G-III Apparel Group’s Earnings Call: Mixed Sentiments and Strategic Moves

G-Iii Apparel ((GIII)) has held its Q3 earnings call. Read on for the main highlights of the call.

The recent earnings call for G-III Apparel Group painted a mixed picture for the company. While there was strong growth in owned brands and direct-to-consumer channels, as well as a robust cash position, these positives were overshadowed by significant declines in PVH licensed brands and the impact of tariffs on gross margins. The company’s profitability and strategic initiatives were highlighted as positive, but challenges remain in the wholesale segment and with PVH brand transitions.

Strong Profitability Despite Tariffs

G-III Apparel Group delivered strong profitability in the third quarter, exceeding the high end of its guidance despite the impacts of tariffs. The company reported earnings per share of $1.90, which was $0.37 above the midpoint of the guidance range, showcasing its ability to maintain profitability in challenging market conditions.

Significant Growth in Owned Brands

The company’s owned brands, particularly Donna Karan and Karl Lagerfeld, showed significant growth. Donna Karan outperformed expectations with a 40% growth forecast for fiscal 2026, while Karl Lagerfeld’s women’s business outperformed and the global men’s business grew by nearly 20%, highlighting the strength of G-III’s brand portfolio.

Digital and Direct-to-Consumer Success

G-III Apparel Group experienced substantial growth in its digital and direct-to-consumer channels. Digital traffic increased over 20% across owned dot-com sites, driving higher conversion rates and overall sales. Notably, Donna Karan’s website traffic surged by approximately 150%, with average order values increasing by over 10%.

Introduction of Dividend Program

In a significant move, G-III Apparel Group declared an initial quarterly cash dividend of $0.10 per share, marking the introduction of its first-ever dividend program. This decision reflects the company’s financial strength and commitment to returning capital to shareholders.

Strong Cash Position and Inventory Management

The company ended the quarter with a net cash position of $174 million, even after repurchasing approximately $50 million in stock year-to-date. Inventory levels remained disciplined, with units down year-over-year, demonstrating effective inventory management.

Decline in PVH Licensed Brands

Sales of the Calvin Klein and Tommy Hilfiger brands saw a significant reduction, with a decline from over $1.5 billion to an expected $800 million this year. This decline in PVH sales accelerated quicker than anticipated, posing a challenge for the company.

Impact of Tariffs on Gross Margin

The impact of tariffs was evident as the gross margin decreased to 38.6% in the third quarter from 39.8% the previous year. The wholesale segment’s gross margin declined by 170 basis points compared to last year, highlighting the challenges faced due to tariffs.

Decrease in Net Sales

Net sales for the quarter were $989 million, down from $1.09 billion in the same period last year. This decrease was primarily due to lower sales from the Calvin Klein and Tommy Hilfiger license businesses, reflecting the challenges in the licensed brand segment.

Challenges with Retail Segment

The retail segment faced challenges as well, with gross margin down to 50.8% from 52.3% the prior year. This decline was attributed to the liquidation of G.H. Bass branded products, indicating difficulties in the retail sector.

Forward-Looking Guidance

Looking ahead, G-III Apparel Group provided updated guidance reflecting strong performance despite market challenges. The company projected net sales of approximately $2.98 billion for fiscal 2026 and raised its full-year non-GAAP earnings per diluted share guidance to a range of $2.80 to $2.90. G-III anticipates non-GAAP net income between $125 million and $130 million and adjusted EBITDA ranging from $208 million to $213 million. The company expects gross margins to normalize and eventually expand as it exits lower-margin licenses and increases the penetration of higher-margin owned brands.

In conclusion, G-III Apparel Group’s earnings call highlighted a mixed sentiment with strong growth in owned brands and direct-to-consumer channels, alongside challenges in the PVH licensed brands and wholesale segment. The company’s strategic initiatives and financial strength, including the introduction of a dividend program, were positive takeaways. However, the impact of tariffs and declining sales in certain segments remain areas of concern.