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This Apparel Player Can Deliver Long-Term Growth

August 21, 2014 | About:
JuhiKulkarni

JuhiKulkarni

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G-III Apparel (GIII), a designer, producer and advertiser of attire and accessories for men and ladies, has been on a tear this year. The stock has shot up and late quarterly results demonstrate that there's a whole other world to originate from G-III.

The organization beat analyst estimates in the second quarter and issued an empowering viewpoint. G -III has been better than peers like Urban Outfitters (URBN) and American Eagle Outfitters (AEO) by a huge margin.

Looking ahead

G-III is growing the Wilsons' shiny new maximum stores that are scheduled to open before the Christmas shopping season. This move is truly sensible as the Wilsons' brand's comps had increased in the previous quarter.

G-III continues to see strong interest for Calvin Klein dresses, ladies' suits and handbags. An impressive development of 70% was seen in Calvin Klein's ladies' suits and separates, which are presently sold at more than 1,100 locations as contrasted with 800 a year prior. Furthermore, the sportswear segment witnessed an increase of half as contrasted with last year as it is presently sold at 890 locations as contrasted with 662 last year.

The worldwide marked attire business is estimated to arrive at $600 billion by 2015, and Calvin Klein is immovably established in this segment. G-III has around five years of licensing period remaining for Calvin Klein, and it maintains a decent relationship with the brand's holder, PVH.

G-III has nearly 30 licensed, claimed and private name brands, and it covers the whole spectrum of retailers from the mass business sector to extravagance.

G-III procured Vilebrequin in August last year. This helped non-licensed revenue develop from $48 million to $70 million year over year. Going ahead, the organization will be adding footwear to its stores before the end of November. Moreover, Vilebrequin's e-business site should be live going into the Christmas season. G-III's raid into the footwear business sector is a thoroughly thought-out strategy and in line with its long-haul plans to turn into a men's and ladies' head-to-toe attire producer.

Looking around

G-III is in a superior position as contrasted with peers such as American Eagle Outfitters. American Eagle had an appalling quarter last time as it lost support among its target customers – the teens. Teens started moving far from logo-driven, expensive fashion wear to cheaper and more competitive fast-fashion clothing.

A sluggish employment market scenario prompted a drop in store activity, comps and revenue in the previous quarter. The organization reported a revenue decline of 3% from the year-back quarter and comps declined 7%. American Eagle expects this pattern to keep going into the Christmas season.

Then again, American Eagle's loss was Urban Outfitters' addition as teenagers started to move towards cheaper options for their attire needs. Moreover, not at all like American Eagle, it targets a more extensive demographic of consumers through its diverse brands – Urban Outfitters (18-28 age range), Free People (25-30 age range), and Anthropologie (28-45 age range).

Keeping in mind the end goal to draw in more consumers, Urban Outfitters is presently wanting to offer sustenance and drinks in its stores. It has sought an alcohol and restaurant license for its approaching megastore at Williamsburg and if this works out well, one could see this stretching to different outlets as well.

Conclusion

The extraordinary thing about G-III is that the stock is modest significantly in the wake of recording solid gains this year. At a trailing P/E of 18x, the stock trades well beneath the industry normal of 26.5. G-III licenses well-known brands and is also attempting to enhance its private name business by method for acquisitions.

This indicates that the organization is after a decent strategy of diversification. Besides, with earnings anticipated that will develop at a CAGR of 14.6% throughout the following five years, G-III looks like a decent stock to purchase at current levels.


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