G-III Grows ‘More Conservative,’ Cuts Outlook Amid Inflation
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G-III Apparel Group has grown more cautious amid the inflationary pressures weighing on both its consumers and its own supply chain.
The multifaceted fashion mainstay — which owns DKNY, Donna Karan and Karl Lagerfeld and also has big licensed businesses with Calvin Klein and Tommy Hilfiger — showed many second-quarter gains, but missed profit expectations.
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More importantly, G-III cut its profit outlook for the year, offering another sign of just how much the second half of 2022 will differ from the strong run fashion saw at the end of 2021.
G-III’s second-quarter net income increased 89 percent to $36.3 million, or 74 cents a diluted share, from $19.2 million, or 39 cents, a year earlier. However, the result was inflated by a number of items, including a $30.9 million gain in the fair value of G-III’s minority ownership of the Karl Lagerfeld brand, which the company acquired full control of in June.
Adjusted earnings per share for the quarter slipped to 39 cents, down from 41 cents a year ago and below the 47 cents Wall Street analysts projected.
Sales for the three months ended July 31 rose 25.3 percent to $605.2 million, up from $483.1 million a year earlier and above the $594.8 million analysts projected.
Morris Goldfarb, the company’s chairman and chief executive officer, who is used to navigating tough markets and recently marked his 50th anniversary at the company, said the deal for Lagerfeld expanded the companies’ reach and that its largest brands were seeing “significant year-over-year sales growth.”
“We are managing the business prudently with a keen eye towards gaining market share and building on our strengths while further expanding our global reach,” Goldfarb said. “Looking ahead, we are in a good position for the fall season and our order book remains strong.”
Even so, G-III is treading lightly.
“Given the challenging environment that has rapidly developed over the last few months, we are taking a more conservative view for the balance of the year,” Goldfarb said. “We have a strong track record of managing through difficult business conditions and remain confident in our strategy and in our ability to deliver on our updated full year expectations, as the overall fundamentals of our business remain solid.”
G-III is now looking for adjusted earnings of $3.60 to $3.70 a diluted share this year, down from the $4.40 and $4.50 projected in mid June, shortly after the Lagerfeld deal was closed.
The company said that guidance anticipates the impact from “current levels of inflationary pressure on consumers and incremental costs associated with the supply chain conditions, including the timing of receipts of goods.”
