G-III Apparel Group Ltd. said third-quarter results were boosted by its Calvin Klein business, but the firm lowered guidance for the fiscal year because of weak traffic patterns at the recently acquired Wilsons outlet business.
For the three months ended Oct. 31, income rose 21.4 percent to $28.8 million, or $1.68 a diluted share, from $23.8 million, or $1.41, in the year-ago period. Sales gained 29.6 percent to $351.6 million from $271.2 million.
Morris Goldfarb, chairman and chief executive officer, told Wall Street analysts on a conference call the Calvin Klein business “has been excellent across nearly every category.…The strong fashion heritage of this brand, combined with high quality and extremely competitive price points, is going to work in our advantage across a number of categories.”
The company expects year-end earnings of between 95 cents and $1.05 a diluted share based on an income range of between $16.3 million and $18.1 million. That compares with previous guidance of diluted EPS of $1.35 to $1.40 on a projected income range of $23.5 million to $24.4 million.
Shares rallied Wednesday, picking up 35 cents, or 6.2 percent, to close at $6.
Todd Slater, analyst at Lazard Capital Markets, said in a research note, “We believe that G-III is doing a great job managing through unprecedented times, but it faces numerous external issues that are likely to create tough challenges in the near term. It is facing a decelerating reorder business, markdown pressure, especially for its luxury brands [Andrew Marc and Cole Haan], and a significant [selling, general and administrative] increase from the Wilsons’ acquisition, which is experiencing below-plan comps and traffic.”
Speaking of the purchases of Wilsons, in July, and Andrew Marc, in February, Slater concluded, “Over time, we believe G-III will succeed in evolving and monetizing its latest acquisitions, although both may underperform in the near term.”
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