Consumer spending was up 0.2% in October, as compared to the previous month. Also, oil prices have declined, the unemployment rate decreased, and there is an increase in the income of people. Thus, retailers such as G-III Apparel (GIII, Financial) are having a nice time as they witness rising sales at their stores. The retailer beat the Street’s earnings estimate in the last four quarters and the recently reported third quarter was not an exception.
The numbers were ahead of the Street’s estimates as it witnessed a higher demand for its products. This helped in sending the share prices higher.
The state of numbers
Revenue for the quarter surged a comfortable 21% to $812.3 million, over last year. This was higher than the analysts’ estimate of $822 million. One of the key reasons for the increase in top line was the acquisition of G.H. Bass in November last year. However, even if we exclude the benefits of the buyout, the organic growth of the company stood at 12%. This shows that demand for the retailer’s core products did increase.
The acquisition of G.H. Bass added 160 stores to G-III Apparel’s store network. Also, it helped the retailer to diversify its business into more lifestyle-oriented merchandise. The buyout was made for $50 million in cash. Thus, this new addition should help the retailer grow further.
The adjusted earnings of the company climbed 35.2% to $3.09 per share, as compared to the last year’s quarter. The bottom line was way ahead of the analysts’ estimate of $2.89 per share. Thus, the retailer is managing its costs pretty well.
Some strengths in focus
G-III Apparel is the secon- largest licensee of Calvin Klein in the U.S. This brings an advantage over other apparel players. It has well-developed channels for shipments of outerwear as well as Calvin Klein merchandise in the region. Also, it is less vulnerable to foreign exchange. Hence, currency fluctuations do not affect the top line much.
Furthermore, the apparel retailer keeps changing its product assortment as per the changing tastes and preference of customers. This enables the retailer to keep ahead of other similar players. For instance, people’s growing interest in blue jeans is taken care of by the company.
Moreover, G-III Apparel is cutting costs in order to further boost its bottom line. This is probably the reason why the retailer upgraded its guidance for the year. Sales for the year are now expected to be around $2.13 billion as against the estimate of $2.11 billion earlier. In addition, earnings are estimated to be in the range of $103 million to $106 million. This is much higher than the earlier estimate of $90.6 million to $93.9 million.
Wrapping it up
G-III Apparel seems to be on the right track with the right strategies in place. Its measures to curb costs and boost the top line should help in achieving success. Also, the new addition of Bass’ business should help the business grow. Further, a bright and upgraded outlook is something to look forward to. These factors make the apparel retailer a desirable pick.
