G-III Apparel Group, Ltd.’s GIII second-quarter fiscal 2025 earnings beat the Zacks Consensus Estimate and improved year over year. Sales missed the consensus mark and declined year over year.
The second-quarter results reflected the success of its owned brands, including double-digit growth for DKNY and Karl Lagerfeld, as well as a successful Donna Karan relaunch. Its progress in transitioning to the go-forward portfolio included a new licensing agreement with Converse, Inc. to design and produce men’s and women’s apparel for global distribution, with the product expected to be launched in fall 2025.
Driven by these factors, the company reaffirmed the fiscal 2025 guidance for net sales and raised the same for adjusted earnings, indicating optimism for the remainder of the year despite an uncertain macroeconomic environment.
Shares of this Zacks Rank #3 (Hold) company have risen 12.8% in the past three months against the industry’s 8.6% decline.
G-III Apparel Group, LTD. Price, Consensus and EPS Surprise
Adjusted earnings of 52 cents per share outpaced the Zacks Consensus Estimate of 28 cents. Also, the bottom line increased 30% from the year-earlier quarter’s adjusted earnings of 40 cents per share.
Net sales decreased 2.3% year over year to $644.8 million and missed the consensus estimate of $650 million.
Net sales for the wholesale segment totaled $620 million, compared with $639 million in the year-ago quarter. Net sales for the retail segment were $37 million for the second quarter, up from $34 million in the prior year quarter, despite the closure of nine stores.
The Zacks Consensus Estimate for wholesale and retail segment net sales was pegged at $629 million and $35 million, respectively, for the quarter under review.
Zacks Investment Research
Image Source: Zacks Investment Research
Insight Into GIII’s Margins & Expenses
Gross profit decreased 0.3% year over year to $275.9 million in the fiscal second quarter. We note that the gross margin expanded 90 basis points (bps) year over year to 42.8%. This increase was due to higher sell-throughs across businesses and greater penetration of the company’s higher-margin owned brands.
The wholesale segment's gross margin percentage was 41.2%, up from 40.6% in the same quarter last year. Gross margin continues to improve through growth in higher-margin go-forward brands and changes in product mix. The retail operations segment saw a gross margin percentage of 54.4%, compared with 50.5% in the prior year's period, driven by reduced promotions following merchandising changes.
SG&A expenses declined 4.3% year over year to $229 million. The decrease in SG&A expenses was partly due to favorable warehousing costs, resulting from lower-than-anticipated inventory receipts and improved warehouse operations. Additionally, some advertising expenses were shifted to the third quarter. As a percentage of net sales, this metric decreased 80 bps year over year to 35.5%.
Operating profit was $41.5 million in the fiscal second quarter compared with operating profit of $31.5 million in the year-earlier quarter.
G-III Apparel ended the fiscal second quarter with cash and cash equivalents of $414.8 million and a total debt of $414 million. Total stockholders’ equity was $1.51 billion. Inventory declined 24.1% year over year to $610.5 million at the end of the quarter.
During the second quarter, the company repurchased 1,180,328 shares of its common stock for a total cost of $31.6 million.
G-III Apparel’s FY25 Guidance
For the third quarter of fiscal 2025, the company expects net sales of $1.10 billion compared with $1.07 billion reported in the year-ago quarter. It expects adjusted net income to be between $98 million and $103 million and adjusted earnings in the range of $2.20-$2.30 per share. This compares with an adjusted net income of $129.6 million and adjusted earnings of $2.78 per share in the third quarter of fiscal 2024.
For fiscal 2025, the company has reaffirmed its net sales guidance of approximately $3.2 billion, representing growth of approximately 3% from the previous year's net sales. This growth will be driven primarily by its own brands and the launch of new initiatives, even as sales of Calvin Klein and Tommy Hilfiger are projected to continue to decline.
The company expects adjusted net income to be between $180 million and $185 million, compared with the previous estimation of $170 million to $175 million. Adjusted earnings are expected to be between $3.95 and $4.04 per share, as compared with the previous anticipation of $3.58 and $3.68 per share. In fiscal 2024, the adjusted net income was $189.8 million and adjusted earnings was $4.04 per share.
Adjusted EBITDA for fiscal 2025 is now projected to be between $305 million and $310 million, up from the previous estimate of $295 million to $300 million. This compares to an adjusted EBITDA of $324.1 million in fiscal 2024.
This outlook continues to anticipate approximately $60 million in additional expenses, mainly tied to the launches of Donna Karan, Nautica, and Halston. About 65% of these expenses are allocated to marketing initiatives for the Donna Karan and DKNY brands, while the remaining costs are primarily associated with investments in technology and talent to enhance operational capabilities.
Key Picks
Some better-ranked stocks are Boot Barn Holdings, Inc. BOOT, Abercrombie & Fitch Co. ANF and Steven Madden, Ltd. SHOO.
Boot Barn operates as a lifestyle retail chain devoted to western and work-related footwear, apparel and accessories. It currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Boot Barn’s fiscal 2025 earnings and sales indicates growth of 8.9% and 10.7%, respectively, from the fiscal 2023 figures. BOOT has a trailing four-quarter average earnings surprise of 7.1%.
Abercrombie is a specialty retailer of premium, high-quality casual apparel. It sports a Zacks Rank of 1 at present. ANF delivered a 16.8% earnings surprise in the last reported quarter.
The consensus estimate for Abercrombie’s fiscal 2025 earnings and sales indicates growth of 61% and 12.6%, respectively, from the fiscal 2024 levels. ANF has a trailing four-quarter average earnings surprise of 28%.
Steven Madden designs, sources, markets and sells fashion-forward name-brand and private-label footwear. It currently has a Zacks Rank of 2 (Buy).
The Zacks Consensus Estimate for Steven Madden’s 2024 earnings and sales indicates growth of 6.9% and 12.6%, respectively, from the year-ago actuals. SHOO has a trailing four-quarter average earnings surprise of 9.5%.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
