G-III Apparel Group Ltd (GIII) 2006 Q1 法說會逐字稿

Goods day, everyone, and welcome to the G-III Apparel Group first quarter 2006 earnings results conference. Today's call is being recorded.

At this time, for opening remarks and introductions, I would like to turn the call over to Mr. Neal Nackman, Vice President of Finance for G-III Apparel Group. Please go ahead, sir.

Good afternoon, everybody.

Before we get started, I just wanted to remind you of the Company's Safe Harbor language. I'm sure you're all familiar with it.

Some statement made today on the call are forward-looking statements as that term is defined under the federal securities laws. Forward-looking statements are subject to risks, uncertainties, and factors, which include but are not limited to alliance on foreign manufacturers, the nature of the apparel industry, including changing customer demands and takes, alliance on licensed products, seasonality, customer acceptance of new products, the impact of competitive products and pricing dependent upon existing management , general economic conditions, as well other risks detailed in the Company's filings with the Securities and Exchange Commission. The Company assumes no obligation to update information in this call.

With that out of the way, I would like to turn the call over to Chief Executive Officer, Morris Goldfarb.

Good afternoon, and thank you for joining us for a review of our first quarter results.

With me today, in addition to Neal Nackman, our VP of Finance, is Wayne Miller, our Chief Operating and Chief Financial Officer.

We're off to a good start this year. We completed the quarter as planned with regards to our financial performance and with a better-than-expected book of business to date for the fall season. As you know, first quarter is our seasonally slowest period of the year, and it is really difficult to extrapolate much about our business from first quarter performance.

The year ago quarter included close-out shipments of fashion sports apparel. This is one of the main reasons why our volume is down from $13.8 million to 16.5 in the year ago quarter. Our booking trends are strong, and we are confident and excited about the fall season. Many of our businesses are tracking on or ahead of plan.

Of course, sports business is really solid. I'm pleased to note that a combination of great product and new sales management has generated a highly motivated team that should produce strong results for our core sports products this year.

Within the men's area, we're benefiting from the Kenneth Cole business, as well as our new Izod license. We have seen excellent results continue with our Sean John and Cole Haan products.

Our private label business is also performing well. We expect to see an increase in our mass business and have made good inrows in the mid-tier distribution channel.

Finally, while the launch is small, we're very excited about our prospects for our men's Black Rivet brand, and have orders for fall from great retailers such as Lord and Taylor, Macy's, and Proffitts.

On the women's side, we continue to see some pressure on Sienna Studio business. Our Jones New York and Nine West businesses are roughly flat to last year. Our mass and mid-tier private label business is booking strong and is running ahead of last year.

We're excited about the brand building we're doing with Cece Cord's luxury handbag line. Looking forward to our first shipment of Izod and our extreme continued growth from Black Rivet --.

While it's still early to extrapolate sales guidance for the second half, we believe we've got an opportunity for a good season. Our operational initiatives of proceeding smoothly and enhancing our capabilities, we now have two sourcing offices in China, and are coordinating a great deal of our production. We expect these offices in next fiscal year to cost less than our former Korean office.

We've taken an additional contiguous space in warehouse facility in [Sucaulkad]. The integration of this new phase is going well, and we believe our efficiency will improve as a result of the integration.

In summary, while our peak season is still ahead of us, we expect that mix of our brands and licenses and the appetite of the market, will help lead us to a good financial performance for the remainder of the year. We will remain focused on executing in all facets of our business. I know that our design teams are proud of the work they have done across all our various businesses, and I believe that we're in a good position to show improved sales and profitability for the year.

I will now pass the call over to Wayne Miller, who will review the numbers.

Thank you, Morris, and good afternoon.

Net sales for the quarter ended April 30, 2005, with $13.8 million, compared to $16.5 million in the year ago first quarter. Gross margin percentage during the quarter was 6.6%, down from 10.5% in the year-ago quarter due primarily to lower regular-priced spring shipment, as well as the impact of fixed costs being spread over lower sales volume.

SG&A expenses decreased to 9.1 million from 10.1 million in the year ago quarter. Our SG&A decrease is a result of decreases in advertising and promotion costs, third-party warehousing costs, and bad debt expense.

Our operating loss for the first quarter was $8.2 million, compared to $8.4 million in the first quarter fiscal 2004. We had a net loss of 4.7 million for the quarter or $0.64 per share, compared to a net loss of 4.8 million or $0.68 per share in the year ago quarter.

I would like it share a few additional key balance items with you. A stockholders equity, at April 30, 2005, this year, is at 62.3 million, compared to 60.8 million at April 30 of '04 last year. Our book value per share stood at $8.55 at April 30 of '05, compared to $8.49 at April 30 last year. Our inventories are down to $22.6 million from $26.6 million the same time last year.

Finally, with respect to guidance for our second quarter ended July 31, 2005, we are forecasting net sales of approximately 50 million and a net loss per share in the range of $0.05 to $0.08. In last year's second quarter, we had net sales of 44 million and a net loss of $0.23 per share,, which includes a non-cash charge of $882,000, equal to $0.12 per share associated with the sale of our joint-venture interest in a sales factory located in China.

Thanks for your attention. I'd like to turn the call back over to Morris.

Before we take your questions, we'd just like to say that we're more than excited about our prospects, both operationally and strategically, than we have been in some time. We believe that there are significant, untapped opportunities in the market for brand, private label programs, and licenses. We are pushing hard to bring new programs into our mix and to leverage our opportunity.

Thank you, and we are now ready to take any questions.

Thank you Mr. Goldfarb.

[OPERATOR INSTRUCTIONS]

We have a late signal from Tim Griffin from Griffin Portfolio Management.

Hi, guys. It's good to hear a positive outlook.

The past four or five years, your July quarter has varied from really strong to last year's disappointment. You expect a pretty good top-line this July. What is it that's preventing you from showing stronger earnings for the July quarter?

It has to do with our receipt of products. We're anxiously producing products to distribute to the retailers, and if we're on time, we could have a surprise. So we're dependent on the timely shipping from our vender base and the timely receipts from our account mix.

Tim, it's Wayne. Historically, we ship our outerwear -- it begins a bit in June, then into July, and then heavy, of course, in August, September, and October.

Last year's second quarter matched up from the second quarter from the previous year. We had much higher shipments of the vintage sports apparel in that previous year, and that's why it was down. Our big results, historically, are in Q3.

Yes, I realize that, and I figured it was the vintage sports apparel that inflated both of the prior years?

In Q1 and Q2, that's right.

So it seems to me what you're saying is that you're rushing to get the product shipped or you will be probably in the July quarter -- towards the end of the quarter -- and that your customers are probably ordering or taking shipment closer to demand.

That 's been for the past couple of years, they take it very close to demand, but I also re-emphasize what Morris said in his section of the script, that our core sports business is very strong. We don't want to clearly differentiate that from the vintage sports portion.

I understand. Can you comment about your -- give us some sense what you look to revenue in October?

It's a little early for us to comment. We believe we're in a good position to have a profitable year. We're aggressive. We're doing all of the right things. We've got a template that we believe will enable us to capture a good season and control our expenses.

All we can say for the moment is that we're cautiously optimistic. We believe that everything's in place for a nice season.

We have no questions remaining in the queue.

Mr. Goldfarb, I'd like to turn the conference back over to you for additional and closing remarks.

Thank you all for your participation, and have a good day.

This will conclude the G-III Apparel Group's first quarter 2006 earnings results conference. Your participation is appreciated.