G-III Apparel (US:GIII)2022-06-07 17:57Financial Data and Key Metrics Changes - Net sales for the first quarter were $689 million, an increase of 33% compared to last year's first quarter net sales of $520 million, exceeding guidance by approximately 15% [8][31] - Non-GAAP net income was $0.72 per diluted share compared to $0.50 per share in the first quarter last year [10][37] - Gross margin percentage was 35.7% in the first quarter, down from 37.6% in the previous year due to inflationary cost increases [32][34] - Net income for the quarter was $30.6 million or $0.62 per diluted share compared to $26.3 million or $0.53 per diluted share in last year's first quarter [36] Business Line Data and Key Metrics Changes - Wholesale operations segment net sales increased approximately 33% to $681 million from $512 million last year [31] - Retail operations segment net sales were $28 million for the first quarter, up 44% compared to net sales of $19 million in last year's first quarter [31] - The handbag business for Calvin Klein, DKNY, and Karl Lagerfeld Paris saw significant growth, with Karl Lagerfeld handbags doubling in distribution [13] Market Data and Key Metrics Changes - Digital sales for the quarter were up approximately 60% compared to pre-pandemic levels [16] - Direct-to-consumer sales for Vilebrequin were up strong double digits compared to pre-pandemic levels, and wholesale nearly doubled [23] Company Strategy and Development Direction - The company is focused on driving power brands across categories, expanding its portfolio through ownership and licensing opportunities, and maximizing omnichannel opportunities [49] - The acquisition of Karl Lagerfeld is expected to enhance growth and geographic reach, with anticipated annual royalty income of over $65 million [15][28] - The company is developing its European-based brand portfolio and expanding Vilebrequin's presence with new stores [22][23] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in business and future growth opportunities, raising the full fiscal year 2023 guidance to approximately $3.24 billion in net sales [28][40] - The company is optimistic about market share gains as life returns to normal, despite challenges such as inflation and supply chain issues [5][39] Other Important Information - Inventory levels are up approximately 59% compared to last year, primarily driven by in-transit inventory [37] - The company ended the quarter with a lower net debt position of $83 million compared to $118 million in the prior year [38] Q&A Session Summary Question: Can you talk about the Karl Lagerfeld brand more in detail? - The anticipated operating margin for Karl Lagerfeld is mid-single digits, with potential to reach mid-double digits over time [52] - The brand has a direct-to-consumer mix of about 60% [53] Question: Can you elaborate on the gross margin expectations? - Gross margins are expected to improve as inflationary pressures ease and price increases are implemented [61] - Both Tommy Hilfiger and Calvin Klein are performing well, with high demand for polished products [63] Question: What are you seeing in terms of department store orders? - Department stores are managing inventory differently, focusing on turn rather than surplus, leading to better margins [67] - The company is creating a significant global footprint with its brands, particularly with the acquisition of Karl Lagerfeld [69]