G-III saw outerwear brand deliveries fall this quarter. Image source: G-III Apparel Group, Ltd.
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What:Shares of G-III Apparel Group Ltd. (NASDAQ: GIII) closed down 20.7% Tuesday after the company released weaker-than-expected fiscal second-quarter 2017 results.
So what:Quarterly revenue fell 7% year over year, to $442.3 million, as strength in G-III's non-outerwear shipments were offset by reduced outerwear deliveries. That translated to a net loss of $1.3 million, or $0.03 per share, including professional fees of roughly $3 million (or $0.04 per share) related to G-III's impending acquisition of Donna Karan. Analysts, on average, were expecting G-III to deliver earnings of $0.18 per share on revenue of $484.9 million.
Now what:G-III also reduced its prior fiscalfull-year guidance, and now expects revenue of $2.48 billion (compared to previous guidance for $2.56 billion), net income of $102 million to $106 million (compared to $120 million to $125 million previously), and net income per diluted share of $2.16 to $2.26 (compared to $2.55 to $2.65 previously).
G-III CEO Morris Goldfarb insisted, "We believe our wholesale outerwear opportunity is intact for the full year despite a reduction by retailers in early season orders as they shifted their focus toward a greater degree of in season replenishment and reorder business."
Goldfarb added the risk of continued softness in retail has likely "somewhat abated" given G-III's now-liquidated inventory from last year's holiday season and promising fall products on the way. G-III also believes cool weather trends are favorable headed into the fall and holiday season, and the company should see stronger margins in the second half of the year.
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Nonetheless, while G-III may be nicely positioned for the crucial holiday season, it's hard to blame the market for taking a step back today given the company's underwhelming quarter and reduced guidance. For now, until I see more signs of tangible improvement, I'm personally content watching G-III's progress from the sidelines.
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