G-III Apparel Group widens its net loss for the fiscal first quarter ended April 30, due primarily to continued softening in the company’s “fashion sports apparel” category and efforts to clear the slower goods that cut deeply into margins. The company said they have decided to not “aggressively pursue” the category because the retailer and consumer have indicated that there is “no demand for it”. GIII will instead focus efforts on a number of outerwear licenses and also announced an extension of its NFL deal.

Net sales fell 11.7% to $16.5 million in Q1 from $18.7 million in the year-ago period. The net loss widened to $4.8 million, or a loss of 68 cents per share, for the Q1 2004 period, versus a net loss of $2.6 million, or 38 cents per share, during the comparable period last year. The key impact to the earnings/loss line was a 1260 basis point drop in gross margin to just 10.7% of sales, due primarily to lower sales of regular price goods and “increased clearance activity.” Inventories were down 14.7% versus the quarter-end last year.

Morris Goldfarb, chairman and CEO, said that they are “astute enough” to know when to quit, when answering questions by analysts on the future of the fashion sports apparel business. “We’re not challenging what the consumer is telling us,” he said. “We are going on to better things.”

The better things appear to be a new NASCAR license to produce men’s and women’s activewear and outerwear as well as a new CLC deal for The YARD collection, which is focused on product for historically black colleges. He also said that the “core sports apparel offerings continue to perform very well”, with the NFL product the largest business in the segment. Goldfarb said the current NFL outerwear license as been extended through March of 2007. Goldfarb also said Cole Haan and Sean John outerwear bookings doubled versus LY.

The issues with the fashion sports apparel product are expected to continue into second quarter and GIII is estimating a second quarter loss per share in the 15 cents to 20 cents range on net sales of approximately $35.0 million, or a sales decline of nearly 23% from the second quarter last year. The net loss for the period is forecast against diluted EPS of 37 cents per share in Q2 last year.