Apparel (GIII 47.60, +4.72, +11.01%) is trading sharply higher today after reporting Q1 (Apr)
earnings results this morning. The company is a manufacturer of a wide range of
apparel/accessories (outerwear, dresses, sportswear, handbags, footwear,
luggage, leather goods etc.) under licensed brands, owned brands, and private
Owned brands include Donna Karan, DKNY, Vilebrequin, G. H. Bass, Andrew Marc, Marc New York, Eliza J, and Jessica Howard. G-III has fashion licenses under the Calvin Klein, Tommy Hilfiger, Karl Lagerfeld Paris, Kenneth Cole, Cole Haan, Guess?, Vince Camuto, Ivanka Trump, Kensie, Levi's, and Dockers brands. Through its team sports business, G-III makes sports apparel under its licenses with the NFL, NBA, MLB, NHL, and 150+ US colleges and universities. G-III also operates retail stores under the DKNY, Wilsons Leather, G. H. Bass, Vilebrequin, Calvin Klein Performance and Karl Lagerfeld Paris names.
GIII made a large acquisition in December 2016 when it acquired Donna Karan Intl for $650 mln (brands include DKNY, Donna Karan and DKNY Jeans). GIII sees it as a transformative addition to its portfolio of iconic brands and enhances its position as a fashion leader. GIII believes that DKNY alone has the potential to generate $1 bln in annual sales. GIII intends to focus on the expansion of the DKNY brand, while also re-establishing DKNY Jeans and Donna Karan.
Turning to the Q1 (Apr) results, non-GAAP EPS jumped to $0.22 from an $(0.18) loss in the prior year period. The company had previously guided to an AprQ loss of $(0.12)-(0.02), so to report such a strong profit was a pleasant surprise. Revenue rose 15.6% year/year to $611.7 mln, which was well above prior guidance of $570 mln. The guidance was quite good as well. GIII expects to report Q2 (Jul) non-GAAP EPS of $(0.05) to $0.05 and revenue of approx $590 mln. Both ranges are well ahead of market expectations.
GIII says it's pleased to have begun the fiscal year with a solid quarter across the board. The company is excited to see the momentum continue and has increased confidence in its outlook for the remainder of this year. GIII believes its long-term growth opportunities have never been more compelling.
In sum, this was a very good quarter for GIII. It seems that its Donna Karan acquisition is paying dividends. In fact, its market share across women's apparel and accessories, after starting from scratch a decade ago, has become dominant in the North American department store channel. Also, GIII has been further developing its Tommy Hilfiger brand which is still in the early stages.
The stock chart looks quite promising. After trading in a narrow $35-40 range from December to May, the stock has since broken above this range and today's report helps with that. It's always good to see a stock consolidate (trade sideways) for a few months, followed by a break higher. That's often a decent sign that more positive outcomes are in store.
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