G III APPAREL GROUP LTD /DE/ Q3 FY2025 earnings call

• Morris Goldfarb was pleased with strong third quarter results, with earnings above expectations due to growth of key owned brands. Teams executed well despite a challenging consumer environment, unseasonable weather, and supply chain disruptions. • Fourth quarter initially had softer sales in cold weather categories but improved as temperatures dropped heading into the holiday period, with notable improvements during Black Friday. • Marketing investments boosted consumer engagement, seen in increased traffic to owned North American direct-to-consumer stores and websites, leading to growth in conversion rates and sales. • Inventories are well positioned to support holiday and early spring demand. • Strategic priorities include driving growth of owned brands, building a complementary licensed portfolio, expanding globally, and bringing the North American retail segment to profitability. • Brand highlights: Donna Karan had strong sales with retail sales exceeding expectations year-to-date, DKNY saw over 30% sales growth driven by North America, Karl Lagerfeld grew over 30% in North America with men's business growing, and Vilebrequin navigated challenges with digital strength and store expansions. • Licensed brands: Successful launches of Nautica, Halston, Champion outerwear, and a new agreement with Converse, Inc. for men's and women's apparel.

Net sales for the third quarter ended October 31, 2024, were $1.09 billion. The wholesale segment had net sales of $1.07 billion, driven by strong growth of key owned brands in North America but offset by a decline in the Calvin Klein and Tommy Hilfiger businesses. The retail segment had net sales of $42 million for the quarter, with double-digit comp sales increases despite closing seven stores. The gross margin percentage in the third quarter of fiscal 2025 was 39.8% overall. The wholesale segment's gross margin percentage was 38.4%, and the retail segment's gross margin percentage was 52.3%. The key owned brands, DKNY, Karl Lagerfeld, Donna Karan, and Vilebrequin collectively grew over 30%.

• For fiscal 2025, net sales guidance is updated to $3.15 billion. • Raised full-year non-GAAP earnings per diluted share guidance to the range of $4.10 to $4.20. • Adjusted EBITDA is expected to be between $309 million and $314 million. • Anticipate incremental expenses of approximately $55 million, primarily related to marketing for Donna Karan and DKNY, and investments in talent and technology.

• Challenging consumer environment. • Unseasonable weather, which affected sales in the fourth quarter start. • Supply chain disruptions. • Potential tariffs, with the company being confident in its ability to adapt to mitigate risk if tariffs become a more prominent issue.

Q: Bob Drbul from Guggenheim asked about the timing of Converse product shipment and the EPS bridge.

A: Morris Goldfarb stated Converse product will have touches in spring and hopes for global penetration by fall 2025. Neal Nackman discussed the puts and takes in the EPS bridge, mentioning differences in top line between Q3 and Q4 and factors like outerwear performance and supply chain issues.

Q: Ashley Owens from KeyBank Capital Markets inquired about gross margin expansion and bottom line momentum.

A: Morris Goldfarb and Neal Nackman noted gross margin improvement from the shift to own brands, stable promotionality, and confidence in bottom line momentum with continued growth.

Q: Mauricio Serna from UBS asked about Donna Karan's contribution and gross margin outlook.

A: Morris Goldfarb and Neal Nackman spoke about Donna Karan's strong performance, its value proposition, and future margin potential as the brand grows.

Q: Paul Kearney from Barclays asked about inventory position and China manufacturing.

A: Morris Goldfarb talked about the company's flexibility in manufacturing with presence in multiple countries and ability to adapt to tariffs. Neal Nackman mentioned inventory levels are in good shape and prospects for future inventory management.