Good day and thank you for standing by. Welcome to the G-III Apparel Group, Ltd. fourth quarter and full year fiscal 2026 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you will need to press star one one on your telephone. You will then hear an automated message advising that your hand is raised. To withdraw your question, please press star one one again. 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, Neil, and thank you everyone for joining us. Fiscal 2026 was a pivotal year for G-III Apparel Group, Ltd. I'm proud of the results our teams 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, unlocked new growth opportunities and strengthened the foundation of G-III Apparel Group, Ltd. 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-through and increasing global relevance, a 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…

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 were $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 were $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 toward more full price sales. The wholesale segment's gross margin percentage was 34.8% 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…

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 wanna thank our partners and shareholders for their continued support as we continue to transform G-III Apparel Group, Ltd. and build value for the long term. Operator, we're now ready to take some questions.

Thank you. As a reminder to ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. One moment for our first question. Our first question will come from the line of Robert Drbul with BTIG, LLC. Your line is open. Please go ahead.

Hi. Good morning.

Morning, Bob.

A couple questions, Morris. On the first one, in terms of, I guess, your visibility on your own brands for this year, in terms of the, you know, the way that retailers are, you know, ordering your wholesale partners, you know, sort of into the fall, I guess. They 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, you know, and really from like the own brand perspective? I think that would follow in terms of the marketing investments that you're making, you know, especially, you know, what's happening in that first quarter. Thanks.

Thanks, Bob. Our own brands, as you heard in our presentation and, you know, possibly as you read, we did well last year. Last year, our businesses and 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. We're really comfortable with our own brands. We're garnering additional space as we stated. One brand, you know, we're anticipating at least 400 more points of sale, and the other brand is 300. We're, you know, excited. Our order book anticipates it. 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, you know, more full price business. You're willing to take less risk on inventory levels in protecting some of your premier brands. You'll find in the future that our inventory levels will be more controlled with the conscious effort in bringing down our level of off-price selling. That said, you know, growth is coming from outside of the United States for the first time. We're not, you know, 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. That brand will show its face throughout the world in the coming months. The marketing spend, as you touched, will be fairly aggressive to support, you know, our initiative of growing our own brands. We've done well with marketing. We've gotten awards from media publications for our efforts in Donna Karan and DKNY and Karl Lagerfeld as well, quite honestly. Our team challenged really for the first time, you know, 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. It's worked. It's worked incredibly well. They've achieved notoriety. They've achieved success for our company. Thank you to our marketing team.

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

We took on Converse. We had an old history with Nike. A little-known fact is that G-III had a studio that developed the Michael Jordan brand as it was coming to market. We had a partnership with Nike in the early 1990s, maybe it was 1995, and I don't recall the date. We continued to do a little bit of private label with them and through a partnership with the Haddads who do kids Converse. They have a great relationship with Nike. We're building the brand globally. Converse gave us the right to expand, you know, beyond North America, and you know, we read the same thing that you do. A little bit of uncertainty and softness maybe in the brand that really doesn't apply to us for the moment. Their strategy for the brand has not really come out yet. When I say theirs, I would go to Nike and ask what the strategy for the brand is because we're again sort of the servant to the licensor. Where Nike wants to take the brand is where we need to follow. You know, there are new accounts that we're opening every day. There is an appetite for the brand. It's an amazing brand, and hopefully you know Nike supports the growth of the brand. We're doing our part, you know. As we've shown, when we have control, you know, we're incredible. Where we have less control, we don't rule. We're guided by the licensor. It's hard to tell you where the brand goes. I could tell you where we could take it. If Nike supports it, you know, I think we have an incredible business.

Great. Thank you very much, Morris.

Thank you.

Thank you. Thanks for your question, Bob.

Thank you. One moment for our next question. Our next question comes from the line of Ashley Owens with KBCM. Your line is open. Please go ahead.

Hi, guys. Thanks for taking my question. 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?

Victoria Apostolico, I'm not sure we prioritize. You know, we are looking for an amazing acquisition, and we are at the same time looking for amazing licenses. You know, 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. 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 of the moment. The appropriate acquisition had not come up. You know, we've tucked into our competencies brands and businesses that we can manage easily.

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

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 Vilebrequin alongside of that. When you look at DKNY, it's more consumer driven, and we're signing 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. The highlights for two of the brands are hospitality and DKNY. We're not seeing interest in DKNY as a hospitality or food and beverage provider, but very strong on the consumer side.

Okay, great. Thank you.

Thank you.

Thank you. One moment for our next question. Our next question will come from the line of Mauricio Serna with UBS. Your line is open. Please go ahead.

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

You know, your first question, the size of Donna Karan. We don't disclose, you know, the size of the business. 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. 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 designer. It's not intended to be boutique. It's intended to, you know, fill the racks of department stores that we have our greatest competency in. We're gonna scale it. An added feature that we did not have with Calvin Klein is we have global rights to our own brands. There's an opportunity throughout the world to expand this brand. We're in the early stage. You're gonna see, you know, great percentage increases. We're at a point where the percentages do make a difference in the future. We're not talking about a $10 million initiative that grew 50%.

Yeah. With respect to the second part of your question, we are seeing and anticipating high single digit growth in the key owned brands. When you look at the in, the total go-forward portfolio, we're also seeing good strong growth. That go-forward portfolio is gonna include the key owned brands. It's gonna include a few other owned brands that we have and then of course the licensed portfolio. We see in total high single digit growth from all of those pieces.

Great. Thanks, Neal. Thanks, Morris. 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 are gonna be up around 3%. Just wanna make sure that the math around that is correct. You know, if that's the case, if it's gonna be up around maybe 2%-3%, what are the drivers behind that SG&A dollar growth? Thank you.

Yeah, Mauricio, 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 gonna 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. It's really those three components that'll continue for us to have investment spend. Of course, you know, when you have such a large fall off the top line, it's hard to leverage that. 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 2027. We expect that will roll in in fiscal 2028.

Understood. Thank you so much.

Thank you. 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.