G-III Apparel Group, Ltd.’s (NASDAQ:GIII) Q2 2025 results were good, with its proprietary brands growing within expectations and the company’s raising guidance from better margins, lower share, and repaid debt. The company also announced a small license with Converse for apparel. The market reacted with a close to 30% up move, which seems exaggerated given the relative impact of the news.

After the move, G-III is up 20% since I started recommending the name in March 2024. The move is exaggerated, but the company continues to trade at an expected earnings yield (ex-license business) of about 11%, while its proprietary brands grow at double digits and it signs new license agreements. For that reason, I believe G-III continues to be an opportunity at these prices, and maintain my Buy rating.

Good results, price boom

Proprietary brand growth: G-III’s owned brands are doing well despite a challenging context. DKNY was up in the high single digits, whereas Karl Lagerfeld was up in the mid-teens. Donna Karan is less than a year old and, therefore, has no comparables, but the fall 2024 season will imply 500 doors compared to 200 doors for the spring 2024 season.

Topline down on licenses: The company’s top line, on the other hand, was down 2.3%. Management commented that the fall comes from the abandonment of part of the Tommy Hilfiger and Calvin Klein license business. The 10-Q for 2Q25 has not been released, but the Q for 1Q25 showed the licensing business falling at 13% figures.

Margins improving: Despite the fall in revenues, the company generated higher operating profits in 2Q25 and 1H25 than in the previous fiscal periods. The operating margin was almost 2 percentage points higher than last year for 1Q25. This bodes well for the company’s transition into its proprietary brands as the main breadwinners.

Challenging 3Q25, good 4Q25: The company guided for a 3Q25 that will be more challenging. Revenue should continue to grow, but margins will probably decrease YoY as the company anniversaries supply-chain-related improvements in 1H25 and as it invests more in the new collections of DK and DKNY. Still, management is very confident that its proprietary brands are doing very well. Last quarter, during the earnings call, the company’s CEO said, “I think our order book will grow, I think exponentially in maybe it’s the fourth quarter.” We should remember that 2H24 represents 66% of the company’s sales.

Improved guidance: Coming from a slight beat in 2Q25 EPS and the repayment of $400 million in 7.25% debt maturing in 2025, plus share repurchases, the company updated the yearly EPS guidance to $4 in the mid-point, from $3.63 last quarter.

Converse license: G-III also announced it will become the global licensor for Converse apparel, launching in Fall 2025 (2H26 for G-III’s fiscal year). The announcement will not be incredible in terms of revenues (management commented on $200 million in sales in the long term, or less than 10% of revenues today). However, the announcement is positive because it carries Nike’s (NKE) seal of approval. Nike owns Converse, and the fact that it chose G-III to manage the apparel business for the brand globally speaks well of G-III’s capacities.

Post-rally valuation

This earnings season, I saw plenty of companies doing well with their stock prices collapsing. The most covered cases have been Nvidia (NVDA) and Abercrombie & Fitch (ANF), and recently, I wrote about Birkenstock, too. The valuations were excessive before the results, and the move after the results was exaggerated, too. The same can be said of the up move after G-III’s results. The earnings were good, but neither the better guidance nor the Converse license justified a 30% improvement in the business. The market may have been overly pessimistic about G-III before the results.

Since I first recommended G-III, the stock is up 20%. Based on the current stock price of $31.1, the company’s market cap is $1.41 billion (it has 45.4 million diluted shares, according to the 2Q25 earnings release). With the repayment of the company’s $400 million in secured debt after the quarter, the company’s EV should be around $1.4 billion as well.

Last quarter, I considered that G-III’s license business from PVH would generate about $170 million in profits before the company lost the licenses. I haven’t changed that figure, therefore, resulting in an EV (ex-license business) of $1.23 billion.

Based on management guidance, I believe G-III’s proprietary business will generate $2.24 billion in revenues in FY25. The company expects an operating margin of 8.6% for the whole business (including licenses). If we assume that the proprietary business has the same margins as the aggregate business (probable given that it will represent 70% of revenues), then the proprietary business should generate an operating income of $192 million or NOPAT of $135 million after taxes. These figures include the $60 million in extra marketing expenses that the company is investing for DK and DKNY this year.

Therefore, ex the proprietary business, G-III trades at an earnings yield of 11%. Its proprietary business is growing at double-digits, and it is adding small licenses (like Converse this quarter and Nautica in FY24). I believe thinking of G-III growing at 4% after the loss of the PVH licenses is not exaggerated, reaching a return of 15% between yield and growth.

In summary, I continue to believe the stock is an opportunity, and maintain my Buy rating.