G-III Apparel Group Ltd. has achieved its success the way few vendors have — by remaining out of the spotlight.
In its 50th year, G-III does not boast an overnight success story. Since going public in 1989, the company has had its share of setbacks before becoming one of the largest outerwear manufacturers in the U.S.
And being one of the few public companies that is still family-run has been both challenging and beneficial. While G-III has ensured deep-rooted knowledge of the brand, at times it has also inhibited growth because of the fear of risking the family's investment.
Morris Goldfarb, chairman and chief executive officer, said for years he was guilty of being too careful and placing vendor and customer needs ahead of Wall Street. "I've always said, 'I'm going to run my company. I am not going to cater to Wall Street.' The Street wants to be courted. They like the sizzle. But I have never put Wall Street front and center," Goldfarb said. "I cared about making our vendors and customers happy. And for many years I got what I deserved in terms of our lack of public attention."
The stock closed its first day of trading at $11.42, and currently trades at around $14. The stock had one split, a three-for-two in 2006. Recently, shares have been trading below the 52-week high by about 17 percent. Average three-month trading volume on the stock is about 157,000, according to Yahoo Finance. The market capitalization is more than $220 million.
Starting as a leather company, G-III has expanded its brand to include outerwear, men's and women's sportswear apparel and, most recently, women's suits and dresses. Its portfolio of licenses includes Calvin Klein, Sean John, Kenneth Cole, Cole Haan, Guess, Jones New York, Nine West, Ellen Tracy and Tommy Hilfiger.
Predominantly an outerwear manufacturer, the company's goal is to include a higher mix of suits and dresses to the product offerings in order to offset the seasonality of the business. While the company continues to grow the outerwear division, it expects to reduce a reliance on the category.
Recent licenses for Calvin Klein dresses and women's suits, as well as sportswear programs for the Exsto brand sold at Wal-Mart Stores will play important roles in G-III's all-season strategy."They continue to expand outside outerwear into dresses, denim and juniors, which have higher margins than outerwear," said Eric Beder, specialty retail analyst at Brean Murray Carret & Co. "They also continue to perform extremely well in outerwear. They have taken advantage of the trend toward outerwear as more of a fashion item, licensing to Guess, Calvin Klein and Sean John."
These category and classification expansions have helped drive sales and narrow the company's loss in the second quarter.
For the second quarter ended July 31, G-III posted a net loss of $884,000, or 5 cents a diluted share, from a loss of $1.7 million, or 14 cents, in the year prior. Sales for the quarter rose 21 percent to $83.9 million from $69.1 million last year. The company raised their full-year forecast to the range of 98 cents to $1.03 a diluted share, from previous guidance of 90 cents to 95 cents a share.
"G-III has consistently beaten the Street's estimates over the past year," Beder said.
"The companies who have succeeded diversified their offerings. Manufacturers cannot depend on department stores to drive growth; while Federated [now Macy's Inc.] has been successful, they aren't growing," Beder explained. "As department stores consolidate, it is crucial that manufacturers succeed beyond one channel of distribution."
Goldfarb said the company is constantly looking for new acquisitions and opportunities to move away from a dependency on department stores. By selling in a diverse group of retailers such as Macy's, J.C. Penney, Nordstrom and Kohl's, G-III is in a healthy position heading into the holidays. And the company expects that 2008 will be a year of significant growth both domestically and internationally. The company has plans to build its own retail concept to house its private labels, and expects to have a bigger presence in specialty stores.
The firm is also looking to move into emerging international markets. Currently, the company is testing in China and will have a presence in Moscow next year.
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