G-III Apparel Group, Ltd. Reports Third Quarter Fiscal 2025 Results Above Guidance; Updates Fiscal 2025 Outlook
- Third Quarter GAAP and Non-GAAP Net Income Per Diluted Share Exceed Guidance
- Net Sales of $1.09 Billion for the Third Quarter Compared to $1.07 Billion Last Year
- Net Income Per Diluted Share of $2.55 for the Third Quarter Compared to $2.74 Last Year
- Non-GAAP Net Income Per Diluted Share of $2.59 for the Third Quarter Compared to $2.78 Last Year
- Raises GAAP and Non-GAAP Net Income Per Diluted Share Guidance for Fiscal 2025
New York, NY — G-III Apparel Group reported results for the third quarter of fiscal 2025 ended October 31, 2024.
Morris Goldfarb, G-III’s Chairman and Chief Executive Officer, said, “I am very pleased with our strong third quarter results, with earnings per diluted share exceeding our expectations, driven by over 30% organic growth of our key owned brands DKNY, Karl Lagerfeld, Donna Karan and Vilebrequin. The power of our transforming business model is delivering margin expansion and bottom-line outperformance. Our teams continue to demonstrate strong execution despite a challenging consumer environment, unseasonable weather and supply chain disruptions. As we have progressed into the fourth quarter, we have experienced strengthening sell-throughs across our brands, and our inventories are well-positioned to support demand for the remaining holiday and early Spring season.”
Mr. Goldfarb concluded, “Looking at the remainder of the year, given our significant third quarter earnings outperformance, we are once again raising our earnings per diluted share guidance for fiscal 2025. Our proven track record of success and our strong balance sheet give us ample flexibility to invest in long-term opportunities to expand our business, while delivering on our commitment to drive long-term sustainable growth and shareholder value.”
Results of Operations
Third Quarter Fiscal 2025 Financial Results
Net sales for the third quarter ended October 31, 2024 increased 1.8% to $1.09 billion compared to $1.07 billion in the prior year’s third quarter.
Net income for the third quarter ended October 31, 2024 was $114.8 million, or $2.55 per diluted share, compared to $127.6 million, or $2.74 per diluted share, in the prior year’s third quarter.
Non-GAAP net income per diluted share was $2.59 for the third quarter ended October 31, 2024 compared to $2.78 in the same period last year. Non-GAAP net income per diluted share excludes (i) in the third quarter of fiscal 2025, a $1.6 million write-off of deferred financing costs related to the redemption of our senior secured notes (the “Notes”), (ii) in the third quarter of fiscal 2025, $0.5 million in one-time severance expenses related to a closed warehouse, (iii) in the third quarter of fiscal 2024, incentive compensation expenses of $1.8 million related to the Karl Lagerfeld transaction, (iv) in the third quarter of fiscal 2024, non-cash imputed interest expense of $0.7 million related to the note issued to seller as part of the consideration for the acquisition of Donna Karan International and (v) in the third quarter of fiscal 2024, asset impairments of $0.2 million. The aggregate effect of these exclusions was equal to $0.04 per diluted share in the third quarter of this year and $0.04 per diluted share in last year’s third quarter.
Balance Sheet as of Third Quarter Fiscal 2025
Inventories decreased 10% to $532.5 million at the end of this year’s third quarter compared to $591.5 million in the third quarter of last year.
Total debt decreased 52% to $224.2 million at the end of this year’s third quarter compared to $461.9 million in the third quarter of last year. In August 2024, a $400.7 million payment was made to voluntarily redeem the entire $400 million principal amount of the Notes at a redemption price equal to 100% of the principal amount of the Notes plus accrued and unpaid interest. The payment was made with cash on hand and borrowings from the revolving credit facility.
Outlook
The Company today updated its outlook for the fiscal year ending January 31, 2025. This outlook anticipates the current macroeconomic and consumer environment, as well as the unseasonable weather. The outlook further includes approximately $55.0 million (prior approximately $60.0 million) in incremental expenses, primarily associated with the launches of Donna Karan, Nautica and Halston. Approximately 60% of these expenses are related to marketing initiatives to support the Donna Karan and DKNY brands. The remaining costs are principally related to talent and technology to expand operational capabilities.
Fiscal 2025
Net sales are expected to increase by approximately 2% to approximately $3.15 billion (prior approximately $3.20 billion), compared to net sales of $3.10 billion for fiscal 2024.
Net income is expected to be between $185.0 million and $190.0 million (prior $179.0 million and $184.0 million), or diluted earnings per share between $4.08 and $4.18 (prior $3.94 and $4.04). This compares to net income of $176.2 million, or $3.75 per diluted share, for fiscal 2024.
Non-GAAP net income for fiscal 2025 is expected to be between $186.0 million and $191.0 million (prior $180.0 and $185.0 million), or diluted earnings per share between $4.10 and $4.20 (prior $3.95 and $4.05). This compares to non-GAAP net income of $189.8 million, or diluted earnings per share of $4.04 for fiscal 2024.
Adjusted EBITDA for fiscal 2025 is expected to be between $309.0 million and $314.0 million (prior $305.0 million and $310.0 million) compared to adjusted EBITDA of $324.1 million in fiscal 2024.
Net interest expense is expected to be approximately $20.4 million, including a $1.6 million non-GAAP charge related to the write-off of deferred financing costs associated with the redemption of the Notes.
We estimate a tax rate of 28.6% for fiscal 2025.
Non-GAAP Financial Measures
| G-III APPAREL GROUP, LTD. AND SUBSIDIARIES (Nasdaq: GIII) CONSOLIDATED STATEMENTS OF INCOME (In thousands, except per share amounts) |
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| Three Months Ended October 31, | Nine Months Ended October 31, | |||||||||||||||
| 2024 |
2023 |
2024 |
2023 |
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| (Unaudited) | ||||||||||||||||
| Net sales | $ | 1,086,759 | $ | 1,067,110 | $ | 2,341,261 | $ | 2,333,460 | ||||||||
| Cost of goods sold | 654,628 | 633,697 | 1,374,363 | 1,373,594 | ||||||||||||
| Gross profit | 432,131 | 433,413 | 966,898 | 959,866 | ||||||||||||
| Selling, general and administrative expenses | 259,240 | 236,308 | 724,891 | 703,476 | ||||||||||||
| Depreciation and amortization | 6,556 | 6,595 | 20,704 | 19,130 | ||||||||||||
| Asset impairments | — | 222 | — | 222 | ||||||||||||
| Operating profit | 166,335 | 190,288 | 221,303 | 237,038 | ||||||||||||
| Other income (loss) | 942 | (3,129 | ) | (2,233 | ) | (1,964 | ) | |||||||||
| Interest and financing charges, net | (6,358 | ) | (11,024 | ) | (16,658 | ) | (32,666 | ) | ||||||||
| Income before income taxes | 160,919 | 176,135 | 202,412 | 202,408 | ||||||||||||
| Income tax expense | 46,151 | 48,755 | 57,903 | 55,651 | ||||||||||||
| Net income | 114,768 | 127,380 | 144,509 | 146,757 | ||||||||||||
| Less: Loss attributable to noncontrolling interests | — | (260 | ) | (273 | ) | (557 | ) | |||||||||
| Net income attributable to G-III Apparel Group, Ltd. | $ | 114,768 | $ | 127,640 | $ | 144,782 | $ | 147,314 | ||||||||
| Net income attributable to G-III Apparel Group, Ltd. per common share: | ||||||||||||||||
| Basic | $ | 2.62 | $ | 2.79 | $ | 3.24 | $ | 3.21 | ||||||||
| Diluted | $ | 2.55 | $ | 2.74 | $ | 3.17 | $ | 3.13 | ||||||||
| Weighted average shares outstanding: | ||||||||||||||||
| Basic | 43,885 | 45,723 | 44,640 | 45,904 | ||||||||||||
| Diluted | 44,954 | 46,560 | 45,719 | 46,992 | ||||||||||||
| Selected Balance Sheet Data (in thousands): | As of October 31, | |||||
| 2024 | 2023 | |||||
| (Unaudited) | ||||||
| Cash and cash equivalents | $ | 104,686 | $ | 197,391 | ||
| Working capital | 980,899 | 1,110,793 | ||||
| Inventories | 532,463 | 591,530 | ||||
| Total assets | 2,783,611 | 2,749,333 | ||||
| Total debt | 224,175 | 461,945 | ||||
| Operating lease liabilities | 302,313 | 239,419 | ||||
| Total stockholders’ equity | 1,648,726 | 1,503,220 | ||||
| G-III APPAREL GROUP, LTD. AND SUBSIDIARIES RECONCILIATION OF GAAP NET INCOME TO NON-GAAP NET INCOME (In thousands) |
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| Three Months Ended | Nine Months Ended | |||||||||||||||
| October 31, 2024 | October 31, 2023 | October 31, 2024 | October 31, 2023 | |||||||||||||
| (Unaudited) | ||||||||||||||||
| GAAP net income attributable to G-III Apparel Group, Ltd. | $ | 114,768 | $ | 127,640 | $ | 144,782 | $ | 147,314 | ||||||||
| Excluded from non-GAAP: | ||||||||||||||||
| Write-off of deferred financing costs | 1,598 | — | 1,598 | — | ||||||||||||
| One-time warehouse related severance expenses | 530 | — | 559 | — | ||||||||||||
| Gain on forgiveness of liabilities | — | — | (600 | ) | — | |||||||||||
| Expenses related to Karl Lagerfeld acquisition | — | 1,847 | — | 5,517 | ||||||||||||
| Non-cash imputed interest | — | 682 | — | 3,585 | ||||||||||||
| Asset impairments | — | 222 | 222 | |||||||||||||
| Income tax impact of non-GAAP adjustments | (610 | ) | (761 | ) | (446 | ) | (2,563 | ) | ||||||||
| Non-GAAP net income attributable to G-III Apparel Group, Ltd., as defined | $ | 116,286 | $ | 129,630 | $ | 145,893 | $ | 154,075 | ||||||||
Non-GAAP net income is a “non-GAAP financial measure” that excludes (i) in the third quarter of fiscal 2025, the write-off of deferred financing costs related to the redemption of the Notes, (ii) in the third quarter of fiscal 2025, one-time severance expenses related to a closed warehouse, (iii) in the second quarter of fiscal 2025, the gain on the forgiveness of certain liabilities related to the acquisition of the minority interest of our DKNY business in China that we did not already own, (iv) in the third quarter of fiscal 2024, incentive compensation expenses related to the Karl Lagerfeld transaction, (v) in the third quarter of fiscal 2024, non-cash imputed interest expense and (vi) in the third quarter of fiscal 2024, asset impairments. The income tax impact of non-GAAP adjustments is calculated using the effective tax rate for the period. Management believes that these non-GAAP financial measures provide meaningful supplemental information regarding our performance by excluding items that are not indicative of our core business operating results. Management uses these non-GAAP financial measures to assess our performance on a comparative basis and believes that they are 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 GAAP NET INCOME PER SHARE TO NON-GAAP NET INCOME PER SHARE |
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| Three Months Ended | Nine Months Ended | |||||||||||||||
| October 31, 2024 | October 31, 2023 | October 31, 2024 | October 31, 2023 | |||||||||||||
| (Unaudited) | ||||||||||||||||
| GAAP diluted net income attributable to G-III Apparel Group, Ltd. per common share | $ | 2.55 | $ | 2.74 | $ | 3.17 | $ | 3.13 | ||||||||
| Excluded from non-GAAP: | ||||||||||||||||
| Write-off of deferred financing costs | 0.04 | — | 0.03 | — | ||||||||||||
| One-time warehouse related severance expenses | 0.01 | — | 0.01 | — | ||||||||||||
| Gain on forgiveness of liabilities | — | — | (0.01 | ) | — | |||||||||||
| Expenses related to Karl Lagerfeld acquisition | — | 0.04 | — | 0.12 | ||||||||||||
| Non-cash imputed interest | — | 0.01 | — | 0.08 | ||||||||||||
| Asset impairments | — | 0.01 | — | — | ||||||||||||
| Income tax impact of non-GAAP adjustments | (0.01 | ) | (0.02 | ) | (0.01 | ) | (0.05 | ) | ||||||||
| Non-GAAP diluted net income attributable to G-III Apparel Group, Ltd. per common share, as defined | $ | 2.59 | $ | 2.78 | $ | 3.19 | $ | 3.28 | ||||||||
N
| G-III APPAREL GROUP, LTD. AND SUBSIDIARIES RECONCILIATION OF FORECASTED AND ACTUAL NET INCOME TO FORECASTED AND ACTUAL ADJUSTED EBITDA (In thousands) |
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| Forecasted Twelve | Actual Twelve | |||||||||||||
| Three Months Ended | Months Ending | Months Ended | ||||||||||||
| October 31, 2024 | October 31, 2023 | January 31, 2025 | January 31, 2024 | |||||||||||
| (Unaudited) | ||||||||||||||
| Net income attributable to G-III Apparel Group, Ltd. | $ | 114,768 | $ | 127,640 | $ | 185,000 – 190,000 | $ | 176,168 | ||||||
| One-time warehouse related severance expenses | 530 | — | 559 | — | ||||||||||
| Gain on forgiveness of liabilities | — | — | (600 | ) | — | |||||||||
| Asset impairments | — | 222 | — | 6,758 | ||||||||||
| Expenses related to Karl Lagerfeld acquisition | — | 1,847 | — | 6,115 | ||||||||||
| One-time expenses primarily related to our DKNY business in China | — | — | — | 3,138 | ||||||||||
| Change in fair value of earnout liability | — | — | — | (1,041 | ) | |||||||||
| Depreciation and amortization | 6,556 | 6,595 | 29,000 | 27,523 | ||||||||||
| Interest and financing charges, net | 6,358 | 11,024 | 20,000 | 39,595 | ||||||||||
| Income tax expense | 46,151 | 48,755 | 75,041 | 65,859 | ||||||||||
| Adjusted EBITDA, as defined | $ | 174,363 | $ | 196,083 | $ | 309,000 – 314,000 | $ | 324,115 | ||||||
| G-III APPAREL GROUP, LTD. AND SUBSIDIARIES RECONCILIATION OF FORECASTED AND ACTUAL GAAP NET INCOME TO FORECASTED AND ACTUAL NON-GAAP NET INCOME (In thousands) |
||||||||
| Forecasted Twelve | Actual Twelve | |||||||
| Months Ending | Months Ended | |||||||
| January 31, 2025 | January 31, 2024 | |||||||
| Net income attributable to G-III Apparel Group, Ltd. | $ | 185,000 – 190,000 | $ | 176,168 | ||||
| Excluded from non-GAAP: | ||||||||
| Write-off of deferred financing costs | 1,598 | — | ||||||
| One-time warehouse related severance expenses | 559 | — | ||||||
| Gain on forgiveness of liabilities | (600 | ) | — | |||||
| Asset impairments | — | 6,758 | ||||||
| Expenses related to Karl Lagerfeld acquisition | — | 6,115 | ||||||
| Non-cash imputed interest | — | 3,798 | ||||||
| One-time expenses primarily related to our DKNY business in China | — | 3,138 | ||||||
| Change in fair value of earnout liability | — | (1,041 | ) | |||||
| Income tax impact of non-GAAP adjustments | (557 | ) | (5,137 | ) | ||||
| Non-GAAP net income attributable to G-III Apparel Group, Ltd., as defined | $ | 186,000 – 191,000 | $ | 189,799 | ||||
| G-III APPAREL GROUP, LTD. AND SUBSIDIARIES RECONCILIATION OF FORECASTED AND ACTUAL GAAP NET INCOME PER SHARE TO FORECASTED AND ACTUAL NON-GAAP NET INCOME PER SHARE |
||||||||
| Forecasted Twelve | Actual Twelve | |||||||
| Months Ending | Months Ended | |||||||
| January 31, 2025 | January 31, 2024 | |||||||
| GAAP diluted net income attributable to G-III Apparel Group, Ltd. per common share | $ | 4.08 – 4.18 | $ | 3.75 | ||||
| Excluded from non-GAAP: | ||||||||
| Write-off of deferred financing costs | 0.04 | — | ||||||
| One-time warehouse related severance expenses | 0.01 | — | ||||||
| Gain on forgiveness of liabilities | (0.01 | ) | — | |||||
| Asset impairments | — | 0.14 | ||||||
| Expenses related to Karl Lagerfeld acquisition | — | 0.13 | ||||||
| Non-cash imputed interest | — | 0.08 | ||||||
| One-time expenses primarily related to our DKNY business in China | — | 0.07 | ||||||
| Change in fair value of earnout liability | — | (0.02 | ) | |||||
| Income tax impact of non-GAAP adjustments | (0.02 | ) | (0.11 | ) | ||||
| Non-GAAP diluted net income attributable to G-III Apparel Group, Ltd. per common share, as defined. | $ | 4.10 – 4.20 | $ | 4.04 | ||||
