G-III Reports In Line, Outlook Same

Zacks

New York-based G-III Apparel Group, Ltd (GIII) posted a loss of 4 cents in the first quarter of fiscal 2013, in line with the Zacks Consensus Estimate and a penny wider than the year-ago quarter loss of 3 cents per share. Reported results were within the company’s guided range of loss of 2 cents to 6 cents.

G-III Apparel’s net sales surged 16.5% year over year in the quarter to $229.4 million.

Quarter Highlights

The significant growth in net sales was chiefly aided by improved performance of wholesale licensed apparel (up 22.7% year-over-year), wholesale non-licensed segment (flat) and retail operations (up 10.4%).

The robust wholesale licensed apparel sales were driven by higher sales of Calvin Klein products, increased sales of Jessica Simpson dresses and the introduction of the new Kensie dress line. Retail sales surged on the back of unit growth as well as comp store increase of 6.3% in the quarter.

During the quarter, G-III Apparel’s gross margin plunged 30 basis points (bps) to 29.9%, due to 17% spike in cost of sales. Margins at wholesale license segment and wholesale non-licensed segment fell 10 bps to 25.7% and 80 bps to 24.6%, respectively. However, gross margin at retail operations improved 140 bps to 46.3%.

Financials

At the end of the quarter, G-III Apparel had cash of $38.3 million and shareholders’ equity of $360.5 million, compared with $12.7 million and $306.1 million in the year-ago quarter, respectively. The company also has no long-term debt on its balance sheet.

Outlook

For the second quarter of 2013, G-III expects earnings per share in the range of 4 cents to 8 cents and net sales between $250 million and $230 million.

The company reiterated its outlook for 2013. G-III anticipates earnings per share in the range of $2.62 to $2.72 and net sales to increase 10% to $1.35 billion.

Our Take

G-III remains optimistic regarding 2013 based on its unit growth, strong demand for its core products and new business initiatives. Management also remains positive regarding the extension of NFL license that will expand distribution rights in the mid tier department stores and the sporting goods channel. Additionally company estimates product cost to moderate in the remainder of 2012. Hence, we expect estimates to go up in the coming days. The Zacks Consensus Estimates for 2013 and 2014 are pegged at $2.70 and $3.06, respectively. 

G-III engaged in apparel business, currently retains a Zacks #4 Rank, which translates into a short-term Sell rating. We are also maintaining our long-term Neutral recommendation on the stock. G-III peers include Columbia Sportswear Company (COLM) and Nike Inc. (NKE).

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