G-III, owner of Marc Jacobs and DKNY brands, slides on disappointing earnings
G-III slid despite an improved bottom line / Photo: Facebook / marcjacobsintl
Shares of fashion conglomerate G-III Apparel Group, which owns brands like Marc Jacobs, DKNY, and Donna Karan, plunged 11% on Wednesday, which reduced its market capitalization to $1.2 billion. The company reported quarterly revenue that fell short of Wall Street expectations. G-III’s full-year forecast calls for a further decline in revenue due to lost sales from Calvin Klein and Tommy Hilfiger products.
Details
G-III fell 11.5% on the Nasdaq on Wednesday to $28.47 per share, its lowest close since mid-May. The company reported that net sales for its fiscal second quarter, ended July 31, fell 10% year over year to $554.1 million. Wall Street and the management had expected $570 million.
Sales came in below forecast due to weaker-than-expected performance in Europe, G-III CEO Morris Goldfarb said during the company’s earnings call, according to a transcript published by GuruFocus. He attributed this in part to a sharp decline in traffic, combined with macroeconomic weakness.
The decline in quarterly revenue eclipsed the improvement in profitability in the market’s eyes, StockStory notes. Adjusted earnings for the quarter came in at $0.26 per share, above the consensus estimate of $0.23 per share.
Outlook
The revenue guidance was also disappointing. The management expects the top line to decline around 12% year over year in its fiscal third quarter to $870 million. Meanwhile, the Wall Street consensus stands at $898.9 million, according to Yahoo Finance data.
Full-year revenue is expected by the management to fall more than 8% to $2.71 billion. The figure incorporates the loss of approximately $460 million in sales of Calvin Klein and Tommy Hilfiger products. The conglomerate had long manufactured and sold them under licenses from PVH; however, the companies agreed in 2022 on a phased transition of the brand rights back to PVH.
G-III’s forecast does not include results from Marc Jacobs, which it acquired from fashion house LVMH in a transaction that closed only on Tuesday. The management expects the brand to generate more than $1 billion in annual revenue in the long term.
What analysts say
G-III shares are off 1.6% year to date. Two Wall Street analysts rate the stock a "buy" versus one “hold” rating. The average target price is $39.33 per share, implying 38% upside from the last close.
