G-III Apparel Group, Ltd. GIII is tracking up the charts, thanks to its robust business strategies. The company remains on track with the process of bolstering brands across channels via new launches, licensing of brands and improved marketing strategies. Moreover, management remains on track with the restructuring of the company’s ailing retail business. A narrower-than-expected loss per share during second-quarter fiscal 2021 is further adding gleam to the stock. Impressively, the New York-based company’s shares have skyrocketed 94% and outperformed the industry’s 64.2% rally over the past six months.
Let’s Delve Deeper
G-III Apparel has been witnessing accelerating demand for the Performance or athleisure-wear category. Management pointed out that the athleisure-wear and jeans categories appear to be major growth opportunities. Additionally, management is quite optimistic about its widely recognized power brands such as DKNY, Calvin Klein and Tommy Hilfiger. It also recently renewed its license deals for the Levi’s and Dockers brands. The company has extended the licenses for these labels with Levi Strauss LEVI through Nov 30, 2024. We note that G-III Apparel will continue bringing creativity and innovation in the outerwear category, alongside capitalizing on its diversified distribution across all platforms.
Moreover, it remains encouraged about the ongoing DKNY and Karl Lagerfeld Paris stores and digital sites. In the fiscal second quarter, the company saw comparable-sales growth of over 60% in the DKNY and Karl Lagerfeld Paris sites. Further, gross margin during the quarter under review increased significantly to 45.3% from the prior-year tally of 36%, mainly driven by higher gross margin in the Wholesale segment, partly offset by contraction in the metric at the Retail unit. Also, SG&A expenses contracted 37.8% year over year to $122.1 million during the quarter under review. Meanwhile, it permanently minimized its global wholesale headcount, which led to roughly $23 million of annualized savings.
Although the company’s loss was narrower in fiscal second quarter, G-III Apparel’s sales lagged the Zacks Consensus Estimate for the eighth consecutive time. The top line plunged 53.8% year over year on sales decline at both the wholesale and retail divisions. Also, the ongoing effects of the coronavirus pandemic have significantly hurt the metric. In fact, management still anticipates the pandemic-related impacts to continue hurting results in the second half of fiscal 2021 and consequently projects net sales to fall in the 28-33% range year over year during the period.
Now shedding light upon G-III Apparel’s retail business, sales at the segment were down nearly 59% in the most-recent quarter. The metric included $20 million of sales for the Wilsons Leather and G.H Bass stores, compared to $54 million in the prior-year period. The segment’s gross margin also contracted to 32.5% from 46.5% in the year-ago quarter, thanks to the store liquidations of the Wilsons Leather and G.H Bass outlets. As mentioned earlier, G-III Apparel’s restructuring initiatives for its retail unit hold promise. This restructuring is believed to help cut losses from underperforming locations and make the division profitable. The restructuring includes shutting down of its entire 110 Wilsons Leather and 89 G.H. Bass outlets.
Encouragingly, G-III Apparel displays a Zacks Rank #3 (Hold).
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