— Net Sales Increase 16% to Second Quarter
Record of $625 million —
— Second Quarter Results Surpass Guidance
—
— G-III Increases Full-Year Net Sales and
Net Income Guidance —
G-III Apparel Group, Ltd. (NasdaqGS: GIII) today announced
operating results for the second quarter of fiscal 2019 that ended
July 31, 2018.
Net sales for the second quarter of fiscal 2019 increased 16.1%
to a second quarter record of $624.7 million, from $538.0 million
in the year-ago period. The Company reported net income for the
second quarter of $10.1 million, or $0.20 per diluted share,
compared to a net loss of $8.6 million, or $(0.18) per share, in
the prior year’s comparable period.
Non-GAAP net income per diluted share was $0.22 for the second
quarter of this year compared to a non-GAAP net loss of $(0.15) per
share in the same period last year. Non-GAAP net income per diluted
share and net loss per share exclude (i) non-cash imputed interest
expense related to the note issued to seller as part of the
consideration for the acquisition of Donna Karan International
(“DKI”) of $1.2 million in this quarter and $1.4 million in the
second quarter of last year and (ii) transitional expenses
associated with the DKI acquisition of $700,000 in the second
quarter of last year. The aggregate effect of these exclusions was
equal to $0.02 per diluted share in the second quarter this year
and $0.03 per share in the second quarter last year.
Morris Goldfarb, G-III’s Chairman and Chief Executive Officer,
said, “We are pleased to report second quarter results that
exceeded our expectations. Our outperformance was driven by
excellent results across our wholesale businesses. We are
successfully leveraging our five global power brands to deliver
market relevant product that resonates with today’s consumers. We
have a world class portfolio of owned and licensed brands that we
believe position us for long-term growth in sales and
earnings.”
Outlook
The Company today increased its prior guidance for the full
fiscal year ending January 31, 2019. The Company now expects net
sales of approximately $3.06 billion and net income between $125
million and $130 million, or between $2.45 and $2.55 per diluted
share. The Company previously forecasted net sales of approximately
$2.97 billion and net income between $112 million and $117 million,
or between $2.20 and $2.30 per diluted share, for fiscal 2019. This
compares to net sales of $2.81 billion and net income of $62.1
million, or $1.25 per diluted share, for fiscal 2018.
The Company is anticipating non-GAAP net income for fiscal 2019
between $129 million and $134 million, or between $2.52 and $2.62
per diluted share, compared to our previous guidance of non-GAAP
net income for fiscal 2019 between $116 million and $121 million,
or between $2.27 and $2.37 per diluted share. Non-GAAP results for
fiscal 2019 exclude non-cash imputed interest expense of
approximately $5.0 million, or $0.07 per diluted share, related to
the note issued to the seller as part of the consideration for the
DKI acquisition. This guidance compares to non-GAAP net income of
$79.5 million, or $1.60 per diluted share, for fiscal 2018.
The Company is projecting full-year adjusted EBITDA for fiscal
2019 between $250 million and $260 million compared to its previous
forecast of adjusted EBITDA between $236 million and $246 million.
This compares to full-year adjusted EBITDA of $201.3 million in
fiscal 2018.
For the third quarter of fiscal 2019 ending October 31, 2018,
the Company is forecasting net sales of approximately $1.08 billion
and net income between $85.0 million and $90.0 million, or between
$1.70 and $1.80 per diluted share. This forecast compares to net
sales of $1.02 billion and net income of $81.6 million, or $1.65
per diluted share, reported for the third quarter of fiscal
2018.
The third quarter forecast includes non-cash imputed interest
expense of $1.2 million related to the note issued to the seller as
part of the consideration for the DKI acquisition. On an adjusted
basis, excluding imputed interest expense, the Company is
forecasting third quarter non-GAAP net income between $85.9 million
and $90.9 million, or between $1.72 and $1.82 per diluted share.
This compares to non-GAAP net income of $82.6 million, or $1.67 per
diluted share, for the third quarter of fiscal 2018.
Non-GAAP Financial Measures
Reconciliations of GAAP net income or net loss per share to
non-GAAP net income or net loss per share and of GAAP net income to
adjusted EBITDA are presented in tables accompanying the condensed
consolidated financial statements included in this release and
provide useful information to evaluate the Company’s operational
performance. Non-GAAP net income or net loss per 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 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 our 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.
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, reliance on licensed product,
reliance on foreign manufacturers, risks of doing business abroad,
the current economic and credit environment, the nature of the
apparel industry, including changing customer demand and tastes,
customer concentration, seasonality, risks of operating a retail
business, customer acceptance of new products, the impact of
competitive products and pricing, dependence on existing
management, possible disruption from acquisitions, risks relating
to G-III’s operations of Donna Karan International Inc., the impact
on our business of the imposition of tariffs by the United States
government and business and general economic conditions, 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 INCOME (LOSS) (In thousands, except per share
amounts)
Three Months Ended July 31, Six
Months Ended July 31, 2018 2017 2018
2017 (Unaudited) (Unaudited) Net sales $ 624,698 $
538,006 $ 1,236,441 $ 1,067,048 Cost of goods sold 393,154
335,016 770,370 662,343
Gross profit 231,544 202,990 466,071 404,705 Selling,
general and administrative expenses 198,860 195,849 400,931 393,260
Depreciation and amortization 9,455 10,736
18,835 20,574 Operating profit
(loss) 23,229 (3,595 ) 46,305 (9,129 ) Other income (loss)
(28 ) 369 (479 ) (863 ) Interest and financing charges, net
(10,210 ) (10,107 ) (19,830 ) (19,835 ) Income
(loss) before income taxes 12,991 (13,333 ) 25,996 (29,827 )
Income tax expense (benefit) 2,914 (4,765 )
6,034 (10,868 ) Net income (loss) $ 10,077
$ (8,568 ) $ 19,962 $ (18,959 ) Net income
(loss) per common share: Basic $ 0.20 $ (0.18 ) $ 0.41
$ (0.39 ) Diluted $ 0.20 $ (0.18 ) $ 0.40 $
(0.39 ) Weighted average shares outstanding: Basic
49,169 48,689 49,148
48,669 Diluted 50,415 48,689
50,272 48,669
Selected Balance Sheet Data (in thousands): At July
31, 2018 2017 (Unaudited)
Cash and cash equivalents $ 42,306 $ 58,782 Working capital 674,852
689,037 Inventories 678,571 655,272 Total Assets 2,236,634
2,042,051 Long-term debt 494,206 568,834 Total Stockholders' Equity
1,087,217 1,021,034
G-III APPAREL GROUP, LTD. AND
SUBSIDIARIES RECONCILIATION OF GAAP NET INCOME (LOSS) PER
SHARE TO NON-GAAP NET INCOME (LOSS) PER SHARE
Three Months Ended July 31, Six
Months Ended July 31, 2018 2017
2018 2017 (Unaudited) GAAP diluted net
income (loss) per common share $ 0.20 $ (0.18 ) $ 0.40 $ (0.39 )
Excluded from non-GAAP: Non-cash imputed interest 0.02 0.03
0.05 0.06 Transitional expenses associated with the DKI acquisition
- 0.01 - 0.04 Income tax impact of non-GAAP adjustments - (0.01 )
(0.01 ) (0.04 ) Non-GAAP diluted net
income (loss) per common share, as defined $ 0.22 $ (0.15 ) $ 0.44
$ (0.33 )
Non-GAAP diluted net income (loss) per common share is a
“non-GAAP financial measure” that excludes non-cash imputed
interest expense and transitional expenses associated with the DKI
acquisition. Income tax impacts of non-GAAP adjustments are
calculated using the effective tax rates for the respective
periods. Management believes that this non-GAAP financial measure
provides meaningful supplemental information regarding our
performance by excluding items that are not indicative of our core
business operating results. Management uses this non-GAAP financial
measure to assess our performance on a comparative basis and
believes that it is 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 TO
FORECASTED AND ACTUAL ADJUSTED EBITDA (In thousands)
Forecasted
Twelve Months Ending
Actual
Twelve Months Ended
January 31, 2019 January 31, 2018 (Unaudited)
Net income $ 125,000 - 130,000 $ 62,124 Transitional
expenses associated with the DKI acquisition - 2,050 Asset
impairment charges - 7,884 Depreciation and amortization 38,000
37,783 Interest and financing charges, net 46,000 43,488 Income tax
expense 41,000 - 46,000 47,925 Adjusted EBITDA, as
defined $ 250,000 - 260,000 $ 201,254
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
transitional expenses associated with the DKI acquisition in fiscal
2018, and asset impairment charges in fiscal 2018 primarily related
to leasehold improvements and furniture and fixtures at certain of
our retail stores. 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, 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 NET INCOME TO NON-GAAP
NET INCOME (In thousands)
Forecasted Three Months
Ending
Actual Three Months
Ended
Forecasted Twelve Months
Ending
Actual Twelve Months
Ended
October 31, 2018 October 31, 2017 January 31,
2019 January 31, 2018 (Unaudited) Net income $
85,000 - 90,000 $ 81,625 $ 125,000 - 130,000 $ 62,124
Excluded from non-GAAP: Transitional expenses associated with the
DKI acquisition - - - 2,050 Non-cash imputed interest 1,200 1,428
5,000 5,714 Asset impairment charges - - - 7,884 Tax Cuts and Jobs
Act enactment - - - 7,477 Income tax impact of non-GAAP adjustments
(300 ) (483 ) (1,000 ) (5,871 )
Non-GAAP net income, as defined $ 85,900 - 90,900 $ 82,570
$ 129,000 - 134,000 $ 79,378
Non-GAAP net income is a “non-GAAP financial measure” that
excludes, in fiscal 2018 and 2019, non-cash imputed interest, and,
in fiscal 2018, (i) transitional expenses associated with the DKI
acquisition (ii) asset impairment charges primarily related to
leasehold improvements and furniture and fixtures at certain of our
retail stores and (iii) income tax charges related to the one-time
effect of the enactment of the Tax Cut and Jobs Act. These income
tax charges primarily relate to reduction of deferred tax assets
and taxes due on foreign earnings. Income tax impacts of non-GAAP
adjustments are calculated using the effective tax rates for the
respective periods, exclusive of the one-time charges. Management
believes that this non-GAAP financial measure provides meaningful
supplemental information regarding our performance by excluding
items that are not indicative of our core business operating
results. Management uses this non-GAAP financial measure to assess
our performance on a comparative basis and believes that it is 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 PER SHARE
TO FORECASTED AND ACTUAL NON-GAAP NET INCOME PER SHARE
Forecasted Three Months
Ending
Actual Three Months
Ended
Forecasted Twelve Months
Ending
Actual Twelve Months
Ended
October 31, 2018 October 31, 2017 January 31,
2019 January 31, 2018 (Unaudited) GAAP diluted
net income per common share $ 1.70 - 1.80 $ 1.65 $ 2.45 - 2.55 $
1.25 Excluded from non-GAAP: Transitional expenses
associated with the DKI acquisition - - - 0.04 Non-cash imputed
interest 0.02 0.03 0.10 0.12 Asset impairment charges - - - 0.16
Tax Cuts and Jobs Act enactment - - - 0.15 Income tax impact of
non-GAAP adjustments - (0.01 ) (0.03 ) (0.12 )
Non-GAAP diluted net income per common share, as defined $
1.72 - 1.82 $ 1.67 $ 2.52 - 2.62 $ 1.60
Non-GAAP diluted net income per common share is a “non-GAAP
financial measure” that excludes, in fiscal 2018 and 2019, non-cash
imputed interest, and, in fiscal 2018, (i) transitional expenses
associated with the DKI acquisition, (ii) asset impairment charges
primarily related to leasehold improvements and furniture and
fixtures at certain of our retail stores and (iii) income tax
charges related to the one-time effect of the enactment of the Tax
Cut and Jobs Act. These income tax charges primarily relate to
reduction of deferred tax assets and taxes due on foreign earnings.
Income tax impacts of non-GAAP adjustments are calculated using the
effective tax rates for the respective periods, exclusive of the
one-time charges. Management believes that this non-GAAP financial
measure provides meaningful supplemental information regarding our
performance by excluding items that are not indicative of our core
business operating results. Management uses this non-GAAP financial
measure to assess our performance on a comparative basis and
believes that it is 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.
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version on businesswire.com: https://www.businesswire.com/news/home/20180906005195/en/
Company:G-III Apparel Group, Ltd.Priya Trivedi,
646-473-5157V.P. Investor Relations & TreasurerorInvestor
Relations:ICR, Inc.Tom Filandro, 646-277-1235Managing
Director
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