G-III Apparel Misses 4Q Estimate

New York-based G-III Apparel Group, Ltd (GIII - Snapshot Report) posted earnings per share of 25 cents in the fourth quarter of fiscal 2012, missing the Zacks Consensus Estimate of 29 cents and the year-ago quarter earnings of 62 cents per share. In full-fiscal 2012, earnings were $2.46 per share versus $2.88 in the prior year.

G-III Apparel’s net sales surged 9.0% year over year in the quarter to $294.3 million. In full-fiscal 2012, revenue jumped 15.8% year over year to $1.23 billion.

Quarter Highlights

Sales growth was chiefly aided by improved performance of wholesale licensed apparel (up 2.3%), wholesale non-licensed segment (up 28.3%) and retail operations (up 15%), partially offset by warm weather during its peak selling period.

The robust wholesale licensed apparel sales were driven by higher sales of Calvin Klein products and theintroduction of the three new Calvin Klein product lines, whereas the wholesale non-licensed segment benefited from an increase in private label outerwear sales. Retail sales surged on the back of unit growth as well as comp store increase of 4.8% in the quarter.

During the quarter, G-III Apparel’s gross margin plunged 400 basis points (bps) to 28.3%, due to steep discounting, product mix and pricing pressures. Margins at wholesale license segment, wholesale non-licensed segment and retail operations fell 560 bps to 21.1%, 130 bps to 22.6% and 230 bps to 45.6%, respectively.

Financials

At the end of 2012, G-III Apparel had cash of $24.7 million and shareholders’ equity of $358.0 million, as compared to $10.0 million and $303.5 million in 2011, respectively.

Outlook

For the first quarter of 2013, G-III expects a loss per share in the range of 2 cents to 6 cents and net sales of $215 million.

Based on the 2012 results, the company initiated its guidance for fiscal 2013. G-III expects earnings per share in the range of $2.62 to $2.72 and net sales of $1.33 billion.

Our Take

G-III remains optimistic regarding 2013 considering its unit growth, strong demand for its core products and new business initiatives. Management also remains positive regarding the extension of NFL license that will expand distribution rights in the mid tier department stores and the sporting goods channel. However, the upcoming quarter remains seasonally weak; hence we expect estimates to go down in the coming days. The Zacks Consensus Estimates for 2013 and 2014 are pegged at $2.67 and $3.30, respectively.

G-III engaged in apparel business, currently retains a Zacks #5 Rank, which translates into a short-term Strong Sell rating. We are also maintaining our long-term Neutral recommendation on the stock. G-III peers include Columbia Sportswear Company (COLM - Snapshot Report) and Nike Inc. (NKE - Analyst Report).