A month has gone by since the last earnings report for G-III Apparel Group (GIII). Shares have lost about 8.6% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is G-III Apparel due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

G-III Apparel Q3 Earnings Beat Estimates, Retail Sales Rise Y/Y

G-III Apparel’s third-quarter fiscal 2025 earnings beat the Zacks Consensus Estimate but sales missed the same. The company’s top line increased and the bottom line declined year over year.

More on G-III Apparel's Q3 Results

Adjusted earnings of $2.59 per share surpassed the Zacks Consensus Estimate of $2.26. The bottom line decreased 6.8% from the year-earlier quarter’s adjusted earnings of $2.78 per share.

Net sales increased 1.8% year over year to $1,086.8 million and missed the consensus estimate of $1,100 million.

Net sales in the wholesale segment reached $1.07 billion, up from $1.05 billion in the previous year. This was driven by the strong growth of owned brands in North America, partially offset by a decline in the Calvin Klein and Tommy Hilfiger businesses. 

In the retail segment, net sales totaled $42.3 million for the quarter compared with $32.7 million in the third quarter of the prior year. The increase was driven by strong double-digit comparable sales growth, despite the closure of seven stores during the quarter.

Insight Into G-III’s Margins & Expenses

Gross profit decreased 0.3% year over year to $432.1 million in the fiscal third quarter. We note that the gross margin contracted 80 basis points (bps) year over year to 39.8%. 

The wholesale segment's gross margin was 38.4% compared with 39.6% in the fiscal third quarter of the previous year. As expected, gross margins were lower due to a mix of factors, including a higher concentration of sales from licensed brands. In the retail segment, the gross margin was 52.3%, up from 49.1% in the prior year, driven by the positive impact of merchandising changes.

SG&A expenses improved 9.7% year over year to $259.2 million. As a percentage of net sales, this metric increased 180 bps year over year to 23.9%. 

Adjusted EBITDA was $174.4 million in the fiscal third quarter compared with $196.1 million in the year-earlier quarter. We note that the adjusted EBITDA margin was 16%, down 240 basis points year over year.

G-III’s Financial Snapshot: Cash, Debt & Equity Overview

G-III Apparel ended the fiscal third quarter with cash and cash equivalents of $104.7 million and a total debt of $224.2 million. Total stockholders’ equity was $1.65 billion. Inventory declined 10% year over year to $532.5 million at the end of the quarter.

G-III Apparel’s FY25 Guidance

For the fourth quarter of fiscal 2025, net sales are expected to grow approximately 6% compared with the previous year. SG&A expenses are anticipated to increase a similar amount to the rise seen in the fiscal third quarter, indicating continued investments in marketing and operational capabilities. Adjusted earnings per share are expected to grow more than 25% compared with the prior year.

For fiscal 2025, net sales are now expected to reach approximately $3.15 billion, implying around 2% growth compared with the previous year's net sales. This growth was driven by the expansion of owned brands and the launch of new initiatives, which more than offset the anticipated decline of about $200 million in net sales from the Calvin Klein and Tommy Hilfiger brands as the company transitioned out of those licenses. Sales from the go-forward portfolio are expected to account for approximately 70% of total net sales in fiscal 2025.

The company expects adjusted net income to be between $186 million and $191 million compared with the previous estimate of $180-$185 million. Adjusted earnings per share are expected to be between $4.10 and $4.20 compared with the previous anticipation of $3.95-$4.04. In fiscal 2024, the adjusted net income was $189.8 million and adjusted earnings were $4.04 per share.  

Adjusted EBITDA for fiscal 2025 is now expected to be between $309 million and $314 million, up from the previous estimate of $305-$310 million. This compares to an adjusted EBITDA of $324.1 million in fiscal 2024.

This outlook continues to anticipate approximately $55 million in additional expenses, mainly tied to the launches of Donna Karan, Nautica and Halston. About 60% of these expenses are allocated to marketing initiatives for the Donna Karan and DKNY brands, while the remaining costs are primarily associated with investments in technology and talent to enhance operational capabilities.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended downward during the past month.

The consensus estimate has shifted -14.16% due to these changes.

VGM Scores

At this time, G-III Apparel has a poor Growth Score of F, however its Momentum Score is doing a lot better with a C. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. Notably, G-III Apparel has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.

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