G-III Apparel's Earnings Visibility Remains Challenging, Analyst Says - G-III Apparel Group (NASDAQ:GIII)

Telsey Advisory Group analyst Dana Telsey has reiterated a Market Perform rating on the shares of G-III Apparel Group Ltd GIII with a price target of $22.00.
The analyst is looking for Q3 EPS of $1.85 versus $2.18 the prior year and guidance of $1.80-$1.90.
On the topline, the analyst is looking for total sales growth of 5.3% to $1.07 billion, compared to the consensus estimate for 4.7% growth to $1.06 billion.
The analyst anticipates 80 basis points of gross margin expansion to 35.0%, roughly in line with the consensus of 35.1%.
Operating margin is expected to be 13.0%, down 250 basis points year-on-year, compared to the consensus of 12.6%.
Reflecting ongoing inflationary pressures, including incremental costs related to supply chain headwinds and the timing of inventory receipts, GIII took a more cautious view of the back half in September.
For the full year, the company guided to FY23 sales of around $3.15 billion (down from $3.24 billion previously), representing an increase of approximately 14% over last year's $2.767 billion.
The overall increase in inventories is largely comprised of in-demand categories (~75%) for Fall (outerwear, dresses, footwear, and newly launched jeans), as opposed to pandemic-driven categories like athleisure, which management expects to continue trending down.
Inventories are expected to remain elevated moving into H2, to support anticipated demand and order books.
An expanding global reach, increased higher margin owned-brand exposure (including the recent acquisition of the entire KL brand), greater DTC penetration, and continued strengthening of the power/status brand portfolio make GIII’s model more resilient than in the past.
However, the analyst added that earnings visibility remains challenging with a potentially promotional wholesale channel in the back half of the year.
Price Action: GIII shares are trading lower by 0.59% at $21.12 on the last check Wednesday.
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