Second Quarter G-III Apparel (GIII) Earnings, FY22

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G-III Clothing Group, Ltd. GIII posted strong results for the second quarter of fiscal 2022, with both upper and lower results exceeding Zacks’ consensus estimate and increasing year over year. The quarter marked the company’s fifth consecutive result. The results also exceeded management’s expectations.

During the second fiscal quarter, G-III Apparel enjoyed continued strength in the casual categories. These categories have a potential growth opportunity with expansion into the outdoor and sports market. In addition, the company saw higher sales penetration in its broader lifestyle categories, such as dresses, more refined sportswear, and workwear. The shoe and handbag categories also continued to grow. The jeans category is also a bright spot. The company’s backlog continues to be impressive and is approaching pre-pandemic levels. Management is focused on expanding its international business.

For the second half, G-III Apparel has incorporated wider functionality into fabrics and intends to serve the wider lifestyles. It is in the process of adding collections focused on particular sports activities and high performance fitness. The company is well positioned with the diverse product categories of its powerful brands, including DKNY, Donna Karan, Calvin Klein, Tommy Hilfiger and Karl Lagerfeld Paris, to meet growing demand.

So far this year, shares of this company currently Zacks Rank # 3 (Hold) have jumped 37.7%, surpassing the industry’s 14.8% growth.

Q2 in detail

G-III Apparel generated earnings per share of 39 cents, beating Zacks’ consensus estimate of 10 cents. In addition, net income rebounded from the loss of 31 cents per share in the prior year quarter. Net income was well above the upper end of management’s previous range of 3 to 13 cents per share.

We note that the company completed the restructuring of its retail segment during the last fiscal year and closed the Wilsons Leather and GH Bass stores. The prior year quarter results included net losses of 53 cents per share from Wilsons and GH Bass store operations.

Net sales jumped 62.5% year-over-year to $ 483.1 million and topped Zacks’ consensus estimate of $ 462 million. The revenue outperformance can be attributed to sales growth in the Wholesale business, offset by weak sales in the Retail business. Management had forecast net sales of approximately $ 460 million for the second quarter of fiscal 2022.

GIII Clothing Group, LTD. Price, consensus and EPS Surprise

GIII Clothing Group, LTD. price-consensus-eps-surprise-chart | GIII Clothing Group, LTD. Quote

We can see that digital sales of the company’s products have been accelerating for some time now. At the sites of the company’s partner distributors and at its own sites, product sales have increased by more than 70% compared to the level reached two years ago. In China, digital sales were stronger than in-store sales. Vilebrequin’s digital sites are up about 70% from the level recorded two years ago.

G-III Apparel regularly launches improved and restructured websites for DKNY and Karl Lagerfeld Paris with advanced technical operations that will allow seamless site navigation. These sites are likely to offer immersive branded content to engage consumers, making it easier to convert and leveraging sales tools, such as virtual selling. It regularly invests in data analytics capabilities to better understand consumers across channels and improve their shopping experiences. Management informed that the company has joined forces with GEODIS, its logistics provider, to strengthen direct sales capacities to consumers.

An overview of the margins

Gross profit jumped 43.2% year-on-year to $ 192.9 million. However, the gross margin of 39.9% contracted 540 basis points (bps) compared to the prior year period reading. Gross margins for the period last year included gains from pandemic-related adjustments.

Selling and administrative expenses jumped 20.2% year-over-year to $ 146.8 million, mainly due to higher compensation expenses related to accrued bonuses and wages. The company reported operating profit of $ 38.9 million compared to an operating loss of $ 11.4 million recorded in the quarter of the previous year.

Segment performances

Net sales to Wholesale segment was $ 467 million, up about 75% year-over-year. Additionally, the segment’s gross margin declined nearly 800 basis points from the last year quarter to 38.3%.

Net sales to Retail The segment totaled $ 27 million, down 22.9% from the reported figure for the prior year quarter, due to the restructuring of its retail segment. Nevertheless, the gross margin of the segment increased sharply to 51.9% against 32.5% recorded in the quarter of the previous year.

Financial details

G-III Apparel ended the second fiscal quarter with cash and cash equivalents of $ 510 million and long-term debt of $ 517.6 million. Total equity was $ 1,380.6 million. Inventories decreased 13.1% to $ 499.3 million at the end of the quarter. At the end of the quarter, it had cash and cash equivalents under its credit agreement of more than $ 900 million.

Outlook

Management has issued the advisory for fiscal year 2022, ending January 31, 2022. This guidance is based on the anticipated impact of supply chain conditions with higher shipping costs and delays in processing. receipt of goods. He anticipates higher freight costs for the remainder of the current year, which should impact gross margins in the second half of the year.

For fiscal 2022, G-III Apparel forecasts net sales of $ 2.70 billion, up from $ 2.57 billion previously. He forecasts a net profit of between 155 and 165 million dollars against 125 to 135 million dollars previously estimated. Management expected earnings per share of $ 3.10 to $ 3.20, higher than the $ 2.60 to $ 2.70 previously forecast.

For fiscal 2021, the company reported revenue of $ 2.06 billion and net income of $ 23.5 million or 48 cents per share.

For the fiscal third quarter, G-III Apparel expects net sales of approximately $ 1 billion and net income in the range of $ 80 million to $ 90 million, or $ 1.65 to $ 1.75 per share. In the quarter of the previous year, it achieved net sales of $ 826.6 million and net income of $ 63.2 million or $ 1.29 per share.

Zacks’ consensus estimate for earnings is currently set at $ 1.66 for the third quarter of fiscal 2022 and $ 2.69 for the full fiscal year.

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