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.
Company Description
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.
Bullish Outlook
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.
The Chart
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.
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