G- III Beats Guidance and Discloses New Licensing Deal
The company's large portfolio of owned brands and licensed businesses just grew with a deal to produce Champion outerwear.
By beating its second-quarter guidance, raising its outlook for the year and signing a new licensing deal, the G-III Apparel Group saw a big leap in its stock price Thursday.
The results — including a 9 percent net sales gain, a decline in net profit but a gain in income on a non-GAAP basis — helped lift the stock price 24 percent, or $4.68, to $23.98 to close Thursday.
G-III's newest license agreement is with HanesBrands to produce an outerwear collection for the Champion brand. “Our collection will feature quality heritage pieces that complement and enhance Champion's principles of self-expression,” Morris Goldfarb, G-III's chairman and chief executive officer, said in his statement Thursday. “This license aligns with G-III's core competencies in outerwear and will fit seamlessly into our well-developed outerwear divisions.” The first Champion deliveries by G-III will be fall 2024.
G-III's sales in the second quarter ended July 31 rose to $659.8 million from $605.2 million in the year-ago period.
The net income declined to $16.4 million, or $0.35 per diluted share, compared to $36.3 million, or $0.74 per diluted share in the prior-year period. However, G-III executives pointed out that on a non-GAAP basis, which excludes certain temporary items related to acquisitions and other areas, per share profits rose to $0.40, from $0.39 in the prior-year period. Year-to-date G-III has repurchased 1.6 million shares, returning $26 million to shareholders, and has replenished its stock buy-back capacity to 10 million shares.
“We once again beat both our top- and bottom-line guidance and made progress on our strategic priorities,” Goldfarb said, recapping the second quarter.
For the first half of the year, “Our performance further validates G-III's ability to successfully navigate what remains a dynamic environment. I am immensely proud of our team's consistently strong execution.”
Earlier this year, G-III inked a 25-year master licensing agreement with Xcel Brands to produce men's and women's products under the Halston brand. Between that deal, the new Champion deal, planned expansions of the G-III owned Donna Karan and Karl Lagerfeld businesses, as well as a previouslyannounced licensing deal with Nautica, G-III is moving to fill the void left by Tommy Hilfiger and Calvin Klein as PVH Corp. gradually takes back control over those licenses.
For the year, the company forecasts net sales of about $3.3 billion and net income of $145 million to $150 million. That's ahead of the previous forecast for $3.29 billion in revenues and profits of $132 million to $137 million.
Last year, the company generated sales of $3.23 billion and a net loss of
$133.1 million, or $2.79 per share. Those results included a $291.5 million non-cash goodwill impairment charge, net of tax.
For the third quarter of this year, G-III forecasts net income of between $94 million and $99 million, or $1.99 to $2.09 per diluted share.
During a conference call with analysts, Goldfarb said the financial results were abetted by freight costs moderating, lapping one-time logistics costs, and rightsizing inventories, which were down 23 percent. He said the company remains disciplined in its approach to future inventory buys and that “new inventories are coming in at much lower freight costs.” He also cited the company's current $825 million in cash and cash availability, which is after repaying $75 million in debt.
Of its large portfolio of 30 owned and licensed brands, G-III considers DKNY, Donna Karan, Karl Lagerfeld, Vilebrequin, Halston and Nautica as “power brands.”
With the Karl Lagerfeld brand, “We have unique partnerships that drive notable international exposure,” Goldfarb said. “Last month, the brand officially opened its first five-star luxury hotel in Macau, with 271 opulent guest rooms and a restaurant featuring a Michelin-star chef. This project represents Karl's design vision, as he personally worked on it for six years prior to his passing.
“Also, in June, we announced a second Karl Lagerfeld hotel tower at The Sail development in Malacca, Malaysia, a UNESCO World Heritage Site that is rapidly emerging as an international tourist destination,” Goldfarb said.
In addition, Karl Lagerfeld jeans recently launched, and there will be two stores opening in the future, in Paris and Madrid, dedicated to just the jeans. “High impact” marketing activities for the Lagerfeld brand are in the works for next fall.
He also said G-III is on track to launch next year the first deliveries of a repositioned and expanded Donna
Karan offering, which will be more widely distributed online and to stores. He said the new Donna Karan will launch in more than 200 partner doors and with more than 150 shops-in-shop.
Next year, Nautica with begin distributing jeans and follow with a broad range of products in more than 200 partner doors and 60 shops in shops to be built, Goldfarb said.
The summer opening of Vilebrequin's new beach club, La Plage, has been “a major success, offering guests an elevated beach experience,” Goldfarb said. “This summer, the club quickly became a destination for international vacationers, as the brand hosted several high-profile celebrity and corporate events at the beach club during the Cannes Film Festival.” He said he sees the concept rapidly replicating with franchise and licensing opportunities for beach clubs. “We are actively working on additional opportunities as we continue to create more Vilebrequin experiences, which will increase global awareness.”
The company also owns G.H.Bass, Eliza J., Jessica Howard, Andrew Marc, Marc New York, Wilsons Leather and Sonia Rykiel.
With its master license of Halston, Goldfarb said G-III has multiple avenues of growth with the label and an option to buy the brand.
Aside from Calvin Klein, Tommy
Hilfiger, Nautica, Halston and Champion, G-III's fashion licenses include Kenneth Cole, Cole Hahn, Guess, Vince Camuto, Levi's and Dockers. The company also has several licenses with professional sports organizations including the
National Football League and the National Basketball Association.
Commenting on the retail landscape, Goldfarb cited “fewer promotions in retail today than pre-COVID-19. There are less promotions around whether it be Macy's, Dillard's or Ralph [Lauren]. If you're sitting with aggressive inventory, you are going to have to take monstrous markdowns to move it. We are not giving away our inventory. It has great value.
“Our order book, as it sits, is in line with our guidance,” Goldfarb added. “The holiday expectation is actually a good one in our categories and product mix. We are looking at what will be a really good year and a good future.
“The elephant in the room is PVH,” Goldfarb added, referring to PVH Corp. taking back G-III's Tommy Hilfiger and Calvin Klein licenses. “We are not concerned about the future of [G-III]. We don't have a need for new licenses or acquisitions. We have sufficient tools to build a huge business. We have brands that afford us the ability to produce all categories. They are major brands that are recognized globally.
“We are quite happy with where we are. With this transition, we have not added or fired people,” Goldfarb said. “It's not a new culture that has to be indoctrinated to new employees.”