G-III Apparel Group Q3 growth fueled by wholesale
G-III Apparel Group, (whose owned brands include DKNY, Donna Karan, Vilebrequin, Andrew Marc and Marc New York, among others, and whose fashion licenses include Calvin Klein, Tommy Hilfiger, Karl Lagerfeld Paris, Kenneth Cole, Cole Haan, Guess?, Vince Camuto, Levi's and Dockers) on Thursday reported that third-quarter net sales rose 4.7% to $1.07 billion from $1.02 billion in the year-ago period, missing Wall Street's expectations of $1.08 billion.
The conglomerate, which designs, sources and markets apparel and accessories under various owned and licensed brands as well as private labels, also reported that net income in the quarter rose to $94 million from $81.6 million a year ago, according to a company press release.
The company raised its full fiscal year guidance as a result of its better-than-expected third quarter results. For the period, which concludes next month, G-III now expects net sales of approximately $3.08 billion (up from its previous guidance of $3.06 billion) and net income between $132 million and $137 million (up from its previous guidance of between $125 million and $130 million).
During a conference call with analysts, CEO Morris Goldfarb on Thursday emphasized the company's diverse portfolio, saying that its Karl Lagerfeld Paris brand and Tommy Hilfiger brands have strong runway for growth and that its Calvin Klein brand, with the help of partner PVH, continues to resonate with North American consumers.
Its wholesale business is especially strong and was responsible for all of the quarter's growth, he also said, adding that DKNY and Donna Karan items, previously exclusive to Macy's, will expand into more department stores. The company acquired that brand from French conglomerate LVMH two years ago for $650 million. "We've achieved what we committed to with Macy's," he said. "In many discussions with Macy's we mutually agreed an exclusive brand sometimes doesn't need to be. The greater exposure and appropriate distribution [helps] Macy's."
Straight retail sales are struggling, though, and the company is working with landlords to shutter more underperforming doors, according to Goldfarb. "Clearly retail has not performed, it's not a secret," he told analysts. "Quite honestly we're on it, it's not moving as fast as we'd like … [but] we will cure it."
Goldfarb addressed the impact of tariffs, saying the company is working to further diversify its sourcing to countries outside China. Much of the company's handbag and leather outerwear is sourced there, a "much smaller part of our business" representing 7% of net sales, and tariffs will have minimal impact on financial results, he said. "We've built G-III to be a very entrepreneurial and nimble company" able to respond to such headwinds.
According to recent report from Coresight Research, "G-III Apparel Group has the most substantial exposure to China of all the apparel companies" analyzed, with 65% of its products sourced from China, down from 78% in fiscal year 2016.
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