GIII

• Strategic Milestone: Completed the acquisition of Marc Jacobs, viewed as transformational for enhancing the owned brand portfolio and evolving into a brand-led global apparel powerhouse.
• Financial Performance: Non-GAAP EPS of $0.26 exceeded guidance ($0.15-$0.25), driven by 440 bps gross margin expansion and disciplined expense management.
• Portfolio Transition: Excluding the exiting PVH licenses (Tommy Hilfiger/Calvin Klein) and new Marc Jacobs contribution, the go-forward portfolio grew in the high single digits. Full-price wholesale sales for this portfolio rose >20%.
• Brand Highlights:
  • Donna Karan: Sales up >45%; strong digital performance and double-digit handbag growth. Launched global campaign with Kendall Jenner.
  • DKNY: Mid-single digit comp store sales; mid-20% e-commerce growth. Expanding international distribution and lifestyle licensing.
  • Karl Lagerfeld: Strong North American growth; expanding hospitality ventures (Cafe in Amsterdam, Residences in Lisbon).
  • Bill Blass: Positive growth with margins exceeding targets.
• Operational Efficiency: Inventory decreased 13% year-over-year. SG&A remained stable at ~$231 million despite investments in marketing and technology.
• Balance Sheet: Ended Q2 with $529 million in cash and ~$1 billion in liquidity, bolstered by $134 million in tariff refunds.

• Fiscal 2027 Net Sales: Reiterated at approximately $2.71 billion (down ~8% YoY), excluding Marc Jacobs impact.
• Fiscal 2027 Earnings: Raised Non-GAAP EPS guidance to $2.20-$2.30 (previously $2.00-$2.20 implied or lower range); Non-GAAP Net Income raised to $97-$101 million.
• Fiscal 2027 Adjusted EBITDA: Raised to $174-$178 million.
• Fiscal 2027 Q3 Outlook: Net sales expected at ~$870 million (down from $989 million in Q3 FY26) due to PVH license exits. Non-GAAP EPS expected at $1.34-$1.45.
• Marc Jacobs Impact: Expected to be dilutive in FY27; full-year contribution (~$360M sales) will be included in Q3 update (December). Long-term target is $1 billion annual revenue.
• Assumptions: Tariffs assumed to remain at current rates; ~400 bps gross margin improvement expected for the full year.

The company reported total net sales of $554 million, a 10% decline from the prior year. The Wholesale segment generated $531 million in revenue (down from $589 million), representing the vast majority of total sales; this decrease was primarily due to the exit of Calvin Klein and Tommy Hilfiger licenses, partially offset by high single-digit growth in the go-forward portfolio. The Retail segment contributed $40 million (down slightly from $41 million). Gross margin expanded significantly to 45.2% (up 440 basis points), driven by a mix shift toward higher-margin owned brands and pricing actions.

• European Macro Softness: Challenging consumer environment, reduced traffic in London, and warmer-than-average weather negatively impacted European sales.
• Off-Price Channel Pressure: Unexpected pressure observed in off-price retailers, potentially due to weather or World Cup impacts, contrary to typical seasonal trends.
• Supply Chain Disruptions: Weather-related delays and container misses can cause temporary shipment shifts between quarters, impacting short-term sales recognition.
• PVH License Exit: Significant revenue loss (~$1.2B over time) from exiting Calvin Klein and Tommy Hilfiger licenses requires successful replacement via organic growth and acquisitions.

Q: Analyst asked about comfort with sales outlook given Europe declines and potential freight/weather headwinds. / A: Management dismissed the Q2 miss as a timing issue rather than a fundamental failure, attributing Europe declines to record heat and reduced Middle Eastern travel. They expressed confidence in the wholesale order book being 90% complete and comparable to last year, noting that G3 is hedged against weather risks through a diverse product mix including swimwear and dresses.