Entering text into the input field will update the search result below

G-III Apparel Group: On The Right Track

Jun. 05, 2020 6:28 AM ETG-III Apparel Group, Ltd. (GIII)22 Comments


  • G-III reported Q1 FY2021 earnings.
  • G-III also announced a retail chain restructuring.
  • This article covers the consequences from these two developments.
  • Looking for a portfolio of ideas like this one? Members of Idea Generator get exclusive access to our model portfolio. Get started today »

In my previous article, titled "G-III Apparel Group Will Be A Coronavirus Winner", I explained why I expected G-III Apparel Group (NASDAQ:GIII) would emerge from the present coronavirus lockdowns as a (stock) winner.

That thesis was based on several solid pillars:

  • GIII was reliant on the wholesale channel (91% of revenues) while having a low physical retail exposure (9%). This ensured low costs/cash burn "to stay shut".
  • The company had valuable brands. This ensures comparatively high wholesale margins (in normal times).
  • GIII had high cash levels. This together with a low cash burn ensured survival.

Since then, G-III has performed well, and today it reported Q1 FY2021 earnings, as well as a physical store restructuring.

These two developments again confirmed G-III remains on the right track. If anything, G-III looks even better now than before. Let me tell you why.

Q1 FY2021 Earnings

Q1 FY2021 earnings were predictably abysmal. It's to be remembered that most apparel retailers report quarterly earnings on a three-month period ending on April 30, instead of the typical ex-retail March 31 reporting. This means that apparel retailers caught more of the coronavirus lockdowns' impact during this period, whereas most other companies will catch the worst of it in their Q2 2020 reporting.

With this in mind, G-III reported a 36% year-on-year drop in revenues. Obviously, this is a large drop, but remember: The survival thesis was based on an impossibly apocalyptic -100% of revenue drop. G-III could survive that, so surely can also survive -36%.

G-III's cash position dropped from $646 million on March 24 to $616 million on April 30. This is a very manageable cash burn, as we had expected. Hence, there's full certainty that G-III will easily survive the current period.

Those are about the most relevant things to consider from the

Idea Generator is my subscription service. It's based on a unique philosophy (predicting the predictable) and seeks opportunities wherever they might be found, by taking into account both valuation (deeply undervalued situations) and a favorable thesis.

Idea Generator has beaten the S&P 500 by around 29% since inception (in May 2015). There is a no-risk, free, 14-day trial available for those wanting to check out the service.

This article was written by

Paulo Santos profile picture
Leader of Idea Generator
Our goal is to beat the S&P500 and to provide consistent positive returns.

Portuguese independent trader and analyst. I have worked for both sell side (brokerage) and buy side (fund management) institutions. I've been investing professionally for around 30 years.

I have a Marketplace service here on Seeking Alpha called Idea Generator that's focused on deep value, real-time actionable ideas based on valuation and catalysts. The Idea Generator portfolio has beaten the S&P 500 by more than 74% since inception (2015).

I can be reached at paulo.santosATthinkfn.com.

Analyst’s Disclosure: I am/we are long GIII. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

Recommended For You

To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.