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Why G-III Apparel Stock Popped Today

By Evan Niu, CFA – Jun 4, 2020 at 1:59PM

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The apparel specialist missed on earnings but announced a restructuring plan.

What happened

Shares of G-III Apparel (GIII 0.62%) have popped today, up by 12% as of 1 p.m. EDT, after the company reported first-quarter earnings. The apparel specialist also said it would restructure its retail operations.

So what

Revenue in the fiscal first quarter came in at $405.1 million, missing the consensus estimate of $407.8 million in sales. That translated into an adjusted net loss of $36 million, or $0.75 per share. Analysts were expecting the apparel maker to lose $0.67 per share on an adjusted basis.

A store closing due to COVID-19

Image source: Getty Images.

"We took proactive steps in response to the COVID-19 outbreak," CEO Morris Goldfarb said in a statement. "We reduced our inventory exposure, furloughed a large portion of our employee base and implemented significant temporary reductions in pay for our senior management and employees."

Now what

G-III is not providing any guidance due to macroeconomic risks related to the coronavirus outbreak. However, investors cheered the company's efforts to cut costs by restructuring its retail segment. G-III will close 110 Wilsons Leather and 89 G.H. Bass locations, hiring Hilco Global to assist in liquidating the stores.

Goldfarb believes that the move will allow G-III to reduce its losses while shifting focus to the company's wholesale business, which generated $2.9 billion in net sales last fiscal year. "Our wholesale business, anchored by our five global power brands: DKNY, Donna Karan, Calvin Klein, Tommy Hilfiger and Karl Lagerfeld, will continue to be the primary growth and profit engine for the Company," the chief executive added.

G-III expects to incur $100 million in restructuring charges related to lease terminations, severance costs, and other related expenses.

Evan Niu, CFA has no position in any of the stocks mentioned. The Motley Fool owns shares of G-III Apparel Group. The Motley Fool has a disclosure policy.

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