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Category: Stock Market and G-III
Date: 6 September 2019 Stock Price: $23.84 We take a look at the 2nd quarter earnings for their 2020 fiscal year of, G-III, the owner of DKNY, Tommy Hilfiger and numerous other apparel and accessories brands
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About G-III
G-III designs, sources and markets apparel and accessories under owned, licensed and private label brands. G-III’s owned brands include DKNY, Donna Karan, Vilebrequin, G. H. Bass, Eliza J, Jessica Howard, Andrew Marc and Marc New York. G-III has fashion licenses under the Calvin Klein, Tommy Hilfiger, Karl Lagerfeld Paris, Kenneth Cole, Cole Haan, Guess?, Vince Camuto, Levi's and Dockers brands. Through its team sports business, G-III has licenses with the National Football League, National Basketball Association, Major League Baseball, National Hockey League, and over 150 U.S. colleges and universities. G-III also operates retail stores under the DKNY, Wilsons Leather, G. H. Bass, Vilebrequin, Karl Lagerfeld Paris and Calvin Klein Performance names.
Financial overview of G-III's latest earnings report
The numbers we are interested in (for the quarter):
- Net sales: $642.892 million (up from $624.698 million from the same quarter of the previous year)
- Cost of sales : $412.123 million (up from $393.154million for the same quarter of the previous year)
- Net income: $11.119 million (up from from $10.077 million for the same quarter of the previous year)
- Diluted net income per share: $0.23 (up from $0.20 for the same quarter of the previous year)
- Diluted weighted-average shares outstanding: 49.116 million (down from 50.415 million for the same quarter of the previous year)
- PE ratio: 25.9 (based on the earnings for this quarter being repeated for a full year)
- Cash and cash equivalents: $39.568 million
- Cash and cash equivalents per share: $0.8
- Cash and cash equivalents makes up 3.3% of G-III's current market capital
- Cash and cash equivalents makes up 1.4% of G-III's total assets
- Inventories: $842.136 million (up from $678.571 million)
- Inventories makes up 31.04% of G-III's total assets. We get concerned as soon as inventories makes up more than 20% of a company's total assets
- Inventories of G-III grew by 24.1% over the last year. Strong growth in inventories could signal that the group is struggling to move stock, which will lead to mark downs in product prices to move stock, which will affect margins and bottom line earnings
- Total shareholders' equity of G-III: $1.167 billion
- Shareholders' equity per share: $23.70
G-III's management commentary on the results and earnings guidance
NEW YORK--(BUSINESS WIRE)--Sep. 5, 2019-- G-III Apparel Group, Ltd. (NasdaqGS: GIII) today announced operating results for the second quarter of fiscal 2020 ended July 31, 2019.
Net sales for the second quarter ended July 31, 2019 increased 3.1% to $643.9 million from $624.7 million in the same period last year. The Company reported GAAP net income for the second quarter of $11.1 million, or $0.23 per diluted share, compared to $10.1 million, or $0.20 per diluted share, in the prior year’s comparable period.
Non-GAAP net income per diluted share was $0.23 for the second quarter of this year compared to $0.22 in the same period last year. Non-GAAP net income per diluted share excludes (i) non-cash imputed interest expense of $1.3 million in this quarter related to the note issued to seller (the “Seller Note”) as part of the consideration for the acquisition of Donna Karan International compared to $1.2 million in the second quarter last year and (ii) a $1.4 million gain on lease terminations in the current quarter. There was no aggregate effect of these exclusions in the second quarter of this year and an effect of $0.02 per diluted share in the same period last year.
Morris Goldfarb, G-III’s Chairman and Chief Executive Officer, said, “We are pleased to report second quarter results that met our expectations and were fueled by continued outperformance in our wholesale business enabling us to navigate the ever-changing retail landscape. Our well-developed supply chain has enabled us to significantly expand our sourcing base throughout the world; we still see substantial opportunities for continued diversification. These capabilities, along with long-standing strong vendor relationships, have helped us mitigate some of the tariff headwinds. However, based on the additional tariffs that were just implemented, we feel it is prudent to revise our guidance to a more conservative posture for the remainder of this fiscal year.”
Mr. Goldfarb concluded, “Our formula for success includes having a portfolio of brands that are in demand and deliver high quality, well-designed, competitively priced products that elevate our position as a supplier-of-choice. Through solid execution, we remain poised to drive significant long-term sales and profit growth.”
Outlook
G-III Apparel Group today issued revised guidance for the fiscal year ending January 31, 2020 that incorporates the expected impact of the additional tariffs implemented effective September 1, 2019 and expected to be implemented later this year. Prior guidance issued last quarter incorporated the effect of tariffs in effect at that time.
For fiscal 2020, the Company is now forecasting net sales of approximately $3.30 billion and net income between $154 million and $159 million, or between $3.10 and $3.20 per diluted share. This compares to net sales of approximately $3.08 billion and net income of $138.1 million, or $2.75 per diluted share for fiscal 2019.
The Company is anticipating non-GAAP net income for fiscal 2020 between $156 million and $161 million, or between $3.15 and $3.25 per diluted share. Non-GAAP guidance excludes (i) non-cash imputed interest expense of approximately $5.4 million related to the Seller Note and (ii) a $2.2 million gain on lease terminations. The aggregate effect of these exclusions is equal to $0.05 per diluted share. This guidance compares to non-GAAP net income of $143.9 million, or $2.86 per diluted share, for fiscal 2019. Non-GAAP results for fiscal 2019 exclude non-cash imputed interest expense of $5.0 million related to the Seller Note and asset impairments primarily related to leasehold improvements and furniture and fixtures at certain of our retail stores of $2.8 million. The aggregate effect of these exclusions was equal to $0.11 in fiscal 2019.
The Company is projecting full-year adjusted EBITDA for fiscal 2020 between $295 million and $300 million compared to adjusted EBITDA of $269.4 million in fiscal 2019. For the third fiscal quarter ending October 31, 2019, the Company is forecasting net sales of approximately $1.17 billion and net income between $90.0 million and $95.0 million, or between $1.85 and $1.95 per diluted share. This forecast compares to net sales of $1.07 billion and net income of $94.0 million, or $1.86 per diluted share, reported in the third quarter of fiscal 2019. Non-GAAP guidance excludes non-cash imputed interest expense related to the Seller Note of approximately $1.4 million, or $0.02 per share, in the third quarter of fiscal 2020 and $1.2 million, or $0.02 per share, in the third quarter of last year. On an adjusted basis, excluding non-cash imputed interest, the Company is forecasting non-GAAP net income between $1.87 and $1.97 per diluted share. This compares to non-GAAP net income of $1.88 per diluted share in third quarter of last year.
Net sales for the second quarter ended July 31, 2019 increased 3.1% to $643.9 million from $624.7 million in the same period last year. The Company reported GAAP net income for the second quarter of $11.1 million, or $0.23 per diluted share, compared to $10.1 million, or $0.20 per diluted share, in the prior year’s comparable period.
Non-GAAP net income per diluted share was $0.23 for the second quarter of this year compared to $0.22 in the same period last year. Non-GAAP net income per diluted share excludes (i) non-cash imputed interest expense of $1.3 million in this quarter related to the note issued to seller (the “Seller Note”) as part of the consideration for the acquisition of Donna Karan International compared to $1.2 million in the second quarter last year and (ii) a $1.4 million gain on lease terminations in the current quarter. There was no aggregate effect of these exclusions in the second quarter of this year and an effect of $0.02 per diluted share in the same period last year.
Morris Goldfarb, G-III’s Chairman and Chief Executive Officer, said, “We are pleased to report second quarter results that met our expectations and were fueled by continued outperformance in our wholesale business enabling us to navigate the ever-changing retail landscape. Our well-developed supply chain has enabled us to significantly expand our sourcing base throughout the world; we still see substantial opportunities for continued diversification. These capabilities, along with long-standing strong vendor relationships, have helped us mitigate some of the tariff headwinds. However, based on the additional tariffs that were just implemented, we feel it is prudent to revise our guidance to a more conservative posture for the remainder of this fiscal year.”
Mr. Goldfarb concluded, “Our formula for success includes having a portfolio of brands that are in demand and deliver high quality, well-designed, competitively priced products that elevate our position as a supplier-of-choice. Through solid execution, we remain poised to drive significant long-term sales and profit growth.”
Outlook
G-III Apparel Group today issued revised guidance for the fiscal year ending January 31, 2020 that incorporates the expected impact of the additional tariffs implemented effective September 1, 2019 and expected to be implemented later this year. Prior guidance issued last quarter incorporated the effect of tariffs in effect at that time.
For fiscal 2020, the Company is now forecasting net sales of approximately $3.30 billion and net income between $154 million and $159 million, or between $3.10 and $3.20 per diluted share. This compares to net sales of approximately $3.08 billion and net income of $138.1 million, or $2.75 per diluted share for fiscal 2019.
The Company is anticipating non-GAAP net income for fiscal 2020 between $156 million and $161 million, or between $3.15 and $3.25 per diluted share. Non-GAAP guidance excludes (i) non-cash imputed interest expense of approximately $5.4 million related to the Seller Note and (ii) a $2.2 million gain on lease terminations. The aggregate effect of these exclusions is equal to $0.05 per diluted share. This guidance compares to non-GAAP net income of $143.9 million, or $2.86 per diluted share, for fiscal 2019. Non-GAAP results for fiscal 2019 exclude non-cash imputed interest expense of $5.0 million related to the Seller Note and asset impairments primarily related to leasehold improvements and furniture and fixtures at certain of our retail stores of $2.8 million. The aggregate effect of these exclusions was equal to $0.11 in fiscal 2019.
The Company is projecting full-year adjusted EBITDA for fiscal 2020 between $295 million and $300 million compared to adjusted EBITDA of $269.4 million in fiscal 2019. For the third fiscal quarter ending October 31, 2019, the Company is forecasting net sales of approximately $1.17 billion and net income between $90.0 million and $95.0 million, or between $1.85 and $1.95 per diluted share. This forecast compares to net sales of $1.07 billion and net income of $94.0 million, or $1.86 per diluted share, reported in the third quarter of fiscal 2019. Non-GAAP guidance excludes non-cash imputed interest expense related to the Seller Note of approximately $1.4 million, or $0.02 per share, in the third quarter of fiscal 2020 and $1.2 million, or $0.02 per share, in the third quarter of last year. On an adjusted basis, excluding non-cash imputed interest, the Company is forecasting non-GAAP net income between $1.87 and $1.97 per diluted share. This compares to non-GAAP net income of $1.88 per diluted share in third quarter of last year.
G-III (NASDAQ: GIII) stock price history
The image below shows the stock price history of G-III for the last 5 years. And as the image shows its been a pretty sad affair for G-III stockholders. 5 years ago the stock was trading at around $42.50 and its currently trading at $23.84. Thats a decline of 43.9% in G-III's stock price over the last 5 years. Not a good story to tell at all. But the stock reacted sharply to the release of their latest earning release. It shot up by over 26%. See the recent coverage of G-III below. The group is trading at well below its 52 week high of around $50 and is trading close to their 52 week low of $18.18 which indicates to us that the short term sentiment towards the group is still overwhelmingly negative. But has the markets gone to for, and is the current depressed price creating a buying opportunity for fundamental long term or value investors?
Recent coverage of G-III
The extract below was obtained from Yahoo Finance in which they briefly covered the results from G-III.
G-III Apparel Group shares soared 26.5% following second-quarter financial results that were better than many had feared. Revenue gains were limited to 3% compared to year-earlier levels, but even a modest gain in adjusted earnings was enough to satisfy investors. G-III's wholesale segment did especially well, posting sales growth of greater than 8%. The company also boosted its revenue projections for the full year, although it cut its expectations for adjusted earnings. G-III still has a long way to go to make up for its share-price declines from earlier in the year, but today's news is a step in the right direction for the apparel company.
Read the original article here
G-III Apparel Group shares soared 26.5% following second-quarter financial results that were better than many had feared. Revenue gains were limited to 3% compared to year-earlier levels, but even a modest gain in adjusted earnings was enough to satisfy investors. G-III's wholesale segment did especially well, posting sales growth of greater than 8%. The company also boosted its revenue projections for the full year, although it cut its expectations for adjusted earnings. G-III still has a long way to go to make up for its share-price declines from earlier in the year, but today's news is a step in the right direction for the apparel company.
Read the original article here
G-III (NASDAQ: GIII) latest stock valuation
So based on G-III latest earnings release and their outlook provided what do we value G-III stock at? Is the stock undervalued and was the surge in the stock price after the release of their earnings justified? Based on our valuation models we have a target price (full value price) on the stock of G-III at $47.69 which is relatively close to their 52 week high. We believe the stock of G-III is undervalued and offers long term fundamental investors a great entry point into the stock, and we expect the stock to trend upwards in coming weeks and months to see the stock price closer to our target (full value) price