GIII G III Apparel Group Ltd

G-III Apparel Group, Ltd (GIII), the designer, manufacturer, and distributor and licensor of various women’s and men’s apparels in the United States, announced recently that its board of directors has approved a share repurchase program worth $2 million.

The repurchase will be executed from time to time in the open market as well as through privately-negotiated transactions based on market conditions, stock price and other factors.

We appreciate G-III’s effort to bolster shareholders’ value over the long term. Moreover, an increase in share buy back authorization affirms the company’s optimistic outlook and reflects strong growth going forward. However, we believe the strategic move is aimed at capitalizing a relatively undervalued share price arising from the volatility in the market and soft second-quarter 2011 results.

As of July 31, 2011, G-III had about 20.3 million shares trading in the market. The stock had historically traded between $20.44 and $45.38 over the last 12 months. Currently, the common shares of the company are trading toward its lower range.

In the recently concluded quarter, G-III posted earnings per share of 8 cents 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 370 basis points fall in gross margin.

However, G-III Apparel’s net sales surged 21.7% year over year in the second quarter to $230 million. Sales growth was aided by improved performances of wholesale licensed apparel (up 22%), wholesale non-licensed segment (up 24.5%) and retail operations (up 19%).

For the third quarter of 2012, G-III expects earnings per share in the range of $2.25–$2.35 and net sales to be $500 million.

Based on poor second quarter results, the company also 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.

Currently, we maintain our long-term Underperform recommendation on the stock. Moreover, G-III holds a Zacks #4 Rank, which translates into a short-term Sell rating. G-III peers include Polo Ralph Lauren Corp. (RL) and CROCS Inc. (CROX).

 
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