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Expected Tariff Impact Causes G-III to Revise Guidance for Second Half

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G-III Apparel Group’s portfolio of owned and licensed brands performed well in the second quarter, but the dark cloud of tariffs are looming.

In a Nutshell: G-III Apparel Group issued revised guidance for the fiscal year ending Jan. 31 that incorporates the expected impact of the additional tariffs implemented on Sept. 1 and others slated to take effect later this year.

For fiscal 2020, the company now forecasts net sales of approximately $3.3 billion and net income between $154 million and $159 million, or between $3.10 and $3.20 per diluted share. This compares to net sales of roughly $3.08 billion and net income of $138.1 million, or $2.75 per diluted share, for fiscal 2019.

G-III—with owned brands that include DKNY, Donna Karan, Vilebrequin, G. H. Bass, Eliza J, Jessica Howard, Andrew Marc and Marc New York—is projecting full-year adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) for fiscal 2020 between $295 million and $300 million, compared to adjusted EBITDA of $269.4 million in fiscal 2019.

For the third fiscal quarter ending Oct. 31, the company, which also holds fashion licenses under the Calvin Klein, Tommy Hilfiger, Karl Lagerfeld Paris, Kenneth Cole, Cole Haan, Guess, Vince Camuto, Levi’s and Dockers brands, is forecasting net sales of approximately $1.17 billion and net income between $90 million and $95 million, or between $1.85 and $1.95 per diluted share. This forecast compares to net sales of $1.07 billion and net income of $94 million, or $1.86 per diluted share, reported in the third quarter of fiscal 2019.

Sales: Net sales for the second quarter ended July 31 increased 3.1 percent to $643.9 million from $624.7 million in the same period last year. For the first half, net sales were up 3.2 percent to $1.28 billion.

Earnings: Net income for the quarter rose 9.9 percent to $11.1 million compared to $10.1 million in the prior-year period. Net income for the six-month period gained 16 percent to $23.2 million.

CEO’s Take: Morris Goldfarb, chairman and CEO, said: “We are pleased to report second quarter results that met our expectations and were fueled by continued outperformance in our wholesale business, enabling us to navigate the ever-changing retail landscape. Our well-developed supply chain has enabled us to significantly expand our sourcing base throughout the world. We still see substantial opportunities for continued diversification. These capabilities, along with long-standing strong vendor relationships, have helped us mitigate some of the tariff headwinds. However, based on the additional tariffs that were just implemented, we feel it is prudent to revise our guidance to a more conservative posture for the remainder of this fiscal year.”

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