Wednesday, KeyBanc Capital initiated coverage of G-III Apparel Group, Ltd. (GIII) stock with a Hold rating. The brokerage established its 2009 EPS estimate of $0.88, and its 2010 estimate of $1.11.
Analyst Edward Yruma said that he has an upbeat long-term view on a company that is well positioned to opportunistically increase its product lineup, and potentially have success within its nascent retail channel.
The analyst's view is tempered in the near term by significant macroeconomic headwinds and a secularly challenged department store channel. At 11.0x the analyst's 2009 P/E, he finds the valuation largely accommodating.
Within apparel coverage universe, the analyst prefers G-III. Both G-III and Oxford continue to struggle with their retail channels. However, the analyst sees greater upside potential at G-III given its larger stable of brands than Oxford and lower contribution from retail.
The analyst finds G-III's valuation compelling, but he awaits more long-term earnings visibility. The analyst finds the stock attractively valued at current levels for long-term investors.
However, the analyst remains circumspect on the near-term view given intense macroeconomic pressures, underwhelming performance at retail, and secular pressures at the department store channel. The stock trades at roughly a 13x point P/E discount to retail universe, which the analyst finds warranted given the near-term concerns surrounding earnings power.
Currently, GIII is down $0.15 or 1.55% and trading at $9.54.
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