Bear of the Day: G-III Apparel Group (GIII)

G-III Apparel Group, Ltd. (GIII) is just trying to survive the coronavirus crisis. This Zacks Rank #5 (Strong Sell) has already fallen 71% year-to-date.

G-III Apparel is a specialty retailer which makes apparel and accessories under their own, licensed and private label brands.

G-III's own brands include well-known brands DKNY, Donna Karan, Vilebrequin, G.H. Bass, Andrew Marc, Marc New York, Eliza J and Jessica Howard.

It has licenses under Calvin Klein, Tommy Hilfiger, Karl Lagerfeld Paris, Kenneth Cole, Cole Haan, Guess?, Vince Camuto, Levi's and Dockers brands.

It also has a team sports business with licenses with the National Football League, the NBA, Major League Baseball, the NHL and over 150 U.S. colleges and universities.

In addition to wholesale business, it operates retail stores for DKNY, Wilsons Leather, G.H. Bass, Vilebrequin, Karl Lagerfeld Paris and Calvin Klein Performance names.

Further Actions Taken in April 2020

On Mar 31, after G-III Apparel had reported fourth quarter results, it provided another update on actions it was taking in response to the COVID-19 outbreak.

As of Mar 30, management voluntarily agreed to temporary reductions in annual salaries. The CEO and Vice Chairman of the Board and President agreed to receive no salary.

Several others agreed to a 40% reduction in their annual salaries.

Also effective Mar 30, the base annual salaries of other senior personnel was temporarily reduced by 10% to 40%, depending on salary levels.

G-III Apparel also furloughed 60% of its wholesale operations segment employees, which was effective Apr 6. These employees would continue to receive existing healthcare benefits.

The company already had closed retail stores in locations with government-mandated shutdowns.

It will reduce its retail workforce by 80%, effective Apr 6, through furloughs and staff reductions. All of the full-time retail business furloughed employees will continue to receive existing healthcare benefits.

Cash on Hand?

On Mar 19, G-III Apparel reported its fourth quarter and full year fiscal 2020 results.

It did not issue any fiscal 2021 guidance at that time.

The company also confirmed that as of the end of fiscal 2020, it had about $800 million in cash and availability under its bank facilities.

Full Year Estimates Slashed

After the fourth quarter earnings report, the analysts all cut Fiscal 2021 earnings estimates.

6 estimates were lowered in the last 30 days for fiscal 2021, which pushed the 2021 Zacks Consensus Estimate to $0.99 from $3.07. That's an earnings decline of 69% as the company earnings $3.19 in fiscal 2020.

But that was then, and this is now.

Each retailer is simply trying to survive this crisis and make it to the other side.

Are Shares Cheap?

Shares have fallen 71% year-to-date, but have rallied off their March lows. They're still at 5-year lows.

They now trade with a forward P/E of 10.5 but it's still not clear what the "E" is going to be for the full year.

G-III Apparel's competitor, and partner, PVH (PVH) is also a Zacks Rank #5 (Strong Sell) and is also facing similar business pressures.

Investors interested in the apparel and accessory retailers might want to wait until there is some certainty about earnings before diving in.

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