Shares of G-III Apparel Group Ltd. continued their slide a day after the company said it would acquire the Donna Karan and DKNY brands for $650 million.

Three firms have downgraded shares of G-III: Piper Jaffray; Cowen & Co., and Telsey Advisory Group.

Piper’s Erinn E. Murphy downgraded the stock to “Neutral” from “Overweight.” She noted that the stock will go through a period of “digestion in the next six to 12 months” as further details on the acquisition become available. She estimated that the deal could be dilutive by 20 cents to 50 cents a share in 2017, and accretive by 10 cents to 20 cents in fiscal year 2019. “Simply stated, the growth thesis we were banking on for 2017 is being pushed out, and a transitional year in 2016 is turning into another transitional year in 2017,” Murphy said.

Murphy also said that while the DKNY brand does present a growth opportunity, the integration is about six to 12 months out, “which adds a wrinkle of risk to an already second half-weighted, ‘show me’ story.” She also said that while G-III can run DKNY more cost effectively — and margins should be better than other businesses G-III owns given that DKNY would be an owned brand, with no royalties paid out — the one thing that has her concerned is the  purchase price paid and the incremental interest burden G-III will have to bear. Murphy noted that $650 million is more than two-times sales, which is above the average 0.5-times sales G-III has paid in previous deals. According to Murphy, Marvin Richards and Winlet were acquired at 0.3-times sales; Andrew Marc at 0.5-times sales, Vilebrequin at 1.9-times sales and G.H. Bass & Co. at 0.2-times sales.

Cowen & Co.’s John Kernan downgraded the stock to “Market Perform” from “Outperform,” with a price target of $43 for the shares. Kernan concluded that the acquisition is an expensive one, given the brand’s earnings potential and execution risk. He said that while DKNY has a large international presence, G-III is focused on U.S. growth, “where contemporary brands — Theory, Rag & Bone, Vince — are struggling.”

At Telsey Advisory Group, Dana Telsey also downgraded the shares to “Market Perform” from “Outperform. She said: “Although G-III’s successful track record of reviving poor performing businesses back to life by integrating and leveraging its well-diversified business model provides a level of confidence with the acquisition of Donna Karan, the lack of visibility into the newly acquired business and the uncertainty of the ultimate impact on the financials leaves us more cautious on the stock.” Telsey said that given the lack of visibility into the Donna Karan business metrics, the timing of the turnaround and consumer response, and estimates regarding dilution to earnings in year one, it was better now to move to the sidelines. She added that there are more attractive investment opportunities in the apparel sector, such as PVH Corp. and VF Corp.

Shares of G-III fell 8.3 percent to close at $39.40 in Nasdaq trading Tuesday.

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