G-III Apparel Group LTD.'s first-quarter solidly beat Wall Street’s expectations by 21 cents, boosted by wholesale sales and the contribution from its G.H. Bass acquisition in 2013.
For the three months ended April 30, net income rose 15.4 percent to $1.3 million, or 6 cents a diluted share, from $1.1 million, or 5 cents, a year ago. Wall Street was expecting a net loss per share of 15 cents. The company also beat Wall Street’s consensus estimate of $346.1 million in sales. The company said net sales increased 34.3 percent to $366.2 million from $272.6 million.
Morris Goldfarb, chairman, president and chief executive officer, said in a conference call that sales were “above our plan and a record for the quarter. Our outperformance was primarily driven by our wholesale business,” noting that $44 million of the sales increase “was a result of the G.H. Bass business we acquired in November 2013.”
Goldfarb, who said his company is on the prowl, noted that G-III can handle acquisitions of $500 million businesses, adding that the acquisition of a $30 million company is not that far different from acquiring a $500 million firm, and that smaller business are a “bit of a drain on our management team.”
The ceo said the wholesale business represented two-thirds of the company’s net sales in the quarter, and that it was driven “primarily by a variety of strong businesses under the Calvin Klein umbrella. We also had a good performance from Vilebrequin in both its wholesale and retail stores.”
The bulk of the strength under the Calvin Klein umbrella was from better sportswear, dresses and handbags, although dresses in general continued to be strong overall. Other contributors in the dress category were the Eliza J and Jessica Simpson brands. The dress business is close to $350 million at wholesale, Goldfarb said.
The company has also rolled out the Ivanka Trump brand in a number of categories, including dresses, sportswear separates, swimwear and outerwear. Goldfarb said the brand can “occupy a distinct and differentiated lifestyle position and can become increasingly important over time.”
On the retail side of its business, Goldfarb said Wilson’s had a positive comp of 1.2 percent for the quarter. The company has about 20 full-price stores, which are still in test mode. As for the Bass business, the company just completed a new showroom for the brand. There are currently 75 company-owned Bass stores, with 21 located in the U.S.
The company revised guidance for fiscal year 2015 ending Jan. 31. It is now projecting a diluted earnings per share range of $4.05 to $4.20, up from its previous guidance of $3.95 to $4.10. Net income is expected at between $87.9 million and $91.2 million on a net sales estimate of $2.06 billion, up from earlier projections of $85.2 million to $88.5 million on net sales guidance of $2.05 billion. That’s compared with $3.71 a diluted share, with net income of $77.4 million on net sales of $1.72 billion for the year ended Jan. 31, 2014.
For the second quarter ending July 31, the forecast is between 13 cents and 17 cents in diluted EPS, with net income of between $2.8 million to $3.7 million and net sales of $392 million.
Brean Capital’s Eric Beder reiterated his “buy” rating on the stock, raising the price target to $91 from $85. “With Calvin Klein continuing to take market share, Ivanka Trump gaining shelf space, and what should be a strong outerwear season on tap, G-III remains one of the best-positioned apparel players in our universe,” Beder said.
Shares of G-III on Tuesday rose 8.9 percent to $82.65 in Nasdaq trading.
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