal to $0.10 per diluted share in the first quarter of this year and $0.03 per diluted share in the first quarter of fiscal 2022.

Under its previously-announced guidance, the company expected net sales of approximately $600.0 million compared to $519.9 million in the same period last year. Net income for the first quarter of fiscal 2023 was expected to be in the range of $25.0 million and $30.0 million, or $0.50 and $0.60 per diluted share.

Outlook
The company raised its guidance for the fiscal year ending January 31, 2023. The company’s fiscal year 2023 guidance contemplates the expected impact of the current supply chain conditions, including the current lockdowns in China, expected increased shipping costs and delays in receiving goods. However, the guidance does not contemplate any reimposition of government-mandated store closures or other governmental restrictions resulting from new COVID-19 variants that may emerge. The reimposition of store closures or other restrictions could have a material impact on our net sales, results of operations and supply chain during fiscal 2023. The guidance also does not contemplate a significant worsening in global inflation rates or consumer sentiment. 

The company’s fiscal 2023 results could differ materially from its current outlook due to the occurrence of any of these or other uncontemplated events. Further, the company has no direct operations in Russia or Ukraine, and exposure from sales to this area could have an immaterial impact on the financial results of its fiscal year 2023.

For fiscal 2023, the company expects net sales of approximately $3.24 billion and net income between $205.0 million and $215.0 million, or between $4.23 and $4.33 per diluted share; this compares to net sales of $2.77 billion and net income of $200.6 million, or $4.05 per diluted share, last year. This guidance includes approximately $140.0 million in net sales and a net income of approximately $0.10 per diluted share in connection with the acquisition of the Karl Lagerfeld brand for seven months of ownership in this fiscal year.

The company is anticipating non-GAAP net income for fiscal 2023 between $213.0 million and $223.0 million, or between $4.40 and $4.50 per diluted share. Non-GAAP results exclude (i) non-cash imputed interest expense of approximately $6.9 million related to the Seller Note and (ii) one-time expenses of $4.2 million related to the Karl Lagerfeld transaction. The aggregate effect of these exclusions is equal to $0.17 per diluted share. This guidance compares to non-GAAP net income of $207.9 million, or $4.20 per diluted share, for fiscal 2022. Non-GAAP results for fiscal 2022 exclude:

  1.  Non-cash imputed interest expense of $6.4 million related to the Seller Note;
  2. One-time expenses of $2.1 million related to the Karl Lagerfeld transaction; and 
  3. Asset impairments net of gains on lease terminations of $1.5 million, primarily related to leasehold improvements and furniture and fixtures at certain of its retail stores. The aggregate effect of these exclusions was equal to $0.15 per diluted share in fiscal 2022.

The company is projecting full-year adjusted EBITDA for fiscal 2023 between $360.0 million and $370.0 million compared to adjusted EBITDA of $350.2 million in fiscal 2022.

For the second quarter of the fiscal year 2023, the company expects net sales of approximately $600.0 million compared to $483.1 million in the same period last year. Net income for the second quarter of fiscal 2023 is expected to be in the range of $20.0 million and $25.0 million, or $0.42 and $0.52 per diluted share; this compares to net income of $19.2 million, or $0.39 per diluted share in last year’s second quarter.

The company is anticipating non-GAAP net income for the second quarter of fiscal 2023 between $21.0 million and $26.0 million, or between $0.45 and $0.55 per diluted share. Non-GAAP results exclude non-cash imputed interest expense of approximately $1.7 million related to the Seller Note. This guidance compares to non-GAAP net income of $20.2 million, or $0.41 per diluted share, for fiscal 2022. Non-GAAP results for fiscal 2022 exclude non-cash imputed interest expense of $1.6 million related to the Seller Note. The effect of this exclusion was equal to $0.03 per diluted share in the second quarter of fiscal 2023 and $0.02 per diluted share in last year’s second quarter.

G-III Apparel manufactures apparel and accessories under more than 30 licensed and proprietary brands anchoring its five power brands: DKNY, Donna Karan, Calvin Klein, Tommy Hilfiger, and Karl Lagerfeld Paris. 

G-III’s owned brands include DKNY, Donna Karan, Vilebrequin, G.H. Bass, Eliza J, Jessica Howard, Andrew Marc, Marc New York, and Sonia Rykiel. 

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. 

G-III has licenses with the major sports leagues and over 150 U.S. colleges and universities through its team sports business.

Photo courtesy G-III/Karl Lagerfeld