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G-III Apparel stock crashes over 40% on looming license expiration, outlook cut

G-III Apparel Group (NASDAQ:GIII) shares fell over 40% after Thursday's open after its Q3 earnings results included warnings on licenses and a pared full-year forecast.

The apparel manufacturer reported a mixed third quarter, missing on the bottom line but narrowly exceeding sales expectations. Yet, management noted that coming quarters will continue to come under pressure from inflation, consumer belt-tightening, supply chain issues, and foreign currency impacts.

For the full fiscal-year 2023, the company anticipates between $2.90 and $3.00 in earnings per share, down sharply from the prior guidance of $3.60 to $3.70 and well below the consensus estimate of $3.59. Adjusted EBITDA forecasts were also trimmed to a range of $265M to $270M from a prior $318M to $323M.

Elsewhere, the company warned that licensing deals with PVH Corp. (PVH) are due to expire in coming years. Currently, the Calvin Klein and Tommy Hilfiger brands are key brands licensed by G-III. While licensing deals were renewed through 2025 and 2027, respectively, PVH made clear its intention to ultimately bring the brands in-house after those staggered expirations.

“The multi-year transition period will enable us to bring these core product categories, which represented approximately one-third of our global licensing revenue, and less than 10% of our consolidated EBIT in 2021, back in-house in a disciplined and methodical way,” PVH CFO Zac Coughlin said on Tuesday evening. “G-III will continue to be a key partner as we work together over the next few years to internalize the direct operations of these businesses.”

G-III CEO Morris Goldfarb said that the company continues to vet alternatives to the brands being folded back into PVH.

“We have been actively pursuing a number of near-term growth initiatives across our current owned and licensed brands, as well as private label, including category, geographic and digital expansion,” he said. “We are also directing resources toward new growth areas, including further leaning into building our own brands, broadening our European business, developing new licensing opportunities and continuing to acquire new businesses.”

Shares fell 41.98% after Thursday’s market open, on track for the largest one-day drop on record, eclipsing an over 38% decline marked ahead of its first quarter of 2020 earnings release.