G-III Raises FY2027 Earnings Guidance as Q2 Gross Margin Jumps 440 Basis Points

G-III Apparel Group raised its fiscal 2027 earnings guidance after a second quarter in which gross margin expanded by 440 basis points, offsetting much of the pressure from a 10% decline in sales. The New York-based apparel company reported net sales of $554.1 million for the quarter ended July 31, down from $613.3 million a year earlier, while gross margin increased to 45.2% from 40.8%.

The improvement was driven by price increases and a continuing shift toward higher-margin owned brands, according to management. G-III lifted its full-year GAAP net income forecast to $181 million to $185 million, equivalent to diluted earnings per share of $4.10 to $4.20, from the $171 million to $175 million and $3.85 to $3.95 ranges it issued after the first quarter.

Non-GAAP earnings guidance also moved higher, although the update was not a broad increase across every profitability measure. In its second-quarter results, G-III maintained its approximately $2.71 billion sales forecast and lowered its adjusted EBITDA range, while saying the outlook still excludes the Marc Jacobs business acquired a day before the earnings release.

Gross profit holds steady despite lower sales

The second-quarter margin expansion meant G-III generated almost the same gross profit on a substantially smaller sales base. Gross profit was $250.4 million, essentially unchanged from the $250.5 million reported a year earlier, even though revenue declined by about $59 million. The company said price increases and a greater contribution from owned brands were behind the 4.4 percentage-point improvement in margin.

That did not translate into higher operating profit for the quarter. Selling, general and administrative expenses increased to $231.4 million from $226.8 million, and operating profit fell to $10.8 million from $16.3 million. The gap between the gross-margin improvement and operating profit is important because it shows that the stronger merchandise economics did not flow fully through the income statement during the period.

GAAP net income nevertheless rose to $20.2 million, or $0.46 per diluted share, from $10.9 million, or $0.25 per share. The quarter included a $9.3 million tax benefit from the release of a valuation allowance and $3.1 million of interest income tied to a tariff refund, while acquisition-related expenses reduced reported earnings. On the company’s adjusted basis, net income was $11.5 million and diluted EPS was $0.26, compared with $11.2 million and $0.25 a year earlier.

The balance sheet strengthened compared with the prior-year quarter. Cash and cash equivalents rose to $529.2 million from $301.8 million, while inventories fell 13% to $555.0 million. G-III returned $12.2 million to shareholders during the quarter, comprising $7.9 million of share repurchases and $4.3 million of dividend payments.

Earnings guidance rises while EBITDA range moves lower

For the year ending January 31, 2027, G-III now expects GAAP diluted EPS of $4.10 to $4.20, up from the $3.85 to $3.95 range provided in June. Forecast GAAP net income increased by $10 million at both ends of the range to $181 million to $185 million. The company also raised non-GAAP net income guidance to $97 million to $101 million from $95 million to $99 million and increased its non-GAAP EPS forecast to $2.20 to $2.30 from $2.15 to $2.25.

Adjusted EBITDA moved in the opposite direction. G-III now expects $174 million to $178 million, compared with its previous $178 million to $182 million forecast. The updated assumptions also include approximately $8 million of GAAP net interest income, compared with $2 million in the prior outlook, and a 25.2% estimated GAAP tax rate versus 30.0% previously. Those changes mean the higher earnings forecast should not be read as an increase in every operating measure.

Revenue guidance remains approximately $2.71 billion, down from $2.96 billion in fiscal 2026. G-III said the forecast incorporates the loss of about $460 million of sales from Calvin Klein and Tommy Hilfiger products as licenses for those businesses wind down. The expected reduction was about $470 million in the company’s June outlook, but the overall sales forecast did not change.

The company also issued third-quarter guidance that points to another year-over-year sales decline. Revenue is expected to be about $870 million for the quarter ending October 31, compared with $988.6 million a year earlier. GAAP net income is forecast at $59 million to $64 million, or $1.35 to $1.45 per diluted share, below the $80.6 million and $1.84 per share reported in the prior-year third quarter.

Marc Jacobs creates a separate variable for the second half

The full-year guidance does not yet include the Marc Jacobs acquisition, which closed on September 1. G-III said it expects the business to be slightly dilutive in fiscal 2027 and plans to provide more specific guidance when it reports third-quarter results. That exclusion is material because Marc Jacobs is now one of G-III’s largest strategic additions as the group reduces its dependence on Calvin Klein and Tommy Hilfiger licensed products.

Under the structure disclosed in G-III’s September 2 Form 8-K, G-III and WHP Global each own 50% of the joint venture holding the Marc Jacobs intellectual property. G-III separately acquired the operating business and will run it under a long-term license. The company said its investment was approximately $500 million, funded with cash on hand and borrowings under its revolving credit facility.

Management has set a long-term target of $1 billion in annual revenue for the Marc Jacobs business, but that target is not part of the current fiscal 2027 forecast. The immediate earnings picture therefore combines two different stories: G-III is extracting better gross margins from its existing portfolio while reported sales remain under pressure from the planned exit of major licensed businesses, and the newly acquired brand has yet to be incorporated into management’s formal outlook.

The second quarter also follows an unusually large first-quarter tariff-related benefit. G-III recorded a $102.7 million pretax benefit in the first quarter tied to the expected recovery of previously incurred tariffs imposed under the International Emergency Economic Powers Act. Excluding that item, first-quarter adjusted gross margin was 45.7%, compared with 42.2% a year earlier. By contrast, the second-quarter gross-margin improvement required only a $122,000 tariff-refund adjustment, leaving the 45.2% reported margin essentially representative of the quarter’s underlying merchandise economics.

That makes the next earnings report a more consequential checkpoint than the headline guidance increase alone suggests. G-III expects to update investors on Marc Jacobs when it reports third-quarter results, which should provide the first formal view of how the acquisition changes fiscal 2027 sales, profit and cash-flow expectations alongside the continuing shift toward owned brands.