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 fiscal full-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.
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.