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G-III Apparel (GIII) Gains Despite Wider-Than-Expected Q1 Loss

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Shares of G-III Apparel Group, Ltd. (GIII - Free Report) jumped 16.6% during the trading session on Jun 4 despite a dismal first-quarter fiscal 2021 performance. The company reported a wider-than-expected loss per share and sales miss in the reported quarter. Also, the top and the bottom line fell year over year. Moreover, the company did not provide any guidance for fiscal 2021 owing to uncertainties tied to the coronavirus pandemic.

Nevertheless, investors cheered probably on the news of restructuring of the company’s retail segment, which has been sluggish due to weakness in underlying brands. In a separate press release, management stated the restructuring of retail operations, which includes shutting down of 110 Wilsons Leather and 89 G.H. Bass outlets. Notably, the liquidation of such stores will start immediately or as outlets reopen. Moreover, it anticipates incurring a total charge of nearly $100 million in relation to the restructuring. Majority of the expense will be made in the fiscal second quarter. Management estimates the cash portion of this charge to be roughly $65 million.

Post restructuring, G-III Apparel’s 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. Impressively, management has completed a comprehensive review of the retail unit and has entered into lease termination agreements for most of such stores. This restructuring is believed to cut losses from underperforming locations and make the retail segment profitable. Meanwhile, the company is optimistic about the wholesale segment, buoyed by global power brands such as DKNY, Donna Karan, Calvin Klein, Tommy Hilfiger and Karl Lagerfeld.

Notably, shares of the company have surged 66.7% compared with the industry’s 27.5% increase in a month.

Q1 in Detail

G-III Apparel reported adjusted loss of 75 cents per share, wider than the Zacks Consensus Estimate of a loss of 66 cents. The company reported adjusted earnings of 25 cents per share in the same quarter a year ago.

On a GAAP basis, the company reported loss per share of 82 cents in the fiscal first quarter against earnings of 24 cents in the year-ago quarter.

Net sales plunged 36.1% year over year to $405.1 million. Moreover, the top line missed the Zacks Consensus Estimate of $415 million, marking the seventh straight quarter of a sales miss. Soft top-line performance can be attributed to a decline in sales at both the wholesale and retail divisions.

GIII Apparel Group, LTD. Price, Consensus and EPS Surprise

 

GIII Apparel Group, LTD. Price, Consensus and EPS Surprise

GIII Apparel Group, LTD. price-consensus-eps-surprise-chart | GIII Apparel Group, LTD. Quote

Moreover, gross profit declined 47.3% year over year to $124.4 million. Also, gross margin of 30.7% contracted 660 basis points (bps), mainly owing to decline in the metric at both its wholesale and retail operations.

However, SG&A expenses contracted 23.4% year over year to $154.6 million. Further, the company reported operating loss of $43.3 million against operating income of $25.6 million in the year-ago quarter.

Segmental Performance

Net sales at the Wholesale segment were $379 million, down roughly 34% year over year. Moreover, the segment’s gross margin declined 530 bps to 29.6%.

Net sales at the Retail segment totaled $34 million, down nearly 59% from the prior-year quarter’s reported figure. Closure of stores due to coronavirus mainly hurt the segment’s performance. The segment’s gross margin contracted 930 bps to 35.9%.

Other Financial Details

G-III Apparel ended first-quarter fiscal 2021 with cash and cash equivalents of $616.2 million and long-term debt of $901.2 million. Total stockholders’ equity was $1,246.2 million.

Furthermore, inventory declined nearly 7% to $500.4 million during the fiscal first quarter. This Zacks Rank #3 (Hold) company spent roughly $6 million as capital expenditures.

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