Q1 2026 G-III Apparel Group Ltd Earnings Call
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Operator: Good day and welcome to the G-III Apparel Group First Quarter Fiscal 2026 Earnings Call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question and answer session.
Good day and welcome to the G. III apparel group first quarter fiscal 2026 earnings call at this time, all participants on listen only mode.
After the Speakers' presentation there'll be a question and answer session and instructions will be given at that time as a reminder, this call maybe recorded.
Operator: Instructions will be given at that time. As a reminder, this call may be recorded.
Neal Nackman: I would like to turn the call over to Neal Nackman, Company Chief Financial Officer. Please go ahead.
Speaker Change: To turn the call over to Neal Nachman Company Chief Financial Officer. Please go ahead.
Neal Nackman: Good morning, and thank you for joining us. Before we begin, I would like to remind participants that certain statements made on today's call and in the Q&A session may constitute forward-looking statements within the meaning of the federal securities laws. Forward-looking statements are not guaranteed, and actual results may differ materially from those expressed or implied in forward-looking statements. Important factors that could cause actual results of operations or the financial condition of the company to differ are discussed in the documents filed by the company with the SEC. The company undertakes no duty to update any forward-looking statements.
Neal Nachman: Good morning, and thank you for joining us.
Speaker Change: Before we begin I would like to remind participants that certain statements made on today's call and in the Q&A session may constitute forward looking statements within the meaning of the federal Securities laws.
Speaker Change: Forward looking statements are not guaranteed and actual results may differ materially from those expressed or implied in forward looking statements.
Speaker Change: Factors that could cause actual results of operations or the financial condition of the company to differ are discussed in the documents filed by the company with the SEC.
Speaker Change: Company undertakes no duty to update any forward looking statements.
Neal Nackman: In addition, during the call, we will refer to non-GAAP net income, non-GAAP net income per diluted share, and adjusted EBITDA, which are all non-GAAP financial measures. We have provided reconciliations of these non-GAAP financial measures to GAAP measures in our press release, which is also available on our website.
Speaker Change: In addition, during the call we will refer to non-GAAP net income non-GAAP net income per diluted share and adjusted EBITDA, which are all non-GAAP financial measures. We have provided reconciliations of these non-GAAP financial measures to GAAP measures in our press release, which is also available on our website.
Morris Goldfarb: I will now turn the call over to our Chairman and Chief Executive Officer, Morris Goldfarb. Good morning, thank you, Neal, and welcome everyone. We delivered solid first quarter results with earnings outperformance that exceeded the high end of our guidance. Our first quarter results were driven by double-digit growth of our key owned brands, DKNY, Karl Lagerfeld, and Donna Karan, mostly offsetting the lost sales of the exited Calvin Klein jeans and sportswear license. These results are a testament to our ability to execute our strategic priorities by leveraging our diverse portfolio of globally recognized brands and our unwavering commitment to disciplined brand building and operational excellence.
Speaker Change: I will now turn the call over to our chairman and Chief Executive Officer Morris Goldfarb.
Morris Goldfarb: Good morning, Thank you Neil and welcome everyone.
We deliberate solid first quarter results with earnings outperformance that exceeded the high end of our guidance at first quarter results were driven by double digit growth of our key owned brands DKNY, Karl Lagerfeld, and Donna Karan, mostly offsetting the lost sales that we exited.
Calvin Klein jeans, and sportswear license business.
These results are a testament to our ability to execute our strategic priorities by leveraging our diverse portfolio of globally recognized brands and their unwavering commitment to disciplined brand building and operational excellence.
Morris Goldfarb: As we've entered the second quarter, we saw cooler weather negatively impacting early spring. As the weather got more seasonal, we've seen positive sales momentum across our brands, channels and regions. We're cautiously optimistic about the consumer environment and are encouraged by the health of our brands and businesses. as we execute in the second quarter and are actively taking advantage of the market disruption to further capture market share.
As we've entered the second quarter, we saw a cooler weather negatively negatively impacting early spring.
As the weather got more seasonal we have seen positive sales momentum across our brands channels and regions.
Speaker Change: We're cautiously optimistic about the consumer environment.
And are encouraged by the health of our brands and business as we execute in the second quarter and are actively taking advantage of the market disruption to further capture market share.
Morris Goldfarb: Before reviewing our quarterly results, I want to address the broader macroeconomic environment and the recent tariff developments. While the global landscape remains uncertain, we are staying focused on what we can control by executing our strategy to drive profitable growth and positioning G-III to capture market share throughout this period of disruption and beyond. Based on incremental tariffs, we estimate the potential unmitigated tariff impact for fiscal 2026 to be approximately $135 million. We are actively working to reduce the impact through a combination of strategies, including continued sourcing diversification, vendor negotiations, selective retail price increases, Disciplined Inventory Management, Cost Savings, and Operational Efficiency.
Speaker Change: Before reviewing our quarterly results I wanted to address the broader macroeconomic environment and the recent tariff developments.
Speaker Change: While the global landscape remains uncertain, we are staying focused on what we can control by executing our strategy to drive profitable growth and positioning G. III to capture market share throughout this period of disruption and beyond.
Speaker Change: Based on incremental tariffs, we estimate the potential unmitigated tariff impact for fiscal 2026 to be approximately $135 million.
Speaker Change: We're actively working to reduce the impact through a combination of strategies.
Speaker Change: Excluding continued sourcing diversification vendor negotiations selective retail price increases.
Speaker Change: Disciplined inventory management cost savings and operational efficiencies.
Morris Goldfarb: starting with sourcing and vendor negotiations. We are leveraging our scale with our long-standing suppliers to negotiate discounts to partially offset cost increases without compromising the high-quality, value-driven assortments G-III is always known for. With over 50 years of sourcing experience, we have consistently led the way in global production shifts. From our beginnings in a single New York City factory, we were early movers, relocating production to South Korea, then Indonesia, then Mongolia, and eventually China, capitalizing on emerging sourcing markets as they opened. Today, our well-diversified supply chain spans over 40 countries across Southeast Asia. The Middle East, Europe, and the Americas, supported by a team of over 400 professionals on the ground.
Speaker Change: Starting with sourcing and vendor negotiations, we're leveraging our scale with our longstanding suppliers to negotiate discounts to partially offset cost increases without compromising the high quality value driven Assortments G. III has always known for.
Speaker Change: With over 50 years of sourcing experience, we've consistently led the way in the level of production shifts.
Speaker Change: Beginning in a single New York City factory.
Speaker Change: We were early movers relocating production to South Korea than Indonesia, Mongolia, and eventually China capitalizing on emerging markets as they open.
Speaker Change: Today, our well diversified supply chain spans over 40 countries across southeast Asia.
Speaker Change: The Middle East Europe, and the Americas is supported by a team of over 400 professionals on the ground.
Morris Goldfarb: As a result, China will represent less than 20% of our production by year-end, down from nearly 90% several years ago.
Speaker Change: As a result, China will represent less than 20% of that production by year end down from nearly 90% several years ago.
Morris Goldfarb: Next. On pricing, we're actively negotiating with retailers and will selectively raise prices. with over 30 in-demand brands across categories, price points, and channels. Our portfolio offers strong pricing power. Consumers are willing to pay more when quality and value are clear. This is evident in the strong AURs and growing demand for our newer brands like Donna Karan and Karl Lagerfeld, whose distribution is extremely limited in the off-price channel. Because these brands, along with our new licensed initiatives, are new to the market, this gives us the opportunity to set higher initial prices. will continue to monitor consumer response closely to protect both market share and profitability.
Speaker Change: Next on pricing, we're actively negotiating with retailers and we will selectively raise prices.
Speaker Change: With over 30 in demand brands across categories price points and channels.
Speaker Change: Our portfolio offers strong pricing power.
Speaker Change: Consumers are willing to pay more when quality and value of clear. This is evident in the strong AUR and growing demand for our newer brands like Donna Karan and Karl Lagerfeld.
Speaker Change: Distribution is extremely limited and the off price channel.
Speaker Change: Because of these brands along with our new licensed initiatives are new to the market. This gives us the opportunity to set higher initial price volumes.
Speaker Change: We will continue to monitor consumer response closely to protect both market share and profitability.
Morris Goldfarb: On the inventory front, we're in good shape, ending the quarter down 5% to last year as we continue to manage inventory tightly, staying disciplined in our buy. In terms of our cost savings initiatives, as we entered Calvin Klein and Tommy Hilfiger We're realigning our organization to unlock further efficiencies in fiscal 2007 and beyond. This includes streamlining our warehouse network. which will result in the exit of four warehouses and related staff reduction of over 150 people. Additionally, we are integrating and optimizing warehousing for our international businesses and reducing inbound freight costs through further consolidation of our brand.
Speaker Change: On the inventory front.
Speaker Change: We're in good shape, ending the quarter down 5% to last year as we continue to manage inventory tightly staying disciplined in our bodies.
Speaker Change: In terms of our cost savings initiatives as we exited the Calvin Klein and Tommy Hilfiger businesses.
Speaker Change: We are realigning our organization to unlock further efficiencies in fiscal 2017 and beyond.
Speaker Change: This include streamlining and spring lining our warehouse network.
Speaker Change: Which will result in the exit of four warehouses and related staff reduction of over 150 people.
Speaker Change: Additionally, we're integrating and optimizing warehousing for our international businesses and reducing inbound freight costs through further consolidation of our brands.
Morris Goldfarb: We are also investing in systems to increase supply chain transparency, upgrading digital tools to better support our omni-channel strategy, and leveraging technology to drive more operational efficiency.
Speaker Change: We're also investing in systems to increase supply chain transparency upgrading digital tools to better support our omni channel strategy and leveraging technology to drive more operational efficiencies.
Morris Goldfarb: On the real estate front, we successfully renegotiated favorable lease terms for our corporate offices. Securing appropriate options for kickouts on approximately one-third of our space. Additionally, we continue to focus on optimizing our global store footprint to improve productivity. Our North American retail segment is expected to break even this year, further enhancing our operating income by $14 million.
Speaker Change: And the real estate front, we successfully renegotiated very favorable lease terms for our corporate offices securing appropriate assets for takeouts on approximately one third of our space.
Speaker Change: Additionally, we continue to focus on optimizing our global store footprint to improve productivity.
Speaker Change: Our North American retail segment is expected to breakeven this year further enhancing our operating income by $14 million.
Morris Goldfarb: We had planned to relaunch our Sonia Ricci brand this fall, but given the uncertainties, we made the decision to cancel production and postpone the launch. We've written down costs related to materials on hand and disbanded the dedicated team with plans to revisit the launch when the operating environment stabilizes. And in parallel, we're realigning our teams to support the organization's future needs. While we remain disciplined in managing expenses, we will continue to invest in our key owned brands and other growth initiatives to support long-term expansion.
Speaker Change: We had plan to relaunch our Sarnia Ricky L brands. This fall, but given the uncertainties. We made the decision to cancel production postpone the launch.
Speaker Change: We've written down costs related to materials on hand, and disbanded the dedicated team with plans to revisit the launch when the operating environment stabilizes.
Speaker Change: And in parallel we're realigning our teams to support the organization as future needs.
Speaker Change: While we remain disciplined in managing expenses, we will continue to invest in our key owned brands and other growth initiatives to support long term expansion.
Morris Goldfarb: Now let us review our first quarter fiscal 2026 financial Non-GAAP earnings per diluted share was $0.19 compared to $0.12 last year, well above the top end of our guidance. Net sales for the quarter were $584 million in line with our guidance. We remain in strong financial position, ending the quarter with cash and availability of approximately $740 million.
Speaker Change: Now, let US review, our first quarter fiscal 2026 financial results.
Speaker Change: non-GAAP earnings per diluted share was <unk> 19, compared.
Speaker Change: Compared to 12 cents last year, well above the top end of our guidance range.
Speaker Change: Net sales for the quarter were $584 million in line with our guidance.
Speaker Change: We remain in strong financial position, ending the quarter with cash and availability of approximately $740 million.
Morris Goldfarb: Turning to our strategic priorities. As we continue on our transformation journey, our top priority remains driving the growth of our own brands as they represent an important and sustainable long-term profit drive. These brands generate higher operating margins and provide an accretive licensing income. As I mentioned earlier, this quarter's results were driven by the strong performance of our key owned brands DKNY, Karl Lagerfeld, and Donna Karan, which collectively grew double digit.
Speaker Change: Turning to our strategic priorities.
Speaker Change: As we continue on our transformation journey, our top priority remains driving the growth of our own brands as they represent an important answer sustainable long term profit driver.
Speaker Change: These brands generated higher operating margins and provide an accretive licensing income stream.
Speaker Change: As I mentioned earlier this quarters results were driven by the strong performance of our key owned brands DKNY, Karl Lagerfeld, and Donna Karan, which collectively grew double digits.
Morris Goldfarb: International remains one of our largest untapped opportunities for our brand. for developing our expertise in Europe where the support of AWWG, our brands are beginning to gain traction. We're building on our brand's already strong global recognition and investing in marketing to drive additional awareness and engagement in key markets overseas.
Speaker Change: International remains one of our largest untapped opportunities for our brands with.
Speaker Change: We are developing our expertise in Europe, where the support of AWD WG, our brands are beginning to gain traction.
Speaker Change: We're building on our brand's already strong global recognition and investing in marketing to drive additional awareness and engagement in key markets of receipts.
Morris Goldfarb: Now let me walk you through brand highlights from the first quarter. Donna Karan had a stellar first year after relaunching last spring with momentum continuing into the first quarter. Sales grew nearly 50% to last year, and the brand's AURs and sell-throughs remain the strongest across our portfolio. We have just scratched the surface on the opportunity here in the U.S. and are excited to introduce the brand into international markets with the potential of a billion dollars in annual sales over the long term. The brand saw substantial growth in dresses, which nearly doubled this quarter, as well as suit separates, which also saw significant growth.
Speaker Change: Now, let me walk you through brand highlights from the first quarter.
Speaker Change: Donna Karan a stellar first year after Relaunching last spring with momentum continuing into the first quarter.
Speaker Change: Sales grew nearly 50% to last year, and the brand's AUR and sell throughs remain the strongest across our portfolio.
Speaker Change: We've just scratched the surface on the opportunity here in the U S and are excited to introduce the brand into international markets with a potential of $1 billion in annual sales over the long term.
Speaker Change: The brand saw substantial growth in dresses, which nearly doubled this quarter as well as suit separates which also saw significant growth.
Morris Goldfarb: Sachs, Nordstrom's, as well as other premium retailers are expanding distribution into their stores after a successful digital-only launch last year. At Nordstrom's, we're quickly scaling and expect to be in 50 doors by fall.
Speaker Change: <unk> <unk> as well as other premium retailers are expanding distribution into their stores. After a successful digital only launch last year.
Speaker Change: Nordstroms, we're quickly scaling and expect to be in 50 doors by Paul.
Morris Goldfarb: As a reminder, we never distributed categories for Calvin Klein and Tommy into full-priced premium stores. Retailers are also dedicating additional floor space, and currently the brand is available in over 1,700 domestic points of sale, up from approximately 500 last spring. The brand's website DonnaKaren.com also saw strong growth led by the dress category. We have plenty of opportunities to expand across categories, including accessories. Our new premium handbag line is commanding AURs of up to $500. and Seeing Strong Demand, underscoring the brand's resonance with aspirational consumers. We're thoroughly and thoughtfully expanding into additional lifestyle categories through our licensing partners with a focus on fragrance, intimates, home, and menswear.
Speaker Change: As a reminder, we never distributed categories for Calvin Klein and Tommy into full price premium stores retailers are also dedicating additional floor space and currently the brand is available in over 1700 domestic points of sale up from approximately 500 last spring.
Speaker Change: The brand's website Donna Karan Dot Com also saw a strong growth led by the dress category.
Speaker Change: We have plenty of opportunities to expand across categories, including accessories.
Speaker Change: Our new premium handbag line is commanding AUR as of up to $500.
Speaker Change: And seeing strong demand underscoring the brands resonance with aspirational consumers.
Speaker Change: We're thoroughly and thoughtfully expanding into additional lifestyle categories through our licensing partners with a focus on fragrance intimate home and menswear into.
Morris Goldfarb: Into Parfum, a fragrance partner, is building on the brand's iconic cashmere mist franchise with the launch of a new scent, Cashmere and Vanilla, which received positive reviews and is experiencing strong sell-through. As part of this launch, we produced a capsule apparel collection made of 100% cashmere, available exclusively on the brand's digital site.
Speaker Change: <unk> phone a fragrance partner is building on the brand's iconic cashmere Ms franchise with the launch of a new scent cashmere and vanilla, which received positive reviews and is experiencing strong sell throughs.
Speaker Change: As part of this launch reproduce the capsule apparel collection made over 100% cashmere available exclusively on the brands digital site.
Morris Goldfarb: On the marketing front... We've developed award-winning campaigns that have driven significant brand awareness and engagement since the relaunch. This spring's campaign featuring Kate Moss was equally powerful, reaching global audiences and exceeding our expectations with over $27 million in earned media value. The great indicator of the brand's strong recognition is its significant celebrity interest and a VIP red carpet styling moment. which includes Margot Robbie, Gwyneth Paltrow, Jenna Ortega, and Dochi, among others.
Speaker Change: On the marketing front.
Speaker Change: We've developed award winning campaigns that have driven significant brand awareness and engagement since the relaunch.
Speaker Change: This spring campaign, featuring Kate Moss was equally powerful reaching global audiences and exceeding our expectations with over $27 million in earned media value.
Speaker Change: A great indicator of the brand's strong recognition is it significant celebrity interests and a VIP red carpet styling moment.
Speaker Change: Which includes Margot Robbie Gwyneth Paltrow General Ortega and <unk> among others.
Morris Goldfarb: DKNY delivered another strong quarter with double-digit sales growth, driven by momentum in North America. The brand is gaining share across categories as we deepen our lifestyle of sorts. Gene Sales more than doubled this quarter, and we saw additional outperformance in App Leisure. Handbags, Swim, and Outerwear. DKNY has established a growing licensing income stream with best-in-class licensing ports. as a compliment to our expanding men's outerwear offer. We're tapping into the opportunity in men's by licensing categories including sportswear, suits. Dress shirts, neckwear, and shoes. We've also established a successful licensed fragrance business. with one of the brand's iconic fragrance franchises, Be Delicious.
Speaker Change: <unk>.
Speaker Change: DKNY delivered another strong quarter with double digit sales growth driven by momentum in North America. The brand is gaining share across categories as we deepen our lifestyle assortment.
Speaker Change: <unk> sales more than doubled this quarter and we saw additional outperformance in athleisure.
Speaker Change: And bass swim and outerwear DKNY has established a growing licensing income stream with best in class licensing partners.
Speaker Change: As a complement to our expanding men's outerwear offering we're tapping into the opportunity in men's by licensing categories, including sportswear suits dress shirts, neckwear and shoes.
Speaker Change: We've also established a successful licensed fragrance business.
Speaker Change: One of the brand's iconic fragrance franchises be delicious nominated as a finalist for the Fragrance Foundation 2025 Hall of Fame Award.
Morris Goldfarb: Nominated as a finalist for the Fragrance Foundation 2025 Hall of Fame.
Morris Goldfarb: On the marketing front, a Spring 2025 campaign featuring Lila Moss rolled out across key global markets including the U.S., the U.K., Italy, Germany, Spain, Portugal, South Korea, and the Middle East. at Digital and Social Influencer Programming. kept the brand top of mind throughout the season. DKNY continues its successful partnership with the New York Yankees with a prominent billboard in right field and this year we also sponsored a DKNY branded jersey giveaway for over 18,000 fans entering Yankee Stadium.
Speaker Change: On the marketing front.
Speaker Change: Our spring 2025 campaign, featuring Leila Moss rolled out across key global markets, including the U S U K, Italy, Germany, Spain, Portugal, South Korea, and the Middle East.
Speaker Change: At digital and social and Influencer Influencer program.
Speaker Change: <unk> kept the brand top of mind throughout the season.
Speaker Change: DKNY continues its successful partnership with the New York Yankees with a prominent Billboard in right field and this year. We also sponsored a DKNY branded Jersey giveaway for over 818000 fans entering Yankee Stadium.
Morris Goldfarb: Internationally. The brand is also gaining momentum. This quarter, Europe delivered strong growth across lifestyle categories with particular strength in jeans and accessories, while the Middle East saw solid sell-throughs in core categories including handbags, sportswear, and footwear. We remain in the early innings of international expansion.
Speaker Change: Internationally the.
Speaker Change: The brand is also gaining momentum this quarter Europe delivered strong growth across lifestyle categories with particular strength in jeans and accessories, while the middle East saw a solid sell throughs in core categories, including handbags sportswear and footwear.
Speaker Change: We remain in the early innings of international expansion.
Morris Goldfarb: Karl Lagerfeld delivered another quarter of double-digit growth. In North America, the brand saw particular strength in sportswear, footwear, dresses, and suits. which collectively grew over 20%. We're leaning into white space opportunities in menswear by adding new licensed categories such as dress shirts and neckwear, and that complements our mens outerwear and suit up. Internationally, the brand continues to expand, with mid-single-digit sales increases driven by broad-based growth across channels. and Prada Categories. We're refining our assortment to reach a broader consumer while balancing the brand's aspirational appeal. Our new Karl Studio line offers more premium, fashion-forward products and is eliciting strong press and consumer engagement with solid growth in the quarter.
Speaker Change: Karl Lagerfeld delivered another quarter of double digit growth.
Speaker Change: North America, the brand saw particular strength in sportswear footwear dresses and suits.
Speaker Change: Which collectively grew over 20%.
Speaker Change: We're leaning into white space opportunities in menswear by adding new licensed categories, such as dress shirts, and neckwear and column and that complements our men's outerwear and suite offerings.
Speaker Change: Internationally. The brand continues to expand with mid single digit sales increases driven by broad based growth across channel.
Speaker Change: And product categories, we're refining our assortment to reach a broader consumer while balancing the brands aspirational appeal.
Speaker Change: Our new cloud studio line offers more premium fashion forward product and is eliciting strong press and consumer engagement with solid growth in the quarter.
Morris Goldfarb: We saw almost 40% growth in digital across our partner marketplaces and Karl.com. were in the early stages of building out the Karl Lagerfeld jeans line, which grew 50% in the quarter, helping us capture a younger consumer. The brand is experiencing solid sell-throughs for spring, delivering strong comparable sales growth across full price and outlets.
Speaker Change: So almost 40% growth in digital across our partner marketplaces, and Carl Dot Com.
Speaker Change: We're in the early stages of building out the Karl Lagerfeld Jeans line, which grew 50% in the quarter, helping us capture a younger consumer.
Speaker Change: Brand is experiencing solid sell throughs for spring delivering strong comparable sales growth across full price and outlet stores.
Morris Goldfarb: We're expanding the brand's retail footprint in key global markets, including the opening of the first store in Karl's hometown of Hamburg, Germany, this quarter. To drive brand awareness in Asia, we recently launched a high-impact pop-up in Seoul, Korea, a city celebrated for its bold, expressive street style, making it an ideal market to spark consumer engagement. This two-week activation offered an immersive journey into the world of Carl, bringing the brand to life in a vibrant and locally resident setting. The results exceeded our expectations as sales at the pop-up more than tripled projections and the event generated significant media buzz.
Speaker Change: We're expanding the brand's retail footprint in key global markets, including the opening of the first store in karl's hometown of Hamburg, Germany This quarter.
Speaker Change: To drive brand awareness in Asia, We recently launched the high impact pop up in South Korea, our cities celebrated for exposed expresses street style, making it an ideal market despite consumer engagement.
Speaker Change: This two week activation offered an immersive journey into the world of Carl bringing the brand to life in a vibrant and local residents setting.
Speaker Change: The results exceeded our expectations at sale AD sales at the pop up more than tripled projections and the event generated significant media Buzz key.
Morris Goldfarb: Key Opinion Leaders and Influences Amplified Our Message driving strong engagement, expanding our reach across digital and social platforms, and generating significant brand awareness. This success underscores the tremendous untapped potential in Asia. We're energized by the momentum and are actively engaging with partners to unlock further growth opportunities in the region.
Speaker Change: Key opinion leaders and influences actual amplifying our message.
Speaker Change: Having strong engagement expanding our reach across digital and social platforms and generating significant brand awareness.
Speaker Change: This success underscores the tremendous untapped potential in Asia.
Speaker Change: We're energized by the momentum and are actively engaging with partners to unlock further growth opportunities in the region.
Morris Goldfarb: In addition to growing our own bread, Expanding our portfolio of strategic licenses remains a key pillar of our long-term strategy. We believe these partnerships will further diversify our business model and drive growth in a capital light way. Our over 30 globally recognized brands are differentiated across lifestyle categories, having a wide range of aesthetics, price points, and distribution channels, appealing to a broad consumer base. We also have global distribution rights for some of our newer licenses. Meanwhile, a powerful corporate platform enables us to bring brands to market efficiently and at scale. Retailers value their relationship with G3 and consider us a partner of choice for exactly the reasons I just mentioned.
Speaker Change: In addition to growing our own brands.
Speaker Change: Pending our portfolio of strategic licenses remains a key pillar of our long term strategy.
Speaker Change: We believe these partnerships will further diversify our business model and drive growth in a capital light way.
Speaker Change: Our over 30 globally recognized brands are differentiated across lifestyle categories, having a wide range of aesthetics and price points and distribution channels appealing to a broad consumer base.
Speaker Change: We also have global distribution rights for some of our newer licenses.
Speaker Change: Meanwhile, our powerful corporate platform enables us to bring brands to market efficiently and at scale.
Speaker Change: Retailers value their relationship with G III and consider US a partner of choice for exactly the reasons I just mentioned.
Morris Goldfarb: Our partners have access to our substantial portfolio of brands and the significant value we offer in the high quality commercial product that we supply at the right price points and on time. Additionally, a key differentiator in the value-add service we provide through our dedicated field merchandisers who ensure our products are well represented on their sales floors, helping to drive strong profitability for our retail partners. In turn, retailers continue to invest in our brands by allocating premium floor space and expanding door counts, fueling mutual growth.
Speaker Change: Our partners have.
Speaker Change: Access to our substantial portfolio of brands and the significant value we offer in the high quality commercial product that we supply at the right price points and on time.
Speaker Change: Additionally, a key differentiator and the value add service, we provide through our dedicated field merchandisers, who ensure our products are well represented on their sales Florida.
Speaker Change: Helping to drive strong profitability for our retail partners.
Speaker Change: In turn retailers continue to invest in our brands by allocating premium floor space and expanding door counts fueling mutual growth.
Morris Goldfarb: Macy's naming us their 2024 Partner of the Year for the second time is a testament to this, reflecting the strength of our 40-plus year relationship and our shared commitment to education. A newly launched Nautica Jeans, Halston and Champion Outerwear at a good spring season and are scaling inside.
Speaker Change: Macy's naming us there 2024 partner of the year for the second time is a testament to this reflecting the strength of our 40 plus year relationship and our shared commitment to excellence.
Speaker Change: Our newly launched not a good genes Austin and champion outerwear and a good spring season and are scaling in size.
Morris Goldfarb: Just a reminder, regarding Nordica, due to our licensing agreement with Tommy Hilfiger, we're currently limited in our ability to produce additional categories. These restrictions will be lifted as we return the Tommy Hilfiger category. In the first year of launching Nautica Jeans, we more than offset the sales of the Tommy Jeans business.
Speaker Change: Just a reminder, regarding not us.
Speaker Change: Due to our licensing agreement with Tommy Hilfiger, We are currently limited in our ability to produce additional categories.
Speaker Change: These restrictions will be lifted as we return the Tommy Hilfiger categories.
Speaker Change: In the first year of launching nautica genes, we more than more than offset the sales of the Tommy jeans business.
Morris Goldfarb: We're on track to launch Converse on BCBG this fall. A converse fall order book for North America and Western Europe is building nicely, with first orders set to ship in August. Converse provides access to a differentiated consumer and distribution network where our fashion brands have little or no presence. This includes big box, sports specialty, and sporting goods stores, as well as Western Europe and through the brand's global distribution network, including the over 1,000 converse stores that G-III can potentially serve.
Speaker Change: We're on track to launch Comverse NBC BG this fall.
Speaker Change: Our Congress fall order books for North America, and Western Europe is building nicely with first store is set to ship in August.
Speaker Change: Congress provides access to a differentiated consumer AD distribution network, whereas fashion brands have little or no presence.
Speaker Change: This includes big box sports specialty and sporting goods stores as well as Western Europe.
Speaker Change: The brand's global distribution network.
Speaker Change: <unk> the over 1000, Comverse stores at G III and potentially service.
Morris Goldfarb: As for our PVH license... For this year, we expect that go-forward brands, led by DKNY and Karl Lagerfeld, will largely offset the sales decline in the exited Calvin Klein jeans and sportswear licenses. which represented $175 million in sales last year.
Speaker Change: As for our PVH licenses for this year, we expect that go forward brands led by DKNY and Karl Lagerfeld will largely offset the sales decline and the exited Calvin Klein jeans, and sportswear licenses, which represented a 100.
Speaker Change: Third $75 million in sales last year.
Morris Goldfarb: Looking ahead to fiscal 2027, we're proactively preparing for the expiration of several key PVH licenses, including Calvin Klein Outerwear and Athleisure, as well as Tommy Hilfiger Outerwear, Sportswear, and Athleisure. Over the course of our long-standing partnership, we've played a pivotal role in building the Calvin Klein and Tommy Hilfiger North American Women's Wholesale Business. contributing to over $15 billion in cumulative wholesale sales. As PVH transitions to managing these categories directly or through new licenses, they will face the dual challenge of building the necessary infrastructure and onboarding new partners while G-III has the opportunity to capture market share and accelerate growth of our portfolio.
Speaker Change: Looking ahead to fiscal 2027, we are proactively preparing for the exploration of several key PVH licenses, including Calvin Klein outerwear, and athleisure as well as Tommy Hilfiger, outerwear sportswear and athleisure.
Speaker Change: Over the course of our long standing partnership we've played a pivotal role in building with Calvin Klein and Tommy Hilfiger, North American women's wholesale business.
Speaker Change: <unk> to over $15 billion in cumulative wholesale set.
Speaker Change: As PVH transitions to managing these categories directly or through new licenses. They will face the dual challenge of building the necessary infrastructure and Onboarding New partners. While G. III has the opportunity to capture market share and accelerate growth of our portfolio.
Morris Goldfarb: As we look forward, we're focused on our own brands and we will be able to fully unlock the global potential of our portfolio. A strong balance sheet also affords us the ability to pursue future licenses and acquisition opportunities that align with our long-term growth strategy.
Speaker Change: As we look forward, we're focused on our own brands and we will be able to fully unlock the global potential of our portfolio.
Speaker Change: Our strong balance sheet also affords us the ability to pursue future licenses and acquisition opportunity that align with our long term growth strategy.
Morris Goldfarb: Turning to our next strategic priority of enhancing our omni-channel capabilities, which includes continuing to improve our North American retail segment. and Strengthening Our Digital Ecosystem. In North America, we reduced the losses in our retail segment by more than half last year after successfully executing our turnaround strategies, which included management changes, reducing our store footprint, and re-merchandising product on our floors to present a better branded experience. As I've stated earlier, this year we expect the business to break even, eliminating approximately $14 million in operating losses, and we remain on track to achieve these goals. On the digital front, we saw high single-digit sales growth across retailer sites and pure play platforms. Our investments in upgrading our owned websites and our expanded lifestyle offerings on pure play platforms is helping to enhance our brand's presence across digital touchpoints and driving market share gains.
Speaker Change: Turning to our next strategic priority is enhancing our omni channel capabilities, which includes continuing to improve our north American retail segment store operations and strengthening our digital ecosystem.
Speaker Change: In North America, we reduced the losses in our retail segment by more than half last year. After successfully executing our turnaround strategies, which included management changes, reducing our store footprint and re merchandising product on our floors to present, a better brand experience.
Speaker Change: As I've stated earlier this year, we expect the business to breakeven eliminating approximately $14 million in operating losses, and we remain on track to achieve these results.
Speaker Change: On the digital front, we saw a high single digit sales growth across retailer sites and pure play platforms.
Speaker Change: Our investments in upgrading our owned websites and are extending our expanded lifestyle offerings on pure play platform is helping to enhance our brand presence across digital touch points and driving market share gains.
Morris Goldfarb: We continue to invest in supporting this ever important channel and ensuring the consumer can access our brands wherever they shop.
Speaker Change: We continued to invest in supporting this ever important channel and ensuring the consumer can access our brands wherever they shop.
Morris Goldfarb: in closing. We delivered a solid first quarter fueled by the strength of our key owned brands. Amid ongoing macroeconomic uncertainty, we remain disciplined and focused on the levers within our control. We're reaffirming our fiscal year 2026 top line guidance and are actively working to mitigate the impact of tax. Our experienced leadership team has successfully navigated through major market disruptions, and we're confident in our ability to emerge from this period even stronger. Backed by a healthy balance sheet, we are investing in our highest conviction growth priorities including accelerating global growth of our portfolio brands, deepening consumer engagement, creating iconic products and enhancing our brand portfolio through both licensing and potential acquisitions.
Speaker Change: In closing.
Speaker Change: We delivered a solid first quarter fueled by the strength of our key owned brands.
Speaker Change: Amanda ongoing macroeconomic uncertainty, we remain disciplined and focused on the levers within our control.
Speaker Change: We are reaffirming our fiscal year 2026 top line guidance and are actively working to mitigate the impact of tariffs.
Speaker Change: Our experienced leadership team has successfully navigated through major market disruptions and we are confident in our ability to emerge from this period even stronger.
Speaker Change: Backed by a healthy balance sheet, we are investing in our highest conviction growth priorities, including accelerating global growth of our portfolio brands deepening consumer engagement, creating iconic products and enhancing our brand portfolio through both licensing and potential acquisitions.
Morris Goldfarb: I want to reiterate how excited I am by our globally recognized brands and the strength of our platform. We're well positioned to drive sustainable, profitable growth and deliver long-term value for our shareholders.
Speaker Change: <unk>.
Speaker Change: I want to reiterate how excited I am by our globally recognized brands and the strength of our platform.
Speaker Change: We are well positioned to drive sustainable profitable growth and deliver long term value for our shareholders.
Neal Nackman: I'll now pass the call to Neal, who will walk you through the financial results for the first quarter of fiscal 2026 and provide some guidance for the second quarter. Thank you Morris. Net sales for the first quarter ended April 30, 2025 were $584 million compared to $610 million in the same period last year, in line with our expectations. Net sales of our wholesale segment were $563 million compared to $598 million in the previous year. Net sales of our retail segment were $36 million for the quarter compared to net sales of $31 million in the previous year.
Speaker Change: I'll now pass the call to Neil who will walk you through the financial results for the first quarter of fiscal 2026 and provide some guidance for the second quarter.
Speaker Change: Thank you Marci net sales for the first quarter ended April 32025, with $584 million compared to $610 million.
Speaker Change: In the same period last year in line with our expectations.
Speaker Change: Net sales of our wholesale segment were $563 million compared to $598 million in the previous year net.
Speaker Change: Net sales of our retail segment were $36 million for the quarter compared to net sales of $31 million in the previous year.
Neal Nackman: A gross margin percentage was 42.2% in the first quarter of fiscal 2026 compared to 42.5% in the previous year's first quarter. Wholesale segment's gross margin percentage was 40.4% compared to 40.9% in last year's comparable quarter. The gross profit percentage in the current year's period decreased 50 basis points due to unfavorable product mix, which was partially offset by the increased sales of our higher margin-owned brand. The gross margin percentage in our retail operation segment was 53.5% compared to 47% in the prior year's period. The gross margin in the current year saw significant improvement driven by our merchandising and execution initiatives as part of our retail segment turnaround strategy, as well as strong digital sales growth of our Donna Karan products, which carry higher AUR.
Speaker Change: Our gross margin percentage was 42, 2% in the first quarter of fiscal 2026 compared to <unk> 42, 5% in the previous year's first quarter.
Speaker Change: The wholesale segment gross margin percentage was 44% compared to 49% in last year's comparable quarter.
Speaker Change: The gross profit percentage in the current year's period decreased 50 basis points due to unfavorable product mix, which was partially offset by the increased sales of our higher margin owned brands.
Speaker Change: The gross margin percentage in our retail operations segment was 53, 5% compared to 47% in the prior year's period.
Speaker Change: The gross margin in the current year, so a significant improvement driven by our merchandising and execution initiatives as part of our retail segment turnaround strategy as well as strong digital sales growth of our Donna Karan products, which carry higher AUR.
Neal Nackman: Non-GAAP SG&A expenses were $231 million compared to $237 million in the previous year's first quarter. The decrease in expenses the last year was primarily due to a reduced advertising expense in this quarter versus the higher spend in the prior year related to the relaunch of the Donna Karan brand and DKNY marketing campaign. In addition, we experienced lower advertising expenses resulting from a decreased net sales of licensed products in the current period. Non-GAAP net income for the first quarter was $8.4 million or $0.19 per diluted share compared to $5.8 million or $0.12 per diluted share in the previous year's first quarter.
Speaker Change: non-GAAP SG&A expenses were $231 million compared to $237 million and.
Speaker Change: The previous year's first quarter.
Speaker Change: The decrease in expenses to last year was primarily due to a reduced advertising expense in this quarter versus the higher spend in the prior year related to the re launch of the Donna Karan brand and DKNY marketing campaigns. In addition, we experienced lower advertising expenses, resulting from a decreased net sales of life.
Neal Nackman: <unk> product in the current period.
Speaker Change: non-GAAP net income for the first quarter was $8 $4 million 19 per diluted share compared to $5 8 million or 12 per diluted share in the previous year's first quarter.
Neal Nackman: Turning to the balance sheet, inventories are in excellent shape at $456 million at the end of the quarter, decreasing 5% from the previous year's $480 million. We ended the quarter with a net cash position of approximately $239 million compared to a net cash position of $82 million in the prior year. We repurchased 800,000 shares for approximately $20 million in the quarter. We remain in a very strong financial position with approximately $740 million of liquidity. Our financial strength provides us flexibility to invest in our business and other strategic opportunities to drive future growth.
Speaker Change: Turning to the balance sheet inventories are in excellent shape at $456 million at the end of the quarter decreasing 5% from the previous year's $480 million.
Speaker Change: We ended the quarter with a net cash position of approximately $239 million compared to a net cash position at $82 million in the prior year.
Speaker Change: We repurchased 800000 shares for approximately $20 million in the quarter, we remain in a very strong financial position with approximately $740 million of liquidity.
Speaker Change: Our financial strength provides us flexibility to invest in our business and other strategic opportunities to drive future growth.
Neal Nackman: Turning to guidance, for the full fiscal year 2026, we are reaffirming our net sales guidance of approximately $3.14 billion. However, due to uncertainty around tariffs and related macroeconomic conditions, we have withdrawn our net income, non-GAAP net income, and adjusted EBITDA guidance for fiscal 2026 issued on our last earnings call on March 13, 2025. We estimate the unmitigated impact of tariffs on products imported into the U.S. to be approximately $135 million, which include an incremental tariff rate of 30% on Chinese products and 10% on imports from other countries. As Morris outlined in his prepared remarks, we are working diligently to offset the impact of tariffs through diversifying our sourcing mix and vendor discounts.
Speaker Change: Turning to guidance for the full fiscal year 2026, we are reaffirming our net sales guidance of approximately $3 one 4 billion.
Speaker Change: However, due to the uncertainty around tariffs and related macroeconomic conditions, we have withdrawn our net income non-GAAP net income and adjusted EBITDA guidance for fiscal 2026 issued on our last earnings call on March 13th 2025.
Speaker Change: We estimate the unmitigated impact of tariffs on products imported into the U S to be approximately $135 million, which include an incremental tariff rate of 30% on Chinese products and 10% on imports from other countries.
Morris Goldfarb: As Morris outlined in his prepared remarks, we are working diligently to offset the impact of tariffs through diversifying our sourcing mix and then the discounts selective price increases and other cost saving initiatives.
Neal Nackman: Selective Price Increases, and other cost-saving initiatives. As you can imagine, this is an iterative process that we are actively managing and are focused on mitigating as much as we can. We expect the impact of tariffs to be predominantly weighted to the second half of fiscal 2026. For the second quarter of fiscal year 2026, we expect net sales to be approximately $570 million compared to $645 million in the prior year. The majority of the decrease to last year is related to timing shifts in certain programs from the second quarter into the second half of this year, as well as supply chain disruptions we are experiencing as a result of incremental tariffs.
Morris Goldfarb: As you can imagine this is an iterative process that we are actively managing and are focused on mitigating as much as we can.
Morris Goldfarb: We expect the impact of tax to be predominantly weighted to the second half of fiscal 2026.
Morris Goldfarb: For the second quarter of fiscal year 2026, we expect net sales to be approximately $570 million compared to $645 million in the prior year. The majority of the decrease to last year is related to timing shifts in certain programs from the second quarter into the second half of this year as well as supply chain.
Morris Goldfarb: <unk>, we are experiencing as a result of incremental tariffs.
Neal Nackman: We expect gross margins for the second quarter to be generally in line with last year, and at this point are anticipating only a small impact from tariffs in the quarter. We expect non-GAF net income per diluted share for the second quarter of fiscal 2026 to be between $1,000,000 and $6,000,000, or between $0.02 and $0.12 per diluted share. This compares to non-GAF net income of $23.8 million, or $0.52 per diluted share, in fiscal 2025. With respect to modeling sales cadence in the back half, we anticipate a low single-digit increase for the third quarter and a mid-single-digit increase in the fourth quarter, inclusive of the new launches for the fall and holiday season.
Speaker Change: We expect gross margins for the second quarter to be generally in line with last year and at this point are anticipating only a small impact from tariffs in the quarter.
Speaker Change: We expect non-GAAP net income per diluted share for the second quarter of fiscal 2026 to be between $1 million and $6 million or between <unk> and <unk> 12 per diluted share. This compares to non-GAAP net income of $23 8 million or <unk> 52 per diluted share in fiscal 2025.
Speaker Change: With respect to modeling sales cadence in the back half, we anticipate a low single digit increase for the third quarter and a mid single digit increase in the fourth quarter inclusive of the new launches for the fall and holiday season.
Neal Nackman: That concludes my comments.
Morris Goldfarb: I will now turn the call back to Morris for closing remarks. Thank you, Neal, and thank you all for joining us today. I'm proud of our team's work this quarter, and I'm confident in G-III's future as a global leader in fashion.
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 I am proud of our teams to work this quarter and I'm confident in <unk> future as a global leader in fashion.
Morris Goldfarb: I'd also like to thank our entire organization, our many partners, and all our stakeholders for their support.
Morris Goldfarb: I'd also like to thank our entire organization, our many partners and all our stakeholders for their support.
Operator: Operator, we're now ready to take some questions. Thank you.
Speaker Change: Operator, we're now ready to take some questions.
Speaker Change: Thank you.
Ashley Owens: Our first question comes from Ashley Owens with KeyBank Capital Markets. Your line is open. Hi, great. Thanks and good morning. So maybe just starting off. Thanks for the question, Ashley. It's actually a really good one. We're getting a great level of cooperation from our retailers in adjusting pricing in targeted areas of our business. We're not arbitrarily taking a 10% increase or a 6% or a 15% increase. We're looking at the opportunities that the consumer will accept. It seems that our retailers are accepting what we suggest. We are partners in this path, and we will find price points that work effectively for ourselves, our retailers, and most importantly, for the consumer.
Speaker Change: Our first question comes from Ashley Owens with Keybanc capital markets. Your line is open.
Ashley Owens: Okay, great. Thanks, and good morning, So maybe just.
Speaker Change: Starting off you talked about price increases as part of the plan and discussing pricing power.
Speaker Change: Some of your own brands.
Speaker Change: These being newer installed by eliminating distribution is this where the focus is for some of those price increases or maybe just more broadly what parts of the assortment, whether it be trusted codes et cetera.
Speaker Change: Most opportunity to take price.
Speaker Change: Okay.
Speaker Change: Thanks for your question internationally is actually a really good one.
Speaker Change: We are getting a great level of cooperation from our retailers and adjusting pricing in targeted areas of our business, we're not arbitrarily, taking a 10% increase or 6% or a 15% increase we're looking at the opportunities that the consumer.
Speaker Change: Will accept.
Speaker Change: It seems that our retailers are accepting what we suggest.
Speaker Change: We are partners in.
Speaker Change: This.
Speaker Change: This path.
Speaker Change: We will see.
Speaker Change: <unk> price points at work effectively for ourselves our retailers and most importantly for the consumer.
Morris Goldfarb: The advantage we have is we have several brands that do not have pricing pressure. We're retailing Donna Karan effectively with good margin and amazing sell-throughs at higher price point. We're positioned differently than with Calvin and Tommy Hilfiger. There's no real history, and if there is, it relates to designer when Donna Karan in her peak produced product dresses that were $1,000 or $1,500. So when a consumer walks in to see a Donna Karan dress, or a sportswear, or a sweater, they say, oh my god, what value this really is. And with that, we've taken a different approach.
Speaker Change: The advantage. We have is we have several brands that do not have pricing pressure, where we're retailing.
Speaker Change: Donna Karan effectively with good margin and amazing sell throughs at higher price point, we're positioned differently than with Calvin and Tommy Hilfiger.
Speaker Change: No no real history, and if there is it relates to designer when Donna Karan in RFP.
Speaker Change: Produced product dresses that were.
Speaker Change: <unk> thousand $500, so when a consumer walks into sea of Donna Karan dress or sportswear sweaters, They say Oh, my God what value.
Speaker Change: This really is.
Speaker Change: And with that we've taken.
Morris Goldfarb: We've taken the iconic and Dresses and sportswear and pretty much the entire collection that Donna had had created and Adjusted, you know the fabrics but kept the trims actual and We're getting amazing attention for it and great sell-throughs. So not very difficult to raise our price with Karl Lagerfeld, similar form. Karl's got a unique identity, European, without distribution, or very little distribution in the off-price channel. So the comparatives in the retailers that we're selling to are very reasonable, and the brand has amazing pricing power. Again, that has a lot to do, mostly to do, with how we create products and how we keep quality and integrity of the brand in place.
Speaker Change: A different approach we've taken.
Speaker Change: The iconic.
Speaker Change: Dresses and sportswear.
Speaker Change: Pretty much the entire collection that Don I had.
Speaker Change: I had created.
Speaker Change: Adjusted the fabrics, but kept the trends.
Speaker Change: Actual end.
Speaker Change: We're getting amazing attention for it and great sell through so not very difficult to raise that price points.
Speaker Change: With.
Speaker Change: Karl Lagerfeld similar form of Karl has got a unique identity.
Speaker Change: European.
Speaker Change: That without distribution.
Speaker Change: Very little distribution in the off price channel so the comparative and the retailers that we're selling to are very reasonable.
Speaker Change: The brand has amazing pricing power.
Speaker Change: Again that has a lot to do mostly to do with how we create product and how we keep quality and integrity of the brand in place so.
Morris Goldfarb: So those are advantages. The launch at Converse is yet another one. There's virtually no apparel or adult apparel in the pipeline or in the past.
Speaker Change: Those are advantages to launches comverse is yet another one.
Speaker Change: Virtually no apparel or adult apparel.
Speaker Change: And the pipeline or in the past for converse so.
Morris Goldfarb: For more information, visit www.FEMA.gov The the consumer is really what you know, we look at what will they accept? And the other area, the other area of... opportunity is the fact that we'll be distributing to a different level of retailer and a big percentage of our business, and the sourcing arm is the same, the factories are very much the same, and our negotiating ability with the factories Strongest anybody in the industry, my bet is, we're much stronger. It's always been a focus of this company. We're keyed in on developing factories, partnering with them, regardless of what country it is.
Speaker Change: Our pricing can be adjusted and hopefully that gets accepted.
Speaker Change: Getting it passed our retailers or our customers is an easier process because there is no no no real reference point.
Speaker Change: The.
Speaker Change: The consumer is really what we look at what will they accept.
Speaker Change: And the.
Speaker Change: The other area.
Speaker Change: The other area of.
Speaker Change: Opportunity.
Speaker Change: Is the fact that we'll be distributing too.
Speaker Change: A different level of retailer and a big percentage of our business and the sourcing the sourcing arm is the same the factories are very very much the same and our negotiating ability with the factories is.
Speaker Change: As strong as anybody in the industry. My bet is were much stronger.
Speaker Change: So it's always been.
Speaker Change: A focus of this company where we.
Speaker Change: We are keyed in on developing factories is partnering with them regardless of what country. It is.
Morris Goldfarb: We have a reputation for not abandoning a vendor. That goes a long way in this type of. So I think we have an advantage. And I do not see, you know, it's all open. We're not certain where tariffs level off. But if they remain in this zone, I believe we're. I hope that answers your question, Ashley. Yeah, no, no, super helpful.
Speaker Change: We have a reputation for not abandoning.
Speaker Change: Our vendor.
Speaker Change: That goes a long way in this type of environment. So I think we have I think we have an advantage.
Speaker Change: Do not see.
Speaker Change: It's all open we're not certain where where tariffs level off.
Speaker Change: But if they remain in this zone I believe we're fine.
Speaker Change: I hope that answers your question actually yeah, no that's super helpful.
Ashley Owens: Maybe just one really quickly too on the guide with the postpone of Sonya, anything there that was factored into the guide for that? And then additionally too, just regards to the order book, what you are doing for demand planning when looking at the second half, any pulling back on supply with potential for less consumer demand if it does slow down? Thank you.
Speaker Change: Maybe just one really quickly to you on the guide with the relaunch alright with the postpone.
Sean: Sean Yes, anything there that was factored into the guide for that and then <unk>, which.
Sean: Just regards to the order book, what you are doing for demand planning with them looking at the second half any pulling back on supply with potential for less consumer demand. If it does slow down. Thank you.
Morris Goldfarb: So as it relates to Sonia Ricciel, we worked hard at developing an amazing collection of product. We sold into... the stores that we needed to in Europe, it was accepted, the price points were accepted, great deal of difficulty in launching a brand with production in small units, sourcing the appropriate factories that are in a sense doing us a favor to launch. We were always working short on margin to get the product produced and placed and our idea was it was not going to be a very big business, it would lose some money and we would position the brand for the future.
Sean: So as it relates to <unk>, we worked hard at developing and developing an amazing collection of products.
Sean: We sold into.
Sean: The stores that we needed to in Europe.
Sean: Has accepted the price points were accepted great deal of difficulty in launching our brand with production in small units.
Sean: Sourcing the appropriate factories that are in a sense doing us a favor to launch.
Sean: We were always working short on margin to get the product produced in place and our view was it was not going to be a very big business. It would lose some money.
Sean: And we would position the brand for the future as tariffs became out of hand.
Morris Goldfarb: As tariffs became out of hand and the process became complicated, production kind of lost its taste for doing us a favor and produced small units, so we decided the best thing to do was pack up and come back another day and we disappointed some retailers, mostly in Europe. and we disbanded the showroom, the people that were staffed to run it, and design is now focused on another area of our business.
Sean: And the process became complicated production.
Sean: I'm kind of lost its taste doing us a favor and produce small units.
Sean: So we decided the best thing to do with pack up and come back another day and.
Sean: We disappointed some retailers mostly in Europe.
Sean: And.
Sean: We disbanded the showroom and the people that we're staffed to run it and design.
Sean: It is now focused on another area of our business so not not a costly event. It would have been far more costly to go forward for the year and we felt this was not the year to two.
Morris Goldfarb: So not a costly event, it would have been far more costly to go forward for the year and we felt this was not the year to launch a brand and lose money. It was a decision with my sounding board at G-III and we decided that we'd be out.
Morris Goldfarb: To launch a brand and lose money doing it.
Sean: It was a decision.
Sean: My.
Speaker Change: My sounding board at G III, and we've decided that we bill.
Morris Goldfarb: Ashley, with respect to the order book and your question on supply challenges, we're certainly anticipating acceleration in the second half. We've got launches that come on in the second half. If you looked at what we did last year, you saw we had a very strong second half as opposed to the first. These businesses have bigger seasons, the ones we launch in the fall versus the spring period of time. I would say that the certainly ordering demand is slightly slower this year than where we were last year, but we remain cautiously optimistic that the consumer will be there for us, they'll be there for the brands we're delivering.
Sean: Yes.
Sean: With respect to the order book.
Sean: And your question on supply challenges.
Sean: Look we are certainly anticipating acceleration in the second half we've got launches that come on in the second half. If you looked at what we did last year. You saw we had a very strong second half as opposed to the first these businesses have bigger seasons. The ones, we launched in the fall versus the spring period of time.
Sean: I would say that the.
Sean: Certainly ordering demand is slightly slower this year than where we were last year, but we remain cautiously optimistic with the <unk>.
Sean: <unk> will be there for us there will be there for the brands, we're delivering we've got a lot of newness going out there.
Ashley Owens: We've got a lot of newness going out there, and that's really what gives us confidence again in the second half order book. In terms of supply, we're always prudent with respect to our inventory purchases, and we supply in accordance with things that we'll be comfortable with should demand get soft on us. It's something that we've been managing throughout our entire careers here, and something that we do well. Okay, great. Thanks so much for the call. I'll pass it along. Thank you, Ashley.
Sean: And that's really what gives us confidence again in the second half order book.
Sean: In terms of supply, we're always prudent with respect to our inventory purchases and we buy in accordance with things that we will be comfortable with should should.
Sean: The demand gets soft on us so it's something that we've been managing through that.
Ashley Owens: Yeah.
Sean: Our entire careers here and something that we do well.
Sean: Okay, great. Thanks, so much for the color I'll pass it along thank you Ashley.
Mauricio Serna: Our next question comes from Mauricio Serna with UBS. Your line is open. Great. Good morning. Thanks for taking my question.
Speaker Change: Thank you. Our next question comes from Mauricio Serna with UBS. Your line is open.
Mauricio Serna: Great. Good morning, good morning, Thanks for taking my questions.
Mauricio Serna: Just first, could you talk about roughly how much is this timing shift that you mentioned on the Q2 guide impacting the revenue outlook? And does that all shift to Q3 or is it actually like spread out in Q3?
Mauricio Serna: Could you talk about roughly how much is this timing shift.
Mauricio Serna: You mentioned on the Q2 guide impacting the revenue outlook.
Mauricio Serna: Does that all shift to Q3 or does it actually spread out in Q3.
Neal Nackman: And then just on on tariff, like any sense of like how much you expect to mitigate out of the one hundred and thirty five million dollars? And I guess looking into like, should we assume a similar unmitigated impact on the first half of next year or or maybe there's like some acceleration on initiatives or just seasonality implies like less impact? Thank you. Thanks Mauricio. Yes, so with respect to your first question in terms of shifting, it's probably easier for us to identify the shifts that are related to the supply chain issues we've had. You know, when we had a 145% tariff rate in China, essentially we were shut down and shut out of many programs. We ceased in some cases significant amounts of production and then really have to restart that when subsequently those tariffs became more manageable for us.
Mauricio Serna: And then just on Ontario.
Neal Nackman: Any sense of like how much you expect to mitigate out about $135 million.
Mauricio Serna: And I guess looking into like.
Neal Nackman: Should we.
Mauricio Serna: I assume a similar on mitigating impact on the first half.
Neal Nackman: Up next year or or maybe if there's like some acceleration on initiatives or just seasonality implies less.
Speaker Change: Thank you.
Horacio: Thanks Horacio.
Paul: So with respect to your first question in terms of shifting its Paul.
Horacio: Easier first identified the shifts that are related to the supply chain issues. We've had when we had a 145% tariff rate in China, essentially we were shut down and shut out in many programs. We ceased in some cases significant amounts of production.
Neal Nackman: And then really have to restart that when when subsequently those tariffs became more manageable for us. So that's something that we probably feel that if we will look at the the downdraft that we got in the second quarter, probably represents about half of the decrease something in the magnitude of I'd say $30 million of a falloff.
Neal Nackman: So that's something that we probably feel that if we were to look at the down draft that we've got in the second quarter, probably represents about half of the decrease, something in the magnitude of I'd say $30 million of fall off that's just supply chain related for us in the second quarter. So that would leave the balance really related to sales and sales shifts. That shift is both Q3 and Q4. We see programs that will be going both into both quarters.
Neal Nackman: There is just supply chain related for us in the second quarter, So that would leave the balance really related to two sales.
Horacio: And sales shifts that shift is both Q3 and Q4, we'd see programs that'll be going both into into both quarters. So far.
Neal Nackman: So part of it is really due also to a bankruptcy in Canada for Hudson Bay. We anticipated a fair amount of business for Q2 for Hudson Bay. We felt that they would be in a Chapter 11 position. We factored in a budget for their business. We had orders on hand, and at the end of the day, they went into liquidation mode. So that was a fair amount of it. And part of it is I described the shutdown of Sonia Ricciale affected us. And Mauricio, with respect to the tariff question, as we indicated in our prepared remarks, we're following several avenues to mitigate the increased tariff costs.
Neal Nackman: Part of it is really.
Horacio: Due also to a bankruptcy in Canada for Hudson Bay.
We anticipated a fair amount of business for Q2 for Hudson Bay.
Horacio: We felt that they would be in a chapter 11 position, we've factored in our budget for their businesses, we had orders on and.
Horacio: And at the end of the day.
Horacio: They went into liquidation mode. So.
Horacio: That was a fair amount of it and part of it as I described to shutdown the Sony Ricky I'll affected us to some degree as well.
Horacio: And Moshe with respect to that.
Horacio: Tariff question, Yes, as we indicated in our prepared remarks, we're following several avenues to mitigate the increased tariff costs.
Neal Nackman: So by way of additional color, let me give you some insight a little bit into the process. You know, as a wholesaler, our product lines for our fall and holiday season largely went to the market and were sold to our customers prior to the new incremental tariff. So we have been continuing to discuss with our retail partners the ability to selectively lift prices on those lines. This process is currently going on and the ultimate results from this process are still uncertain. With respect to our spring lines, those will come to market in the summer, and for those lines we will be able to incorporate our new higher costs with our upfront selling.
Horacio: So by way of additional color, let me give you some insight a little bit into the process.
Horacio: Wholesaler, our product lines for our fall and holiday season, with largely went to the market and was sold to our customers prior to the new incremental tariffs. So we have been continuing to discuss with our retail partners the ability to selectively lift prices on those lines. This process is currently going on in the <unk>.
Horacio: Results from this process is still uncertain.
Horacio: With respect to our spring lines those will come to market in the summer and for those lines, we will be able to incorporate our new higher cost whether upfront selling.
Neal Nackman: With respect to conversations with our sourcing vendors, we've made great progress with realigning our sourcing locations and striking compromises on our prices that are also originated prior to the incremental tariffs. We've not completed our purchasing for the year, and there's certainly some degree of uncertainty with respect to the costing and the location for those goods, but all of those processes cover our largest portion of the year and are currently very fluid. Accordingly, we did not feel comfortable specifying what the impact on our bottom line results would be. Mario, you have to realize that we have pricing power within our brands, which I tried to describe earlier.
Horacio: With respect to conversations with our sourcing vendors, we've made great progress with realigning our sourcing locations and striking compromises on our prices that are also originated prior to the incremental tariffs we have not completed our purchasing for the year and there are certainly some degree of uncertainty with respect to the costing and the location for those.
Horacio: But all of those processes.
Horacio: Largest portion of the year and are currently very fluid and accordingly, we did not feel comfortable specifying what the impact on our bottom line results would be.
Horacio: Alright.
Horacio: You have to realize that we have pricing power within our brands.
Horacio: <unk> tried to describe earlier.
Morris Goldfarb: We believe that we're not immune, but I think we're in good shape to manage price increases with consumer acceptance on a big percentage of our business, and the pieces that are essential. We're the most competitive resource in our universe of competition. So I would say, as we raise our prices, our competition has to raise their prices. So good chance that the scale of our business grows as we are, in many cases, the opening price point for our department. So they would trade down, and come to us, and give up a resource that couldn't manage pricing the way we did.
Horacio: We believe that we're not immune.
Horacio: I think we're in good shape.
Horacio: To manage price increases with consumer acceptance.
Horacio: A big percentage of our business and the pieces that are essential.
Horacio: We're the most competitive resource in our universe.
Horacio: Competition.
Horacio: So I would say.
Horacio: As we raised our prices.
Horacio: Our competition is to raise their prices. So good chance that the scale of our business grows as we are in many cases, the opening price points for our department stores. So.
Horacio: With trade down and come to us and give up a resource that couldnt manage pricing the way we can.
Mauricio Serna: And finally, just to be clear on the spring and into next year, again, when we see our cost impact up front, we're able to engineer that into our pricing and work back to the margins that we need to run the business. Got it.
Horacio: And finally to be clear.
Horacio: To be clear on this spring.
Horacio: Bring it into next year again, when we see the.
Horacio: Our cost impact upfront and we're able to so engineered add into our pricing.
Horacio: Look back to the margins that we that we need to run the business.
Mauricio Serna: And just a quick follow-up, you know, do you maintain the revenue guide? situation with Sonia Arriquez postponing the launch. So is it fair to assume that you're expecting, you think like relative to where you were in March, you maybe like the outperformance that you've seen in the own brands is allowing you to maintain the guy despite this headwind or what is driving you, you know, what is allowing you to maintain the sales guy despite, you know, not postponing this launch? No, that's right. We see other strength in the rest of the portfolio. Thank you so much and good luck.
Horacio: Got it and just a quick follow up.
Horacio: Do you maintain the revenue guide quite crazy situation with Sanyo, Ricky I'll postpone responding to launch.
Speaker Change: Is it fair to assume that you're expecting you think relative to where you were in March maybe like the outperformance that you've seen in the owned brands is allowing you to maintain the guide. Despite this headwind our what is driving you know what is allowing you to maintain the sales guide despite.
Speaker Change: This morning this launch.
Speaker Change: No Thats why we see we see we see other strength in the rest of the portfolio.
Speaker Change: Okay. Thank you so much good luck. Thank you. Thanks for your question Mary My question is as an area.
Mauricio Serna: Thank you.
Paul Kearney: And our last question comes from Paul Kearney with Barclays. Your line is open. Hey, good morning. Thanks for taking my question. So, just on the inventory, can you maybe speak to how you're anticipating ending 2Q inventory levels, just given that you were kind of shut out of production when China tariffs were $145 and then you're restarting it. So, where do you think inventory lands for you in 2Q and then through the year? And then I'll have a follow-up. We've been cleaner in terms of what sits in our warehouses, but we continue to think that our inventory levels will move more consistent with the sales growth that we've got in the future periods.
Mauricio Serna: Thank you.
Paul Cooney: Last question comes from Paul Cooney with Barclays. Your line is open.
Paul Cooney: Hey, good morning, Thanks for taking my question.
Paul Kearney: So just on the.
Speaker Change: On the inventory can you maybe speak to how your.
Speaker Change: Anticipating ending <unk> inventory levels, just given you said that you were kind of shut out production when trying to tariffs were 145, and then youre restarting. It so where do you think inventory lands for your <unk> and then through the year, but I will follow up.
Horacio: Yes.
Horacio: Inventory believe we've been we've been chasing.
Horacio: We've been cleaner in terms of what.
Horacio: <unk>.
Horacio: Houses, but we continue to think.
Horacio: Our inventory levels will move more consistent with the sales growth that we got in the future periods.
Neal Nackman: Paul, this is not a normal period of time. There's still uncertainty as to where tariffs wind up. a date that politically has been given out that tariffs will be reviewed and we are accelerating everything that we can so there may be a shift that is not a normal shift. We're moving out as much product not to get stuck in a windfall potential, not that I think that's going to get us out of the way if there's another windfall. Thank you. I'm sorry. Go ahead. It's difficult at this time to really run a stable business with all the factors that surround us, but it's all good as far as inventory levels.
Horacio: This is not a normal period of time, there is still uncertainty as to where where tariffs windup.
Horacio: And there is.
Horacio: As.
Horacio: Date that.
Horacio: Politically has been given out that.
Horacio: Tariffs will be reviewed.
Horacio: And.
Neal Nackman: We are accelerating everything that we can so there may be a shift that is not a normal ship, we're moving out as much product not to get stuck.
Horacio: And windfall potential not that I believe it occurs.
Horacio: But we want to be out of the way. If there is another there is another storm.
Horacio: My second was difficult.
Neal Nackman: I'm sorry go ahead.
Speaker Change: No go ahead now it's difficult at this time two two.
Speaker Change: Really run a stable business with all of the factors that surround us, but it's all good as.
Horacio: As far as inventory levels.
Morris Goldfarb: I'd say if we wind up with a deluge of inventory that we're able to receive in Q2 that looks like it's a negative, it's an absolute positive. We've gotten out of the way and we own the air.
Neal Nackman: Say, if we wind up in <unk>.
Horacio: Deluge of inventory that we were able to receive in Q2.
Horacio: It looks like it's a negative it's an absolute positive.
Horacio: Gotten out of the way and we own the inventory.
Morris Goldfarb: Okay, my second one is, and fully understand, you're speaking to the pricing power of some of your own brands, but when we look in the industry and we hear others speaking to consumer uncertainty, driving traffic headwinds, we're starting to see inventory build throughout the industry. I guess, what are you expecting for promotions for the remainder of the year and how will you navigate that? Thank you. We're not feeling very much pressure on promotions. Our products, as I described, you deliver quality product, you deliver it on time, you're positioned well, you care and manage your customers, in many cases you win.
Horacio: Okay. My second one is fully understand.
Speaker Change: You are speaking to the pricing power of some of your own brands, but when we look in the industry.
Horacio: There are other speaking to consumer uncertainty driving traffic headwinds, we're starting to see inventory build throughout the industry. I guess, what are you expecting for promotions for the remainder of the year and how will you navigate that.
Horacio: We're not feeling very much pressure on.
Horacio: And.
Horacio: Promotions.
Horacio: Our products as I described the deliberate and deliver quality product.
Horacio: You delivered on time, we're positioned value manner.
Speaker Change: You care and manage your customers.
Morris Goldfarb: And this isn't only for our brands, this includes our exiting brands. Tommy and Calvin, our sales are very good. They're performing incredibly well in the department stores that they occupy space. There's some pressure in how we're managing the business as we're exiting it, but the product is selling well, there's a high demand for it, and in many cases, I would tell you that our inventory levels right now are a little bit too low for the product that we're creating and selling through.
Horacio: In many cases, you win and this isn't only for our brands. This includes our exiting brands Tommy and Calvin.
Morris Goldfarb: <unk> sales are very good.
Horacio: They're there.
Horacio: <unk>.
Horacio: They are performing incredibly well.
Horacio: In the department stores that they occupy space.
Horacio: There is some pressure in how we're managing the business as we're exiting it but the product is selling well.
Horacio: There is a high demand for it and in many cases.
Horacio: I would tell you that our inventory levels right now are a little bit too low for the demand that.
Horacio: Further product that we're creating and selling forever.
Horacio: Okay. Thank you.
Operator: Thank you and thank you all for your interest in our company and your patience, tolerance and support and I wish you a great weekend. Thank you for your participation. You may now disconnect. Everyone, have a great day.
Horacio: Thank you. Thank you.
Speaker Change: And thank you all for your interest in our company and your patience tolerance and support and I wish you a great weekend.
Speaker Change: Thank you for your participation you may now disconnect everyone have a great day.
Speaker Change: Okay.
Speaker Change: [music].
Speaker Change: Okay.
Operator: Thanks for watching!
Speaker Change: Okay.
Speaker Change: Okay.
Horacio: [music].