G-III earns 13 percent less despite strong outlookThursday, 06 September 2012
G-III Apparel Group Ltd.'s saw its fiscal second-quarter
earnings falling 13 percent due to the high cost of their new acquired luxury resort brand. Lululemon and Zumiez also were in the spotlight, yet for different reasons.
GIII stock gained 10.01 percent Wednesday after raising its full-year outlook up to per-share earnings of 2.68 dollars to 2.78 dollars and sales of 1.41 billion dollars. Previously, the group advanced estimated earnings per share between 2.62 dollars and 2.72 dollars and 1.35 billion dollars in sales.
For the current quarter, the owner of brands such as Sean John, Kenneth Cole, and Calvin Klein, forecast per-share earnings of 2.25 dollars to 2.35 dollars on revenue of 570 million dollars. Analysts polled by Thomson Reuters most recently expected 2.34 dollars and 558.6 million dollars, respectively.
For the quarter, G-III, which sells apparel under the Marc New York label, but also has fashion licenses for the Sean John, Kenneth Cole, and Calvin Klein brands, saw revenue rise 9 percent to 251.5 million dollars as net income dipped slightly to 0.07 dollars from the 8 cents it reported in the year-ago period. Despite the drop in income, these results were more or less in line with Wall Street's expectations of 250.5 million dollars in revenue and a profit of 7 cents. Where G-III really got its boost was in its upped full-year forecast, which now calls for revenue of 1.41 billion dollars (up from 1.35 billion dollars), and an EPS between 2.68 dollars and 2.78 dollars.
Meanwhile, analysts at Avafin addressed the attention to Lululemon's premium pricing strategy, as it “is risky during economic slowdowns, when consumers tend to substitute to lower-priced apparel. Additionaly, North America can support only about 350 lululemon locations, given the brand's premium niche positioning.”
Shares of LULU opened Wednesday 66.65 dollars and traded 17 cents down during the day to 66.71 dollars. To date, the stock has gained 3.90 percent within the last week. On the volume side, 2M shares were traded which is less than the average volume of 2M shares, Avafin stressed. Lululemon Athletica is trading above the 50 day moving average and higher than the 200 day moving average. The stock's 52 week low is 41.70 dollars and 52 week high is 81.09 dollars
Finally, it was a tough day for Zumiez, which saw its stock downgraded after missing the expectations with weaker quarter figures. Zumiez had its target price cut by Imperial Capital from 41 dollars to 33 dollars in a research note issued to investors on Wednesday: “Our new price target is derived by applying a 19x multiple to our new 2013 EPS estimate of $1.75, a discount to its two-year historical average forward multiple of 23x, and consistent with its current 2012 P/E multiple. We continue to believe ZUMZ deserves to trade at a premium multiple to the comparable group average of 14x given its long-term organic square footage growth potential and above average earnings growth. However, difficult comparisons and a slower growth rate relative to the past few years could limit significant multiple expansion,” Imperial Capital’s analyst wrote.