G-III Apparel Stock Plunges 66% YTD: Will Growth Plans Aid?
G-III Apparel Group, Ltd. GIII has been in the doldrums, which is evident from its shares losing 66.1% on a year-to-date basis. The company’s sluggish retail business has been marring its performance for quite some time now. The COVID-19 pandemic has further stomped on the retail division’s performance, owing to shutdown of the company’s physical stores. The New York-based company’s shares have also underperformed its industry’s 21.4% decline. Here, what comes as a silver lining is that G-III Apparel had announced restructuring plans for its retail unit, which is believed to cut losses from underperforming locations, making the segment profitable.
Let’s Take a Closer Look
Weakness in underlying brands has been badly hitting G-III Apparel’s retail business. In the first quarter of fiscal 2021, the retail segment’s net sales fell nearly 59% from the prior-year quarter’s reported figure, with the pandemic also hurting the segment’s performance. Furthermore, the segment’s gross margin contracted 930 basis points (bps) to 35.9%. This dismal performance has been weighing on the company’s overall top-line results. Apparently, sales missed estimates for the seventh consecutive time in the fiscal first quarter. The company also reported a wider-than-expected loss per share in the same quarter, breaking its 12-quarter-long earnings beat trend.
However, on Jun 4, management informed that it has been on track with the restructuring of its retail business, including eliminating the underperforming stores. This restructuring includes shutting down of 110 Wilsons Leather and 89 G.H. Bass outlets. Notably, liquidation of such stores was supposed to start immediately or as outlets reopened. It had also anticipated incurring a total charge of nearly $100 million in relation to the restructuring, with the cash portion of roughly $65 million.
Post restructuring, the retail unit will initially 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. Management had also completed a comprehensive review of the retail unit and entered into lease-termination agreements for most of such stores.
Apart from the company’s soft retail business, its wholesale segment’s results were also dismal during the first quarter of fiscal 2021. Revenues at the segment were down roughly 34% year over year, with its gross margin declining 530 bps in said quarter. Nonetheless, G-III Apparel is optimistic about this segment, given the strength in its five global power brands — DKNY, Donna Karan, Calvin Klein, Tommy Hilfiger and Karl Lagerfeld.
Meanwhile, G-III Apparel’s robust strategies, including licensing of well-known brands, to expand its product portfolio bode well. Also, the company remains on track with the process of bolstering brands across channels, with new launches, improved marketing strategies and broader consumer reach. So, let’s wait and see whether this Zacks Rank #3 (Hold) company can make its comeback in the foreseeable future, given the aforesaid efforts and restructuring plans.
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