G-III Apparel shares rise on agreement

Financial terms were undisclosed, but Lazard Capital Markets analyst Todd Slater said in a note to investors that the deal might be worth more than $100 million and has the potential for higher operating margins than anything in G-III's portfolio.

G-III will make and distribute the better--or mid-priced--women's apparel to stores in the United States, Canada, and Mexico, as well as sites in Central and South America. The license for the line was recently held by Kellwood Co.

G-III already holds licenses for some Calvin Klein products, including men's and women's better outerwear, women's performance apparel and women's better suits and dresses.

"There is significant room for expansion at major department stores including Macy's, Dillard's, Bon-Ton, and/or Belk," Slater wrote on Wednesday. "With this new license, the company's CK licenses could represent 35 percent of G-III's sales mix by the end of 2009 (up from 25 percent in 2008)."

Slater said he expects G-III obtained a low-minimum royalty license from Calvin Klein, which would reduce its risk and allow for a "more rational and manageable growth trajectory."

He rates the company "Buy" with a $24 price target.

G-III shares rose $1.13, or 7.6 percent, to $16.03 Wednesday. The stock has traded between $10.73 and $21 over the past 52 weeks.