Stock Story -
Fashion conglomerate G-III (NASDAQ:GIII) missed Wall Street’s revenue expectations in Q3 CY2024 as sales only rose 1.8% year on year to $1.09 billion. The company’s full-year revenue guidance of $3.15 billion at the midpoint came in 1.5% below analysts’ estimates. Its non-GAAP profit of $2.59 per share was 13.4% above analysts’ consensus estimates.
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G-III (GIII) Q3 CY2024 Highlights:
- Revenue: $1.09 billion vs analyst estimates of $1.10 billion (1.8% year-on-year growth, 1.1% miss)
- Adjusted EPS: $2.59 vs analyst estimates of $2.28 (13.4% beat)
- Adjusted EBITDA: $174.4 million vs analyst estimates of $157 million (16% margin, 11% beat)
- The company dropped its revenue guidance for the full year to $3.15 billion at the midpoint from $3.2 billion, a 1.6% decrease
- Management raised its full-year Adjusted EPS guidance to $4.15 at the midpoint, a 3.8% increase
- EBITDA guidance for the full year is $311.5 million at the midpoint, above analyst estimates of $308.8 million
- Operating Margin: 15.3%, down from 17.8% in the same quarter last year
- Market Capitalization: $1.39 billion
Company OverviewFounded as a small leather goods business, G-III (NASDAQ:GIII) is a fashion and apparel conglomerate with a diverse portfolio of brands.
Apparel and Accessories
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.Sales Growth
A company’s long-term sales performance can indicate its overall quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Unfortunately, G-III struggled to consistently increase demand as its $3.11 billion of sales for the trailing 12 months was close to its revenue five years ago. This fell short of our benchmarks and is a sign of poor business quality.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. Just like its five-year trend, G-III’s revenue over the last two years was flat, suggesting it is in a slump.
This quarter, G-III’s revenue grew by 1.8% year on year to $1.09 billion, falling short of Wall Street’s estimates.
Looking ahead, sell-side analysts expect revenue to grow 4.6% over the next 12 months. Although this projection indicates its newer products and services will spur better top-line performance, it is still below average for the sector.
Here at StockStory, we certainly understand the potential of thematic investing. Diverse winners from Microsoft (NASDAQ:MSFT) to Alphabet (NASDAQ:GOOGL) (GOOG), Coca-Cola (NYSE:KO) to Monster Beverage (NASDAQ:MNST) could all have been identified as promising growth stories with a megatrend driving the growth. So, in that spirit, we’ve identified .
Cash Is King
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 robust cash profitability, giving it an edge over its competitors and the ability to reinvest or return capital to investors. The company’s free cash flow margin averaged 18% over the last two years, quite impressive for a consumer discretionary business. The divergence from its underwhelming operating margin stems from the add-back of non-cash charges like depreciation and stock-based compensation. GAAP operating profit expenses these line items, but free cash flow does not.