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With Karl Lagerfeld in Hand, G-III Raises Guidance

On the heels of its Karl Lagerfeld acquisition, G-III sees growth opportunity in Europe and omnichannel.

In a Nutshell: Brand and production maven G-III Apparel Group said in raising its guidance for the fiscal year ending Jan. 31, 2023, it factors in the expected impact from the current supply chain conditions, including the lockdowns in China, expected increased shipping costs and delays in receipt of goods.

For fiscal 2023, G-III expects net sales of approximately $3.24 billion and net income between $205 million and $215 million, or $4.23 and $4.33 per diluted share. This compares to net sales of $2.77 billion and net income of $200.6 million, or $4.05 per diluted share, last year.

The guidance is inclusive of about $140 million in net sales and estimated net income of 10 cents per diluted share in connection with the acquisition of the Karl Lagerfeld brand for seven months of ownership in this fiscal year.

The company is projecting full-year adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) between $360 million and $370 million compared to adjusted EBITDA of $350.2 million in fiscal 2022.

For the second quarter, G-III forecast net sales of approximately $600 million compared to $483.1 million in the same period last year. Net income for the second quarter is expected to be in the range $20 million and $25 million, or 42 cents and 52 cents per diluted share. This compares to net income of $19.2 million, or 39 cents per diluted share in last year’s second quarter.

“Our retail partners are seeing significant growth in sales of our power brands DKNY, Donna Karan, Calvin Klein, Tommy Hilfiger and Karl Lagerfeld Paris.” Morris Goldfarb, chairman and CEO, told Wall Street analysts on a conference call Tuesday. “Given the positioning of our brands in better department stores, our business is much less impacted by the recent inflationary pressures. In particular, our status brands, Vilebrequin and Karl Lagerfeld, are even further…on pace with the overall luxury market.”

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Goldfarb also noted that the company aims to extend its reach by further developing omnichannel and its European-based brand portfolio.

“The Karl Lagerfeld acquisition significantly furthers our progress in this area, together with the opportunities ahead for Vilebrequin, Sonia Rykiel and DKNY,” Goldfarb said. “We’re developing our infrastructure, leveraging our leadership talent and creating synergies to build a solid foundation that will fuel these businesses.”

Neal Nackman, chief financial officer and treasurer, said the company’s gross margin percentage was 35.7 percent in the first quarter compared to 37.6 percent in the previous year’s quarter.

“The gross margin percentage in the first quarter was expected to be lower than the same period last year due to the inflationary increases in our cost, including increases in freight expense,” Nackman said. “Cost increases were partially offset by price increases implemented by us and improvements in the promotional environment.”

Sales: Net sales for the first quarter ended April 30 increased 32.5 percent to $688.8 million from $519.9 million in the prior-year period.

Net sales from wholesale operations increased 33 percent to $681 million. Net sales from retail operations were up 44 percent to $28 million.

Earnings: Net income for the quarter rose 16.3 percent to $30.6 million, or 62 cents per diluted share, compared to $26.3 million, or 53 cents per diluted share, in the prior year’s quarter.

CEO’s Take: Goldfarb said: “Our strong momentum continued in the first quarter of fiscal 2023, exceeding both our top and bottom line guidance, despite a challenging environment. Consumers are refreshing their wardrobes as they return to work and resume social activities, driving demand for our products. Our globally recognized power brands–DKNY, Donna Karan, Calvin Klein, Tommy Hilfiger and Karl Lagerfeld–combined with our ability to quickly pivot resources to respond to trends and deliver the right merchandise, position us well to capitalize on demand for products in the marketplace.”

“We remain extremely focused on our strategic priorities to deliver continued long-term profitable growth,” Goldfarb added. “Our recent Karl Lagerfeld acquisition has further expanded our portfolio of owned brands and our global presence. Our experienced senior leadership, world class teams and well-developed supply chain infrastructure set the stage for another strong year of market share gains and our ability to deliver on our raised outlook.”