With recent acquistions like Andrew Marc and Wilson's The Leather Experts, G-III Apparel Group (Nasdaq:GIII) continues to grow. While the business has taken off, the stock hasn't. I'll evaluate whether this will hold true in the future.

For over half a century, G-III has kept consumers covered up, operating one of the largest outerwear businesses in the United States. Started in 1956 when Aron Goldfarb came to the U.S. to build a business, it was originally G&N Sportswear. Joined in 1972 by current CEO and son Morris Goldfarb, in 1974 the company was renamed G-III Leather Fashions, a leather outerwear company. By 1989 when G-III went public, it had ventured into dresses, women's suits and sportswear, producing product under license and for its own brands.

Gone Full Circle
In 1989, G-III merged with Ante Corp., a Minnesota-based venture capital firm run by Wilson's Leather founder Lyle Berman. Berman contributed $1.5 million in capital along with his expertise for 15% of the business, which would operate as G-III Apparel Group. To raise additional cash for expansion purposes, G-III did a secondary offering in 1989 for $13 a share.

More recently, in early July, G-III announced it was paying $22 million to acquire 116 outlet stores of Wilson's The Leather Experts as well as some inventory and trademarks, the Wilson's name and a distribution center. This gives the company a direct-to-consumer retail presence.

The move so excited Brean Murray, Carret & Co., that it reiterated its $26 target price and buy rating, suggesting the move was a logical extension to the company's existing distribution plan. G-III historically sold products to Wilson's for both its mall and outlet stores. In fact, Wilson's was once one of its top five customers, but G-III stopped selling to Wilson's, unsure of its ability to pay for orders. Former Wilson's CEO Joel Waller will return to be President of G-III's outlet store division (L12), and in the process, create a vertically integrated retailer.

Earnings 1, Stock 0
G-III's sales have grown from $225 million in fiscal 2004 to $519 million in fiscal 2008 and operating profit from $14.8 million in 2004 to $32.4 million in 2008. In fiscal 2008, it grew sales 21.5% to $519 million while net income grew 32.6% to $17.5 million from $13.2 million. In Q1 fiscal 2009, sales increased from $35.1 million to $75.4 million while earnings per share were in the red by 42 cents, although flat to the same period last year and better than expected. (Explore the controversies surrounding companies commenting on their forward-looking expectations in Can Earnings Guidance Accurately Predict The Future?)

Initial guidance for full-year 2009 suggested revenues of $650 million to $660 million with earnings per share between $1.25 and $1.30. Adding in the Wilson's purchase, G-III upped guidance to between $720 million and $730 million and earnings per share of $1.35 to $1.40. Despite all this good news, its stock has traded below $10 for much of its history until 2006, when it moved all the way up to the mid-20s, only to drop back down into the teens in 2008. However, there is cause for optimism. In the last 52 weeks, its stock is up 5.5%.

A Solid Plan
G-III is always evolving. In 1988 it entered the men's leather apparel market. In 1993 it jumped into the sports licensing business, making NFL team outerwear. In 2001 it acquired the license to make Jones New York from Jones Apparel Group (NYSE:JNY) outerwear. Other acquisitions include the men's licenses for Sean John and Timberland (NYSE:TBL) leather outerwear, and in 2004 it added the Kenneth Cole Productions (NYSE:KCP) men's outerwear license. In 2006, G-III started making Calvin Klein women's suits and dresses.

Like the cherry on top of a sundae, in February 2008 G-III purchased Andrew Marc for $42 million. It will act as a cornerstone brand for the company, giving it additional access to the luxury market. In June, G-III announced an agreement with the Camuto Group to produce a line of women's shoes under its Andrew Marc and Marc New York brands. The product will begin to roll out in the fall of 2009. This is the first of its promised brand extensions for Andrew Marc. Camuto shoes are available in more than 5,400 doors worldwide. It's firing on all cylinders.

Bottom Line
Morris Goldfarb, CEO and son of the founder, owns 19.3% of the company. For six decades, the Goldfarbs have been peddling apparel and making money doing it. G-III is a very conservatively run company. Its total debt is less than EBITDA earnings, price-to-sales and PEG ratios are both below one and its enterprise value is just 8.6 times EBITDA. (For more on investing using metrics such as these, check out Investment Valuation Ratios.)

While I don't expect any home runs from its Q2 earnings announcement September 9, I do expect good things from its stock for the remainder of 2008 and into 2009. With the Andrew Marc and Wilson's acquisitions, the company is more prepared than ever to handle any economic environment that comes down the pike. Investors should take solace in this fact.

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