G-III Apparel Posts 5% Sales Drop in Q2

Key Points

• Revenue of $613.3 million and adjusted EPS of $0.25 both exceeded management’s guidance for Q2 FY2026, despite being down from the prior year.

• The full-year outlook for fiscal 2026 was sharply reduced, with forecast net income expected to decline over 35% from last year and net sales projected to decrease by about 5%.

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G-III Apparel Group (NASDAQ:GIII), a fashion company known for its portfolio of owned and licensed brands such as DKNY and Karl Lagerfeld, reported results for the quarter ended July 31, 2025. Released on Sept. 4, 2025, the earnings showed that GAAP net sales and adjusted EPS surpassed the company’s guidance. Revenue reached $613.3 million, outpacing the $570 million target, and adjusted EPS came in at $0.25, topping guidance of $0.02–$0.12. However, both sales and profits fell significantly compared to the same quarter last year.

Management’s new outlook signals a challenging period ahead, with a substantial cut in full-year forecasts and profitability under increased pressure. Overall, the quarter demonstrated solid execution against reduced targets, but underscored lingering headwinds in sales, profit margins, and inventory management.

Source: G-III Apparel. Note: Fiscal 2026's second quarter ended July 31, 2025. Fiscal 2025's Q2 ended July 31, 2024.

Inside G-III Apparel Group's Business and Strategic Focus

G-III Apparel Group is a global designer and distributor of fashion apparel, with brands spanning women's and men's outerwear, dresses, sportswear, and accessories. It owns labels such as DKNY, Donna Karan, Karl Lagerfeld, and Vilebrequin, and licenses major names including Calvin Klein and Tommy Hilfiger. The company's strategy centers on building its owned brands, gradually reducing reliance on licensed offerings, and expanding into new international markets.

Recent success for the business has depended on strengthening its proprietary label portfolio and securing new licenses to offset expiring agreements. Key factors include maintaining strong relationships with major wholesale customers, which accounted for 69.6% of sales in FY2025, adapting its supply chain in response to tariffs, and carefully managing inventory and costs.

Quarter in Review: Performance and Developments

During the quarter, G-III Apparel Group delivered GAAP sales and non-GAAP earnings above its internal forecast, although both fell sharply from the prior year. Net income per diluted share (non-GAAP) reached $0.25, well above the top end of guidance, but GAAP net income per diluted share fell nearly 52% from last year's level. GAAP revenue, while better than expected, dropped 4.9% year over year compared to Q2 fiscal 2025, reflecting the expiration of major licensed brands.

Gross profit (GAAP) declined by 9.2% compared to the second quarter of fiscal 2025. Selling, general, and administrative expenses changed little even as revenue fell. Adjusted EBITDA, a non-GAAP measure of core profitability that excludes certain non-cash and non-recurring charges, was down between 36.2% and 39.3% for FY2026 compared to FY2025.

The company significantly reduced its debt, redeeming $400 million in bonds in August 2024, and lowering total debt to just $15.5 million at quarter’s end from $414 million one year earlier. Share repurchases continued, with $24.6 million invested in buying back 1.1 million shares. Inventory, however, increased 4.8% compared to the second quarter of fiscal 2025.

This period also saw management reiterate the importance of a shift towards owned brands, which made up more than half of sales in fiscal 2025. The company highlighted support from ongoing categories like DKNY, Donna Karan, Karl Lagerfeld, and Vilebrequin -- a swimwear brand. Looking ahead, G-III expects to launch new lines in partnership with Converse, a footwear and apparel label, and BCBG, a women’s fashion brand, aimed for fall 2025. The company noted that tariff-related costs are now significantly higher, with an estimated $155 million in additional duties for FY2026, of which $75 million is expected to remain unmitigated, primarily impacting the second half of FY2026. These costs are being managed through a mix of targeted price increases, adjustments in sourcing, and vendor negotiations.

Forward Look: Management Outlook and Investor Focus

Leadership provided updated guidance reflecting a much more cautious stance for the remainder of FY2026. GAAP revenue is now forecast at $3.02 billion for fiscal 2026, a 5% drop from fiscal 2025. Management expects full-year non-GAAP earnings per share to decline by about 40% at the midpoint for FY2026, a reflection of the cumulative impact of higher tariffs, lost license revenues, and more reserved order plans from wholesale partners. Gross margin pressure and higher inventories will remain areas of scrutiny for future quarters.

For Q3 FY2026, the company anticipates GAAP net sales of approximately $1.01 billion and diluted earnings per share of $1.43 to $1.63, well below the $2.55 posted in Q3 FY2025. Management noted that the bulk of the remaining unmitigated tariff cost will be recognized in the second half of FY2026. Going forward, investors will likely monitor inventory levels, demand for new product launches, the pace of international expansion, and the success of further supply chain mitigation efforts as G-III continues to adapt to changing market conditions.

Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.

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