Shares of G-III Apparel Group (GIII -12.07%) dropped after the diversified company reported disappointing top-line results in its fourth-quarter earnings report. As a result, G-III stock was down 13.1% on the news as of 3:19 p.m. ET.
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G-III comes up short in Q4
G-III, which licenses and owns several apparel brands, said that revenue in the quarter fell 10.5% to $764.8 million, which was well below estimates of $817.5 million. The company slashed its inventories in the quarter, which fell 27%, as part of a strategy to shore up margins as gross margin jumped from 33% to 36.8%.
The company also credited its margin expansion to the growth of its higher-margin, owned brands like DKNY, Karl Lagerfeld, and Vilebrequin. These made up 47% of net sales, compared to 40% in the quarter a year ago.
Improving margins also helped drive adjusted earnings per share up from $0.41 to $0.76, which was better than estimates of $0.67.
CEO Morris Goldfarb also noted the company’s improving financial position saying, “Our diverse business model and disciplined operating approach has allowed us to further strengthen our credit profile as we ended the year in a net cash position, with over a billion dollars in liquidity.”
What’s next for G-III
Looking ahead, the company expects revenue of around $3.2 billion this year, representing an increase of 3% and matching the consensus. On the bottom line, it expects adjusted earnings per share of $3.50-$3.60, which is well below the $4.04 per share it made last year.
Management noted incremental expenses of around $60 million related to the launches of Donna Karan, Nautica, and Halston. Nonetheless, investors were still disappointed with the guidance and sent the stock sliding on the news.
Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends G-III Apparel Group. The Motley Fool has a disclosure policy.
