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G-III Apparel (GIII) Tumbles on Wider-than-Expected Q4 Loss

Zacks Equity Research

Shares of G-III Apparel Group, Ltd. GIII tumbled more than 14% after the company reported dismal quarterly numbers for fourth-quarter fiscal 2017. Moreover, the company also provided bleak outlook for fiscal 2018 which further dampened investors’ sentiment. In the past six months, the company’s shares have declined 31.6%, wider than the Zacks categorized Textile-Apparel Manufacturing industry's decrease of 15.6%.

G-III Apparel Group reported adjusted loss per share of 16 cents, wider than the Zacks Consensus Estimate of loss of 9 cents. In the prior-year quarter, the company had reported adjusted earnings per share of 17 cents. Dismal performance of the company’s retail businesses continues to mar the overall results.

The company reported net sales of $603.3 million, missing the Zacks Consensus Estimate of $625 million. Notably, this is the sixth consecutive quarter in which its net sales have missed estimates. However, the company’s top-line increased 14.4% year over year primarily due to robust performance of non-outwear wholesale business which comprises of new product introductions and inclusion of nearly $29 million of net sales from the DKI business.

Gross profit for the reported quarter increased 7.5% to $198.1 million, while gross margin contracted 110 basis points (bps) to 32.8%. The company reported operating loss of $21.9 million. In the year-ago quarter, it had reported operating income of $12.4million.

Balance Sheet

G-III Apparel ended the quarter with cash balance of $80 million and stockholders’ equity of approximately $1,021.2 million. The company had long-term debt of $461.8 million. Capital expenditures for the year came in at $25 million.

G-III Apparel Group, LTD. Price, Consensus and EPS Surprise

 

G-III Apparel Group, LTD. Price, Consensus and EPS Surprise | G-III Apparel Group, LTD. Quote

Guidance

Management provided fiscal 2018 and first-quarter guidance. For fiscal 2018, the company expects adjusted earnings per share in the range of $2.16–$2.26, down from the earlier estimate of 99 cents to $1.09. The Zacks Consensus Estimate for fiscal 2018 is currently pegged at $1.62 and could witness downward revisions in the coming days.

The company provided net sales guidance of nearly $2.73 billion. The company expects adjusted EBITDA in the range of $162–$171 million, in comparison with $148.1 million in fiscal 2017.

For the fiscal first quarter, the company expects net sales of nearly $500 million compared with $457 million in the prior-year quarter. The company expects loss per share in the range of 41–51 cents. In the prior-year quarter, the company had reported earnings per share of 6 cents. The Zacks Consensus Estimate for the first quarter is currently pegged at a loss of 7 cents.

Zacks Rank & Stocks to Consider

G-III Apparel currently carries a Zacks Rank #3 (Hold). Better-ranked stocks in the retail sector include Kate Spade & Company KATE, The Children's Place, Inc. PLCE and Foot Locker, Inc. FL. Kate Spade & Company and Children's Place sports a Zacks Rank #1 (Strong Buy) while Foot Locker carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Kate Spade & Company delivered an average positive earnings surprise of 14.6% in the trailing four quarters and has a long-term earnings growth rate of 28.3%.

Children's Place delivered an average positive earnings surprise of 39% in the trailing four quarters and has a long-term earnings growth rate of 8%.

Foot Locker delivered an average positive earnings surprise of 2.2% in the trailing four quarters and has a long-term earnings growth rate of 9.7%.

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