G-III Apparel: Zacks’ Bear of the Day Play

G-III Apparel Group, Ltd. (GIIIFree Report) warned on 2017 earnings again as the apparel industry continues to struggle. This Zacks Rank #5 (Strong Buy) is expected to see a 40% decline in earnings this year.

G-III Apparel owns and distributes apparel and accessories under some of the most iconic brands in the fashion industry including Donna Karan, DKNY, Vilebrequin, Bass, Weejuns, Eliza J and Jessica Howard. It has licenses with other well-known brands including Calvin Klein, Tommy Hilfiger, Karl Lagerfeld, Kenneth Cole, Jones New York, Jessica Simpson and others.

It addition to its wholesale business it operates retail stores under the Donna Karan, Wilsons Leather, Bass, G.H. Bass & Co., Vilebrequin and Calvin Klein Performance names.

Warned Again on Full Year Earnings

On Jan 5, G-III Apparel updated its fourth quarter and full year 2017 outlook, lowering its prior guidance.

Unseasonably warm weather in the first part of the quarter, as November was warm throughout the Midwest and East coast, meant slower coat sales even though a polar blast did finally descend on the country in December. But it was too late to save the quarter, apparently.

Also, the retail side of the business at Wilsons and G.H. Bass was worse than expected as mall and outlet mall traffic remained depressed. It had been anticipating positive comparable sales increases of the low single digits for both of those chains but instead, G-III now sees the comparables down low-double digits for Wilsons and down mid-single digits for G.H. Bass.

That’s a huge swing in the course of only a few weeks.

As a result, earnings will be impacted by $0.20 per share.

Its outlook for the wholesale business remains unchanged.

G-III now sees fiscal 2017 in the range of $1.21 to $1.31, down from its prior guidance of $1.41 to $1.51.

Earnings Estimates Slashed Again

G-III has already lowered full year guidance in previous quarters so this is more bad news on top of bad news. It doesn’t look like it has hit bottom yet in terms of a turnaround in the business.

The analysts have cut estimates to be within the range, pushing the Zacks Consensus Estimate down to $1.44 from $2.13 just 90 days ago.

There’s not even a reason to talk about fiscal 2018 yet because 2017 is just so bad.

Are the Shares Cheap?

Shares sold off on the news but didn’t retest previous lows.

It would be one thing if the shares were cheap. It might be considered a value play then. But G-III trades with a forward P/E of 17.1. I wouldn’t consider it truly a bargain until its P/E dropped to around 10 to 12x.

If you really must be in the apparel stocks, you might want to consider its partner on some of its licenses, PVH Corporation (PVHFree Report) . It’s a Zacks Rank #3 (Hold) right now but there are no guarantees on its quarter either.

In-Depth Zacks Research for the Tickers Above

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G-III Apparel Group, LTD. (GIII) – free report >>


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