Bear of the Day: GIII Apparel Group (GIII)

Losing market share to the coinciding Zacks Rank #1 (Strong Buy) Bull of the Day pick, Ralph Lauren RL, GIII Apparel Group GIII stock lands a Zacks Rank #5 (Strong Sell) and the Bear of the Day.

While Ralph Lauren has been one of the few exceptions in regard to apparel companies that have been able to navigate the downturn from a more inflation-conscious consumer, GIII Apparel is struggling with weakening demand and operational challenges.  

This comes as the Zacks Textile-Apparel Industry is currently in the bottom 31% of over 240 Zacks industries.

GIII’s Lackluster YTD Performance

Correlating with the notion that some mid-tier apparel companies are also struggling because of Ralph Lauren’s market dominance, RL shares are up a blazing +35% year to date, with GIII down nearly 20% and closer to the low-rated Textile-Apparel Industry’s -28% return.  

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Licensing Risk & Brand Transition

For GIII, specifically, the company is struggling amid its transition from being overly reliant on selling third-party licensed brands, including PVH’s PVH Calvin Klein and Tommy Hilfiger brands, which have historically driven a large portion of its revenue.

The shift towards its own clothing, footwear, and accessory brands has introduced uncertainty, especially at a time when market acceptance of new or reintroduced labels has also been curbed by a conservative consumer. Elaborating on GIII’s operational challenges, the company’s gross margins have contracted due to a higher mix of licensed brand sales and increased SG&A (Selling, General, and Administrative) expenses.

Additionally, tariff pressures have weighed on GIII’s operations, with the company anticipating $155 million in incremental tariff costs, with about $75 million unmitigated.

Lowered Guidance & Declining EPS Revisions

Despite exceeding its Q2 expectations earlier in the month, GIII cut its full-year guidance, with its top and bottom lines contracting sharply from the prior year quarter.

GIII now expects annual sales to dip 5% to $3.02 billion, with adjusted EPS projected to drop to between $2.53-$2.73 in its current fiscal 2026 from $4.42 per share in FY25.

Attributed to its weaker and cautious outlook, FY25 EPS revisions have fallen 6% in the last 30 days. More concerning and starting to take away from hopes of a rebound in GIII’s stock in the near future is that FY27 EPS estimates have fallen 15% over the last month from $3.50 to $2.98.

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Bottom Line

Although GIII stock may look more appealing at under $30 and 10X forward earnings, it may still be best to avoid investing in the company while it goes through a tough transitional phase that has been affected by inflationary and tariff pressures.

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This article originally published on Zacks Investment Research (zacks.com).

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