G-III Apparel Group, Ltd. Aktie

Thank you for standing by. Welcome to the G-III Apparel Group First Quarter Fiscal 2027 Earnings Conference Call. [Operator Instructions]. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Neal Nackman, Chief Financial Officer. Sir, please go ahead.

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.

In addition, during the call, we will refer to non-GAAP gross profit, non-GAAP net income and loss, non-GAAP net income and loss per 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.

I will now turn the call over to our Chairman and Chief Executive Officer, Morris Goldfarb.

Thank you, Neal, and thank you, everyone, for joining us. We're very pleased with our first quarter performance, which came in ahead of expectations driven by continued momentum across our go-forward portfolio and disciplined management of the P&L. Net sales were $536 million ahead of guidance, the quality of total company sales continues to strengthen, driven by a meaningful increase in full price sales versus the prior year. Our go-forward portfolio delivered growth even as the top line was pressured by the planned loss of PVH brand revenues. We saw growth in our go-forward portfolio in both North America and Europe despite the macroeconomic challenges in the European market.

Non-GAAP loss per share was $0.21, which was also ahead of our guidance range for the quarter. Importantly, we delivered gross margin expansion for the first time since fiscal 2025, reflecting healthy full price selling, strong inventory management, a shift towards owned brands and tariff mitigation efforts. Non-GAAP gross margins in the first quarter were up 350 basis points versus the prior year. Our balance sheet remains very healthy and we ended the first quarter with cash of $394 million and inventories down 8% versus prior year.

The macroeconomic backdrop remains volatile with the ongoing conflict in the Middle East impacting global consumer sentiment. Despite this, we're executing with discipline and our brands continue to gain share helping to exceed our expectations for the first quarter and increase our outlook for fiscal 2027. Stepping back, our first quarter demonstrates that we're executing our strategy to evolve from a primarily licensed portfolio into a balanced global fashion house with meaningful owned brands. And that brings me to our recently announced acquisition of the iconic Marc Jacobs brand in partnership with WHP Global, which represents a significant milestone for G-III and is strongly aligned to our vision of strategic transformation. The Marc Jacobs acquisition accelerates our transition toward higher margin, longer duration brand equity. This acquisition is upgrading the quality of our earnings and advancing our long-term growth trajectory.

We see three core drivers of the strategic rationale behind this transaction. First, Marc Jacobs is a global and iconic brand with Marc Jacobs himself being one of the most influential designers in modern American fashion. Since founding his namesake brand in 1984, he's built a global fashion house that defines trends, influences culture and connects with consumers across generations. The brand's positioning is premium and aspirational yet remains accessible which is well aligned with our portfolio and [ heritage ]. We're acquiring Marc Jacobs because of its cultural relevance and creative authority not to change what is special.

Today, the brand has over 100 company-operated stores worldwide, with the majority located in the United States and has a strong e-commerce platform. The brand's direct-to-consumer operations are complemented by a growing wholesale and retail partner network. This diversified omnichannel foundation and strong brand recognition provide a solid base for future expansion. Second, we see significant opportunity to unlock the next phase of growth for Marc Jacobs, building upon its scalable platform we see a lot of potential ahead for the brand, which directly aligns with our operational expertise and brand-building strengths. From a product perspective, Marc Jacobs assortment is currently led by handbags and accessories, while our expertise is deeply rooted in apparel. We see considerable opportunity to expand the brand's lifestyle across new product categories while further enhancing G-III's capabilities and scale in leather goods and accessories.

In terms of channel mix, the brand leans more heavily towards retail and e-commerce, while G-III brings a [indiscernible] global wholesale platform and long-standing retailer relationships. Geographically, we believe we can further expand the Marc Jacobs brands globally and expect to see strong interest from leading distributors around the world. This acquisition positions us to expand our reach and partner with some of the best operators in key markets globally. The third key point in our rationale is the unique structure of this transaction. G-III will own 100% of the operating company and will lead all aspects in the brand's operations, including product development, sourcing, merchandising and global marketing to drive long-term growth. We will also offer global services to all licensee operations to ensure with the brand's positioning, standards and long-term vision. Together, G-III and WHP Global will own the Marc Jacobs intellectual property through a 50-50 joint venture. As an equal owner of the JV, G-III will directly participate in the growth of the brand's royalty income stream and cash flow generation. WHP Global a leader in brand management and global licensing whose portfolio includes brands such as [ Vera Wang ], [ Ragan Bone ], G-Star and [indiscernible] will lead the expansion of licensing opportunities across categories and geographies.

With a shared vision for the future of the Marc Jacobs brand this structure will maximize value creation and capitalize on each partner's strengths. Importantly, G-III had a long history of identifying iconic brands with large runways for growth, acquiring and successfully scaling it. Our approach begins with a respect for the brand's heritage and is rooted in preserving the brand's codes and make them special.

The DKNY and Donna Karan acquisition in 2016 to is a strong example of G-III's track record of value creation. Over the past decade, we've successfully reiterated DKNY, relaunched the Donna Karan brand increased revenues by more than 150% and significantly improved profitability. Karl Lagerfeld is another strong example, here with one of the most celebrated designers in fashion with tremendous global recognition yet substantial opportunity to build brand around them. First, we built a business in North America from scratch, and since taking full ownership of the brand in 2022, we've increased revenues by approximately 90% while broadening its reach globally.

With Vilebrequin, we saw our brand with a storied history and a loyal following yet significant untapped potential. Since acquiring the brand in 2012, we reestablished Vilebrequin as a pure luxury swimwear brand and developed lifestyle partnerships that reinforce its premium positioning. Lastly, Calvin Klein and Tommy Hilfiger demonstrate G-III's long-standing ability to build and scale brands. For more than 20 years, we successfully built up and expanded both brands in North America, introducing new categories and turned around underperforming ones. We grew net wholesale sales for these businesses into a combined $1.5 billion platform at their peak. We believe Marc Jacobs is a natural fit for our portfolio and aligns perfectly with the brand building model that has been so successful for us in the past. We expect the transaction to be dilutive in the first year, however, we anticipate accretion thereafter. Moreover, we believe there is a significant multiyear opportunity in both growing the operating business as well as licensing income and free cash flow from the joint venture.

We will fund our approximately $500 million investment through a combination of cash and our revolving credit facility. This structure provides us with ample liquidity and flexibility while maintaining a prudent approach to our balance sheet. After the anticipated close of the acquisition in the third quarter, our financial health will continue to be solid with low leverage, significant available liquidity and strong cash flow. Overall, we're confident in our ability to help lead the Marc Jacobs brand into its next chapter of growth. G-III will protect and grow the brand's desirability through a disciplined approach in category expansion, sourcing, scale and global distribution. The brand will gain the infrastructure of a global public platform while retaining its creative independence. Long term, we believe the business can generate $1 billion in annual revenues for G-III. As we drive revenue growth, we expect to see meaningful long-term product accretion and cash flow generation. We will provide more details, including our go-forward strategy when the transaction closes.

Now turning to our own brands. At Donna Karan, the brand once again outperformed delivering approximately 40% growth in the first quarter, driven by healthy sell-throughs and strong AURs. Lifestyle momentum across categories continues supported in part by our licensing efforts. Fragrance continues to be a standout and a few weeks ago, we added a new scent to the popular Cashmere collection. Donna Karan Jewelry exceeded expectations at wholesale with key styles selling-out, reorders underway and expanded doors for Fall 2026. Looking ahead, we will launch Intimates for holiday 2026 with our licensed partner, [ Komar ], further expanding the brand's lifestyle reach. Digital performance grew with donnakaran.com sales up nearly 60%, driven by increases in traffic, conversion and AUR. We continue to support the brand through targeted marketing investments that drive visibility and reinforce brand desirability. Interest from celebrity stylists and A-list talent remains strong across both the newer and archival collections, underscoring the brands enduring relevance. The strength of this brand continues to attract top-tier creative partners. And looking ahead to fall, we're partnered with a global talent whose unmatched social reach and relevance will introduce the world of Donna Karan to new audiences worldwide.

At DKNY we continue to position the brand for long-term strength. In the first quarter our North American direct-to-consumer business grew meaningfully with stores delivering a double-digit comp increase, higher productivity and improved full price sell-throughs across seasonal categories. Sales on dkny.com increased over 40% during the strong spring season, driven by higher conversion rates, targeted marketing and increased newness that resonated with our core customer. Our Hailey Bieber-led campaign remained an important driver of brand visibility and engagement during the spring season and will continue into the summer months. A strong connection to a highly engaged audience helped drive increased traffic to our site and broaden the awareness of the brand globally.

We also kicked off another season of our Yankee sponsorship, reinforcing the brand's connection to New York City's culture and style. Internationally, a new DKNY flagship store opened in Shanghai strategically located in one of the city's premier fashion destinations as we continue our focus on expanding the brand's global footprint. Overall, we're seeing healthy lifestyle momentum, strong digital engagement and continued progress in our DTC and international initiatives.

At Karl Lagerfeld, the brand performed well in the quarter with strength led by North America, where we saw a healthy growth across our DTC channels. Despite a challenging backdrop in Europe, International performance was supported by growth in Karl Lagerfeld jeans, which continued to gain traction to our younger customer, delivering a high single-digit increase during the quarter. While we expect the European market to remain soft given ongoing pressure on consumer sentiment, we're encouraged by the strong brand momentum we see across the business. Our marketing initiatives continue to drive strong visibility and engagement.

Building on the success of our initial partnership with Paris Hilton, the second chapter of our global campaign generated record engagement across the digital, social and experiential platforms. This included an event that shut down Herald Square with a DJ performance by Paris her self and a Macy's shopping experience celebrating the spring/summer collection. These efforts reinforce the brand's cultural relevance and expanded visibility across key markets.

Finally, Vilebrequin performed strongly in the first quarter with broad-based growth across all regions. As the brand enters its peak selling season, we continue to build momentum through a series of spring and summer activations and collaborations. This included the recent launch of the Vilebrequin Beach Club in Miami, as well as several activations during the Con Film Festival at our La Plage location in [indiscernible]. Overall, our own brands are becoming stronger, more profitable and increasingly global, reinforcing their role as the core driver of our long-term growth. The momentum we are seeing across North America is expanding brand awareness and consumer interest in markets around the world, creating new opportunities for growth. Digital expansion continues to be an important growth driver, and our investments across our own sites are delivering strong results.

During the quarter, DTC sales increased close to 40% and versus last year, reflecting healthy consumer engagement across the portfolio. Q1 performance across retail partner sites exceeded expectations driven by strong execution in digital wholesale like Amazon and [ Zalando ] as well as marketplace channels. Handbags were a standout category during the quarter with strong growth across our key owned brands. Results were supported by relevant designs, disciplined marketing investments and improved promotional execution. As we expand our omnichannel presence, we will continue to invest in data, AI capabilities and digital infrastructure to enhance engagement and profitability across the business.

Our License business continues to complement our own brands in a capital-light profitable manner with a focus on strong brands with our Contemporary Fashion and Sports and Lifestyle platforms. Contemporary Fashion strengthens our presence in modern lifestyle categories and complements our own brand portfolio. While Sports Lifestyle expands our reach to passionate fan communities through team partnerships and specialized distribution channels. Within contemporary brands, BCBG, which we launched last fall, is exceeding our expectations with customers responding very positively to the the refreshed point of view in modern styling. French Connection, which we added to our portfolio in the first quarter, is also off to a strong start as we refine the brand positioning with a clearer aesthetic and more focused product and distribution strategy.

In April, we launched -- we relaunched the U.S. site as part of our efforts to reinvigorate the brand in the market. We're excited to share the news of our new partnership with NEXT one of the largest fashion retailers in the U.K., which will create opportunities to collaborate across brands and categories over time. The first initiative is the license agreement with Joules, NEXT's, premium British lifestyle brand known for its country inspired lifestyle aesthetic and bright, colorful collections, the brand has a strong point of view that we believe will resonate well with consumers in North America. Under the license agreement, we will design, distribute and market men's and women's apparel and accessories in the U.S. and Canada. So far, the response has been very encouraging with close to 350 doors confirmed for a fall launch. We believe there is a meaningful opportunity to grow the Joules brand in North America over time.

In Sports and Lifestyle, our Team Sports business remains healthy and represents a considerable growth opportunity. We continue to advance several strategic initiatives in this category including the addition of a new WNEA license, which we see as well aligned with both the momentum in women's sports and our capabilities in this space. Converse is performing nicely across nearly 900 points of sale while remaining in the early innings of scaling. Starters continues to execute well and is finding moments to connect sports, fashion and culture. In Q1, the brand shipped a limited edition Pokemon Jacket exclusively with Target which launched in early May and sold-out in less than 10 minutes. Collaborations will continue to play an important role in the brand strategy.

In conclusion, I'm pleased with our team's execution in the first quarter and our ability to exceed guidance. Today, we're reiterating our guidance for fiscal 2027 net sales to be approximately $2.71 billion and are raising our guidance for non-GAAP EPS, which is now expected to be $2.15 to $2.25, up from our prior outlook of $2 to $2.10. We continue to expect our go-forward portfolio to grow in the high single-digit range for the year, demonstrating the strong underlying health of our core business. The consumer and retail environment remains dynamic, and we'll continue to focus on executing our strategy.

Stepping back, our transformation is creating a stronger, more dynamic future for G-III. We're building a portfolio of premium global brands, where creative identity, cultural relevance and pricing integrity are protected and enhanced through disciplined ownership. Our evolution into global apparel powerhouse is well underway, and the strength of our portfolio has never been clearer. Our key owned brands DKNY, donna Karan, Karl Lagerfeld, Vilebrequin and soon, Marc Jacobs are globally recognized and have meaningful runway for growth. With extraordinary brands strong execution, deep industry relationships and talented global team, we believe G-III is uniquely positioned to drive sustainable long-term growth and significant shareholder value. Thank you.

I will now pass the call to Neal to discuss financials.

Thank you, Morris. Net sales for the first quarter ended April 30, 2026, were $536 million down 8% compared to $584 million in the same period last year. First quarter sales were ahead of guidance of approximately [ $530 ] million. Net sales of our Wholesale segment were $515 million compared to $563 million in the previous year. During the quarter, growth in our go-forward portfolio was offset by the anticipated reductions in PVH license revenues. Net sales of our Retail segment were $41 million for the first quarter compared to net sales of $36 million in the previous year's first quarter. Comparable store sales were healthy and increased for Karl Lagerfeld Paris, Donna Karan and DKNY compared to the prior year.

Let me touch on tariffs. Following the U.S. Supreme Court's decision in February, the U.S. Court of International Trade ordered U.S. Customs and Border Protection to refund IEEPA tariffs. As a result of this ruling and other available information, we have assessed that the recovery of previously paid IEEPA tariffs is probable. Accordingly, we have recorded a receivable of $140 million, reflecting our claim for IEEPA tariffs. We concurrently reduced our cost of goods sold by approximately $120 million, which represents the expense related to the tariffs. Additionally, in the first quarter, we recognized an approximate $20 million reduction in the carrying value of our April 30, 2026 inventories for tariffs previously capitalized. The inventory benefit will flow through cost of goods sold during the balance of fiscal 2027.

Of the approximately $120 million reduction in cost of goods sold, $103 million was related to IEEPA tariffs expensed in fiscal 2026. We have excluded the impact of those prior year tariffs from our non-GAAP first quarter fiscal 2027 results and have updated non-GAAP fiscal 2027 outlook.

Turning to gross margins. First quarter gross margins on a GAAP basis were 64.9% compared to 42.2% in the previous year. Excluding the non-GAAP IEEPA tariff recovery benefit, adjusted gross margin was 45.7%, up 350 basis points compared to [ 42% ] in the prior year. Gross margin benefited from pricing actions taken last year to mitigate tariffs as well as the mix shift to higher-margin owned brands from licenses.

The Wholesale segment's gross margin percentage was 63.8% compared to 40.4% in last year's comparable quarter. Excluding the impact of the IEEPA tariff benefit gross margin in our Wholesale segment was 43.8% for the first quarter. The gross margin percentage in our Retail segment was 48% compared to 53.5% in the prior year's period. Non-GAAP SG&A expenses were $252 million in the first quarter compared to $231 million in last year's first quarter. As previously discussed, with anticipated increased SG&A this year as we continue to make investments in our people, technology and marketing to support our future growth. Our first quarter was also impacted by higher compensation expenses attributable to our higher-than-expected profitability.

Non-GAAP net loss for the first quarter was $8.7 million or $0.21 per share compared to non-GAAP net income of $8.4 million or $0.19 per diluted share in last year's first quarter. First quarter net loss was ahead of guidance, largely driven by better-than-anticipated gross margin.

Turning to the balance sheet. We ended the first quarter in a strong financial position with $394 million in cash, up from $258 million in the prior year. We expect that our cash position will further improve with the benefit from the expected tariff recovery this year. Our liquidity position remains robust, and we ended first quarter with over $800 million in available liquidity. Inventories are in excellent shape and are down 8% compared to the prior year.

Now let me discuss our outlook. Our outlook does not include any impact as a result of the pending Marc Jacobs transaction. For the full fiscal year 2027, we are reiterating guidance for net sales of approximately $2.71 billion, down 8% to the prior year. This reflects approximately $470 million of lost sales from Calvin Klein and Tommy Hilfiger products, partially offset by the growth of our go-forward portfolio, which we continue to expect to grow high single digits. We are raising our guidance for non-GAAP net income for the year, which is now expected to be between $95 million and $99 million or between $2.15 and $2.25 per diluted share up from our prior outlook for diluted earnings per share of $2 to $2.10.

Full year adjusted EBITDA is now expected to be between $178 million and $182 million up from our prior outlook of $158 million to $162 million. For the second quarter of fiscal 2027, we expect net sales of approximately $570 million compared to $613 million in the second quarter of fiscal 2026. We expect non-GAAP net income in the second quarter of between $7 million and $11 million or $0.15 to $0.25 per diluted share. This compares to non-GAAP net income of $11 million or $0.25 per diluted share for the second quarter of fiscal 2026.

We expect gross margin expansion of approximately 450 basis points in the second quarter.

Let me touch on a few modeling items. With respect to tariffs, our updated guidance assumes the tariffs for the remainder of the year will approximate those that existed under the IEEPA regime, which would anticipate an increase to rates currently in effect. In terms of gross margin, we now expect approximately 400 basis points of gross margin improvement for the year, higher than our initial guidance for the 300 basis points of expansion. The increase in our outlook reflects the realized upside in the first quarter gross margin and the expected benefit from the reduced inventory carrying costs associated with the tariff refund which will favorably impact cost of goods sold over the balance of the year.

For SG&A, we continue to expect expense deleverage this year as our newer businesses scale and as we continue to invest in our business to support growth. As we discussed last quarter, we have identified cost-saving initiatives that are expected to generate $25 million of run rate savings in fiscal 2028, and we will continue to evaluate our cost structure. We expect the level of de-leverage to improve sequentially as we move through the year. We continue to expect net interest income of approximately $2 million for the full year and now estimate our non-GAAP tax rate to be approximately 33.5%. The higher tax rate is attributable to the anticipation of higher nondeductible items than previously expected. We expect capital expenditures to be approximately $40 million for the year. Our guidance does not anticipate any potential share repurchases for the year. That concludes my comments.

I will now turn the call back to Morris for closing remarks.

Thank you, Neal, and thank you all for joining us today. I've never been more excited about the future of G-III. I want to thank all of our team members for their hard work and dedication as well as our shareholders for their continued support. Operator, we're now ready to take some questions.

[Operator Instructions] Our first question is going to come from the line of Bob Drbul with BTIG.

This is [ Jay Catsicas ] on for Bob. So your own brands continue to post strong growth and are becoming a much larger percentage of sales. Could you discuss where you see the biggest white space opportunities across the brands, whether it's category expansion or international growth, DTC? And how large do you think these brands can ultimately become?

Thank you for your question, Jay. Jay, these brands are still in their early stage of development. We've done an amazing job of classification expansion. We're at the early stage of international growth, and we're not yet matured on the licensing potential of any one of these brands. The -- will hit on DKNY first. DKNY is arguably maybe the most commercial piece that grown beautifully over time, and it's gaining market share as there is -- there's change in our industry in branding and positioning. We seem to be picking up more real estate and strengthen classification, greater depth and classifications. So our familiarity with the customer base in North America is very, very strong. Our ability to govern how the brands are positioned is respected. And it's been a really nice run.

And again, I believe it's the early stage. With Donna Karan, we're barely in the third or fourth inning. This is really our second year with the launch of Donna Karan. Classification expansion is not at maturity yet. We're successful in pretty much any classification that we've placed in the marketplace. We're cautious on distribution. There's protection for the brand, the brand, its integrity and it's archival value to our company and to the consumer. Growth digitally is being achieved. We're fine-tuning some of the floors in our digital distribution, which is going to make a huge difference for the future. So Donna Karan, again, has got growth that could be 3x the size of what it is today. We've not even touched on the international component of Donna Karan. There's an appetite for it, and we're about ready to launch Donna Karan internationally. None of our overseas offices are representing the product of Donna Karan for distribution yet. We're almost there.

And Karl Lagerfeld. Karl Lagerfeld contrary to some of these brands to DKNY and Donna Karan is possibly best known in the European market. Karl Lagerfeld was born, and he himself is born in Germany. The adoption of his talent and his persona went to France very quickly. And the Globe quite candidly, I might say that he's the best designer of all time. So we were penetrated in Europe to some degree, and underpenetrated in North America. We believe there is tremendous growth. The sell-throughs have been amazing, possibly the best of what we have, and our Retail presence is minuscule. Our next focus will be to grow the Retail potential of all our brands. We will have -- we've aligned our talent pool in Retail or in the process of aligning our talent pool in Retail, to enable us to grow direct-to-consumer in that venue.

And Vilebrequin is -- Vilebrequin is a fun brand that hasn't scratched the surface yet. Today, it's best known for a men's luxury swim [indiscernible], it will be ready to wear in the future. We're distributing the brand and its presence in places like [indiscernible] on the beach [indiscernible], we're dominant as the luxury swim brand. We'll be on the beach and clubs to a greater extent in the coming years. And the -- possibly the trophy might be our new acquisition.

We believe that Marc Jacobs and the man and the brand have a huge following that addresses the millennials, the Gen Z consumer and the luxury consumer that is a little bit older, it crosses -- it crosses generations. So we're going to expand our retail. We're going to expand our offerings to include a much broader assortment of apparel and fine-tune was well created in handbags and accessories. So there's a tremendous amount of internal growth that's still available to us. The company is just excited by everything that's happening around us. The sell-throughs on our own brands, the new acquisitions and the new launches. We're not talking very much about BCBG, French Connection, Converse and [indiscernible], which we've worked at for the last few years, and we finally found a solution for [indiscernible], that will post profits for us in the coming years.

And as I said in our script, we're aligned with NEXT in the U.K. to attempt to build some of their brands here. The first initiative is Joules, and we've been successful in placing it yet to be shipped -- but we believe that there's a good deal of opportunity with even our licensed initiative. It's a well-balanced machine, something that was created initially as a licensing model. We evolved into owning a couple of insignificant brands through today possibly being the dominant fashion provider of owned brands as well as still not giving up on our licensed partnerships. So well balanced, well managed and consistent in performance and not many companies in our sector can make that statement. Sorry for the long-winded effort, Jay, but hopefully, I've answered your question

Our next question will come from the line of Dana Telsey with Telsey Advisory Group.

Nice to see the progress. Congratulations on the Marc Jacobs acquisition. As you think about your portfolio now, Morris, and obviously, you have many brands that could be $1 billion in sales. Is there a difference to what the distribution could be? Obviously, I see Marc Jacobs, you have wholesale opportunity. How do you see the margin potential of the combined portfolio accelerating?

Thank you for your question, Dana. It's a really good one. It's what we've been focused on. Margin enhancements are really what we're about today. If you look at our performance across our brands, this has not been an easy period. We're transitioning out of our largest pieces of business. So what you're getting in performance is a combination of exiting brands as well as entering to a greater extent, our own brands where our margins are better. It's difficult to maintain high margin as you exit and your 20-year-old assets the consumer knows, not the consumer, but your customers know that it's a period of transition, and there's a desire to move your inventory and end up -- there's a requirement to distribute your inventory and not be left with anything over a period of time.

So we're aggressive in moving our inventory there. As far as our own brands, we have a lifetime. We're managing our margins in a different fashion, and it's showing great results for us. The beauty of Marc Jacobs, margins are not the problem. Their margins at retail are exceptionally good. Their scale is more the issue. And we're good at that. We're good at providing solutions for scaling the business. We've shown that pretty much in every asset that we've taken on, be it Vilebrequin where there is not a markdown to be seen. There are global relationships that enhance the scale of the business and there's a respect and integrity that we retain as we build these brands. So I'd say we've done an amazing job of building and being recognized for continued growth and prosperity for our retailers.

We seem to -- as stuff comes our way, and it's not all positive. We find solutions. This is a team that just works 24/7 in supplying solutions for the retailer and retain the retail presence that we have, that again, we all know that's not an easy feat, in diminishing door count and diminishing opportunity for distribution of product. And we seem to be solving it.

Got it. And one other thing, just given the category categories of Marc Jacobs, which is leather goods and accessories. Is there any cross-pollination that could benefit any of your other brands to expand their sales in the category?

Cross-pollination in sourcing and development possibly design, we keep the design separate by brand, whether it's a license or an own brand, whether it's a mass market brand or a premium luxury brand. We retained the specialness of everything that we own. So the intent is not to [indiscernible] the acquisition. It's to continue to make it special. We bought it because it was special. We have a partner that sees it the same way. And not only what we do, the way we will license the category is out there'll be -- the brand will be protected. It's not intended to hit the mass market at any point. It's intended to create an important diffusion brand yet to be decided.

But in console with our retail partners. There's a big appetite for a diffusion brand as well as the continued maintenance of the Marc Jacobs brand. So nothing really changes except maybe a diffusion brand that becomes distributed to a great integrated scale might come out of the Fusion brand.

Just to add to the margin file, I think it's important to remember when we ran a significantly licensed portfolio, we really ran those at low double-digit operating margins. When we look at the owned businesses, we really run those essentially without the royalty charges that are associated with them. So we run into the mid-teens up to the upper teens from an operating margin standpoint. The portfolio is being recreated. It's got a mix of owned and licensed businesses, both growth. I'd characterize the Marc Jacobs as a hybrid where we're really paying essentially a half royalty. So from an operating margin standpoint, we would expect to get back to some mix of high -- low double-digit operating margin businesses, low double-digit operating margin on the license portfolios and then a mix of higher operating margins on the owned.

Our next question comes from the line of Ashley Owens with KeyBanc Capital Markets.

Maybe just to start, if you could talk about any shifts in what you're hearing from wholesale partners heading into fall, if there's been any changes over the past several weeks, just with the consumer backdrop still choppy and then the conflict in the Middle East kind of dragging on here. Any sense that buyers are still leaning into newness in the own brands? Or are you seeing any signs of caution in some of the [indiscernible] order commitments?

That's a great question, Ashley. We would anticipate greater pushback and greater concern. It seems as if the consumer is shopping. They're maybe more selectively. But in our performance and our retail customers regardless of channel, it seems as if the consumer is finding their way and affording high gas prices traveling and they're buying apparel. I'm not -- we're aware and we're cautious. But if we look at sell-throughs, there are blips on a given week. But overall, I would tell you that the consumer seems to be quite positive on their shopping average. I'm not seeing a major reason based on sell-throughs for concern, yet we are -- this applies to North America, a little bit different in Europe.

Europe is a little bit more cautious. Performance in Europe is a little less than we would like to see from the consumer's point of view. But the -- these are issues that we're not in control of. And as far as the Middle East, we don't have a large business in the Middle East. It's a growing developed developing business, but nothing that happens in the Middle East. It's a chart for us.

Okay. Understood. Maybe -- and then just a follow-up, Neal, I know you called out some of the higher compensation expenses as part of that SG&A increase in the quarter. Just any way to help us think about the magnitude of the comp accrual swing versus some of the planned investments you've alluded to this year with that being people or marketing tech initiatives? I'm just trying to isolate the underlying G&A run rate once you strip out some of that variable comp piece.

Yes. Look, I think the key thing to think about, Ashley, is that while we expect a significant amount of deleverage on the full year, if you look at that rate in each quarter, you'll see that will scale down, and I would expect that would be somewhat consistent for Q2 and 3. And just remember, in Q4, we had a large charge last year. So you'll be up against that as as a reduction just taken into account when you do your modeling.

[Operator Instructions] Showing no further questions, I would like to hand the conference back over to Morris Goldfarb, CEO, for closing remarks.

Thank you all for spending a beautiful Friday morning with us. And we'll have more next quarter, the development of Marc Jacobs, maybe there'll be further disclosure. Hopefully, we can give you a more defined structure in the coming quarter. With that, have a great weekend. Thank you.

This concludes today's conference call. Thank you for participating, and you may now disconnect. Everyone, have a great day.

Good day, and thank you for standing by. Welcome to the G-III Apparel Group Fourth Quarter and Full Year Fiscal 2026 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded.

I would now like to hand the conference over to your speaker today, Neal Nackman. Please go ahead, sir.

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. .

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.

I will now turn the call over to our Chairman and Chief Executive Officer, Morris Goldfarb.

Thank you, Neal and thank you, everyone, for joining us. Fiscal 2026 was a pivotal year for G-III. I'm proud of the results our team has delivered and the meaningful progress we made advancing our long-term strategy despite a tough environment. As we transition out of our Calvin Klein and Tommy Hilfiger businesses, we accelerated the strategic transformation of our portfolio, unlock new growth opportunities and strengthened the foundation of G-III. The power and global recognition of our brands, combined with our disciplined operating model and strong balance sheet enabled us to deliver compelling product and differentiated brand experiences despite a highly dynamic retail environment, including evolving tariff conditions and cost pressures.

As we reshape the portfolio, we're sharpening our focus on a brand builder and long-term steward of both our owned and licensed brands. At the same time, we've made targeted investments in infrastructure, technology and talent to support the next phase of growth. In the fourth quarter, our underlying results were strong, excluding the impact of the Saks bankruptcy, full year EPS would have exceeded the high end of our guidance. For the full year, our key owned brands, DKNY, Donna Karan, Karl Lagerfeld and Vilebrequin, collectively delivered mid-single-digit growth, helping offset the impact of the exited PVH licenses. These brands are growing with improving quality of revenue higher full price sell-throughs and increasing global relevance, the clear validation of our strategic direction.

With that, I'll now review our fourth quarter and full year fiscal 2026 results. Net sales were $771 million in the fourth quarter and $2.96 billion for the full year. Relative to guidance, sales were negatively impacted by approximately $20 million as we stopped shipments to Saks in December ahead of the bankruptcy filing. Strong margin for the fourth quarter and the full year was ahead of expectations, driven by higher full-price selling and more balanced distribution with less penetration in the off-price channel. We're successfully establishing higher price points with our newer brands and seeing healthy consumer response further supporting our margin expansion opportunity. Non-GAAP earnings per diluted share were $0.30 in the fourth quarter and $2.61 for the full year. In the fourth quarter, we took an approximate $17.5 million bad debt expense associated with the Saks bankruptcy, which negatively impacted earnings by $0.30.

Turning to our balance sheet. Our working capital remains in great shape. We exited the year with clean inventories, down 4% year-over-year on lower units. We ended the year with more than $400 million in cash and over $900 million in total liquidity. This is after returning more than $50 million to shareholders through share repurchases and our new cash dividend. We remain in the strong financial position with ample flexibility to continue investing in our brands and infrastructure to support long-term growth.

Turning to our strategic priorities. Over the past several years, we've been very clear about our strategy, simplifying our portfolio, leaning into our most powerful owned brands and building a company with greater control and long-term growth potential. Fiscal 2026 was another important step in that journey, capturing the long-term potential of our own brands is a top strategic priority. These brands are powerful, sustainable drivers of profitability, delivering higher margins and incremental licensing income. During the year, our own brands demonstrated strong consumer resonance supported by compelling product, disciplined distribution and effective marketing. We saw solid full price sell-throughs, healthy margins and increased brand engagement. Our key owned brands delivered mid-single-digit growth accounting for close to 60% of revenue this year, up from roughly 50% last year.

We're driving this growth through 4 key areas. First, product and consumer engagement. We continue to invest in brand-building initiatives through an always-on marketing strategy that leverages top-tier talent, elevated content and targeted global activations to expand and reach and drive conversion. Second, driving direct-to-consumer. We're focused on strengthening our digital business to boost traffic and conversion across owned and partner sites. Meanwhile, we're executing well on our retail segment turnaround initiatives in North America optimizing the footprint to improve productivity and profitability.

Third, international expansion. With just over 20% of fiscal 2026 net sales generated outside the United States, the opportunity remains significant. We're pursuing global expansion with discipline, prioritizing the right markets, partners and infrastructure to ensure long-term sustainable growth. Fourth, category expansion through licensing. Our partners have helped us expand the lifestyle offerings into complementary categories that broaden our brand reach and deepen consumer connections. In return, G-III earns a highly accretive licensing income stream, the vast majority of which falls directly to our bottom line. We see significant opportunity to grow our brands through new licensing partners over time.

I will now walk you through brand highlights from the year. Donna Karan continues to be one of our most powerful and new-to-market growth engines, delivering strong profitability supported by healthy AURs and sell-throughs. In fiscal 2026, the brand delivered approximately 40% growth, underscoring the strength of the relaunch and the momentum we are seeing across channels. Touching on a few highlights. In North America, we're expanding distribution of key wholesale accounts, supported by consistent sell-throughs that continue to build retailer confidence. We ended the year with approximately 1,900 points of sale with an additional 400 expected for fall. Sales on donnakaran.com grew close to 170% this year, driven by more than 120% increase in traffic. Repeat customers represented close to 20% of sales and we acquired nearly 100,000 new customers during the year. The brand continued to perform well on retailer sites, and we expect digital momentum to continue as we expand our lifestyle offerings online.

Category diversification through licensing and product expansion is broadening the brand's reach. Donna Karan weekend launched in November to strong reception while license categories continue to perform well. The fragrance business grew approximately 20% this year, led by the continued strength of the Cashmere Mist franchise, which remained one of the top products in prestige fragrance. Our new jewelry line is off to a good start and will roll out in select department stores this spring.

Our marketing investments are reinforcing the brands authority and cultural relevance across key markets globally. This year, our campaigns have featured iconic empowered women like [ Kate Moss and Claudia Schiffer ], who embody the brand and bring authenticity to the collection. At the same time, we've seen strong organic momentum with A-list celebrities choosing the brand, underscoring that it continues to capture how women want to dress today with confidence and effortless ease. Looking ahead, as we build on our success in North America, we remain focused on thoughtfully scaling across categories, doors and geographies while protecting its premium positioning and strong brand equity. With increasing brand awareness and multiple growth levers still ahead, we expect strong growth in fiscal 2027 and remain highly confident in Donna Karan's long-term trajectory and $1 billion annual G-III net sales potential.

Karl Lagerfeld delivered another exceptional year growing high single digits. Brand heat was reinforced through our impactful marketing campaigns with Paris Hilton, strengthening consumer engagement at key touch points on a global scale. Building on that momentum, we're continuing our partnership with Paris for spring and summer this year. In North America, sales grew high teens for the year as we broadened the lifestyle assortment and expanded distribution across key accounts. Our footprint in the region grew to approximately 3,000 points of sale with more than 300 new points of sale expected by fall. In our North American direct-to-consumer business, we continue to optimize the retail footprint and enhance digital. This year, the brand saw a positive comp sales increases across stores and e-comm fueled by over 20% growth on karl.com. Internationally, the brand grew mid-single digits with expanding margins despite softer consumer trends in Europe.

The Karl Lagerfeld jeans line remained a primary growth driver, delivering 30% growth for the year, helping to engage a younger consumer. We're prioritizing productivity and improvements in our international operations to drive stronger profitability across channels. With more than 170 Karl Lagerfeld branded freestanding stores worldwide, we're thoughtfully expanding the global retail footprint. This year, 15 new stores were opened in key strategic markets, including Latin America and Mexico through our partners, and we continue to target underpenetrated regions such as Asia Pacific for future growth.

Our licensing and hospitality business continues to reinforce Karl's position as a global lifestyle brand with aspirational relevance. This year, we signed licensing agreements for luxury brand residences in Portugal and the Middle East. In fiscal 2026, the brand generated approximately $630 million in reported net sales and over $1.7 billion in global retail sales. Looking ahead, we're focused on accelerating global expansion, scaling our digital business and engaging a broader consumer through expanded lifestyle offerings and brand activations. These initiatives reinforce our confidence in the powerful growth runway for Karl Lagerfeld and capturing over $1 billion in GIII's net sales opportunity long term.

Turning to DKNY. Our strategy remains focused on investing in how and where the brand shows up with a clear emphasis on driving full price sales. Over the last 12 to 24 months, we've taken a disciplined approach to elevating brand presentation, refining our distribution and deepening engagement with a younger consumer. Our North American direct-to-consumer business improved with stores and [ .com ], delivering double-digit comp growth and higher productivity. Notably, sales on dkny.com, increased approximately 40% for the year, reflecting strong consumer engagement with the collections. North America increased marketing spend and targeted activations resonated with our target audience, driving strong response to fashion and newness. Internationally, brand-building activations across key markets boosted visibility and fueled ready-to-wear growth led by jeans and handbags.

DKNY delivered several standout brand moments. We launched 2 global campaigns, Spring 2025 with [ Laila Mass ] and Fall of '25 with Haley Bieber significantly elevating brand visibility and cultural relevance. Social engagement rose nearly 300% year-over-year with 4 campaigns generating the strongest social performance in the brand's history. Haley returns for Spring 2026 supported by a global media plan. Marketing-led storytelling translated into results. The [ Paula ] commuter tote became our #1 handbag collection for the year, supported by immersive pop-ups and experiential moments that brought the brand's New York City DNA to key markets. Broader high-impact brand moments, including a landmark Burj Khalifa projection in Dubai and 190 screen citywide digital takeover further amplified visibility and brand heat. In fiscal 2026, DKNY delivered approximately $650 million in reported net sales and over $2.4 billion in global retail sales.

As we look to next year, our focus centers on product newness, expanded lifestyle assortments and scaling distribution across North America. Internationally, we're unlocking growth in Europe and China, where we recently onboarded a new licensing partner and we'll open a new Shanghai store this spring. We're also seeing opportunity in markets across the Asia Pacific and India through new partnerships. With disciplined execution and a clear strategic focus, we're confident in DKNY's billion dollar G-III net sales opportunity.

Vilebrequin, a status swimwear brand delivered low single-digit sales growth despite a challenging European backdrop. Demand remained resilient among our aspirational consumer supported by strong global brand awareness and engagement. Growth was driven by higher AURs reflecting the brand's pricing power, premium positioning and continued demand for its luxury swimwear and lifestyle offering. Performance was led by strength in Europe, particularly in France and the Caribbean, along with continued momentum in digital. In hospitality, we're building on strong performance in [ can ] and partner locations in Doha and [ Cree ] with the addition of a fourth partner beach operation in Oman. A new rooftop restaurant in Miami is also set to open in the coming weeks.

Looking ahead, our strategy remains focused on premium product with higher AURs, creative collaborations to drive global awareness and hospitality led distribution at a boutique placement in incremental brand builders. Vilebrequin continues to be a key player in our own portfolio as we unlock its long-term global potential. In addition to owned brands, licensed brands remained a core pillar of our strategy with an enhanced focus on contemporary fashion and sports lifestyle categories. These segments allow us to leverage our core competencies and capture incremental market share and sales. In fiscal 2026, our licensed brands generated mid-single-digit growth excluding our PVH and other exited licensing businesses.

Team sports, led by [ Starter ], continues to expand our reach within the licensed sports marketplace. This division serves a highly engaged sports fan and unlocks additional distribution across stadiums, sporting goods and specialty retail and strategic digital channels. With the addition of Converse, which we launched in the second half of the year and is already contributing to top line sales, this portfolio represents more than $130 million in net sales in fiscal 2026, and we see a path to growth to $500 million over time. In contemporary fashion, we're building a portfolio that complements our own brands and strengthens our presence in modern lifestyle categories.

BCBG launched for Fall 2025 is performing well alongside an increase in door counts this year. In January, we signed a new licensing agreement for a French connection to design and distribute women's and men's apparel and select accessories in North America. This addition enhances our contemporary offering and is expected to contribute revenue beginning this year. In terms of our Calvin Klein and Tommy Hilfiger licenses, we've continued to manage these businesses diligently as the license rolls off. In fiscal 2026, they represented approximately $830 million in revenue, and we expect them to generate approximately $360 million in fiscal 2027 before rolling off in fiscal 2028.

Turning to our next priority of enhancing omnichannel. We're on track to return our North American retail segment to profitability in fiscal 2027. Through management changes, reduced store footprint and better merchandising, we strengthened our execution and improved the brand presence. As a result, we further cut operating losses by more than 50% in fiscal 2026. Digital remained a key growth and profit driver. Sales on our own website grew over 30% this year, led by outsized growth on our donnakaran.com. This momentum reinforces the importance of the channel and our ability to meet consumers wherever they shop. Across our marketplace platforms, including Amazon and Zalando, we delivered strong bottom line profitability and top line performance for our go-forward businesses. This was fueled by advertising efficiencies and promotional discipline driving stronger ROIs on reduced expenses.

We'll continue to expand our brand's presence across platforms through new category launches and assortment extensions. At the same time, we're investing in data and AI capabilities, modernizing our enterprise systems and enhancing digital content and consumer insights to drive higher engagement and conversion. Together, these efforts position us to scale profitably while delivering richer brand experience across channels. In our cost structure, we remain actively focused on driving cost savings and efficiencies across the business, including optimizing our supply channel infrastructure.

As we look forward to fiscal 2027 and the expected volume loss tied to the PVH license givebacks, we're implementing further cost reduction to drive profit improvements over time. As we work to enhance productivity and profitability, this will free up resources to invest further in our highest priority growth initiatives. Thus far, we've identified $25 million of cost savings across supply chain, organizational structure as well as discretionary expenses and expect to achieve this on a run rate basis in fiscal 2028. We'll continue to evaluate our cost structure and seek additional areas where we can unlock savings to further align our go-forward model.

Turning to our outlook. As we continue to transform the business, our outlook reflects an improving margin profile on lower revenues in the near term as the remaining PVH licenses roll off. We're focused on driving gross margin expansion, streamlining our cost structure and operating with greater discipline to enhance profitability and efficiency. At the same time, we remain committed to growing our go-forward brands, generating healthy cash flow and remaining a very strong balance sheet and maintaining a very strong balance sheet. As we enter fiscal 2027, we do sell from a position of strength with brand momentum, expanding margins and the flexibility to invest in both ourselves and in strategic opportunities.

For the year, we expect net sales of approximately $2.71 billion, which reflects an approximate $470 million reduction in our expiring Calvin and Tommy businesses. Meanwhile, our go forward business is expected to grow high single digits driven by continued momentum of our own brands. Non-GAAP diluted earnings per share for the year is expected to be between $2 and $2.10. In closing, I want to thank our global teams for their continued hard work and dedication. Their execution, creativity and commitment are what drive our success. I'll now pass the call to Neal who will walk you through the financial results of the fourth quarter and full year as well as our fiscal 2027 outlook.

Thank you, Morris. Net sales for the fourth quarter ended January 31, 2026, were $771 million down 8% compared to $840 million in the same period last year. Relative to our guidance, sales results were negatively impacted by approximately $20 million as we stopped shipments to Saks in December ahead of the bankruptcy filing. Net sales of our wholesale segment was $737 million compared to $799 million in the previous year. We saw healthy increases in our owned brands and our go-forward license portfolio, offset by lower sales from our Calvin Klein and Tommy Hilfiger licensed businesses. .

Net sales of our retail segment was $63 million for the fourth quarter compared to net sales of $56 million in the previous year's fourth quarter. We achieved strong double-digit comp sales in Karl Lagerfeld Paris, DKNY and Donna Karan. Fourth quarter gross margins were 37% compared to 39.5% in the previous year, reflecting the negative impact of tariffs which was the largest quarter impacted for the year, partially offset by a favorable mix shift towards more full-price sales. The wholesale segment's gross margin percentage was 34.8% and compared to 38.1% in the previous year's quarter. The gross margin percentage in our retail segment was 46.3% compared to 48.3% in the prior year's period.

Non-GAAP SG&A expenses were $260 million in the fourth quarter compared to $244 million in the previous year's fourth quarter. The fourth quarter reflects a $17.5 million bad debt expense associated with the Saks bankruptcy, which drove our SG&A expenses to be higher than planned. Non-GAAP net income for the fourth quarter was $13 million or $0.30 per diluted share compared to $58 million or $1.20 per diluted share in the previous year's fourth quarter. Fourth quarter EPS reflects an approximate $0.30 impact from the Saks bankruptcy filing. Excluding this, our fourth quarter earnings would have been ahead of our internal expectations.

Let's review the full fiscal year ended January 31, 2026. Net sales for the full year were $2.96 billion compared to $3.18 billion in the previous year. Net sales of our wholesale segment were $2.87 billion compared to $3.08 billion in the previous year. The decrease is driven primarily by the $254 million decline in our Calvin Klein and Tommy Hilfiger businesses due largely to the exited licenses. These decreases were partially offset by growth of our go-forward owned and licensed brands, particularly our key owned brands, which grew mid-single digits for the year.

Net sales of our retail segment were $186 million, up approximately 12% from last year's $166 million. The increase was driven by our owned digital business particularly donnakaran.com, we also saw strong comparable store sales increases across our Karl Lagerfeld and DKNY retail stores. Gross margins for the full year were 39.4% compared to 40.8% in the previous year. The year-over-year margin decline reflects approximately $65 million of unmitigated impact from tariffs. While gross margins were down to last year, they actualized ahead of expectations driven by a favorable mix shift towards more full-price sales. Gross margins in the wholesale segment were 37.4% compared to 39.4% in the previous year.

Gross margin in the retail segment were 50.1% compared to 50.4% in the prior year. Non-GAAP SG&A expenses for the year were $975 million or 33% of sales compared to $968 million or 30.4% of sales in the previous year. The increase in SG&A as a percentage of sales was driven primarily by the unplanned increase in bad debt expense as a result of the Saks bankruptcy filing. In the second half of the year, we began to see the benefit of our efforts to optimize warehouse capacity and expect this improvement in efficiency to continue into fiscal 2027. We continue our tight review and control over expenses and were in line with our plan, excluding the Saks fair debt expense. We also continue to invest in infrastructure, technology and talent as well as marketing to support long-term growth of our brands.

Non-GAAP net income for the year was $116 million or $2.61 per diluted share compared to $204 million or $4.42 per diluted share in the previous year. Full year non-GAAP earnings per diluted share would have exceeded the high end of our guidance range, excluding the $0.30 impact from the Saks bad debt expense.

Turning to the balance sheet. We strengthened our balance sheet and liquidity position, ending the year with $407 million in cash and more than $900 million in total liquidity, while returning over $50 million to shareholders through share repurchases and a new cash dividend. As a reminder, we initiated our first ever dividend program in December of last year. Inventories remain in good shape down 4% to $460 million from the previous year's $478 million, reflecting our disciplined approach to inventory management. Unit decreases are down high single digits compared to the prior year. Cost variances to the prior year reflects higher unit costs this year and as a result of the new tariffs. Our strong financial position and ability to generate cash provide us with ample optionality and we remain committed to a balanced capital allocation framework.

First and foremost, we will continue to invest in ourselves to organically grow our business for the long term. Second, we will pursue strategic opportunities, including acquisitions as well as new brand licenses. Third, we will continue to return capital to shareholders through opportunistic share repurchases and quarterly dividends.

Turning to our outlook. For the full fiscal year 2027, we expect net sales of approximately $2.71 billion, down 8% to the prior year. This reflects $470 million of lost sales from Calvin Klein and Tommy Hilfiger products, partially offset by the growth of our go-forward portfolio, which we expect to grow high single digits. Non-GAAP net income for fiscal 2027 is expected to be between $88 million and $92 million or between $2 and $2.10 per diluted share. This compares to non-GAAP net income of $116 million or $2.61 per diluted share for fiscal 2026. Full year adjusted EBITDA is expected to be between $158 million and $162 million compared to $192 million in fiscal 2026.

For the first quarter of fiscal 2027, we expect net sales of approximately $530 million compared to $584 million in the first quarter of fiscal 2026. We expect the net loss in the first quarter of between $13 million and $18 million or $0.30 and $0.40 per share. This compares to non-GAAP net income of $8.4 million or $0.19 per diluted share for the first quarter of fiscal 2026. We are expecting increases in our gross margin percentage of approximately 150 basis points. Our SG&A will be impacted by higher marketing spend due to timing in our spring marketing initiatives.

Now let me discuss a few modeling points. First, on tariffs, our guidance reflects tariff rates effective prior to the recent Supreme Court ruling and assumes the most recent 2025 IEFA trade policies. We have not anticipated any changes to tariff policy or refunds in our outlook. In terms of sales cadence, we expect the first half sales decline to be larger than the second half which reflects several new brand licenses that we expect will scale toward the end of this year. On gross margins, we are expecting as much as 300 basis points of gross margin improvement for the year resulting in significantly higher gross margin percentage than where we have historically been. Margins will benefit from our tariff mitigation efforts as we lap the impact of tariffs in the second half of the year.

Furthermore, margins will benefit from the shift in penetration toward our higher-margin owned brands as the more significant portion of the PVH licenses roll off this year. In the first quarter, we expect less margin growth as compared to the balance of the year. As a reminder, our first quarter of last year was not impacted by last year's tariff increases.

Regarding SG&A, we expect expense deleverage for the full year as our newer businesses scale and as we continue to invest in people, technology and marketing spend to support growth, while the top line is impacted by significant loss Calvin Klein and Tommy Hilfiger sales. We expect the largest amount of deleverage in the first quarter as a result of the timing of spring marketing initiatives and anticipate sequential improvement as we move through the year. Meanwhile, we have identified several cost savings initiatives that we expect will result in $25 million in run rate savings in fiscal 2028. We expect net interest income of approximately $2 million for the full year and estimate our tax rate to be 30%. We expect capital expenditures to be approximately $40 million.

Lastly, we have not anticipated any potential share repurchases for the year in our guidance. Our business remains strongly cash generative and despite our expectation for lower earnings versus fiscal 2026, we anticipate we will generate very healthy free cash flows for the year to further enhance our current strong financial position. That concludes my comments. 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 incredibly proud of our team and the progress we're making as we build some of the best fashion brands in the world. I also want to thank our partners and shareholders for their continued support as we continue to transform G-III and build value for the long term. Operator, we're now ready to take some questions. .

[Operator Instructions] Our first question will come from the line of Bob Drbul with BTIG LLC.

A couple of questions, Morris. On the first one, in terms of, I guess, your visibility on your own brands for this year, in terms of the way that retailers are ordering, your wholesale partners sort of into the fall, I guess, give great visibility into the spring now, but into the fall. Can you just talk us through how you see inventory levels, how you see the order books and really from like the own brand perspective, I think that would follow in, in terms of the marketing investments that you're making, especially what's happening in the first quarter?

Thanks, Bob. Our own brands, as you heard in our presentation and possibly, as you read, we did well last year. Last year, our businesses in our own brands grew high single digits and the pressure on our company is really the exiting brands and not only the scale of the exiting brands, but also the margin retrieval as you exit brands. There's margin pressure that we didn't anticipate to be as strong as it was. The demand for an exiting brand with uncertainty as to what the future is with those brands put pressure on our ability to move product. So we are really comfortable with our own brands. We're garnering additional space as we stated and one brand, we're anticipating at least 400 more points of sale and the other brands is 300.

So we're excited. Our order book anticipate it. And our inventory is very much in line. We're tempering the level of inventory as you have a conscious effort to change your distribution to more full-price business. You're willing to take less risk on inventory levels and protecting some of your premier brands. So you'll find in the future that our inventory levels will be more controlled with the conscious effort in bringing down our level of [ all ] price selling. And that said, growth is coming from outside of the United States for the first time. We're not fully penetrated in areas of the world that have high demand for the product. There's not a nickel's worth of product other than fragrance for Donna Karan. So that brand will show its face throughout the world in the coming months.

And the marketing spend, as you touched, will be fairly aggressive to support our initiative of growing our own brands. We've done well with marketing. We we've gotten awards from media publications for our efforts in Donna Karan and DKNY and Karl Lagerfeld as well, quite honestly. So our team challenged really for the first time in the last 18 or 24 months is really the first time our marketing team has been aggressive on campaigns because of our need to grow our own brands. And it's worked. It's worked incredibly well. They've achieved notoriety. They've achieved success for our company, and thank you to our marketing team.

I guess could I ask a follow-up, just a different question, but can you guys give us an update on the Converse launch, how that's going, what you've learned and sort of the prospects for that this year?

So we took on Converse. We had an old history with Nike. We -- little known fact is that G-III had a studio that developed the Michael Jordan brand as it was coming to market. So we had a partnership with Nike in the early '90s. Maybe it was 1995. I don't recall the date. So -- and we continue to do a little bit of private label with them and through a partnership with the [ Head Ends ] to do kids Converse with -- they have a great relationship with Nike. We're building the brand globally. Converse gave us the right to expand beyond North America. And we read the same thing that you do a little bit of uncertainty and softness maybe in the brand. And that really doesn't apply to us for the moment. Their strategy hasn't -- their strategy for the brand has not really come out yet.

When I say there is, I would go to Nike and ask what the strategy for the brand is because we're -- again, we're sort of the service to the Lord where Nike wants to take the brand is where we need to follow. There are new accounts that we're opening every day. There is an appetite for the brand. It's an amazing brand. And hopefully, Nike supports the growth of the brand. We're doing our part. And as we've shown, when we have control, we're incredible. Where we have less control, we don't rule. We're guided by the licensor. So it's hard to tell you where the brand goes. I can tell you where we could take it if Nike supports it, I think we have an incredible business.

Our next question comes from the line of Victoria Epistolico with KBC.

I just wanted to hit on acquisitions and licensing. As we enter 2026, how are you prioritizing acquisitions versus new licensing opportunities, particularly given the strength in balance sheet and ongoing shift towards these own brands?

So Victoria, I'm not sure we prioritized. We are looking for an amazing acquisition, and we are, at the same time, looking for amazing licenses. Our balance sheet supports our ability of funding a sizable acquisition and our talent pool support and our balance sheet, again, supports our ability of managing through a great license. So I'm not sure that there's an issue and we can do both, which is exactly what we're doing. We've licensed some amazing brands because that was the opportunity at the moment and the appropriate acquisition had not come up. And we've tapped into our competencies, brands and businesses that we can manage easily.

Okay. Great. And then you've spoken about category expansion and things such as fragrance, eyewear home, hospitality. Which these would you say is furthest along in becoming a meaningful revenue contributor?

So if we look at Karl Lagerfeld, you look at hospitality as a key driver in the last, I'd say, the last 18 months and [ Belbuca ] and alongside of that. When you look at DKNY, it's more consumer driven, and we're assigning global licenses where we've signed deals in Latin America. We have a new deal in China. We're expanding into India and that's for a broad range of product. Some will be distributor based and some will be classification-based. So we're -- the highlights for 2 of the brands are hospitality and DKNY, we're not seeing interest in DKNY as hospitality or food and beverage provider but very strong on the consumer side.

Next question will come from the line of [ Min Fan ] with UBS.

This is Mauricio Serna from UBS. I think the registration got confused. Just a couple of questions first. On Donna Karan, great to see the strong growth in last fiscal year, up 40%. Maybe could you tell -- give us a sense of how big the business is right now? And then on the growth outlook, the go-forward business being up high single digits. Could you maybe break that down? Like how much of that is coming from like the key own brands versus growth from the licenses that you've been launching over the last few years?

So the first -- your first question, the size of Donna Karan, we don't disclose the size of the business. But I could tell you in 18 months of doing business, let's go back to when we started Calvin Klein, which grew to be $1.2 billion in sales. We're bigger and further along in 18 months of Donna Karan than we were with Calvin Klein. So I would say we're very happy with the positioning. We're cautious on the distribution, and it's a very scalable business. It's not intended to be a designer. It's not intended to be boutique. It's intended to fill the racks of department stores that we have our greatest competency in and we're going to scale it an added feature that we did not have with Calvin Klein, we have global rights to our own brands. So there's an opportunity throughout the world to expand this brand. So we're in the early stage. You're going to see great percentage increases. And we're at a point where the percentages do make a difference in the future. It's not -- I'm not -- we're not talking about a $10 million initiative that grew 50%.

Yes. And with respect to the second part of your question, we are seeing and anticipating high single-digit growth in the key owned brands and when you look at the total go-forward portfolio, we're also seeing good strong growth. That go-forward portfolio is going to include the key owned brands, it's going to conclude a few other own brands that we have and then, of course, the license portfolio. So we see, in total, high single-digit growth from all of those pieces.

Great. A quick follow-up just on the commentary on gross margin. I think you mentioned 300 basis point expansion for the year. Just I think doing the math on that, I think it implies, based on what you said on EBITDA or EBIT, like -- it implies SG&A dollars. We're going to be up around 3%. I just want to make sure the math on that is correct. And if that's the case, it's going to be up like around maybe like 2% to 3%. What are the drivers behind that SG&A dollar growth?

Yes, I think you've got the math fairly close. The expansion in SG&A going forward is really primarily maintaining the talent pool that we have. We are going to make some additional investments in our infrastructure. We've been on a path of increasing some of our spend on technology with all the new technology that's out there and just continuing to upgrade the systems that we use. So it's really those 3 components that will continue for us to have investment spend. And of course, when you have such a large fall off the top line, it's hard to leverage that or it's certainly not prudent to leverage that in the near term. We will be looking to, as we mentioned on the call, cost savings initiatives. We've not built that into our plan for fiscal '27. We expect that will roll in, in fiscal '28.

And I would now like to hand the conference back over to Morris Goldfarb for any closing remarks.

Thank you all for spending time with us and hearing our story, and we will talk to you next quarter.

This concludes today's conference call. Thank you for participating, and you may now disconnect. Everyone, have a great day.

Ladies and gentlemen, thank you for standing by. Welcome to G-III Apparel Group Third Quarter Fiscal 2026 Earnings Call. [Operator Instructions] Please be advised that today's conference is being recorded.

I would like now to turn the conference over to Neal Nackman, Chief Financial Officer. Neal, please go ahead.

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.

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.

I will now turn the call over to our Chairman and Chief Executive Officer, Morris Goldfarb.

Thank you, Neal, and thank you, everyone, for joining us. We delivered strong profitability in the third quarter despite the impacts of tariffs, with earnings exceeding the high end of our guidance range. This was driven by the strength of our go-forward portfolio, particularly our owned brands, as well as a healthy mix of full-price sales and our mitigation efforts against tariffs.

Our solid year-to-date performance highlights G-III's ability to effectively manage through a dynamic and often challenging marketplace. Since PVH's unexpected decision to end our long-standing licensing partnership, we've demonstrated significant progress in transforming our business model and accelerating our longer-term strategies.

At its peak, the Calvin Klein and Tommy Hilfiger brands represented over $1.5 billion in annual net wholesale sales. And this year, these brands are expected to generate approximately $800 million. As previously mentioned, the PVH sales decline accelerated quicker than originally anticipated.

Despite this decline, our teams replaced more than 70% of the lost sales volume through organic growth of our go-forward owned and licensed portfolio. Our newer brands, like Donna Karan, have enabled us to command greater pricing power while maintaining healthy price elasticity.

Our balance sheet during this period has strengthened, ending the quarter with a net cash position of $174 million. We remain keenly focused on executing our strategic priorities, making disciplined brand investments and positioning our portfolio to capture market share and long-term growth.

Our third quarter performance reflects healthy consumer demand for our brands. Seasonal weather boosted our cold weather categories, which saw a nice pickup in sell-throughs across brands and channels as we move through the quarter. Within wholesale, we saw meaningful gains in women's outerwear with full price retail sales up nearly 20%.

Our marketing investments have driven a significant increase in consumer engagement as seen in the uptick in traffic across our direct-to-consumer business. In digital, we saw traffic lift over 20% across our owned dot-com, which drove substantial growth in conversion rates and overall sales.

As we exited October, trends continued to improve through the Black Friday period, with Europe posting high single-digit growth and North America up double digits compared to last year. Performance across channels indicates that our product offerings continue to align with consumer preferences.

Demand has been steady across brands during the holiday season, supported by full price sell-throughs. Looking ahead, we remain mindful of the global consumer environment and are taking a prudent approach to our outlook for the remainder of the year.

Now let us review our third quarter fiscal 2026 financial results. Net sales for the quarter were $989 million, generally in line with the expectations. Non-GAAP earnings per diluted share were $1.90, $0.37 above the midpoint of our guidance range. Gross margins were 38.6%, outperforming expectations, driven by a healthy mix of our higher-margin owned brands and solid selling into the full price channel.

Units were down year-to-year as our disciplined inventory management kept inventories nearly flat, up just 3% despite tariffs. We remain in the strong financial position, ending the quarter in a net cash position of $174 million after repurchasing approximately $50 million in stock year-to-date.

As we work to maximize the full potential of our globally recognized brands, we're guided by our strategic priorities. Our growth is powered by an exceptional foundation of experienced leadership, world-class merchant capabilities, a diverse product mix, a reliable supply chain and long-standing retail relationships.

Together, these strengths enable us to bring brands to market and scale them across channels with speed. Our strategy centers on driving both near- and long-term growth. Building brand strength remains a core focus, and our strong seasonal marketing and promotional cadence continue to deliver results. We're also prioritizing investments in technology, infrastructure and talent to enhance our business and improve efficiency.

As we look to the final months of the fiscal year, we remain focused on holiday performance and spring selling. We continue to plan our key brands to grow mid-single digits this year. Capturing the long-term potential of our own brands is a top strategic priority. These brands are powerful, sustainable drivers of profitability, delivering higher margin and incremental licensing income.

We're focused on 4 key pillars. First, product and consumer engagement. We're leveraging each brand's unique DNA to deliver differentiated products across every shopping channel. By extending our core assortments and entering new categories, we're delivering growth in the wholesale channel, particularly in North America.

We will continue to build momentum through impactful marketing campaigns, strategic partnerships and innovative collaborations, ensuring that each of our brands remains firmly at the center of its own culture.

Second, driving direct-to-consumer. Complementing our strong wholesale business, we're enhancing our digital capabilities to boost traffic and conversion on our brand sites and many marketplaces. Meanwhile, we continue to evolve our North American retail segment strategy to deliver profitability and continue to optimize our international retail performance.

Third, international expansion. Our owned brands remain highly underpenetrated internationally. Strategic investments and partnerships, including AWWG, position us to capture the substantial long-term growth opportunity.

Fourth, category expansion through licensing. Our partners have helped us extend into additional categories like fragrance, eyewear and home as well as experiential categories such as hospitality, all deepening consumer connections and broadening brand reach. We believe we have many opportunities to monetize as we grow each brand.

To support our key pillars, we continue to invest in marketing to amplify the global visibility of our brands. We see tremendous potential across all growth avenues, including product, channel, category and geographies.

Now I'll share some brand highlights from the third quarter. Donna Karan outperformed expectations, delivering impressive double-digit sales increases in North America. We expect growth of 40% in fiscal 2026, reinforcing the brand's position as a key growth driver within our portfolio. The brand is leveraging its iconic DNA and aspirational luxury positioning to capture strong consumer demand at higher price points, underscoring its enduring appeal and pricing power.

As we continue to develop the brand into a full lifestyle offering, we're excited about the introduction of Donna Karan Weekend, which hit stores in early November. The collection offers a more casual yet refined aesthetic, and we're already seeing great results across channels. Dresses, denim and knit sets are early standouts so far in the fourth quarter.

Donna Karan Jewelry launched in mid-November, exclusively on donnakaran.com, and will roll out to department and specialty stores in spring 2026. The collection already gained buzz with its signature twisted cuff earning the Accessories Council's 2025 award for design excellence, and we've seen strong sell-throughs through the first few weeks.

In the quarter, donnakaran.com outperformed, with traffic up approximately 150% and average order values increasing over 10%, alongside healthy AURs and strong sell-throughs. Now 1.5 years since launch, we're seeing close to 20% of our sales from repeat customers. This growth was led by dresses, footwear and handbags, with particular strength in our best-selling Baldwin handbag.

Wholesale momentum during the quarter was equally impressive. The brand is currently sold in about 1,700 points of sale, and we expect to add roughly 200 more by spring 2026. We're increasing penetration across better department stores with retailers allocating a greater footprint to the brand in new and existing stores. Premium retailers like Saks, Bloomingdale's and Nordstroms have expanded distribution, both online and in-store this fall, reflecting the brand's ability to enter new accounts while maintaining its aspirational brand positioning.

On the marketing front, we launched our Fall 2025 Campaign, Woman to Woman, in early September, featuring a new cast of talent with deep connections to the brand. The campaign resonated strongly, generating approximately 5.6 billion impressions and over $11 million in earned media value.

We carried that momentum into the holiday season with refreshed campaigns, strategic paid media and VIP partnerships aimed at attracting new audiences to shop. Building on the brand's outstanding domestic success, we've been disciplined in our distribution rollout and see significant opportunities to expand across categories and channels, ultimately capturing the long-term global potential.

Karl Lagerfeld delivered another strong quarter, amplified by the success of our global brand initiative starring the iconic Paris Hilton. Our fall/winter 2025 campaign, From Paris with Love, delivered a high-impact global rollout across our key markets, marking one of our strongest media performances to date. This culminated in the standout cultural moment during Paris Fashion Week.

An exclusive late-night event at the Palais de Tokyo, where Paris Hilton took over the DJ booth in a series of custom Karl Lagerfeld looks. The event drew an extraordinary gathering of fashion leaders, celebrities and global influencers. The campaign was supported by a series of high-impact in-store activations across the globe, driving local visibility and reinforcing the campaign's momentum at retail.

Building on this, we rolled out our holiday campaign, From Karl with Love, with activations designed to emphasize storytelling, retail experiences and wider influencer amplifications.

From a brand perspective, we continue to see strong growth in our women's business in North America outperforming. Our global men's business continues to be a key growth catalyst, complementing our women's business and posting close to 20% growth in the quarter. Karl Lagerfeld jeans, currently sold internationally, is resonating with younger consumers and driving incremental growth, with sales up over 30% in the third quarter.

The Studio Collection continues to reinforce its role as the brand's halo with its fashion-forward design, driving strong press and consumer interest across the campaign and gaining presence in key European retailers.

Specifically, in North America, we saw a healthy performance across wholesale and retail, with strong full price selling and AUR increases. With just over 3,200 domestic points of sale in Fall 2025, we expect to add approximately 100 more by Spring, driven by extended assortments and increased footprint. Our North American direct-to-consumer business saw a positive comp sales increases, showing that our refreshed product is resonating across men's and women's.

Internationally, despite a soft macro environment, the brand continued to perform well, supported by disciplined pricing, which drove strong gross margin improvement amid a more promotionally competitive landscape. Our customer activations led directly to improved traffic and performance.

As cooler weather hit, we saw digital traffic accelerate across our own dot-com as well as digital partners, including marketplace. Looking ahead to spring, our collaboration with Paris will continue for a second season, driving high global visibility across key markets.

In our hospitality business, we're looking forward to sharing some news shortly on a new project. With strong global recognition and momentum behind our expansion initiatives, the brand is well positioned to gain share across North America and Europe, while capturing significant untapped opportunity in Asia, setting the stage for sustained long-term growth.

DKNY, our largest brand, was led by healthy full-price sell-throughs in North America across key categories, reinforcing brand relevance. Our North American direct-to-consumer business also showed solid improvement, with positive comp growth across stores and dkny.com, up 20% on higher conversion.

Internationally, we continued to see solid traction. Fall 2025 deliveries and improving sell-throughs helped meet targets despite softer European markets. Europe showed notable progress led by handbags, our top-performing category, with strong full price sell-throughs. Digital performance at DKNY similar to Karl remains robust, driven by growth at Answear and Zalando.

We hosted pop-ups across 8 major cities for the Paola handbag, featuring localized collaborations and digital first activations, which successfully elevated our hero styles and drove reorders in key markets like Spain and Poland. We're expanding our global footprint with a new license partner in China to reposition the brand for growth there.

Marketing momentum is strong. Our Fall 2025 campaign with Hailey Bieber delivered record results, with 7.9 billion impressions and $15.9 million in earned media value. A major Dubai media takeover amplified awareness across global audiences, with a particular emphasis on driving our Middle East business. We focused investments in product and marketing. We are successfully positioning the brand and laying the groundwork for meaningful growth ahead.

Vilebrequin continued to strengthen its global brand presence by expanding premium lifestyle offerings and creating unique experience for its aspirational customers. While retail softness in Europe and Caribbean weighed on results, growth in France helped offset the pressures.

In July, we revealed a partnership with Fiat on the limited edition Fiat Topolino micro car. The collaboration has generated great global coverage. We also advanced our luxury hospitality strategy with an exclusive boutique at the Hotel Christopher in St. Barths and robust double-digit growth at our Cannes flagship and Beach Club.

Partner-operated clubs in Doha and Crete performed well, and upcoming launches in Oman and Miami Beach alongside curated swimwear lifestyle assortments reinforce confidence in long-term global expansion.

Turning to our omnichannel capabilities. We experienced robust digital performance across North America and Europe, further demonstrating that our efforts here are really paying off. We continue to focus on our DTC business performance, highlighted by our North American segment, which remains on track to be close to breakeven in fiscal 2026. Internationally, we see healthy performance across our DTC business, supported by improved full-price selling and strength across our digital ecosystem.

Our retail footprint saw improved productivity and profitability across stores internationally. As we continue to expand this area, we're making targeted investments to sharpen our global go-to-market execution. From strengthening our data capabilities to extending our Shopify platform across brands and regions, we're positioning the business to capture long-term growth.

We're leveraging deeper consumer insights to guide design and merchandising. At the same time, we're elevating our product presentation across owned and partner sites, enhancing imagery, description and video content to deliver a richer consumer experience at higher conversion.

Digital sales in the quarter delivered nearly 20% growth with outside performance by Donna Karan, highlighting the significant value and long-term potential of this channel. This momentum reinforces our ability to meet consumers wherever they shop.

Expanding our portfolio of strategic licenses remains key to our growth strategy. Licensed brands are capital light way to scale and further diversify through complementary brands that offer unique attributes across varying aesthetics, consumer segments, channels and geographies. Our licensed team sports business continues to gain momentum, delivering a solid quarter with sales up 9%.

We're experiencing a strong NFL season supported by strategic activations around key moments with retail partners. Additionally, through our sublicense agreement with Fanatics, we brought timely L.A. Dodger World Series product to market, reinforcing our agility in capturing demand.

This quarter marked the first shipments of Converse apparel across channels, delivering strong results fueled by consumer enthusiasm for the product. As part of Nike, Inc, the partnership reflects our confidence -- their confidence in our expertise, and expands our ability to reach new consumer globally.

Levi's is our largest men's coat brand and continues to post solid growth. Nautica Jeans is scaling distribution, posting a solid quarter, and Halston and Champion are also performing well after launching just over a year ago. BCBG, one of our newest licenses, launched in the fall across approximately 300 points of sale and is performing our initial expectations with high AURs, and we expect to launch an additional 50 Macy's doors this spring.

As we execute the wind down of our PVH licenses, both Tommy Hilfiger and Calvin Klein continued to perform well at retail. We remain committed to supporting our retail partners and delivering what consumers expect from these brands. Our disciplined approach to inventory and focus on full price selling are helping us maximize profitability as we manage the exit. We anticipate that the remaining PVH brand sales will be approximately $400 million in next year's fiscal 2027.

As licenses expire, we're redeploying talent and resources to accelerate growth in our go-forward brands. Thanks to our agile teams and flexible business model, we've already offset a substantial portion of the PVH sales reduction, and are confident in our ability to sustain long-term success.

While the marketplace is full of brands with high potential, only a few operating companies like ours can help them reach it. As we look ahead, we're deliberate in selecting those that align with our portfolio and support our long-term growth trajectory.

In closing, we delivered a strong third quarter, with gross margins and earnings per diluted share far exceeding expectations despite the impact of tariffs. Our consumers continue to respond to newness and fashion, and we're encouraged by the solid trends we've seen throughout the holiday season to date.

Looking ahead, we're updating our fiscal 2026 guidance to take into consideration our third quarter earnings outperformance, combined with the uncertainties around the consumer environment and tariff-related margin pressures. We now expect net sales to be approximately $2.98 billion, and importantly, we're raising our full year non-GAAP earnings per diluted share guidance to $2.80 to $2.90.

I'm incredibly proud of our teams for executing on our priorities and delivering strong profitability amid uncertainty. With a strong balance sheet and a proven track record, we have the flexibility to drive growth, pursue strategic opportunities, including acquisitions, and return capital to shareholders. As part of this strategy, we're proud to introduce our first-ever dividend program.

I'll now pass the call to Neal to discuss our third quarter financial results as well as our fourth quarter and full year fiscal 2026 guidance.

Thank you, Morris. Net sales for the third quarter ended October 31, 2025, were $989 million compared to $1.09 billion in the same period last year, generally in line with our expectations. Net sales of our wholesale segment were $977 million compared to $1.07 billion last year. The decline in sales compared to the prior year is primarily a result of lower sales from Calvin Klein and Tommy Hilfiger license businesses, due largely to several expired licenses, specifically Calvin Klein jeans and sportswear, which we exited at the end of last year.

Net sales of our retail segment were $46 million for the quarter compared to net sales of $42 million in the prior year despite operating less stores. The increase was driven by solid comp sales increases across our North American DKNY and Karl Lagerfeld Paris stores as well as strong sales growth on our Donna Karan website.

Gross margin was 38.6% in the third quarter of fiscal 2026 compared to 39.8% in the previous year's third quarter. The wholesale segment's gross margin was 36.7% compared to 38.4% in last year's comparable quarter. Gross margin declined 170 basis points this year compared to last year as a result of the impact of tariffs.

Gross margins were better than our expectations, driven by a stronger mix of full price sales. Gross margin in our retail segment was 50.8%, down from 52.3% in the prior year. This decline primarily reflects the liquidation of the G.H. Bass branded product which is transitioning to a license arrangement with the Aldo Group beginning January 2026.

Non-GAAP SG&A expenses were similar to the prior year at $258 million compared to $259 million in the previous year. We continue to stay vigilant with our expense management. We have rightsized our warehouse space and continue to prudently invest in people, marketing and technology to position the company for growth. Non-GAAP net income for the third quarter was $83 million or $1.90 per share compared to $116 million or $2.59 per share in the previous year. These results were significantly better than our expectations.

Turning to the balance sheet. Inventory levels remain in good shape. Inventories modestly increased 3% to $547 million at the end of the quarter from last year's $532 million. We continue to focus on disciplined inventory management with units down year-over-year, and our inventory is well positioned to meet holiday demand.

We remain in a strong financial position, ending the quarter in a net cash position of $174 million after repurchasing approximately $50 million worth of shares year-to-date. This compares to a net debt position of $119 million in the same period of the previous year. Our total availability remains very strong at approximately $875 million. Our financial strength provides us flexibility to invest in our business and other strategic opportunities, including acquisitions to drive future growth.

In addition, our Board has approved a new dividend program to further enhance our returns to stockholders. The Board of Directors has declared an initial quarterly cash dividend of $0.10 per share. The company intends to pay dividends quarterly in the future, subject to market conditions and the approval of the Board of Directors.

Turning to guidance. We now expect fiscal year 2026 net sales of approximately $2.98 billion, a decrease of approximately 6% to last year. We continue to expect our key owned brands, DKNY, Donna Karan, Karl Lagerfeld and Vilebrequin to grow at a mid-single-digit rate this year.

Our updated view is that the gross impact of tariffs will amount to approximately $135 million, and we now estimate the unmitigated impact to be approximately $65 million for fiscal 2026. As a reminder, since we are primarily a North American wholesale business, we were limited in our ability to adjust pricing on inventory already sold into retailers for the fall and holiday seasons.

As a result, we are absorbing a larger share of these costs in this fiscal year to remain competitive and protect market share. Looking ahead, as we move through fiscal 2027, we expect gross margins to normalize and ultimately expand as we exit lower-margin licenses, increased penetration of our higher-margin owned brands and implement targeted price increases. Our owned brands, Donna Karan and Karl Lagerfeld, are well positioned to command greater pricing power in the marketplace.

Non-GAAP net income for fiscal 2026 is expected to be between $125 million and $130 million, or diluted earnings per share between $2.80 and $2.90. This compares to non-GAAP net income of $204 million or diluted earnings per share of $4.42 for fiscal 2025. Adjusted EBITDA for fiscal 2026 is expected to be between $208 million and $213 million compared to adjusted EBITDA of $326 million in fiscal 2025.

Let me add some context around modeling. We now expect gross margins for the full fiscal year 2026 to be down approximately 200 basis points. The fourth quarter gross margin decline will reflect the highest penetration and impact from tariff inventory. We expect interest expense to be approximately $1.5 million for the full year, benefiting from the $400 million debt repayment last year.

We expect capital expenditures of approximately $40 million, principally driven by the build-out of shop-in-shops for our new brand launches, leasehold improvements and technology investments. We are estimating a tax rate of approximately 29.5% for fiscal 2026. We have not anticipated any potential share repurchases for the fourth quarter in our guidance.

That concludes my comments. 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. I'd also like to thank our entire organization and many partners and all our stakeholders for their support. Operator, we're now ready to take some questions.

[Operator Instructions] And our first question comes from Bob Drbul with BTIG.

I guess can we unpack the gross margin performance a bit more? When you look at the results and you look at the performance and the upside to it, can you just give us some more color around how you did that, sort of the various buckets? And then I guess when you think about the unmitigated $65 million for this year, when you look at next year in gross margin, do you believe you'll be able to fully mitigate the tariff situation? And I guess just be very curious to hear about pricing.

Thanks, Bob. The -- look, I guess the best way to help frame this is I think if you went back to our expectations at the beginning of the year, we would have expected pre-tariffs to have been up somewhere around 50 basis points in terms of gross margin percentage. And that's, again, driven by what we expect will be continued improvement of the mix of our own brands and higher gross margins.

So now if you play back and extract the impact of tariffs, we're probably expecting to be down about 200 basis points, which comes awfully close to about the $65 million impact that we've been referring to. The majority of that gross margin hit for us now looks like it's going to be in the fourth quarter, but we took a sizable hit for that in the third quarter as well.

One of the reasons that we were better than we had expected for the third quarter gross margins is we did extremely well in the full price selling and had -- and really didn't want to take advantage of heavy discounting in the off-price market. So we probably left some of those sales on the table at the moment. The inventory levels are in good shape. We didn't feel we need to push that out at all.

I think in terms of the last part of your question with respect to getting to where we go on gross margins, early to say if we'll capture all. But certainly going into every market week that we'll have prospectively, we're going to know our costs as opposed to this past year, really not knowing the tariff cost that we have to put into our product. So we'll know that upfront.

And our intent will be to put that into price and achieve normal margins for us, which again should reflect higher margins on the owned businesses, weaker margins in the licensed portfolio and overall a mix that continues to show a higher gross margin going forward.

Bob, we've raised our prices to the level that we believe the consumer will expect and accept. And it's working. There are a couple of areas that we need to make some adjustments. We're seeing a little discontent in a couple of areas, and we're adjusting those prices. So we'll source more efficiently. We'll -- as Neal said, our own brands are more productive.

If you look at the -- we just stated in our peak years, we did approximately $1.5 billion with PVH brands that we paid a royalty and advertising charges for it. So we were out of pocket for royalties for north of $150 million on a reasonable year. That money stays in our company for marketing, for margin enhancements and for building, let's say, better product if needed, as needed. So we have opportunities that we did not have before.

We also have with our own brands, a direct-to-consumer possibility that we never had with licensed with PVH, we were -- we never had a site that we could market through. And we never had global distribution. Our own brands afford us the ability of direct-to-consumer, which in itself is better margin business. And as we get it to scale, it's going to make a difference in our company. And the other piece is, for the first time in over a decade, we're seeing daylight in our own bricks model.

We're very close to breakeven, and there's a slim chance we break even or make a small profit this year. But I think we have the formula right, and we're about ready to grow that sector of our -- so opportunities for margin enhancements are absolutely there. We're launching a more important men's initiative. We've hired talent to help us with the growth of men's and new initiatives.

So it's all looking good. It's not a walk in a park, replacing half of your top line in a short period of time is no small feat with the economics we're faced with, with the tariffs that are thrown at us and all the factors that relate to how we do a business. But not want to complain. This is what we're challenged to do, and this is what we will do. So we're highly confident that we can achieve what we say we can.

Great. And if I could just ask a follow-up. Just as you look at next year, I think you talked about the PVH license business being $400 million, and I think you said margins would be -- gross margins would be up next year. Any other sort of preliminary thoughts around the top line or the bottom line goals that you're thinking about as you look to next year?

We've got a whole bunch of thoughts, quite honestly, and we're working toward executing some of them, which are possible. That might be an acquisition. It might be another license. It might be distribution through another channel. Too early to bring them to our investor group. It's all work in progress. We are not sitting by and bringing our business down to a nonproductive scale.

But that said, there is no rush. We have a strong balance sheet, as you see. We're not desperate to sign on another license or acquisition. As we find it, we'll execute it. And for the moment, we're cautiously looking at the right synergistic action that we're likely to find in the coming months.

And our next question will come from Ashley Owens with KeyBanc.

Maybe just to follow up on PVH really quickly. I know you said it's now expected to come down to about $400 million next year. So effectively, another halving of the business declines accelerating quicker than you initially expected. Just be curious how that reshapes the mix and the residual drag into next year. And from your perspective, does this accelerate the time line for reaching a cleaner base? I think you'll still have another chunk of roll-offs at the end of 2026. So would be curious on your thoughts here.

So the thoughts are really kind of mixed. We're not in control of our own destiny. We have partners. On one side, we have less than a great relationship with PVH. We're at the mercy of where the retailer wants to take our business and their business. Fortunately, for us, we're outperforming expectations with our own brands. And if you track PVH's performance with their own brands, it appears from where I sit, they're not achieving what their goals were on taking in their own brands and producing them and servicing the marketplace.

They highlighted the fact that their business in North America is 2/3 underwear. Well, God bless them, let them produce underwear, and we're in the fashion business. So the lanes that we created for fashion with PVH's brands, I believe, are open to ourselves and other fashion providers that they are not going to fill. So the opportunity to expand our own brands or newly acquired or licensed brands is there, I believe, because of PVH's inability to execute on what they thought they would.

Okay. Got it. Maybe just quickly then on owned brands, especially like Donna Karan, just given the information you've provided us, I think you said up 40% this year, but still early in the broader reset that you executed. Would just be curious as to what the priority levers to keep that momentum going into next year are and where the biggest opportunity is to scale from here?

Well, we've achieved -- I don't want to say perfection, but the launch was great. The -- when you launch a brand, you find flaws in what you've created and you go on, you improve. And every quarter, you get margin enhancements, you get better product, you get customers that have tried your product and become repeat customers. What's beautiful about Donna Karan is we're finding even on our digital side that, as I said, we can track our own today.

We're finding over 20% of our customers is -- are return customers. So they're satisfied customers that are supporting the brand not only in a category that they might have bought, but now they'll expand and say where their first acquisition might have been a dress, they'll say, wow, it came in great, fit. I got lots of compliments on it. I'm buying a handbag. And we're getting lots of that. The strength of the business overpoweringly for the moment is the dress side.

We have a dress business that is not only retailing well, but it's retailing well at a much higher price point than our other brands, and that would be Tommy Hilfiger, Calvin Klein, DKNY, Karl Lagerfeld, Donna Karan is at a premium price point turning as well as the lower price point brands that we're marketing.

So we're finding opportunities in consumer acceptance. And as I stated in the script, we've also expanded distribution to pretty good penetration in Dillard's, Nordstrom's, Bloomingdale's, Saks, Neimans, so we're getting a healthier penetration of, call it, more premium department stores.

And the next question comes from Mauricio Serna with UBS.

Yes, I would like to get -- if you could provide a little bit more detail on what has been the performance from the other parts of your business. You've had several licenses that you're lapping the launches this year. Maybe could you talk a little bit about Nautica? And any initial thoughts about what you've seen with Nike and BCBG, that will be very helpful.

So thank you, Mauricio. I'll start with Nautica. We signed a license with ABG for Nautica as we found one might say surprisingly that PVH was taking back Tommy Hilfiger. So we needed a brand that was close in DNA to Tommy. And Nautica is an American spirited brand and colors of Nautica are similar. They're red, white and blue. And we thought as we were exiting categories with Tommy through our PVH license, as we vacated a classification of product, we would be able to market our newly licensed Nautica brand.

So we're doing exactly that. It's growing nicely. It's not easy finding the appropriate space for it. But as it shipped, it's retailing well and the scale of it is beyond what we expected. So we're happy with Nautica. We had a unique opportunity to invest in Halston that gives us long-term ability to own the brand, and we're carefully marketing the brand in the right venues.

I would not say that was a major success on its first effort. Second effort a little bit better, and our third delivery appears to be really well accepted. We'll be in the middle of shipping it soon. We're excited by what we see, and we believe there's an opportunity there. It's not nothing that I would point to of scale today, but it does have a $250 million to $300 million opportunity in our portfolio. So it merits the actions that we're taking.

I can't give you an income statement on that area just yet. I can tell you that it does cost money to build brands. It does cost money to launch brands. And when you make the right decisions, you prosper after the first couple of years of spending. But it is a capital-light means of growing your business. We did not spend very much money on an acquisition. We spent money on talent, samples, shopping, all the good stuff, showroom, but all very manageable.

BCBG, better. BCBG was -- we first shipped it recently with good door distribution. We know what we've got to do to make it better, same as always. We're in over 300 doors very quickly, working well. Go to Converse and Converse through Nike is a little bit unique. It's global. It's got distributors all over the world that we've -- we're working to understand their needs. They're working very hard. The global distributors are working hard to understand how we can make their business better.

It's a wide open field for us with great cooperation from the Converse organization. So we're excited by it, and it further enhances our -- call it, our active business. It's classified somewhat as skate. We don't have a skate initiative other than this, and we're not cannibalizing our own dollars. This is all new to us, and we're excited by where that goes. So -- and there'll be others.

There'll be 1 or 2 other announcements on licenses that are also scalable. We're not signing licenses that we see a potential of $20 million or $30 million. Those are the pieces that we're cleaning up. I guess our measuring tool would be in a 3-year period if a brand doesn't hit over $100 million in sales, it's really -- it shouldn't be on our radar screen. And we also have a private label initiative that we work hard at.

That's spearheaded through our overseas organization that manages to get private label businesses globally. So we're working harder on that than we've ever worked. So we're conscious of the fact of what we need to do to keep the comfortable scale of our business. And the backdrop is if it doesn't work, we'll be profit-driven and not top line driven. We're doing well on managing our business.

We've not focused on headcount reduction. If some of these things don't work, that will be a necessary evil that we'll have to look at closely. But there are opportunities throughout the company. Hope I answered a little bit of what you're looking for, Mauricio.

Yes, yes, definitely was very helpful. If I could just have a quick follow-up for -- on the gross margin. Maybe just looking at the guidance that you gave, I think it implies for fourth quarter like roughly a little bit over 400 basis points margin contraction.

As we think about spring '26 and the initiatives that you're doing on pricing and so forth, should we expect like a pressure more aligned with Q3? Or I would suppose sequentially better than Q4, but just thinking about whether it could be closer to Q3 or still like meaningful pressure.

Yes. Without getting into the specifics of the quarters for next year, I think, Mauricio, if you're interested generally, where we got impacted by tariffs was a little bit in the second quarter, more significantly in the third quarter and the most in the fourth quarter. So essentially, if you reverse those, that's where we expect to get the pickups into next year.

And the last question comes from Dana Telsey with Telsey Advisory.

Morris, as you think about the wholesale channel of distribution, how have the order trends been changing lately, particularly for your own brands like the Donna Karan and the Karl Lagerfeld? And then, Neal, given the gross margin, excluding the tariff, the complexion coming from your own brands, certainly, what I've been seeing in the stores is the good sell-through of Donna Karan and Karl and have the -- whether it's extended sizing, whether it's handbags, the improvement in retail, are any of these potential additive catalysts that are incremental for 2026 and going forward?

Thank you, Dana. The order trends, sometimes you can almost feel it. You feel it in the air. If you walk outside and it's cold, trends are going to be better this time of the year. So I would tell you, we had a few surprises. As you see, our inventory levels are relatively low. There's a different percentage of off-price to regular retail, full-price retail that we have today.

So demand was significantly higher at the full-price channel for us this year than most years. And if you shop the stores, we're very proud of the way our inventory looks -- the retailers that chased product are prospering. The highlights for us were the coat area and the dress area, and it's not just one brand, it's across the broad. All of our brands are doing well. The sell-throughs are higher than they've been historically.

So it's all said with all of what's been thrown at us, I'd say we had an excellent year and still a little time to go, but we're happy with the consumer. We're happy with our retail partners. And our staff has done an amazing job of managing during this period. I boast about it regularly. So if I've said it one too many times here, I apologize, but it's a great team of people that step up when needed, and this is a period of time that stepping up is essential. We've all done it. And thank you, team, if you're listening. And you had another follow-up on that one on this question that I missed, Dana. Did I?

It's about -- when you think about next year, extended sizing, what you've done with Weekend, what you've done with handbags, what you've done with own retail, how do you think of the incrementality of that of your own brands and the opportunity for contribution, whether to top line or to margin?

Well, pretty much all -- if you look at the new-to-market brands, and I would consider Donna Karan new-to-market, it's not even all the new elements or new classifications that we bring. It's the penetration of the old. It's -- you have a period of time which is proof of -- call it, proof of concept. The dresses have to sell before you get door expansion and penetration within the doors that you've had.

So we're in a good mode. All our initiatives with Donna Karan work. So I'll tell you, our dress business will grow. Our sportswear business will grow. Our handbag business will grow. Our footwear business will grow. So there's -- and the Weekend, which we just shipped, we're very excited about, and we believe that the brand will be a shining star within the retail world. With that, we also have a greater penetration internationally, and we haven't touched international for Donna Karan yet.

So we're about to. We're testing some Donna Karan product in the European market. But we're cautiously distributing it and carefully distributing it into a full-price channel distribution. So that's all working. And with that, Karl Lagerfeld, the same way. Karl Lagerfeld has grown somewhat dramatically this year. we have a greater concentration in calendar 2026 on growing the men's side of Karl Lagerfeld in North America.

So there are -- if your question is targeted to organic growth opportunities, every one of our brands has potential to grow organically. That's what we've basically done to mitigate the PVH givebacks. So -- and there's still plenty of room where -- as I said earlier, we're not under pressure to make an acquisition. We're not under pressure to sign another license.

We have these great assets that have a lot of bandwidth, a lot of ability to grow without pressures on margin. Thank you Dana. With that, I thank you all. I wish you all happy holidays, and thank you for your time and your support of our company.

This concludes today's conference call. Thank you for participating, and you may now disconnect.

Good day. Thank you for standing by. Welcome to the G-III Apparel Group Second Quarter Fiscal 2026 Earnings Conference Call. [Operator Instructions] Please note that today's conference is being recorded.

I will now hand the conference over to your speaker host, Neal Nackman, the company Chief Financial Officer. Please go ahead, sir.

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.

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.

I will now turn the call over to our Chairman and Chief Executive Officer, Morris Goldfarb.

Good morning. Thank you, Neal, and welcome, everyone. In the second quarter, we exceeded our expectations across both net sales and earnings. Net sales benefited from retailers responding to consumer demand for newness and fashion as we transition season.

Sales momentum in the quarter was driven by our go-forward portfolio, specifically our key owned brands, DKNY, Donna Karan, Karl Lagerfeld and [indiscernible]. Gross margins in the quarter were impacted by higher-than-expected tariff costs, driven primarily by a greater volume of tariff inventory shipments than initially forecasted. We're actively mitigating these pressures through a combination of vendor participation, selective sourcing shift and targeted price increases. In the near term, we're absorbing a portion of these costs to remain competitive and capture market share. Looking ahead, we anticipate gross margins will largely normalize and ultimately expand as we exit licenses, as the penetration of our owned brands increases, and as we continue to take selected price increases.

As we look to the second half of the year, our retail partners are increasingly cautious on their inventory buys, in anticipation of tariff increases becoming more pronounced. Additionally, we've seen a disproportionate reduction in open to buy specifically for the Calvin Klein and Tommy Hilfiger businesses. During the transition, we're responsibly exiting these business, and staying disciplined in our inventory position based on the increased cost pressures in narrower selling period. In response to the latest tariffs, including those affecting India, we've proactively adjusted our inventory positions prioritizing margin over sales. Accordingly, fiscal 2026 guidance we provided this morning reflects all of these factors.

Now let us review our second quarter fiscal 2026 financial results. Net sales for the quarter were $613 million, well ahead of our guidance. Our GAAP earnings per diluted share were $0.25, also well above the top end of our guidance range. Inventory levels were up 5% versus last year's -- reflecting our planned acceleration of inventory receipts due to tariffs. We remain in a strong financial position ending the quarter in a net cash position of $286 million after repurchasing $25 million in shares this past quarter, compared to last year's net neutral cash position.

Turning to our strategic priorities. We're actively working to maximize the full potential of our globally recognized brands. To drive growth we've built a robust corporate foundation anchored by an experienced leadership team, world-class merchant capabilities, strength across lifestyle categories, a well-developed supply chain, and long-term relationships with retail partners. This foundation has enabled us to consistently launch and scale brands with speed.

To support our long-term strategy, we're streamlining our go-to-market approach, including investments in technology and infrastructure. In North America, we're optimizing network capability and implementing process improvements to drive productivity and reduce costs across materials, labor and freight. We're consolidating our warehouse network, exiting 4 facilities, and reducing associated staff by year-end, which is expected to generate significant savings.

In parallel, we're investing in systems to support product creation all the way through to our speed to market and consumer engagement strategies. As part of our technology transformation, we're advancing digital tools such as 3D design, AI automation and other innovations to help gain efficiencies. We're further realigning the organization as we transition our business to unlock additional savings in fiscal 2027 and beyond.

Capturing the long-term potential of our own brands is one of our top priorities. Owned brands represent an important and sustainable long-term profit driver as they generate higher operating margins, and provide an accretive licensing income stream. Our strategy centers on leveraging each brand's iconic DNA to deliver a differentiated product to a wide array of consumers in their shopping channel of choice. We are rapidly scaling each brand's full lifestyle product offering by extending existing assortments while expanding into new categories. This has enabled us to unlock accelerated growth across the wholesale channel, particularly in North America.

Through our licensing partners, the brands have expanded into complementary categories such as fragrance, eyewear and home, as well as experiential categories like hospitality, culinary and refined leisure, all broadening consumer touch points and deepening brand affinity.

We're investing in our brand's e-commerce presence. Importantly, our own brands remain highly underpenetrated internationally, presenting a significant opportunity for long-term expansion. We are continuing to invest in marketing to amplify our brand's global reach. This year, in addition to Donna Karan and DKNY, we're also investing in Karl Lagerfeld. With an always-on marketing approach, we're focused on top-tier talent with authentic brand resonance, [ and the ] rich content, and global market activations to connect with new and existing consumers and drive conversion. This will come to life through local influencer programs, pop-up experience and in-store events. All designed to bring our brands closer to the consumer.

We see substantial potential across all growth avenues, including product, channel, categories and geographies. We're confident in our ability to scale each of our own brands into the largest women's fashion brands over time. I'll now review brand highlights from the second quarter.

This year marks 4 decades since Donna Karan revolutionized the way women dressed. The brand's unwavering spirit has transcended time, providing cross-generational women with a daily wardrobe that is effortless, central and timeless. Our strategy centers on leveraging the brand's iconic DNA with classic silhouettes, cultured hardware and sophisticated designs, while infusing it with fresh contemporary interpretation. It's aspirational luxury positioning allows us to establish higher price points and capture premium full price distribution in the U.S.

The brand's AURs and sell-throughs remain the strongest across our portfolio. As a result, Donna Karan has tapped into a white space opportunity, not only within our portfolio, but also in the crowded marketplace. In the second quarter, the brand delivered strong results across its lifestyle offering led by continuous strength in dresses. Our accessories business is gaining traction with premium handbags commanding AURs upward of $500, with several styles emerging as standouts, including The Baldwin, The Glenwood, and The [indiscernible].

As we continue to develop the Donna Karan lifestyle, we're expanding into new and existing categories with a current focus on social occasion wear, and now entering more casual offerings through the upcoming launch of our Donna Karan weekend collection. [ Donnakaran.com ] is outperforming expectations, driven by engaging content and great product that is boosting conversion and top line growth. Digital sales are gaining strong traction with affluent neighborhoods, which are emerging as our top performing markets, further reinforcing the brand's aspirational luxury positioning. We're optimizing customer acquisition costs while investing in retention to drive loyalty through compelling products and a seamless shopping experience, ultimately enhancing the customer lifetime value.

Turning to marketing. Our fall 2025 campaign launched yesterday and directs our focus to 5 icons who embody the essence of the brand. The campaign entitled women to women, features an authentic cash that have a rich history with the brand, including Claudia [ Schiffer ], Irina [ Shake ] and [indiscernible], among others. The full media plan will roll out across key U.S. markets with outdoor placements, robust digital and social programming, and high-caliber VIP social partnerships to maintain brand aspiration and relevance. In its first 24 hours, the campaign has already exceeded our expectations.

Looking ahead to the second half of the year, we look forward to the soft launch of Donna Karan weekends for holiday 2025, with a more robust collection spanning an impressive 200 points of sale in spring 2026. The newest lifestyle line will feature relaxed sophisticated looks, complemented by the addition of casual handbag silhouettes. This brand extension opens up opportunities for further growth in traditional channels, as well as new distribution like leisure destination shops.

We just signed a licensing agreement for fashion jewelry collection with price points ranging from $125 to $350. As a reminder, Donna Karan is currently distributed in the U.S. where we expect the brand to grow over 40% this year. We see outside global growth potential in fiscal 2027 and beyond.

Karl Lagerfeld is building momentum globally, delivering another quarter of strong growth led by North America. In the region, sales grew over 30%, driven by outperformance across the lifestyle offerings with margin expansion. Notably, men's sales grew approximately 20% to last year. For the fall, we expect to add approximately 150 domestic points of sale driven by extended assortments in suit separates, handbags and footwear, as well as men's sportswear. Additionally, North American retail business saw high single-digit comp increases driven by traffic and AUR growth.

Internationally, the brand delivered broad-based growth across all channels and product categories as well as margin expansion despite a challenging macro backdrop. The wholesale business has accelerated supported by curated product assortments to better deliver core [indiscernible]. We've also seen steady growth in our digital ecosystem.

A couple of years ago, we bought our [ karllagerfeld.com ] site in-house, which has facilitated the expansion of the product offerings and distribution capabilities. We are further investing in upgrading the platform to drive conversion and capture back-end cost efficiencies.

Turning to marketing. On August 27, we unveiled our fall/winter 2025 global brand campaign from Paris with Love, featuring cultural icon Paris Hilton. The campaign is another major investment in the brand, designed for high visibility to drive momentum across each touch point of the Karl Lagerfeld universe. Paris Hilton brings her unmistakable charisma through our collection, celebrating confidence, individuality and attitude. Qualities that reflect the irreverence spirit and shop sophistication of Karl himself. The collection highlights studio pieces, structured tailoring and timeless accessories with the K Autograph handbag line in the heart of the campaign.

In just 1 week, the campaign has already garnered over 1.5 billion impressions driving strong engagements globally. The rollout includes high-impact activations across our key global markets. From an immersive pop-up at [ Galleries Lafayette ] in Paris, and unmistakable billboards in New York's Times Square and Los Angeles' [ Sunset Boulevard ] to major media features, branded taxis in Las Vegas and a strong local influencer presence worldwide.

Digital storytelling also plays a central role with bold social first activations to connect with new audiences. The momentum will build towards a high-profile Paris Fashion Week event, with Paris Hilton in the center of an unforgettable late-night party, as well as store events planned for London, Berlin, Paris and Munich during each city's fashion week. These efforts further solidify our cultural impact and our global presence. We're capturing further market share in Europe and North America as well as building out our business in Asia, where today, the brand has a small presence.

DKNY draws inspiration from the energy and attitude of New York offering a modern wardrobe designed to seamlessly transition from day to night, appealing to a younger consumer seeking contemporary assortments. The brand delivered a solid second quarter led by North America. Outerwear saw outsized growth with sales nearly doubling. Our North American retail business experienced positive comp sales increases, driven by AUR growth, showing that our refresh product is resonating.

Internationally, the brand is gaining traction. In Europe, we experienced nice wholesale expansion across DKNY jeans and accessories. We're pleased with the improving sell-through trends despite the challenging consumer environment. In the Middle East, our business is mostly accessories where we saw solid sell-throughs. This year, we will open 3 new DKNY mono-branded boutiques in the Middle East.

We're excited about our fall marketing campaign launched September 2 with global style icon on [ Hailey Bieber ]. Born in New York, [ Hailey ] has an authentic connection and affinity for the brand, and comes with a highly engaged global fan base of over 72 million social followers. Rooted in the New York Street style, and redefined through [ Hailey's ] lens, the collection is timeless, versatile and effortlessly cool. In just 24 hours the campaign has already delivered an overwhelmingly positive response, garnering over 2.3 billion impressions and reaching over 22 million users over social media.

As we enter the second half of the year, our expanding product assortments including extended sizing, we're well positioned to capture an incremental market share across premier North American department [indiscernible]. DKNY will roll out a series of global pop-ups and activations to promote its best-selling handbags, which are expected to drive traffic and conversion.

We deepened our relationship with the New York Yankees with a limited edition collaboration featuring fashion-forward sports apparel. Drawing inspiration from the Yankees game day year each piece has settled hints of embroidery, as well as DKNY and Yankee [ co-brand ]. This collaboration is an extension of DKNY strategy to build brand visibility and connect with a broader audience in new ways, while also leveraging our well-developed sports licensing capabilities.

Internationally, we're focused on brand expansion through new and existing partners across wholesale, digital and franchise stores to increase global accessibility and awareness of the brand. We see outsized growth potential for the brand globally. Vilebrequin, possibly the world's most recognized men's swimwear brand showed solid improvement in the second quarter with positive sales growth this summer season driven by Europe and the Caribbean. Our flagship store [indiscernible], where we also opened our first ever Beach Club has become the most productive store in our fleet. Several of our other stores are breaking all-time weekly records.

To celebrate the start of the summer season in style, we teamed up with Fiat to create the [ FiaTaPolino ] Vilebrequin collection edition, which sold out. The special version of the most coveted [ micro car ] is the celebration of style, spontaneity, and that timeless sensation of never-ending summer by the sea, and a fabulous example of the brand's lifestyle reach. Vilebrequin Beach Clubs further extend the brand's lifestyle offerings, seamlessly blending beach culture, elevated culinary experiences and refined leisure. After launching our first-ever Beach Club in [indiscernible] over 2 years ago, we've perfected the Beach Club concept and developed a successful license model. Through a license partner, we opened our second Beach Club at the [ St. Regis in Doha ], which is doing well. This summer, a third Beach Club launched in [indiscernible], bringing [ Riviera ] charm and [ Radian ] sophistication to one of the most -- of the Mediterranean's most exclusive resorts. The domes [indiscernible]. We have two more exciting launches in the pipeline this year in Miami and Oman.

Coming out of a strong summer season, we see many more opportunities to further drive the business in summer 2026 and beyond with significant global potential for the brand over the long term. Investing in and expanding our complementary portfolio of licensed brands continues to be a key driver of our long-term strategy. We take a thoughtful approach to partnering with brands, ensuring that each new addition complements our existing portfolio, while offering unique propositions that strengthen our business.

Licensed brands are also a capital-light way to grow and leverage our powerful corporate foundation. Our team sports business is growing with the expanded rights for several of our major sports league licenses. This business historically limited us to just outerwear. With our newly negotiated renewals, we'll expand our offerings to include activewear and athleisure, as well as kids. We have several other exciting initiatives in the pipeline for next year.

Nautica, [ Austin ] and Champion which launched last year, delivered solid results in the second quarter. Our newest licenses for Converse and BCBG adjusted in stores, and we're excited to see the product building momentum. BCBG launched here in North America with over 300 points of sale and is doing well. Converse also accesses 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 internationally in Western Europe and through the brand's global network converse stores.

For North America, our launch spans across a rapidly growing wholesale business, in addition to existing Converse's brick-and-mortar online stores -- and online stores. Internationally, we partnered with Converse Partners throughout Europe, Latin America and Southeast Asia, enabling us to service both Converse stores, as well as wholesale partners in those regions. Launch is already exceeding our expectations.

Looking ahead to fiscal 2027, we're proactively preparing for the expiration of several key [ PDH ] licenses including Calvin Klein outerwear and athleisure, and Tommy Hilfiger [indiscernible], sportswear and athleisure. At peak, we built Calvin Klein and Tommy Hilfiger into $1.5 billion business in reported wholesale sales. After this year, following the expiration of the categories that I just mentioned, we expect remaining PVH sales to represent approximately $400 million in fiscal 2027.

As PVH transitions these categories to themselves, or in new licensees, we strongly believe this will create a meaningful product void in the market which we see as a strategic opportunity to capture additional market share while continuing to deepen our partnerships with retailers. Our own brands, along with our growing license portfolio, will help offset lost sales from the PVH brands. With a solid balance sheet, we're poised to unlock our global growth potential and pursue future license and acquisition opportunities aligned with our long-term growth strategy.

We're focused on enhancing our omnichannel capabilities by improving our North American retail segment store operations and strengthening our digital ecosystem. In North America, we've made significant progress in our turnaround efforts. We remain on track to almost breakeven this year, eliminating approximately $10 million in operating losses.

On the digital front, in the second quarter, our global Digital business was up mid-single digits as our digital business continues to expand, we're strategically investing in our team technology and possess -- and processes to enhance tread streamline our global go-to-market capabilities. We remain focused on delivering a more robust and visually compelling product catalog across our owned and third-party partner sites.

By elevating the quality of imagery, descriptors and video content, we aim to provide an enriched consumer experience that drives conversion. Our owned websites delivered strong double-digit growth this quarter underscoring the significant value and long-term potential of the channel. This momentum further enables consumers to engage with our brand seamlessly wherever they choose to shop.

In closing, we delivered solid second quarter results as we executed on our strategic priorities. Looking ahead, we've provided fiscal 2026 guidance to reflect the current macro environment, a more cautious outlook from our retail partners that affected most of our portfolio, especially Calvin Klein and Tommy Hilfiger ahead of the transition, as well as the impact of tariffs on our top and bottom lines.

We now expect net sales of approximately $3.02 billion, and non-GAAP diluted earnings per share between $2.55 and $2.75. With a clear strategic path, we're confident in our ability to unlock the full potential of our go-forward portfolio of globally recognized brands, while successfully navigating a difficult environment. Our strong balance sheet and dynamic business model provides flexibility to invest in our brands, as well as pursue strategic opportunities.

We will also consider opportunistically returning capital to our shareholders through stock repurchases. I'm incredibly excited about the transformation journey we're on, driven by our commitment to delivering long-term growth and shareholder value.

I'll now pass the call to Neal who will walk through the financial results for the second quarter and provide guidance for the third and full year 2026.

Thank you, Morris. Net sales for the second quarter ended July 31, 2025, were $613 million, compared to $645 million in the same period last year, well ahead of our expectations driven by our Wholesale segment. The decline in sales compared to the prior year is primarily attributable to the exit from the Calvin Klein jeans and sportswear license businesses. Net sales of our Wholesale segment were $590 million, compared to $620 million in the previous year. Net sales of our Retail segment were $41 million for the quarter, compared to net sales of $37 million in the previous year. This growth is a direct result of our turnaround initiatives despite the decrease in store footprint in our North American outlet business.

Our gross margin percentage was 40.8% in the second quarter of fiscal 2026, compared to 42.8% in the previous year's second quarter. The Wholesale segment's gross margin percentage was 38.9%, compared to 41.2% in the previous year. The gross profit percentage in the current period decreased 230 basis points due to higher-than-expected tariff costs driven primarily by a greater volume of tariff inventory shipments in the quarter, as well as an unfavorable product mix. Gross margin in our retail operations segment was 52.4%, down from 54.4% in the prior year. This decline primarily reflects the liquidation of the [ G.H. Bass ] branded product, which is previously shared this past spring, is transitioning to a license arrangement with the Aldo Group beginning January 2026.

Non-GAAP SG&A expenses were $226 million, compared to $229 million in the previous year. This decrease was driven by lower compensation expenses resulting from decreased profitability, as well as reduced advertising expenses related to lower net sales of licensed products in the period. These decreases were partially offset by higher supply chain expenses, reflecting the acceleration of inventory receipts, as previously mentioned.

Non-GAAP net income for the second quarter was $11 million, or $0.25 per diluted share, compared to $24 million or $0.52 per diluted share in the previous year. The impact of lower sales and additional tariff costs were the primary drivers in our reduced profitability.

Turning to the balance sheet. Inventories are in excellent shape at $640 million at the end of the quarter increasing 5% from last year's $610 million. We remain in a strong financial position, ending the quarter in a net cash position of $286 million after repurchasing $25 million worth of shares this past quarter, compared to last year's net neutral cash position. Our total availability remains very strong at approximately $830 million. Our financial strength provides us flexibility to invest in our business and other strategic opportunities to drive future growth.

Turning to guidance. We issued updated guidance this morning for fiscal 2026, which reflects a more cautious outlook resulting from both the retail landscape and consumer environment, as well as the impact of tariffs on our top and bottom lines. We now expect fiscal year 2026 net sales of approximately $3.02 billion, a decrease of approximately 5% to the previous year.

Driven by, first, the expiration of our Calvin Klein jeans and sportswear licenses as of December 31, 2024, which contributed approximately $175 million in sales in the previous full year. Second, the cautious stance from retail partners reflected in reduced open to buys in our order book, particularly in the second half of the year as consumer impacts from tariffs become more pronounced. This affected most of our portfolio, especially Calvin Klein and Tommy Hilfiger ahead of the transition.

Third, we are responsibly planning our exit from the expiring Calvin Klein and Tommy Hilfiger licenses, and staying disciplined in our inventory positions based on the increased cost pressures and narrow selling period. Additionally, we are foregoing sales due to the recent 50% tariff rate on India. This decision was made to protect margins. It is important to note, our key owned brands, DKNY, Donna Karan, Karl Lagerfeld and Vilebrequin continued to show healthy growth, and are expected to grow at a mid-single-digit rate this year.

I want to take a moment to discuss our estimated tariff impact. We expect the total incremental cost of tariffs to be approximately $155 million, up from the $135 million original estimate, and this is based on the latest tariff increases implemented for Vietnam, India and Indonesia, among others. Through a combination of vendor participation, strategic sourcing shifts and targeted price increases, we have successfully mitigated a portion of these costs. Our updated outlook for fiscal 2026 reflects an unmitigated impact of tariffs of approximately $75 million, with the majority expected to be incurred in the second half of the year.

As a primarily North American wholesale business, we had limited flexibility to adjust pricing on inventory already sold into retailers for the upcoming seasons. As a result, in the near term, we are absorbing a larger share of these costs to remain competitive and protect market share. Looking ahead, we expect gross margins to normalize and ultimately expand, driven by the exit of lower-margin licenses, from the increased penetration of our higher-margin owned brands and from continued selective price increases.

Non-GAAP net income for fiscal 2026 is expected to be between $113 million and $123 million, or diluted earnings per share between [ $2.55 and $2.75 ]. This compares to non-GAAP net income of $204 million, or diluted earnings per share of $4.42, for fiscal 2025. Adjusted EBITDA for fiscal 2026 is expected to be between $198 million and $208 million, compared to adjusted EBITDA of $325 million in fiscal 2025.

Let me discuss a few points related to our guidance. As to the gross margin rate, we expect the full fiscal year 2026 gross margin rate to be down approximately 300 basis points. We expect third quarter gross margin rate to be down slightly less than the fourth quarter, as the fourth quarter sales will have the highest penetration and impact from tariff inventory.

Regarding SG&A, as we look ahead, we are actively pursuing initiatives to optimize our business model and drive cost efficiencies across our operations. We believe that continued investments in our brands and infrastructure will be key supporting our business transformation and unlocking the full potential of our portfolio. For example, we are aligning our warehouse footprint and capacity to our needs, and are making the appropriate investments in technology and our corporate platform. Further, we will continue to support our brand investments through marketing in line with last year.

We expect interest expense to be approximately $5 million for the full year, benefiting from the $400 million debt repayment. We expect capital expenditures of approximately $40 million, principally driven by the build-out of shop-in-shops [ to our ] new brand launches and implementation of new technology to support our transforming business model. We are estimating a tax rate of approximately 30% for fiscal 2026. We have not anticipated any potential share repurchases in our guidance.

That concludes my comments. 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. I'd also like to thank our entire organization, our many partners, and all our stakeholders for their support.

Operator, we're now ready to take some questions.

[Operator Instructions] Our first question coming from the line of Ashley Owens with KeyBanc Capital Markets.

So just to start on the gross margin. I appreciate the color there. Just anything else we should be mindful of weighing on the balance of the year? How you're approaching promotionality, just as you balance elasticity with some of these price increases, given the mixed consumer signals we're getting?

And then moving into next year, I know it's early, but do you foresee further pressure in the first half of the year? Or should some of these mitigation strategies be fully in motion by then?

Thank you for your question, Ashley. On price increases, we're targeting areas of our business where it's appropriate and acceptable to raise prices. As I said in our script, a lot of what we do is -- no, maybe I didn't say that in our script, is art. We don't sell a dozen eggs. We don't sell tonnage of steel. And art, if it's done appropriately and you target your consumer, you get paid well for art, and you create demand with great art.

We're doing great art. We have demand for our collections. The consumer has accepted some price increases that we've implemented at the tail end of Q2. And currently, the month of of August, we had product that was elevated in price point, and there was no consumer resistance. Back-to-school is very good. The consumer is resilient. We're looking at it closely, the areas of business where we need to be competitive, we're competitive. Where we believe there's elasticity, we'll implement it. We'll implement price increases.

We have a unique situation. Tariffs are not for us, and not solely the cause of margin deflation and top line dilution. You need to remember that we are exiting PVH's assets and when tariffs are implemented, and prices need to be increased to come out alive, you modify your plan. You have retailers that are not certain about acceptance of price increases. They know there's a transition of management and supervision of the brands. And we offered our plan for PVH on the exit.

We have a limited time period to dispose, or sell-through, of our inventory in the PVH assets. And we decided that it was not worth the risk with the pressure of price increase and the lack of support that we were getting on the exit of the brands. So the tariffs influenced the level of inventory we bought. And all said, we're comfortable that as we transition out of the PVH brands and get into the coming year, we believe that it all levels out. We've got some very strong initiatives that are now being shipped into the stores, new licenses, as well as the maturity of Donna Karan and Karl Lagerfeld and DKNY for that matter. And we see growth in every one of our brands.

And as I stated earlier, owned brands provide a better return on margin than licensed brands. So as a percentage of our own brands increases, you'll see margin improvement over the coming year.

Ashley, this is Neal. With respect to the first half of next year. Look, it's a little early for us to give you any kind of specific guidance. Let me give you a little bit of background in terms of what we're looking at.

Certainly, we end this year in January, the beginning of our spring shipping. And then, of course, the first quarter will be the robust part of our spring shipping. The spring season, the latest set of tariffs really happened sort of midstream with respect to our going to market. We've been able to correct some of those prices and incorporate those, as Morris mentioned, not entirely. So we'll have a little bit of pressure. But I think overall, the big thing for us is that if we see the tariffs coming ahead of time before we go to market, we can appropriately price our product and get back to the kinds of margins that we expect to have, and had in the past.

Got it. Yes, that's super helpful. Maybe just one more quickly to follow up. I think, with the mix of owned and licensed, and just talking about PVH, when you last spoke to the portfolio strategy about 6 months ago, I believe it was mentioned that Calvin and Tommy were expected to represent about 25% of total sales at the end of this year. But just given the reduction in open the [ bias ] that you highlighted for some of these brands, is that still how we should be thinking about the full year mix shift?

I guess, better way to word that is the reduction there driving an acceleration in kind of a mix step down from PVH for the balance of the year?

Yes, no dramatic change in terms of percentage. Pretty similar to where we've been before. We've been impacted certainly across all the brands as far as the pullback in our sales as a result of the consumer pressures and the impact of tariffs.

Our next question coming from the line of Mauricio Serna with UBS.

I wanted to ask if you could provide a little bit more detail on the sales update for the year. Maybe could you give us more -- a bit more detail like how much is that attributed to like much lower revenues from the PVH brands, versus your go-forward business? Particularly given the comments that you expect the go-forward brands to be up mid-single digit kind of -- it kind of implies -- it kind of implies a deceleration versus like the double-digit growth rates you've seen like in previous quarters?

Yes. Thanks, Mauricio, for the question. Look, you're right on. We've actually got challenges this year, both -- first and foremost, really from the transition of the businesses. It's not just the businesses that are [indiscernible] really all of the Calvin product is in a transition mode for us, and that does present some selling seasons -- selling problems into the marketplace.

I think when you combine that with the tariff pressures, as Morris was mentioning before, it's nearly a perfect storm. So we've got certainly deceleration in the Calvin and PVH brands, and we've got some deceleration in our own. And you're right, the mid-single digits is what we're expecting this year, down from where we've been a little bit more robust.

We also see a little softness in some of our categories. Footwear has been soft for us. So there is an internal miss on what we projected to do in footwear. There's the confusion of exiting most of our production out of China did not help us. Moving into new factories and getting your trading partners to comply with how you produce, when you produce, and the quality of what you produce is not seamless. So we were affected by transitioning from country to country, as well as softness in the general consumer demand for footwear as we see it.

Got it. Just a quick follow-up on the Q2 results. Maybe could you tell us like how much was the tariff impact that you had in the second quarter? And I guess like -- is it just like mainly because you were taking product with 145% China tariffs? Just trying to understand like how -- if this like will be actually like probably like [indiscernible] positive in Q2 next year just as you lap this headwind?

Yes, Mauricio, if I were to look at our reduction of just over 200 basis points, I would say it was probably half tariffs and half product mix. So relatively speaking, a pretty small tariff impact in the quarter, but certainly, as a percentage, it was a significant part of the falloff from the prior year.

We do not have tariffs at 145%. Rate of China tariffs were at 30%. And we did receive some of that, the tariff product that flowed through in the second quarter, probably slightly more than we would have expected when we did the original forecasts.

To be clear, we were not impacted on the 145% tariff. That was a moment in time. We responded by rerouting product to Europe where we marketed a potential problem. And we held [indiscernible] another batch of product. As tariffs became more realistic and we brought the product in. So if the assumption is the dilution of product, [ our ] profit was 145% tariff, it was not.

Our next question coming from the line of Paul Kearney with Barclays.

I was wondering if you can just help size the amount of product that was coming from India? I'm just trying to gauge the impact from the [ Forgan ] product post tariff from India versus the reduction in order to buy from Calvin and Tommy?

The amount -- thank you for your question, Paul. The amount of product we bring in from India historically has not been very much. It's a low single-digit percentage of our total production. This quarter, the third and fourth quarter, as we moved some product into India, is greater than the low single-digit number. But it is not impactful for the future. It is impactful for the year. We plan on taking some of the product, and again, marketing it in Europe, if we can. And if not, it will be held and dealt with, with our Indian partners.

I'm happy to give you the top line FOB number. It happens to be somewhere near $30 million, which does affect our fourth quarter, [ our ] year-end top line results. Should we have to abandon it. And it's factored in as a [ giveback ].

And just to clarify, the $30 million is the sales impact of the reduction.

Okay. My quick follow-up, and I think you touched on it a little bit, but in the past, you've spoken to some very strong pricing power for the right product. And I'm just curious as you look to mitigate the tariffs into next year.

Do you -- are you starting to see any resistance on price, whether through your own brands, or through what your retail partners are saying, are we starting to push against the limit of what is possible on price?

So we are seeing some resistance, and the resistance is not because the consumer is not willing to pay. It's basically retailers wanting to see comp prices in the field. So for example, the off-price channel is about value. Price value relationships. And for them to be comfortable that they can afford to pay increases, they need to see price increases in the department store level. They've not yet felt comfortable enough to get behind it in full force. They're buying their needs, and my belief is that there's a treasury waiting to be spent when prices are rationalized.

Last question coming from the line of Dana Telsey with Telsey Advisory Group.

As you think about the future, which is the future of your own brands, can you expand on the performance of your own brands for the remainder of this year, or this quarter -- and this third quarter?

And then, Morris, can you talk about the other potential license opportunities? I think Converse gets you into new places, BCBG, with obviously what we have going on now a point in time. But if you think about the go forward, what do you see as the brand opportunities, both for licensing and any changes to your existing expectations?

Thanks for your questions. Our brands are retailing very well. You can tell pretty much every call, we talk about door expansion. You don't get door expansion without performing. So initially, as you launch a new brand, you get a handful of doors to test it. As sales begin to surface the door count increases. And today, every retailer we trade with has seen the merit of carrying Donna Karan. They've seen outsized performance relative to inventory that they've carried and door count.

So we're getting not only greater door count. We're getting better penetration per door. And we ourselves are expanding classifications within those brands, as I stated before. Weekend, which is yet to be shipped, has booked incredibly well, and I believe we'll be in almost 300 doors for spring. That's not been shipped yet. So there's a soft launch coming in the next probably 45 days, and then we get further penetrated as it retails.

And with Karl Lagerfeld, basically the same way. If you -- if you're a store shopper and you do shop department stores, you'll see great penetration of DKNY, Karl Lagerfeld and Donna Karan. They're clearly leaders in the department store sector as far as penetration. You wouldn't know this, but as far as performance as well, there was a call out from Macy's on several brands. I believe there were 4 brands that Tony Spring called out as performing well. And Donna Karan again, I believe this might have been the third time he cited good performance with Donna Karan. We're proud to hear it. We're proud to see it. And we have no distribution outside of the United States.

We have no price distribution. It's a pure brand that has power that we believe we can take advantage of. And we just ship product into [indiscernible] for the first time in Donna Karan. So we're hopeful that it will retail and we'll have another department store group that will support the brand. And our own retail in Karl Lagerfeld has been very good. We're looking at outlet expansion now, we're shopping for more stores as we logically and carefully maybe, maybe, maybe conquered the retail space on our own, which is essential to some of our brands.

We do not have a store for Donna Karan. We're likely to open a couple of flagships. And we're beginning to get significant interest in licensing Donna Karan. As I stated, the first license was jewelry and the jewelry looks great. Parts of it come from Donna's archives. And we're getting great support, great marketing, great talent that underpins it all in G-III.

So I talk about Donna Karan, the Donna Karan today is -- let's say, if we talk about the triplet, Donna Karan, DKNY and Karl Lagerfeld. Donna Karan is the smallest of the group with great potential. It's quite large for a launch. It's far better than we anticipated scale-wise, but there's a long way to go. We believe it can be a $1 billion brand in the coming years. So as we post that, margins will improve. Top line will improve and diversity will also improve, will be better balanced for pricing elasticity.

I'm sorry to be so wordy. But as you can tell, and I'm very proud of what this organization has accomplished in difficult times, not only tariffs, PVH, the consumer. If there was a perfect windstorm, we were hit with it and we're coming out in rock-solid from a financial point of view, we're in great shape.

From a balanced portfolio, I haven't even touched on your question of BCBG and Converse. Those are globally recognized brands, who doesn't know Converse, and supported by Nike. It's owned by Nike and we're challenged to take on pretty much globally. There's North America, there is Western Europe. And most of our licensees do not include anything out of North America. This one does. And the abundance orders that are coming in. We've shipped very little. We're about to get our product out there, but we have great global distribution.

We've been giving accolades for how great the product looks. I don't want to speak for the Converse organization, their team. But as they come through, they're much more than satisfied and maybe surprised as to how fast we brought it to market, utilizing identified factories that are unique for Nike production. They need to be approved. We got that accomplished. We got product produced, and ready to be delivered and product looks great.

So I think we have -- we have a big brand in the horizon. And BCBG covers another piece of our business, or not our business, newly entered into the business, which is contemporary. There's an effort to balance assortments in department stores with more contemporary brand, and BCBG covers that. We shipped a fair amount of product just recently and the sell-throughs this past [indiscernible].

So we see growth in two emerging brands that I think will hit the radar screen and maybe we'll talk that out. How important again, our license business is as we exit PVH.

Thank you, Dana, as always. And thank you all for your participation. And wait and see. We've got some great stuff on the horizon. I'm eager to share it with you in the coming quarters. Thank you all.

This concludes today's conference call. Thank you for your participation, and you may now disconnect.

Good day, and welcome to the G-III Apparel Group First Quarter Fiscal 2026 Earnings Call. [Operator Instructions] As a reminder, this call may be recorded.

I would now like to turn the call over to Neal Nackman, company Chief Financial Officer. Please go ahead.

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. 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.

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 business. 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 different brand building and operational excellence.

As we've entered the second quarter, we saw a 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 business as we execute in the second quarter and are actively taking advantage of the market disruption to further capture market share.

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're 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 efficiencies.

Starting with sourcing and vendor negotiations. We're 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've 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 open. Today, our well-diversified supply chain stands over 40 countries across Southeast Asia, the Middle East, Europe and the Americas, supported by a team of over 400 professionals on the ground. As a result, China will represent less than 20% of our production by year-end down from nearly 90% several years ago.

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 license initiative are new to the market, this gives us the opportunity to set higher initial price points. We'll continue to monitor consumer response closely to protect both market share and profitability.

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 buys. In terms of our cost savings initiatives, as we enter the Calvin Klein and Tommy Hilfiger businesses, we're realigning our organization to unlock further efficiencies in fiscal [ 2007 ] and beyond. This includes streamlining and spring aligning our warehouse network which will result in the exit of 4 warehouses and related staff reduction of over 150 people. Additionally, we're integrating and optimizing warehousing for our international businesses and reducing inbound freight costs through further consolidation of our brands. We're also investing in systems to increase supply chain transparency, upgrading digital tools to better support our omnichannel strategy and leveraging technology to drive more operational efficiencies.

On the real estate front, we successfully renegotiated favorable lease terms for our corporate offices, securing appropriate actions for kickouts on approximately 1/3 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.

We had planned to relaunch our Sonia Rykiel 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'll continue to invest in our key owned brands and other growth initiatives to support long-term expansion.

Now let us review our first quarter fiscal 2026 financial results. Non-GAAP earnings per diluted share was $0.19 compared to $0.12 last year, well above the top end of our guidance range. Net sales for the quarter were $584 million, in line with our guidance. We remain in a strong financial position, ending the quarter with cash and availability of approximately $740 million.

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 driver. These brands generate higher operating margins and provide an accretive licensing income stream. 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 digits.

International remains one of our largest untapped opportunities for our brands. We're 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 of receipts.

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'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.

The brand saw a substantial growth in dresses, which nearly doubled this quarter as well as suit separates, which also saw significant growth. Saks, Nordstrom as well as other premium retailers are expanding distribution into their stores after successful digital-only launch last year. At Nordstrom, we're quickly scaling and expect to be in 50 doors by fall. 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 1,700 domestic points of sale, up from approximately 500 last spring. The brand's website, donnakaran.com also saw a 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. Inter Parfums, 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-throughs.

As part of this launch, we produced a capsule apparel collection made of 100% Cashmere available exclusively on the brand's digital side. 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.

A great indicator of the brand's strong recognition is its significant celebrity interest and a VIP red carpet styling moment, which includes Margot Robbie, Giant Altroz, Jenna Ortega and Doce, among others.

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. Jean sales more than doubled this quarter, and we saw additional outperformance in athleisure, handbags, swim and outerwear. DKNY has established a growing licensing income stream with best-in-class licensing partners.

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, net wear and shoes. We've also established a successful license fragrance business with one of the brand's iconic fragrance franchises Be Delicious, nominated as a finalist for the Fragrance Foundation 2025 Hall of Fame award.

On the marketing front, Spring 2025 campaign featuring Lila Moss, rolled out across key global markets, including the U.S. U.K., Italy, Germany, Spain, Portugal, South Korea and the Middle East. Our digital and social influencer program 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.

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.

Karl Lagerfeld delivered another quarter of double-digit growth. In North America, the brand saw a 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 license categories such as dress shirts and knitwear and that complements our men's outerwear and suit offerings.

Internationally, the brand continues to expand with mid-single-digit sales increases driven by broad-based growth across channel and product 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 product and is soliciting strong press and consumer engagement with solid growth in the quarter. We saw almost 40% growth in digital across our partner marketplaces and karl.com. 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.

The brand is experiencing solid sell-through for spring delivering strong comparable sales growth across full price and outlet stores. 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 the high-impact pileup in Seoul, Korea, a city celebrated for its bold expressive street style, making it an ideal market to spar consumer engagement.

This 2-week activation offered an immersive journey into the world of Karl, bringing the brand to life in a vibrant and locally resonant setting. The results exceeded our expectations and sales at the pop up more than triple projections and the event generated significant media buzz. Key opinion leaders and influencers 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. In addition to growing our own brands, 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 G-III and consider us a partner of choice for exactly the reasons I just mentioned. 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.

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 Echelon. Our newly launched Nautica jeans Houston and Champion outerwear at a good spring season and are scaling in size. Just a reminder, regarding Nautica, 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 categories.

In the first year of launching Nautica jeans, we more than offset the sales of the Tommy Jeans business. We're on track to launch Converse and BCBG this fall. 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 back 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 service.

As for our PVH licenses, for this year, we expect our 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.

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.

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. Our strong balance sheet also affords us the ability to pursue future licenses and acquisition opportunity that align with our long-term growth strategy.

Turning to our next strategic priority of enhancing our omnichannel capabilities, which includes continuing to improve our North American retail segment, store operations 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 remerchandising product on our floors to present a better brand 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 results. On the digital front, we saw a 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 touch points and driving market share gains.

We continue to invest in supporting this ever important channel and ensuring the consumer can access our brands wherever they shop. 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 tariffs.

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're investing in our highest conviction growth priorities, including accelerating global growth of our portfolio of brands, deepening consumer engagement, creating iconic products and enhancing our brand portfolio through both licensing and potential acquisitions.

I want to reiterate how excited I am by our globally recognized brands and the strength of that platform. We're well positioned to drive sustainable, profitable growth and deliver long-term value for our

shareholders. 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.

Our gross margin percentage was 42.2% in the first quarter of fiscal 2026 compared to 42.5% in the previous year's first quarter. The 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 brands.

The gross margin percentage in our retail operations segment was 53.5% compared to 47% in the prior year's period. The gross margin in the current year saw 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 AURs.

Non-GAAP SG&A expenses were $231 million compared to $237 million in the previous year's first quarter. 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 relaunch of the Donna Karan brand and DKNY marketing campaigns. In addition, we experienced lower advertising expenses resulting from a decreased net sales of licensed product 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.

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.

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 product 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, 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. 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-GAAP net income per diluted share for the second quarter of fiscal 2026 to be between $1 million and $6 million or between $0.02 and $0.12 per diluted share. This compares to non-GAAP 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.

That concludes my comments. 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. I'd also like to thank our entire organization, our many partners and all our stakeholders for their support.

Operator, we're now ready to take some questions. .

Our first question comes from Ashley Owens with KeyBanc Capital Markets.

Great. So maybe just starting off, you talked about taking price increases as part of the plan and discussing some pricing power in AURs and some of your own brands. With these being newer and still more limited in 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 dresses, coats, et cetera, do you see the most opportunity to take price?

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 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.

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 if there is, it relates to designer and Donna Karan and repeat 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 athleisure, they say, "Oh my god, what value this really is. And with that, we've taken a different approach. We've taken the iconic and dresses and sportswear and pretty much the entire collection that Donna had created and adjusted the fabrics, but kept the trends actual and we're getting amazing attention for it and great sell-through. So not very difficult to raise our price points.

With Karl Lagerfeld similar form. Karl's got a unique identity, European without distribution, very little distribution in the off-price channel. So the comparatives and 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 product and how we keep quality and integrity of the brand in place. So those are advantages. The launch of Converse is yet another one. There's virtually no apparel or adult apparel in the pipeline or in the past for Converse. So our pricing can be adjusted and hopefully, that gets accepted.

And getting it past our retailers or our customers is an easier process because there's no real reference point. The consumer is really what 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, very much the same and our negotiating ability with the factories is as strong as anybody in the industry, my bet is we're much stronger -- it's always been a focus of this company where -- we're keyed in on developing factories, partnering with them regardless of what country it is. We have a reputation for not abandoning a vendor that goes a long way in this type of environment.

So I think we have an advantage, and I do not see it's all open. We're not certain where tariffs level off. But if they remain in this zone, I believe we're fine. I hope that answers your question, Ashley.

Yes. No, super helpful. Maybe just one really quickly here on the guide with the [indiscernible] the postponed of Sonia, anything there that was factored into the guide for that? And then additionally to with just regards to the order book, what you are doing for demand planning is looking at the second half? Any pulling back on supply with potential for less consumer demand if it does slow down?

So as it relates to Sonia Rykiel, 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, a 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're always working short on margin to get the product produced in place, then our view was it was not going to be a very big business, it was money and we would position the brand for the future.

As tariffs became out of hand and the process became complicated, production kind of lost its taste for doing us a favor and produce small units. So we decided the best thing to do is pack up and come back another day. And we've 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. 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 to launch a brand and lose money doing it. So it was a decision with my sounding board at G-III, and we decided that we do.

Ashley, with respect to the order book and your question on supply challenges, the -- look, 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 launched in the fall versus the spring period of time. I would say that the certainly, ordering demand is slightly slower this year than 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. 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 buy in accordance with things that we'll be comfortable with should demand get soft on us. So it's something that we've been managing through -- throughout our entire careers here and something that we do well.

Our next question comes from Mauricio Serna with UBS.

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 Q2 and Q3? And then just on tariffs, like any sense of like how much you expect to mitigate out of the $135 million. And I guess, looking into like should we assume a similar unmitigated impact on the first half of next year? Or maybe there's like some acceleration on initiatives or just seasonality implies like less impact.

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. 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. So that's something that we probably feel that if we will look at the downdraft that we've got in the second quarter, it probably represents about half of the decrease, something in the magnitude, I'd say, $30 million of a falloff 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.

So part of it is really due also to bankruptcy in Canada for Hudson's Bay. We anticipated a fair amount of business for Q2 for Hudson's Bay. We we felt that they would be in a Chapter 11 position. We factored in for their business, we had orders on hand. And at the end of the day, and they went into liquidation mode. So that was a fair amount of it. And part of it, as I described, the shutdown of Sonia Rykiel affected us to some degree as well.

And Mauricio, with respect to the tariff question, we indicated in our prepared remarks, we're following several avenues to mitigate the increased tariff costs. So by way of additional color, let me give you some insight a little bit into the process. As a wholesaler, our product lines for our fall and holiday season will 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 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. 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.

Mauricio, you have to realize that we have pricing power within our brands, which I tried to describe earlier. 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 the -- as we raise our prices, our competition has to raise their prices. So a good chance that the scale of our business grows as we are, in many cases, the opening price point for our department stores. So they would trade down and come to us and give up a resource that couldn't manage pricing the way we can.

And finally just to be clear on this, the spring and into next year, again, when we see the -- our cost impact upfront, we're able to to engineer that into our pricing and work back to the margins that we need to run the business.

Got it. And just a quick follow-up. Do you maintain the revenue guide facing like this situation with Sonia Rykiel postponing the launch. So is it fair to assume that you -- 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 guide despite this headwind? Or what is -- what is it allowing you to maintain the sales guide despite not postponing this launch?

No, that's right. We see other strength in the rest of the portfolio.

And our last question comes from Paul Kearney with Barclays.

So just on the on the inventory. Can you maybe speak to how you're anticipating ending 2Q inventory levels just given you said that you were kind of shut out 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 have a follow-up.

Yes. Look, inventory has been, we've been chasing. 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.

Paul, this is not a normal period of time. There's still uncertainty as to where tariffs lined up, and there's 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 believe it occurs, but we want to be out of the way if there's another storm. So you can -- I'm sorry. No, go ahead, no. 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. I'd say if we wind up and we tell you 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 inventory.

Okay. And 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?

We're not feeling very much pressure on promotions. Our products, as I described, the deliver quality product, you deliver it on time, you're positioned well. You manage, you care and manage your customers, in many cases, you win. And this isn't only for our brands. This includes our exiting brands, Tommy and Calvin, our sales are very good. The -- 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, our -- I would tell you that our inventory levels right now are a little bit too low for the demand that -- for the product that we're creating and selling through.

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.