G-III Apparel: Q1 2025 Was Good For Its Brands, The Stock Is More Attractive Now

Core Viewpoint - G-III Apparel Group reported flat revenues in 1Q25, missing consensus estimates, leading to a 15% decline in stock price, but the underlying performance of proprietary brands showed strong growth of 16% YoY, indicating potential for future profitability [2][3][4] Financial Performance - The company missed consensus revenues by approximately 1% and reported flat sales, with licensed segment sales down 13% due to poor performance of key brands [3][4] - Proprietary brands grew by 16.7% in the quarter, indicating strong demand and resilience in a challenging wholesale market [3] - Gross margins increased by 130 basis points, while operating margins fell slightly by 30 basis points to 2.2% due to increased SG&A expenses [4] - Inventories decreased by 22% despite flat sales, reflecting efficient inventory management [4] Brand Developments - G-III's proprietary brands are expanding, with Karl Lagerfeld launching new product categories and Vilebrequin planning to open 15 beach clubs [6] - DKNY's fall collection features a campaign with influencer Kaia Gerber, while Donna Karan's relaunch includes a campaign with notable legacy models [6] - The company made a $54 million investment in AWWG Group for a 12$1.22 billion, with an enterprise value of $1.15 billion, reflecting stable fundamentals despite stock price fluctuations [7] - The company projects revenues of$3.2 billion for the year, with proprietary brands expected to account for 70% of sales [7] - An operating margin of 7.3% on proprietary brands is deemed achievable, given current performance metrics and historical data [7] - The licensed business is viewed as a temporary asset, allowing for a more favorable valuation of the proprietary brand segment [7]