G-III (GIII)

Fashion conglomerate G-III (NASDAQ:GIII) announced better-than-expected revenue in Q1 CY2025, but sales fell by 4.3% year on year to $583.6 million. Revenue guidance for the full year exceeded analysts’ estimates, but next quarter’s guidance of $570 million was less impressive, coming in 8.2% below expectations. Its non-GAAP profit of $0.19 per share was 51.1% above analysts’ consensus estimates.

Company Overview

Founded as a small leather goods business, G-III (NASDAQ:GIII) is a fashion and apparel conglomerate with a diverse portfolio of brands.

Thanks to social media and the internet, not only are styles changing more frequently today than in decades past but also consumers are shifting the way they buy their goods, favoring omnichannel and e-commerce experiences. Some apparel and accessories companies have made concerted efforts to adapt while those who are slower to move may fall behind.

G-III’s primary competitors include Ralph Lauren (NYSE:RL), VF Corp (NYSE:VFC), owner of The North Face and Timberland, and Capri Holdings (NYSE:CPRI), owner of Michael Kors and Versace.

A company’s long-term performance is an indicator of its overall quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Regrettably, G-III’s sales grew at a weak 1.5% compounded annual growth rate over the last five years. This was below our standards and is a tough starting point for our analysis.

Long-term growth is the most important, but within consumer discretionary, product cycles are short and revenue can be hit-driven due to rapidly changing trends and consumer preferences. G-III’s recent performance shows its demand has slowed as its revenue was flat over the last two years.

This quarter, G-III’s revenue fell by 4.3% year on year to $583.6 million but beat Wall Street’s estimates by 0.6%. Company management is currently guiding for a 11.6% year-on-year decline in sales next quarter.

Looking further ahead, sell-side analysts expect revenue to decline by 1.6% over the next 12 months, a slight deceleration versus the last two years. This projection is underwhelming and implies its products and services will see some demand headwinds.

G-III’s operating margin might fluctuated slightly over the last 12 months but has generally stayed the same, averaging 9.1% over the last two years. This profitability was mediocre for a consumer discretionary business and caused by its suboptimal cost structure.

This quarter, G-III generated an operating margin profit margin of 1.5%, in line with the same quarter last year. This indicates the company’s overall cost structure has been relatively stable.

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

G-III’s EPS grew at a solid 15.5% compounded annual growth rate over the last five years, higher than its 1.5% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.

In Q1, G-III reported EPS at $0.19, up from $0.12 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects G-III’s full-year EPS of $4.57 to shrink by 16.1%.

Although earnings are undoubtedly valuable for assessing company performance, we believe cash is king because you can’t use accounting profits to pay the bills.

G-III has shown decent cash profitability, giving it some flexibility to reinvest or return capital to investors. The company’s free cash flow margin averaged 11.3% over the last two years, slightly better than the broader consumer discretionary sector.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

G-III historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 8.3%, somewhat low compared to the best consumer discretionary companies that consistently pump out 25%+.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Fortunately, G-III’s ROIC averaged 1.3 percentage point increases over the last few years. This is a good sign, and we hope the company can continue improving.

Companies with more cash than debt have lower bankruptcy risk.

G-III is a well-capitalized company with $257.8 million of cash and $18.74 million of debt on its balance sheet. This $239 million net cash position is 20% of its market cap and gives it the freedom to borrow money, return capital to shareholders, or invest in growth initiatives. Leverage is not an issue here.

We were impressed by how significantly G-III blew past analysts’ EPS expectations this quarter. We were also glad its full-year revenue guidance slightly exceeded Wall Street’s estimates. On the other hand, its EPS guidance for next quarter and its EBITDA missed. Overall, this quarter was mixed. The stock remained flat at $27.80 immediately after reporting.

Updated: June 12, 2025 at 10:40 PM EDT

When considering an investment in G-III, investors should account for its valuation and business qualities as well as what’s happened in the latest quarter.

G-III falls short of our quality standards. To kick things off, its revenue growth was weak over the last five years, and analysts expect its demand to deteriorate over the next 12 months. And while its solid EPS growth over the last five years shows its profits are trickling down to shareholders, the downside is its projected EPS for the next year is lacking. On top of that, its relatively low ROIC suggests management has struggled to find compelling investment opportunities.

G-III’s P/E ratio based on the next 12 months is 5.5x. While this valuation is optically cheap, the potential downside is huge given its shaky fundamentals. There are better investments elsewhere.

Wall Street analysts have a consensus one-year price target of $25.25 on the company (compared to the current share price of $21.15).

Although the price target is bullish, readers should exercise caution because analysts tend to be overly optimistic. The firms they work for, often big banks, have relationships with companies that extend into fundraising, M&A advisory, and other rewarding business lines. As a result, they typically hesitate to say bad things for fear they will lose out. We at StockStory do not suffer from such conflicts of interest, so we’ll always tell it like it is.