- Second Quarter Net Sales and GAAP and Non-GAAP Net Income
Per Diluted Share Exceed Guidance
- Net Sales of $659.8 Million for the Second Quarter Compared
to $605.2 Million Last Year
- Net Income Per Diluted Share of $0.35 for the Second Quarter
Compared to $0.74 Last Year
- Non-GAAP Net Income Per Diluted Share of $0.40 for the
Second Quarter Compared to $0.39 Last Year
- Raises Guidance for Fiscal Year 2024
- Announces New Multi-Year Outerwear License for the Champion
Brand
G-III Apparel Group, Ltd. (NasdaqGS: GIII), a global leader in
fashion with expertise in design, sourcing, and manufacturing,
today announced results for the second quarter of fiscal 2024,
ended July 31, 2023.
Morris Goldfarb, G-III’s Chairman and Chief Executive Officer,
said, “For the second quarter of fiscal 2024, we once again beat
both our top and bottom line guidance and made progress on our
strategic priorities. Our first half performance further validates
G-III’s ability to successfully navigate what remains a dynamic
environment. I am immensely proud of our team’s consistently strong
execution.”
Mr. Goldfarb continued, “We are pleased to announce our newest
license agreement with HanesBrands to produce an outerwear
collection for the Champion brand. Champion is a well-recognized
iconic American brand. Our collections will feature quality
heritage pieces that complement and enhance Champion’s principles
of self-expression. This license aligns with G-III's core
competencies in outerwear and will fit seamlessly into our
well-developed outerwear divisions.”
Mr. Goldfarb concluded, “G-III closed out a strong first half of
our year, giving us confidence to once again raise our outlook. Our
balance sheet provides us with financial flexibility to invest in
our business and consider additional opportunities. Agility is at
the heart of everything we do at G-III and I am confident that we
will continue to evolve, regardless of external factors. We will
continue to drive our business forward and expect to deliver strong
results for our shareholders.”
Results of Operations
Net sales for the second quarter ended July 31, 2023 increased
9% to $659.8 million from $605.2 million in the prior year’s
quarter. The Company reported net income for the second quarter of
$16.4 million, or $0.35 per diluted share, compared to $36.3
million, or $0.74 per diluted share, in the prior year’s
quarter.
Non-GAAP net income per diluted share was $0.40 for the second
quarter of this year compared to $0.39 in the same period last
year. Non-GAAP net income per diluted share excludes (i) non-cash
imputed interest expense of $1.1 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 second quarter last year, (ii)
expenses related to the Karl Lagerfeld transaction of $1.8 million
in this year’s quarter that include incentive compensation and $5.7
million in last year’s second quarter that include incentive
compensation, professional fees and amortization of inventory
valuation adjustments and (iii) in the second quarter of last year,
a $30.9 million gain in the fair value of the Company’s minority
ownership in Karl Lagerfeld prior to the Company becoming the sole
owner of the Karl Lagerfeld entities. The aggregate effect of these
exclusions was equal to $0.05 per diluted share in the second
quarter of this year and $(0.35) per diluted share in the second
quarter of fiscal 2023.
Outlook
The Company today raised its guidance for the fiscal year ending
January 31, 2024.
For fiscal 2024, the Company expects net sales of approximately
$3.30 billion and net income between $145 million and $150 million,
or between $3.05 and $3.15 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 included a
$291.5 million non-cash goodwill impairment charge, net of tax.
The Company is anticipating non-GAAP net income for fiscal 2024
between $152 million and $157 million, or between $3.20 and $3.30
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 $284 million and $289 million compared to adjusted
EBITDA of $266.1 million in fiscal 2023.
For the third quarter of fiscal year 2024, the Company expects
net sales of approximately $1.13 billion compared to $1.08 billion
in the same period last year. The Company expects net income for
the third quarter of fiscal 2024 between $94 million and $99
million or between $1.99 and $2.09 per diluted share. This compares
to net income of $61.1 million, or $1.26 per diluted share, in last
year’s third quarter. The third quarter of fiscal 2023 results
included significant one-time demurrage charges of $26.7 million,
or $0.40 per diluted share, related to logistics challenges within
our distribution centers.
The Company is anticipating non-GAAP net income for third
quarter of fiscal 2024 between $96 million and $101 million, or
between $2.03 and $2.13 per diluted share. This compares to
non-GAAP net income of $65.6 million, or $1.35 per diluted share,
in last year’s third quarter.
Non-GAAP Financial
Measures
Reconciliations of GAAP net income (loss) to non-GAAP net
income, GAAP net income (loss) per diluted share to non-GAAP net
income 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, non-GAAP net
income 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, Dockers and Champion 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 impact from
COVID-19, 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, 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 July
31,
Six Months Ended July
31,
2023
2022
2023
2022
(Unaudited)
Net sales
$
659,761
$
605,244
$
1,266,350
$
1,294,001
Cost of goods sold
383,108
376,318
739,897
819,036
Gross profit
276,653
228,926
526,453
474,965
Selling, general and administrative
expenses
239,207
191,012
467,168
376,420
Depreciation and amortization
5,959
6,656
12,535
12,751
Operating profit
31,487
31,258
46,750
85,794
Other income
192
30,325
1,165
27,618
Interest and financing charges, net
(9,492
)
(12,550
)
(21,642
)
(24,753
)
Income before income taxes
22,187
49,033
26,273
88,659
Income tax expense
5,951
12,968
6,896
21,968
Net income
16,236
36,065
19,377
66,691
Less: Loss attributable to noncontrolling
interests
(202
)
(254
)
(297
)
(262
)
Net income attributable to G-III Apparel
Group, Ltd.
$
16,438
$
36,319
$
19,674
$
66,953
Net income attributable to G-III Apparel
Group, Ltd. per common share:
Basic
$
0.36
$
0.76
$
0.43
$
1.39
Diluted
$
0.35
$
0.74
$
0.42
$
1.36
Weighted average shares outstanding:
Basic
45,714
47,999
45,996
48,007
Diluted
46,570
49,019
46,992
49,061
Selected Balance Sheet Data (in
thousands):
As of July 31,
2023
2022
(Unaudited)
Cash and cash equivalents
$
197,735
$
150,977
Working capital
978,673
996,024
Inventories
804,858
1,040,814
Total assets
2,662,053
3,082,354
Total debt
466,036
575,777
Operating lease liabilities
247,544
228,981
Total stockholders' equity
1,382,115
1,584,001
G-III APPAREL GROUP, LTD. AND
SUBSIDIARIES
RECONCILIATION OF GAAP NET
INCOME TO NON-GAAP NET INCOME
(In thousands)
Three Months Ended
Six Months Ended
July 31, 2023
July 31, 2022
July 31, 2023
July 31, 2022
(Unaudited)
GAAP net income attributable to G-III
Apparel Group, Ltd.
$
16,438
$
36,319
$
19,674
$
66,953
Excluded from non-GAAP:
Karl Lagerfeld investment gain
—
(30,925
)
—
(30,925
)
Expenses related to Karl Lagerfeld
acquisition
1,848
5,693
3,669
9,872
Non-cash imputed interest
1,086
1,740
2,903
3,411
Gain on lease terminations
—
(29
)
—
(38
)
Income tax impact of non-GAAP
adjustments
(786
)
6,220
(1,724
)
4,380
Non-GAAP net income attributable to G-III
Apparel Group, Ltd., as defined
$
18,586
$
19,018
$
24,522
$
53,653
Non-GAAP net income is a “non-GAAP financial measure” that
excludes (i) in fiscal 2023 only, 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) in both fiscal 2023 and 2024, expenses related to
the Karl Lagerfeld transaction that include incentive compensation
and, in fiscal 2023 only, professional fees, amortization of
inventory valuation adjustments and foreign currency losses, (iii)
in both fiscal 2023 and 2024, non-cash imputed interest expense,
and (iv) in fiscal 2023 only, gain on lease terminations. 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
Six Months Ended
July 31, 2023
July 31, 2022
July 31, 2023
July 31, 2022
(Unaudited)
GAAP diluted net income attributable to
G-III Apparel Group, Ltd. per common share
$
0.35
$
0.74
$
0.42
$
1.36
Excluded from non-GAAP:
Karl Lagerfeld investment gain
—
(0.63
)
—
(0.63
)
Expenses related to Karl Lagerfeld
acquisition
0.04
0.12
0.08
0.20
Non-cash imputed interest
0.03
0.03
0.06
0.07
Gain on lease terminations
—
(0.00
)
—
(0.00
)
Income tax impact of non-GAAP
adjustments
(0.02
)
0.13
(0.04
)
0.09
Non-GAAP diluted net income attributable
to G-III Apparel Group, Ltd. per common share, as defined
$
0.40
$
0.39
$
0.52
$
1.09
Non-GAAP diluted net income per common share is a “non-GAAP
financial measure” that excludes (i) in fiscal 2023 only, 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) in both fiscal 2023 and 2024,
expenses related to the Karl Lagerfeld transaction that include
incentive compensation and, in fiscal 2023 only, professional fees,
amortization of inventory valuation adjustments and foreign
currency losses, (iii) in both fiscal 2023 and 2024, non-cash
imputed interest expense, and (iv) in fiscal 2023 only, gain on
lease terminations. 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
July 31, 2023
July 31, 2022
January 31, 2024
January 31, 2023
(Unaudited)
Net income (loss) attributable to G-III
Apparel Group, Ltd.
$
16,438
$
36,319
$
145,000 - 150,000
$
(133,061
)
Karl Lagerfeld investment gain
—
(30,925
)
—
(27,071
)
Expenses related to Karl Lagerfeld
acquisition
1,848
5,693
6,098
13,895
Asset impairments and gain on lease
terminations
—
(29
)
—
349,686
Bonus accrual expense reversed due to
goodwill impairment charge
—
—
—
(17,900
)
Depreciation and amortization
5,959
6,656
29,141
27,762
Interest and financing charges, net
9,492
12,550
47,899
56,602
Income tax expense
5,951
12,968
55,862
(3,788
)
Adjusted EBITDA, as defined
$
39,688
$
43,232
$
284,000 - 289,000
$
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)
in fiscal 2023 only, 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) in both fiscal 2023 and 2024, expenses related to the Karl
Lagerfeld acquisition that included incentive compensation and, in
fiscal 2023 only, professional fees, amortization of inventory
valuation adjustments and foreign currency losses, (iii) in fiscal
2023 only, asset impairments, including the goodwill write-down of
$347.2 million, and gain on lease terminations and (iv) in fiscal
2023 only, bonus accrual expense reversed due to the goodwill
impairment recognized in that fiscal year. 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
(In thousands)
Forecasted Three
Actual Three
Forecasted Twelve
Actual Twelve
Months Ending
Months Ended
Months Ended
Months Ended
October 31, 2023
October 31, 2022
January 31, 2024
January 31, 2023
(Unaudited)
Net income (loss) attributable to G-III
Apparel Group, Ltd.
$
94,000 - 99,000
$
61,103
$
145,000 - 50,000
$
(133,061
)
Excluded from non-GAAP:
Karl Lagerfeld investment gain
—
—
—
(27,071
)
Expenses related to Karl Lagerfeld
acquisition
1,820
3,769
6,098
13,895
Non-cash imputed interest
682
1,750
3,798
6,947
Asset impairments and gain on lease
terminations
—
250
—
349,686
Bonus accrual expense reversed due to
goodwill impairment charge
—
—
—
(17,900
)
Income tax impact of non-GAAP
adjustments
(502
)
(1,289
)
(2,896
)
(53,737
)
Non-GAAP net income attributable to G-III
Apparel Group, Ltd., as defined
$
96,000 - 101,000
$
65,583
$
152,000 - 157,000
$
138,759
Non-GAAP net income is a “non-GAAP financial measure” that
excludes (i) for fiscal 2023 only, 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) for both fiscal 2023 and 2024, expenses related to
the Karl Lagerfeld transaction that include incentive compensation
and, in fiscal 2023 only, professional fees, amortization of
inventory valuation adjustments and foreign currency losses, (iii)
in both fiscal 2023 and 2024, non-cash imputed interest expense,
(iv) in fiscal 2023 only, asset impairments, including the goodwill
write-down of $347.2 million, and gain on lease terminations and
(v) in fiscal 2023 only, bonus accrual expense reversed due to the
goodwill impairment recognized in that fiscal year. 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 PER SHARE
Forecasted Three
Actual Three
Forecasted Twelve
Actual Twelve
Months Ending
Months Ended
Months Ended
Months Ended
October 31, 2023
October 31, 2022
January 31, 2024
January 31, 2023
(Unaudited)
GAAP diluted net income (loss)
attributable to G-III Apparel Group, Ltd. per common share
$
1.99 - 2.09
$
1.26
$
3.05 - 3.15
$
(2.79
)
Adjustment from GAAP diluted shares to
Non-GAAP diluted shares(1)
—
—
—
0.06
Excluded from non-GAAP:
Karl Lagerfeld investment gain
—
—
—
(0.56
)
Expenses related to Karl Lagerfeld
acquisition
0.04
0.07
0.13
0.29
Non-cash imputed interest
0.01
0.04
0.08
0.14
Asset impairments and gain on lease
terminations
—
0.01
—
7.18
Bonus accrual expense reversed due to
goodwill impairment charge
—
—
—
(0.37
)
Income tax impact of non-GAAP
adjustments
(0.01
)
(0.03
)
(0.06
)
(1.10
)
Non-GAAP diluted net income attributable
to G-III Apparel Group, Ltd. per common share, as defined
$
2.03 - 2.13
$
1.35
$
3.20 - 3.30
$
2.85
Non-GAAP diluted shares(1)
47,500
48,475
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 non-GAAP 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) for fiscal 2023 only, 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) for both fiscal 2023 and 2024,
expenses related to the Karl Lagerfeld transaction that include
incentive compensation and, in fiscal 2023 only, professional fees,
amortization of inventory valuation adjustments and foreign
currency losses, (iii) for both fiscal 2023 and 2024, non-cash
imputed interest expense, (iv) for fiscal 2023 only, asset
impairments, including the goodwill write-down of $347.2 million,
and gain on lease terminations and (v) for fiscal 2023 only, bonus
accrual expense reversed due to the goodwill impairment recognized
in that fiscal year. 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/20230907980416/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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