G-III Apparel Group Looks Set to Rise
G-III Apparel Group Ltd. (NYSE:GIII) is a company that you probably have not heard of but is intricately involved in many of the clothing and designer lines you may own. In fact, it is among the leading manufacturers and distributors of outerwear, dresses, sportswear, swimwear, women’s suits, and women’s performance wear, as well as footwear, luggage, and handbags under both licensed brands, its own brands, and private label brands. G-III sells swimwear, resort wear, and related accessories under its Vilebrequin brand. G-III also sells outerwear, dresses, and performance wear under its own Andrew Marc and Marc New York brands, and has licensed these brands to select third parties in certain product categories.
G-III has fashion licenses under the Calvin Klein, Kenneth Cole, Cole Haan, Guess, Tommy Hilfiger, Jones New York, Jessica Simpson, Vince Camuto, Ivanka Trump, Nine West, Ellen Tracy, Kensie, Mac & Jac, Levis, and Dockers brands. Through its team sports business, it has licenses with the National Football League, National Basketball Association, Major League Baseball, National Hockey League, Touch by Alyssa Milano, and more than 100 U.S. colleges and universities. Through its growth trajectory, the stock has rewarded shareholders in the difficult retail space, rising 216 percent in the past two years. But can this path continue? To answer this question, an analysis of G-III recent’s performance is necessary.
For the quarter ended April 30, G-III reported that net sales increased by 34 percent to $366.2 million from $272.6 million in the year-ago period. Of this increase, $44.2 million was the result of net sales by the G.H. Bass business that was acquired in November. The company’s net income for the first quarter was $1.3 million, or 6 cents per diluted share, as compared to $1.1 million, or 5 cents per diluted share, in the prior year’s comparable period. For the fiscal year ended January 31, net sales were $1.72 billion and net income was $77.4 million, or $3.71 per diluted share. The results for the first quarter include expenses related to the transition and repositioning of the recently acquired G.H. Bass business.
Morris Goldfarb, the company’s CEO, said: “Our wholesale revenues were strong, exceeding our plan across a number of important categories. We finished the quarter with good momentum, clean inventories and a solid mix of growth opportunities. There were strong performances by a number of our Calvin Klein divisions, Vilebrequin and several of our dress businesses, all of which enabled us to exceed our forecast for the first quarter. Although our comparable store sales for Wilsons were modestly positive for the quarter overall, we saw an accelerating trend in April. We are pleased with the progress we are making with respect to the integration of G.H. Bass into our operational platform.”
Now that we know where the company has been performance wise, where it is going? This is the most important question to ask when deciding what to do with a stock. The company recently revised its prior guidance for the full fiscal 2015 year ending January 31, 2015. The company is now forecasting net sales of approximately $2.06 billion and net income between $87.9 million and $91.2 million, or a range between $4.05 and $4.20 per diluted share, compared to its previous guidance of net sales of approximately $2.05 billion and net income between $85.2 million and $88.5 million, or a range between $3.95 and $4.10 per diluted share.
The company is now projecting adjusted earnings for fiscal 2015 to increase between 16 percent and 19 percent to between approximately $170.2 million and $175.5 million as compared to its previous guidance of between $166.3 million and $171.5 million. For its second fiscal quarter ending July 31, the company is forecasting net sales of approximately $392 million compared to $304.2 million in the comparable quarter last year. The company is also forecasting net income for the second fiscal quarter between $2.8 million and $3.7 million, or between 13 cents and 17 cents per diluted share, compared to net income of $3.6 million, or 17 cents per diluted share, in last year’s second quarter.
Overall, the company delivered a solid quarter. Looking ahead, the next quarter is likely going to be weaker than last year’s quarter because of transitional expenses. However, the company is projecting that it will have record earnings for the entire year and as such, revised its prior guidance higher. On the Street, this is what we like to see. Thus, given the current metrics of the stock and the company’s performance, I expect the stock to continue higher.
Disclosure: Christopher F. Davis holds no position in Measurement Specialties and has no plans to initiate a position in the next 72 hours.