G-III Apparel Group LTD. (GIII) 2025 Q2 Earnings Call Summary

Optimistic Highlights

• Exceeded Bottom Line Guidance

Second quarter results exceeded bottom line guidance, leading to a raised outlook for the second half of the year.

• New License with Converse

Announced a new global agreement with Converse Inc. for men's and women's apparel launching in fall 2025, expanding the active lifestyle business.

• Strong Performance of Owned Brands

Donna Karan, DKNY, Karl Lagerfeld, and Vilebrequin brands grew mid-teens compared to last year's quarter, gaining market share, especially in North America.

• Improved Financial Position

Inventory down approximately 24% from last year's second quarter, ending the quarter with no debt and a strong financial position.

• Increased Investment in AWWG

Increased ownership stake in AWWG to just under 20%, aiming to drive DKNY, Donna Karan, and Karl Lagerfeld across Spain and Portugal, potentially adding over $200 million in sales in the next three to five years.

Pessimistic Highlights

• Decline in Calvin Klein and Tommy Hilfiger Businesses

Net sales of the wholesale segment were driven by strong growth of owned brands but offset by a decline in Calvin Klein and Tommy Hilfiger businesses.

• Vilebrequin Pressures in Europe

Vilebrequin faced pressures in Europe due to a soft consumer environment and cooler weather conditions, impacting beachwear sales.

• Elevated SG&A Levels

Balancing resources to support current and future businesses has created slightly elevated SG&A levels.

• Freight Costs and Lead Times

Higher freight costs expected in the third quarter, with some delays in inventory receipts impacting margins.

Company Outlook

• Reaffirmed Net Sales Guidance

Reaffirmed net sales guidance of $3.2 billion for fiscal 2025, driven by owned brands and new initiatives.

• Raised Full-Year Earnings Guidance

Raised full-year earnings per diluted share guidance to be in the range of $3.95 to $4.05.

• Continued Investment in Marketing and Technology

Continued investments in marketing, technology, and talent to support long-term growth, with significant SG&A spend expected in the second half of the year.

• Cautiously Optimistic

Remain cautiously optimistic about the remainder of the fiscal year, closely monitoring supply chain dynamics.

Q & A Highlights

• Q: Can you further elaborate on the opportunity you see for the Converse license and how should we think about future license additions from here versus the current brands? (Paul Kearney, Barclays)

  A: Converse is a huge opportunity, fitting well with existing talent. It's a global distribution deal, leveraging Nike's approval process. Factories are already approved, and sample making is underway. (Morris Goldfarb)

• Q: Inventories for the quarter remain incredibly clean. Can you talk about the composition of that for owned versus licensed and how should we think about inventories through the back half? (Paul Kearney, Barclays)

  A: Inventories are in great shape, with better aging than historically. Expect Q3 and Q4 inventories to be slightly up, aligned with future sales growth. (Neal Nackman)

• Q: Can you speak more around what's driving the confidence in the 4Q outlook? (Chandana Madaka, KeyBanc Capital Markets)

  A: Confident due to outsized growth in own brands and new initiatives. Donna Karan's launch has been highly successful, with strong marketing and product development. (Morris Goldfarb)

• Q: How do we think about SG&A spend into the second half of the year and the investment cycle for own brands and marketing campaigns? (Will Gaertner, Wells Fargo)

  A: Significant increase in SG&A expected in Q3 due to advertising and warehouse expenses. Investment in Donna Karan will continue but should level off as the business scales. (Neal Nackman)

• Q: Can you frame up the visibility into your order book, U.S. versus Europe? (Will Gaertner, Wells Fargo)

  A: Order book is more elastic in North America. European business is built on two deliveries, with tighter inventory management. (Morris Goldfarb)

• Q: Given the success with Donna Karan, how should we think about the size of the business expected for this year? (Mauricio Serna, UBS)

  A: Donna Karan has strong potential, with a conservative estimate of $1 billion in sales. The brand has had the best launch in company history. (Morris Goldfarb)

• Q: How to dimensionalize Converse rollout over time in terms of distribution and retail partners? (Mauricio Serna, UBS)

  A: Expect $200 million in sales in a reasonable time, with global distribution through department stores, sporting goods shops, and distributors. (Morris Goldfarb)

• Q: How do you think about the distribution expansion for licensed brands and the standout opportunities? (Dana Telsey, Telsey Advisory Group)

  A: Focus on expanding distribution for brands like Pepe, Hackett, and Fashion Noble, leveraging partnerships and unique retailer initiatives. (Morris Goldfarb)

• Q: What are you seeing in terms of freight costs and lead times? (Dana Telsey, Telsey Advisory Group)

  A: Higher freight costs expected in Q3, with some delays in inventory receipts. These factors have been built into the guidance. (Neal Nackman)