G-III Apparel Group Ltd (GIII) 2005 Q1 法說會逐字稿

Good afternoon and welcome to the G-III Apparel Group first quarter fiscal 2005 earnings conference call. At this time all parties have been placed on a listen only mode and the floor will be open for your questions following the presentation.

Now it is my pleasure to turn the floor over to your host, Mr. James Palczynski of Integrated Corporate Relations. Sir, the floor is yours.

Good afternoon, everybody. I would just like to remind you of the Company's Safe Harbor language before we get started. I am sure you are all familiar with it. Statements concerning the Company's business outlook or future economic performance of anticipated revenues, expenses, or other financial items, introductions, plans and objectives related thereto and statements concerning assumptions made or expectations that any future events, conditions, performance or other matters are forward-looking statements as that term is defined under the federal securities laws. Forward looking statements are subject to risks, uncertainties, and factors including but not limited to reliance on foreign manufacturers, the nature of the apparel industry including changing customer demand and taste, seasonality, consumer acceptance of new products, the impact of competitive pricing, dependence on the financial management, general economic conditions as well as other risk detailed in the Company's filings with the Securities and Exchange Commission. The Company assumes no obligation to update the information in this conference call.

Thank you and with that out of the way, I'd like to introduce you to Morris Goldfarb, Chairman and Chief Executive Officer of G-III Apparel Group.

Good afternoon and thank you for joining us for a review of our first quarter results. With me today are Jeanette Nostra, our President and Wayne Miller, our Chief Operating and Financial Officer.

As anticipated, our results for the first quarter were below last year. This was the result primarily of lower sales of our fashion sportswear product. Our financial results for the second quarter will continue to be challenged by a further reduction in fashions sportswear sales.

While it remains somewhat early, we are optimistic about our prospects for the second half of our fiscal year. Our core sports apparel offerings continue to perform very well. NFL product is our largest business in this area.

I would like you all to know how proud we are of our relationship with the NFL that dates back to 1993 and we're real pleased to have signed a renewal with the NFL which takes us through March 31st, 2007.

Our fashion licenses for department and specialty stores distribution are booking well. Cole Haan and Sean John are very strong with bookings nearly double the year ago level. Kenneth Cole and Jones New York are both ahead of last year. Our own Black Rivet brand, though still small, is gaining traction and is also tracking at nearly double last year's level.

While our men's (indiscernible) business is somewhat challenging at this time we're seeing good increases in women's bookings for this same tier of distribution.

As you may have read in our press release, we've made good progress in expanding our portfolio of licenses. We have signed with NASCAR to produce men's and women's activewear and outerwear. Stock car racing is a tremendously popular sport. And we believe that the market potential for this business, which is aimed at the mix here and the department store distribution, is excellent. Additionally, we've signed a license agreement to distribute casual sportswear and outerwear under the Will Coker tour brand.

Lastly we've become the exclusive licensee for The Yard (ph), a brand launched by the collegiate licensing agreement. The items are new brands focused on the tradition and culture of historically black colleges and universities. Each of these new initiatives is expected to use our existing infrastructure and should not require additional investments for these operations.

We continue to aggressively seek new opportunities, both licensed and company-owned.

In summary, we have strong programs of leading brands and have expanded our suite of licenses. Our balance sheet continues to be in great shape and we are looking at or we are booking at a good pace.

Last year's cold winter should bode well for our order trends going forward. The retail environment is currently strong. The consumer is showing a willingness to embrace new fashion trends and continue spending on apparel. We have good opportunities, both for the upcoming season; even more so for the long-term.

I would now like to turn the call over to Wayne Miller, our Chief Operating and Financial Officer who will review the numbers.

Thank you, Morris, and good afternoon. Net sales for the quarter ended April 30th, 2004, were 16.5 million compared to 18.7 million a year ago first quarter. This decrease resulted primarily from lower shipments of sports apparel. Gross margin percentage during the quarter was 10.7 percent, compared to 23.3 percent in the year ago quarter.

This decline was primarily the result of lower regular price shipments and increased clearance activity in fashions sports apparel. Our SG&A expenses increased to 10.2 million from 8.8 million in the year ago first quarter. The increase is primarily the result of higher personnel and warehousing expenses.

Our operating loss for the first quarter was 8.4 million compared to 4.4 million in the first quarter of fiscal 2003.

As a result of these factors we had a net loss of 4.8 million for the quarter, or 68 cents per share. Compared to a net loss of 2.6 million or 38 cents per share in the year ago quarter.

I'd also like to share a few additional key balance sheet items with you. On April 30th of this year, our stockholders equity stood at 60.8 (ph) million compared to 53.1 million at the same time last year. Our book value per share at April 30th '04 was at $8.49 and our book value per share a year ago was at $7.73.

Our inventories were approximately $5 million lower at 26.6 million today, compared to 31.2 million a year ago.

Finally, with respect to guidance for our second quarter ended July 31, 2004. We are forecasting a loss per share in the range of 15 to 20 cents with net sales of approximately 35 million. In the year ago quarter, net sales were 45.3 million, diluted earnings per share were 37 cents. The increased losses are primarily due to lower sales of fashion sports apparel and higher personnel expenses. Thanks for your attention and now I'd like to turn the call back over to Morris.

Thank you, Wayne. Before we take some questions I would just like to comment that, while we're disappointed with our short-term results, we are pleased with the additions we've made and the continued diversification of our product offerings as we build for the future.

Operator, we're now ready to take any questions.

(OPERATOR INSTRUCTIONS) Richard Friary (ph) of Delcy (ph) Management.

I'm hoping -- I know you provided some guidance in the release but I am just hoping you can provide a little more color as to what you're trying to do to turn the sales picture on and start driving sales. I was looking at retailer same-store sales. And they're pretty strong today so I'm hoping there's room for you guys to grow your sales. I think 20 percent of your business is going at Wal-Mart and they're doing pretty well. What's your plan for driving sales going forward?

Thanks for your question Richard. Our sales in pretty much all our areas as we spoke to earlier, they're showing increases. Wal-Mart isn't as -- is actually quite good. The problem that we're having is with an entire area of fashion sportswear as it relates to our sports division. So, if we can overcome that, we as well can show good increases. The great sales or the good sales that we're -- the good bookings that we are incurring in the outerwear area are offsetting a good deal of that drop.

Outerwear is offsetting a good deal, all right. At least on the fashion apparel's on the sportswear side there. Who are your big competitors? Are you guys feeling competitive pressure or are people just generally not buying the products?

We made a decision early on, early on being the early part of first quarter not to aggressively pursue it. The retailer and the consumer have pretty much indicated that there is no demand for it. So there is competition out there but they're faced with the same dilemma and possibly even to a greater extent. We believe we are astute enough to know when to quit. So we're not challenging what the consumer is telling us. We are going on to better things.

You mentioned some future growth coming from both NASCAR and the licensing arrangements you have with The Yard. Just -- first thing about NASCAR. I followed a few stocks that are relying upon NASCAR -- I don't know. Unfortunately, they haven't grown a whole lot and I think there's some thinking out there that a lot of the growth sort of passed us there. I'm wondering if you see real growth opportunities there and also what kind of opportunities do you see with The YARD?

Any volume we get in NASCAR is growth. Don't have the business there. So what we're looking to do is offset some of the drop in the fashion segment of the business, utilizing the same stats which we have in place, it's quite capable of developing product, (indiscernible) and bringing it to market. So, if we can offset some of the drop in the sportswear with NASCAR and The Yard, we will have done a good job.

Okay and just one last thing and I will let someone else ask a question. Somewhere in here in one of your filings got a list of when all your licenses roll. And I know you mentioned that the NFL you've got a two-year renewal. I'm wondering if any of these other licenses that are coming due in the next year are close to renewal?

We're still negotiating. There is one that's coming due and that's Kenneth Cole. And we are still in the negotiating process.

All right. And do you guys ever break out how much -- you know, what percent of revenue each license is?

(MULTIPLE SPEAKERS) No, we don't.

(OPERATOR INSTRUCTIONS) At this time, there are no further questions in the queue. I'd like to turn the floor back over to management for any closing remarks.

If there are no further questions, we thank you for spending some time with us this afternoon. And if you're patient, hopefully, we will bring you better results. Thank you.

Thank you. That does conclude today's teleconference. You may disconnect your lines at this time and have a wonderful day.