Market Overview

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

Share:

— Net Sales Increase 3.6% for First Quarter to $634 million —

— GAAP Net Income Per Diluted Share for the First Quarter Increased
to $0.24 vs. $0.20 Last Year —

— Non-GAAP Net Income Per Diluted Share for the First Quarter
Increased to $0.25 vs. $0.22 Last Year —

— Company Reaffirms Full Year Guidance —

G-III Apparel Group, Ltd. (NASDAQ:GIII) today announced operating
results for the first quarter of fiscal 2020 ended April 30, 2019.

Net sales for the first quarter ended April 30, 2019 increased 3.6% to
$633.6 million from $611.7 million in the same period last year. The
Company reported GAAP net income for the first quarter of $12.0 million,
or $0.24 per diluted share, compared to $9.9 million, or $0.20 per
diluted share, in the prior year's comparable period.

Non-GAAP net income per diluted share was $0.25 for the first quarter of
this year compared to $0.22 in the same period last year. Non-GAAP net
income per diluted share excludes non-cash imputed interest expense
related to the note issued to seller (the "Seller Note") as part of the
consideration for the acquisition of Donna Karan International of $1.3
million in this quarter compared to $1.2 million in the first quarter
last year and a $0.8 million gain on lease terminations in the current
quarter. The aggregate effect of these exclusions was equal to $0.01 per
diluted share in the first quarter of this year and $0.02 per diluted
share in fiscal 2019.

Morris Goldfarb, G-III's Chairman and Chief Executive Officer, said, "We
are pleased to have reported first quarter net income per diluted share
that was at the high end of our expectations. Our results were once
again fueled by strong performance in our wholesale business led by our
five global power brands DKNY, Donna Karan, Calvin Klein, Tommy Hilfiger
and Karl Lagerfeld."

Mr. Goldfarb concluded, "We know disruption in the retail industry has
never been greater, but we remain confident in our ability to adapt to
unique challenges. We are well positioned for a solid year and I am
confident we are poised to achieve significant growth over the next
several years."

Impact of New Lease Accounting Rules

Effective February 1, 2019, the Company adopted the new Lease Accounting
Standards Codification Topic 842 ("ASC 842") which resulted in a
significant increase in its reported assets and liabilities associated
with its operating leases. The adoption of ASC 842 will have a
significant impact on the Company's Consolidated Balance Sheet, but is
not expected to have a material impact on its Consolidated Statements of
Income and Comprehensive Income or Consolidated Statements of Cash Flows.

Outlook

G-III Apparel Group today reaffirmed guidance for the fiscal year ending
January 31, 2020, which incorporates the impact on certain of the
Company's products, of the current 25% tariffs imposed on nearly $200
billion of total goods imported from China into the U.S. However, the
Company has not incorporated any future increases in tariffs on
additional goods imported from China into the US in its fiscal 2020
guidance.

For fiscal 2020, the Company is forecasting net sales of approximately
$3.28 billion and net income between $163 million and $168 million, or
between $3.19 and $3.29 per diluted share.

The Company is anticipating non-GAAP net income for fiscal 2020 between
$167 million and $172 million, or between $3.25 and $3.35 per diluted
share. Non-GAAP guidance excludes non-cash imputed interest expense
related to the Seller Note of approximately $5.4 million and a $0.8
million gain on lease terminations. The aggregate effect of these
exclusions is equal to $0.06 per diluted share.

The Company is projecting full-year adjusted EBITDA for fiscal 2020
between $307 million and $313 million compared to adjusted EBITDA of
$269.4 million in fiscal 2019.

For the second fiscal quarter ending July 31, 2020, the Company is
forecasting net sales of approximately $660.0 million and net income
between $8.0 million and $13.0 million, or between $0.15 and $0.25 per
diluted share. This forecast compares to net sales of $624.7 million and
net income of $10.1 million, or $0.20 per diluted share, reported in the
second quarter of fiscal 2019. Non-GAAP guidance excludes non-cash
imputed interest expense related to the Seller Note of approximately
$1.3 million, or $0.02 per share, in the second quarter of fiscal 2020,
and $1.2 million, or $0.02 per share, in the second quarter of prior
year. On an adjusted basis, excluding non-cash imputed interest, the
Company is forecasting non-GAAP net income between $0.17 and $0.27 per
diluted share. This compares to non-GAAP net income of $0.22 per diluted
share in second quarter of fiscal year 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, 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 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, 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
(In
thousands, except per share amounts)

 

Three Months Ended
April 30,

2019 2018
(Unaudited)
 
Net sales $ 633,552 $ 611,743
Cost of goods sold   397,488   377,216
Gross profit 236,064 234,527
 
Selling, general and administrative expenses 201,859 202,071
Depreciation and amortization 9,473 9,380
Gain on lease terminations   (829)  
Operating profit 25,561 23,076
 
Other loss (648) (451)
Interest and financing charges, net   (10,320)   (9,620)
Income before income taxes 14,593 13,005
 
Income tax expense   2,550   3,120
Net income $ 12,043 $ 9,885
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