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G-III Apparel Group, Ltd. G-III Apparel Group, Ltd. Announces Third Quarter Fiscal 2020 Results

NEW YORK--(BUSINESS WIRE)--

— Net Sales Increase 5.2% for Third Quarter to $1.13 Billion —

— Net Sales for the Wholesale Segment Increase 6.2% for Third Quarter to $1.07 Billion —

Full Year Guidance Revised —

G-III Apparel Group, Ltd. (GIII) today announced operating results for the third quarter of fiscal 2020 ended October 31, 2019.

Net sales for the third quarter ended October 31, 2019 increased 5.2% to $1.13 billion from $1.07 billion in the same period last year. The Company reported GAAP net income for the third quarter of $95.4 million, or $1.97 per diluted share, compared to $94.0 million, or $1.86 per diluted share, in the prior year’s comparable period.

Non-GAAP net income per diluted share was $1.99 for the third quarter of this year compared to $1.88 in the same period last year. Non-GAAP net income per diluted share excludes (i) non-cash imputed interest expense of $1.4 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 $1.2 million in the third quarter last year and (ii) a $0.1 million gain on lease terminations in the current quarter. The aggregate effect of these exclusions was equal to $0.02 per diluted share in each of the third quarter of this year and the prior year.

Morris Goldfarb, G-III’s Chairman and Chief Executive Officer, said, “We are pleased to report third quarter results that exceeded our bottom-line expectations. We maintained good momentum in our wholesale business, in spite of the challenging retail and macro environment. Our merchants did a good job managing product costs, as we benefitted from accelerated inventory receipts and support from our Chinese vendor base to mitigate some of the impact of the tariffs that were imposed.”

Mr. Goldfarb concluded, “We remain focused on continuing to grow our business in multiple categories and elevating our position as a supplier-of-choice for our retail partners. We remain confident in our future growth expectations, powered by the strength of our global power brands: DKNY, Donna Karan, Calvin Klein, Tommy Hilfiger and Karl Lagerfeld.”

Outlook

G-III Apparel Group today issued revised guidance for the fiscal year ending January 31, 2020. This forecast also incorporates the expected impact of the additional tariffs implemented effective September 1, 2019.

For fiscal 2020, the Company is now forecasting net sales of approximately $3.20 billion and net income between $147 million and $152 million, or between $3.01 and $3.11 per diluted share. This compares to net sales of $3.08 billion and net income of $138.1 million, or $2.75 per diluted share for fiscal 2019.

The Company is anticipating non-GAAP net income for fiscal 2020 between $149 million and $154 million, or between $3.06 and $3.16 per diluted share. Non-GAAP guidance excludes (i) non-cash imputed interest expense of approximately $5.4 million related to the Seller Note and (ii) a $2.3 million gain on lease terminations. The aggregate effect of these exclusions is equal to $0.05 per diluted share. This guidance compares to non-GAAP net income of $143.9 million, or $2.86 per diluted share, for fiscal 2019. Non-GAAP results for fiscal 2019 exclude non-cash imputed interest expense of $5.0 million related to the Seller Note and asset impairments primarily related to leasehold improvements and furniture and fixtures at certain of our retail stores of $2.8 million. The aggregate effect of these exclusions was equal to $0.11 per diluted share in fiscal 2019.

The Company is projecting full-year adjusted EBITDA for fiscal 2020 between $283 million and $288 million compared to adjusted EBITDA of $269.4 million in fiscal 2019.

Non-GAAP Financial Measures

Reconciliations of GAAP net income per share to non-GAAP net income per share and of GAAP net income to adjusted EBITDA are presented in tables accompanying the condensed financial statements included in this release and provide useful information to evaluate the Company’s operational performance. Non-GAAP net income 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, Eliza J, Jessica Howard, Andrew Marc and Marc New York. 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 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 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, 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, 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

(GIII)

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share amounts)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended
October 31,

 

Nine Months Ended
October 31,

 

 

2019

 

2018

 

2019

 

2018

 

 

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

$

1,128,403

 

$

1,072,982

 

$

2,405,847

 

$

2,309,423

Cost of goods sold

 

 

729,384

 

 

690,882

 

 

1,538,995

 

 

1,461,252

Gross profit

 

 

399,019

 

 

382,100

 

 

866,852

 

 

848,171

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative expenses

 

 

246,580

 

 

232,052

 

 

644,887

 

 

632,983

Depreciation and amortization

 

 

9,701

 

 

10,033

 

 

28,963

 

 

28,868

Gain on lease terminations

 

 

(124)

 

 

 

 

(2,346)

 

 

Operating profit

 

 

142,862

 

 

140,015

 

 

195,348

 

 

186,320

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income (loss)

 

 

677

 

 

176

 

 

(722)

 

 

(303)

Interest and financing charges, net

 

 

(12,518)

 

 

(12,323)

 

 

(33,623)

 

 

(32,153)

Income before income taxes

 

 

131,021

 

 

127,868

 

 

161,003

 

 

153,864

 

 

 

 

 

 

 

 

 

 

 

 

 

Income tax expense

 

 

35,634

 

 

33,843

 

 

42,454

 

 

39,877

Net income

 

$

95,387

 

$

94,025

 

$

118,549

 

$

113,987

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income per common share:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

2.00

 

$

1.91

 

$

2.45

 

$

2.32

Diluted

 

$

1.97

 

$

1.86

 

$

2.42

 

$

2.26

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

47,768

 

 

49,231

 

 

48,333

 

 

49,176

Diluted

 

 

48,356

 

 

50,494

 

 

49,056

 

 

50,345

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selected Balance Sheet Data (in thousands):

 

At October 31,

 

 

2019

 

2018

 

 

(Unaudited)

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

55,801

 

$

66,080

Working capital

 

 

972,484

 

 

961,513

Inventories

 

 

650,633

 

 

616,162

Total assets (1)

 

 

2,928,607

 

 

2,551,068

Long-term debt

 

 

675,396

 

 

694,277

Operating lease liabilities (2)

 

 

326,860

 

 

Total stockholders' equity

 

 

1,260,302

 

 

1,180,955

(1)

Total assets now include operating lease assets of $293.8 million as of October 31, 2019 in accordance with ASC 842.

(2)

These liabilities are now included in accordance with ASC 842.

G-III APPAREL GROUP, LTD. AND SUBSIDIARIES

RECONCILIATION OF GAAP NET INCOME PER SHARE TO

NON-GAAP NET INCOME PER SHARE

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

October 31,

 

 

October 31,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

 

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP diluted net income per common share

 

$

1.97

 

$

1.86

 

$

2.42

 

$

2.26

 

 

 

 

 

 

 

 

 

 

 

 

 

Excluded from non-GAAP:

 

 

 

 

 

 

 

 

 

 

 

 

Non-cash imputed interest

 

 

0.03

 

 

0.03

 

 

0.08

 

 

0.08

Gain on lease terminations

 

 

 

 

 

 

(0.05)

 

 

Income tax impact of non-GAAP adjustments

 

 

(0.01)

 

 

(0.01)

 

 

(0.01)

 

 

(0.02)

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP diluted net income per common share, as defined

 

$

1.99

 

$

1.88

 

$

2.44

 

$

2.32

Non-GAAP diluted net income per common share is a “non-GAAP financial measure” that excludes non-cash imputed interest expense and gain on lease terminations. The income tax impact of non-GAAP adjustments is 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, 2020

 

January 31, 2019

 

 

(Unaudited)

 

 

 

 

 

 

 

Net income

 

$

147,000 - 152,000

 

$

138,067

 

 

 

 

 

 

 

Gain on lease terminations

 

 

(2,346)

 

 

Asset impairment charges

 

 

 

 

2,813

Depreciation and amortization

 

 

39,000

 

 

38,819

Interest and financing charges, net

 

 

45,000

 

 

43,924

Income tax expense

 

 

54,346

 

 

45,763

 

 

 

 

 

 

 

Adjusted EBITDA, as defined

 

$

283,000 - 288,000

 

$

269,386

Adjusted EBITDA is a “non-GAAP financial measure” which represents earnings before depreciation and amortization, interest and financing charges, net, gain on lease terminations, asset impairment charges primarily related to leasehold improvements and furniture and fixtures at certain of our retail stores and income tax expense. 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 Twelve

 

Actual Twelve

 

 

Months Ended

 

Months Ended

 

 

January 31, 2020

 

January 31, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

147,000 - 152,000

 

$

138,067

 

 

 

 

 

 

 

Excluded from non-GAAP:

 

 

 

 

 

 

Non-cash imputed interest

 

 

5,400

 

 

4,951

Gain on lease terminations

 

 

(2,346)

 

 

Asset impairment charges

 

 

 

 

2,813

Income tax impact of non-GAAP adjustments

 

 

(1,054)

 

 

(1,932)

 

 

 

 

 

 

 

Non-GAAP net income, as defined

 

$

149,000 - 154,000

 

$

143,899

Non-GAAP net income is a “non-GAAP financial measure” that excludes non-cash imputed interest, gain on lease terminations and asset impairment charges primarily related to leasehold improvements and furniture and fixtures at certain of our retail stores. The income tax impact of non-GAAP adjustments is 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 PER SHARE TO

FORECASTED AND ACTUAL NON-GAAP NET INCOME PER SHARE

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Forecasted Twelve

 

Actual Twelve

 

 

Months Ended

 

Months Ended

 

 

January 31, 2020

 

January 31, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP diluted net income per common share

 

$

3.01 - 3.11

 

$

2.75

 

 

 

 

 

 

 

Excluded from non-GAAP:

 

 

 

 

 

 

Non-cash imputed interest

 

 

0.11

 

 

0.10

Gain on lease terminations

 

 

(0.05)

 

 

Asset impairment charges

 

 

 

 

0.05

Income tax impact of non-GAAP adjustments

 

 

(0.01)

 

 

(0.04)

 

 

 

 

 

 

 

Non-GAAP diluted net income per common share, as defined

 

$

3.06 - 3.16

 

$

2.86

Non-GAAP diluted net income per common share is a “non-GAAP financial measure” that excludes non-cash imputed interest, gain on lease terminations and asset impairment charges primarily related to leasehold improvements and furniture and fixtures at certain of our retail stores. The income tax impact of non-GAAP adjustments is 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.

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