G-III Apparel (GIII) - 2026 Q2 - Quarterly Report

PART I – FINANCIAL INFORMATION This section presents G-III Apparel Group's unaudited condensed consolidated financial statements, including balance sheets, income statements, equity, and cash flows, along with detailed accounting notes Item 1. Financial Statements This section presents the unaudited condensed consolidated financial statements for G-III Apparel Group, Ltd. and its subsidiaries, including balance sheets, income statements, statements of stockholders' equity, and cash flow statements, along with detailed notes explaining the basis of presentation, accounting policies for key items like doubtful accounts, inventories, financial instruments, leases, earnings per share, notes payable, supply chain finance, revenue recognition, and segment reporting Condensed Consolidated Balance Sheets This section provides a snapshot of the company's financial position, detailing assets, liabilities, and stockholders' equity at specific reporting dates ASSETS and LIABILITIES (In thousands) | ASSETS (In thousands) | July 31, 2025 | July 31, 2024 | January 31, 2025 | | :-------------------- | :------------ | :------------ | :--------------- | | Cash and cash equivalents | $301,778 | $414,791 | $181,440 | | Accounts receivable, net | $474,931 | $477,465 | $624,752 | | Inventories | $639,756 | $610,492 | $478,086 | | Total current assets | $1,485,015 | $1,594,058 | $1,335,354 | | Total assets | $2,690,981 | $2,696,287 | $2,483,234 | | LIABILITIES (In thousands) | July 31, 2025 | July 31, 2024 | January 31, 2025 | | :-------------------- | :------------ | :------------ | :--------------- | | Accounts payable | $431,034 | $289,771 | $228,154 | | Total current liabilities | $672,340 | $546,405 | $510,490 | | Notes payable, net | $6,869 | $402,541 | $3,045 | | Total liabilities | $982,460 | $1,183,652 | $803,753 | | Total stockholders' equity | $1,708,521 | $1,512,635 | $1,679,481 | Condensed Consolidated Statements of Income and Comprehensive Income This section presents the company's financial performance over specific periods, detailing net sales, gross profit, operating profit, and net income Income and Comprehensive Income (In thousands, except per share amounts) | (In thousands, except per share amounts) | Three Months Ended July 31, 2025 | Three Months Ended July 31, 2024 | Six Months Ended July 31, 2025 | Six Months Ended July 31, 2024 | | :--------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net sales | $613,266 | $644,755 | $1,196,875 | $1,254,502 | | Gross profit | $250,471 | $275,874 | $497,015 | $534,767 | | Operating profit | $16,300 | $41,464 | $24,776 | $54,968 | | Net income attributable to G-III Apparel Group, Ltd. | $10,939 | $24,212 | $18,698 | $30,014 | | Basic Net income per common share | $0.26 | $0.54 | $0.43 | $0.67 | | Diluted Net income per common share | $0.25 | $0.53 | $0.42 | $0.65 | Condensed Consolidated Statements of Stockholders' Equity This section details changes in the company's equity over time, reflecting net income, comprehensive income, and share repurchases - Total stockholders' equity increased to $1,708.5 million as of July 31, 2025, from $1,512.6 million as of July 31, 2024, primarily driven by net income and other comprehensive income[8][11] - Accumulated other comprehensive income (loss) significantly improved, moving from a loss of $(12.1) million at July 31, 2024, to an income of $23.5 million at July 31, 2025, largely due to foreign currency translation adjustments[8][11] - The company repurchased common stock totaling $24.6 million during the three months ended July 31, 2025, and $31.6 million during the three months ended July 31, 2024[11] Condensed Consolidated Statements of Cash Flows This section outlines the cash inflows and outflows from operating, investing, and financing activities over specific periods Cash Flows (In thousands) | (In thousands) | Six Months Ended July 31, 2025 | Six Months Ended July 31, 2024 | | :--------------------------------------- | :------------------------------- | :------------------------------- | | Net cash provided by operating activities | $168,877 | $94,830 | | Net cash used in investing activities | $(19,170) | $(108,656) | | Net cash used in financing activities | $(41,251) | $(75,416) | | Net increase (decrease) in cash and cash equivalents | $120,338 | $(93,038) | | Cash and cash equivalents at end of period | $301,778 | $414,791 | Notes to Condensed Consolidated Financial Statements This section provides detailed explanations and disclosures regarding the accounting policies and specific line items within the financial statements NOTE 1 – BASIS OF PRESENTATION This note describes the company's business operations, brand portfolio, and significant ownership changes in subsidiaries and affiliates - G-III Apparel Group, Ltd. designs, sources, distributes, and markets a wide range of apparel and accessories under over 30 owned and licensed brands, including DKNY, Donna Karan, Karl Lagerfeld, and Vilebrequin[16][83][84] - The company acquired the remaining 25% interest in Fabco (DKNY and Donna Karan business in China) on April 17, 2024, making it a wholly-owned subsidiary[17] - Effective July 19, 2024, G-III increased its ownership in AWWG to 18.7%, leading to accounting under the equity method[17] NOTE 2 – ALLOWANCE FOR DOUBTFUL ACCOUNTS This note details the company's allowance for doubtful accounts, including balances and write-offs related to accounts receivable Accounts Receivable and Allowance for Doubtful Accounts (In thousands) | (In thousands) | July 31, 2025 | July 31, 2024 | January 31, 2025 | | :-------------------- | :------------ | :------------ | :--------------- | | Accounts receivable, net | $474,931 | $477,465 | $624,752 | | Allowance for doubtful accounts | $(1,472) | $(1,260) | $(7,588) | - During the six months ended July 31, 2025, $8.4 million in accounts receivable were written off against the allowance, primarily due to the bankruptcy of certain wholesale customers, including Hudson's Bay Company[25][26] NOTE 3 – INVENTORIES This note outlines the valuation methods for different inventory types and provides a breakdown of inventory balances - Wholesale inventories are valued at the lower of cost (FIFO) or net realizable value, while retail and Vilebrequin inventories use the weighted average method[27] Inventories (In thousands) | (In thousands) | July 31, 2025 | July 31, 2024 | January 31, 2025 | | :-------------------- | :------------ | :------------ | :--------------- | | Inventories | $639,756 | $610,492 | $478,086 | | Inventory return asset | $7,200 | $6,500 | $13,200 | | Inventory held on consignment | $5,100 | $4,700 | $5,900 | NOTE 4 – FAIR VALUE OF FINANCIAL INSTRUMENTS This note explains the valuation hierarchy for financial instruments and details impairment charges recorded during the fiscal year - The company uses a three-level valuation hierarchy for fair value measurements, with most debt instruments recorded at carrying value approximating fair value due to variable rates or short-term nature[30][31] Financial Instrument Carrying Values (In thousands) | Financial Instrument | Level | July 31, 2025 (Carrying Value) | July 31, 2024 (Carrying Value) | January 31, 2025 (Carrying Value) | | :------------------- | :---- | :----------------------------- | :----------------------------- | :-------------------------------- | | Secured Notes | 1 | $0 | $400,000 | $0 | | Unsecured loans | 2 | $5,180 | $7,760 | $6,159 | | Overdraft facilities | 2 | $4,125 | $7,906 | $0 | | Foreign credit facilities | 2 | $6,176 | $0 | $0 | - During fiscal 2025, the Company recorded a $0.8 million impairment charge primarily related to leasehold improvements and furniture and fixtures at certain retail stores[32] NOTE 5 – LEASES This note provides details on the company's operating lease assets and liabilities, including lease costs and weighted average terms Lease Assets and Liabilities (In thousands) | (In thousands) | July 31, 2025 | July 31, 2024 | January 31, 2025 | | :-------------------- | :------------ | :------------ | :--------------- | | Operating lease assets | $264,526 | $204,008 | $255,180 | | Total lease liabilities | $280,295 | $218,733 | $271,525 | - Lease costs for the three and six months ended July 31, 2025, were $17.8 million and $36.0 million, respectively, recorded within selling, general and administrative expenses[38] - As of July 31, 2025, the weighted average remaining lease term for operating leases is 6.5 years, with a weighted average discount rate of 6.4%[40] NOTE 6 – NET INCOME PER COMMON SHARE This note presents the calculation of basic and diluted net income per common share, including the shares used in the computation Net Income Per Common Share (In thousands, except share and per share amounts) | (In thousands, except share and per share amounts) | Three Months Ended July 31, 2025 | Three Months Ended July 31, 2024 | Six Months Ended July 31, 2025 | Six Months Ended July 31, 2024 | | :------------------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Basic net income per share | $0.26 | $0.54 | $0.43 | $0.67 | | Diluted net income per share | $0.25 | $0.53 | $0.42 | $0.65 | | Basic common shares | 42,777 | 44,569 | 43,254 | 45,022 | | Diluted common shares | 44,219 | 45,483 | 44,795 | 46,105 | - Approximately 43,000 and 34,500 shares of common stock were excluded from diluted EPS calculations for the three and six months ended July 31, 2025, respectively, due to performance conditions not being met[42] NOTE 7 – NOTES PAYABLE This note details the company's various debt instruments, including secured notes, unsecured loans, and credit facilities, along with their terms Notes Payable (In thousands) | (In thousands) | July 31, 2025 | July 31, 2024 | January 31, 2025 | | :-------------------- | :------------ | :------------ | :--------------- | | Secured Notes | $0 | $400,000 | $0 | | Unsecured loans | $5,180 | $7,760 | $6,159 | | Overdraft facilities | $4,125 | $7,906 | $0 | | Foreign credit facilities | $6,176 | $0 | $0 | | Total | $6,869 | $402,541 | $3,045 | - In August 2024, the company redeemed the entire $400.0 million principal amount of Senior Secured Notes due August 2025, using cash on hand and revolving credit facility borrowings[46] - The Third ABL Credit Agreement, a five-year senior secured asset-based revolving credit facility, was amended and restated on June 4, 2024, increasing borrowing capacity to $700.0 million and extending maturity to June 2029[47][49] - As of July 31, 2025, there were no borrowings outstanding under the Third ABL Credit Agreement, and the company was in compliance with all covenants[52][53] NOTE 8 – SUPPLY CHAIN FINANCE PROGRAM This note describes the company's voluntary supply chain finance program and the outstanding payment obligations under it - The company operates a voluntary supply chain finance (SCF) program, with $205.3 million in payment obligations outstanding as of July 31, 2025[60] - During the six months ended July 31, 2025, $131.6 million in confirmed invoices were paid through the SCF Program[61] NOTE 9 – REVENUE RECOGNITION This note explains the company's revenue recognition policies, disaggregated by segment, and details contract liabilities - Revenue is disaggregated by wholesale and retail operations segments, consistent with how the Chief Operating Decision Maker manages the company[62][63] - Wholesale revenues are recognized when control transfers to the customer, typically upon physical possession, while retail revenues are recognized at the point of sale[64][65] - Contract liabilities, primarily gift card liabilities and advance payments from licensees, totaled $5.8 million at July 31, 2025[66] NOTE 10 – SEGMENTS This note provides financial information for the company's wholesale and retail operations segments, including net sales, gross profit, and assets - The company operates in two reportable segments: wholesale operations and retail operations, with operating profit/loss used as the measure of segment performance[67][68] Segment Performance (In thousands) | (In thousands) | Three Months Ended July 31, 2025 (Wholesale) | Three Months Ended July 31, 2025 (Retail) | Six Months Ended July 31, 2025 (Wholesale) | Six Months Ended July 31, 2025 (Retail) | | :--------------------------------------- | :------------------------------------------- | :---------------------------------------- | :----------------------------------------- | :-------------------------------------- | | Net sales | $589,023 | $41,060 | $1,151,671 | $77,435 | | Gross profit | $228,976 | $21,495 | $456,060 | $40,955 | | Operating profit (loss) | $16,597 | $(297) | $28,278 | $(3,502) | Segment Assets (In thousands) | (In thousands) | July 31, 2025 | July 31, 2024 | January 31, 2025 | | :-------------------- | :------------ | :------------ | :--------------- | | Wholesale assets | $1,741,392 | $1,719,733 | $1,508,111 | | Retail assets | $86,763 | $116,831 | $97,226 | | Corporate assets | $862,826 | $859,723 | $877,897 | | Total assets | $2,690,981 | $2,696,287 | $2,483,234 | NOTE 11 – STOCKHOLDERS' EQUITY This note details changes in stockholders' equity, including the utilization of treasury stock for equity awards - For the six months ended July 31, 2025, the company utilized 277,191 shares of treasury stock for equity awards vesting[73] NOTE 12 – LITIGATION WITH PVH CORP. This note describes the ongoing legal dispute with PVH Corp. regarding license agreements for Calvin Klein and Tommy Hilfiger brands - On June 13, 2025, G-III filed a complaint against PVH Corp. for breach of contract regarding the denial of a license extension for Calvin Klein and Tommy Hilfiger women's suits[75] - PVH Corp. subsidiaries filed a counter-complaint on July 30, 2025, alleging breaches of license agreements by G-III, which G-III believes is without merit and intends to vigorously defend[75] NOTE 13 – RECENT ADOPTED AND ISSUED ACCOUNTING PRONOUNCEMENTS This note outlines recent FASB accounting pronouncements, including those related to income tax disclosures and expense disaggregation - The FASB issued ASU 2023-09, "Income Taxes (Topic 740): Improvements to Income Tax Disclosures," effective for fiscal years beginning after December 15, 2024, requiring more detailed tax rate reconciliations and disaggregated income tax payments[77] - The FASB issued ASU 2024-03, "Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses," effective for fiscal years beginning after December 15, 2026, requiring more detailed disclosure of certain income statement expenses[78] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. This section provides management's perspective on the company's financial performance and condition, highlighting key trends, operational results, and an analysis of liquidity and capital resources Overview This section provides a general description of G-III's business, brand portfolio, distribution channels, and key success factors - G-III is a global fashion leader with over 30 owned and licensed brands, including DKNY, Donna Karan, Karl Lagerfeld, and Vilebrequin, offering a diverse range of apparel and accessories[83][84] - Products are sold through leading retailers (e.g., Macy's, Nordstrom), online retail partners (e.g., Amazon, Zalando), and the company's own retail stores and digital sites[85][86] - The company's success depends on its ability to adapt to changing consumer demands, diversify its product portfolio, and maintain competitive sourcing[88][89] Segments This section describes the company's two reportable segments: wholesale operations and retail operations, detailing their respective activities - The company reports based on two segments: wholesale operations and retail operations[90] - Wholesale operations include sales to retailers under owned, licensed, and private label brands, as well as Karl Lagerfeld and Vilebrequin businesses, and royalty revenues from owned trademarks[91] - Retail operations consist of direct sales to consumers through 47 company-operated outlet stores (primarily DKNY and Karl Lagerfeld Paris in North America) and digital channels[92] Trends Affecting Our Business This section discusses external factors impacting the company, including tariffs, industry trends, digital expansion, and retailer financial difficulties - Tariffs: The U.S. imposed tariffs on imports from China (temporarily reduced to 30% through November 2025), Vietnam (20%), and Indonesia (19%), impacting sourcing costs and supply chain planning[93][95] - Industry Trends: The apparel industry faces challenges from retail store closures, increased focus on digital sales, retail consolidation, and a desire for vendor consolidation[96] - Digital Expansion: G-III is investing in digital marketing, personnel, logistics, and distribution to expand its digital footprint across its own and third-party websites[97] - Retailer Financial Difficulties: Bankruptcies and store closings by retailers (e.g., Hudson's Bay Company) pose credit risk, which G-III mitigates through monitoring and credit insurance[98] Calvin Klein and Tommy Hilfiger Licenses This section addresses the significant impact of expiring Calvin Klein and Tommy Hilfiger licenses on net sales and mitigation strategies - Net sales from Calvin Klein and Tommy Hilfiger brands constituted approximately 34.0% of total net sales in fiscal 2025 and 41.0% in fiscal 2024[101] - The staggered expirations of these licenses (from December 31, 2024, through December 31, 2027) are expected to cause a significant decrease in net sales[102] Calvin Klein and Tommy Hilfiger License Expirations | Calvin Klein and Tommy Hilfiger license expirations by date | Portion of Total G-III Fiscal 2025 Net Sales (in thousands, except for percentages) | | :-------------------------------------------------------- | :-------------------------------------------------------------------------------- | | December 31, 2024 | $174,279 (5%) | | December 31, 2025 | $467,834 (15%) | | December 31, 2026 | $413,202 (13%) | | December 31, 2027 | $26,034 (1%) | - G-III aims to mitigate these losses by expanding owned brands (DKNY, Donna Karan, Karl Lagerfeld), new product lines, international growth, digital channels, and new licensed brands (Nautica, Halston, Champion, Converse, BCBG)[104] Litigation with PVH Corp. This section details the ongoing legal dispute with PVH Corp. concerning license extensions and alleged breaches of agreements - G-III filed a complaint against PVH Corp. on June 13, 2025, for breach of contract related to the denial of a license extension for Calvin Klein and Tommy Hilfiger women's suits[106] - PVH Corp. filed a counter-complaint on July 30, 2025, alleging G-III breached license agreements; G-III intends to vigorously defend against these claims[106] Political Environment This section discusses the potential impact of new political policies, international trade relations, and geopolitical tensions on the company - Uncertainty regarding new policies from the current administration could impact international trade relations, legislation, economic policies, and geopolitical tensions, potentially affecting global economy and operating results[107] Foreign Currency Fluctuation This section addresses the potential effects of global foreign currency exchange rate volatility on the reported results of non-U.S. subsidiaries - Volatility in global foreign currency exchange rates, particularly the Euro against the U.S. dollar, may positively or negatively impact the reported results of non-U.S. subsidiaries[108] Tax Laws and Regulations This section discusses the impact of recent tax legislation, specifically the One Big Beautiful Bill Act, on the company's financial statements - The One Big Beautiful Bill Act (OBBBA) was enacted on July 4, 2025, making key elements of the Tax Cuts and Jobs Act permanent and modifying the international tax framework[109] - The impact of the OBBBA on the company's provision for income taxes and consolidated balance sheet as of July 31, 2025, was immaterial[111] Inflation and Interest Rates This section analyzes the effects of inflationary pressures and interest rate changes on consumer demand, pricing, and borrowing costs - Inflationary pressures have led to softening consumer demand, increased promotional activity, and higher product pricing, potentially impacting future sales and cost structure[112] - The Federal Reserve decreased interest rates in fiscal 2025 and maintained them in fiscal 2026, but future volatility could increase borrowing costs and negatively affect consumer spending[113] Supply Chain This section discusses the challenges and disruptions in the global supply chain, including tariffs and shipping delays, and sourcing strategies - The global supply chain is negatively impacted by reciprocal tariffs and disruptions in the Red Sea, leading to shipping delays but no significant loss of customer sales for G-III[114][116] - The company sources substantially all products from independent, third-party manufacturers, primarily in Asia, and monitors changing tariffs and trade restrictions[115] International Conflicts This section addresses the potential macroeconomic impacts of military conflicts and sanctions on the global economy and consumer demand - Military conflicts in Ukraine and the Middle East, along with potential sanctions, could lead to broader unfavorable macroeconomic conditions, including higher fuel prices, weaker global economy, and lower consumer demand[117] - Sales in Russia, Ukraine, and Israel are not material to G-III's financial results, but the overall impact of these conflicts remains uncertain[117] Results of Operations This section provides a comparative analysis of the company's financial performance for the three and six months ended July 31, 2025, versus the prior year Three months ended July 31, 2025 compared to three months ended July 31, 2024 This section compares the company's financial performance for the three months ended July 31, 2025, against the same period in the prior year Key Financial Metrics (In millions) | Metric (In millions) | Q2 2025 | Q2 2024 | Change (YoY) | | :------------------- | :------ | :------ | :----------- | | Net sales | $613.3 | $644.8 | -4.96% | | Wholesale net sales | $589.0 | $620.3 | -5.05% | | Retail net sales | $41.1 | $37.2 | +10.48% | | Gross profit | $250.5 | $275.9 | -9.21% | | Gross profit % | 40.8% | 42.8% | -2.0 pp | | Operating profit | $16.3 | $41.5 | -60.72% | | Net income | $10.9 | $24.2 | -54.96% | - Wholesale net sales decreased primarily due to a $48.8 million decrease in Calvin Klein and Guess licensed products, partially offset by a $20.2 million increase in Karl Lagerfeld products[119] - Retail net sales increased due to higher sales at Karl Lagerfeld Paris stores and increased comparable store sales for both Karl Lagerfeld Paris and DKNY, despite a decrease in store count[120] - Gross profit percentage decreased in wholesale due to tariffs and product mix, and in retail due to reduced gross profit from digital sales of G.H. Bass products[121] - Interest and financing charges shifted from an expense of $4.9 million in Q2 2024 to an income of $0.3 million in Q2 2025, primarily due to the redemption of Senior Secured Notes[125][127] Six months ended July 31, 2025 compared to six months ended July 31, 2024 This section compares the company's financial performance for the six months ended July 31, 2025, against the same period in the prior year Key Financial Metrics (In millions) | Metric (In millions) | H1 2025 | H1 2024 | Change (YoY) | | :------------------- | :------ | :------ | :----------- | | Net sales | $1,196.9| $1,254.5| -4.60% | | Wholesale net sales | $1,151.7| $1,218.1| -5.45% | | Retail net sales | $77.4 | $67.7 | +14.33% | | Gross profit | $497.0 | $534.8 | -7.10% | | Gross profit % | 41.5% | 42.6% | -1.1 pp | | Operating profit | $24.8 | $55.0 | -54.91% | | Net income | $18.7 | $30.0 | -37.70% | - Wholesale net sales decreased by $110.2 million due to Calvin Klein and Guess licensed products, partially offset by a $57.6 million increase in Karl Lagerfeld, DKNY, and Donna Karan products[130] - Retail net sales increased due to higher sales at DKNY and Karl Lagerfeld Paris stores, with increased comparable store sales[131] - Gross profit percentage in retail operations improved due to a better product assortment and increased digital sales of Donna Karan products with higher average unit retail prices[132] - Selling, general and administrative expenses decreased by $7.4 million, primarily due to lower compensation and advertising expenses, partially offset by increased warehouse and bad debt expenses[133] - Interest and financing charges decreased significantly from $10.3 million expense to $0.2 million income, driven by the redemption of Senior Secured Notes[136] Liquidity and Capital Resources This section analyzes the company's cash availability, debt instruments, credit facilities, and cash flows from operating, investing, and financing activities Cash Availability This section details the company's cash and cash equivalents and available borrowing capacity under its revolving credit facility - As of July 31, 2025, G-III had $301.8 million in cash and cash equivalents and approximately $530 million in availability under its revolving credit facility[139] Senior Secured Notes This section discusses the redemption of the company's Senior Secured Notes and the associated financial impact - The company redeemed the entire $400.0 million principal amount of Senior Secured Notes in August 2024, resulting in $1.6 million unamortized debt issuance costs charged to interest expense[140] Third Amended and Restated ABL Credit Agreement This section describes the terms and current status of the company's primary asset-based revolving credit facility - The Third ABL Credit Agreement, effective June 4, 2024, provides a five-year senior secured asset-based revolving credit facility of up to $700.0 million, extending maturity to June 2029[141][142] - Borrowings bear interest at Adjusted Term SOFR plus a margin of 1.50% to 2.00%, or an alternate base rate plus 0.50% to 1.00%; average rate was 8.0% per annum as of July 31, 2025[145] - As of July 31, 2025, there were no outstanding borrowings under the Third ABL Credit Agreement, and the company was in compliance with all covenants[147][148] Unsecured Loans This section provides details on the unsecured loans held by the company's foreign entities, including outstanding balances and interest rates - Foreign entities have unsecured loans with an aggregate outstanding balance of €4.4 million ($5.2 million) as of July 31, 2025, with fixed interest rates of 0% to 5.0% per annum[150] Overdraft Facilities This section describes the overdraft facilities utilized by foreign entities and their aggregate drawn amounts - Foreign entities utilize overdraft facilities with HSBC Bank (max €10 million) and UBS Bank (max CHF 4.7 million), with an aggregate of €3.5 million ($4.1 million) drawn as of July 31, 2025[151] Foreign Credit Facilities This section details credit agreements held by international subsidiaries and their aggregate borrowings - KLH has a €15.0 million credit agreement with ABN AMRO Bank, and a Vilebrequin subsidiary has a €5.0 million credit agreement with CIC Bank; aggregate borrowings were €5.3 million ($6.2 million) as of July 31, 2025[152][153] Outstanding Borrowings This section summarizes the company's outstanding borrowings under various facilities and contingent liabilities - No borrowings were outstanding under the Third ABL Credit Agreement at July 31, 2025. Contingent liability under open letters of credit was $3.3 million[155] Outstanding Borrowings (In millions) | (In millions) | July 31, 2025 | July 31, 2024 | | :-------------------- | :------------ | :------------ | | Unsecured loans | $5.2 | $7.8 | | Overdraft facilities | $4.1 | $7.9 | | Foreign credit facilities | $6.2 | $0 | Supply Chain Finance Program This section details the outstanding payment obligations under the company's supply chain finance program - The company's SCF Program had $205.3 million in outstanding payment obligations as of July 31, 2025, recorded within accounts payable[60][156] Share Repurchase Program This section outlines the company's share repurchase program, including shares repurchased and remaining authorization - The Board authorized an increase to 10,000,000 shares for the repurchase program in August 2023. During the six months ended July 31, 2025, 1,948,425 shares were repurchased for $44.3 million[157] - As of July 31, 2025, 5,841,743 shares remained authorized for purchase under the program[157] Cash from Operating Activities This section analyzes the cash generated from the company's core business operations, highlighting key drivers - Generated $168.9 million in cash from operating activities during the six months ended July 31, 2025, driven by net income, increased accounts payable, and decreased accounts receivable[158] - Operating cash flow changes are consistent with seasonal patterns of inventory buildup for the fall shipping season[159] Cash from Investing Activities This section details the cash used in investing activities, primarily for capital expenditures - Used $19.2 million in investing activities during the six months ended July 31, 2025, primarily for $18.4 million in capital expenditures related to leasehold improvements[161] Cash from Financing Activities This section outlines the cash flows related to financing activities, including share repurchases and debt transactions - Net cash used by financing activities was $41.3 million, mainly due to $44.3 million for share repurchases and $4.9 million for taxes on net share settlements, partially offset by $8.0 million net proceeds from foreign facilities[162] Critical Accounting Policies This section highlights the significant accounting policies that require management's judgment and estimates in preparing financial statements - Management's discussion relies on consolidated financial statements prepared using critical accounting policies that involve judgments and estimates, which may differ from actual future events[163] - No material changes to critical accounting policies were reported as of July 31, 2025, from those in the Annual Report on Form 10-K for the year ended January 31, 2025[164] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section states that there are no material changes to the market risk disclosures previously provided in the company's Annual Report on Form 10-K for the fiscal year ended January 31, 2025 - No material changes to market risk disclosures from the Annual Report on Form 10-K for the year ended January 31, 2025[165] Item 4. Controls and Procedures This section details the evaluation of the company's disclosure controls and procedures, identifying a material weakness in internal control over financial reporting within the KLH subsidiary, and outlines the remediation measures being undertaken Evaluation of Disclosure Controls and Procedures This section presents management's conclusion on the effectiveness of the company's disclosure controls and procedures - Management, including the CEO and CFO, concluded that disclosure controls and procedures were not effective as of July 31, 2025, due to a material weakness in internal control over financial reporting[167] Material Weakness in Internal Control This section identifies a material weakness in information technology general controls within the KLH subsidiary affecting financial reporting processes - A material weakness was identified in the operating effectiveness of information technology general controls (ITGCs) over business applications supporting financial reporting processes within the KLH subsidiary (8.2% of fiscal 2025 net sales)[169] - Despite the material weakness, management concluded that the consolidated financial statements present fairly, in all material respects, the financial position, results of operations, and cash flows[170] Remediation Measures This section outlines the actions management is taking to address and remediate the identified material weakness in internal controls - Management is implementing remedial actions, including additional risk assessment procedures over IT, control enhancements, and training, with oversight from the Audit Committee[171] Changes in Internal Control over Financial Reporting This section reports on any material changes in internal control over financial reporting during the quarter - Other than the identified material weakness, there were no other material changes in internal control over financial reporting during the quarter ended July 31, 2025[172] PART II – OTHER INFORMATION This section provides additional information not covered in Part I, including risk factors, equity security sales, other disclosures, and a list of exhibits Item 1A. Risk Factors This section refers to the risk factors detailed in the company's Annual Report on Form 10-K for the year ended January 31, 2025, stating that there have been no material changes to these risks as of July 31, 2025 - No material changes to risk factors from the Annual Report on Form 10-K for the year ended January 31, 2025[175] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section provides details on the company's common stock repurchases during the three months ended July 31, 2025, under its authorized share repurchase program Common Stock Repurchases | Date Purchased | Total Number of Shares Purchased | Average Price Paid Per Share | | :------------------- | :------------------------------- | :--------------------------- | | May 1 - May 31, 2025 | — | $— | | June 1 - June 30, 2025 | 1,140,988 | $21.60 | | July 1 - July 31, 2025 | — | $— | | Total | 1,140,988 | $24.96 | - As of July 31, 2025, 5,841,743 shares remained authorized for purchase under the share repurchase program, which has no expiration date[177] Item 5. Other Information This section states that no director or officer adopted or terminated a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement during the three months ended July 31, 2025 - No director or officer adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the three months ended July 31, 2025[178] Item 6. Exhibits This section lists all exhibits filed with the Form 10-Q, including certifications by the CEO and CFO, and XBRL-related documents - Includes certifications by Morris Goldfarb (CEO) and Neal S. Nackman (CFO) pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350[182] - Contains Inline XBRL documents for instance, schema, calculation, definition, label, and presentation linkbases, along with the Cover Page Interactive Data File[182]