WHOLESALE GROWTH IN SWIMS BRAND HELPS DIFFERENTIAL POST GAINS IN THIRD QUARTER

Differential Brands Group’s stock was up 8 percent in post-market trading on Wednesday on the news of the fashion company’s gains in the third quarter.

The owner of such brands as Hudson Jeans, Robert Graham, and Swims, reported total company net sales for the third quarter increased 3 percent to $42.4 million, reflecting a 1 percent increase in the wholesale segment sales and a 5 percent increase in the consumer direct segment sales.

The wholesale segment increase was driven by over 40 percent growth at Swims, as well as by modest growth from the Hudson brand, primarily at full price specialty doors. The increase in the consumer direct segment was led by e-commerce sales growth of 12 percent. In addition, comparable store sales in the Robert Graham business grew 3 percent, driven by full price stores.

As a result of Hurricanes Harvey and Irma, which severely impacted the Texas and Florida markets during August and September of this year, Robert Graham store sales were negatively impacted by approximately $300,000. The hurricanes also negatively impacted the company’s wholesale business due to cancellations of approximately $450,000 across brands, which the company honored, and inbound inventory receipt delays of $400,000, which shipped into the subsequent quarter.

Total company net sales for the year-to-date increased 11 percent to $118.9 million compared to $107.2 million for the same period in the prior year, reflecting an 11 percent increase in wholesale segment sales and a 10 percent increase in consumer direct segment sales.

“During the third quarter, we continued to grow sales and expand gross margin, resulting in an adjusted EBITDA improvement of $1.4 million,” said Michael Buckley, chief executive officer. “Our consumer direct segment growth rate continued to out-pace our wholesale segment, with double-digit e-commerce growth this year, which came on top of more than 50 percent growth in the comparable quarter last year. The increase was driven largely by higher conversion rates and more units sold per order across our brands’ websites. Robert Graham retail comparable store sales improved 3 percent for the quarter, excluding stores impacted by Hurricanes Harvey and Irma. Just prior to the hurricanes, total retail store sales compared to the same period in the prior year were trending in the high single digits. Consumer direct sales at our Swims brand more than doubled versus the same quarter last year, benefiting from the launch of our U.S. website in June 2017 and the addition of a second outlet store in Norway.”

Buckley continued, “In the wholesale segment, the sales increase was driven by the addition of the non-comparable Swims business, as well as high double-digit growth in sales to specialty retailers in our Hudson business. For Swims, we successfully acclimated our U.S. based wholesale sales team during the quarter, which will play a key role in the rapid growth of this brand in spring 2018 and forward. The Swims brand has now expanded into approximately 380 better specialty stores and department stores in the U.S. and Canada, and we believe that the near-term potential is over 600 doors. At Hudson, increased doors combined with better sell-through in both the men’s and women’s categories drove growth. Overall, we continue to navigate the sales distribution shift in our industry from traditional brick and mortar channels, especially at department stores, to e-commerce driven sales on both our brands’ sites and our partners’ sites, and to new and innovative digital marketplaces around the globe.”