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Why Is G-III Apparel (GIII) Down 6% Since Last Earnings Report?

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A month has gone by since the last earnings report for G-III Apparel Group (GIII - Free Report) . Shares have lost about 6% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is G-III Apparel due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

G-III Apparel’s Q3 Earnings Beat, FY22 View Higher

G-III Apparel posted sturdy third-quarter fiscal 2022 results with both the top and the bottom line beating the Zacks Consensus Estimate and growing year over year. Results also exceeded management’s expectations.

Q3 in Detail

G-III Apparel delivered earnings per share of $2.16, beating the Zacks Consensus Estimate of $1.79. Also, the reported figure surged 67.4% from $1.29 a share delivered in the year-ago quarter. The bottom line outpaced the management’s guided range of $1.65-$1.75 per share for the quarter.

Net sales jumped 22.8% year over year to $1,015.4 million and came above the Zacks Consensus Estimate of $1,011 million. The top-line outperformance can be attributed to sales growth at the Wholesale unit, offset by soft sales at the Retail division.

G-III Apparel’s digital business has been robust for a while now. Compared to two years ago, sales on its partner sites rose more than 45% and above 60% on its sites. In China, digital sales were stronger than store sales, while Vilebrequin's digital sales also increased.

A Sneak Peek Into Margins

Gross profit increased 16.7% year over year to $347.5 million. However, gross margin of 34.2% contracted 180 basis points (bps) from the prior-year period’s reading. The year-ago period's gross margins included gains from the pandemic-related adjustments.

SG&A expenses inched up 2.7% year over year to $182.4 million, mainly due to higher compensation expenses with respect to bonus accruals. G-III Apparel reported an operating income of $158.1 million, up 43.6% from the year-ago quarter’s number.

Segmental Performance

Net sales at the Wholesale segment were $1.01 billion, up from 783 million recorded in the year-earlier quarter. Also, the segment’s gross margin declined nearly 250 bps from the year-ago quarter’s level to 33%.

Net sales at the Retail segment totaled $26 million, down from $58 million in the prior-year quarter due to the restructuring of its retail segment. Nonetheless, the segment’s gross margin grew sharply to 49.8% from 33.9% registered in the year-earlier quarter.

Financial Details

G-III Apparel ended the fiscal third quarter with cash and cash equivalents of $279.6 million and long-term debt of $517.5 million. Total stockholders’ equity was $1,486.2 million. Inventories declined 2.8% to $449 million at the end of the reported quarter. At the quarter-end, it had cash and availability under its credit agreement of more than $900 million.

Outlook

For fiscal 2022, G-III Apparel projects net sales of $2.77 billion, up from the prior view of $2.70 billion. It forecasts net income between $180 million and $190 million compared with $155-$165 million estimated earlier.

Management envisioned earnings per share of $3.65-$3.75, higher than $3.10-$3.20 guided previously.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates revision. The consensus estimate has shifted 20.74% due to these changes.

VGM Scores

At this time, G-III Apparel has an average Growth Score of C, however its Momentum Score is doing a lot better with an A. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, G-III Apparel has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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