G-III Apparel (GIII) - 2024 Q3 - Quarterly Report

Fiscal Year and Reporting Periods - G-III's fiscal year ending January 31, 2024 is referred to as "fiscal 2024," with retail operations segment periods ending on October 28, 2023 and October 29, 2022 for fiscal 2024 and 2023, respectively[91] Business Segments - G-III's wholesale operations segment includes sales of products to retailers under owned, licensed, and private label brands, as well as sales related to the Karl Lagerfeld and Vilebrequin businesses[111] - G-III's retail operations segment consists primarily of direct sales to consumers through company-operated stores and digital channels for the DKNY, Donna Karan, Karl Lagerfeld Paris, G.H. Bass, and Wilsons Leather businesses[112] Brand Expansion and Licensing - G-III is repositioning and expanding the Donna Karan brand for Spring 2024, with expected distribution in North America and internationally through diversified channels, including better department stores and digital platforms[102] - G-III entered into a global 25-year master license with Xcel Brands, Inc. in May 2023 to design and produce all categories of men's and women's products for the Halston brand[105] - G-III entered into a license with HanesBrands Inc. in September 2023 to design and produce a men's and women's outerwear collection for the Champion brand in North America[108] Digital and Strategic Investments - G-III is investing in digital personnel, marketing, logistics, planning, distribution, and other strategic opportunities to expand its digital footprint, including its own web platforms and partnerships with leading online retailers[114] Tax and Regulatory Considerations - G-III is evaluating the impact of the EU's Pillar Two global minimum tax of 15%, expected to be effective for the fiscal year ending January 31, 2025[119] Market and Economic Conditions - Inflationary pressures and higher interest rates have led to a softening of consumer demand and increased promotional activity in G-III's apparel categories, potentially impacting future sales and cost structures[120][121] Inventory and Supply Chain - G-III experienced higher inventory levels in fiscal 2023 due to accelerated production schedules to accommodate extended transit times from overseas suppliers caused by supply chain disruptions[125] - Elevated inventory levels and disruptions in shipping led to significant demurrage charges in fiscal 2023, with measures implemented to reduce these charges in fiscal 2024[126] Financial Performance - Retail Operations - Net sales of the retail operations segment increased to $32.7 million for the three months ended October 31, 2023, up from$28.8 million in the same period last year[132] Financial Performance - Wholesale Operations - Net sales of the wholesale operations segment decreased to $1.05 billion for the three months ended October 31, 2023, from$1.07 billion in the comparable period last year[131] Financial Performance - Overall - Net sales for the nine months ended October 31, 2023, decreased to $2.33 billion from$2.37 billion in the same period last year[141] - Gross profit was $433.4 million, or 40.6$344.6 million, or 32.0% of net sales, in the same period last year[135] - Gross profit was $959.9 million, or 41.1$819.6 million, or 34.5% of net sales, in the same period last year[144] - Selling, general and administrative expenses increased to $703.5 million in the nine months ended October 31, 2023, from$616.4 million in the same period last year[145] - Income tax expense was $55.7 million for the nine months ended October 31, 2023, compared to$39.5 million for the same period last year[149] Liquidity and Capital Resources - As of October 31, 2023, the company had cash and cash equivalents of $197.4 million and availability under its revolving credit facility of approximately$645 million[152] - The company completed a private debt offering of $400 million aggregate principal amount of 7.875$8.0 million of debt issuance costs related to the ABL Credit Agreement, which are amortized over the term of the agreement[167] - The LVMH Note was issued at a discount of $40 million, which is being amortized as interest expense over the term of the note[170] - The company has an aggregate outstanding balance of €8.6 million ($9.1 million) under unsecured loans, with quarterly principal payments of €0.6 million[172] - TRB has an aggregate of €1.8 million ($1.9 million) drawn under overdraft facilities, including a €5 million facility with HSBC Bank and CHF 4.7 million in state-backed facilities with UBS Bank[173] - KLH has €3.9 million ($4.2 million) of borrowings outstanding under a €15.0 million credit facility with ABN AMRO Bank N.V.[174] - The company had $400 million in borrowings outstanding under the Notes at October 31, 2023, unchanged from October 31, 2022[176] - The company repurchased 1,598,568 shares of common stock for$26.1 million under its share repurchase program, with 10,000,000 shares remaining authorized for purchase[177] - The company generated $226.3 million in cash from operating activities during the nine months ended October 31, 2023, primarily due to net income of$147.3 million and a $117.8 million decrease in inventories[178] - The company used$19.3 million of cash in investing activities, including $15.7 million in capital expenditures and$3.6 million for an investment in a private company[180] - Net cash used by financing activities was $199.1 million, primarily due to$112.8 million in repayments under the ABL Credit Agreement and a $75.0 million principal repayment of the LVMH Note[181]