G III APPAREL GROUP LTD /DE/ (GIII)·Q3 2025 Earnings Summary

Executive Summary

• Q3 FY2025 revenue of $1.09B grew 1.8% YoY; GAAP EPS was $2.55 and non-GAAP EPS $2.59, both exceeding company guidance, driven by >30% growth in owned brands (DKNY, Karl Lagerfeld, Donna Karan, Vilebrequin) and better-than-expected gross margin mix; inventory was down 10% YoY and debt cut 52% YoY following redemption of $400M notes .
• Versus Q3 guidance issued on Sep 5, revenue came in roughly in line ($1.09B vs “$1.10B”), while non-GAAP EPS materially beat ($2.59 vs $2.20–$2.30) on gross margin outperformance and lower-than-planned expenses; company raised FY25 EPS and EBITDA outlook but trimmed FY25 sales outlook to ~$3.15B reflecting weather and supply chain timing .
• Management cited warm weather and a brief port strike that delayed $20–$30M of shipments (most shifting to Q4), with Q4 shaping favorably as outerwear sell-throughs improved into holiday; wholesale and retail both showed strength, with retail gross margin up 320 bps YoY to 52.3% on merchandising changes .
• Strategic catalysts: accelerating owned-brand mix (royalty-free, licensing upside), international expansion via AWWG, retirement of high-cost notes (interest savings), and new licenses (Converse global apparel) set up margin durability and medium-term growth; near-term narrative skewed positive on EPS/gross margin beat and raised FY EPS despite softer top-line guide .

What Went Well and What Went Wrong

• What Went Well

  • Owned brands delivered outsized growth (>30%), driving mix-led margin outperformance and EPS above guidance; management highlighted sequentially strengthening sell-throughs into holiday and efficient inventory positioning .
  • Balance sheet de-risking: redeemed $400M 2025 notes, cutting total debt 52% YoY to ~$224M and improving optionality; net interest expense outlook reduced alongside improved liquidity .
  • Retail segment progressing: double-digit comps; retail gross margin expanded to 52.3% vs 49.1% YoY on merchandising changes; DTC sites/stores saw improved traffic and conversion from marketing investments .
  • CEO quote: “The power of our transforming business model is delivering margin expansion and bottom-line outperformance” .

• What Went Wrong

  • Weather and logistics: unseasonably warm weather and a brief port strike delayed $20–$30M of shipments, pressuring outerwear categories in early Q4 before temperatures turned; Q3 gross margin rate declined YoY (39.8% vs 40.6%) given brand/program mix .
  • Top-line outlook trimmed: FY25 net sales reduced to ~$3.15B (from ~$3.20B) despite EPS raise, reflecting macro, weather, and launch-related timing; Q3 revenue roughly in line with guidance but not a clear top-line beat .
  • PVH transition headwind persists: CK/Tommy sales penetration down to ~30%; company working to backfill with owned brands and new licenses (Nautica, Halston, Converse), but mix shift carries execution risk and near-term SG&A burden due to elevated marketing .

Financial Results

Overall comparisons (Q1 → Q2 → Q3 FY2025)

YoY and guidance context (Q3 focus)

Segment breakdown (Net sales)

Additional KPIs

Notes on non-GAAP: Q3 adjustments included $1.6M write-off of deferred financing costs and $0.5M one-time warehouse severance; net effect ~$0.04 per diluted share; prior-year Q3 included KL-related incentives, imputed interest, and asset impairments .

Guidance Changes

FY2025 guidance progression (from Sep 5 Q2 release to Dec 10 Q3 release)

Q4 color: Company expects Q4 gross margin up YoY; SG&A dollars to increase by roughly the same dollar amount as Q3 increases; capex ~$50M unchanged .

Earnings Call Themes & Trends

Management Commentary

• “I am very pleased with our strong third quarter results, with earnings per diluted share exceeding our expectations, driven by over 30% organic growth of our key owned brands DKNY, Karl Lagerfeld, Donna Karan and Vilebrequin.” — Morris Goldfarb, CEO .
• “As we have progressed into the fourth quarter, we have experienced strengthening sell-throughs across our brands... our inventories are well-positioned to support demand.” — Morris Goldfarb .
• “Gross margins for the quarter were better than anticipated, driven by greater penetration of our higher-margin owned brands.” — Morris Goldfarb .
• “Historically, we’ve struggled in our own retail... next year, for the first time in a decade, we will be profitable in our own retail.” — Morris Goldfarb .
• “We’ve significantly reduced our China production... down to just over 30% today (ex outerwear ~20%).” — Morris Goldfarb .

Q&A Highlights

• Q3 beat drivers and Q4 bridge: Gross margin above plan and prudently managed SG&A offset slight top-line shortfall; outerwear softness and logistics timing weighed on Q3, with $20–$30M shipments slipping to Q4; Q4 outlook calls for ~6% revenue growth and >25% EPS growth with GM up YoY .
• Converse rollout: Spring ’25 limited shipments, broader Fall ’25 global penetration; talent and factory approvals in place; long-run revenue potential of ~$200M cited .
• SG&A and marketing cadence: Heavy marketing in Q3 (fall campaigns), elevated SG&A tied to brand launches and capability build; expect leverage as scale increases, with Donna Karan/DKNY spend a focus .
• Inventory/tariffs: Inventories “in excellent shape” across go-forward and non-go-forward; China manufacturing ~30% (ex outerwear ~20%) with ability to shift quickly if tariff risk escalates .
• Retail segment: Comp improvement, store closures completed; retail margin expansion and breakeven in FY25 set up profitability next year .

Estimates Context

• Wall Street consensus (S&P Global) could not be retrieved at this time due to an SPGI daily request limit, so we compare to company guidance instead. Non-GAAP EPS of $2.59 materially beat Q3 company guidance of $2.20–$2.30; revenue was roughly in line/slightly below the ~$1.10B guide .
• Implication: Street EPS models likely need to move up on mix-driven margins and lower interest expense; top-line models may drift modestly lower given trimmed FY sales guide to $3.15B, but narrative remains EPS/margin-led .

Key Takeaways for Investors

• Mix shift to owned brands is working: despite a modest YoY gross margin rate decline in Q3 from mix, margin quality and EPS are improving vs internal plans; sustained GM strength and lower interest underpin FY EPS raise .
• Clean balance sheet after redeeming $400M notes and lower net interest support capital deployment into growth and potential shareholder returns over time .
• Donna Karan and DKNY momentum, plus Karl Lagerfeld international scaling, provide multi-year growth engines; new licenses (Converse, Nautica, Halston) diversify and backfill PVH transition .
• Near-term demand risk skewed to weather-sensitive categories, but Q4 setup improved as temperatures normalized and delayed receipts shift into the quarter; company expects Q4 GM up YoY .
• Retail segment moving from loss to profit enhances consolidated margin profile and brand control, aided by marketing and merchandising upgrades .
• International optionality via AWWG (Europe/Iberia/India) and owned-brand licensing (fragrance, accessories) broadens TAM and earnings durability .
• Watch catalysts: holiday sell-throughs vs plan, Q4 EPS delivery on >25% growth target, early Converse order visibility, and continued PVH transition execution .

Appendix: Additional Detail on Non-GAAP Adjustments and Margins

• Q3 FY25 non-GAAP adjustments: $1.6M deferred financing cost write-off; $0.5M warehouse severance; tax impacts; total ~$0.04 per share; prior-year Q3 included acquisition-related comps, imputed interest, asset impairments (also ~$0.04 per share) .
• Q3 margins: Company GM 39.8% vs 40.6% YoY; wholesale GM 38.4% vs 39.6%; retail GM 52.3% vs 49.1% reflecting merchandising improvements .

Sources: Q3 FY2025 8-K and press release (Dec 10, 2024) ; Q3 FY2025 earnings call (Dec 10, 2024) ; Q2 FY2025 press release/call (Sep 5, 2024) ; Q1 FY2025 press release/call (Jun 6, 2024) .