G-III Apparel (GIII) Gains On Narrower-than-Expected Q1 Loss

Shares of G-III Apparel Group, Ltd. (NASDAQ:GIII) advanced more than 15% after the company reported better-than-expected first-quarter fiscal 2018 results. Moreover, the company raised guidance for fiscal 2018 which buoyed investor sentiment. We believe robust results and optimistic view will provide cushion to the stock that has witnessed a decline of 47.8% in the past one year, compared with the Zacks categorized Textile-Apparel Manufacturing industry’s fall of 21%.

G-III Apparel Group reported adjusted loss per share of 18 cents, narrower than the Zacks Consensus Estimate of loss of 37 cents. In the prior-year quarter, the company had reported adjusted earnings per share of 6 cents.

The company reported net sales of $529 million, beating the Zacks Consensus Estimate of $500 million. Notably, this is for the first time the company’s sales surpassed the estimate after missing the same in the trailing five quarters. Moreover, the company’s top-line increased 15.7% year over year primarily owing to robust performance of wholesale business which increased 18% year over year.

Sharp increase in wholesale business was primarily driven by rise in sales of Tommy Hilfiger license products and inclusion of nearly $40 million of net sales from fresh DKNY as well as Donna Karan product lines. Wholesale business witnessed a gain of 8% excluding the impact of the Donna, Calvin and DKNY brands. In fiscal 2018, the company anticipates wholesale business to increase nearly 18%.

Gross profit for the reported quarter increased 21.8% to $201.9 million, while gross margin expanded 200 basis points (bps) to 38.2%. The company reported operating loss of $5.4 million. In the year-ago quarter, it had reported operating income of $5.4 million.

Balance Sheet

G-III Apparel ended the quarter with cash balance of $67.1 million and stockholders’ equity of approximately $1,016.1 million. The company had long-term debt of $493 million.

Guidance

Management raised fiscal 2018 and provided second-quarter guidance. For fiscal 2018, the company expects adjusted earnings per share in the range of $1.20–$1.30, sharply up from the earlier estimate of 99 cents and $1.09. The Zacks Consensus Estimate for fiscal 2018 is currently pegged at $1.02 and could witness upward revisions in the coming days.

The company provided net sales guidance of nearly $2.76 billion, up from the previous guidance of $2.73 billion. The company anticipates adjusted EBITDA in the range of $178–$186 million, compared with previous guided range of $162–$171 million. In the fiscal 2017, the company had reported adjusted EBITDA of $148.1 million.

For the second quarter, the company expects net sales of nearly $520 million compared with $442 million in the prior-year quarter. The company expects adjusted loss per share in the range of 24–34 cents. In the prior-year quarter, the company had reported earnings per share of a penny. The Zacks Consensus Estimate for the second quarter is currently pegged at a loss of 31 cents.

Zacks Rank & Stocks to Consider

G-III Apparel currently carries a Zacks Rank #4 (Sell). Better-ranked stocks worth considering in the retail space include Aaron's, Inc. (NYSE:AAN) , Best Buy Co., Inc. (NYSE:BBY) and The Children's Place, Inc. (NASDAQ:PLCE) . All these stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Aaron's has reported better-than-expected earnings in the trailing four quarters, with an average beat of 10.6%.

Best Buy has an impressive long-term earnings growth rate of 11.8% and has also surpassed the Zacks Consensus Estimate in the trailing four quarters, with an average earnings beat of 33.8%.

The Children's Place has reported earnings beat in the trailing four quarters, with an average of 36.6%.

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