Apparel and accessory retailer G-III Apparel (GIII 34.42, +4.28 +14.2%) trades to 52-week highs in reaction to this morning’s Q3 earnings beat and its raised FY18 earnings guidance.
As a bit of background, GIII’s owned brands include Donna Karan, DKNY, Vilebrequin, G. H. Bass, Andrew Marc, Marc New York, Eliza J and Jessica Howard. G-III has fashion licenses under the Calvin Klein, Tommy Hilfiger, Karl Lagerfeld Paris, Kenneth Cole, Cole Haan, Guess?, Vince Camuto, Ivanka Trump, Kensie, Levi's and Dockers brands. The company also holds licenses with the National Football League, National Basketball Association, Major League Baseball, National Hockey League, Hands High, Touch by Alyssa Milano and more than 100 U.S. colleges and universities. G-III also operates retail stores under the DKNY, Wilsons Leather, G. H. Bass, Vilebrequin, Calvin Klein Performance and Karl Lagerfeld Paris names.
Swinging back to the results, GIII performed well in Q3; specifically, earnings came in ahead of market expectations at $1.67 and revenues rose about 15.9% compared to last year to about $1.02 billion on gross profit of 38.1%. Despite commenting that traffic and retails comps remain soft, the company noted that year-to-date, its comps outside of the US are up low double digits and up mid-single-digits in the U.S. Management also commented on the launch of the DKNY and Donna Karan products, highlighting that net sales in these brands reached $88 million in Q3.
Commenting further on its business segments, GIII noted that its most recent major growth initiative and across the board relaunch of DKNY and Donna Karan is off to a good start. Additionally, the Wholesale businesses continue to have tremendous sales potential to grow both domestically and overseas in Europe, China.
Overall, GIII’s business in Calvin Klein was strong for the quarter with continued momentum in the high single digit rate of growth. Also, Tommy Hilfiger is proving to be a key growth driver and the company’s plans to double the business this year are still intact. Specifically, Tommy Hilfiger jeans, dresses, sportswear all performed very well. Karl Lagerfeld had a really good quarter led by sportswear, dresses, handbags and shoes. The company anticipates doubling last year's volume, and the brand still holds potential for tremendous growth.
Net sales in GIII’s wholesale segment increased as a result of increases in net sales of their Tommy Hilfiger licensed products which are now shipping product in all categories, their Calvin Klein and Karl Lagerfeld licensed products and in their Andrew Mark line of products. Net sales of the company’s retail operations segment increased 11% to $119 million from $107 million, due to the inclusion of net sales of $18 million from their aforementioned new DKNY stores, offset in part by a decrease in net sales at their G.H. Bass store chain.
Guidance was also strong; GIII raised its guidance for FY18 EPS, and the company now sees a range of $1.42-1.52 from the previous $1.28-1.38. The net sales guidance was unchanged at $2.80 billion. Further, the company is now forecasting projected full-year adjusted EBITDA for fiscal 2018 between $188-196 million compared to adjusted EBITDA of $148.1 million in fiscal 2017 and compared to its previous forecast of adjusted EBITDA of between $180-188 million.
Suffice it to say, the stock has followed the broader retail sector these past few weeks to a T. Given today’s breakout, though, the stock handily outperforms both the XRT and the RTH.