Business context and reporting period
G-III Apparel Group, Ltd. designs, sources and markets apparel and accessories through wholesale and retail channels. Its portfolio includes more than 30 licensed and proprietary brands, including DKNY, Donna Karan, Calvin Klein, Tommy Hilfiger and Karl Lagerfeld Paris. This filing is the Form 10-K for the fiscal year ended January 31, 2022, filed March 28, 2022; it does not cover 2020 Q4 as the request metadata suggests.
Key financial metrics
| Metric | Fiscal 2022 | Fiscal 2021 |
|---|---|---|
| Net sales | $2.767 billion | $2.055 billion |
| Gross profit / margin | $988.2 million / 35.7% | $744.4 million / 36.2% |
| Operating profit / margin | $311.1 million / 11.2% | $82.8 million / 4.0% |
| Net income attributable to G-III | $200.6 million; diluted EPS $4.05 | $23.5 million; diluted EPS $0.48 |
| Cash from operating activities | $185.8 million | $74.8 million |
| Cash and cash equivalents at year-end | $466.0 million | $351.9 million |
- Current assets were $1.653 billion and current liabilities $510.8 million at January 31, 2022. The company reported more than $560 million of availability under its revolving facility and no ABL borrowings at year-end.
- Reported notes payable, net of discounts and issuance costs, totaled $515.3 million. Principal obligations included $400 million of 7.875% senior secured notes and a $125 million LVMH note; additional euro-denominated unsecured loans and overdrafts were also outstanding. Operating lease liabilities were $185.6 million.
- Fiscal 2022 cash used in investing activities was $51.5 million, including a $25 million minority investment in an e-commerce retailer, $18.3 million of capital expenditures and $13.2 million for a brand acquisition, partly offset by $5 million from selling part of the e-commerce investment. Cash used in financing activities was $23.4 million, including $17.3 million of share repurchases.
Changes versus comparable periods
- Sales rose 34.6% from fiscal 2021 as retail partners reopened and consumer demand recovered from pandemic-related disruption. Sales remained below fiscal 2020’s $3.160 billion.
- Wholesale sales increased to $2.711 billion from $1.917 billion, with growth across DKNY and Donna Karan, Calvin Klein, Tommy Hilfiger and Karl Lagerfeld Paris. Retail sales fell to $117.7 million from $170.4 million, mainly following the closure of 150 Wilsons Leather, G.H. Bass and Calvin Klein Performance stores. Retail operating losses narrowed to $24.8 million from $126.8 million.
- Gross margin declined 0.5 percentage point. Wholesale margin fell to 34.2% from 35.9%, partly because fiscal 2021 benefited from reversal of markdown accruals; higher freight costs also weighed on fiscal 2022. Retail margin improved to 50.9% from 33.6% as prior-year promotions and liquidation activity eased.
- SG&A increased to $648.0 million from $605.1 million, including higher compensation and advertising, partly offset by lower facility and bad-debt expenses. Asset impairment charges fell to $1.5 million from $17.9 million.
- Operating cash flow increased from $74.8 million to $185.8 million, while accounts receivable and inventories increased by $112.8 million and $95.7 million, respectively, using working capital.
Outlook, management commentary and risks
- No quantified fiscal 2023 revenue or earnings guidance is provided in the filing text. Management anticipated elevated freight costs and delayed receipts of goods for at least the first three fiscal quarters of fiscal 2023, while noting that delayed goods had not yet resulted in order cancellations. It planned to mitigate higher costs with selective price increases, contracted carrier capacity and earlier production schedules; the effect of price increases on demand remains uncertain.
- Management said consumer demand improved during fiscal 2022 as restrictions eased, but COVID-19 variants and possible renewed restrictions could again disrupt demand and operations. Inflation, port congestion, transportation shortages, higher freight rates, raw-material costs and tariffs could pressure margins and timely delivery.
- Licensed products represented 67.2% of fiscal 2022 net sales. Calvin Klein and Tommy Hilfiger products together represented approximately 50.7% of sales, creating material exposure to license renewal, licensor strategy and brand reputation. The ten largest customers accounted for 78.0% of sales; Macy’s represented 23.9%.
- A Canadian customs valuation appeal remained pending after an adverse CBSA decision. A CAD$26.9 million bond secured claimed duties and interest; cumulative amounts paid and deferred under the challenged valuation were CAD$14.7 million through January 31, 2022. An unfavorable outcome could result in additional charges and higher future duties.
- G-III acquired Sonia Rykiel in October 2021 and planned a France relaunch in fall 2022, followed by expansion. It also signed a DKNY and Donna Karan fragrance license with Inter Parfums, effective July 1, 2022, with an initial term through 2032.
- The company reported compliance with debt covenants and effective internal controls; the auditor issued unqualified opinions on the financial statements and internal controls. The Board’s stated policy is to retain earnings rather than pay cash dividends.
Important facts for investors to verify
- Confirm the reporting period: this is fiscal 2022, ended January 31, 2022, rather than 2020 Q4.
- Review the sustainability of the post-pandemic sales and earnings rebound, especially wholesale growth, retail losses and the contribution of price increases versus freight and other cost inflation.
- Assess customer and licensing concentration, upcoming license expirations, and the ability to retain Calvin Klein and Tommy Hilfiger business.
- Track the Canadian customs appeal and potential duty exposure, including the bond and amounts paid or deferred.
- Reconcile debt maturity disclosures: the filing describes the senior secured notes as due in 2025 in some passages, while its contractual-obligations table lists $400 million of notes due in 2026. Also monitor the LVMH note maturities in 2023 and the ABL facility’s springing-maturity provision.
- Evaluate cash conversion and working-capital needs, given the increases in receivables and inventory, seasonal concentration of sales and ongoing supply-chain delays.