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GI

G III APPAREL GROUP LTD /DE/ (GIII)·Q4 2025 Earnings Summary

Executive Summary

  • Q4 FY2025 delivered solid growth and margin expansion: revenue up 9.8% y/y to $839.5M, GAAP diluted EPS $1.07 (vs $0.61), and non‑GAAP EPS $1.27 (vs $0.76), driven by stronger owned-brand mix and improved outerwear margins .
  • Full-year FY2025 hit record EPS (GAAP $4.20; non‑GAAP $4.42), with inventories down 8% and total debt reduced ~99% to $6.2M after redeeming $400M notes, enhancing balance sheet flexibility .
  • FY2026 outlook implies modest top-line decline as PVH licenses roll off but continued mix-driven profitability: sales ~$3.14B, EPS $4.15–$4.25, adj. EBITDA $310–$315M; Q1 FY2026 sales ~$580M and EPS $0.05–$0.15. Management expects slight gross margin expansion, ~100 bps SG&A deleverage, ~$9M interest expense, 28.5% tax, and ~$50M capex .
  • Catalyst narrative: transformation toward owned brands (DKNY, Donna Karan, Karl Lagerfeld, Vilebrequin) with Donna Karan’s relaunch cited as the “best launch” in company history and >$1B long-term sales potential; ongoing mitigation of China tariff headwinds, AI adoption, and AWWG partnership to accelerate international growth .

What Went Well and What Went Wrong

  • What Went Well

    • Owned-brand mix drove margin gains: Q4 gross margin rose to 39.5% (vs 36.9% LY), aided by stronger outerwear profitability; non‑GAAP EPS rose to $1.27 (vs $0.76) .
    • Donna Karan relaunch outperformed with high AURs/sell‑throughs; management: “best launch” and seeing ~40% growth outlook; DKNY and Karl Lagerfeld delivered double‑digit growth with expanding points of sale .
    • Balance sheet improved: inventories −8% y/y to $478.1M; total debt ~$6.2M after redeeming $400M notes, enabling focus on growth investments and optionality for buybacks .

  • What Went Wrong

    • PVH license roll-off a continuing headwind; CK/Tommy down ~$188–$200M in FY2025 and stepping down further in FY2026, requiring replacement with go‑forward portfolio .
    • Q4 impacted by Hudson’s Bay bankruptcy (negative effect on shipments), requiring adjustments to FY2026 exposure; also elevated bad debt reserve increased by ~$6M in Q4 .
    • Tariff and macro: recent 20% China tariffs add cost pressure (largest exposure in Q2 FY2026) though management plans cost offsets, selective pricing (outerwear elasticity), and sourcing diversification .

Financial Results

MetricQ4 FY2024Q3 FY2025Q4 FY2025
Net Sales ($MM)$764.8 $1,086.8 $839.5
GAAP Diluted EPS ($)$0.61 $2.55 $1.07
Non‑GAAP Diluted EPS ($)$0.76 $2.59 $1.27
Gross Margin (%)36.9% 39.8% 39.5%

Notes and drivers:

  • Q4 y/y revenue +9.8% and EPS expansion reflect stronger owned brands and improved outerwear profitability; SG&A up with planned investments and higher bad debt reserve .
  • Q4 vs Q3 seasonal step-down in sales/EPS as expected in apparel; margins held near Q3 levels due to mix .

Segment performance (Q4 FY2025 per CFO commentary)

SegmentNet Sales ($MM)Gross Margin (%)
Wholesale$799 38.1%
Retail$56 48.3%

Note: Segment totals may not reconcile to consolidated net sales due to eliminations/other adjustments; figures as disclosed in prepared remarks .

Balance sheet and cash metrics

Metric ($MM)Jan 31, 2024Jan 31, 2025
Cash and Cash Equivalents$507.8 $181.4
Working Capital$1,166.7 $824.9
Inventories$520.4 $478.1
Total Assets$2,681.2 $2,483.2
Long-Term Debt$417.8 $6.2
Total Stockholders’ Equity$1,550.3 $1,679.5

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net SalesFY2026N/A~$3.14B New
GAAP Net IncomeFY2026N/A$192–$197M New
GAAP Diluted EPSFY2026N/A$4.15–$4.25 New
Non‑GAAP Net Income/EPSFY2026N/A$192–$197M / $4.15–$4.25 New
Adjusted EBITDAFY2026N/A$310–$315M New
Net Interest ExpenseFY2026N/A~$9M New
Tax RateFY2026N/A~28.5% New
Gross MarginFY2026N/ASlight expansion (qualitative) New
SG&A RateFY2026N/A~+<100 bps (qualitative) New
CapexFY2026N/A~$50M New
Net SalesQ1 FY2026N/A~$580M New
GAAP Net Income / EPSQ1 FY2026N/A$2–$7M / $0.05–$0.15 New

Earnings Call Themes & Trends

TopicQ2 FY2025 (prior-2)Q3 FY2025 (prior-1)Q4 FY2025 (current)Trend
Owned brands (DKNY, Donna Karan, Karl Lagerfeld, Vilebrequin)Mid-teens growth; Donna Karan relaunch exceeding plan; >$1B LT potential for Donna Karan/DKNY; Karl expansion; Vilebrequin investment >30% growth of owned brands; gross margin tailwind; DKNY/DK relaunch momentum; Karl jeans, stores; Vilebrequin mixed in Europe Continued double-digit growth expected FY2026; Donna Karan “best launch,” ~40% growth outlook Positive acceleration
PVH license transition (CK/Tommy)Reaffirm transition plan; licenses still sizable; FY2025 go-forward ~70% of sales CK/Tommy down ~30% penetration; expecting further declines; replacing with go-forward brands CK/Tommy ~34% of sales now; tracking to ~25% by end FY2026 Managed decline; mix shift improving margins
Tariffs/sourcingFreight/lead times manageable; exposure reduction from China ongoing China exposure ~30% (ex‑outerwear ~20%); tariff readiness Recent 20% China tariffs; mitigate via vendor negotiations and selective pricing (outerwear elasticity); diversify sourcing; biggest exposure Q2 FY2026 Risk manageable; proactive mitigation
Supply chain and weatherInventory −24%; freight under contract; lead times modestly affected Port disruption briefly impacted Q3; warm weather constrained coats Cold February hurt spring; Hudson’s Bay bankruptcy negatively impacted Q4 shipments Mixed transitory headwinds
AI/technologyInvesting in tech; capex tilt to tech/shop‑in‑shops Enhancing tech landscape; warehousing efficiency Evaluating AI across ops/design; “blank canvas” for Converse systems; capex ~$50M Increasing adoption
International expansion (AWWG)Stake raised to ~20%; platform to expand Iberia; $200M 3–5yr opportunity Early stages; supports Europe expansion Emphasis continues; using AWWG to scale DKNY/Donna Karan/Karl Building

Management Commentary

  • Strategic focus: “Owned brands now represent just over half of our total net sales… an accretive licensing income stream… tremendous long‑term opportunity to capture market share globally” .
  • Donna Karan relaunch: “We believe Donna Karan has over $1 billion in annual reported net sales potential” and “the best launch that we’ve had,” with ~40% growth outlook and highest margins in the company .
  • Mix shift: “Calvin… and Tommy Hilfiger… represent approximately 34% of our total sales… expect… ~25% by end of fiscal 2026” .
  • Tariffs: “We believe we can mitigate a vast majority of the impact… higher AURs in outerwear provide elasticity… will diversify sourcing away from China” .
  • AI: “We’re using AI… including design… Converse… will be as futuristic as the market has to offer” .

Q&A Highlights

  • PVH license roll-off and guidance: FY2025 CK/Tommy declines broadly as anticipated; FY2026 adjusted for further roll-off with retailers maintaining space for G‑III brands .
  • Tariffs cadence: Limited Q1 exposure given inventory; greatest exposure in Q2; mitigation via vendor/customer negotiations and selective pricing .
  • Q4 puts/takes: No shipment shift; Hudson’s Bay bankruptcy negatively impacted Q4; adjusted go‑forward exposure; outerwear stronger vs LY; gross margin strength from owned brands .
  • AI initiatives: Evaluating broad use cases; leveraging AI in design and new Converse systems .
  • Modeling clarifications: FY2026 slight GM expansion; ~<100 bps SG&A rate increase; interest ~$9M; capex ~$50M; tax ~28.5% .

Estimates Context

  • S&P Global consensus estimates were not available at the time of analysis due to access limits; as a result, we cannot provide verified consensus vs. actual comparisons for Q4 FY2025. Values would normally be retrieved from S&P Global.
  • Management characterized Q4 results as outperforming expectations and highlighted full‑year record non‑GAAP EPS and margin expansion, but this references internal expectations/guidance rather than third‑party consensus .

Key Takeaways for Investors

  • Mix shift to owned brands is working, lifting margins and EPS even as PVH license sales decline; management expects further CK/Tommy step-down offset by owned and new licensed brands (e.g., Converse) .
  • Donna Karan relaunch is a major growth engine with superior margins and strong wholesale/DTC traction; continued floor space expansion and category broadening underpin FY2026 .
  • Near-term macro/tariff headwinds appear manageable via pricing elasticity in outerwear, vendor offset negotiations, and sourcing diversification; biggest tariff exposure in Q2 FY2026 is incorporated in guidance .
  • Balance sheet strength (de‑levered, inventory normalized) provides optionality to invest behind brands, tech/AI, and selectively repurchase stock .
  • FY2026 guide implies modest top‑line pressure but resilient profitability (slight GM expansion despite SG&A deleverage); watch execution on Converse launch, AWWG-enabled international expansion, and retail turnaround .
  • Trading lens: narrative centers on durable margin mix shift, Donna Karan/DKNY momentum, and tariff mitigation credibility; updates on PVH shelf-space backfill and wholesale reorder cadence are key catalysts through FY2026 .