An established dress business and a growing handbag segment, among other business components, helped G-III Apparel Group Ltd. best Wall Street’s second-quarter consensus estimates.
Those results and wholesale bookings contributed to the company’s optimism about the second half, prompting it to raise full-year guidance.
Shares of G-III rose 1.4 percent to close at $67.86 in Nasdaq trading Wednesday.
Morris Goldfarb, G-III’s chairman, president and chief executive officer, attributed the company’s ability to navigate what’s been a difficult retail environment for most firms to its learnings and expertise in outerwear, which it used to grow its business in other segment silos, first with dresses and then moving on to sportswear and now handbags.
The company’s wholesale bookings are up 22 percent and it’s booked 90 percent to plan for the year.
For the three months ended July 31, net income jumped 99.7 percent to $12.5 million, or 27 cents a diluted share, from $6.2 million, of 14 cents, a year ago. Net sales rose 11.8 percent to $473.9 million from $424 million. Wall Street was expecting 20 cents a share on sales of $470.1 million.
The department store business remains the strongest channel for G-III, where its business is in many categories, including dresses, sportswear, separates, handbags and outerwear.
In the dress business, the Calvin Klein brand is in over 1,300 doors, while the company-owned brand Eliza J is in 700 doors and is the number one dress brand at Nordstrom, Goldfarb said. The Vince Camuto dress business is now in over 500 doors.
In sportswear, the Kensie contemporary line is in over 1.200 doors, while the Ivanka Trump brand, expected to double this year, continues to grow. According to Goldfarb, “The Ivanka Trump apparel line has the potential to be a $100 million business for G-III.”
The ceo also noted that the women’s classification of the Calvin Klein wholesale business, projected for the full fiscal year, is approaching “$1 billion,” a significant contributor to the company’s overall expectations of $2.40 billion in total net sales.
Goldfarb also spoke about the Calvin Klein handbag business, now in 1,000 doors, which seems to have avoided the problems in the category felt by its more higher-priced competitors, such as Michael Kors, Coach and Kate Spade. Noting the growth opportunity for the business and its impressive margins, Goldfarb believes that the “business will be at around $100 million in wholesale by yearend and that continued growth could make it a $200 million business.”
The ceo said of the Calvin Klein handbag business, “The category is excellent and will be a bigger driver for the year…. We are garnering more retail space. We’re not of the same scale of Michael Kors. We’re still growing the brand and it is far from matured. We’re building growth, which is very sustainable and we’re not exposed globally.” Goldfarb suggested that its price points, which are “priced just under that of Michael Kors,” also help to grow the brand for consumers that are more price conscious.
G-III is also in the process of building out shop-in-shops just for the Calvin Klein handbag collection, growing to 75 from 35 this year.
One area for longer term growth will be its joint partnership with Karl Lagerfeld, of which G-III holds a 49 percent stake in the U.S., and is projected by the company to be a brand opportunity in excess of $500 million.
The Karl Lagerfeld product will ship within the next 60 days for sportswear, dresses, handbags and coats. Footwear will follow, and could be the next growth category for G-III. The company already has experience in the sector through its Bass operation, and could easily expand the category by “tucking in” other footwear components of its existing brand businesses into the silo.
While the company continues to explore acquisition options, Goldfarb said the next deal doesn’t have to be in the footwear space.
He told analysts during the company conference call, “I’m spending a disproportionate amount of my time on the acquisition front. We’ve looked at many opportunities, and we’ve either rejected the opportunities or we’ve been rejected on the proposals,” noting that there are “several opportunities that we’re still pursuing.”
Meanwhile, the company is currently searching for sites for Karl Lagerfeld stores. It plans to open them within the next 12 months, and is likely to build out an outlet concept for the brand as well, Goldfarb said. G-III also will begin building out shop-in-shops for the brand during the first quarter of next year.
The company raised its guidance for the full fiscal year ending Jan. 31. It expects $2.40 billion in net sales, with net income between $129 million and $134 million. Diluted earnings-per-share are expected at between $2.78 and $2.88. That’s compared with prior guidance of net sales at $2.40 billion and net income between $123 million to $128 million, or diluted EPS between $2.66 and $2.76. The company ended fiscal 2015 with jet income of $110.4 million, or $2.48 a diluted share, on net sales of $2.12 billion.
For the third quarter ending Oct. 31, the company guided diluted EPS at $1.78 to $1.83, with net income between $83 million to $85.3 million on net sales of about $920 million.
G-III’s company-owned brands include Vilebrequin, Andrew Marc, Marc New York, Bass, G.H. Bass, Eliza J and Jessica Howard, to name a few. Licensed brands under its umbrella include Calvin Klein, Karl Lagerfeld, Kenneth Cole, Cole Haan, Guess, Tommy Hilfiger, Jones New York, Jessica Simpson, Vince Camuto, Ivanka Trump, Ellen Tracy, Kensie, Levi’s and Dockers.