Good day, and thank you for standing by. Welcome to the G-III Apparel Group Fourth Quarter and Full Fiscal Year 2025 Earnings Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there'll be a question-and-answer session. [Operator Instructions] Please be advised today's conference is being recorded. I would now like to hand the conference over to your speaker today, Neal Nackman, Company's CFO. 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 guarantees 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. Good morning. As noted in our press release, our outstanding fourth-quarter results outperformed expectations. For the year, we brought to market compelling products driving remarkable top-line growth of our own and new launches -- our own brands and our new launches, which more than offset anticipated net sales declines of $188 million for the Calvin Klein and Tommy Hilfiger businesses and $40 million for the Guess brand exit. Our world-class teams have consistently executed and delivered bottom-line growth and record non-GAAP earnings per share of $4.42 in fiscal 2025, an increase of 9% over last year, exceeding our forecast. These results are in light of what was and continues to be a very challenging operating environment. I want to recognize this achievement and thank our global teams for their efforts. Touching on highlights from the year, first, we powered global growth with annual net sales increasing 2.7% to $3.18 billion, driven by over 20% growth of our key owned brands, DKNY, Karl Lagerfeld, Donna Karan and Vilebrequin, while expanding gross margins as well. Second, our Calvin Klein and Tommy Hilfiger businesses now collectively represent approximately 34% of our total sales, down from over 50% two years ago, and we expect a further decline to approximately 25% by the end of fiscal 2026. Third, we brought to market four new brands, which contributed sizably to our top-line growth. Our Donna Karan relaunch was extremely successful, outpacing our internal expectations and delivering strong profitability with high AURs and sell-throughs. Our launches of Nautica, Halston, and Champion outerwear also performed well for their first year and together, these four launches represent a significant growth opportunity. Fourth, our retail segment turnaround in North America is working as we cut our losses in half. Fifth,…

Thank you, Morris. Net sales for the fourth quarter ended January 31, 2025, were $840 million, up 10% compared to $765 million in the same period last year. Net sales of our Wholesale segment were $799 million compared to $729 million in the previous year. We had good sales increases in our owned brands and our go-forward licensed portfolio. Net sales of our Retail segment were $56 million for the fourth quarter compared to net sales of $51 million in the previous year's fourth quarter. Our gross margin percentage was 39.5% in the fourth quarter of fiscal 2025 compared to 36.9% in the previous period. The Wholesale segment's gross margin percentage was 38.1% compared to 35.6% in the previous year's quarter. The gross margin percentage in the current year's period was positively impacted by the higher penetration and performance of our owned brands compared to last year's fourth quarter. Additionally, sales of our licensed portfolio saw significant improvement in gross margin rate, primarily driven by a more favorable outerwear performance. The gross margin percentage in our Retail operations segment was 48.3% compared to 44.2%, a significant improvement driven by our merchandising and execution initiatives as part of our Retail segment turnaround strategy. Non-GAAP SG&A expenses were $244 million compared to $219 million in the previous year's quarter. This year's increases are partially correlated to the 10% sales increase in the quarter as well as the planned investments in marketing, technology and talent that we have discussed throughout the year. In addition, we recorded a $6 million increase to our bad debt reserve in the quarter. Non-GAAP net income for the fourth quarter was $58 million or $1.27 per diluted share compared to $36 million or $0.76 per diluted share in the previous year's quarter, is driven by higher sales and…

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 comes from Ashley Owens with KeyBanc Capital Markets. Your line is open.

Hi, good morning and thanks for taking our questions. So first off, maybe just help us with some of the context on the headwinds. I know you mentioned in your prepared remarks, there's a greater roll off of some of the PVH licenses this year. So how much did each of these impact the full-year guide? And then additionally, I know you made comments on tariffs, but any impact from that on non-outerwear categories? And then any additional color you could provide us thus far on exit rates into February and how trends have fared so far into March? Thanks.

Sure, Ashley. With respect to the prior year, the fall of the Calvin Klein businesses were approximately $200 million, which we significantly offset and, in fact, more than offset last year. As I mentioned in my prepared remarks, with respect to tariffs, the way we summarize it, just to be able to give you a little more refinement, if you look at our current inventory position, we certainly have a good inventory position going into the first quarter. So I think tariffs with respect to the first quarter, we feel pretty comfortable with having very limited exposure there. Tariffs with respect to the second half of the year, obviously, we have more time to prepare to have our negotiations with both our customers and our vendors. Probably the single biggest exposure we have is in the second quarter. And as you know, these tariffs came about very quickly. So those are the ones that we'll have to scurry the most to try to figure out answers to. We believe we've got that all rolled into our forecasting. Specifically with respect to outerwear, as I mentioned, it is the highest-priced item that we sell and therefore, we feel like there's good elasticity with respect to being able to increase prices there. But we'll look across the whole portfolio for places that we can have increases.

Ashley, as it relates to trends in business in February and early March, clearly, we have full visibility on February. February, it was tough for the retailer. It was very cold and I can remember last quarter talking about how warm it was and how it impacted our coat business. I guess February, I'd have to say it was very cold and it impacted our Spring business. In spite of that, our guidance is out there for first quarter, which has that factored in and our business is good. And early March is good. Retail is fine. And we're looking forward to a good retail year. Unfortunately, there are many issues that don't relate to a stable retail environment that we're dealing with and very difficult to anticipate. But in spite of that, we've given you the best guidance we could provide for year end, which indicates a pretty good year and going forward.

Okay, got it. And then quickly as well, I know you mentioned AI in the prepared remarks as being an area of investment you'll be focusing on to streamline operations this year. With AI, it seems like it's one of those items that is changing pretty quickly. So would be curious in the past 90 days or so, if you've seen any new opportunities or just any additional thoughts about some of the new initiatives that you'll be working on within AI?

Well, we're evaluating it all. It's coming at us so fast. Changes are being looked at. And we're using AI for areas of our business, which believe it or not, also include design in sectors of our business. We're using AI in the entry point of Converse, which is -- which is great. We have a blank canvas that we can utilize the best there is -- there's no systems in place for Converse and it will be as futuristic as the market has to offer and we anticipate a good deal of help through utilization of AI, but we're evaluating all the opportunities and we'll implement the components that are appropriate for our business.

Okay, great. I'll pass it along. Thank you.

Thank you, Ashley.

One moment for our next question. Our next question comes from Mauricio Serna with UBS. Your line is open.

Great. Good morning and thanks for taking my questions. Just wanted to make sure on the Q4 outperformance, just want to make sure there wasn't like any type of a, like shift in wholesale shipments or anything like that coming out of Q1 because like just looking at the initial guidance, I thought maybe that was the reason, but it seems like it was more like outperformance than what you were expecting. So I wanted to check on -- just double-check on that. And then on the decline that you saw on PVH revenues in fiscal year '25, I think it was like a little bit less than anticipated. So just was wondering what drove that like higher-than-anticipated, I guess, sales from that -- from those brands? And then lastly, could you provide some details around like what is like the current size of the Donna Karan business? Thank you.

So as it relates to Q4, nothing unique, as a matter of fact, I guess, maybe there is a unique component. Hudson Bay affected us -- the bankruptcy of Hudson Bay affected us negatively. We've adjusted for that. So had Hudson Bay not filed for the equivalent of Chapter 11, we would have shown you better numbers. So if anything, the -- our numbers were anticipated at better than we gave you because of the quick adjustment of Hudson's Bay. And that said, we've adjusted the go-forward fiscal 2026 numbers as it relates to doing far less business with Hudson Bay should they not go into liquidation and remain in business. So the adjustment was recently made, which maybe is a result we anticipated 1% down for the year.

In terms of the PVH fall off that, Mauricio that was pretty much significantly what we had anticipated. We knew we'd have significant fall off this year and we did and that's again without any licenses really falling off this year. Next year again, we do have Calvin Klein jeans and sportswear that fall off. And in addition to that, we're expecting some fall off in the rest of the portfolio where we do continue to have licenses that go beyond the end of '24.

It's not only the fall-off go-forward, it's the year that you're in, you project your business out conservatively, so you can manage your inventory in -- in the exit of a licensed category. So, in spite of all that, I think it's remarkable that we're guiding the way we are with adjusting how we buy, what we buy and when we buy it for. So I think we're -- I think we're in a great position.

Got it. And the question about Donna Karan?

We don't disclose on the segmented pieces of our business. I'll tell you, it's the best launch that we've had and we anticipate growth that approaches 40% go-forward. And the margins on Donna Karan are the best in the company with not touching the global side of the business. There's no distribution outside of North America and it's concise, tailored, better distribution than our better -- than our other brands.

Yeah, understood. Nice to hear that. Just last one. Maybe could you talk a little bit more about the gross margin in Q4, like G-III nice outperformance. I know you mentioned a little bit about the details there in the prepared remarks, but just more detail, if you could provide a little bit more insight, that would be great. Thank you.

Yeah. So we've been seeing strong -- stronger margins, obviously from the businesses that we own. We don't pay a royalty on those businesses. That's a component. Overall, a lot of the portfolio performed stronger than the prior year. While I wouldn't characterize it as a strong coat year, it was certainly stronger than the coat year in the prior year and the coat margins were strong. If you look at the prior year, Mauricio, you'd also see that was probably our lowest gross margin. So I think all of those components lead towards what was a very strong gross margin result and somewhat consistent with what we had forecasted from the beginning of the year, which was a slight improvement to gross margin from the previous year.

Understood. Thank you so much for the time and congratulations on the results.

Thank you, Mauricio.

One moment for our next question. Our last question comes from Dana Telsey with Telsey Advisory Group. Your line is open.

Hi, good morning, everyone, and congratulations on the very nice fourth quarter. As you think about the growing of your owned brands and you talked in your initial remarks, Morris, about the extended categories for Donna Karan or DKNY, how do you see that developing and coming into the picture? What are you seeing overall in terms of wholesale order trends, especially with your largest customer? And when you think about your owned DTC, particularly in North America, how do you see that developing? Thank you.

Thanks for your questions, Dana. The Donna Karan brand is, and as I've stated before and I guess our retailers will attest to it, it was an amazing launch. We created a fabulous product, a lot of it stemming from the archives of Donna herself. The quality of what we delivered was excellent. That doesn't happen often in a launch. Maybe we were lucky, maybe we were good, maybe everybody cared a little bit more about this one. But at the end of the day, it worked seamlessly and the opportunities are huge. Clearly, in your first year out, you're in -- forget about added classifications that will tack on to the brand, but your penetration is not what an existing brand, Donna Karan, Karl Lagerfeld, those brands are around for -- with us for five, six, seven, eight years. And we've matured with it and we've built scale with it. With Donna Karan, the level of inventory that we carried to support it was not very high because it was a launch. We were cautious on the buy. The retailers were a little bit cautious on the initial purchases. But as the product hit, it just blew out of all our stores -- all our customer stores and it was a chase to maximize the business through the course of the year and we -- and I won't give you the total number, but it was the single biggest launch that we've had of anything that we've ever tackled. So -- and on top of it, we're forecasting internally close to a 40% increase in the size of the business go forward. It wasn't the fluke thing. We've got commitments from our retailers. Our digital business had a hiccup when we first launched. We've solved it. So, our direct-to-consumer digital is planned at being up more than 60% this year come to our launch year. So all good things, there is an appetite in Europe and we are questioning whether we're ready for Europe with the appropriate marketing. We are -- we have an aggressive budget on marketing as it -- we see that it takes quite a bit to create the customer awareness and win that customer. So all things are in really good shape. Getting away from Donna for the moment, we will launch a more casual element of Donna going forward and we will open some stores in North America and going forward, we're just not ready for the store launch and we will touch on the more casual piece this year. For fourth quarter, it will be in the stores. And so that's extending the brand's presence. And we've -- we have a very, very proud group that is limiting the distribution to the appropriate retail partners and it's -- it's great. We've succeeded. The -- I think the jury came in and applauded the effort. Th…

With respect to order trends, Dana, they're pretty similar to what we experienced last year. This time of year, we have about 50% of our order book done. We've shown for fall and certainly have the spring order book. So very similar to where we were last year and in support of really what our initial forecast look like.

Thank you. Okay, DTC?

Yeah. We're focused on the execution in DTC. We're adjusting our quick response needs through our warehouses as I stated, we're closing warehouses this year and making the ones that are responsible for direct-to-consumer, more accountable for immediate service to that consumer who pretty much demands it. And again, with Donna Karan, as I said, we had a glitch. We fixed it. We fixed the marketing side of it and we're seeing an amazing difference there. Our business February, March has more than doubled what we had a year ago. And we've redefined the leadership in our digital side of the business as well. So, we've done a lot of work. Our team is ready to go and ready to post numbers that will make a difference for our Company.

Thank you.

Thank you, Dana. Thank you for your questions, and thank you for your support. With that, I appreciate everybody's interest in joining us today, and I hope you enjoy your spring season. Thank you.

Ladies and gentlemen, this does conclude today's presentation. You may now disconnect and have a wonderful day.