G-lll Apparel Raises Estimates, Expects Return of Workwear
G-III Apparel Group Ltd. is making a comeback.
The firm, parent to the DKNY and Donna Karan brands, among others, revealed first-quarter earnings Monday before the market opened, improving on top-line revenues and turning last year’s losses into a profit. Company shares closed up 10.69 percent to $34.80 a piece Monday as a result.
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“We were pleased with our strong outperformance in the first quarter of this fiscal year,” Morris Goldfarb, G-III’s chairman and chief executive officer, said in a statement. “With each passing week, sales for broader lifestyle apparel, such as sportswear, wear-to-work attire and dresses, are accelerating and our overall business in North America is getting stronger. We believe these trends provide a good indication for the remainder of the year and give us confidence that we and our industry are well on our way to recovery. We believe we are well positioned to capitalize on consumer demand as the year progresses and are optimistic about this fiscal year.”
Total sales for the three-month period ending April 30 increased more than 28 percent to about $520 million, up from $405 million during fiscal year 2021’s first quarter. The company logged $26.3 million in profits as a result, compared with losses of $39.2 million a year earlier.
“We have a long runway of organic growth ahead of us and the resources to invest in that growth,” Goldfarb told analysts on Monday morning’s conference call.
Over the last three months, growth drivers included the China business, which is now expected to be up 50 percent for the year, compared with last year; Vilebrequin; DKNY women’s footwear, and the wholesale division. Goldfarb added that G-III’s power brands — DKNY, Donna Karan, Calvin Klein, Tommy Hilfiger and Karl Lagerfeld — alone have the potential to reach $4 billion in annual revenues.
The Karl Lagerfeld activewear collection, for example, which launched at 75 Macy’s locations earlier this year, has far exceeded company expectations, Goldfarb said.
“As a result, we will more than triple our distribution from 75 to 250 doors by the end of the year,” he said on the call.
And while Goldfarb said he recognizes “the importance of transforming into an omnichannel organization,” he also believes in the power of brick-and-mortar.
“We feel great about our current store base,” the CEO said. “These brands are among some of the most recognized global fashion brands and are strategically important to our longer-term goals of brand ownership and omnichannel distribution. We’re looking to take advantage of the current availability of prime retail space at favorable lease terms to selectively add some locations with average lease terms of about three years.”
Potential headwinds include the European business, where the majority of stores were closed last quarter due to local lockdowns, rising shipping rates and the availability of containers.
“The impediment to growing the business more rapidly is getting more supply,” Goldfarb said on the call. “Demand is high. We’re positioned OK on an inventory level. I wish we had far more inventory. The market opened up faster than we had anticipated and some of the resource countries that we’re engaged with are limited and a potentially big piece of our production.
“There is an inability to chase product when factories are closed,” he continued. “So, we’re bringing back some production to China. We made a solid base in China, which worked to our advantage. And as areas like Vietnam have limited capacity compared to China, we’re electing to bring back some of that production to China where the ability of sourcing more product competitively exists.”
G-III ended the quarter with more than $396 million in cash and cash equivalents and nearly $515 million in long-term debt.
The group is now expecting its current quarter revenues to be about $460 million, up from $297 million a year ago. For the full fiscal year, G-III is anticipating revenues of about $2.57 billion, compared with $2.06 billion during the 2021 fiscal year. Full-year income is expected to be between $125 million and $135 million, or between $2.60 and $2.70 a diluted share, compared with 2021’s full-year profits of $23.5 million, or $0.48 a diluted share.
“Reflecting upon the last year and the difficult challenges posed by the global pandemic, it is impressive to see how effectively we navigated through this period, demonstrating the power and diversification of G-III’s business to adapt and succeed in any environment,” Goldfarb said. “As the world reopens, we are in a strong financial position, which we believe will allow us to fund our growth domestically and internationally and enable us to take advantage of opportunities that arise.”
G-III — which also includes luxury swimwear brand Vilebrequin, Eliza J, Jessica Howard, Andrew Marc and Marc New York in the greater portfolio, in addition to fashion licenses under the Calvin Klein, Tommy Hilfiger, Karl Lagerfeld Paris, Kenneth Cole, Cole Haan, Guess, Vince Camuto, Levi’s and Dockers brands — permanently closed all of its Wilsons Leather and G.H. Bass stores — nearly 200 locations — last year.
The company’s stock is up more than 93 percent, year-over-year.
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