- First Quarter Net Sales and GAAP and Non-GAAP Net Income Per
Diluted Share Exceed Expectations
- G-III Raises Guidance for Fiscal Year 2024
- Net Sales of $606.6 Million for the First Quarter Compared
to $688.8 Million Last Year
- Net Income Per Diluted Share of $0.07 for the First Quarter
Compared to $0.62 Last Year
- Non-GAAP Net Income Per Diluted Share of $0.13 for the First
Quarter Compared to $0.72 Last Year
- Announces New Long-Term License for the Halston
Brand
G-III Apparel Group, Ltd. (NasdaqGS: GIII), a global fashion
leader with expertise in design, sourcing, and manufacturing, today
announced operating results for the first quarter of fiscal 2024,
ended April 30, 2023.
Morris Goldfarb, G-III’s Chairman and Chief Executive Officer,
said, “For the first quarter of fiscal 2024, we exceeded both our
top and bottom line guidance with non-GAAP net income per diluted
share of $0.13, exceeding the high end of our guidance. We made
progress rightsizing our inventory position, which sequentially
decreased by $80 million, while our gross margins were
significantly better than last year’s first quarter. I am proud of
how our team successfully navigated what remains a challenging
environment.”
Mr. Goldfarb continued, “Aligned with our initiative to direct
resources toward new growth opportunities, we are pleased to
announce a licensing agreement with Xcel Brands for the American
heritage fashion brand, Halston. This 25-year master licensing
agreement allows G-III to design and produce all categories of
product for Halston and provides an option to buy the brand at the
end of the licensing term. This agreement represents our third
substantial growth opportunity announced this year alongside the
re-positioning and global expansion of Donna Karan and a long-term
license for Nautica in North America. Development of our Donna
Karan and Nautica initiatives is well underway.”
Mr. Goldfarb concluded, “G-III continues to deliver positive
results and we are off to a good start to the new fiscal year.
Looking ahead, we are optimistic about our business and, as a
result, are raising our guidance. We remain focused on driving our
key strategic priorities and continuing to develop new growth
opportunities.”
Results of Operations
Net sales for the first quarter ended April 30, 2023 decreased
11.9% to $606.6 million from $688.8 million in the prior year’s
quarter. The Company reported net income for the first quarter of
$3.2 million, or $0.07 per diluted share, compared to $30.6
million, or $0.62 per diluted share, in the prior year’s
quarter.
Non-GAAP net income per diluted share was $0.13 for the first
quarter of this year compared to $0.72 in the same period last
year. Non-GAAP net income per diluted share excludes (i) non-cash
imputed interest expense of $1.8 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 $1.7 million in the first quarter last year and (ii)
expenses related to the Karl Lagerfeld transaction that include
incentive compensation, professional fees and, in fiscal 2023,
foreign currency losses of $1.8 million in this quarter compared to
$4.2 million in the first quarter last year. The aggregate effect
of these exclusions was equal to $0.06 per diluted share in the
first quarter of this year and $0.10 per diluted share in the first
quarter of fiscal 2023.
Halston License
G-III has signed a global twenty-five year master license
agreement with Xcel Brands to design and produce all categories of
men’s and women’s product for the Halston brand. The agreement
provides for an initial term of five years, followed by a
twenty-year period, as well as a purchase option at the end of the
twenty-five year term. First deliveries of Halston product are
expected for the Fall 2024 season. The product will be distributed
globally through better department stores and digital channels.
G-III believes that significant opportunity exists in the better
women’s apparel space where G-III has significant expertise. The
Halston brand joins G-III’s portfolio of some of the largest
American brands in the world.
Outlook
The Company today raised its guidance for the fiscal year ending
January 31, 2024. 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
$3.29 billion and net income between $125.0 million and $130.0
million, or between $2.65 and $2.75 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.
The Company is anticipating non-GAAP net income for fiscal 2024
between $132.0 million and $137.0 million, or between $2.80 and
$2.90 per diluted share. This compares to non-GAAP net income of
$138.8 million, or $2.85 per diluted share, for fiscal 2023.
The Company is projecting full-year adjusted EBITDA for fiscal
2024 between $267.0 million and $272.0 million compared to adjusted
EBITDA of $266.1 million in fiscal 2023.
For the second quarter of fiscal year 2024, the Company expects
net sales of approximately $595.0 million compared to $605.2
million in the same period last year. The Company expects a net
loss for the second quarter of fiscal 2024 in the range $(5.0)
million and break even or between $(0.10) and $0.00 per share. This
compares to net income of $36.3 million, or $0.74 per diluted
share, in last year’s second quarter.
The Company is anticipating non-GAAP results for second quarter
of fiscal 2024 between a net loss of $(3.0) million and net income
of $2.0 million, or between $(0.06) and $0.04 per diluted share.
This compares to non-GAAP net income of $19.0 million, or $0.39 per
diluted share, in last year’s second quarter.
Non-GAAP Financial
Measures
Reconciliations of GAAP net income (loss) to non-GAAP net income
(loss), GAAP net income (loss) per diluted share to non-GAAP net
income (loss) per diluted share and GAAP net income (loss) to
adjusted EBITDA are presented in tables accompanying the financial
statements included in this release and provide useful information
to evaluate the Company’s operational performance. A description of
the amounts excluded on a non-GAAP basis are provided in
conjunction with these tables. Non-GAAP net income (loss), non-GAAP
net income (loss) per diluted share and adjusted EBITDA should be
evaluated in light of the Company’s financial statements prepared
in accordance with GAAP.
About G-III Apparel Group,
Ltd.
G-III designs, sources and markets apparel and accessories under
owned, licensed and private label brands. G-III’s substantial
portfolio of more than 30 licensed and proprietary brands is
anchored by its global power brands: DKNY, Donna Karan, Karl
Lagerfeld, Calvin Klein and Tommy Hilfiger. G-III’s owned brands
include DKNY, Donna Karan, Karl Lagerfeld, Vilebrequin, G.H. Bass,
Eliza J, Jessica Howard, Andrew Marc, Marc New York, Wilsons
Leather and Sonia Rykiel. G-III has fashion licenses under the
Calvin Klein, Tommy Hilfiger, Nautica, Halston, 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 distributes directly to consumers through its DKNY, Karl
Lagerfeld, Karl Lagerfeld Paris and Vilebrequin stores and its
digital channels for the DKNY, Donna Karan, Vilebrequin, Karl
Lagerfeld, Karl Lagerfeld Paris, Andrew Marc, Wilsons Leather and
G.H. Bass brands.
Statements concerning G-III's business outlook or future
economic performance, anticipated revenues, expenses or other
financial items; product introductions and plans and objectives
related thereto; and statements concerning assumptions made or
expectations as to any future events, conditions, performance or
other matters are "forward-looking statements" as that term is
defined under the Federal Securities laws. Forward-looking
statements are subject to risks, uncertainties and factors which
include, but are not limited to, risks related to the COVID-19
pandemic, reliance on licensed product, risks relating to G-III’s
ability to increase revenues from sales of its other products, new
acquired businesses or new license agreements as licenses for
Calvin Klein and Tommy Hilfiger product expire on a staggered
basis, reliance on foreign manufacturers, risks of doing business
abroad, supply chain disruptions, possible adverse effects from
elevated inventory levels, the current economic and credit
environment risks related to our indebtedness, the nature of the
apparel industry, including changing customer demand and tastes,
customer concentration, seasonality, risks of operating a retail
business, risks related to G-III’s ability to reduce the losses
incurred in its retail operations, customer acceptance of new
products, the impact of competitive products and pricing,
dependence on existing management, possible disruption from
acquisitions, the impact on G-III’s business of the imposition of
tariffs by the United States government and business and general
economic conditions, including inflation and higher interest rates,
as well as other risks detailed in G-III's filings with the
Securities and Exchange Commission. G-III assumes no obligation to
update the information in this release.
G-III APPAREL GROUP, LTD. AND
SUBSIDIARIES
(Nasdaq: GIII)
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
(In thousands, except per share
amounts)
Three Months Ended April
30,
2023
2022
(Unaudited)
Net sales
$
606,589
$
688,757
Cost of goods sold
356,788
442,718
Gross profit
249,801
246,039
Selling, general and administrative
expenses
227,961
185,407
Depreciation and amortization
6,576
6,095
Operating profit
15,264
54,537
Other income (loss)
973
(2,708
)
Interest and financing charges, net
(12,151
)
(12,203
)
Income before income taxes
4,086
39,626
Income tax expense
945
9,000
Net income
3,141
30,626
Less: Loss attributable to noncontrolling
interests
(95
)
(8
)
Net income attributable to G-III Apparel
Group, Ltd.
$
3,236
$
30,634
Net income attributable to G-III Apparel
Group, Ltd. per common share:
Basic
$
0.07
$
0.64
Diluted
$
0.07
$
0.62
Weighted average shares outstanding:
Basic
46,286
48,016
Diluted
47,442
49,108
Selected Balance Sheet Data (in
thousands):
As of April 30,
2023
2022
(Unaudited)
Cash and cash equivalents
$
289,729
$
438,411
Working capital
983,659
1,164,595
Inventories
630,308
550,059
Total assets
2,554,483
2,718,272
Total debt
543,004
521,382
Operating lease liabilities
253,430
180,798
Total stockholders' equity
1,380,447
1,558,292
G-III APPAREL GROUP, LTD. AND
SUBSIDIARIES
RECONCILIATION OF GAAP NET
INCOME TO NON-GAAP NET INCOME
(In thousands)
Three Months Ended
April 30, 2023
April 30, 2022
(Unaudited)
GAAP net income attributable to G-III
Apparel Group, Ltd.
$
3,236
$
30,634
Excluded from non-GAAP:
Expenses related to Karl Lagerfeld
acquisition
1,821
4,179
Non-cash imputed interest
1,817
1,671
Income tax impact of non-GAAP
adjustments
(841
)
(1,328
)
Non-GAAP net income attributable to G-III
Apparel Group, Ltd., as defined
$
6,033
$
35,156
Non-GAAP net income is a “non-GAAP financial measure” that
excludes (i) expenses related to the Karl Lagerfeld transaction
that include incentive compensation, professional fees and, in
fiscal 2023, foreign currency losses, and (ii) non-cash imputed
interest expense. For fiscal 2024 and 2023, the income tax impact
of non-GAAP adjustments is calculated using an effective tax rate
derived from our results of operations excluding the non-GAAP
adjustments. Management believes that these non-GAAP financial
measures provide meaningful supplemental information regarding our
performance by excluding items that are not indicative of our core
business operating results. Management uses these non-GAAP
financial measures to assess our performance on a comparative basis
and believes that they are also useful to investors to enable them
to assess our performance on a comparative basis across historical
periods and facilitate comparisons of our operating results to
those of our competitors. The presentation of this financial
information is not intended to be considered in isolation or as a
substitute for, or superior to, the financial information prepared
and presented in accordance with GAAP.
G-III APPAREL GROUP, LTD. AND
SUBSIDIARIES
RECONCILIATION OF GAAP NET
INCOME PER SHARE TO NON-GAAP NET INCOME PER SHARE
Three Months Ended
April 30, 2023
April 30, 2022
(Unaudited)
GAAP diluted net income attributable to
G-III Apparel Group, Ltd. per common share
$
0.07
$
0.62
Excluded from non-GAAP:
Expenses related to Karl Lagerfeld
acquisition
0.04
0.09
Non-cash imputed interest
0.04
0.04
Income tax impact of non-GAAP
adjustments
(0.02
)
(0.03
)
Non-GAAP diluted net income attributable
to G-III Apparel Group, Ltd. per common share, as defined
$
0.13
$
0.72
Non-GAAP diluted net income per common share is a “non-GAAP
financial measure” that excludes (i) expenses related to the Karl
Lagerfeld transaction that include incentive compensation,
professional fees and, in fiscal 2023, foreign currency losses, and
(ii) non-cash imputed interest expense. For fiscal 2024 and 2023,
the income tax impact of non-GAAP adjustments is calculated using
an effective tax rate derived from our results of operations
excluding the non-GAAP adjustments. Management believes that these
non-GAAP financial measures provide meaningful supplemental
information regarding our performance by excluding items that are
not indicative of our core business operating results. Management
uses these non-GAAP financial measures to assess our performance on
a comparative basis and believes that they are also useful to
investors to enable them to assess our performance on a comparative
basis across historical periods and facilitate comparisons of our
operating results to those of our competitors. The presentation of
this financial information is not intended to be considered in
isolation or as a substitute for, or superior to, the financial
information prepared and presented in accordance with GAAP.
G-III APPAREL GROUP, LTD. AND
SUBSIDIARIES
RECONCILIATION OF FORECASTED
AND ACTUAL NET INCOME (LOSS) TO FORECASTED AND ACTUAL ADJUSTED
EBITDA
(In thousands)
Forecasted Twelve
Actual Twelve
Three Months Ended
Months Ended
Months Ended
April 30, 2023
April 30, 2022
January 31, 2024
January 31, 2023
(Unaudited)
Net income (loss) attributable to G-III
Apparel Group, Ltd.
$
3,236
$
30,634
$
125,000 - 130,000
$
(133,061)
Karl Lagerfeld investment gain
—
—
—
(27,071)
Expenses related to Karl Lagerfeld
acquisition
1,821
—
6,071
13,895
Asset impairments and gain on lease
terminations
—
—
—
349,686
Bonus accrual expense reversed due to
goodwill impairment charge
—
—
—
(17,900)
Depreciation and amortization
6,576
6,095
31,409
27,762
Interest and financing charges, net
12,151
12,203
54,229
56,602
Income tax expense
945
9,000
50,291
(3,788)
Adjusted EBITDA, as defined
$
24,729
$
57,932
$
267,000 - 272,000
$
266,125
Adjusted EBITDA is a “non-GAAP financial measure” which
represents earnings before depreciation and amortization, interest
and financing charges, net and income tax expense and excludes (i)
the gain in the fair value of the Company’s minority ownership in
Karl Lagerfeld that it held prior to the Company becoming the sole
owner of the Karl Lagerfeld entities, (ii) expenses related to the
Karl Lagerfeld acquisition that included incentive compensation,
professional fees, and, in fiscal 2023, amortization of inventory
valuation adjustments and foreign currency losses, (iii) asset
impairments, including the goodwill write-down of $347.2 million,
and gain on lease terminations and (iv) bonus accrual expense
reversed due to the goodwill impairment recognized in fiscal year
2023. Adjusted EBITDA is being presented as a supplemental
disclosure because management believes that it is a common measure
of operating performance in the apparel industry. Adjusted EBITDA
should not be construed as an alternative to net income (loss), as
an indicator of the Company’s operating performance, or as an
alternative to cash flows from operating activities as a measure of
the Company’s liquidity, as determined in accordance with GAAP.
G-III APPAREL GROUP, LTD. AND
SUBSIDIARIES
RECONCILIATION OF FORECASTED
AND ACTUAL GAAP NET INCOME (LOSS) TO FORECASTED AND ACTUAL NON-GAAP
NET INCOME (LOSS)
(In thousands)
Forecasted Three
Actual Three
Forecasted Twelve
Actual Twelve
Months Ending
Months Ended
Months Ended
Months Ended
July 31, 2023
July 31, 2022
January 31, 2024
January 31, 2023
(Unaudited)
Net income (loss) attributable to G-III
Apparel Group, Ltd.
$
(5,000) - 0,000
$
36,319
$
125,000 - 130,000
$
(133,061)
Excluded from non-GAAP:
Karl Lagerfeld investment gain
—
(30,925)
—
(27,071)
Expenses related to Karl Lagerfeld
acquisition
1,821
5,693
6,071
13,895
Non-cash imputed interest
1,086
1,740
3,798
6,947
Asset impairments and gain on lease
terminations
—
(29)
—
349,686
Bonus accrual expense reversed due to
goodwill impairment charge
—
—
—
(17,900)
Income tax impact of non-GAAP
adjustments
(907)
6,220
(2,869)
(53,737)
Non-GAAP net income (loss) attributable to
G-III Apparel Group, Ltd., as defined
$
(3,000) - 2,000
$
19,018
$
132,000 - 137,000
$
138,759
Non-GAAP net income (loss) is a “non-GAAP financial measure”
that excludes (i) the gain in the fair value of the Company’s
minority ownership in Karl Lagerfeld that it held prior to the
Company becoming the sole owner of the Karl Lagerfeld entities,
(ii) expenses related to the Karl Lagerfeld transaction that
include incentive compensation, professional fees, and, in fiscal
2023, amortization of inventory valuation adjustments and foreign
currency losses, (iii) non-cash imputed interest expense, (iv)
asset impairments, including the goodwill write-down of $347.2
million, and gain on lease terminations and (v) bonus accrual
expense reversed due to the goodwill impairment recognized in
fiscal year 2023. The income tax impact of non-GAAP adjustments is
calculated using the effective tax rate for the period, except for
the year ended January 31, 2023, where the income tax impact of
non-GAAP adjustments is calculated using an effective tax rate
derived from our results of operations excluding the non-GAAP
adjustments. Management believes that these non-GAAP financial
measures provide meaningful supplemental information regarding our
performance by excluding items that are not indicative of our core
business operating results. Management uses these non-GAAP
financial measures to assess our performance on a comparative basis
and believes that they are also useful to investors to enable them
to assess our performance on a comparative basis across historical
periods and facilitate comparisons of our operating results to
those of our competitors. The presentation of this financial
information is not intended to be considered in isolation or as a
substitute for, or superior to, the financial information prepared
and presented in accordance with GAAP.
G-III APPAREL GROUP, LTD. AND
SUBSIDIARIES
RECONCILIATION OF FORECASTED
AND ACTUAL GAAP NET INCOME (LOSS) PER SHARE TO FORECASTED AND
ACTUAL NON-GAAP NET INCOME (LOSS) PER SHARE
Forecasted Three
Actual Three
Forecasted Twelve
Actual Twelve
Months Ending
Months Ended
Months Ended
Months Ended
July 31, 2023
July 31, 2022
January 31, 2024
January 31, 2023
(Unaudited)
GAAP diluted net income (loss)
attributable to G-III Apparel Group, Ltd. per common share
$
(0.10) - 0.00
$
0.74
$
2.65 - 2.75
$
(2.79)
Adjustment from GAAP diluted shares to
Non-GAAP diluted shares(1)
—
—
—
0.06
Excluded from non-GAAP:
Karl Lagerfeld investment gain
—
(0.63)
—
(0.56)
Expenses related to Karl Lagerfeld
acquisition
0.04
0.12
0.13
0.29
Non-cash imputed interest
0.02
0.03
0.08
0.14
Asset impairments and gain on lease
terminations
—
(0.00)
—
7.18
Bonus accrual expense reversed due to
goodwill impairment charge
—
—
—
(0.37)
Income tax impact of non-GAAP
adjustments
(0.02)
0.13
(0.06)
(1.10)
Non-GAAP diluted net income (loss)
attributable to G-III Apparel Group, Ltd. per common share, as
defined
$
(0.06) - 0.04
$
0.39
$
2.80 - 2.90
$
2.85
Non-GAAP diluted shares(1)
47,000
49,109
47,500
48,694
(1)
Represents adjustment for shares used to calculate diluted
earnings per share. Due to our recording a GAAP net loss for fiscal
year 2023, diluted shares were the same as basic shares for GAAP.
When applying nonGAAP exclusions our results moved from a net loss
to net income position.
Non-GAAP diluted net income per common share is a “non-GAAP
financial measure” that excludes (i) the gain in the fair value of
the Company’s minority ownership in Karl Lagerfeld that it held
prior to the Company becoming the sole owner of the Karl Lagerfeld
entities, (ii) expenses related to the Karl Lagerfeld transaction
that include incentive compensation, professional fees, and, in
fiscal 2023, amortization of inventory valuation adjustments and
foreign currency losses, (iii) non-cash imputed interest expense,
(iv) asset impairments, including the goodwill write-down of $347.2
million, and gain on lease terminations and (v) bonus accrual
expense reversed due to the goodwill impairment recognized in
fiscal year 2023. The income tax impact of non-GAAP adjustments is
calculated using the effective tax rate for the period, except for
the year ended January 31, 2023, where the income tax impact of
non-GAAP adjustments is calculated using an effective tax rate
derived from our results of operations excluding the non-GAAP
adjustments. Management believes that these non-GAAP financial
measures provide meaningful supplemental information regarding our
performance by excluding items that are not indicative of our core
business operating results. Management uses these non-GAAP
financial measures to assess our performance on a comparative basis
and believes that they are also useful to investors to enable them
to assess our performance on a comparative basis across historical
periods and facilitate comparisons of our operating results to
those of our competitors. The presentation of this financial
information is not intended to be considered in isolation or as a
substitute for, or superior to, the financial information prepared
and presented in accordance with GAAP.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230606005325/en/
G-III Apparel Group, Ltd.
Company Contact: Priya Trivedi SVP of Investor Relations
and Treasurer (646) 473-5228
Investor Relations Contact: Tom Filandro ICR, Inc. (646)
277-1235
Company Media Contact: Andrew Blecher
andrew.blecher@g-iii.com
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