A month has gone by since the last earnings report for G-III Apparel Group (GIII). Shares have added about 11.9% 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 the most recent earnings report in order to get a better handle on the important catalysts.
G-III Apparel’s Q3 Earnings and Sales Decrease Y/Y
G-III Apparel’s third-quarter fiscal 2021 earnings per share of $1.29 fell from $1.97 reported in the same quarter a year ago. The reported figure includes net losses from the Wilsons Leather and G.H. Bass operations of 25 cents per share versus loss per share of 8 cents in the year-ago period. The Zacks Consensus Estimate for third-quarter earnings is pegged at 88 cents.
Net sales plunged 26.7% year over year to $826.6 million, beating the Zacks Consensus Estimate of $773 million. Year-over-year fall in top-line can be attributed to a decline in sales at both the wholesale and retail divisions. Further, the restructuring of the company’s retail segment includes shuttering of 110 Wilsons Leather and 89 G.H. Bass outlets. Net sales for the Wilsons Leather and G.H. Bass stores’ portion of the segment were $38.2 million, down from $59.8 million in the year-earlier period. Management is on track to complete shuttering of stores by fiscal 2021.
However, we note that rate of sales has decelerated sharply from 53.8% witnessed in the preceding quarter. Morris Goldfarb, G-III’s Chairman and CEO, said, “Our results reflect a significant sequential improvement in the third quarter as we effectively developed product lines that aligned with the shift in consumer demand towards casual, comfortable and functional clothing. We believe our product assortments for our portfolio of global brands are responsive to today’s market trends as we continue to gain market share.”
For fiscal fourth quarter, management projects net sales to decrease about 30% from the year-ago period. However, it did not offer additional guidance owing to pandemic uncertainties.
During the reported quarter, the company’s digital sales penetration at its department store retailers reached about 40%, higher than 23% in the year-ago period. For its own digital sites, the company is experiencing elevated demand with comparable sales increase of more than 40%.
Moreover, gross profit declined 25.4% year over year to $297.8 million. However, gross margin of 36% increased 60 basis points (bps), mainly driven by higher gross margin in the Wholesale segment, partly offset by contraction in the metric at the Retail unit.
However, SG&A expenses contracted nearly 28% year over year to $177.6 million. We note that the company has further streamlined the headcount in its global wholesale operations, and consequently estimates roughly $28 million of annualized savings.
Further, the company reported operating income of $110.1 million, which decreased about 23% from the year-ago quarter.
Net sales at the Wholesale segment were $783 million, down roughly 27% year over year. However, the segment’s gross margin rose 230 bps 35.5%, benefiting from the reversal of the earlier anticipated markdown accruals.
Net sales at the Retail segment totaled $58 million, down 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 to $60 million in the prior-year period. The segment’s gross margin also contracted to 33.9% from 49.3%, mainly due to the store liquidations for Wilsons Leather and G.H Bass outlets.
Other Financial Details
G-III Apparel ended third-quarter fiscal 2021 with cash and cash equivalents of $149.7 million and long-term debt of $508.4 million. Total stockholders’ equity was $1,310.3 million. Further, inventory declined nearly 29% to $461.8 million during fiscal third quarter.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates review. The consensus estimate has shifted -45.12% due to these changes.
At this time, G-III Apparel has a poor Growth Score of F, however its Momentum Score is doing a bit better with a D. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, 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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