Q2 2026 Earnings Call: Contradictions Emerge on Tariffs, Inventory, and Brand Performance Discrepancies

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

Date of Call: September 4, 2025

Financials Results

• Revenue: $613 million, down ~5% YOY (vs. $645 million last year)
• EPS: $0.25 per diluted share, down ~52% YOY (vs. $0.52 last year)
• Gross Margin: 40.8%, compared to 42.8% in the prior year (down 200 bps)

Guidance:

• FY26 net sales expected ~$3.02B (down ~5% YOY)
• Non-GAAP EPS $2.55–$2.75; Adjusted EBITDA $198–$208M
• FY26 gross margin down ~300 bps; Q4 bears highest tariff impact; Q3 down slightly less
• Unmitigated tariff cost ≈ $75M (total incremental ≈ $155M); owned brands to grow mid-single digits
• Interest expense ≈ $5M; Capex ≈ $40M; tax rate ≈ 30%
• No share repurchases assumed; exiting lower-margin PVH licenses; prioritizing margin over sales (including foregone India-sourced product)

Business Commentary:

* Revenue and Earnings Performance: - G-III Apparel Group reported net sales of $613 million for Q2 fiscal 2026, exceeding their guidance. - The company's GAAP earnings per diluted share were $0.25, also surpassing the top end of their guidance range. - The strong performance was driven by retailers responding to consumer demand for newness and fashion in the transition season, particularly from key owned brands like DKNY, Donna Karan, Karl Lagerfeld, and Vilebrequin.

• Tariff Impact and Gross Margin Challenges:
• G-III faced a gross margin percentage of 40.8% for the second quarter, down from 42.8% in the previous year.
• The decline was primarily due to higher-than-expected tariff costs, driven by a greater volume of tariff inventory shipments and an unfavorable product mix.

• The company is actively mitigating these pressures through vendor participation, selective sourcing shifts, and targeted price increases, with plans to absorb some of these costs in the near term.

• Strategic Brand Growth and Market Share:

• Owned brands like DKNY, Donna Karan, Karl Lagerfeld, and Vilebrequin delivered healthy growth in the second quarter.
• The company continues to expand its product offerings and global distribution, including entering new markets like China and enhancing its digital presence to capitalize on brand potential.

• The strategy focuses on growing market share as key licenses, like Calvin Klein and Tommy Hilfiger, transition out, creating opportunities for additional share capture.

• Retailer Cautiousness and License Transitions:

• Retail partners have reduced open-to-buy for brands like Calvin Klein and Tommy Hilfiger, impacting G-III's sales projections.
• The company is responsibly exiting these licenses and staying disciplined in inventory positions, reflecting increased cost pressures and a narrowing selling period.
• Despite these challenges, G-III aims to offset lost sales from PVH brands by leveraging its growing license portfolio and strong financial position to invest in global growth opportunities.

Sentiment Analysis:

• Company exceeded internal expectations in Q2, but revenue and EPS declined YOY and gross margin fell to 40.8% (vs. 42.8%). FY26 outlook cut to ~$3.02B (down ~5% YOY) with EPS $2.55–$2.75 amid tariff headwinds (unmitigated ≈ $75M). Management highlights owned-brand momentum (DKNY, Donna Karan, Karl Lagerfeld, Vilebrequin) and expects margins to normalize/expand post-PVH exits.

Q&A:

• Question from Ashley Owens (KeyBanc Capital Markets Inc., Research Division): How should we think about gross margin/promotionality for the balance of the year and into next year given price increases and mixed consumer signals?
  Response: Selective price increases are being accepted; near term margins pressured by tariffs and PVH exits, but mix shift to owned brands should normalize/expand margins next year as pricing is reset.

• Question from Ashley Owens (KeyBanc Capital Markets Inc., Research Division): Is PVH’s share of sales still around prior expectations given reduced open-to-buys?
  Response: No material change in mix; pullback is broad across brands due to consumer/tariff pressures.

• Question from Mauricio Serna Vega (UBS Investment Bank, Research Division): Can you bridge the full-year sales update between PVH declines and slower growth in go-forward brands?
  Response: Transition of Calvin/Tommy plus tariff pressures drive most of the slowdown; owned brands move to mid-single-digit growth; footwear softness and sourcing shifts also weighed.

• Question from Mauricio Serna Vega (UBS Investment Bank, Research Division): What was Q2 tariff impact, and were 145% China tariffs involved?
  Response: About half of the ~200 bps margin decline was tariffs; China tariffs were ~30%, not 145%; high-rate risk was avoided via rerouting/holding product.

• Question from Paul Kearney (Barclays Bank PLC, Research Division): Size the India exposure and impact versus Calvin/Tommy order reductions.
  Response: India is typically low single-digit of sourcing; ~$30M sales impact in 2H is factored into guidance and is primarily a one-year issue.

• Question from Paul Kearney (Barclays Bank PLC, Research Division): Are you seeing pricing resistance as you mitigate tariffs?
  Response: Some retailer pushback pending broader market price alignment—especially in off-price—but demand should unlock as prices rationalize.

• Question from Dana Telsey (Telsey Advisory Group LLC): Update on owned-brand performance into 2H and new license opportunities?
  Response: Owned brands are outperforming with door expansion (e.g., Donna Karan, DKNY, Karl); Donna Karan Weekends launches with broad distribution; new licenses (Converse, BCBG) are exceeding early expectations and will help offset PVH exits.