G-III Apparel Up Big After Telsey Advisory Upgrade: What You Might've Missed

• G-III Apparel Group, Ltd. GIII shares rose more than 3 percent Tuesday morning.
• Telsey’s Dana Telsey has upgraded the rating on the company from Market Perform to Outperform, with a price target of $64.
• The upgrade is based on a more constructive view of the apparel market, the company’s attractive growth prospects for the company and the concerns regarding higher inventory being already priced into the stock.

Analyst Dana Telsey believes that the underlying business trends in the apparel segment are robust, or at least "moving in the right direction." In addition, G-III Apparel has proven its ability to grow revenues in the low teens at the least, with EPS growth at 20 percent.

Telsey explained the recent sell-off has led to the concerns regarding higher inventory in the department store channel, driven by warm weather, already being priced into the stock.

According to the Telsey report, "Over the past several years, G-III has diligently worked to diversify its business model in order to reduce its dependence on the winter months and outerwear sellthrough, as well as its licensed businesses."

Although Q4 could prove to be a difficult quarter, Telsey believes that "the stock has reached a more attractive entry point" and that the company is among the largest outerwear providers, with a robust branded portfolio and significant partner representation.

Telsey mentioned that "the company has greater negotiating power when it comes to markdown allowances compared to other secondary and tertiary labels."

However, G-III Apparel is expected witness gross margin pressure of about 134 bps during Q4, although Telsey believes that inventories would have been "appropriately managed."