The perfect storm hit the shores of U.S. retailers and apparel companies over the last few months. Just as consumer demand appears to be waning from the pandemic fueled consumption boom, retailers are finding themselves stuck with unusually large inventories and rising costs on account of higher interest rates and a tight labor market. The silver lining for them is that the U.S. Dollar Index which benchmarks the U.S. dollar against a benchmark of six major currencies, had come down during the last three months after showing tremendous strength for the better part of the last two years. Shipping rates have also come down, although congestion at ports has resulted in additional demurrage charges for some retailers.
Two apparel related companies that I follow including VF Corp (VFC) and G-III Apparel Group (GIII) have been hit hard by these macroeconomic factors. Over the last year, VF Corp has lost nearly two-thirds of its value and G-III is down nearly 50%. VF is the world’s larges apparel and footwear company that owns brands like Vans, The North Face, Timberland, Dickies and Supreme. The company generated nearly $12 billion in revenue TTM, sports net margins of 3.6% and trades at a forward P/E of 29.
G-III on the other hand has both owned as well as licensed brands like Calvin Klein and Tommy Hilfiger that it licenses from PVH (PVH). G-III generated over $3 billion in revenue TTM, sports net margins of 5.66% and trades at a forward P/E of just 4.38. While the decline in VF was gradual throughout this year, G-III was hit hard on December 1st when the company lost nearly 45% of its value in a single day before rebounding a little in the ensuing days.
G-III investors were unhappy about the company missing its bottom line expectations and guiding to lower full year fiscal 2023 earnings of $2.90 to $3.00 per share from prior guidance of $3.60 to $3.70 per share. A big part of the drop in the stock price was however driven by news that the company is going to lose its licenses for Calvin Klein and Tommy Hilfiger starting in December 2023 for Tommy Jeans and December 2029 for both Calvin Klein and Tommy Hilfiger Women’s suits. A vast majority of the category license expirations will occur between December 2025 and December 2027 as you can see from the table below.
The company downplayed the importance of these expirations by claiming that the Calvin Klein and Tommy business is only a 10% operating margin business and that they are developing other internal brands like Donna Karan. A quick Google Trends comparison shows that despite being an aging brand, Calvin Klein still has 25 times the brand recognition of Donna Karan. Moreover, after excluding extraordinarily good results for fiscal 2022 (ending January 2022) as a result of the pandemic, operating margins at G-III have mostly been in the 8% range. This implies that the 10% operating margin business from the licensed brands, which represents nearly $1.5 billion of revenue, generates higher margins than the other half of G-III’s unaffected business.
Insiders of G-III appear to be more optimistic than the market and started buying stock last week with three different insiders participating. They clearly have a divergent view of the company’s future or think that the stock is very cheap at these single digit P/E levels. CEO Morris Goldfarb, who has been an executive officer of the company and its predecessors since the formation of the company in 1974, picked up $3.14 million worth of stock at an average price of $12.54. His prior purchases were a series of very well timed trades in March and April 2020 when he picked up shares at prices between $5.48 and $6.54. Those purchases were small in comparison to his purchase last week.
I would like to see how changes in macroeconomic factors impact the company in the coming months and if they can indeed build or acquire other brands that will help them offset the impact of losing licensed brands before I get interested in G-III. For now, it was an interesting development to track in a company that is both buying back its own stock and where the insiders are also buying stock.
Welcome to edition 650 of Insider Weekends. Insider buying decreased last week with insiders purchasing $95.05 million of stock compared to $168.95 million in the week prior. Selling on the other hand increased to $1.58 billion compared to $971.61 million in the week prior.
Sell/Buy Ratio: The insider Sell/Buy ratio is calculated by dividing the total insider sales in a given week by total insider purchases that week. The adjusted ratio for last week went up to 16.62. In other words, insiders sold almost 17 times as much stock as they purchased. The Sell/Buy ratio this week was unfavorable compared to the prior week when the ratio stood at 5.75.
Notable Insider Buys:
1. AMERCO (UHAL): $66.84
President Edward Shoen acquired 248,300 shares of U-Haul’s parent company, paying $64.97 per share for a total amount of $16.13 million. These shares were purchased indirectly by Clarendon Strategies, LLC.
You can view the list of recent insider transactions for Energy Transfer LP here.
|P/E: 12.43||Forward P/E: 11.91||Industry P/E: 4.24|
|P/S: 2.22||Price/Book: 2.03||EV/EBITDA: 7.04|
|Market Cap: $13.08B||Avg. Daily Volume: 665,510||52 Week Range: $44.79 – $73.16|
2. Datadog, Inc. (DDOG): $74.56
Director Matthew Jacobson acquired 192,154 shares of this monitoring and analytics platform for developers, paying $69.35 per share for a total amount of $13.33 million. These shares were purchased indirectly by ICONIQ Strategic Partners VI, L.P.
You can view the list of recent insider transactions for Datadog, Inc. here.
|P/E: 7456||Forward P/E: 63.19||Industry P/E: 23.27|
|P/S: 15.46||Price/Book: 18.36||EV/EBITDA: 2106.73|
|Market Cap: $23.68B||Avg. Daily Volume: 4,625,454||52 Week Range: $66.447 – $186.28|
3. Atlanticus Holdings Corporation (ATLC): $26.8
Executive Chairman David G. Hanna acquired 325,000 shares of this credit and related financial services and products provider, paying $27.15 per share for a total amount of $8.82 million. These shares were purchased indirectly by a trust.
You can view the list of recent insider transactions for Atlanticus Holdings Corporation here.
|P/E: 3.91||Forward P/E: 4.44||Industry P/E: 11.01|
|P/S: 0.92||Price/Book: 1.26||EV/EBITDA: N/A|
|Market Cap: $387.13M||Avg. Daily Volume: 23,010||52 Week Range: $23.19 – $74.63|
4. G-III Apparel Group, Ltd. (GIII): $13.4
Shares of this apparel company were acquired by 3 insiders:
You can view the list of recent insider transactions for G-III Apparel Group, Ltd. here.
|P/E: 3.64||Forward P/E: 4.23||Industry P/E: 13.29|
|P/S: 0.2||Price/Book: 0.39||EV/EBITDA: 5.87|
|Market Cap: $636.35M||Avg. Daily Volume: 1,083,485||52 Week Range: $11.6 – $31.7|
5. B. Riley Financial, Inc. (RILY): $43.26
Chairman and Co-CEO Bryant R. Riley acquired 51,514 shares of B. Riley Financial, paying $43.93 per share for a total amount of $2.26 million. Mr. Riley increased his stake by 0.86% to 6,029,929 shares with this purchase.
You can view the list of recent insider transactions for B. Riley Financial, Inc. here.
|P/E: 7.39||Forward P/E: N/A||Industry P/E: 11.01|
|P/S: 1.48||Price/Book: 2.38||EV/EBITDA: N/A|
|Market Cap: $1.23B||Avg. Daily Volume: 281,759||52 Week Range: $36.86 – $91.24|
You can view the full list of purchases from this Insider Buying page.
Notable Insider Sales:
1. Walmart Inc. (WMT): $145.31
Director Robson S. Walton sold 660,144 shares of Walmart for $148.18, generating $97.82 million from the sale. These shares were sold indirectly through a trust.
You can view the list of recent insider transactions for Walmart Inc. here.
|P/E: 44.71||Forward P/E: 22.18||Industry P/E: N/A|
|P/S: 0.65||Price/Book: 5.43||EV/EBITDA: 13.43|
|Market Cap: $391.87B||Avg. Daily Volume: 6,551,245||52 Week Range: $117.27 – $160.77|
2. Royal Caribbean Cruises Ltd. (RCL): $56.21
Director Arne Alexander Wilhelmsen sold 1,317,977 shares of this cruise company for $60.71, generating $80.01 million from the sale. These shares were purchased indirectly by A. WILHELMSEN AS.
You can view the list of recent insider transactions for Royal Caribbean Cruises Ltd. here.
|P/E: N/A||Forward P/E: 17.03||Industry P/E: 13.29|
|P/S: 1.99||Price/Book: 4.47||EV/EBITDA: -96.28|
|Market Cap: $14.34B||Avg. Daily Volume: 6,631,903||52 Week Range: $31.09 – $90.55|
3. PTC Inc. (PTC): $121.19
Shares of this software and services company were sold by 2 insiders:
You can view the list of recent insider transactions for PTC Inc. here.
|P/E: 46.43||Forward P/E: 22.74||Industry P/E: 23.27|
|P/S: 7.36||Price/Book: 6.2||EV/EBITDA: 27.77|
|Market Cap: $14.24B||Avg. Daily Volume: 780,182||52 Week Range: $96.55 – $133.14|
4. Antero Resources Corporation (AR): $31.81
Director Howard W. Keenan sold 1,000,000 shares of this oil and natural gas company for $31.30, generating $31.29 million from the sale. These shares were sold indirectly by Yorktown Energy Partners VIII, L.P.
You can view the list of recent insider transactions for Antero Resources Corporation here.
|P/E: 4.86||Forward P/E: 4.05||Industry P/E: 7.88|
|P/S: 1.07||Price/Book: 1.55||EV/EBITDA: 3.89|
|Market Cap: $9.55B||Avg. Daily Volume: 7,629,446||52 Week Range: $15.98 – $48.8|
5. Palo Alto Networks, Inc. (PANW): $158.9
Shares of this cybersecurity platform were sold by 2 insiders:
You can view the list of recent insider transactions for Palo Alto Networks, Inc. here.
|P/E: N/A||Forward P/E: 39.43||Industry P/E: 23.27|
|P/S: 8.26||Price/Book: 94.58||EV/EBITDA: 385.94|
|Market Cap: $48.04B||Avg. Daily Volume: 4,250,904||52 Week Range: $140.07 – $213.633|
You can view the full list of sales from this Insider Sales page.
Disclaimer: I hold a long position in B.Riley (RILY). Please do your own due diligence before buying or selling any securities mentioned in this article. We do not warrant the completeness or accuracy of the content or data provided in this article.