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The call conveyed substantial positive operational momentum: meaningful margin expansion (adjusted +350 bps), stronger DTC and owned-brand performance (Donna Karan ~+40%, DTC near +40%), improved cash and liquidity, and an upgraded profitability outlook (non-GAAP EPS and EBITDA raised). Offsetting these positives are persistent top-line pressure (Q1 sales down 8% and FY sales guidance down ~8%) driven by the planned loss of large license revenues, a Q1 non-GAAP net loss, higher SG&A as investments scale, regional softness in Europe, and the near-term dilutive nature and funding needs of the Marc Jacobs acquisition. On balance, the positives (margin recovery, brand/DTC momentum, liquidity, and raised profit guidance) outweigh the lowlights, though key risks remain around revenue recovery and integration of the acquisition.
The company reiterated full-year net sales guidance of approximately $2.71 billion (down ~8% year-over-year, reflecting about $470 million of lost Calvin Klein/Tommy Hilfiger sales) while expecting the go‑forward portfolio to grow in the high single digits; it raised full‑year non‑GAAP net income to $95–$99 million (or $2.15–$2.25 per diluted share, up from $2.00–$2.10) and raised adjusted EBITDA to $178–$182 million (from $158–$162 million). For Q2 the company expects net sales of roughly $570 million (vs. $613 million prior year) and non‑GAAP net income of $7–$11 million ($0.15–$0.25 per share, vs. $11 million/$0.25 prior year), and it now models ~400 basis points of gross margin expansion for the year (Q2 ~450 bps); Q1 adjusted gross margin was 45.7% (up 350 bps) and GAAP gross margin was 64.9% reflecting a $140 million IEEPA tariff receivable and about $120 million COGS benefit (including $103 million of prior‑year tariffs and a ~$20 million inventory carrying value reduction). The company finished Q1 with $394 million of cash, over $800 million of available liquidity, inventories down 8%, expects capex of ~$40 million, net interest income of ~ $2 million, a non‑GAAP tax rate of ~33.5%, and reiterated $25 million of identified run‑rate cost savings for fiscal 2028; guidance excludes the pending ~ $500 million Marc Jacobs transaction (to be funded with cash and revolver), which the company says will be dilutive in year one but accretive thereafter with a long‑term ~$1 billion revenue opportunity.
Adjusted (non-GAAP) gross margin of 45.7% in Q1, up 350 basis points YoY versus 42.2%; GAAP gross margin was 64.9% (inflated by tariff recovery). Company recorded a $140M IEEPA tariff receivable and reduced COGS by ~ $120M (of which $103M related to prior-year tariffs).
Q1 net sales of $536 million came in ahead of guidance (~$530M) though down 8% YoY from $584M. Management reiterated full-year net sales guidance of approximately $2.71 billion (also down ~8% YoY).
Company increased fiscal 2027 non-GAAP net income guidance to $95M–$99M (non-GAAP EPS $2.15–$2.25, up from $2.00–$2.10) and raised adjusted EBITDA guidance to $178M–$182M (from $158M–$162M).
Ended Q1 with $394M in cash (up from $258M a year ago) and over $800M in available liquidity; inventories down 8% YoY, which supports working capital health and margin improvement.
DTC sales across the portfolio increased close to 40% YoY. Donna Karan sales grew ~40% in Q1; donnakaran.com up nearly 60%; DKNY.com up over 40% and North American DTC stores delivered double-digit comps. Handbags and accessories were standouts.
Retail segment net sales increased to $41M in Q1 from $36M a year ago; comparable store sales improved for Karl Lagerfeld Paris, Donna Karan and DKNY.
Announced acquisition structure (~$500M investment) to own 100% of the operating company and a 50/50 JV with WHP Global for the Marc Jacobs IP. Management expects the deal to be dilutive in year one but accretive thereafter and sees multi-year potential to reach ~$1B in annual revenues for G-III from the brand.
Recorded an approximate $20M reduction in carrying value of inventory related to previously capitalized tariffs; company expects the inventory/tariff benefits to favorably impact COGS and gross margin over the balance of fiscal 2027.
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 contin...