G-III Apparel Group (NASDAQ: GIII) manufactures
and distributes outerwear and sportswear, under licensed and company-owned brands. The firm creates fashions for such names as Calvin Klein, Kenneth Cole, Guess?, Jones New York, Nine West, IZOD and Tommy Hilfiger. It also focuses on apparel for NFL, NBA, NHL and MLB teams. Further, G-III cooperates with leading retailers in developing product lines that are sold under its own private labels. Department store customers include Macy's (NYSE: M) and Wal-Mart (NYSE: WMT).
Investors were pleased last week, when the company moved to establish a more significant retail presence by purchasing 116 outlet stores from Wilsons The Leather Experts. The acquisition led management to boost FY09 EPS guidance to $1.35-$1.40 ($1.29 consensus) and FY09 revenue guidance to $720-$730 million ($661.86M consensus). Brean Murray subsequently reiterated its "buy" rating on the shares, noting that the deal offered a "natural outlet" for G-III's products and reduced its dependence on the department store channel.
The stock
popped into a bullish "flag" consolidation pattern on the news. Prices frequently exit flags moving in the same direction they were traveling on entry. In this case, that would be to the upside.
Altogether, brokers recommend the shares with three "strong buys" and one "buy". Analysts see an 18% average annual growth rate, through the next five years. The GIII Price to Sales ratio (0.40), Price to Book ratio (1.32), Price to Cash Flow ratio (9.86), Sales Growth rate (114.81%), Return on Assets (8.04%) and Revenue per Employee ($981k) compare favorably with industry, sector and S&P 500 averages. Institutions hold about 78% of the outstanding shares. Over the past 52 weeks, the stock has traded between $10.73 and $21.00. A stop-loss of $11.75 looks good here. Note that the firm is next expected to report quarterly results in mid-September.
Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com. He does not hold positions in any of the stocks mentioned above.
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