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These 3 Apparel Players Can Be Good Long-Term Buys

Shaky consumer confidence, higher payroll taxes, a stubborn job market, and a sluggish economy took their toll on the apparel and accessories industry last year. However, finding good stock picks from the apparel-retail segment isn't a daunting task. Let's take a look at G-III Apparel Group (NASDAQ: GIII  ) and see how it stacks up against Gap (NYSE: GPS  ) and PVH (NYSE: PVH  ) .

G-III going strong
G-III reported stellar third-quarter results, thrashing all estimates -- a positive earnings surprise, a positive sales surprise, and an upward revision of management's guidance. Its growth was fueled by solid demand for its assortment of products across all segments, new business opportunities as a result of a strategic acquisition, and increased market penetration.

G-III operates retail stores primarily under the Wilsons Leather and G.H. Bass names, and retail accounts for around 11% of revenue. The licensed segment accounts for 69% and non-licensed is 20% of revenue. In its third quarter, net sales rose 23% year over year to $668.7 million, with the licensed segment being the star performer with 25% gains. On the heels of strong revenue growth, it posted better-than-expected earnings of $2.85 per share, representing a 20% jump over the year-ago quarter.

The retail platform has been performing well, and the company is investing in its retail strategy also. G.H. Bass was acquired from PVH in November, and this positioned the company as a diversified head-to-toe apparel and accessories retailer for both men and women. The integration of 160 G.H Bass stores into the company's retail platform provides additional opportunities immediately after the acquisition. Going forward, this will be one of the growth drivers.

Moreover, a rich portfolio of high-margin brands like Calvin Klein, Guess, and Tommy Hilfiger in licensed segments will also be a growth driver going forward as these brands resonate well with consumers. Over the years, through a series of acquisitions, G-III has successfully transformed itself from an outerwear producer into a diversified apparel company. Diversity has clearly helped G-III in performing well in a period when others like American Eagle Outfitters and Abercrombie & Fitch have struggled.

What about Gap?
Diversity has also helped Gap to perform well in what has been a difficult environment for the apparel-retail industry. It continued its streak of good results in its third quarter and reported impressive comps growth, making it the seventh consecutive quarter of positive comps. On the back of comps growth, revenue inched up 1% year over year and earnings per share increased 14%. Earnings per share were also helped by a lower share count as a result of share buybacks during the quarter. In its third quarter, Gap returned approximately $900 million through share buybacks and dividends.

Gap's international expansion allows the retailer to reduce its dependence on the U.S., where the sluggish economy isn't helping the apparel retailers in general. During the third quarter, Gap opened about 18 stores in mainland China, bringing its store count to 73 in that region. China is a big market from a long-term perspective, as it is expected to be a $218 billion market by 2016, according to Trans World News. The company is also planning to add to its affordable luxury brand Banana Republic in China, encouraged by the success of high-end players such as Coach.

PVH is another good bet
PVH is one of the world's largest apparel companies with a rich brand portfolio that includes Calvin Klein, Tommy Hilfiger, and Heritage. It has also benefited from diversity and iconic brands in its portfolio. According to consulting form Bain & Co, the global luxury-menswear market is growing at about 14% a year. PVH has been expanding its footprint through acquisitions and licensing deals in order to make the most of the opportunity.

PVH acquired The Warnaco Group, which helped in fueling the growth of the Calvin Klein North America retail business. In the last reported quarter, the Calvin Klein North America business grew twofold to $799.7 million from $319.6 million in the year-ago quarter. In addition, it also entered into an agreement with Axis Golf to market and distribute IZOD-brand products across Australia, New Zealand, Fiji, and other South Pacific islands, and this will fuel growth going forward.

PVH is concentrating more on its high-margin business, and as a result, it disposed off the non-core Bass business to G-III Apparel. In order to expand the footprint of the high-margin Calvin Klein segment, PVH formed a joint venture with Gazal for marketing the brand across Australia, New Zealand, and the South Pacific nations and islands.

Bottom line
Despite a sluggish apparel industry and uncertain consumer confidence, all three companies discussed here have trudged along nicely. They have got some good plans in the bag to improve their businesses, which is an indication of their confidence regarding the future. So, investors looking to invest in the apparel industry should definitely consider these stocks.

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