G-III Apparel Tops Estimates, Delivers Best Quarter Ever as Company Continues to Grow
G-III Apparel Group is anticipating a very merry Christmas.
The firm, parent to the DKNY and Donna Karan brands, among others, revealed quarterly earnings Wednesday before the market opened, improving on both top and bottom lines as the retailer continues to grow its portfolio. In the most recent quarter, G-III picked up French brand Sonia Rykiel. It also agreed to a long-term global licensing deal with beauty company Interparfums Inc. to make DKNY and Donna Karan fragrances (coming in July 2022); launched Bass Outdoor; has plans to expand its nearly 40 other licensing agreements across brands and categories, and is on track for the Karl Lagerfeld Paris business — a joint venture between luxury brand Karl Lagerfeld, in which G-III owns half — to achieve at least $500 million in revenues in the next several years.
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The company raised its guidance for the full year as a result and is now expecting 2022 fiscal year net revenues to be about $2.77 billion, up from last year’s reported net sales of $2.05 billion, as well as net income between $180 million and $190 million for the year, up from $23.5 million in profits last year, or nearly $144 million pre-pandemic. G-III is also anticipating net income per diluted share to be in the range of $3.65 and $3.75 each — potentially making it the highest annual net income per diluted share in the company’s history.
Shares of G-III shot up more than 6 percent at the start of Wednesday’s session, as a result.
“The strong momentum in our business in the first half continues as we delivered outstanding third quarter results, which exceeded our guidance for both the top and bottom line,” Morris Goldfarb, G-III’s chairman and chief executive officer, said in a statement. “Given the strong demand we are seeing across our brands, we are well positioned for the holiday season. We are raising our full-year guidance and expect to deliver our highest annual earnings in our company’s history.
“Our world-class team continues to maintain tremendous flexibility and is delivering the right product at the right time across our diversified distribution channels,” Goldfarb continued. “We believe we will enter the new fiscal year in our strongest financial position ever, affording us flexibility to further expand our global reach and increase shareholder value.”
G-III — which also includes luxury swimwear brand Vilebrequin, Eliza J, Jessica Howard, G.H. Bass, Andrew Marc and Marc New York in the greater portfolio, in addition to fashion licenses under the Calvin Klein, Tommy Hilfiger, Kenneth Cole, Cole Haan, Guess, Vince Camuto, Levi’s and Dockers brands — reported third-quarter net revenues for the three-month period ending Oct. 30 of $1.02 billion. That’s an increase of nearly 23 percent, compared with last year’s $827 million.
Revenues at the fast-growing Karl Lagerfeld Paris business were approximately $175 million for the quarter, up from $135 million pre-pandemic, as the brand continues to expand its retail footprint with Macy’s.
G-III also permanently closed all of its Wilsons Leather and G.H. Bass stores — nearly 200 locations — in 2020, but continues to operate each brand’s e-commerce business.
The retailer added that it will continue to invest in digital, with sales on its partner sites up 45 percent, compared with two years ago’s pre-pandemic levels, and up 60 percent for its own sites, during the same time period.
In China, digital sales are now outpacing store sales, Goldfarb told analysts on Wednesday morning’s conference call.
G-III logged $106 million in profits as a result, up from $63 million last year.
The firm called out outerwear, jeans, dresses, handbags, footwear, activewear and athleisure and “career wear” as continued growth drivers during the quarter.
“They’re buying everything,” Goldfarb told WWD in an exclusive interview. “There’s not a category that we’re disappointed in.
“During the peak of the pandemic, giving away a dress was difficult,” the CEO continued. “Anything with a heel was difficult to market. What happened, as the world opened up, the athleisure component of our business did not slow down. What happened was that the other elements that were taking a rest all woke up and they became accretive to the business.
“We’re an agile company that knows its way around the consumer,” Goldfarb continued. “And the next approach to our business is to build and manage the men’s business. If we don’t get her, we’re going to get him. We’re historically a women’s business, other than men’s outerwear. We know how to make men’s. We just haven’t focused on designing the ready-to-wear piece of it.”
Other growth drivers included the company’s wholesale segment, which Goldfarb defined as a combination of stores and online shopping and said is quickly approaching pre-pandemic levels.
He added that in-store shopping continues to rise — both in department stores and stand-alone locations — with store traffic down about 25 percent, compared with pre-pandemic levels.
“[Brick-and-mortar stores] are not dinosaurs in my world and they are not dormant in my world,” Goldfarb said. “I don’t know how one can say department stores are done, when they’ve recovered pretty much as quickly as I’m seeing and they’re still pretty much handicapped by [the lack of] tourist traffic.”
The retailer will have a total of 59 Karl Lagerfeld Paris and DKNY stores by the end of the year, including the addition of 10 new Karl Lagerfeld Paris stores this year. Donna Karan is also expanding its international business with partner-operated stores in places such as Saudi Arabia and Kuwait.
“The beauty of DKNY and Donna Karan is that when the world opened up and there was an acceptance to Western brands in the Middle East, Donna Karan was the first one there,” Goldfarb said. “There is a young community of expats who live in these regions who are looking for younger, more active products that we’ve provided.”
Meanwhile, the entire retail industry continues to battle supply chain pressures, such as increased freight costs and delays during the holiday shopping season, as well as consumer fears and potential lockdowns from a new coronavirus variant. G-III acknowledged that it too expects higher shipping costs and delays of receipts of goods through most of 2022, but also said it was able to maintain “flexibility navigating supply chain disruptions [during the most recent quarter], which has enabled us to rise above the pandemic, by maintaining relationships with long-time factory partners and raising prices to match inflationary pressures.
“G-III has no choice but to raise prices,” Goldfarb said. “Our prices have gone up, not only on transportation, but the fact that labor costs have gone up globally; there are fewer factories, greater competition for space within the factories. We’re forced to pay more for the product that we’ve purchased. But the good news is that we’re not a commodity business. We’re a little bit of an art. There’s creativity that goes into our product. And you get paid for being creative. It’s not a quart of milk that you can compare it at every supermarket and compare prices. The better art gets paid more. We’ve proved that out.
“Our prices for outerwear have gone up, some of our brands have gone up as much as $20 per garment,” he continued. “In our dress business, our prices are up now in anticipation of what the future will be as far as our costs. Some brands are up $10 a dress, on average unit retail, and we have a brand that’s up $20, comparable to two years ago. And sales have not slowed down. I only wish I had great supply in our warehouse to support the demand. So, the consumer is not scared away from paying appropriate prices for appropriate garments.”
Goldfarb added that as concerns of the new Omicron variant spread around the world, the company has adjusted its order books in anticipation of at least some canceled orders.
“Not because of the virus itself, but because of the fear factor that might be setting in with retailers,” he said. “So, we’re considering it. I do not know what to do about [the new variant]. But we’re monitoring it. [But] we’re still looking at the most amazing year we’ve ever had. The strong will survive. We’re picking up market share.”
The company ended the quarter with nearly $280 million in cash and cash equivalents and $517 million in long-term debt.
Shares of G-III Apparel, which closed down 4.14 percent Tuesday to $29.64 apiece, are up more than 37 percent, year-over-year.
