Apparel designer G-III Apparel Group, Ltd. (NASDAQ:GIII) is unlikely to show any earnings growth in fiscal 2020 as it is unable to offset new tariffs with price increases, according to BofA.
The Analyst
Bank of America analyst Heather Balsky downgraded G-III Apparel Group's stock rating from Buy to Neutral with a price target lowered from $35 to $21.
The Thesis
More than 85% of all G-III sales are U.S. based, so the company has minimal opportunity to offset tariffs through price increases in the international markets, the analyst wrote. This is due to the fact that international shoppers tento be more price inelastic.
The financial toll to G-III could be as much as 450 basis points of annualized gross margin pressure. The research firm is lowering its 2019 EPS estimate by 33 cents to $2.98 while 2020 estimate is lowered by 93 cents to $2.36. This suggests the company will show a 4% EPS growth in 2019 but a 21% decline the following year.
Price Action
Shares of G-III Apparel Group hit a new 52-week low of $18.18 Wednesday morning and were trading higher by 1.4% Wednesday afternoon at $19.12.
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