Macy's 3Q Call Spells Concerns for G-III Apparel Group (GIII); Piper Jaffray Cuts Price Target to $52

Piper Jaffray maintained an Overweight rating on G-III Apparel (NASDAQ: GIII), and cut the price target to $52.00 (from $70.00), following Macy's 3Q call. The call highlighted several concerns in the retail and vendor space. GIII makes up 60-70% of the outerwear department for Macy's and GIII derives 32% of its overall sales from outerwear. Macy's inventory was up 4.6% Y/Y vs. the sales decline of 5.2% Y/Y. On the call, management indicated it would significantly liquidate inventory in Q4 and expect gross margins as a result to be well below last year.

Analyst Erinn Murphy commented, "Post Macy's Q3 call which highlighted several concerns in the retail and vendor space, we are reducing our estimates on GIII. This is the second estimate revision we have made in the last month. While we note GIII is an important vendor to Macy's given its breadth of brands, we do believe the cautionary outerwear comments discussed are too hard to overlook. To wit, GIII makes up 60-70% of the outerwear department for Macy's and GIII derives 32% of its overall sales from outerwear. While dresses were favorable on the call, we see risk to numbers tied to cancellations, higher markdowns and lower sellthroughs. We are reducing Q4E from $0.64 to $0.46. We believe in the longer-term model but recognize there are tough near-term headwinds to navigate. We are lowering our PT from $70 to $52. Our Overweight rating is based on intraday share price (10:45AM ET) of $43.82."

For an analyst ratings summary and ratings history on G-III Apparel click here. For more ratings news on G-III Apparel click here.

Shares of G-III Apparel closed at $48.30 yesterday.

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