G-III Apparel Group: Plenty of horsepower
Few can top G-III Apparel Group’s (Nasdaq:GIII) stable of trendy brands, from Calvin Klein to the newly acquired Andrew Marc. Bred for growth, this clothes horse is racking up sales in an economy only a mudder could love.
G-III’s strategy is to load up on acquisitions and licenses, providing a range of high-quality clothes to retailers — coats, jackets and pants, and women’s wear, such as suits and dresses. It makes and sells clothes under licensed, proprietary and private retail brands to retailers such as Macy’s (NYSE:M) and Nordstrom (NYSE:JWN). G-III’s made four acquisitions since mid-2005, including Andrew Marc in February. That purchase brought the brands Andrew Marc and Marc New York into the fold, along with outerwear licenses for the Dockers and Levi’s brand.
Sales — almost all of which are in the United States — have been on a tear. Revenue rose 35% to $113.5 million in the second quarter through July, from the same period in 2007. The company sported a loss in the quarter, attributed to seasonal weakness at the newly acquired Andrew Marc and its Wilsons outlet chain. G-III lost $0.23 per share, compared with a loss of $0.05 the previous year.
Still, G-III plans on eclipsing fiscal 2008’s performance, when sales grew 21.5% to $519 million and earnings per share rose 11.2% to $1.05. Guidance calls for earnings to increase to $1.35 to $1.40 per share in the 2009 year through January, and revenue to climb to $730 million.
With a market value of $316 million, New York-based G-III closed Wednesday at $19.13 per share, near the top of a 52-week range from $10.73 to $21. That puts the P/E at 13.7 based on the average analyst estimate of $1.39 for this year and at 11.5 based on next year’s average forecast for $1.66. G-III extended a credit arrangement in April and believes this, plus cash on hand and cash from operations, is sufficient to meet operating and capital expenditures.
Carrying shares higher is an expected payoff in the coming year from acquisitions. Eric Beder, analyst at Brean Murray, Carret and Co., wrote earlier this month that G-III has transformed itself in the past 12 months by adding high-end leather goods (Andrew Marc), a retail component (Wilsons Leather) and more non-outerwear licenses, including Jessica Simpson and Calvin Klein.
Beder rates G-III a “buy” and carries a $26 target. “We continue to view the shift to a more diversified and robust business model for G-III as a key positive,” he wrote, adding that resulting top- and bottom-line growth should expand margins.
There are a few hurdles, though, not the least of which is the economy. Retailers have struggled as people reduce spending because of energy price and debt worries. Consumer cutbacks, fickle fashion trends and the challenges of successfully integrating acquisitions may harness this filly.
Racing against the headwinds of a lackluster industry takes a lot of horsepower. G-III’s been a frontrunner, making it a good bet when retail’s fortune’s shift.
About the Author
Contributing author Jennifer Allen has two decades of experience as a writer and editor, mainly as a financial wire service correspondent.
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