Adjusted EPS grew 12% year-over-year to $1.04, the strongest growth rate since 2023.
Adjusted FIFO operating profit was $1.1 billion for the quarter.
E-commerce sales grew 16%, driven by increased households and order frequency, with delivery sales surpassing pickup sales for the first time.
Excluding the pharmacy mix and sale impact, FIFO gross margin rate decreased 9 basis points, in line with expectations to remain margin neutral.
FIFO gross margin rate increased 39 basis points year-over-year, primarily due to the sale of Kroger Specialty Pharmacy and lower supply chain costs.
Fuel sales and profitability declined due to lower retail prices and fewer gallons sold, with expectations for continued lower gallons sold through 2025.
Identical sales without fuel grew 3.4%, marking the sixth consecutive quarter of improvement.
Operating general and administrative (OG&A) rate improved, decreasing 5 basis points year-over-year, and 41 basis points on an underlying basis after adjustments.
Impact of Tariffs and De Minimis Removal on Margins and Pricing Strategy
Management highlighted a $240 million mitigated impact on gross margin due to tariffs and the removal of the de minimis exemption, representing approximately 220 basis points of margin decline for 2025.
The removal of the de minimis exemption is expected to have a significant impact, accounting for about 170 basis points of the tariff-related decline.
The company is implementing strategic pricing actions and supply chain initiatives to mitigate increased tariff costs, but these will take time to fully realize benefits.
For 2026, the net impact of tariffs and de minimis removal is projected to be around $320 million, affecting operating margins.
The company is actively managing inventory placement and supply chain adjustments to offset some of the tariff-related costs.
Pricing increases are being cautiously rolled out on a small portion of the assortment, with ongoing evaluation planned.
Impact of Tariffs on G-III's Inventory and Margins
Management highlighted that higher-than-expected tariff costs, primarily from increased shipments from Vietnam, India, and Indonesia, impacted gross margins in Q2 2026.
The company is actively mitigating tariff pressures through vendor participation, sourcing shifts, and targeted price increases, but is currently absorbing some costs to stay competitive.
Tariff impact was estimated at approximately $75 million unmitigated, with a total incremental tariff cost of about $155 million for fiscal 2026.
The company’s strategic decision to hold and reroute product from India, where tariffs reached 50%, was aimed at protecting margins despite affecting the year-end topline.
Management expects gross margins to normalize and expand as they exit lower-margin licenses and increase penetration of owned brands.
Tariffs have influenced inventory decisions, leading to a 5% increase in inventory levels and a cautious approach to inventory buybacks.
The impact of tariffs on margins is expected to be most pronounced in the fourth quarter, with some relief anticipated in the second half of next year.
Adjusted gross margin contracted 160 basis points to 61.7%, impacted by $9 million in additional tariffs despite mitigation efforts.
Adjusted net earnings per share were $1.26, slightly above guidance.
Adjusted operating profit was $28 million (7% margin), down from $57 million (13.5% margin) in prior year due to investments and challenging environment.
Adjusted SG&A expenses increased 5% to $224 million, driven by new store openings and higher employment and occupancy costs.
Consolidated net sales were $403 million in Q2 2025, down from $420 million in Q2 2024, near the midpoint of guidance ($395M-$415M).
Inventory increased 19% on LIFO basis, primarily due to tariff-related accelerated purchases and capitalized costs.
Long-term debt was $81 million, up from $31 million at fiscal 2024-end, reflecting capital expenditures and share repurchases.
Total company comparable sales declined 5% in Q2, consistent with guidance.
Impact of Tariffs and Mitigation Strategies on Margins
Management highlighted ongoing tariff impacts, estimating a 250 basis point gross margin pressure due to tariffs in the Brand Portfolio segment.
Mitigation efforts include sourcing country mix adjustments, factory concessions, and selective price increases, but lag effects mean pressure persists into the second half of 2025.
The company expects gross margin pressure from tariffs to continue into the third quarter, with some normalization anticipated in the fourth quarter as mitigation strategies take effect.
Approximately $10 million of sales in Q2 were negatively impacted by tariffs, split evenly between cancellations and delayed receipts, with recovery expected in Q3.
Management emphasized the lag between tariff enactment and mitigation effectiveness, which complicates short-term margin recovery efforts.
The company is actively exploring additional cost savings and efficiency measures to offset tariff-related margin pressures.
Cash and short-term investments ended at $33.5 million, down from $63.2 million a year ago, with no debt and $70.1 million available on the revolving credit facility.
Comparable store sales declined 7.1%, while direct sales fell 14.4%, with sequential monthly improvement from May (-10.4%) to July (-7%).
EBITDA fell to $4.6 million from $6.5 million last year, impacted by lower sales but partially offset by expense reductions.
Gross margin rate decreased 300 basis points to 45.2%, mainly due to a 240 basis point increase in occupancy costs and higher markdown rates.
Inventory was $78.9 million, flat year-over-year, with clearance penetration steady at 10.2%. Inventory down 28.5% compared to 2019.
Merchandise margins declined by 60 basis points, partially offset by a favorable shift from national to private brands.
Net sales for Q2 2025 were $115.5 million, down from $124.8 million in Q2 2024, driven by a 9.2% decline in comparable sales.
SG&A expenses decreased by $6.1 million year-over-year, reducing SG&A as a percentage of sales to 41.2%.
Dafinchi
