Shares of G-III Apparel Group Ltd. (GIII) hit its 52-week high mark of $37.92 on September 14, following a solid fiscal second-quarter report that included an earnings surprise of 85.7% and an enhanced outlook for fiscal 2013. This apparel manufacturer has gained more than 55.0% since last month.
The future for GIII looks bright, based on impressive booking for the key fall season, unit growth expansion, strong demand for its core products, acquisition of the leading luxury resort brand Vilebrequin, and other novel business initiatives. A year-to-date return of 49.4% and rising earnings estimates indicate significant potential for this Zacks #1 Rank (Strong Buy) stock.
Fabulous Quarter, Forecast Raised
On September 5, G-III Apparel Group reported fiscal second-quarter 2013 earnings of 13 cents per share, breezing past the Zacks Consensus Estimate of 7 cents and above the company's guided range of 4 cents to 8 cents.
Net sales surged 9.4% year over year to $251.5 million, driven by double-digit comps growth in dresses, sportswear, suits, handbags, team sports and specialty retail operations. The significant growth in net sales was chiefly aided by improved performances from wholesale licensed apparel (up 13.0% year-over-year) and retail operations (up 16.0%), partially offset by a dip of 4.7% in the wholesale non-licensed segment.
Gross margin expanded 130 basis points (bps) to 29.8%, due to a decline in cost of sales as a percentage of revenue. Margins at the wholesale license segment advanced 70 bps to 26.2%, while the wholesale non-licensed segment rose 90 bps to 24.7%. Moreover, gross margin at retail operations improved 290 bps to 48.0%.
For the third quarter of 2013, G-III expects earnings per share between $2.25 and $2.35 with net sales of $510 million to $570 million.
Based on strong second quarter results, the company raised its outlook for fiscal 2013. G-III now anticipates earnings per share between $2.68 and $2.78, up from the previously forecasted range of $2.62 to $2.72. Net sales are now expected to be $1.41 billion, versus the earlier projection of $1.35 billion. On an adjusted basis, the company expects earnings per share in the range of $2.74 - $2.84.
Earnings Estimates Surge
Estimates for its current fiscal year and next have each increased over the past month. The Zacks Consensus Estimate for fiscal 2013 grew nearly 4.4% to $2.83 per share in the last 30 days as all 5 estimates moved up, representing year-over-year growth of 14.9%. The Zacks Consensus Estimate for fiscal 2014 advanced 4.5% to $3.22 as 5 of 6 estimates moved higher. This signifies a year-over-year improvement of about 13.9%.
G-III Apparel currently trades at a forward P/E of 13.1x, reflecting a 29.9% discount to the peer group average of 18.7x. On a price-to-book basis, shares trade with a 14.3% discount at 2.0x. The company's compelling fundamentals are well supported by its long-term estimated EPS growth rate of 20.0% versus 13.7% for the peer group.
The company has a trailing 12-month ROE of 14.0%, above the peer group average of 11.8%. This implies that the company reinvests its earnings more efficiently than its peer group.
Charts Show Vigor
Shares have shown a year-to-date return of 49.4%, and recently reached a 52-week high of $37.92.
Moreover, the company's shares have been trading above the 50 and 200-day moving averages since August 6, this year. G-III has a market cap of $742.4 million. Its average trade volume is decent at 139K. The company has also outperformed the S&P 500 Index since mid-August.
Based in New York, G-III Apparel Group is a leading designer and distributor of women's and men's apparel in the United States. The company deals in outerwear, dresses, sportswear, swimwear, beachwear and women's suits, as well as handbags and luggage. The company sells its apparel and other products under proprietary brands, including the Andrew Marc, Marc New York, Jessica Howard, Black Rivet, G-III, Eliza J, Marvin Richards, Siena Studio, Winlit, Marc Moto, G-III Sports by Carl Banks, and G-III for Her, as well as under various licensed and private label brands. G-III Apparel offers its products to department, specialty, and mass merchant retail stores, as well as upper tier stores and catalogs primarily in the United States, Canada, Europe, and the Far East.
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