G-III Apparel (GIII) Q4 Earnings Miss, Sales Improve Y/Y
G-III Apparel Group, Ltd. GIII posted mixed results in fourth-quarter fiscal 2023, wherein the top line beat the Zacks Consensus Estimate and the bottom line missed the same. Adjusted earnings of 41 cents per share missed the Zacks Consensus Estimate of 46 cents. Also, the bottom line compared unfavorably with the year-earlier quarter’s earnings of $1.06 per share.
We note that the company has numerous growth opportunities including the Spring 2024 repositioning and expansion of the Donna Karan label and a new long-term license for the Nautica brand. Nautica is available in nearly 1300 freestanding stores and shops globally as well as boasts a sturdy digital presence in over 30 countries.
G-III Apparel will produce Nautica products across several categories starting with jeanswear. This includes jeans and a complete range of corresponding lifestyle products. The company will later expand in a phased manner with other categories like sportswear, suit separates and dresses.
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Over the past three months, shares of the company have increased 13.8% compared with the industry's 0.2% dip.
Q4 in Detail
Net sales rose 14.2% year over year to $854.4 million and surpassed the Zacks Consensus Estimate of $773 million. The top-line results included $61–million in sales of the Karl Lagerfeld business. The business became a wholly owned subsidiary on May 31, 2022. Higher sales at both the wholesale and retail divisions aided the overall top line. Net sales for the Wholesale segment were $822 million, up roughly 14% year over year and the metric at the Retail segment was $49 million, up nearly 8.9% from the prior-year quarter’s reported figure.
Strength in outerwear, dresses and suit separates aided the company’s performance. The company has built strong handbag, footwear and jeans divisions, all of which are significantly contributing to the business. We note that the company is focused on new initiatives such as building its own brands, acquiring new businesses, developing long-term licenses and enhancing its private-label business.
G-III Apparel Group, LTD. Price, Consensus and EPS Surprise
G-III Apparel Group, LTD. price-consensus-eps-surprise-chart | G-III Apparel Group, LTD. Quote
Moreover, gross profit jumped 11.6% year over year to $281.5 million. Meanwhile, the gross margin of 33% contracted 70 basis points (bps), mainly due to the lower gross margin at the wholesale unit. The segment’s gross margin was 31.4%, down 50 bps year over year. The Retail unit’s gross margin was 45.8%, down 550 bps from the year-ago period.
SG&A expenses increased 22.3% year over year to $216.8 million. Further, the operating loss came in at $292.5 million in the fiscal fourth quarter against an operating income of $67.2 million.
Other Financial Details
G-III Apparel ended fourth-quarter fiscal 2023, with cash and cash equivalents of $191.7 million and long-term debt of $619.4 million. Total stockholders’ equity was $1,385.4 million. It spent roughly $38 million in capital expenditures.
At the fiscal 2023 end, this Zacks Rank #3 (Hold) company had cash and availability of roughly $750 million under its credit agreement.
Vilebrequin accomplished a record year of sales and profitability with robust double-digit comps growth. Management expects to witness a long-term potential of $250 million in sales for the brand. GIII-Apparel has been expanding in digital, increasing total sales by about 15% in fiscal 2023 through a focus on the company’s pureplay presence across various partners like Amazon, Zalando and Fanatics.
Management remains impressed with the Karl Lagerfeld business, generating $400 million in annualized global sales. It predicts double-digit sales growth for fiscal 2024 and billion dollars in net sales in the long run.
GIII-Apparel issued guidance for fiscal 2024 and anticipates the impacts of inflationary pressures on consumers and the company’s operations. It also expects incremental costs related to managing elevated levels of inventory. Management projects the top line to be $3.23 billion in fiscal 2024, including the acquired Karl Lagerfield business. The top line is expected to be flat year over year.
Adjusted earnings per share are likely to come in the bracket of $2.55-$2.65, versus $2.85 in fiscal 2023. For fiscal 2023, adjusted EBITDA is estimated to be between $248 million and $253 million versus adjusted EBITDA of $266 million recorded last fiscal. Further, G-III Apparel forecasts inventory levels to normalize by the third-quarter fiscal 2024 end, resulting in positive cash flows.
For the first quarter of the fiscal year 2024, net sales are likely to be approximately $560 million versus $689 million in the same period of last year. Management envisioned an adjusted loss per share of 5-15 cents versus 72 cents a share earned in the year-earlier quarter. First-quarter gross margin is predicted to increase almost 600 bps year over year, mainly due to lower freight costs, the addition of the Karl Lagerfeld business and gains from promotional sales.
The first quarter is likely to witness tough year-over-year comparisons and GIII plans significant declines in the athleisure and jeans category owing to the rebalancing of the same on consumer demand. However, management expects these categories to grow, finishing the fiscal year with roughly the same sales as compared to the prior year.
Eye These Solid Picks
Here we have highlighted three better-ranked stocks, namely, Oxford Industries OXM, lululemon athletica LULU and Skechers SKX.
Oxford Industries, which designs, sources, markets and distributes lifestyle products and other brands, sports a Zacks Rank #1 (Strong Buy). Oxford Industries has a trailing four-quarter earnings surprise of 18.9%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for OXM’s current financial year EPS suggests growth of 34.4% from the year-ago reported number.
lululemon athletica is a yoga-inspired athletic apparel company. LULU has a Zacks Rank #2 (Buy) at present.
The Zacks Consensus Estimate for lululemon athletica’s current financial year sales and EPS suggests growth of 28.5% and 26.8%, respectively, from the year-ago corresponding figures. LULU has a trailing four-quarter earnings surprise of 6.7%, on average.
Skechers, a footwear dealer, has a Zacks Rank of 2 at present. SKX has a trailing four-quarter earnings surprise of 3.8%, on average.
The Zacks Consensus Estimate for Skechers’ current financial year sales and EPS suggests growth of 6.4% and 24%, respectively, from the year-ago corresponding figures.
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