G-III Apparel Group, Ltd. — Form 10-Q Summary
Reporting period: Three months ended April 30, 2024 (the first quarter of fiscal 2025), compared with the three months ended April 30, 2023. The filing is unaudited; results are seasonal. Amounts below are in U.S. dollars.
Business context and operating performance
G-III designs, sources and markets apparel and accessories through wholesale and retail operations, with a portfolio of licensed, proprietary and private-label brands. Wholesale sales accounted for most revenue. The filing includes calendar-quarter results through March 31, 2024 for certain subsidiaries, and retail-segment periods ended May 4, 2024 and April 29, 2023.
| Metric | Q1 FY2025 | Q1 FY2024 | Change |
|---|---|---|---|
| Net sales | $609.7 million | $606.6 million | Up 0.5% |
| Gross profit / margin | $258.9 million / 42.5% | $249.8 million / 41.2% | Margin up 1.3 percentage points |
| Operating profit | $13.5 million | $15.3 million | Down 11.5% |
| Net income attributable to G-III | $5.8 million | $3.2 million | Up 79% |
| Diluted EPS | $0.12 | $0.07 | Up $0.05 |
| Operating cash flow | $45.5 million | $201.8 million | Down $156.3 million |
| Capital expenditures | $12.7 million | $5.0 million | Up $7.7 million |
Wholesale sales rose to $597.8 million from $586.9 million; retail sales were $30.5 million versus $30.2 million. Wholesale growth reflected Karl Lagerfeld and DKNY, plus initial shipments of relaunched Donna Karan products, partly offset by lower Calvin Klein and Tommy Hilfiger licensed-product sales. Wholesale gross margin improved to 40.9% from 39.9%, supported by greater owned-brand mix and favorable product mix. Retail gross margin fell to 47.0% from 50.9%, primarily due to increased promotions; retail operations recorded an $8.4 million operating loss, compared with a $9.3 million loss.
Financial position, liquidity and debt
- Cash and cash equivalents were $508.4 million at April 30, 2024, versus $289.7 million a year earlier and $507.8 million at January 31, 2024.
- Current assets were $1.55 billion and current liabilities $408.1 million. Accounts receivable were $473.2 million and inventory was $479.7 million.
- Notes payable totaled approximately $426.4 million, including $400 million of 7.875% senior secured notes due August 2025. The company had no borrowings under its existing ABL facility and reported more than $480 million of availability. It was in compliance with applicable debt covenants.
- Cash exceeded notes payable by approximately $82 million, excluding lease liabilities. Operating lease liabilities totaled $224.5 million.
- Quarter-end cash was nearly unchanged from January 31: operating cash flow of $45.5 million, investing outflow of $14.8 million and financing outflow of $27.3 million were partly offset by foreign-currency translation.
Material changes and management commentary
- Gross profit increased despite nearly flat sales, but operating profit declined as SG&A rose to $236.6 million from $228.0 million. Management cited $10.6 million more advertising, mainly for the Donna Karan relaunch and DKNY, and $2.8 million more compensation, partly offset by lower warehouse and facility costs.
- Net income benefited from net interest and financing charges falling to $5.4 million from $12.2 million. Management attributed the decline chiefly to increased investment income on cash and repayment of the $125 million LVMH note in fiscal 2024.
- The effective tax rate increased to 29.3% from 23.1%; the prior-year rate benefited from discrete items.
- Operating cash flow was lower year over year, reflecting seasonal working-capital movements and the timing of cash flows. Receivables and inventory reductions provided cash, while decreases in payables/accruals and customer refund liabilities used cash.
- The company repurchased 1,029,504 shares for $28.4 million under its program during the quarter; 8,970,496 shares remained authorized for repurchase at April 30.
Outlook, subsequent events and risks
- The filing provides no numerical fiscal 2025 earnings or sales guidance. Management cautions that the quarter is not necessarily indicative of full-year results because of seasonality.
- In May 2024, G-III acquired a 12% interest in AWWG for €50 million ($53.6 million), using cash. AWWG is expected to act as agent for Karl Lagerfeld, DKNY and Donna Karan in Spain and Portugal, supporting the company’s international expansion plans.
- On June 4, 2024, after quarter-end, the company replaced its $650 million ABL facility, scheduled to mature in 2025, with a five-year facility of up to $700 million maturing in June 2029, subject to a springing-maturity provision. Availability is subject to borrowing-base formulas.
- Effective April 17, 2024, G-III acquired the remaining 25% of Fabco, making the DKNY and Donna Karan China joint venture wholly owned.
- Management cited risks from reliance on important licenses and major customers, changing consumer demand, inflation and interest rates, foreign exchange, supply-chain disruption and increased shipping costs, international conflicts, and cybersecurity and privacy risks. Panama Canal and Red Sea disruptions and Asia port congestion had lengthened transit times; management anticipated moderate shipping-cost increases in North America and Europe during fiscal 2025.
- Disclosure controls were concluded to be effective, with no material changes in internal controls reported. Management reported no material changes to the risk factors in the prior Form 10-K.
Key facts investors should verify
- Whether wholesale growth in DKNY, Karl Lagerfeld and Donna Karan offsets declines in Calvin Klein and Tommy Hilfiger licensed products, and how license extensions or changes affect future revenue.
- Whether improved wholesale margin can be sustained while retail promotions and the retail segment’s operating losses persist.
- Cash-flow conversion and working-capital trends through the seasonal peak, including inventory, receivables and customer refund liabilities.
- Plans to refinance or repay the $400 million senior secured notes due August 2025, and the availability and conditions of the new ABL facility.
- Returns and strategic progress from the AWWG investment, and the financial effect of full ownership of Fabco.