Q3 2025 G-III Apparel Group Ltd Earnings Call
I will now turn the call over to our chairman and Chief Executive Officer Morris Goldfarb.
Morris Goldfarb: Thank you Neil.
Morris Goldfarb: Thank you everyone for joining us.
Morris Goldfarb: I'm very pleased with our strong third quarter results with earnings above our expectations driven by growth of hours she owned brands.
Morris Goldfarb: DKNY, Karl Lagerfeld, Donna Karan Anvil breakout, which collectively grew over 30%.
Morris Goldfarb: Our teams continue to demonstrate strong execution, despite a challenging consumer environment.
Morris Goldfarb: Seasonable weather and supply chain disruptions in fact in the U S September and October ranked as one of the warmest on record.
Morris Goldfarb: Had the weather been in line with historical trends, we would have captured incremental sales in the third quarter driving further earnings outperformance.
Morris Goldfarb: At the start of the fourth quarter, we experienced softer sales in cold weather.
Morris Goldfarb: Categories.
However, as temperatures have started to dry heading into the holiday selling period.
Morris Goldfarb: We have seen notable improvements in selling through at it across our brands and channels.
This momentum was further amplified during the critical black Friday period without products strongly resonating with consumers.
Morris Goldfarb: Our marketing investments have driven a significant increase in consumer engagement.
Morris Goldfarb: Is best seen in the boosted traffic to our owned North American direct to consumer stores and websites, resulting in a substantial growth in both conversion rates and overall sales.
Morris Goldfarb: Our inventories are well positioned to support holiday in early spring demand.
Morris Goldfarb: We remain cautiously optimistic about the remainder of the year as reflected in our raised earnings per diluted share guidance.
Morris Goldfarb: It's been two years since the unexpected announcement of the upcoming expirations of our PVH licenses.
Morris Goldfarb: At that time, those two brands represented approximately 50% of our revenue.
Morris Goldfarb: We immediately set out to accelerate our long term strategies.
Morris Goldfarb: And have made significant progress in transforming our business model.
Morris Goldfarb: The plans, we laid out our working.
Morris Goldfarb: Our key owned brands DKNY, Karl Lagerfeld, Donna Karan and BELBUCA and collectively grew over 30% this quarter.
Morris Goldfarb: We're building a complimentary licensed portfolio to further diversify our business.
Morris Goldfarb: We continue to navigate the ever changing retail environment as we gained market share across channels.
Morris Goldfarb: International expansion remains a top priority as we continue to build our operational platform in Europe complemented by our partnership with AWD WG.
Morris Goldfarb: Calvin Klein and Tommy Hilfiger continue to deliver strong profitability. Despite the challenges of the transition and for this fiscal year. The SaaS penetration of PVH brands is expected to be down for nearly 30%.
Morris Goldfarb: I'm proud of what we've accomplished together this transformation was a call to action and not only has our team risen to the challenge, but we're delivering beyond our expectations.
Morris Goldfarb: I want to thank our entire organization for helping to shape the future of G. III.
Morris Goldfarb: Now, let US review the financial results for the first the third quarter of fiscal 2025.
Our GAAP earnings per diluted share was $2 59 says and significantly above our expectations driven by gross margin outperformance and lower than planned expenses.
Morris Goldfarb: Gross margins for the quarter were better than anticipated driven by greater penetration of our higher margin old brands.
Morris Goldfarb: Net sales for the quarter were one point to one $9 billion generally in line with our expectations.
Morris Goldfarb: Our inventory remains in good position down approximately 10% from last year third quarter.
Now, let US review the progress we've made in our strategic priorities, which include driving growth of our own brands.
Morris Goldfarb: Building, a complementary portfolio of licensed brands.
Morris Goldfarb: Standing our global reach and bringing our north American retail segment to profitability.
Morris Goldfarb: Yeah.
Morris Goldfarb: As we continue transforming our business model, we're constantly evaluating our infrastructure and our warehousing footprint to drive greater efficiencies.
Morris Goldfarb: Additionally, we're investing in enhancing our.
Morris Goldfarb: Our technology landscape, while assessing regional competencies to allocated resources to support business growth.
This year, our existing team combined with investments in talent.
Morris Goldfarb: Enabled us to develop and launch four new brands.
Morris Goldfarb: As these new brands scale in our business model evolves, we remain focused on refining processes optimizing operations and capturing additional efficiencies to drive cost savings.
Morris Goldfarb: Throughout <unk> history we've.
Morris Goldfarb: We've adapted to sourcing strategies in multiple countries across the globe in order to bring the highest quality product at the most advantageous cost with on time deliveries to our customers.
This approach has enabled us to build a highly agile sourcing and supply chain network, while skillfully diversifying our vendor base, ensuring no material dependence on a single partner or region.
Morris Goldfarb: We've significantly reduced that China production from what was 180% several years ago down to just over 30% today and excluding outerwear, the China penetration would be just over 20%.
Morris Goldfarb: Should the potential for tariffs become a more prominent issue we're confident in our ability and our adaptability to respond quickly in order to mitigate risk as we've done in the past.
Morris Goldfarb: Capturing the long term potential of our own brands is one of our top priorities.
Morris Goldfarb: With full control over the design production and global distribution and marketing. These brands represent an important and sustainable long term profit driver generating higher operating margins and providing an accretive licensing income stream.
Morris Goldfarb: As previously mentioned, we made outsized investments in marketing this year to support the launch of Donna Karan and further drive brand engagement for DKNY.
Morris Goldfarb: With an emphasis on campaign content, including talent and featured product. Our investments are directed from top of funnel marketing to social media the SCO all to better align with our product as it hits retailer's floors.
Morris Goldfarb: Additionally, we are working more closely with our licensees to coordinate our marketing efforts and further amplify their impact and reach.
Morris Goldfarb: We continue to see these investment results and the outside outsized growth of our brands.
Morris Goldfarb: A key owned brands DKNY, Karl Lagerfeld, Donna Karan, a <unk> can along with the rest of our go forward portfolio generated approximately $1 8 billion.
Morris Goldfarb: Net sales last year and expected to grow strong double digits. This year.
And together with our new launches, we see over $5 billion in long term net sales potential.
Speaker Change: I will now walk you through some of the brand highlights from the quarter.
Speaker Change: Donna Karan offers a modern system of dressing serving the needs of women in search of sophisticated product.
Speaker Change: We meticulously analyzed thousands of archival looks and vintage details to craft a collection that honors the legacy in essence of Donna Karan.
Speaker Change: Every element from the refined jewelry like hardware to the contemporary design touches reflects the seamless blend of heritage and modernity to meet the demands of today's consumer.
Speaker Change: Donna Karan delivered another standout quarter.
Speaker Change: Year to date basis retail sales have exceeded our expectations by double digits, while driving some of the highest AUR and sell throughs across our portfolio.
Speaker Change: Our elevated product is resonating with consumers and generating healthy profitability for both our retailers and G. III.
Speaker Change: Our retail partners expanded floor space and doors in the fall and have allocated further expansion for spring 2025.
Speaker Change: Our spring launch in North America spanned across 900 points of sale.
Speaker Change: Which grew to 200 in the fall and is expected to reach over $600 in spring of 2025.
Speaker Change: In addition, our digital business is performing incredibly well with particular strength.
Speaker Change: Donna Karan Dot com, which has significantly outpaced our internal expectations.
Speaker Change: The successful reintroduction of Donna Karan is a testament to the brand's enduring legacy and a beacon of sophistication for all women.
Our powerful fall campaign reflections on women featuring a group of eight iconic models delivered major brand awareness globally as well as demand for celebrity styling.
Speaker Change: Including healthy ballerina.
Speaker Change: Hi, Ed Garber, Kate Hudson, among others, all of which resulted in a significant earned media value.
Speaker Change: Alongside our launch of fragrance partner Enterprise CWM unveiled the new Donna.
Speaker Change: Karen Cashmere collection.
Speaker Change: This collection of four new fragrance is off to a solid start and was just awarded this year's best fragrance collection at the Marie Claire U S Fragrance Awards.
Our news said is planned to be released next year.
Speaker Change: For the holiday season, we expanded our social dresses and handbags collection and added new elevated layering pieces, all of which youre seeing strong sell throughs.
Speaker Change: Driving AUR is even higher.
Speaker Change: For example, AOS and social dresses are approximately 50% higher than our other brands.
Speaker Change: In support of these product initiatives, our digital marketing content is keeping the brand top of mind and driving demand during the important holiday shopping season.
Speaker Change: Notably given this is just the north American launch the strong sales performance product residence.
Speaker Change: Marketing impact gave us confidence in the significant global expansion opportunity.
Speaker Change: We continue to expect over $1 billion in annual net sales potential for Donna Karan in the long term.
Speaker Change: DKNY draws inspiration from the energy and attitude of New York and offers a modern more drug designed to seamlessly transition from day to night.
Speaker Change: <unk> younger consumers seeking contemporary stylish pieces.
Speaker Change: The brand delivered another strong quarter with sales increasing over 30% driven by North America.
Speaker Change: Retailers are expanding floor space across key categories with over 700, new points of sale added in the fall.
Speaker Change: Our own North American direct to consumer business is benefiting from our recently implemented turnaround initiatives, which drove solid comp increases in line with the brand sales growth this quarter.
Speaker Change: We're leveraging unique partnerships and brand building experiences to help deepen our connection with the consumer and fueled continued desire for the brand.
In partnership with higher Gerber.
Speaker Change: We launched our fall New York stories campaign with book Activations across New York City, London, and Milan during each cities fashion week.
Speaker Change: The fall campaign captured the attention of global audiences, garnering significant press attention in social engagement, while helping us tap a younger consumer segment.
Speaker Change: Further our prominently featured DKNY Billboard at Yankee Stadium surpassed our expectations enhancing the brand's visibility as the team made it all the way through the World series.
Speaker Change: The fall marketing campaign combined with the Yankees partnership grew at the full lifestyle appeal of DKNY to life delivering an impressive earned media value.
Speaker Change: The global launch of our new DKNY $24, seven fragrance and the Sol aligned well with the timing of our fall marketing campaign.
Speaker Change: The fragrance launched in over 35 countries and was backed by a robust marketing around the world with an emphasis on key markets, including the U S, Germany, UK, Spain and travel retail.
Speaker Change: The new fragrance was advertise across larger outflows in over 100 key points of sale and prominently displayed in travel retail locations, including 70 screens at the Madrid Airport.
Speaker Change: Perhaps most exciting was the extensive takeover of multiple high traffic subway staffs in Madrid, which were wrapped wall to wall with fragrance campaign with our fragrance campaign.
All of these efforts were capped off with a splashy launch event.
Speaker Change: The fragrance is off to a good start and interpret firm has expanded geographic distribution to new markets partnerships like this help expand the brand's global reach to a broader consumer across additional lifestyle categories.
Speaker Change: We believe there is significant runway ahead for DKNY as we further enhance our lifestyle product assortment drive consumer engagement and fuel brand heat around the world.
We expect further growth to be driven by continued momentum in North America as we extend our relationship with key retail partners expansion into new cat and Jude new geographies and increased engagement across a wider consumer audience.
Speaker Change: We're in the early stages of international expansion and continue to expect over $1 billion in annual net sales potential for DKNY in the mid tier.
Speaker Change: Karl Lagerfeld and iconic name in fashion captures the essence of its namesake designers timeless aesthetic seemed.
Speaker Change: Seamlessly blended with a contemporary forward thinking spirit.
Speaker Change: The collection showcases Parisian inspired classics infused with Iraq chic attitude delivering a bold take on high fashion.
Speaker Change: In North America, Karl Lagerfeld delivered another impressive quarter with sales growing over 30% to last year also driven by continued momentum in North American wholesale.
Speaker Change: Our expanded lifestyle offering contributed to the addition of nearly 600 points of sale for a total over.
Speaker Change: Over the read across North America.
Speaker Change: Our owned North American direct to consumer business.
Speaker Change: <unk> sequential improvement with the stores delivering double digit comp sales growth and the website continuing to outperform with comp sales nearly doubling over last year.
Speaker Change: Internationally, Karl Lagerfeld continues to gain momentum and relevance in overseas markets as we expand distribution through new store openings and new geographies as well as introduce additional lifestyle categories.
Speaker Change: Since the acquisition the Karl Lagerfeld mens business has grown substantially serving as a nice complement to our women's business and offering additional growth Avenue for us to Lena.
Speaker Change: Our metals product is resonating with the consumer and driving a nice lift to sales.
Speaker Change: Last year, our mens business represented approximately 17% of the brand's international sales and we expect it will grow to over 20%. This year with continued momentum into next year.
Speaker Change: In the fall, we launched our new K L studio collection, featuring premium product showcase in our retail stores as well as pop ups and renowned European Department stores.
Speaker Change: The collection drove significant press attention and engagement and has been well received by international customers.
Speaker Change: While the line is narrow and distribution is limited collections like this helped reinforce the powerful brand halo and ignite fashion excitement.
Our newly launched Karl Lagerfeld premium jeans line further extends the brand's offering featuring a full product assortment to complement the denim lifestyle.
Speaker Change: In its second year. This line delivered solid growth in the quarter and were focused on expanding our presence online by working with our digital pure play partners to make the full jeans line accessible to a broader consumer.
Speaker Change: Karl Lagerfeld saw a strengthening of sell throughs coming out of summer into the fall season.
Speaker Change: As we look to next year. The spring 2025 order book in Europe tracked well ahead of plan and we expect to be well positioned for next fall.
Speaker Change: Momentum in North America demonstrates the brand's substantial opportunity to unlock future sales in international markets, We expect over $1 billion in annual net sales potential for Karl Lagerfeld globally.
<unk> our status Swimwear brand health.
Speaker Change: Cultivates, a spirit of refinement and fantasy with perfectly tailored and always in style product for a top tier clientele.
Speaker Change: The brand continues to demonstrate powerful global brand awareness and engagement while building on its status appeal through enhanced experiences and premium lifestyle product that meet the needs of our aspirational customer.
Speaker Change: We're navigating this challenging environment with retail softness impacting sales in the quarter, particularly in France, one of our largest markets, partially offset by stronger sell throughs in digital.
Speaker Change: We're driving further brand desirability.
Speaker Change: And they are seeing strong demand for premium products, such as our embroidered swimwear line.
Speaker Change: Expansion of our lifestyle offerings through new licenses and collaborations.
Speaker Change: Other diversify our product mix and create memorable brand experience for our customers.
Speaker Change: And an extension to our hospitality business and inspired by our Beach Club concept. We are building a new line of outdoor furniture with a partner that will launch on our site summer of 2025.
Speaker Change: Over the past few months, we've expanded <unk> retail store footprint with four new locations in Macau, the U S and Brazil.
Speaker Change: We opened our first ever flagship store and Beach club and Con and our second Beach club operated by our partner just opened in the St Regis Hotel in Delek Qatar.
Speaker Change: On Miami Beach rooftop restaurant will open next with several other projects in the pipeline for 2025 and beyond.
Speaker Change: We're on track to open approximately 15 partner operated Beach club concept by the end of 2027.
Speaker Change: These clubs along with our expanding store footprint underpins our confidence in our long term global expansion opportunity.
Speaker Change: Our next strategic priority is to further build out our complementary portfolio of licensed brands.
Speaker Change: We're thoughtful in our approach to partnering with brands, ensuring that each new brand complements our existing portfolio, while offering unique propositions that further bolster our business.
We seek brands that offer a differentiated range of lifestyle product with varying aesthetics.
Speaker Change: That further diversify our distribution across channels and geographies and appeal to a broad range of consumers.
Speaker Change: Importantly, licensed brands are also a capital light way to grow our business and leverage our powerful corporate foundation.
Speaker Change: This foundation includes our experienced management team.
Speaker Change: Best in class merchant expertise dominance across a range of lifestyle categories.
Speaker Change: Well developed level sourcing and supply chain infrastructure and.
Speaker Change: Our strong relationships with retailers across a diversified distribution network.
Speaker Change: The licensing team sports business is experiencing a strong year of growth.
Speaker Change: Successfully renewed and that's our license and secured expanded rights for distribution of select product categories within big box retailers like Walmart target and measure.
Speaker Change: This spring we will further expand our reach by distributing select product through the club channel.
Speaker Change: The Detroit Lions recent success has been a positive driver for our business, especially in their home markets, where we've increased where we've seen increased opportunities.
Speaker Change: We anticipate continued growth in this business moving forward.
Speaker Change: This year, our team has for our three differentiated brands nautica.
Speaker Change: Boston as well as champion outerwear to the market in record time.
Speaker Change: Nautica offers iconic modern and notably inspired designs with a casual fit feel and function.
Speaker Change: We launched Nautica jeans, this spring, which are already replaced the sales of our Tommy jeans business, we exited last year.
Speaker Change: We plan to expand the brand's distribution as well as introduce additional categories over the course of this multi year license.
Speaker Change: This quarter, we launched Torsten and champion outerwear.
Of which performed as expected for their first season.
Speaker Change: Boston several in classic elegance offers an easy modern approach to aspirational style while champion.
Speaker Change: Brand born from sport offers iconic athletic apparel with a strong appeal amongst the younger customer.
Speaker Change: Last quarter, we announced our newest global licensing agreement with Comverse, Inc. For men's and women's apparel owned by Nike.
Speaker Change: Congress is an iconic American youth lifestyle brand with global recognition and a long standing legacy across multiple sports and creative communities that meets the ever shifting demands of the younger consumer.
Speaker Change: The brand allows us to extend our active lifestyle offerings beyond our team sports business and with product that is differentiated from our fashion brands. It also enables.
Speaker Change: <unk> us to sell across multiple tiers of distribution, including Big box better Department stores sports retail and sporting goods stores and with certain rights to distribute the brand globally, we see a tremendous growth runway ahead.
We're excited to see the product we've designed come to life.
Speaker Change: We will continue to seek opportunities to work with brands that further complement our portfolio as we drive our vision forward and file for the future.
Speaker Change: G. III has a proven track record of growing potential brands into significant businesses as demonstrated by our success with Calvin Klein and Tommy Hilfiger.
Speaker Change: Before we assume the licenses for both brands the womens business in North America wholesale was virtually nonexistent.
Speaker Change: Single Handedly built a women's lifestyle categories for these brands and grow these businesses to a combined $1 $5 billion at their peak.
Speaker Change: As we transition, our Calvin Klein and Tommy Hilfiger business back to PVH.
We're working aggressively with our retailers to maintain budgets and shelf space.
Speaker Change: To maximize the potential of these brands under G. III as PVH bills as spring 2025 order book and their plans for the future.
Speaker Change: Expanding our global reach.
Speaker Change: Brands outside of North America remains one of our largest opportunities over the near and long term.
Speaker Change: Philbrick can along with our acquisition of Karl Lagerfeld has helped accelerate our international presence.
We are in the early stages of global expansion for DKNY, and just beginning with Donna Karan.
Speaker Change: Importantly, most of our newly added licenses, including Comverse Nautica and Halston provided an opportunity for international distribution.
Speaker Change: We continue to actively invest in and build upon our capabilities to support our international business.
Speaker Change: Our partnership with AWD WG is in its early stages as we work to unlock synergies between our companies.
Speaker Change: In fiscal 2020 for just over 20% of our sales were from outside the United States with our go forward portfolio of owned and licensed brands.
Speaker Change: We see significant untapped potential to scale globally.
Speaker Change: In conclusion.
We delivered a strong third quarter with earnings per diluted share exceeding our expectations, while making strategic investments in our brands and business.
Speaker Change: Looking at the remainder of the year, we remain cautiously optimistic as the power of our transforming business model driven.
Speaker Change: By our own brands.
Speaker Change: Is delivering margin expansion and bottom line outperformance.
Speaker Change: However, we remain grounded in the realities of the current macroeconomic and consumer environment as well as the unseasonable weather during the first month of our fourth quarter.
Speaker Change: For fiscal 2025, we are updating our net sales guidance to $3, one 5 billion.
Speaker Change: And importantly, raising our full year non-GAAP earnings per diluted share guidance to be in the range of $4 10 to $4 20.
Speaker Change: This raised guidance reflects our significant third quarter earnings out performance and commitment to driving long term sustainable growth and shareholder value as we make progress on our strategic initiatives.
Speaker Change: As proven track record of success and a strong balance sheet gives us ample flexibility to invest in long term opportunities to expand our business.
Speaker Change: The plans, we've laid out over the past two years of working.
Speaker Change: We've done a great job of improving what we own.
Building on our infrastructure cutting the north American retail segment losses by more than half and adding what we need for the future.
Speaker Change: G III has already stronger and better than ever before.
Speaker Change: I'll now pass the call over to Neil for a discussion of our third quarter as well as our fiscal 2025 outlook. Thank you Maher.
Neil: Net sales for the third quarter ended October 31 2024.
Speaker Change: $1 9 billion compared to $1 7 billion in the same period last year and in line with our expectations.
Speaker Change: Net sales of our wholesale segment were $1 7 billion driven by strong growth of our owned brands in North America offset by a decline in the Calvin Klein and Tommy Hilfiger businesses. This compares to $1 5 billion in the previous year.
Speaker Change: Net sales of our retail segment were $42 million for the quarter compared to net sales of $33 million in the previous year's third quarter.
Speaker Change: This increase was driven by strong double digit comp sales increases in the quarter. Despite the closing of seven stores.
Speaker Change: We are pleased with the progress we are making in our retail segment transformation since the recently implemented management footprint merchandising and brand experience changes.
Speaker Change: Our gross margin percentage was 39, 8% in the third quarter of fiscal 2025 compared to 46% in fiscal 2024.
Speaker Change: The wholesale segment gross margin percentage was 38, 4% compared to 39, 6% in the previous year's third quarter.
Speaker Change: As anticipated gross margins were lower than last year due to a mix of programs, including a greater concentration of sales of our licensed brands.
However, gross margins in the third quarter of fiscal 'twenty five.
Speaker Change: Slightly better than our expectations.
Speaker Change: Gross margin percentage in our retail operation segment was 52, 3% compared to 49, 1% in the prior year driven by the positive impact of our merchandising changes.
Speaker Change: non-GAAP SG&A expenses were $259 million compared to $234 million in the previous year's quarter.
Speaker Change: As you'll recall, we had guided a higher investment and expenses for this year, primarily associated with the marketing for Donna Karan and DKNY and the expansion of our operational capabilities to talent and technology investments.
Speaker Change: The marketing expenses were weighted to the first and third quarters in line with the spring and fall marketing campaigns.
Speaker Change: non-GAAP net income for the third quarter was $116 3 million or $2 59 per diluted share compared to $129 6 million or $2 78.
Speaker Change: Per diluted share in the previous year's third quarter.
Speaker Change: These results were significantly better than our expectations.
Speaker Change: Turning to the balance sheet inventory levels remain in good shape inventory decreased 10% to $532 million at the end of the quarter from last year's $592 million.
Speaker Change: Our inventory is well positioned to meet our holiday in early spring orders.
Speaker Change: We ended the quarter in a net debt position of $119 million compared to a net debt position of $265 million in the previous year. This.
Speaker Change: This improvement is after our investment of approximately $80 million AWD WG in approximately $60 million of stock repurchases. We've.
Speaker Change: We've had good cash flow from operations and reduced inventory levels.
Speaker Change: This quarter, we retired our $400 million 2025 senior secured notes.
Speaker Change: After this repayment the only outstanding debt is primarily seasonal borrowings under our revolving credit facility.
Speaker Change: We have a strong financial and liquidity position, which provides us with the flexibility to make investments to drive our business as well as return capital to shareholders.
Speaker Change: The more we have a solid credit profile, which provides us ample optionality to make additional investments by accessing the capital markets.
Speaker Change: As for our outlook, we are pleased with our third quarter results.
Speaker Change: We remain cautiously optimistic about the remainder of the fiscal year.
Speaker Change: Our current outlook for fiscal 2025 contemplates the challenging consumer environment and unseasonable weather for.
Speaker Change: For the full fiscal year 2025, we are now expecting net sales of approximately $3 one $5 billion.
Speaker Change: Representing approximately 2% growth to the previous year's net sales.
Speaker Change: Given by growth of our own brands and the launches of our new initiatives, which more than offset the decline of approximately $200 million in net sales. This year of the Calvin Klein and Tommy Hilfiger brands as we transition out of those licenses.
Speaker Change: For fiscal 2025, we continue to anticipate sales of our go forward portfolio to approach approximately 70% of our total net sales.
Speaker Change: Importantly on a non-GAAP basis, we are raising our outlook and now expect net income for fiscal 2025 to be between 186 and $191 million or between $4 <unk> and $4 20 per diluted share.
Speaker Change: This compares to non-GAAP net income of $190 million or $4 <unk> per diluted share for fiscal 2024.
Fiscal 2025, adjusted EBITDA is expected to be between 390 and $314 million compared to adjusted EBITDA of $324 million in fiscal 2024 as previously.
Speaker Change: As we mentioned, we expect incremental expenses of approximately $55 million, primarily related to marketing expenses to support the launch of Donna Karan and further drive Brian engagement for DKNY as well as investments in talent and technology to expand our operational capabilities.
Speaker Change: Let me provide some additional context around modeling.
As we have previously mentioned, we continue to expect fourth quarter gross margins to be up to last year. We now expect to end fiscal 2025 with gross margin rate expansion, reflecting the outperformance of our owned brands regarding.
Speaker Change: Regarding SG&A for the fourth quarter of fiscal 2025, we expect the SG&A dollars to increase by approximately the same dollar amount as the increases in the third quarter.
Speaker Change: non-GAAP interest expense is expected to be approximately $19 million for the full year.
Speaker Change: We continue to expect capital expenditures of approximately $50 million. This is higher than our spend in previous years, principally driven by the build outs of shop in shops for our new brand launches and new technology to support our business.
Speaker Change: We are estimating a tax rate of 28, 5% for fiscal 2025.
Speaker Change: We have not anticipated any future potential share repurchases in our guidance that.
Speaker Change: That concludes my comments I will now turn the call back to Morris for closing remarks.
Morris Goldfarb: Thank you Neil and thank you all for joining us today.
Morris Goldfarb: <unk> of our teams work this quarter and I'm confident in <unk> future as a global leader in fashion.
Morris Goldfarb: I would also like to thank our entire organization, our many partners and all our stakeholders for their support.
Speaker Change: Operator, we're now ready to take some questions.
Speaker Change: Thank you as a reminder to ask a question. Please press star one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one again, one moment, while we compile ask Q&A roster.
Speaker Change: Our first question is going to come from the line of Bob <unk> with Guggenheim. Your line is open. Please go ahead hi.
Good morning.
It's impressive to see the outlook increase in light of the environment can you talk a bit more just about the third quarter outperformance and maybe just walk us through the puts and takes for the remainder of the year.
Speaker Change: Our third quarter Shine.
Speaker Change: Shines.
Speaker Change: Early nicely.
Speaker Change: In spite of some warm weather in.
Speaker Change: Quite honestly.
Speaker Change: Towards the end.
Speaker Change: We were a little bit disappointed we thought we could drive even more business in the third quarter.
Speaker Change: We left a little bit on the table because of.
Speaker Change: Logistical issues.
Speaker Change: Although the port strike lasted for a bear moment that bear moment.
Probably cost us $20 million to $30 million in shipping.
Speaker Change: They are ready to go containers, we are ready to be picked up.
So we kind of slipped four for that.
Speaker Change: For Q3.
Speaker Change: Follow up question might be did it go into Q4.
Speaker Change: Part of it did.
Speaker Change: Most of it did.
Speaker Change: Q4.
Speaker Change: As is shaping up nicely.
Speaker Change: Our sales for the last 10 days have been very good the weather has broken our outerwear sales were good reorders in pretty much every classification of product our handbag business has opened up a little bit.
Speaker Change: Our our footwear business is good.
Speaker Change: Our sportswear business is good so it's.
Speaker Change: That's all.
Speaker Change: All beginning to shine.
Speaker Change: The.
Speaker Change: The Q3 sell throughs go back to Q3 for a minute.
Speaker Change: We're good.
Speaker Change: Amazingly well in our own retail historically, we've struggled in.
Speaker Change: And our own retail and we're close to this year were planned on being pretty close to breakeven in next year.
Speaker Change: For the first time in a decade.
Speaker Change: We will be profitable in our own retail shrinking it to an appropriate size and now.
Speaker Change: Evaluating how we now grow it to something significant in that world. So Q3 was a great learning period for us.
Speaker Change: We had new initiatives, we launched.
Speaker Change: Early in the year, we launched Donna Karan in Q3 was a great for Donna Karan.
Speaker Change: We did a little bit of shipping for champion for the first time that worked out well.
Speaker Change: And we've developed.
Speaker Change: Now we haven't developed line pretty much ready to go for Comverse. So we don't expect very much out of Congress until spring of.
Speaker Change: Of 25.
Speaker Change: But where we are all geared to go and I think it all began in.
Speaker Change: The energy resolved.
Speaker Change: <unk> kind of put in place in Q3.
We're working very hard to.
Speaker Change: To replace the sales of what we are giving up.
Speaker Change: We should site as well the fact that.
Speaker Change: We gave back.
Speaker Change: Gas as a license, which is approximately $60 million in annual sales.
Speaker Change: We don't get go go forward, when we lose a little bit in Q3 and in Q4 shipping.
Speaker Change: If you look at our guests.
We are.
Speaker Change: Yeah.
Speaker Change: We brought down.
Speaker Change: Our Calvin business or the retailers have brought down the scale of that business by a couple of hundred million Bucks and we've compensated for it so I'd say.
Speaker Change: We've done better than.
Speaker Change: You might even see so little little worthy to your to your question bond by apologize if I've left anything out give me a follow up.
Speaker Change: I think thats good on the <unk>.
<unk> side.
Speaker Change: And just the timing of when that is shipped.
Speaker Change: When you're starting to ship and then I guess the other piece on low Neil <unk>.
Speaker Change: The EPS bridge sort of Q3 Q4, the updated guidance can you just give us a little more just around some of the puts and takes there.
Speaker Change: So let me start with the Comverse piece.
Speaker Change: Congress will have touches of product going out in the spring.
Speaker Change: We'll have pretty good penetration globally hopefully globally.
Speaker Change: Sure.
Speaker Change: For fall of 2025.
Speaker Change: Putting our distributors in place.
Speaker Change: We are opening.
Speaker Change: Regional offices.
Speaker Change: We've got an amazing talent pool.
Speaker Change: It was put together.
Speaker Change: <unk> experienced in this sector.
Speaker Change: We've got great support from the Comverse team. This was not a license we assume from another licensee. This was owned and operated by Comverse.
We saw us as a suitable partner to build their the men's and women's business globally. So we're excited by the partnership.
Speaker Change: We believe this is scalable the opportunities they've put on the table for us.
Speaker Change: Sure.
Speaker Change: Our impressive.
So that's a congress piece of it nailed the response, yes Bob.
Speaker Change: In terms of the puts and takes between Q3 and Q4 and just bridging you on EPS.
Speaker Change: So let's start at the top line.
Speaker Change: I guess compared to where we were before we're probably about $15 million off in our model on the third quarter about $35 million in.
Speaker Change: In the fourth quarter.
Speaker Change: The real story, there as outerwear plain and simple the other categories are performing reasonably well.
Speaker Change: Did see some unusually warm weather that certainly hurt us in addition to the supply chain issues that Mark was talking about and while it's broken now right now we feel we've got a reasonable feel for what's going to happen in the fourth quarter in terms of going back to the third quarter.
Speaker Change: Very strong performance in the bottom line, despite being slightly off on the top.
Speaker Change: Margin percentage came in stronger than we expected our SG&A, we continue to manage very prudently. So we've got some nice efficiencies in our warehouse, that's a help a little bit to a low inventory levels. We did have a small amount of advertising spend they are probably slipped from Q3 into Q4's period.
Speaker Change: But a very strong performance overall with respect to Q3 results and that really leads us into a very strong performance with Q4 results. So despite taking down top line sales, we're still looking for 6% topline growth in the fourth quarter, we're looking for over 25% EPS growth.
Speaker Change: We fine tune, what we expect our gross margin percentages to be in the fourth quarter those were up strong and nice and we continue to monitor our SG&A.
Speaker Change: Judiciously.
Speaker Change: Thank you very much good luck.
Speaker Change: Thank you for your questions Bob.
Speaker Change: Thank you one moment as we move on to our next question.
Speaker Change: And our next question will come from the line of Ashley <unk> with Keybanc capital markets. Your line is open. Please go ahead.
Speaker Change: Great. Thanks, and good morning, just wanted to keep on the subject of gross margin really quickly with expected to be up in the fourth quarter can you just talk about the magnitude of expansion puts and takes there and then just some insight into how holiday promotions are panning out relative to your expectations, let's say three months ago.
Speaker Change: Yes, so look we know and expect that as we shift to our own brands, we don't pay a royalty on those brands. We've got the ability to generate licensing income we've got a wider penetration distribution network and we expect to have higher gross margin percentages as a result of that shift.
Speaker Change: We've been seeing that this year.
Speaker Change: Rate increases have been moderate that's been helpful.
Speaker Change: So overall, we're really kind of a little bit ahead of where we would expect it to be in the early part of the year.
Speaker Change: With respect to promotion Ality.
Speaker Change: It's been out there it has not been very extreme in our businesses. It is something that we that we build into our process and we really haven't seen any extreme pressures beyond what we have anticipated.
Speaker Change: The retailer is not promoting aggressively.
Speaker Change: Thing.
The consumers out there buying.
Speaker Change: It's not.
Speaker Change: There is nothing unique that has gone on Conversely, it appears that margins aren't the issue there is.
Speaker Change: It doesn't appear that there is dumping throughout the world are through the fashion community, we certainly arent promoting heavily to move our product there is no need to.
Speaker Change: And.
Speaker Change: The retailers overall injector doing seasonal promotions that are not abnormal.
Okay, great. Thank you Ashley.
Speaker Change: Yes.
Speaker Change: One more on bigger picture sorry.
Speaker Change: Bottom line.
Speaker Change: It's growing slightly above the projected sales growth for this year, obviously last year, you had significant margin expansion and bottom line through flow through would just be curious to gauge your confidence levels and the bottom line momentum next year should the growth continue to outpace the sales line and then any buckets of opportunity you've identified for additional lives.
Speaker Change: Going into next year.
Speaker Change: Yes.
Speaker Change: A little bit too early for us to give you the specifics on next year, but we're very bullish about what's going on in our business.
Speaker Change: Very bullish about how our brands are performing.
Speaker Change: Very excited about the new launches.
Speaker Change: The new all the new brands at Morris was discussing I think in terms of where we land from a gross margin standpoint.
Speaker Change: The shift to our own brands continues to be a positive lever. We're now launching a few launches licensed businesses. Those obviously I think perform at about the same levels that we would've been in our portfolio before in terms of leveraging on SG&A. We did have the big spend this year on advertising I think that sets a good baseline for us I think.
Speaker Change: Prospectively.
Speaker Change: We've got some new business that we're still launching so we're looking to the advertising.
Speaker Change: The spend for those but we will certainly start to lever the base of a higher level of spending on the Donna Karan and DKNY business as we continue to see sales grow from those two brands.
Speaker Change: Thank you Ashley I'll pass it on thank you.
Speaker Change: Thank you one moment as we move on to our next question.
Speaker Change: Our next question is going to come from the line of Mauricio Serna with UBS. Your line is open. Please go ahead.
Mauricio Serna: Hi, Good morning, Thanks for taking my question I, just wanted to get a little more details.
Speaker Change: On the Donna Karan brand and.
Speaker Change: Not a covered mainly Donna Karan since it's one of the biggest launches you've had in a while maybe.
Speaker Change: Could you tell us more about what how should we think about the contribution of that brand to <unk>.
Speaker Change: <unk>.
And then on the gross margin it was nice to see the outperformance I remember the guidance called for some contraction because of the shift within brands, but just wanted to understand what wasn't really like even stepping taking a step back or what drove the outperformance in Q3. So it was just like healthier margins on brands on a like for like basis.
Speaker Change: And.
Speaker Change: As we think about 2024 is it timing.
Speaker Change: Secondly, in 'twenty six calendar year 'twenty five.
Speaker Change: Fair to assume like gross margin could continue expanding just on a revenue on our brands next year. Thank you.
Speaker Change: So thank you for your question Morris.
The.
Speaker Change: Donna Karan launch.
Speaker Change: <unk>.
Speaker Change: Perfectly executed.
Speaker Change: The marketing married incredibly well with the product mix.
Speaker Change: The talent pool that we have at G. III as their time was beginning to open up with the elimination of some of the categories for PVH.
Speaker Change: Was the ability to focus.
Speaker Change: And.
Speaker Change: Study the archives of Donna Karan carefully.
And bring them to two two and affordable price point at least affordable for where we are positioning it although elevated.
Speaker Change: It's a surprise to most women walking into the store to see Donna Karan dress sportswear sweater or a handbag or a pair of shoes as the price point that we're putting it out although 50% higher in most categories and our other brands.
Speaker Change: It's an absolute bargain.
Speaker Change: So we make friends with the consumer we made friends with the retailer and we were quite happy with the margins that it provided us.
Speaker Change: And now that we are.
Speaker Change: More entrenched in it.
Speaker Change: There's an amazing amount that you learn as you launch a brand.
Speaker Change: Some product thats better than others some colors at schein.
Speaker Change: Some trends that are worthy of further development and you begin to eliminate.
Speaker Change: The lesser performing areas.
Speaker Change: So you can only expect better from what we've put out with Donna.
Speaker Change: We should be going through a major growth period every retailer that has bought the product.
Speaker Change: <unk> has expanded their door count expanded categories and.
Speaker Change: Chairman with quality of sales the quality of sales is absolutely up there.
Speaker Change: <unk>.
Speaker Change: As careful distribution.
Speaker Change: Careful analysis price points.
Speaker Change: <unk>.
Speaker Change: Continued marketing to support the.
Speaker Change: <unk> of the brand so we're very very excited by it.
You brought out.
Speaker Change: Austin.
Speaker Change: We took on half then from a BG who is.
Speaker Change: Basically.
Speaker Change: An IP company.
Speaker Change: We needed halston as a possible replacement for Tom.
Speaker Change: Tommy Hilfiger as elements of Tommy fade off as categories.
Speaker Change: Slip growth tuck in nautica to try to replace some of the <unk>.
Speaker Change: <unk> business, where we are.
Speaker Change: Done it effectively on the <unk> side as we gave back <unk>.
Speaker Change: Tommy jeans.
Speaker Change: We more than replaced the scale of the Tommy jeans business utilizing nautica.
Speaker Change: Thanks, a lot to the power of the company managing the brand it's not always the brand. It's the management team that management design and Karen integrity that really is the guardian of the brand. So I would say, we did a great job with nautica and we continue to believe that.
Speaker Change: Ed.
Speaker Change: Good deal of what we would give back with <unk>.
PVH with Tommy can be replaced with nautica and maybe a couple of other brands.
Speaker Change: No.
Speaker Change: The scale of business seems to be consistent.
Speaker Change: With consideration for some of the give backs.
Speaker Change: Im.
Speaker Change: We're evaluating.
Speaker Change: This is a lot of this has to do with.
Speaker Change: Really the retailers view.
Speaker Change: We're not.
Speaker Change: We're not vertical on on our business as we have a high dependency on department store cooperation on budgets and space. So we work hard at retaining space.
Speaker Change: And expanding space with new brands.
It's not an easy period for G III everybody's on.
Speaker Change: Our full time vocation of making it work and off assets.
Speaker Change: And just to follow up a little bit more so on your question as far as.
Speaker Change: Financial contribution I think you look at what we've accomplished this year.
Speaker Change: We've got improving gross margins for the year as I just said before certainly is possible for us to continue that it's going to be a function of how those.
Speaker Change: Our own business is mixed with the licenses.
Speaker Change: A new license businesses that we're launching and the current year, we got in SG&A spend there was rather unusual so I think if you strip that out.
Speaker Change: We're really very pleased with the performance not to mention that our retail performance is also now improved as well which is gives us.
Additional.
Speaker Change: ROE in the quiver for the future.
Morris Goldfarb: Got it understood. Thank you much. Thank you morry congratulations.
Speaker Change: Thank you.
Speaker Change: Thank you and one moment as we move on to our next question.
Speaker Change: And our last question is going to come from the line of Paul Kearney with Barclays. Your line is open. Please go ahead.
Hi, good morning, Thanks for taking my question.
Speaker Change: Can you speak to the current inventory position of the Gulfport portfolio compared to the total.
On the 30% exposure to China manufacturing, how much lower do you think that can go and how quickly and if you could provide any thoughts on how youre planning inventory for next year, if tariffs become more of a reality do you anticipate the need to potentially bring inventory in early thank you.
Speaker Change: So thank you for your question Paul It's a good one.
It's an unknown quite honestly.
Speaker Change: But.
Speaker Change: I would say.
Speaker Change: Whereas prepared as anybody is to bring down the scale of our business in China or whatever country.
Speaker Change: That aggressive tariffs.
Speaker Change: Impose that are not manageable for us.
Speaker Change: We've done it before.
Speaker Change: You might be aware.
Speaker Change: We're but we come from the factory base not really a design based company.
Speaker Change: The founder of the company was an entrepreneur who.
Speaker Change: As an immigrant.
Speaker Change: It wasn't about fashion for him it was about his ability to need to make money. So he built a factory produced product in New York City of all places.
Speaker Change: And when I joined his company was by that.
We were all about New York City everything was produced here on.
Speaker Change: West side.
Speaker Change: And as.
Speaker Change: As time evolves.
Speaker Change: Fashion brought us to South Korea.
Speaker Change: We brought our entire business is basically to South Korea.
Speaker Change: From South Korea, we went to Indonesia, we were in Mongolia and.
Speaker Change: Today.
Speaker Change: Our home offices in northern China overseen by.
Speaker Change: Gentlemen, thats been with the company for over 30 years.
Speaker Change: And we're we're very flexible.
Speaker Change: We were there.
Speaker Change: If there was a need to move out of China to Caribbean based countries.
Speaker Change: We have a footprint there we're in Jordan.
Yeah.
Speaker Change: Basically anywhere this is selling machine youll find our presence.
Speaker Change: And we have a team of people that have been with the company.
Speaker Change: <unk> and China has been with the company or since 1984, most of them and they're very very flexible there very company.
Speaker Change: Theyre not theyre not suit and tie their boots on the ground and where do we go next and what do we need to do.
Speaker Change: So I think that's about as secure as I can be.
Speaker Change: I believe that.
Speaker Change: That's a major advantage for our company and the competitive landscape I don't think anybody can do it better than we can.
Speaker Change: It's not it's not something we look forward to but it's something that I believe we can manage it as I've said in the script.
Speaker Change: We were at 80, some odd percent China several years ago brought down to 30, and if you eliminate our coat business from China were at about 20%. So.
Speaker Change: I would say it wouldn't take us very long to accommodate.
Speaker Change: It is.
Speaker Change: What is thrown at us through through tariffs and political strategy.
Speaker Change: Yes, just in terms of inventory levels compared to where they've been in the go forward brands in the non go forward.
Speaker Change: The inventory levels are.
Speaker Change: In excellent shape.
Speaker Change: Across the portfolio I think prospectively, we would expect not the size decreases that you've seen for the first three quarters were probably more in line with future sales growth prospectively.
Speaker Change: Thank you very much happy holidays.
Speaker Change: Thank you Paul Thank you for your question.
Speaker Change: Thank you and I would now like to hand, the conference back over to Morris Goldfarb for any further or closing remarks.
Speaker Change: Okay.
Speaker Change: Thank you for thank you all for your interest your support and we wish you an amazing holiday season. Thank you very much.
Speaker Change: This concludes today's conference call. Thank you for participating you may now disconnect.
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Speaker Change: Yes.
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