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Hawk’s Nest

Beaten Up Apparel Company Attracts Unusual Call Buys on Cheap Valuation

by | Sep 14, 2022

G-III Apparel (GIII) traded over 4000 calls on 9/13 which is 140X average as 3250 December $15 calls opened $2.80 to $2.85 and the October $15 calls bought 1100X at $2.15. GIII shares are down 40% YTD and back to November 2020 levels nearing a key $15 support level in this volume pocket but valuation is starting to look very attractive. GIII designs, sources and markets an extensive range of apparel, including outerwear, dresses, sportswear, swimwear, women’s suits and women’s performance wear, as well as women’s handbags, footwear, small leather goods, cold weather accessories and luggage. GIII has a substantial portfolio of more than 30 licensed and proprietary brands, anchored by five global power brands: DKNY, Donna Karan, Calvin Klein, Tommy Hilfiger and Karl Lagerfeld Paris. Its products are sold through a cross section of leading retailers such as Macy’s, Dillard’s, Hudson’s Bay Company, including their Saks Fifth Avenue division, Nordstrom, Kohl’s, TJX Companies, Ross Stores and Burlington.

GIII now has a market cap of $800M trading 4.4X Earnings, 3.8X EBITDA, 4.8X FCF and 1.83X Cash while having limited debt obligations. GIII revenues are seen rising 12.9% this year after jumping 34.6% in 2022 while EPS seen lower by 11.7% on rising cost pressures. GIII recently missed EPS estimates and lowered its outlook. GIII dresses and career-wear is seen rebounding further with some return to office pressures. GIII is certainly facing a tough environment but has shown prowess before as a strong operator and shares trade near a ten-year valuation trough. GIII’s valuation and solid brand lineup could attract a strategic buyer.