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G-III Apparel (GIII) Stock Gains on Solid Q2 Earnings & View


G-III Apparel Group, Ltd. GIII delivered robust second-quarter fiscal 2019 results, with the top and bottom lines increasing on a year-on-year basis and also surpassing the Zacks Consensus Estimate. This marks the company’s sixth straight bottom-line beat, while sales topped estimates for the third time in a row. Its quarterly performance was backed by sturdy wholesale business. Further, management provided an encouraging view for fiscal 2019 as well as the third quarter.

In response to splendid results and encouraging outlook, shares of the company gained 4.5% yesterday. In fact, a positive surprise history, along with dedicated endeavors to bolster brands and business channels have long been aiding this Zacks Rank #3 (Hold) stock to remain in investors’ good books. Incidentally, the company’s shares have gained 30% in the past six months compared with the industry’s rally of 23.5%.

Results in Detail

Adjusted earnings came in at 22 cents per share, which surpassed the consensus mark of 2 cents. This compares favorably with the prior-year quarter’s adjusted loss of 15 cents per share.

Further, net sales of $624.7 million grew 16.1% year over year. Sales also surpassed the Zacks Consensus Estimate of $590.7 million. During the quarter, the top line mainly benefited from stellar show in wholesale operations, while retail remained almost flat. Further, the quarter gained from increased same-store sales at Wilsons and DKNY, while comps at G. H. Bass stores registered a decline. The company’s e-commerce direct to-consumer business grew 20% during the quarter.

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

Moving on, gross profit rose 14% to reach $231.5 million. However, gross margin of 37.1% contracted 60 basis points. The decline can be attributable to weak gross margin recorded in the retail segment, partially countered by improved wholesale gross margin.

The quarter witnessed an increase of 1.6% in SG&A costs, which amounted to nearly $198.9 million. This was majorly driven by enhanced employee costs, stemming from bonuses and salaries.

Further, operating profit amounted to $23.2 million, marking a substantial improvement from the prior-year’s operating loss of $3.6 million.

Segment Performances

Net sales in the wholesale segment came in at $545 million, reflecting an increase of almost 16.4%. The segment gained from broad-based strength, led by robust brand performances. Significant among them were Calvin Klein, Tommy Hilfiger and Karl Lagerfeld.

Retail segment net sales came in at $106 million, remaining flat with the prior-year period. Stiff competition negatively impacted the performance of the segment.

Other Financial Details

GIII-Apparel exited the second quarter of fiscal 2019 with cash and cash equivalents of $42.3 million and long-term debt of $494.2 million. Total stockholders’ equity came in at $1,087.2 million.

Guidance & Management Plans

Led by sturdy results in the second quarter, management raised its view for fiscal 2019. The company now expects net sales to be close to $3.06 billion versus the earlier view of approximately $2.97 billion. Also, management now expects adjusted earnings in the range of $2.52-$2.62 per share versus prior projection of $2.27-$2.37.

Apart from this, management also provided third-quarter guidance, which is expected to depict quite an improvement from the prior-year quarter. For the third quarter, management expects net sales of $1.08 billion compared with $1.02 billion a year ago. Also, management expects the bottom line in the range of $1.72-$1.82 per share compared with the year-ago adjusted earnings of $1.67.

Notably, the company expects wholesale outerwear businesses to perform well in the upcoming quarters, and remains well placed to exploit opportunities therein. Also, in a bid to improve retail business, the company is set to bring in new products and strengthen its ties with retailers, especially those in Europe. It is also on track with retail store closures. In this respect, GIII-Apparel plans to shutter approximately 105 Wilsons and Bass retail stores by the end of this year. Markedly, management expects low single-digit comps in the retail segment, including Wilsons and Bass.

Apart from these, GIII-Apparel remains on track with the process of bolstering brands across channels, with new launches, improved marketing strategies and consumer reach. It also plans to make efficient utilization of digital and social media platforms.

Looking for Consumer Discretionary Stocks? Check These

lululemon athletica inc. LULU, sporting a Zacks Rank #1 (Strong Buy), came up with an average positive earnings surprise of 19.2% in the trailing four quarters. It has a long-term earnings growth rate of 17.1%. You can see the complete list of today’s Zacks #1 Rank stocks here.

Michael Kors Holdings Limited KORS, sporting a Zacks Rank #1, delivered an average positive earnings surprise of 35.7% in the trailing four quarters. The company has a long-term earnings growth rate of 6.8%.

Ralph Lauren Corporation RL, carries a Zacks Rank #2 (buy), has a solid earnings surprise history. The company has a long-term earnings growth rate of 9.6%.

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