G III APPAREL GROUP LTD /DE/ [GIII] Filings

10-Q 1 giii-20241031x10q.htm 10-Q G III APPAREL GROUP LTD /DE/_October 31, 2024

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended October 31, 2024


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 0-18183

G-III APPAREL GROUP, LTD.

(Exact name of registrant as specified in its charter)


Delaware		41-1590959
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

512 Seventh Avenue, New York, New York		10018
(Address of principal executive offices)		(Zip Code)

(212) 403-0500

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 par value per share	GIII	The Nasdaq Stock Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files.) Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of December 5, 2024, there were 43,886,707 shares of issuer’s common stock, par value $0.1 per share, outstanding.

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TABLE OF CONTENTS

		Page No.
Part I	FINANCIAL INFORMATION
Item 1.	Financial Statements
	Condensed Consolidated Balance Sheets – October 31, 2024 (Unaudited), October 31, 2023 (Unaudited) and January 31, 2024	3
	Condensed Consolidated Statements of Income and Comprehensive Income – For the Three and Nine Months Ended October 31, 2024 and 2023 (Unaudited)	4
	Condensed Consolidated Statements of Stockholders’ Equity – October 31, 2024 and October 31, 2023 (Unaudited)	5
	Condensed Consolidated Statements of Cash Flows – For the Nine Months Ended October 31, 2024 and 2023 (Unaudited)	6
	Notes to Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	30
Item 4.	Controls and Procedures	30

Part II	OTHER INFORMATION
Item 1A.	Risk Factors	32
Item 5.	Other Information	32
Item 6.	Exhibits	33

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PART I – FINANCIAL INFORMATION

Item 1. Financial Statements.

G-III APPAREL GROUP, LTD. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS


	October 31,		October 31,		January 31,
	2024		2023		2024
	(Unaudited)		(Unaudited)
	(In thousands, except per share amounts)
ASSETS
Current assets
Cash and cash equivalents	$	104,686	$	197,391	$	507,829
Accounts receivable, net of allowance for doubtful accounts of $1,355, $18,412 and $1,471, respectively		879,681		863,221		562,363
Inventories		532,463		591,530		520,426
Prepaid income taxes		9,207		2,216		1,356
Prepaid expenses and other current assets		55,183		58,779		68,344
Total current assets		1,581,220		1,713,137		1,660,318
Investments in unconsolidated affiliates		109,911		24,354		22,472
Property and equipment, net		70,298		52,032		55,084
Operating lease assets		286,232		221,474		216,886
Other assets, net		47,246		53,852		45,147
Other intangibles, net		28,232		32,565		31,676
Deferred income tax assets, net		26,964		26,389		19,248
Trademarks		633,508		625,530		630,333
Total assets	$	2,783,611	$	2,749,333	$	2,681,164
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current portion of notes payable	$	10,277	$	59,099	$	15,026
Accounts payable		239,882		179,396		182,531
Accrued expenses		160,059		153,200		140,535
Customer refund liabilities		88,323		108,042		84,054
Current operating lease liabilities		55,479		55,897		56,587
Income tax payable		45,730		46,380		14,676
Other current liabilities		571		330		219
Total current liabilities		600,321		602,344		493,628
Notes payable, net of discount and unamortized issuance costs		213,898		402,846		402,807
Deferred income tax liabilities, net		51,442		44,265		42,736
Noncurrent operating lease liabilities		246,834		183,522		178,247
Other noncurrent liabilities		22,390		14,543		15,764
Total liabilities		1,134,885		1,247,520		1,133,182

Redeemable noncontrolling interests		—		(1,407)		(2,278)

Stockholders' Equity
Preferred stock; 1,000 shares authorized; no shares issued		—		—		—
Common stock - $0.01 par value; 120,000 shares authorized; 49,396, 49,396 and 49,396 shares issued, respectively		264		264		264
Additional paid-in capital		456,839		453,504		458,841
Accumulated other comprehensive income (loss)		3,420		(15,995)		(3,207)
Retained earnings		1,304,894		1,131,258		1,160,112
Common stock held in treasury, at cost - 5,511, 3,670 and 3,668 shares, respectively		(116,691)		(65,811)		(65,750)
Total stockholders' equity		1,648,726		1,503,220		1,550,260
Total liabilities, redeemable noncontrolling interests and stockholders' equity	$	2,783,611	$	2,749,333	$	2,681,164

The accompanying notes are an integral part of these statements.

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G-III APPAREL GROUP, LTD. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME


	Three Months Ended October 31,				Nine Months Ended October 31,
	2024		2023		2024		2023

	(Unaudited)
	(In thousands, except per share amounts)
Net sales	$	1,086,759	$	1,067,110	$	2,341,261	$	2,333,460
Cost of goods sold		654,628		633,697		1,374,363		1,373,594
Gross profit		432,131		433,413		966,898		959,866
Selling, general and administrative expenses		259,240		236,308		724,891		703,476
Depreciation and amortization		6,556		6,595		20,704		19,130
Asset impairments		—		222		—		222
Operating profit		166,335		190,288		221,303		237,038
Other income (loss)		942		(3,129)		(2,233)		(1,964)
Interest and financing charges, net		(6,358)		(11,024)		(16,658)		(32,666)
Income before income taxes		160,919		176,135		202,412		202,408
Income tax expense		46,151		48,755		57,903		55,651
Net income		114,768		127,380		144,509		146,757
Less: Loss attributable to noncontrolling interests		—		(260)		(273)		(557)
Net income attributable to G-III Apparel Group, Ltd.	$	114,768	$	127,640	$	144,782	$	147,314


NET INCOME PER COMMON SHARE ATTRIBUTABLE TO G-III APPAREL GROUP, LTD.:
Basic:
Net income per common share	$	2.62	$	2.79	$	3.24	$	3.21
Weighted average number of shares outstanding		43,885		45,723		44,640		45,904

Diluted:
Net income per common share	$	2.55	$	2.74	$	3.17	$	3.13
Weighted average number of shares outstanding		44,954		46,560		45,719		46,992

Net income	$	114,768	$	127,380	$	144,509	$	146,757
Other comprehensive income (loss):
Foreign currency translation adjustments		15,489		(11,391)		6,589		(4,317)
Other comprehensive income (loss)		15,489		(11,391)		6,589		(4,317)
Comprehensive income	$	130,257	$	115,989	$	151,098	$	142,440
Comprehensive loss attributable to noncontrolling interests:
Net loss		—		(260)		(273)		(557)
Foreign currency translation adjustments		—		(1)		38		(25)
Comprehensive loss attributable to noncontrolling interests		—		(261)		(235)		(582)
Comprehensive income attributable to G-III Apparel Group, Ltd.	$	130,257	$	115,728	$	150,863	$	141,858

The accompanying notes are an integral part of these statements.

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G-III APPAREL GROUP, LTD. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY


					Accumulated				Common
			Additional		Other				Stock
	Common		Paid-In		Comprehensive		Retained		Held In
	Stock		Capital		Loss		Earnings		Treasury		Total

	(Unaudited)
	(In thousands)
Balance as of July 31, 2024	$	264	$	451,005	$	(12,069)	$	1,190,126	$	(116,691)	$	1,512,635
Share-based compensation expense		—		5,834		—		—		—		5,834
Other comprehensive income, net		—		—		15,489		—		—		15,489
Net income attributable to G-III Apparel Group, Ltd.		—		—		—		114,768		—		114,768
Balance as of October 31, 2024	$	264	$	456,839	$	3,420	$	1,304,894	$	(116,691)	$	1,648,726

Balance as of July 31, 2023	$	264	$	448,762	$	(4,603)	$	1,003,618	$	(65,926)	$	1,382,115
Equity awards vested, net		—		(115)		—		—		115		—
Share-based compensation expense		—		4,890		—		—		—		4,890
Taxes paid for net share settlements		—		(33)		—		—		—		(33)
Other comprehensive loss, net		—		—		(11,392)		—		—		(11,392)
Net income attributable to G-III Apparel Group, Ltd.		—		—		—		127,640		—		127,640
Balance as of October 31, 2023	$	264	$	453,504	$	(15,995)	$	1,131,258	$	(65,811)	$	1,503,220

Balance as of January 31, 2024	$	264	$	458,841	$	(3,207)	$	1,160,112	$	(65,750)	$	1,550,260
Equity awards vested, net		—		(9,668)		—		—		9,668		—
Share-based compensation expense		—		17,942		—		—		—		17,942
Taxes paid for net share settlements		—		(7,534)		—		—		—		(7,534)
Other comprehensive income, net		—		—		6,627		—		—		6,627
Repurchases of common stock		—		—		—		—		(59,973)		(59,973)
Excise tax on stock repurchases		—		—		—		—		(636)		(636)
Reduction of noncontrolling interest		—		(2,742)		—		—		—		(2,742)
Net income attributable to G-III Apparel Group, Ltd.		—		—		—		144,782		—		144,782
Balance as of October 31, 2024	$	264	$	456,839	$	3,420	$	1,304,894	$	(116,691)	$	1,648,726

Balance as of January 31, 2023	$	264	$	468,712	$	(11,653)	$	983,944	$	(55,819)	$	1,385,448
Equity awards vested, net		—		(16,108)		—		—		16,108		—
Share-based compensation expense		—		11,728		—		—		—		11,728
Taxes paid for net share settlements		—		(10,828)		—		—		—		(10,828)
Other comprehensive loss, net		—		—		(4,342)		—		—		(4,342)
Repurchases of common stock		—		—		—		—		(26,100)		(26,100)
Net income attributable to G-III Apparel Group, Ltd.		—		—		—		147,314		—		147,314
Balance as of October 31, 2023	$	264	$	453,504	$	(15,995)	$	1,131,258	$	(65,811)	$	1,503,220

The accompanying notes are an integral part of these statements.

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G-III APPAREL GROUP, LTD. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS


	Nine Months Ended October 31,
	2024		2023

	(Unaudited, in thousands)
Cash flows from operating activities
Net income attributable to G-III Apparel Group, Ltd.	$	144,782	$	147,314
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Depreciation and amortization		20,704		19,130
Loss on disposal of fixed assets		388		239
Non-cash operating lease costs		44,176		43,467
Asset impairment		—		222
Extinguishment of deferred financing costs		1,598		—
Equity gain in unconsolidated affiliates		2,758		3,725
Change in fair value of equity securities		—		(1,009)
Share-based compensation		17,942		11,728
Deferred financing charges and debt discount amortization		1,951		6,054
Deferred income taxes		990		(519)
Changes in operating assets and liabilities:
Accounts receivable, net		(317,318)		(188,258)
Inventories		(12,037)		117,815
Income taxes, net		23,203		35,175
Prepaid expenses and other current assets		13,949		12,636
Other assets, net		(730)		(3,044)
Customer refund liabilities		4,269		18,282
Operating lease liabilities		(44,270)		(43,750)
Accounts payable, accrued expenses and other liabilities		80,629		47,064
Net cash (used in) provided by operating activities		(17,016)		226,271

Cash flows from investing activities
Operating lease assets initial direct costs		(1,757)		(52)
Proceeds from sale of assets		733		—
Investment in equity interest of private company		(84,832)		(3,600)
Capital expenditures		(31,757)		(15,653)
Net cash used in investing activities		(117,613)		(19,305)

Cash flows from financing activities
Repayment of borrowings - revolving facility		(228,756)		(112,826)
Proceeds from borrowings - revolving facility		438,811		32,738
Repayment of borrowings - LVMH Note		—		(75,000)
Repayment of borrowings - foreign facilities		(103,635)		(106,100)
Proceeds from borrowings - foreign facilities		97,338		99,032
Repayment of borrowings - senior secured notes		(400,000)		—
Payment of financing costs		(3,785)		—
Purchase of treasury shares		(59,973)		(26,100)
Taxes paid for net share settlements		(7,534)		(10,828)
Net cash used in financing activities		(267,534)		(199,084)

Foreign currency translation adjustments		(980)		(2,143)
Net (decrease) increase in cash and cash equivalents		(403,143)		5,739
Cash and cash equivalents at beginning of period		507,829		191,652
Cash and cash equivalents at end of period	$	104,686	$	197,391

Supplemental disclosures of cash flow information
Cash payments:
Interest, net	$	26,036	$	32,882
Income tax payments, net	$	29,691	$	20,195
Excise tax liability related to stock repurchases	$	636	$	—

The accompanying notes are an integral part of these statements.

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G-III APPAREL GROUP, LTD. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 – BASIS OF PRESENTATION

As used in these financial statements, the term “Company” or “G-III” refers to G-III Apparel Group, Ltd. and its subsidiaries. The Company designs, sources and markets an extensive range of apparel, including outerwear, dresses, sportswear, swimwear, women’s suits and women’s performance wear, as well as women’s handbags, footwear, small leather goods, cold weather accessories and luggage. The Company also operates retail stores and licenses its proprietary brands under several product categories.

The Company consolidates the accounts of its wholly-owned and majority-owned subsidiaries. The Company’s DKNY and Donna Karan business in China is operated by Fabco Holding B.V. (“Fabco”), a Dutch joint venture limited liability company that was 75% owned by the Company through April 16, 2024 and was treated as a consolidated majority-owned subsidiary. Effective April 17, 2024, the Company acquired the remaining 25% interest in Fabco that it did not previously own and, as a result, Fabco began being treated as a wholly-owned subsidiary. AWWG Investments B.V. (“AWWG”) is a Dutch corporation that was 12.1% owned by the Company from May 3, 2024 through July 18, 2024 and was accounted for using the cost method. Effective July 19, 2024, the Company acquired an additional 6.6% minority interest in AWWG, increasing its total ownership interest to 18.7% and, as a result, AWWG began being accounted for under the equity method of accounting. All material intercompany balances and transactions have been eliminated.

Karl Lagerfeld Holding B.V. (“KLH”), a Dutch limited liability company that is wholly-owned by the Company, Vilebrequin International SA (“Vilebrequin”), a Swiss corporation that is wholly-owned by the Company, Sonia Rykiel, a Swiss corporation that is wholly-owned by the Company, Fabco and AWWG report results on a calendar year basis rather than on the January 31 fiscal year basis used by the Company. Accordingly, the results of KLH, Vilebrequin, Sonia Rykiel, Fabco and AWWG are included in the financial statements for the quarter ended or ending closest to the Company’s fiscal quarter end. For example, with respect to the Company’s results for the nine-month period ended October 31, 2024, the results of KLH, Vilebrequin, Sonia Rykiel, Fabco and AWWG are included for the nine-month period ended September 30, 2024. The Company’s retail operations segment reports on a 52/53 week fiscal year. For fiscal 2025 and 2024, the three and nine-month periods for the retail operations segment were each 13-week and 39-week periods, respectively, and ended on November 2, 2024 and October 28, 2023, respectively.

The results for the three and nine months ended October 31, 2024 are not necessarily indicative of the results expected for the entire fiscal year, given the seasonal nature of the Company’s business. The accompanying financial statements included herein are unaudited. All adjustments (consisting of only normal recurring adjustments) necessary for a fair presentation of the financial position, results of operations and cash flows for the interim period presented have been reflected.

The accompanying financial statements should be read in conjunction with the financial statements and notes included in the Company’s Annual Report on Form 10-K for the fiscal year ended January 31, 2024 filed with the Securities and Exchange Commission (the “SEC”).

Assets and liabilities of the Company’s foreign operations, where the functional currency is not the U.S. dollar (reporting currency), are translated from the foreign currency into U.S. dollars at period-end rates, while income and expenses are translated at the weighted-average exchange rates for the period. The related translation adjustments are reflected as a foreign currency translation adjustment in accumulated other comprehensive loss within stockholders’ equity.

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NOTE 2 – ALLOWANCE FOR DOUBTFUL ACCOUNTS

The Company’s financial instruments consist of trade receivables arising from revenue transactions in the ordinary course of business. The Company considers its trade receivables to consist of two portfolio segments: wholesale and retail trade receivables. Wholesale trade receivables result from credit the Company has extended to its wholesale customers based on pre-defined criteria and are generally due within 60 days. Retail trade receivables primarily relate to amounts due from third-party credit card processors for the settlement of debit and credit card transactions and are typically collected within 3 to 5 days.

The Company’s accounts receivable and allowance for doubtful accounts as of October 31, 2024, October 31, 2023 and January 31, 2024 were:


	October 31, 2024
	Wholesale		Retail		Total

	(In thousands)
Accounts receivable, gross	$	879,572	$	1,464	$	881,036
Allowance for doubtful accounts		(1,217)		(138)		(1,355)
Accounts receivable, net	$	878,355	$	1,326	$	879,681

	October 31, 2023
	Wholesale		Retail		Total

	(In thousands)
Accounts receivable, gross	$	880,827	$	806	$	881,633
Allowance for doubtful accounts		(18,349)		(63)		(18,412)
Accounts receivable, net	$	862,478	$	743	$	863,221

	January 31, 2024
	Wholesale		Retail		Total

	(In thousands)
Accounts receivable, gross	$	563,130	$	704	$	563,834
Allowance for doubtful accounts		(1,408)		(63)		(1,471)
Accounts receivable, net	$	561,722	$	641	$	562,363

The allowance for doubtful accounts for wholesale trade receivables is estimated based on several factors. In circumstances where the Company is aware of a specific customer’s inability to meet its financial obligations (such as in the case of bankruptcy filings (including potential bankruptcy filings), extensive delay in payment or substantial downgrading by credit rating agencies), a specific reserve for bad debt is recorded against amounts due from that customer to reduce the net recognized receivable to the amount reasonably expected to be collected. For all other wholesale customers, an allowance for doubtful accounts is determined through analysis of the aging of accounts receivable at the end of the reporting period for financial statements, assessments of collectability based on historical trends and an evaluation of the impact of economic conditions. The Company considers both current and forecasted future economic conditions in determining the adequacy of its allowance for doubtful accounts.

The allowance for doubtful accounts for retail trade receivables is estimated at the credit card chargeback rate applied to the previous 90 days of credit card sales. In addition, the Company considers both current and forecasted future economic conditions in determining the adequacy of its allowance for doubtful accounts.

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The Company had the following activity in its allowance for doubtful accounts:


	Wholesale		Retail		Total

	(In thousands)
Balance as of January 31, 2024	$	(1,408)	$	(63)	$	(1,471)
Provision for credit losses, net		143		(75)		68
Accounts written off as uncollectible		48		—		48
Balance as of October 31, 2024	$	(1,217)	$	(138)	$	(1,355)

Balance as of January 31, 2023	$	(18,237)	$	(60)	$	(18,297)
Provision for credit losses, net		(115)		(3)		(118)
Accounts written off as uncollectible		3		—		3
Balance as of October 31, 2023	$	(18,349)	$	(63)	$	(18,412)

Balance as of January 31, 2023	$	(18,237)	$	(60)	$	(18,297)
Provision for credit losses, net		166		(3)		163
Accounts written off as uncollectible		16,663		—		16,663
Balance as of January 31, 2024	$	(1,408)	$	(63)	$	(1,471)

NOTE 3 – INVENTORIES

Wholesale inventories, which comprise a significant portion of the Company’s inventory, and KLH inventories are stated at the lower of cost (determined by the first-in, first-out method) or net realizable value. Retail and Vilebrequin inventories are stated at the lower of cost (determined by the weighted average method) or net realizable value. Substantially all of the Company’s inventories consist of finished goods.

The inventory return asset, which consists of the amount of goods that are anticipated to be returned by customers, was $10.6 million, $15.6 million and $16.5 million as of October 31, 2024, October 31, 2023 and January 31, 2024, respectively. The inventory return asset is recorded within prepaid expenses and other current assets on the condensed consolidated balance sheets.

Inventory held on consignment by the Company’s customers totaled $5.6 million, $7.9 million and $6.6 million at October 31, 2024, October 31, 2023 and January 31, 2024, respectively. The Company reflects this inventory on its condensed consolidated balance sheets.

NOTE 4 – FAIR VALUE OF FINANCIAL INSTRUMENTS

Generally Accepted Accounting Principles establish a three-level valuation hierarchy for disclosure of fair value measurements. The determination of the applicable level within the hierarchy for a particular asset or liability depends on the inputs used in its valuation as of the measurement date, notably the extent to which the inputs are market-based (observable) or internally-derived (unobservable). A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The three levels are defined as follows:

●

Level 1 — inputs to the valuation methodology based on quoted prices (unadjusted) for identical assets or liabilities in active markets.

●

Level 2 — inputs to the valuation methodology based on quoted prices for similar assets or liabilities in active markets for substantially the full term of the financial instrument; quoted prices for identical or similar instruments in markets that are not active for substantially the full term of the financial instrument; and model-derived valuations whose inputs or significant value drivers are observable.

●

Level 3 — inputs to the valuation methodology based on unobservable prices or valuation techniques that are significant to the fair value measurement.

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The following table summarizes the carrying values and the estimated fair values of the Company’s debt instruments:


		Carrying Value						Fair Value
		October 31,		October 31,		January 31,		October 31,		October 31,		January 31,
Financial Instrument	Level	2024		2023		2024		2024		2023		2024

		(In thousands)
Secured Notes	1	$	—	$	400,000	$	400,000	$	—	$	396,340	$	401,080
Revolving credit facility	2		210,055		—		—		210,055		—		—
Note issued to LVMH	3		—		49,787		—		—		49,350		—
Unsec