G-III Lags, Trims EPS Outlook - Analyst Blog
September 22 2011 - 7:00AM
Zacks
New York-based G-III
Apparel Group, Ltd (GIII) posted earnings per share of 8
cents in the second quarter of fiscal 2012, missing the Zacks
Consensus Estimate of 20 cents and the year-ago quarter earnings of
15 cents per share. The lower-than-expected result was mainly due
to margin contraction.
G-III Apparel’s net sales surged
21.7% year over year in the quarter to $230 million. Sales growth
was aided by improved performance of wholesale licensed apparel (up
22%), wholesale non-licensed segment (up 24.5%) and retail
operations (up 19%).
The robust wholesale licensed
apparel sales were driven by higher sales of Calvin Klein products,
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 11% in
the quarter.
During the quarter, G-III Apparel’s
gross margin fell 370 basis points (bps) to 28.5%, as the company
allowed discounts to customers due to soft economic conditions.
Margin at wholesale license segment, wholesale non-licensed segment
and retail operations fell 490 bps to 25.5%, 150 bps to 24.7% and
30 bps to 45.1%, respectively.
Financials
At quarter end, G-III Apparel had
cash of $8.6 million and shareholders’ equity of $309.7
million.
Outlook
For the third quarter of 2012,
G-III expects earnings per share in the range of $2.25–$2.35 and
net sales of $500 million.
Based on second quarter results,
the company trimmed its earnings guidance for fiscal 2012.
G-III now expects earnings per share in the range of $3.05 to
$3.15, down from the earlier-guided range of $3.15 to $3.25 per
share. However, the company has raised its sales outlook to $1.25
billion from its previous forecast of $1.20 billion.
Our Take
G-III, the designer, manufacturer,
and distributor of various women’s and men’s apparels in the
United States, remains optimistic regarding the second half of
2012, based on unit growth and strong demand for its products.
However, we expect the estimates to go down in the coming days as
the company reported weak results and also trimmed its earnings
outlook. The Zacks Consensus Estimates for 2012 and 2013 are pegged
at $3.08 and $3.57, respectively.
G-III currently retains a Zacks #5
Rank, which translates into a short-term Strong Sell rating. We are
also maintaining our long-term Underperform recommendation on the
stock. G-III peers include Polo Ralph Lauren Corp.
(RL) and CROCS Inc. (CROX).
CROCS INC (CROX): Free Stock Analysis Report
G-III APPAREL (GIII): Free Stock Analysis Report
RALPH LAUREN CP (RL): Free Stock Analysis Report
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