G-III Apparel (GIII) - 2026 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Net sales for the third quarter were $989 million, down from $1.09 billion in the same period last year, generally in line with expectations [28] - Non-GAAP earnings per diluted share were $1.90, compared to $2.59 in the previous year, exceeding expectations [30] - Gross margins were 38.6%, down from 39.8% in the previous year's third quarter, primarily due to tariffs [29] Business Line Data and Key Metrics Changes - Wholesale segment net sales were $977 million, down from $1.07 billion last year, mainly due to lower sales from Calvin Klein and Tommy Hilfiger licensed businesses [28] - Retail segment net sales increased to $46 million from $42 million, driven by solid comp sales increases across North American DKNY and Karl Lagerfeld stores [28] - Donna Karan is expected to grow by 40% in fiscal 2026, reflecting strong consumer demand and pricing power [10] Market Data and Key Metrics Changes - North America saw double-digit growth compared to last year, while Europe posted high single-digit growth [6] - Digital traffic increased over 20% across owned dot-com, contributing to substantial growth in conversion rates and overall sales [6] - The company experienced robust digital performance across North America and Europe, with nearly 20% growth in digital sales [22] Company Strategy and Development Direction - The company is focused on driving both near and long-term growth through brand strength, technology investments, and enhancing direct-to-consumer capabilities [8][9] - Strategic priorities include expanding owned brands, international expansion, and category expansion through licensing [9][10] - The company plans to grow mid-single digits this year for key owned brands like DKNY, Donna Karan, and Karl Lagerfeld [31] Management's Comments on Operating Environment and Future Outlook - Management remains cautious about the global consumer environment but is optimistic about holiday performance and spring sell-in [8] - The company is taking a prudent approach to its outlook for the remainder of the year, adjusting guidance to reflect third-quarter earnings outperformance [26] - Management expressed confidence in the ability to sustain long-term success despite challenges from tariffs and the exit from PVH licenses [25] Other Important Information - The company ended the quarter with a net cash position of $174 million after repurchasing approximately $50 million in stock year-to-date [30] - A new dividend program has been introduced, with an initial quarterly cash dividend of $0.10 per share [31] - The gross impact of tariffs is estimated to be approximately $135 million, with an unmitigated impact of about $65 million for fiscal 2026 [32] Q&A Session Summary Question: Can you unpack the gross margin performance? - Management indicated that gross margins were better than expected due to strong full-price selling, despite the impact of tariffs [40][41] Question: What are the preliminary thoughts around the top line or bottom line goals for next year? - Management is exploring various strategic options, including acquisitions and new licenses, but is not in a rush to make decisions [48][49] Question: How has the order trend been changing for your own brands? - Management noted significantly higher demand at the full-price channel, with strong sell-throughs across all brands [76] Question: What are the opportunities for growth in owned brands like Donna Karan? - Management highlighted the potential for growth in dresses, sportswear, and handbags, with a focus on expanding distribution [81]