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G-III Apparel Group, Ltd. (GIII - Free Report) posted sturdy second-quarter fiscal 2022 results with both the top and the bottom line beating the Zacks Consensus Estimate and growing year over year. The quarter marked the fifth straight earnings beat for the company. Results also exceeded management’s expectations.
In the fiscal second quarter, G-III Apparel witnessed continued strength in casual categories. These categories have a potential growth opportunity with expansion into the outdoor and sports market. In addition, the company saw higher penetration of sales across its broader lifestyle categories, such as dresses, more polished sportswear and wear-to-work clothing. The shoes and handbag categories also continue to grow. The jeans category is a bright spot too. The company’s order book continues to be impressive and approaching the pre-pandemic levels. Management is focused on expanding its international business.
For the second half, G-III Apparel has been incorporating a wider functionality in fabrics and intends to serve the broader lifestyles. It is on track to add collections focusing on particular sports activities and high-performance fitness. The company is well-positioned with the diversified product categories across its power brands including DKNY, Donna Karan, Calvin Klein, Tommy Hilfiger and Karl Lagerfeld Paris to cater to growing demand.
So far this year, shares of this presently Zacks Rank #3 (Hold) company have surged 37.7%, outperforming the industry’s 14.8% growth.
Q2 in Detail
G-III Apparel delivered earnings per share of 39 cents, beating the Zacks Consensus Estimate of 10 cents. Also, the bottom line rebounded from the year-earlier quarter’s loss of 31 cents a share. The bottom line significantly outpaced the upper end of management’s earlier guided range of 3-13 cents per share.
We note that the company completed the restructuring of its retail segment during the last fiscal and shuttered the Wilsons Leather and G.H. Bass stores. The prior-year quarter’s results included net losses of 53 cents per share from the Wilsons and G.H. Bass store operations.
Net sales surged 62.5% year over year to $483.1 million and surpassed the Zacks Consensus Estimate of $462 million. The top-line outperformance can be attributed to sales growth at the Wholesale unit, offset by soft sales at the Retail division. Management had forecast net sales of about $460 million for second-quarter fiscal 2022.
GIII Apparel Group, LTD. Price, Consensus and EPS Surprise
We note that digital sales of the company’s products have been accelerating for a while now. On the company’s retail partners' sites and its own sites, sales of the products surged more than 70% from the level achieved two years ago. In China, digital sales were stronger than store sales. Vilebrequin digital sites were up about 70% compared with the level recorded two years ago.
G-III Apparel consistently launches enhanced and replatformed websites for DKNY and Karl Lagerfeld Paris with advanced technical operations that will allow a seamless navigation of the sites. These sites are likely to offer an immersive brand content to engage consumers, thus facilitating conversion and leverage sales tools, such as virtual selling. It is steadily investing in data analytics capabilities to better know the consumers across channels and boost their shopping experiences. Management informed that the company is partnering with GEODIS, its logistics provider, to boost the direct-to-consumer capabilities.
A Sneak Peek Into Margins
Gross profit surged 43.2% year over year to $192.9 million. However, gross margin of 39.9% contracted 540 basis points (bps) from the prior-year period’s reading. The year-ago period's gross margins included gains from the pandemic-related adjustments.
SG&A expenses jumped 20.2% year over year to $146.8 million, mainly due to higher compensation expenses with respect to bonus accruals and salaries. The company reported an operating income of $38.9 million against the operating loss of $11.4 million recorded in the year-ago quarter.
Segmental Performance
Net sales at the Wholesale segment were $467 million, up roughly 75% year over year. Also, the segment’s gross margin declined nearly 800 bps from the year-ago quarter to 38.3%.
Net sales at the Retail segment totaled $27 million, down 22.9% from the prior-year quarter’s reported figure, due to the restructuring of its retail segment. Nonetheless, the segment’s gross margin grew sharply to 51.9% from 32.5% registered in the year-earlier quarter.
Financial Details
G-III Apparel ended the fiscal second quarter with cash and cash equivalents of $510 million and a long-term debt of $517.6 million. Total stockholders’ equity was $1,380.6 million. Inventories declined 13.1% to $499.3 million at the end of the reported quarter. At the quarter-end, it had cash and availability under its credit agreement of more than $900 million.
Outlook
Management raised the view for fiscal 2022, ending Jan 31, 2022. This guidance is based on the anticipated impact of the supply-chain conditions with expected higher shipping costs and delays in the receipt of goods. It anticipates higher freight costs for the balance of the ongoing fiscal year, which is likely to impact gross margins in the second half.
For fiscal 2022, G-III Apparel projects net sales of $2.70 billion, up from the prior view of $2.57 billion. It forecasts net income between $155 million and $165 million compared with $125-$135 million estimated earlier. Management envisioned earnings per share of $3.10-$3.20, higher than $2.60-$2.70 guided previously.
For fiscal 2021, the company reported sales worth $2.06 billion and a net income of $23.5 million or 48 cents per share.
For the fiscal third quarter, G-III Apparel projects net sales of roughly $1 billion and a net income in the bracket of $80-$90 million or $1.65-$1.75 per share. In the year-earlier quarter, it delivered net sales worth $826.6 million and a net income of $63.2 million or $1.29 a share.
The Zacks Consensus Estimate for earnings is currently pegged at $1.66 for the third quarter of fiscal 2022 and $2.69 for the full fiscal.
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G-III Apparel's (GIII) Q2 Earnings Beat, FY22 View Higher
G-III Apparel Group, Ltd. (GIII - Free Report) posted sturdy second-quarter fiscal 2022 results with both the top and the bottom line beating the Zacks Consensus Estimate and growing year over year. The quarter marked the fifth straight earnings beat for the company. Results also exceeded management’s expectations.
In the fiscal second quarter, G-III Apparel witnessed continued strength in casual categories. These categories have a potential growth opportunity with expansion into the outdoor and sports market. In addition, the company saw higher penetration of sales across its broader lifestyle categories, such as dresses, more polished sportswear and wear-to-work clothing. The shoes and handbag categories also continue to grow. The jeans category is a bright spot too. The company’s order book continues to be impressive and approaching the pre-pandemic levels. Management is focused on expanding its international business.
For the second half, G-III Apparel has been incorporating a wider functionality in fabrics and intends to serve the broader lifestyles. It is on track to add collections focusing on particular sports activities and high-performance fitness. The company is well-positioned with the diversified product categories across its power brands including DKNY, Donna Karan, Calvin Klein, Tommy Hilfiger and Karl Lagerfeld Paris to cater to growing demand.
So far this year, shares of this presently Zacks Rank #3 (Hold) company have surged 37.7%, outperforming the industry’s 14.8% growth.
Q2 in Detail
G-III Apparel delivered earnings per share of 39 cents, beating the Zacks Consensus Estimate of 10 cents. Also, the bottom line rebounded from the year-earlier quarter’s loss of 31 cents a share. The bottom line significantly outpaced the upper end of management’s earlier guided range of 3-13 cents per share.
We note that the company completed the restructuring of its retail segment during the last fiscal and shuttered the Wilsons Leather and G.H. Bass stores. The prior-year quarter’s results included net losses of 53 cents per share from the Wilsons and G.H. Bass store operations.
Net sales surged 62.5% year over year to $483.1 million and surpassed the Zacks Consensus Estimate of $462 million. The top-line outperformance can be attributed to sales growth at the Wholesale unit, offset by soft sales at the Retail division. Management had forecast net sales of about $460 million for second-quarter fiscal 2022.
GIII Apparel Group, LTD. Price, Consensus and EPS Surprise
GIII Apparel Group, LTD. price-consensus-eps-surprise-chart | GIII Apparel Group, LTD. Quote
We note that digital sales of the company’s products have been accelerating for a while now. On the company’s retail partners' sites and its own sites, sales of the products surged more than 70% from the level achieved two years ago. In China, digital sales were stronger than store sales. Vilebrequin digital sites were up about 70% compared with the level recorded two years ago.
G-III Apparel consistently launches enhanced and replatformed websites for DKNY and Karl Lagerfeld Paris with advanced technical operations that will allow a seamless navigation of the sites. These sites are likely to offer an immersive brand content to engage consumers, thus facilitating conversion and leverage sales tools, such as virtual selling. It is steadily investing in data analytics capabilities to better know the consumers across channels and boost their shopping experiences. Management informed that the company is partnering with GEODIS, its logistics provider, to boost the direct-to-consumer capabilities.
A Sneak Peek Into Margins
Gross profit surged 43.2% year over year to $192.9 million. However, gross margin of 39.9% contracted 540 basis points (bps) from the prior-year period’s reading. The year-ago period's gross margins included gains from the pandemic-related adjustments.
SG&A expenses jumped 20.2% year over year to $146.8 million, mainly due to higher compensation expenses with respect to bonus accruals and salaries. The company reported an operating income of $38.9 million against the operating loss of $11.4 million recorded in the year-ago quarter.
Segmental Performance
Net sales at the Wholesale segment were $467 million, up roughly 75% year over year. Also, the segment’s gross margin declined nearly 800 bps from the year-ago quarter to 38.3%.
Net sales at the Retail segment totaled $27 million, down 22.9% from the prior-year quarter’s reported figure, due to the restructuring of its retail segment. Nonetheless, the segment’s gross margin grew sharply to 51.9% from 32.5% registered in the year-earlier quarter.
Financial Details
G-III Apparel ended the fiscal second quarter with cash and cash equivalents of $510 million and a long-term debt of $517.6 million. Total stockholders’ equity was $1,380.6 million. Inventories declined 13.1% to $499.3 million at the end of the reported quarter. At the quarter-end, it had cash and availability under its credit agreement of more than $900 million.
Outlook
Management raised the view for fiscal 2022, ending Jan 31, 2022. This guidance is based on the anticipated impact of the supply-chain conditions with expected higher shipping costs and delays in the receipt of goods. It anticipates higher freight costs for the balance of the ongoing fiscal year, which is likely to impact gross margins in the second half.
For fiscal 2022, G-III Apparel projects net sales of $2.70 billion, up from the prior view of $2.57 billion. It forecasts net income between $155 million and $165 million compared with $125-$135 million estimated earlier. Management envisioned earnings per share of $3.10-$3.20, higher than $2.60-$2.70 guided previously.
For fiscal 2021, the company reported sales worth $2.06 billion and a net income of $23.5 million or 48 cents per share.
For the fiscal third quarter, G-III Apparel projects net sales of roughly $1 billion and a net income in the bracket of $80-$90 million or $1.65-$1.75 per share. In the year-earlier quarter, it delivered net sales worth $826.6 million and a net income of $63.2 million or $1.29 a share.
The Zacks Consensus Estimate for earnings is currently pegged at $1.66 for the third quarter of fiscal 2022 and $2.69 for the full fiscal.
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