If I could add one button to any broker's website, I'd add a big, red flashing one marked "Do Over." I'm pretty sure that such a button would make me the next Warren Buffett. At the least, I'm confident that my ranking on The Motley Fool's new stock-picking service, Motley Fool CAPS, would've risen toward the top 100 or so.

What was my big gaffe on CAPS? Since making my stock picks in late August and early September, my biggest goof by far has been giving a thumbs-down on the short-term prospects for G-III Apparel (NASDAQ:GIII).

Conference calls have been one of my more accurate ways to gauge a company's medium-term future. They gave me confidence to stick with Guess? (NYSE:GES) despite the stock's strong run-up, and they're also why I went short-term bearish with G-III.

I came away from its conference call last June with mixed signals. On one end, it was clear that G-III was gearing up for rapid growth from a variety of outlets, including new Calvin Klein suits that were just making their way to stores at the time. On the other end, however, fixed costs on its sales, general, and administrative expenses line had risen substantially, and despite a projected growth rate of roughly 23%, net income growth was expected to come in at only 13%, highlighting the weight of rising costs on earnings.

We now know that these estimates were a far cry from reality. G-III ended fiscal 2007 with top-line growth of 31.7%, which flooded down to a bottom-line increase of 62%. My CAPS portfolio took a huge hit, leaving me wishing for that do-over button.

Without one, I can at least look at fiscal 2008 as a fresh opportunity to gauge what lies ahead for G-III. In this edition of Fool on Call, we will focus our attention on its merchandise set for the upcoming year, with special attention on Calvin Klein dresses. In the end, merchandise is what drives sales for G-III.

The year of the dress
Last year, the words heard over and over again from women's-apparel producers such as Chico's FAS (NYSE:CHS), AnnTaylor (NYSE:LTD), Dress Barn (NASDAQ:DBRN), and many others were "wear now," a call for casual wear. This year is shaping up to be the year of the dress. Polo Ralph Lauren (NYSE:RL) recently highlighted the dress category as a key area of growth for 2007, and Guess? echoed these sentiments. It was clear from G-III's conference call that it, too, sees dresses as an important merchandise category this year.

In his prepared remarks, CEO Morris Goldfarb stated that both Calvin Klein suits and dresses are "performing well." He added, "We believe we can double the size of each of these businesses in the next year." More specifically, he notes, "Dresses remain a very strong category for spring, and we have one of the best brands in the market, so we expect to benefit from the trend."

We learn in the question-and-answer portion of the call that the prediction to "double the size" of both dresses and suits is "fairly conservative." Goldfarb substantiated his claim by pointing out that bookings for dresses and suits "are strong."

In fiscal 2007, licensed wear led the charge for the company, with 36% revenue growth; non-licensed segments achieved 24% sales growth. Calvin Klein experienced the largest volume growth during that period. If we take Goldfarb at his word that he expects Calvin Klein suits and dresses to double in business in fiscal 2008, by all indications, it looks as though licensed merchandise is set for another very strong year of sales growth.

Here's another positive: Calvin Klein suits and dresses, which sell at higher margins than outerwear does, were the primary reason for gross profit margin expansion this past year. Currently, 90% of G-III's business is derived from the outerwear segment. But later in the call, Goldfarb stated that this product mix is clearly shifting as a result of the performance of suits and dresses. With higher-margin merchandise expected to become a greater percentage of net sales in fiscal 2008, good things lie ahead.

G-III offers a variety of dress lines for the Calvin Klein label. From casual dress to career dress, party dress to evening dress, G-III covers just about every dress category save miniskirts, which are excluded because they don't fit the Calvin Klein image that G-III upholds. In addition to a range of categories, G-III also covers a variety of fabrics, from cotton to satin. Whether it is cut or fabric, what is most important is G-III's remaining consistent with the "Calvin Klein message."

And why wouldn't it want to be consistent with that message? Calvin Klein was a serious breadwinner for G-III in 2006, and it's expected to be even more so in 2007.

Looking smooth in 2007
Beyond apparent continued expansion in sales and margins as the company enters fiscal 2008, inventories seem healthy, too. In the Q&A, Goldfarb indicated that, as a percentage of sales, inventories are "lower than they've ever been."

After observing other apparel makers, I know that slim inventories aren't always good. They can suggest that the company is battening down to weather a tougher sales environment. If sales are going gangbusters, too-slim inventories can also restrict a company's ability to capitalize on demand. Hopefully, these low inventories mean that G-III's distribution model is efficient enough to meet whatever demand it sees for fiscal 2008.

According to Goldfarb, demand looks brisk for G-III, particularly in the dress and suit segments. I bet against G-III in 2006, but you won't see me betting against it in 2007. Accelerating sales, expanding margins, and tight inventory control are a recipe for juicy profits.

G-III Apparel gets a thumbs-up from this Fool. Now if I can just find that "do over" button...

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Fool contributor Jeremy MacNealy has no financial interest in any company mentioned. The Motley Fool has a disclosure policy.