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Shares of G-III Apparel Group, Ltd. GIII have rallied 41.2% over the past three months, thanks to robust business strategies. The company is on track with the process of strengthening brands across channels via product launches, licensing of brands and improved marketing strategies. The stock’s momentum can also be attributed to the company’s recently reported better-than-expected results for third-quarter fiscal 2021. Also, its digital initiatives to boost overall presence bode well. Hence, the New York-based company’s shares have surpassed its industry’s 16.9% rally and the S&P 500’s 8.7% rise in the same time frame.
Despite such strengths, the company’s ailing retail business has been a concern. Weak underlying brands and store closures have been marring the segment’s performance, which have been hurting the overall top-line results. During the fiscal third quarter, the retail segment’s net sales fell nearly 35.6% from the prior-year quarter’s reported figure. The metric included $38 million of sales for the Wilsons Leather and G.H Bass stores compared with $60 million in the prior-year period.
To fix this segment, G-III Apparel is well on track with the restructuring of its retail unit, which is believed to cut losses from underperforming locations and make the division profitable. This restructuring includes shutting down of 110 Wilsons Leather and 89 G.H. Bass outlets. Post restructuring, the retail unit will comprise 41 DKNY and 13 Karl Lagerfeld Paris outlets. Also, it will have e-commerce sites for Donna Karan, Andrew Marc, Karl Lagerfeld Paris, DKNY, Wilsons Leather and G.H. Bass. Impressively, management is on track to complete shuttering of stores by fiscal 2021.
Given the robust strategic initiatives, we expect the company to retain momentum in the year ahead. Additionally, for fiscal 2022, the Zacks Consensus Estimate of $2.37 for earnings and $2.52 billion for revenues suggest year-over-year growth of more than 308% and 22%, respectively.
Speaking of G-III Apparel’s brand strength, management is optimistic about its three power brands including Calvin Klein, Tommy Hilfiger and DKNY. These brands offer technical design and fashion in athleisure category, which is a significant opportunity. Jeans collection across these labels focuses on casual fashion with a variety of woven and knit tops, and comfortable bottoms and pants. These lines have aided the company to become a key player in the denim space. These lines are expected to contribute to the company’s overall profitability, with each of these jeans lines having the potential to grow to a $250-million business. Its outerwear collections also look appealing. Furthermore, its DKNY and Karl Lagerfeld Paris stores are performing impressively. Also, the company is seeing robust results on the websites for both DKNY and Karl Lagerfeld Paris.
Coming to digital advancement, G-III Apparel’s digital sales penetration at its department store retailers reached about 40% during the third quarter of fiscal 2021. This is higher than 23% recorded in the year-ago period. For the company’s own digital sites, it is experiencing elevated demand with comparable sales increase of more than 40%. Also, the company’s product assortments, including global brands, are responsive to the current market trends, and in turn aid the company expand market share. Management has also streamlined the company’s global wholesale headcount. Additionally, it rationalized cost base and is on track to deliver annual savings of roughly $28 million.
Encouragingly, G-III Apparel displays a Zacks Rank #3 (Hold).
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