G-iii Apparel's Q2 2026 Earnings Call: Contradictions Emerge on Tariff Impacts, Brand Mix, and Margin Outlook

The above is the analysis of the conflicting points in this earnings call

Date of Call: September 3, 2025

Financials Results

• Revenue: $613M, down ~5% YOY (vs $645M prior year)
• EPS: $0.25 non-GAAP diluted EPS, down ~52% YOY (vs $0.52 prior year)
• Gross Margin: 40.8%, compared to 42.8% in the prior year (down ~200 bps)

Guidance:

• FY26 net sales ~ $3.02B, down ~5% YOY.
• Non-GAAP EPS $2.55-$2.75; Adjusted EBITDA $198-$208M.
• FY gross margin down ~300 bps; Q3 GM down slightly less than Q4.
• Unmitigated tariff impact ~ $75M, mostly in 2H.
• Owned brands (DKNY, Donna Karan, Karl Lagerfeld, Vilebrequin) to grow mid-single digits in FY26.
• Interest expense ~ $5M; tax rate ~30%.
• Capex ~ $40M; no buybacks assumed.
• Prioritizing margin over sales; warehouse consolidation and tech investments ongoing.

Business Commentary:

* Strong Performance in Owned Brands: - G III Apparel Group's owned brands, including DKNY, Donna Karan, Karl Lagerfeld, and Vilbriken, showed solid performance. - Sales momentum was driven by these brands, leading to net sales of $613 million in Q2, exceeding guidance. - The strong performance was attributed to retailers responding to consumer demand for newness and fashion transitions.

• Impact of Tariffs and Inventory Pressures:
• Gross margins were impacted by higher than expected tariff costs, with a primary cause being a greater volume of tariff inventory shipments.
• The company is actively mitigating these pressures through vendor participation, selective sourcing shifts, and targeted pricing.

• Inventory levels were up 5% to $640 million, reflecting accelerated receipts due to tariffs.

• Fiscal Year 2026 Guidance Adjustment:

• G III Apparel Group reduced its fiscal 2026 net sales outlook to approximately $3,020 million, a decrease of approximately 5% due to the expiration of its Calvin Klein licenses and cautious retail partner behavior.
• The company anticipates the total incremental cost of tariffs to be $155 million, up from the $135 million estimate.

• Guidance reflects increased cost pressures and narrower selling periods, as well as a strategic shift to protect margins.

• Strategic Initiatives and Brand Growth:

• The company is streamlining its go-to-market approach and investing in technology and infrastructure to enhance productivity and reduce costs.
• Expansion of the owned brand portfolio is central to unlocking long-term potential, with each brand showing strong growth and international expansion opportunities.
• G III Apparel Group continues to invest in marketing and digital presence to amplify brand reach and drive conversion.

Sentiment Analysis:

• “We exceeded our expectations across both net sales and earnings.” Yet, “We now expect fiscal year 2026 net sales of approximately $3,020,000,000, a decrease of approximately 5% to the previous year.” FY26 EPS guided to $2.55–$2.75 vs $4.42 last year, and “the full fiscal year 2026 gross margin rate [to] be down approximately 300 basis points.” Management cites “unmitigated impact of tariffs of approximately $75,000,000…mostly in the second half,” while highlighting owned brands’ growth and long-term margin normalization.

Q&A:

• Question from Ashley Owens (KeyBanc Capital Markets): Gross margin outlook, promotionality, and pricing elasticity; will pressures persist into next year or will mitigation fully kick in?
  Response: Selective price increases where acceptable; near term absorbing some costs; margins to normalize/expand as PVH exits and owned-brand mix rises; early next year some pressure, but pricing can reset if tariffs are known before going to market.

• Question from Ashley Owens (KeyBanc Capital Markets): Is PVH still ~25% of sales given reduced open-to-buys, or is mix stepping down faster?
  Response: No dramatic change; PVH mix roughly similar, with pullbacks affecting most brands amid tariff and consumer pressures.

• Question from Marcio Serna (UBS): What’s driving the sales outlook cut—PVH declines vs go-forward brands—and does mid-single-digit growth imply deceleration?
  Response: PVH transitions plus tariffs created a “perfect storm,” slowing PVH and moderating owned-brand growth to mid-single digits.

• Question from Marcio Serna (UBS): Size of Q2 tariff impact and any exposure to a 145% China tariff?
  Response: About half of the ~200 bps GM decline was tariffs, half mix; no 145% tariff exposure—China tariffs were ~30% and product was rerouted/held to avoid spikes.

• Question from Paul Kearney (Barclays): How large is India-sourced product and the sales impact of foregoing it vs PVH order reductions?
  Response: India historically low-single-digit share; temporarily higher in H2; potential ~$30M sales impact if abandoned, already reflected in outlook.

• Question from Paul Kearney (Barclays): Are price increases hitting a ceiling with customers and retailers?
  Response: Some retailer resistance pending comp price validation; consumers accept higher prices in many areas; value channels buying needs until pricing normalizes.

• Question from Dana Telsey (Telsey Advisory Group): Update on owned-brand performance for the rest of the year and new license opportunities like Converse and BCBG?
  Response: Owned brands are expanding doors and penetration (DK Weekend ~300 spring doors; Saks added Donna Karan); considering DK flagships; Converse and BCBG launches are strong and open new channels/geographies.