For the longest time, it seemed G-III Apparel (NASDAQ:GIII) was immune to the forces of gravity. Over the last 52 weeks, shares of the New York-based clothier have more than doubled. But this morning, as the company released its earnings news on fiscal Q1 2007, gravity reasserted itself and sent the shares tumbling earthwards once more.

As of this writing, the company has seen 6%, or $7 million, shaved off its market cap. But was the news really that bad? Let's find out.

G-III reported $14.4 million worth of sales and a $0.72-per-diluted-share loss, up a respective 4.5% and 67.4% from last year. Thus, the firm missed analyst estimates for both sales and profits (which presumably sparked the sell-off). But if you caught yesterday's Foolish Forecast, you'll know that G-III actually hit the midpoint of its own projected $0.70-to-$0.74-per-share loss.

The company has made clear that this quarter and the next are seasonally weak ones for its business, and that investors need to expect it to report losses (G-III usually only books a profit in fiscal Q3). The more the firm sells in the other quarters, the more money it's going to lose. And with the firm taking on the new Marvin Richards and Winlit clothing lines, those losses will be greater this year than last.

That probably explains investors' adverse reaction to G-III's guidance for next quarter, in which the company predicts a narrower loss ($0.30 to $0.35) than the $0.39-per-share loss that its analyst had predicted. For this company, losing less money than expected in a weak quarter means . selling less stuff (about $60 million) than expected (about $65.5 million) as well. In other words, the firm isn't growing as fast as predicted.

In other disappointing news, the firm improved one working-capital metric, but saw another deteriorate. Although G-III didn't break out its accounts receivable on the abridged balance sheet it provided, it did show that "working capital" declined about 7%, which suggests that accounts receivable collection may have improved. Unfortunately, at the same time, inventories ballooned 27% -- far outpacing the rate of sales, and exacerbating investor concerns that sales aren't going well.

Finally, two other numbers grew substantially since this time last year. Unfortunately, those numbers were for debt (up $26.7 million) and shares outstanding (diluted by 11.7%, even after accounting for the effects of a 3-for-2 share split conducted in March). Despite the CEO's assertion that his company's "opportunities have never been more compelling," I can't fault investors today for discounting the opportunities and focusing instead on the disappointing results.

Want small-cap companies that actually deliver on their promises? Tom Gardner's Motley Fool Hidden Gems highlights the best small caps that Wall Street overlooks. Get Tom's full list of picks with a free 30-day guest pass.

Fool contributor Rich Smith does not own shares of any company named above.