Why G-III Apparel Group Ltd. Stock Soared Today

The diversified apparel group beat estimates and raised its guidance.

Jeremy Bowman
Jeremy Bowman
Jun 6, 2017 at 12:22PM
Consumer Goods

What happened

Shares of G-III Apparel Group Ltd. (NASDAQ:GIII) jumped Tuesday after the diversified clothing brand beat estimates in its first-quarter earnings report and raised its guidance.

As of 11:10 a.m. EDT, the stock was up 21.5%.

An ad for DKNY featuring two women on the streets of a city.

Image source: G-III.

So what

The company, which owns brands such as Donna Karan and Vilebrequin and licenses several others, said that revenue surged 16% in the quarter to $529 million. That easily beat expectations at $499.6 million.

On the bottom line, G-III posted an adjusted loss of -$0.18 a share, down from a profit of $0.06 a share in the period a year ago. However, without the effect of the recent acquisition of Donna Karan International, G-III would have had an $0.11 per share profit in the period.

Even without the adjustment, the loss was still better than expected, as analysts predicted a shortfall of -$0.37 a share.

Commenting on the quarter, CEO Morris Goldfarb said, "Our wholesale business demonstrates the power of our brand portfolio to transcend a difficult market environment." He also said the company was reducing operating costs and closing and repurposing stores, in order to reduce loses in the company's retail operations.

Now what

G-III's guidance was also better than expected as it now sees revenue of $2.76 billion, up from $2.73 billion, and adjusted EPS of $1.20 to $1.30, better than the previous range of $0.99 to $1.09.

Wall Street had expected revenue of $2.72 billion and EPS of just $1.01.

Clearly, the improved guidance is a positive for shareholders, but they should keep an eye on the retail segment as apparel retailers have been getting crushed by e-commerce and fast fashion competitors. G-III has a solid stable of brands and should be able to succeed if it manages its costs effectively. However, with the shifting retail consumption patterns, the industry continues to be a risky one.