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G-III Apparel Group, Ltd. Reports Second Quarter Fiscal 2025 Results, Signs Converse License image

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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