G-III Apparel (GIII) Stock Soars More Than 80% YTD: Here's Why
G-III Apparel Group, Ltd. GIII has been doing well, thanks to its robust strategies, including digital expansion and brand strength, and sound fundamentals. The company has been undertaking several strategies, including acquisitions and the licensing of well-known brands, to expand its product portfolio. Management is optimistic about the company’s diversified portfolio of key brands, namely DKNY, Donna Karan, Karl Lagerfeld, Vilebrequin, Nautica and Halston.
Buoyed by such endeavors, shares of this Zacks Rank #1 (Strong Buy) company have surged a whopping 80.9% year to date. Meanwhile, the industry fell 6.6% in this year so far.
Let’s Delve Deeper
G-III Apparel’s strategic priorities include driving power brands across categories, enhancing its portfolio via the ownership of brands and licensing opportunities, expanding its global reach, maximizing omnichannel capabilities and scaling the private label business. G-III Apparel has also been making progress on rightsizing the inventory.
We note that the company has numerous growth opportunities including the repositioning and expansion of the Donna Karan label and a long-term license for the Nautica brand. G-III Apparel will produce Nautica products across several categories starting with jeanswear. This includes jeans and a complete range of corresponding lifestyle products.
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The company has entered into a 25-year agreement with Xcel Brands to design and manufacture all categories with the choice to buy the brand at the end of the licensing term. First deliveries are likely to be in 2024 fall. Management has announced a new multi-year license agreement with HanesBrands to manufacture an outerwear collection for the Champion brand. The company will create quality heritage pieces to expand Champions' lifestyle offering. The product will be distributed via its diverse channels across North America and Champions' global network with the first deliveries scheduled for fall of 2024.
With respect to the company’s brand progress, the key brands like DKNY, Donna Karan, Karl Lagerfeld, Vilebrequin, Nautica and Halston are likely to perform well. Expanding the company’s owned brands, which include DKNY, Karl Lagerfeld, Donna Karan and Vilebrequin, is a priority as these brands represent an important long-term profit. Also, these brands enable the company to further widen its global reach. In fiscal 2024, with the ownership of the whole Karl Lagerfeld brand, the company’s international sales will be up 20% versus the prior year. Management believes this business can expand to more than $3 billion in annual revenues over time.
What’s More?
G-III Apparel posted better-than-expected results in second-quarter fiscal 2024, wherein the top and bottom line beat the Zacks Consensus Estimate, and improved year over year. For fiscal 2024, management projects net sales to be about $3.30 billion and net income to be $145-$150 million, or between $3.05 per share and $3.15 per share. This compares favorably to net sales of $3.23 billion and a net loss of $(133.1) million, or $(2.79) per share, for fiscal 2023. It expects continued gross margin improvement for the rest of the fiscal year, and projects ending the year with the gross margin up nearly 450 bps year over year. The second half of fiscal 2024’s gross margin will benefit from moderated freight costs.
Analysts seem optimistic about the company. The Zacks Consensus Estimate for fiscal 2024 sales and earnings per share (EPS) is currently pegged at $3.30 billion and $3.27, respectively. These estimates show corresponding increases of 8% and 14.7% year over year. The consensus mark for fiscal 2025 sales and EPS currently stands at $3.37 billion and $3.41, respectively, reflecting corresponding increases of 1.9% and 4.5% year over year.
Given all the aforesaid tailwinds, we believe G-III Apparel will continue to perform well on the bourses. A VGM Score of A further speaks volumes for the company.
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