New York-based clothier G-III Apparel (NASDAQ:GIII) was on quite a run over the past year, but the recent quarter sent shares packing. Fool analyst Rich Smith noted that investors grew wary over what appear to be cooling growth rates. Sales in the first quarter increased by 4.5% year over year, but were outpaced by a 27% hike in inventory levels, which may suggest problems ahead.

To make better sense of what's going down in the world of G-III, I've consulted my colleagues Bodhi Zappa and Hank Schofield. Together, we'll get to the bottom of the positive and negative impact of G-III's recent acquisitions.

Hank, given your bearish-mindedness, why don't you get us started? Is the recent sell-off warranted?

Hank: Is that a rhetorical question? Of course it's warranted. Red flag No. 1 for me: Did you notice that management was unable to critique itself in the opening remarks to its shareholders, the press, and investment analysts? If you took the words of CEO Morris Goldfarb and CFO Neal Nackman as gospel, golly, everything just sounds so perfect. At best, what I heard was a gloss-over, in which lower sales were unable to offset higher SG&A expenses associated with G-III's recent acquisitions of Marvin Richards and Winlit.

So poor sales performance is to blame, right? Wrong. According to Goldfarb, the problem arose because the year-ago period didn't include "typical seasonal losses of Marvin Richards or Winlet," like the current quarter did. Difficult year-ago comparisons are a part of the problem, but that's certainly not the whole story. Wall Street wasn't buying it, and neither am I.

Bodhi: Hank, did you consider that it wasn't necessary for management to criticize current results, because the latest performance was in line with expectations? Or better yet, that it's considered a small part of a larger build-out of the company? Short-term growth pains are worth it if the payout leads to long-term gains. Goldfarb pointed to such a strategy in his opening remarks, stating, "We believe we've repositioned our Company, not only for growth for the remainder of this year and beyond, but also to become a less seasonal, more diversified full-range apparel company." You're so stuck on the thorn that you're missing the bed of roses.

Jeremy: Since management spent considerable time highlighting various growth initiatives, it's worth noting two in particular. First, management obviously views the expanded relationship with the Calvin Klein label, which came via its Marvin Richards acquisition, as a critical piece of its overall growth strategy. CK-branded women's suits and dresses in particular should fuel the top and bottom lines alike, since this premium label commands fatter margins. It's a good thing these profitable lines are on board, since its other major expansion effort, Exsto -- a new urban young men's and boys branded sportswear line for Wal-Mart (NYSE:WMT) -- will certainly have tighter margins. These initiatives and others led Goldfarb to conclude, "It is our belief that we've positioned G-III for a period of strong growth."

Bodhi: Shareholders should expect to see that "period of strong growth" sooner rather than later. The Calvin Klein suits are already hitting store shelves, and the dresses are expected arrive for this holiday season. Additionally, the Exsto line will be in 300 Wal-Mart stores by fall, and nearly 500 by the holidays. As a result, Goldfarb is "confident" in the company's ability to meet its sales target of approximately $400 million for the year. Note that sales year-to-date were only $14.4 million, so we should expect to see some solid top-line performance in the quarters to come.

Hank: What about its bottom-line performance? Due to the acquisitions, SG&A expenses are now 63% higher than a year ago, and so far, sales have been unable to recoup these costs. Putting operating expenses aside, even gross margins are under strain from the acquisition. Cost of sales increased 6.7% year over year, and the company has thus far been unable to leverage these expenses. This compelled one analyst to ask why gross margins were so negatively affected, declining to 4.7% from 6.6% in the year-ago period, given that Calvin Klein suits are so profitable. Goldfarb simply pointed out the obvious: While Calvin Klein suits were profitable, the company had increased "fixed costs" relating to its acquisitions.

Bodhi: Hank, your criticisms should come with a disclaimer: "Bodhi will fill in the rest of the story." You failed to mention that G-III's Calvin Klein suit offering is still ramping up. As of April, the product was only in 40 stores, and for June and July, it will be in 70 stores. Its distribution is growing by the day. In addition, Calvin Klein dresses, another highly profitable product line which hasn't even hit store shelves yet, are expected to be "at least as large" a launch as suits have been. As such, I fully anticipate that both gross and operating margins will improve from their current levels in the coming quarters.

And the final score .
Jeremy: G-III's increased fixed costs in production and operations should be more than offset by the substantial sales increases anticipated in the coming months. However, the company's ability to increase profitability from comparable levels remains doubtful. While sales are expected to increase 23% for the year -- a suitable growth rate for its current inventory levels -- net income is only anticipated to grow by as much as 12.7%. How much of this discrepancy results from weaker margins, as opposed to higher interest expenses and amortization costs, remains to be seen. Even with these concerns in mind, however, as the company enters what it sees as a booming growth period, G-III remains worthy of further investigation.

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Fool contributor Jeremy MacNealy has no financial interest in any company mentioned. Wal-Mart is a M otley Fool Inside Value recommendation.