G-III (GIII)

Fashion conglomerate G-III (NASDAQ:GIII) announced better-than-expected revenue in Q2 CY2025, but sales fell by 4.9% year on year to $613.3 million. On the other hand, next quarter’s revenue guidance of $1.01 million was less impressive, coming in 99.9% below analysts’ estimates. Its non-GAAP profit of $0.25 per share was significantly above analysts’ consensus estimates.

Company Overview

Founded as a small leather goods business, G-III (NASDAQ:GIII) is a fashion and apparel conglomerate with a diverse portfolio of brands.

Thanks to social media and the internet, not only are styles changing more frequently today than in decades past but also consumers are shifting the way they buy their goods, favoring omnichannel and e-commerce experiences. Some apparel and accessories companies have made concerted efforts to adapt while those who are slower to move may fall behind.

G-III’s primary competitors include Ralph Lauren (NYSE:RL), VF Corp (NYSE:VFC), owner of The North Face and Timberland, and Capri Holdings (NYSE:CPRI), owner of Michael Kors and Versace.

Examining a company’s long-term performance can provide clues about its quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Unfortunately, G-III’s 3.9% annualized revenue growth over the last five years was sluggish. This fell short of our benchmark for the consumer discretionary sector and is a tough starting point for our analysis.

Long-term growth is the most important, but within consumer discretionary, product cycles are short and revenue can be hit-driven due to rapidly changing trends and consumer preferences. G-III’s performance shows it grew in the past but relinquished its gains over the last two years, as its revenue fell by 1.2% annually.

This quarter, G-III’s revenue fell by 4.9% year on year to $613.3 million but beat Wall Street’s estimates by 7.4%. Company management is currently guiding for a 99.9% year-on-year decline in sales next quarter.

Looking further ahead, sell-side analysts expect revenue to remain flat over the next 12 months. This projection is underwhelming and indicates its newer products and services will not catalyze better top-line performance yet.

G-III’s operating margin has been trending down over the last 12 months and averaged 8.9% over the last two years. The company’s profitability was mediocre for a consumer discretionary business and shows it couldn’t pass its higher operating expenses onto its customers.

This quarter, G-III generated an operating margin profit margin of 2.7%, down 3.8 percentage points year on year. This contraction shows it was less efficient because its expenses increased relative to its revenue.

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

G-III’s EPS grew at a spectacular 23.8% compounded annual growth rate over the last five years, higher than its 3.9% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.

In Q2, G-III reported adjusted EPS of $0.25, down from $0.52 in the same quarter last year. Despite falling year on year, this print easily cleared analysts’ estimates. Over the next 12 months, Wall Street expects G-III’s full-year EPS of $4.30 to shrink by 41.1%.

Although earnings are undoubtedly valuable for assessing company performance, we believe cash is king because you can’t use accounting profits to pay the bills.

G-III has shown decent cash profitability, giving it some flexibility to reinvest or return capital to investors. The company’s free cash flow margin averaged 12.9% over the last two years, slightly better than the broader consumer discretionary sector.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

G-III historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 8.3%, somewhat low compared to the best consumer discretionary companies that consistently pump out 25%+.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Unfortunately, G-III’s ROIC has stayed the same over the last few years. If the company wants to become an investable business, it must improve its returns by generating more profitable growth.

Companies with more cash than debt have lower bankruptcy risk.

G-III is a profitable, well-capitalized company with $301.8 million of cash and $295.8 million of debt on its balance sheet. This $6.00 million net cash position gives it the freedom to borrow money, return capital to shareholders, or invest in growth initiatives. Leverage is not an issue here.

It was good to see G-III beat analysts’ EPS expectations this quarter. On the other hand, its full-year revenue guidance missed and its revenue guidance for next quarter fell short of Wall Street’s estimates. Overall, this was a softer quarter. The stock traded down 4.1% to $25.98 immediately after reporting.

Updated: December 3, 2025 at 10:04 PM EST

We think that the latest earnings result is only one piece of the bigger puzzle. If you’re deciding whether to own G-III, you should also grasp the company’s longer-term business quality and valuation.

G-III falls short of our quality standards. First off, its revenue growth was weak over the last five years, and analysts expect its demand to deteriorate over the next 12 months. On top of that, G-III’s projected EPS for the next year is lacking, and its relatively low ROIC suggests management has struggled to find compelling investment opportunities.

G-III’s P/E ratio based on the next 12 months is 12.8x. This valuation multiple is fair, but we don’t have much confidence in the company. There are superior stocks to buy right now.

Wall Street analysts have a consensus one-year price target of $30.25 on the company (compared to the current share price of $29.76).