G-III Apparel Group Ltd. (NASDAQ:GIII) stock fell Wednesday after the company reported mixed second-quarter results and issued a weaker-than-expected third-quarter outlook.
The apparel company said sales came in slightly below its expectations as economic weakness in Europe weighed on demand.
Earnings Beat, Revenue Falls Short
G-III reported adjusted earnings of 26 cents per share, beating the consensus estimate of 19 cents.
Sales fell 10% year over year to $554.09 million. The figure missed the $568.41 million estimate. The decline mainly reflected the company’s continued exit from the Calvin Klein and Tommy Hilfiger licenses.
G-III has lost nearly $1.2 billion in revenue since PVH Corp. announced the return of those licenses in fiscal 2023. Excluding Marc Jacobs, G-III expects its go-forward portfolio to replace about $700 million of those sales by the end of fiscal 2027.
Gross margin expanded by 440 basis points to 45.2%. Price increases, more full-price sales and a shift toward higher-margin owned brands drove the improvement.
The company ended the quarter with $529 million in cash and about $1 billion in available liquidity. Cash included roughly $134 million in tariff refunds and interest. Inventory declined 13% from a year earlier.
G-III also returned more than $12 million to shareholders through share repurchases and dividends.
Marc Jacobs Acquisition Offers Growth Potential
G-III completed its acquisition of Marc Jacobs as part of its push to become a brand-led global apparel company.
Marc Jacobs is expected to generate about $360 million in global sales this year. That figure excludes licensing revenue from the intellectual property joint venture. G-III believes the brand could eventually reach $1 billion in annual revenue.
The company plans to expand Marc Jacobs through ready-to-wear products, licensing, international growth and broader distribution.
The acquisition is expected to be slightly dilutive in fiscal 2027. However, it should become accretive after the first 12 months. G-III plans to include Marc Jacobs in its formal outlook when it reports third-quarter results in December.
Donna Karan Sales Jump More Than 45%
Donna Karan sales increased more than 45% in the second quarter. Strong consumer demand, full-price selling and growth across digital, handbags and footwear supported the increase.
DKNY continued to gain traction in North America and international markets. Karl Lagerfeld and Vilebrequin also delivered growth despite difficult conditions in Europe.
G-III is also expanding its licensed portfolio through brands such as Starter, Converse, Levi’s, French Connection, BCBG and Joules.
Wholesale sales fell to $531 million from $589 million a year earlier. Retail sales declined to $40 million from $41 million.
However, G-III’s go-forward portfolio grew at a high-single-digit rate when excluding Calvin Klein and Tommy Hilfiger. Full-price wholesale sales increased more than 20%.
Wholesale gross margin improved to 43.3% from 38.9%. Retail gross margin fell to 50.6% from 52.4% due to increased promotional activity.
Third-Quarter Outlook Misses Estimates
During the earnings call, G-III said its exit from the Calvin Klein and Tommy Hilfiger licenses would eliminate about $460 million in fiscal 2027 sales. The company expects growth from its go-forward portfolio to partly offset the decline. However, the transition will weigh most heavily on third-quarter revenue.
For the third quarter, G-III expects adjusted earnings of $1.35 to $1.45 per share. That came in below the $1.75 estimate. The company projected sales of about $870 million, also below the $899.40 million estimate.
For fiscal 2027, G-III raised its GAAP earnings outlook to $4.10 to $4.20 per share from $3.85 to $3.95. The company also increased its adjusted earnings forecast to $2.20 to $2.30 per share from $2.15 to $2.25. The consensus estimate stands at $2.22.
G-III reaffirmed its full-year sales forecast of $2.71 billion, broadly in line with the $2.709 billion estimate. The company expects gross margin to improve by about 400 basis points in fiscal 2027. Price increases and a shift toward higher-margin owned brands should support the expansion.
GIII Price Action: G-III Apparel Group shares were down 9.79% at $29.02 at the time of publication on Wednesday, according to Benzinga Pro data.
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