A month has gone by since the last earnings report for G-III Apparel Group (GIII). Shares have added about 3% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is G-III Apparel due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
G-III Apparel Posts Q2 Earnings Beat, Updates View
G-III Apparel posted second-quarter fiscal 2020 results, wherein adjusted earnings improved 4.5% year over year to 23 cents per share and surpassed the Zacks Consensus Estimate of 22 cents. Quarterly earnings benefited from top-line growth and higher operating margin.
Net sales of $643.9 million rose 3.1% year over year. However, the top line missed the Zacks Consensus Estimate of $655 million, marking fourth straight quarter of sales miss. The figure mainly benefited from stellar results in wholesale operations on impressive brand performances. This was partly offset by persistent challenges in the company’s retail operations.
Moreover, gross profit dipped 0.1% year over year to $231.8 million. Meanwhile, gross margin of 36% contracted 110 basis points (bps), thanks to lower gross margins in the retail and wholesale segments.
Furthermore, SG&A expenses inched down 1.3% year over year to $196.4 million. Operating profit increased 15.9% to $26.9 million in the fiscal second quarter, with operating margin expansion of 50 bps to 4.2%.
Net sales in the Wholesale segment were $588.6 million, up almost 8.1% year over year. Tommy Hilfiger, Calvin Klein and DKNY brands were primary growth drivers.
Net sales for the company’s Retail segment were $84 million, down nearly 22% from the prior-year quarter’s reported figure. The segment witnessed sales decline across Wilsons and G.H. Bass, somewhat offset by growth at DKNY. Notably, same-store sales declined nearly 21% at Wilsons and 16% at G.H. Bass, while it improved 3% at DKNY stores. A decline in the number of stores operated by the company also exerted pressure on the segment’s performance.
Other Financial Details
GIII-Apparel ended second-quarter fiscal 2020 with cash and cash equivalents of $39.6 million, and long-term debt of $553.8 million. Total stockholders’ equity was $1,167.8 million.
On a year-to-date basis, the company spent nearly $18 million as capital expenditures in fiscal 2020. Further, it repurchased about 1.3 million shares for $35 million, following which it had roughly 2.9 million shares available for buybacks under its authorized share repurchase plan.
Management updated its view for fiscal 2020 to reflect the anticipated impacts of additional and potential tariffs. The company anticipates costs of roughly $12 million for this fiscal, thanks to impacts of the fourth tranche of tariffs.
The company now estimates net sales of nearly $3.30 billion in fiscal 2020 compared with the earlier projection of $3.28 billion, and $3.08 billion generated in fiscal 2019.
Moreover, the company now foresees adjusted EBITDA in the range of $295-$300 million compared with the prior anticipation of $307-$313 million. Adjusted earnings per share (EPS) are now expected in the band of $3.15-$3.25, down from $3.25-$3.35 guided earlier. In fiscal 2019, it recorded adjusted earnings of $2.86 per share.
Furthermore, management estimates adjusted losses in the company’s Retail segment to be around $5 million higher than the loss reported in fiscal 2019. This incorporates high-single-digit decline in comps at Wilsons and Bass. DKNY’s retail sales are expected to remain flat compared with the year-ago period’s figure due to fall in the average comp store count. For DKNY’s Wholesale and Licensing operations, top line is estimated to improve by roughly 25%.
For third-quarter fiscal 2020, G-III Apparel anticipates net sales of around $1.17 billion and adjusted EPS in the band of $1.87-$1.97. In the year-ago quarter, the company recorded sales of $1.07 billion and adjusted earnings of $1.88. The Zacks Consensus Estimate for the quarter is currently pegged at $2.11, which is likely to witness downward revisions in the upcoming days. Moreover, the company assumes a high-single-digit decrease in comps at its retail operations.
How Have Estimates Been Moving Since Then?
Estimates review followed a downward path over the past two months. The consensus estimate has shifted -8.11% due to these changes.
Currently, G-III Apparel has a poor Growth Score of F, however its Momentum Score is doing a lot better with a C. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
G-III Apparel has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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G-III Apparel Group, LTD. (GIII) : Free Stock Analysis Report
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