G-III Apparel Group, Ltd. Reports Second Quarter Fiscal 2025 Results, Signs Converse License
- Net Sales of $644.8 Million for the Second Quarter Compared to $659.8 Million Last Year
- Second Quarter GAAP and Non-GAAP Net Income Per Diluted Share Exceed Guidance
- Raises GAAP and Non-GAAP Net Income Per Diluted Share Guidance for Fiscal Year 2025
- Repaid $400 Million Senior Secured Notes Due August 2025
- Repurchased 1.2 Million Shares of the Company’s Common Stock for $31.6 Million
- Announces New Global Apparel License for the Converse Brand
New York, NY — G-III Apparel Group reported results for the second quarter of fiscal 2025 ended July 31, 2024.
Morris Goldfarb, G-III’s Chairman and Chief Executive Officer, said, “We delivered a strong first half of the year. Our second quarter non-GAAP net income per diluted share of $0.52 exceeded our expectations, led by our owned brands. DKNY and Karl Lagerfeld collectively grew double-digits and the Donna Karan relaunch has been incredibly successful, in addition to continued solid performance with healthy sell-throughs across the rest of our business.”
Mr. Goldfarb concluded, “Having the most desirable brands is central to our strategy and I am pleased with the transition to our go-forward portfolio, which will continue to evolve for the future. Our new businesses are working, and I am excited to announce a licensing agreement for Converse, Inc., a globally recognized American youth lifestyle brand. This new partnership represents a significant opportunity to expand our active lifestyle category while leveraging our core capabilities to build a global apparel business. The powerful combination of our brands, our business model and diverse growth drivers, together with our agility, operating discipline and strong foundation give us confidence that our strategy will deliver long-term shareholder value.”
Mr. Goldfarb concluded, “Given our second quarter earnings per diluted share outperformance, we are reaffirming our fiscal year 2025 net sales and, once again, raising our earnings per diluted share outlook. Despite the uncertain macroeconomic environment, we remain optimistic about the remainder of the year and our orderbook is in a good position for the important Fall and Holiday seasons.”
Results of Operations
Second Quarter Fiscal 2025 Financial Results
Net sales for the second quarter ended July 31, 2024 decreased 2% to $644.8 million compared to $659.8 million in the prior year’s second quarter.
Net income for the second quarter was $24.2 million, or $0.53 per diluted share, compared to $16.4 million, or $0.35 per diluted share, in the prior year’s second quarter.
Non-GAAP net income per diluted share was $0.52 for the second quarter compared to $0.40 in the same period last year. Non-GAAP net income per diluted share excludes (i) in the second quarter of fiscal 2025, the $0.6 million 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, (ii) in the second quarter of fiscal 2024, incentive compensation expenses of $1.8 million related to the Karl Lagerfeld transaction and (iii) in the second quarter of fiscal 2024, non-cash imputed interest expense of $1.1 million related to the note issued to seller as part of the consideration for the acquisition of Donna Karan International. The aggregate effect of these exclusions was equal to $(0.01) per diluted share in the second quarter of this year and $0.05 per diluted share in last year’s second quarter.
Balance Sheet as of Second Quarter Fiscal 2025
Inventories decreased 24% to $610.5 million at the end of this year’s second quarter compared to $804.9 million in the second quarter of last year.
During the quarter, we bought back 1,180,328 of our shares of common stock for an aggregate purchase price of $31.6 million.
Converse License
G-III signed a license agreement for Converse, Inc. to design and produce men’s and women’s apparel for distribution globally. The product is expected to launch in Fall 2025. Converse is an iconic American youth lifestyle brand and represents a significant opportunity for G-III to expand the active lifestyle business, providing exposure to a differentiated consumer and distribution network while leveraging existing fashion talent.
Outlook
The Company today updated its outlook for the fiscal year ending January 31, 2025. This outlook continues to anticipate approximately $60.0 million in incremental expenses, primarily associated with the launches of Donna Karan, Nautica and Halston. Approximately 65% of these expenses are related to marketing initiatives to support the Donna Karan and DKNY brands. The remaining costs are principally related to technology and talent to expand operational capabilities.
Fiscal 2025
Net sales are expected to increase by approximately 3% to $3.20 billion (unchanged to prior guidance), compared to net sales of $3.10 billion for fiscal 2024.
Net income is expected to be between $179.0 million and $184.0 million (prior $170.0 million and $175.0 million), or diluted earnings per share between $3.94 and $4.04 (prior $3.58 and $3.68). 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 $180.0 million and $185.0 million (prior $170.0 and $175.0 million), or diluted earnings per share between $3.95 and $4.05 (prior $3.58 and $3.68). 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 $305.0 million and $310.0 million (prior $295.0 million and $300.0 million) compared to adjusted EBITDA of $324.1 million in fiscal 2024.
Net interest expense is expected to be approximately $24.0 million, including a $1.7 million non-GAAP charge related to the write-off of deferred financing costs associated with the redemption of our senior secured notes. We estimate a tax rate of 28.5% for fiscal 2025.
Third Quarter Fiscal 2025
Net sales for the third quarter of fiscal 2025 are expected to increase by approximately 3% to $1.10 billion compared to $1.07 billion in the same period last year.
Net income for the third quarter of fiscal 2025 is expected to be in the range of $97.0 million and $102.0 million, or diluted earnings per share between $2.18 and $2.28. This compares to net income of $127.6 million, or diluted earnings per share of $2.74, in last year’s third quarter.
Non-GAAP net income for the third quarter of fiscal 2025 is expected to be between $98.0 million and $103.0 million, or diluted earnings per share between $2.20 and $2.30. This compares to non-GAAP net income of $129.6 million, or diluted earnings per share of $2.78, for the third quarter of fiscal 2024.
G-III APPAREL GROUP, LTD. AND SUBSIDIARIES
(Nasdaq: GIII)
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
| Three Months Ended July 31, | Six Months Ended July 31, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| (Unaudited) | ||||||||||||||||
| Net sales | $ | 644,755 | $ | 659,761 | $ | 1,254,502 | $ | 1,266,350 | ||||||||
| Cost of goods sold | 368,881 | 383,108 | 719,735 | 739,897 | ||||||||||||
| Gross profit | 275,874 | 276,653 | 534,767 | 526,453 | ||||||||||||
| Selling, general and administrative expenses | 229,030 | 239,207 | 465,651 | 467,168 | ||||||||||||
| Depreciation and amortization | 5,380 | 5,959 | 14,148 | 12,535 | ||||||||||||
| Operating profit | 41,464 | 31,487 | 54,968 | 46,750 | ||||||||||||
| Other (loss) income | (2,952 | ) | 192 | (3,175 | ) | 1,165 | ||||||||||
| Interest and financing charges, net | (4,876 | ) | (9,492 | ) | (10,300 | ) | (21,642 | ) | ||||||||
| Income before income taxes | 33,636 | 22,187 | 41,493 | 26,273 | ||||||||||||
| Income tax expense | 9,447 | 5,951 | 11,752 | 6,896 | ||||||||||||
| Net income | 24,189 | 16,236 | 29,741 | 19,377 | ||||||||||||
| Less: Loss attributable to noncontrolling interests | (23 | ) | (202 | ) | (273 | ) | (297 | ) | ||||||||
| Net income attributable to G-III Apparel Group, Ltd. | $ | 24,212 | $ | 16,438 | $ | 30,014 | $ | 19,674 | ||||||||
| Net income attributable to G-III Apparel Group, Ltd. per common share: | ||||||||||||||||
| Basic | $ | 0.54 | $ | 0.36 | $ | 0.67 | $ | 0.43 | ||||||||
| Diluted | $ | 0.53 | $ | 0.35 | $ | 0.65 | $ | 0.42 | ||||||||
| Weighted average shares outstanding: | ||||||||||||||||
| Basic | 44,569 | 45,714 | 45,022 | 45,996 | ||||||||||||
| Diluted | 45,483 | 46,570 | 46,105 | 46,992 | ||||||||||||
| Selected Balance Sheet Data (in thousands): | As of July 31, | |||||
| 2024 | 2023 | |||||
| (Unaudited) | ||||||
| Cash and cash equivalents | $ | 414,791 | $ | 197,735 | ||
| Working capital | 1,047,653 | 978,673 | ||||
| Inventories | 610,492 | 804,858 | ||||
| Total assets | 2,696,287 | 2,662,053 | ||||
| Total debt | 413,968 | 466,036 | ||||
| Operating lease liabilities | 218,733 | 247,544 | ||||
| Total stockholders’ equity | 1,512,635 | 1,382,115 | ||||
G-III APPAREL GROUP, LTD. AND SUBSIDIARIES
RECONCILIATION OF GAAP NET INCOME TO NON-GAAP NET INCOME
(In thousands)
| Three Months Ended | Six Months Ended | |||||||||||||||
| July 31, 2024 | July 31, 2023 | July 31, 2024 | July 31, 2023 | |||||||||||||
| (Unaudited) | ||||||||||||||||
| GAAP net income attributable to G-III Apparel Group, Ltd. | $ | 24,212 | $ | 16,438 | $ | 30,014 | $ | 19,674 | ||||||||
| Excluded from non-GAAP: | ||||||||||||||||
| Gain on forgiveness of liabilities | (600 | ) | — | (600 | ) | — | ||||||||||
| Expenses related to Karl Lagerfeld acquisition | — | 1,848 | — | 3,669 | ||||||||||||
| Non-cash imputed interest | — | 1,086 | — | 2,903 | ||||||||||||
| Income tax impact of non-GAAP adjustments | 168 | (786 | ) | 168 | (1,724 | ) | ||||||||||
| Non-GAAP net income attributable to G-III Apparel Group, Ltd., as defined | $ | 23,780 | $ | 18,586 | $ | 29,582 | $ | 24,522 | ||||||||
G-III APPAREL GROUP, LTD. AND SUBSIDIARIES
RECONCILIATION OF GAAP NET INCOME PER SHARE TO NON-GAAP NET INCOME PER SHARE
| Three Months Ended | Six Months Ended | |||||||||||||||
| July 31, 2024 | July 31, 2023 | July 31, 2024 | July 31, 2023 | |||||||||||||
| (Unaudited) | ||||||||||||||||
| GAAP diluted net income attributable to G-III Apparel Group, Ltd. per common share | $ | 0.53 | $ | 0.35 | $ | 0.65 | $ | 0.42 | ||||||||
| Excluded from non-GAAP: | ||||||||||||||||
| Gain on forgiveness of liabilities | (0.01 | ) | — | (0.01 | ) | — | ||||||||||
| Expenses related to Karl Lagerfeld acquisition | — | 0.04 | — | 0.08 | ||||||||||||
| Non-cash imputed interest | — | 0.03 | — | 0.06 | ||||||||||||
| Income tax impact of non-GAAP adjustments | — | (0.02 | ) | — | (0.04 | ) | ||||||||||
| Non-GAAP diluted net income attributable to G-III Apparel Group, Ltd. per common share, as defined | $ | 0.52 | $ | 0.40 | $ | 0.64 | $ | 0.52 | ||||||||
G-III APPAREL GROUP, LTD. AND SUBSIDIARIES
RECONCILIATION OF FORECASTED AND ACTUAL NET INCOME TO FORECASTED AND ACTUAL ADJUSTED EBITDA
(In thousands)
| Forecasted Twelve | Actual Twelve | ||||||||||||||
| Three Months Ended | Months Ending | Months Ended | |||||||||||||
| July 31, 2024 | July 31, 2023 | January 31, 2025 | January 31, 2024 | ||||||||||||
| (Unaudited) | |||||||||||||||
| Net income attributable to G-III Apparel Group, Ltd. | $ | 24,212 | $ | 16,438 | $ | 179,000 – 184,000 | $ | 176,168 | |||||||
| Gain on forgiveness of liabilities | (600 | ) | — | (600 | ) | — | |||||||||
| Write-off of deferred financing costs | — | — | 1,700 | — | |||||||||||
| Asset impairments | — | — | — | 6,758 | |||||||||||
| Expenses related to Karl Lagerfeld acquisition | — | 1,848 | — | 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 | 5,380 | 5,959 | 31,000 | 27,523 | |||||||||||
| Interest and financing charges, net | 4,876 | 9,492 | 22,000 | 39,595 | |||||||||||
| Income tax expense | 9,447 | 5,951 | 71,900 | 65,859 | |||||||||||
| Adjusted EBITDA, as defined | $ | 43,315 | $ | 39,688 | $ | 305,000 – 310,000 | $ | 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 Three | Actual Three | Forecasted Twelve | Actual Twelve | |||||||||||||
| Months Ending | 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. | $ | 97,000-102,000 | $ | 127,640 | $ | 179,000 – 184,000 | $ | 176,168 | ||||||||
| Excluded from non-GAAP: | ||||||||||||||||
| Gain on forgiveness of liabilities | — | — | (600 | ) | — | |||||||||||
| Write-off of deferred financing costs | 1,700 | — | 1,700 | — | ||||||||||||
| Asset impairments | — | 222 | — | 6,758 | ||||||||||||
| Expenses related to Karl Lagerfeld acquisition | — | 1,847 | — | 6,115 | ||||||||||||
| Non-cash imputed interest | — | 682 | — | 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 | (700 | ) | (761 | ) | (100 | ) | (5,137 | ) | ||||||||
| Non-GAAP net income attributable to G-III Apparel Group, Ltd., as defined | $ | 98,000-103,000 | $ | 129,630 | $ | 180,000 – 185,000 | $ | 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 Three | Actual Three | Forecasted Twelve | Actual Twelve | |||||||||||||
| Months Ending | Months Ended | Months Ending | Months Ended | |||||||||||||
| October 31, 2024 | October 31, 2023 | January 31, 2025 | January 31, 2024 | |||||||||||||
| (Unaudited) | ||||||||||||||||
| GAAP diluted net income attributable to G-III Apparel Group, Ltd. per common share | $ | 2.18 – 2.28 | $ | 2.74 | $ | 3.94 – 4.04 | $ | 3.75 | ||||||||
| Excluded from non-GAAP: | ||||||||||||||||
| Gain on forgiveness of liabilities | — | — | (0.01 | ) | — | |||||||||||
| Write-off of deferred financing costs | 0.03 | — | 0.03 | — | ||||||||||||
| Asset impairments | — | 0.01 | — | 0.14 | ||||||||||||
| Expenses related to Karl Lagerfeld acquisition | — | 0.04 | — | 0.13 | ||||||||||||
| Non-cash imputed interest | — | 0.01 | — | 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 | (0.01 | ) | (0.02 | ) | (0.01 | ) | (0.11 | ) | ||||||||
| Non-GAAP diluted net income attributable to G-III Apparel Group, Ltd. per common share, as defined | $ | 2.20 – 2.30 | $ | 2.78 | $ | 3.95 – 4.05 | $ | 4.04 | ||||||||
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