On Monday, Barclays has downgraded G-III Apparel Group, Ltd. (NASDAQ:GIII) from Equalweight to Underweight, adjusting the stock's price target to $23 from the previous $30. The revision reflects concerns over several factors expected to impact the company's revenue and business operations.
The downgrade is primarily attributed to three specific challenges identified by Barclays. Firstly, the firm anticipates an approximate 2% revenue headwind over the next three years due to the recently announced store closures by Macy's (NYSE:M) on February 27, 2024.
Secondly, the loss of licenses is expected to begin affecting G-III Apparel's business over the coming five-year period. Lastly, there is a noted muted search interest in the company's owned brands, suggesting a longer timeframe may be required to counteract the revenue challenges.
Barclays expressed confidence in G-III Apparel's ongoing efforts to secure new licensing agreements with different brands. However, the firm also highlighted the limited visibility concerning the potential new agreements, including when they might commence and whether they will be substantial enough to replace the revenues previously generated by Calvin Klein and Tommy Hilfiger businesses.
The new price target of $23 is based on a 7x multiple of Barclays' calendar year 2025 earnings per share estimate for G-III Apparel, which has been revised down to $3.31 from $3.75. The firm also raised concerns about the potential risks associated with G-III Apparel's possible acquisitions outside of its core women's and outerwear businesses.
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