G-III Apparel Group (GIII) continues to show excellent earnings results as back-to-school spending rebounds. Shares are also a good value as investors have been cautious with the retail sector.
G-III Apparel makes clothing for the whole family under several well-known brands. Recognizable names include Tommy Hilfiger, Levi’s, Dockers, Calvin Klein and several others.
Surprises Keep Coming
While many investors are shying away from retailers, G-III Apparel continues to post solid earnings results. On Jun 7 the company reported quarter results that showed a 43% increase in sales to $154 million.
The net result was a loss of 7 cents per share, but can be expected with the seasonality in retail and it was much better than the 41 cent loss a year ago. This was the fifth consecutive earnings surprise.
G-III Apparel announced 2 new licensing agreements in the same release as well as reducing the interest rate on their line of credit.
Management is looking for annual sales to come in near $950, which is roughly a 19% improvement over last year. Additionally they guided earnings above the Zacks Consensus Estimates.
Analysts raised full-year estimates on the news, lifting the fiscal 2011 estimate to $2.33, up 18 cents. Next year’s forecasts are averaging $2.68, up 26 cents. If met, year over year growth rates will be 34% and 15%, respectively.
Shares are Cheap
Thanks to the overall sentiment surrounding the consumer and, consequently, retailers the stock is still trading with excellent multiples. The forward P/E is coming in just under 11 times. G-III’s growth is cheap too, with a PEG of 0.6 times compared to the industry average of 1.2.
Back to School
Based on a survey by the National Retail Federation, back to school spending is seeing a nice rebound this year. Average spending is expected to climb more than 10%, slightly higher than the 2008 level. We should see some pent up demand after some parents held off on purchases last summer.
Despite strong estimate revisions pushing GIII to a Zacks #1 Rank (Strong Buy) investors were hesitant to buy the stock. However, over the past couple weeks shares have broken out of a down trend and could be heading higher from here.