管理層發言
Ladies and gentlemen, thank you for being here. Welcome to G-III Apparel Group's Third Quarter Fiscal 2026 Earnings Call. Please note that today's conference is being recorded. I will now hand over the call to Neal Nackman, Chief Financial Officer. Neal, please proceed.
Good morning, and thank you for joining us. Before we begin, I would like to remind participants that certain statements made on today's call and in the Q&A session may constitute forward-looking statements within the meaning of the federal securities laws. Forward-looking statements are not guaranteed, and actual results may differ materially from those expressed or implied in forward-looking statements. Important factors that could cause actual results of operations or the financial condition of the company to differ are discussed in the documents filed by the company with the SEC. The company undertakes no duty to update any forward-looking statements. In addition, during the call, we will refer to non-GAAP net income, non-GAAP net income per diluted share and adjusted EBITDA, which are all non-GAAP financial measures. We have provided reconciliations of these non-GAAP financial measures to GAAP measures in our press release, which is also available on our website. I will now turn the call over to our Chairman and Chief Executive Officer, Morris Goldfarb.
Thank you, Neal, and thank you, everyone, for joining us. We delivered strong profitability in the third quarter despite the impacts of tariffs, with earnings exceeding the high end of our guidance range. This was driven by the strength of our go-forward portfolio, particularly our owned brands, as well as a healthy mix of full-price sales and our mitigation efforts against tariffs. Our solid year-to-date performance highlights G-III's ability to effectively manage through a dynamic and often challenging marketplace. Since PVH's unexpected decision to end our long-standing licensing partnership, we've demonstrated significant progress in transforming our business model and accelerating our longer-term strategies. At its peak, the Calvin Klein and Tommy Hilfiger brands represented over $1.5 billion in annual net wholesale sales. And this year, these brands are expected to generate approximately $800 million.
As previously mentioned, the PVH sales decline accelerated quicker than originally anticipated. Despite this decline, our teams replaced more than 70% of the lost sales volume through organic growth of our go-forward owned and licensed portfolio. Our newer brands, like Donna Karan, have enabled us to command greater pricing power while maintaining healthy price elasticity. Our balance sheet during this period has strengthened, ending the quarter with a net cash position of $174 million. We remain keenly focused on executing our strategic priorities, making disciplined brand investments and positioning our portfolio to capture market share and long-term growth. Our third quarter performance reflects healthy consumer demand for our brands. Seasonal weather boosted our cold weather categories, which saw a nice pickup in sell-throughs across brands and channels as we move through the quarter.
Within wholesale, we saw meaningful gains in women's outerwear with full price retail sales up nearly 20%. Our marketing investments have driven a significant increase in consumer engagement as seen in the uptick in traffic across our direct-to-consumer business. In digital, we saw traffic lift over 20% across our owned dot-com, which drove substantial growth in conversion rates and overall sales. As we exited October, trends continued to improve through the Black Friday period, with Europe posting high single-digit growth and North America up double digits compared to last year. Performance across channels indicates that our product offerings continue to align with consumer preferences. Demand has been steady across brands during the holiday season, supported by full price sell-throughs. Looking ahead, we remain mindful of the global consumer environment and are taking a prudent approach to our outlook for the remainder of the year.
Now let us review our third quarter fiscal 2026 financial results. Net sales for the quarter were $989 million, generally in line with the expectations. Non-GAAP earnings per diluted share were $1.90, $0.37 above the midpoint of our guidance range. Gross margins were 38.6%, outperforming expectations, driven by a healthy mix of our higher-margin owned brands and solid selling into the full price channel. Units were down year-to-year as our disciplined inventory management kept inventories nearly flat, up just 3% despite tariffs. We remain in the strong financial position, ending the quarter in a net cash position of $174 million after repurchasing approximately $50 million in stock year-to-date. As we work to maximize the full potential of our globally recognized brands, we're guided by our strategic priorities. Our growth is powered by an exceptional foundation of experienced leadership, world-class merchant capabilities, a diverse product mix, a reliable supply chain and long-standing retail relationships.
Together, these strengths enable us to bring brands to market and scale them across channels with speed. Our strategy centers on driving both near- and long-term growth. Building brand strength remains a core focus, and our strong seasonal marketing and promotional cadence continue to deliver results. We're also prioritizing investments in technology, infrastructure and talent to enhance our business and improve efficiency. As we look to the final months of the fiscal year, we remain focused on holiday performance and spring selling. We continue to plan our key brands to grow mid-single digits this year. Capturing the long-term potential of our own brands is a top strategic priority. These brands are powerful, sustainable drivers of profitability, delivering higher margin and incremental licensing income. We're focused on four key pillars. First, product and consumer engagement. We're leveraging each brand's unique DNA to deliver differentiated products across every shopping channel.
By extending our core assortments and entering new categories, we're delivering growth in the wholesale channel, particularly in North America. We will continue to build momentum through impactful marketing campaigns, strategic partnerships and innovative collaborations, ensuring that each of our brands remains firmly at the center of its own culture. Second, driving direct-to-consumer. Complementing our strong wholesale business, we're enhancing our digital capabilities to boost traffic and conversion on our brand sites and many marketplaces. Meanwhile, we continue to evolve our North American retail segment strategy to deliver profitability and continue to optimize our international retail performance. Third, international expansion. Our owned brands remain highly underpenetrated internationally. Strategic investments and partnerships, including AWWG, position us to capture the substantial long-term growth opportunity.
Fourth, category expansion through licensing. Our partners have helped us extend into additional categories like fragrance, eyewear and home, as well as experiential categories such as hospitality, all deepening consumer connections and broadening brand reach. We believe we have many opportunities to monetize as we grow each brand. To support our key pillars, we continue to invest in marketing to amplify the global visibility of our brands. We see tremendous potential across all growth avenues, including product, channel, category and geographies. Now I'll share some brand highlights from the third quarter. Donna Karan outperformed expectations, delivering impressive double-digit sales increases in North America. We expect growth of 40% in fiscal 2026, reinforcing the brand's position as a key growth driver within our portfolio. The brand is leveraging its iconic DNA and aspirational luxury positioning to capture strong consumer demand at higher price points, underscoring its enduring appeal and pricing power.
As we continue to develop the brand into a full lifestyle offering, we're excited about the introduction of Donna Karan Weekend, which hit stores in early November. The collection offers a more casual yet refined aesthetic, and we're already seeing great results across channels. Dresses, denim and knit sets are early standouts so far in the fourth quarter. Donna Karan Jewelry launched in mid-November, exclusively on donnakaran.com, and will roll out to department and specialty stores in spring 2026. The collection already gained buzz with its signature twisted cuff earning the Accessories Council's 2025 award for design excellence, and we've seen strong sell-throughs through the first few weeks. In the quarter, donnakaran.com outperformed, with traffic up approximately 150% and average order values increasing over 10%, alongside healthy average unit retails and strong sell-throughs. Now 1.5 years since launch, we're seeing close to 20% of our sales from repeat customers.
This growth was led by dresses, footwear and handbags, with particular strength in our best-selling Baldwin handbag. Wholesale momentum during the quarter was equally impressive. The brand is currently sold in about 1,700 points of sale, and we expect to add roughly 200 more by spring 2026. We're increasing penetration across better department stores with retailers allocating a greater footprint to the brand in new and existing stores. Premium retailers like Saks, Bloomingdale's and Nordstrom have expanded distribution, both online and in-store this fall, reflecting the brand's ability to enter new accounts while maintaining its aspirational brand positioning. On the marketing front, we launched our Fall 2025 Campaign, Woman to Woman, in early September, featuring a new cast of talent with deep connections to the brand. The campaign resonated strongly, generating approximately 5.6 billion impressions and over $11 million in earned media value.
We carried that momentum into the holiday season with refreshed campaigns, strategic paid media and VIP partnerships aimed at attracting new audiences to shop. Building on the brand's outstanding domestic success, we've been disciplined in our distribution rollout and see significant opportunities to expand across categories and channels, ultimately capturing the long-term global potential. Karl Lagerfeld delivered another strong quarter, amplified by the success of our global brand initiative starring the iconic Paris Hilton. Our fall/winter 2025 campaign, From Paris with Love, delivered a high-impact global rollout across our key markets, marking one of our strongest media performances to date. This culminated in the standout cultural moment during Paris Fashion Week. An exclusive late-night event at the Palais de Tokyo, where Paris Hilton took over the DJ booth in a series of custom Karl Lagerfeld looks.
The event drew an extraordinary gathering of fashion leaders, celebrities and global influencers. The campaign was supported by a series of high-impact in-store activations across the globe, driving local visibility and reinforcing the campaign's momentum at retail. Building on this, we rolled out our holiday campaign, From Karl with Love, with activations designed to emphasize storytelling, retail experiences and wider influencer amplifications. From a brand perspective, we continue to see strong growth in our women's business in North America outperforming. Our global men's business continues to be a key growth catalyst, complementing our women's business and posting close to 20% growth in the quarter. Karl Lagerfeld jeans, currently sold internationally, is resonating with younger consumers and driving incremental growth, with sales up over 30% in the third quarter. The Studio Collection continues to reinforce its role as the brand's halo with its fashion-forward design, driving strong press and consumer interest across the campaign and gaining presence in key European retailers.
Specifically, in North America, we saw a healthy performance across wholesale and retail, with strong full price selling and average unit retail increases. With just over 3,200 domestic points of sale in Fall 2025, we expect to add approximately 100 more by Spring, driven by extended assortments and increased footprint. Our North American direct-to-consumer business saw positive comparable sales increases, showing that our refreshed product is resonating across men's and women's. Internationally, despite a soft macro environment, the brand continued to perform well, supported by disciplined pricing, which drove strong gross margin improvement amid a more promotionally competitive landscape. Our customer activations led directly to improved traffic and performance. As cooler weather hit, we saw digital traffic accelerate across our own dot-com as well as digital partners, including marketplaces.
Looking ahead to spring, our collaboration with Paris will continue for a second season, driving high global visibility across key markets. In our hospitality business, we're looking forward to sharing some news shortly on a new project. With strong global recognition and momentum behind our expansion initiatives, the brand is well positioned to gain share across North America and Europe while capturing significant untapped opportunity in Asia, setting the stage for sustained long-term growth. DKNY, our largest brand, was led by healthy full-price sell-throughs in North America across key categories, reinforcing brand relevance. Our North American direct-to-consumer business also showed solid improvement, with positive comparable growth across stores and dkny.com, up 20% on higher conversion. Internationally, we continued to see solid traction. Fall 2025 deliveries and improving sell-throughs helped meet targets despite softer European markets.
Europe showed notable progress led by handbags, our top-performing category, with strong full price sell-throughs. Digital performance at DKNY similar to Karl remains robust, driven by growth at Answear and Zalando. We hosted pop-ups across 8 major cities for the Paola handbag, featuring localized collaborations and digital-first activations, which successfully elevated our hero styles and drove reorders in key markets like Spain and Poland. We're expanding our global footprint with a new license partner in China to reposition the brand for growth there. Marketing momentum is strong. Our Fall 2025 campaign with Hailey Bieber delivered record results, with 7.9 billion impressions and $15.9 million in earned media value. A major Dubai media takeover amplified awareness across global audiences, with a particular emphasis on driving our Middle East business. We focused investments in product and marketing.
We are successfully positioning the brand and laying the groundwork for meaningful growth ahead. Vilebrequin continued to strengthen its global brand presence by expanding premium lifestyle offerings and creating unique experiences for its aspirational customers. While retail softness in Europe and the Caribbean weighed on results, growth in France helped offset the pressures. In July, we revealed a partnership with Fiat on the limited edition Fiat Topolino micro car. The collaboration has generated great global coverage. We also advanced our luxury hospitality strategy with an exclusive boutique at the Hotel Christopher in St. Barths and robust double-digit growth at our Cannes flagship and Beach Club. Partner-operated clubs in Doha and Crete performed well, and upcoming launches in Oman and Miami Beach alongside curated swimwear lifestyle assortments reinforce confidence in long-term global expansion.
Turning to our omnichannel capabilities. We experienced robust digital performance across North America and Europe, further demonstrating that our efforts here are really paying off. We continue to focus on our direct-to-consumer business performance, highlighted by our North American segment, which remains on track to be close to breakeven in fiscal 2026. Internationally, we see healthy performance across our direct-to-consumer business, supported by improved full-price selling and strength across our digital ecosystem. Our retail footprint saw improved productivity and profitability across stores internationally. As we continue to expand this area, we're making targeted investments to sharpen our global go-to-market execution. From strengthening our data capabilities to extending our Shopify platform across brands and regions, we're positioning the business to capture long-term growth.
We're leveraging deeper consumer insights to guide design and merchandising. At the same time, we're elevating our product presentation across owned and partner sites, enhancing imagery, description and video content to deliver a richer consumer experience at higher conversion. Digital sales in the quarter delivered nearly 20% growth with outside performance by Donna Karan, highlighting the significant value and long-term potential of this channel. This momentum reinforces our ability to meet consumers wherever they shop. Expanding our portfolio of strategic licenses remains key to our growth strategy. Licensed brands are a capital-light way to scale and further diversify through complementary brands that offer unique attributes across varying aesthetics, consumer segments, channels and geographies. Our licensed team sports business continues to gain momentum, delivering a solid quarter with sales up 9%.
We're experiencing a strong NFL season supported by strategic activations around key moments with retail partners. Additionally, through our sublicense agreement with Fanatics, we brought timely L.A. Dodger World Series product to market, reinforcing our agility in capturing demand. This quarter marked the first shipments of Converse apparel across channels, delivering strong results fueled by consumer enthusiasm for the product. As part of Nike, Inc., the partnership reflects our confidence in their expertise and expands our ability to reach new consumers globally. Levi's is our largest men's coat brand and continues to post solid growth. Nautica Jeans is scaling distribution and had a strong quarter, while Halston and Champion are also performing well after launching just over a year ago. BCBG, one of our newest licenses, launched in the fall at approximately 300 points of sale and is meeting our initial expectations with high average unit retails.
We also anticipate launching an additional 50 doors in Macy's this spring. As we execute the wind down of our PVH licenses, both Tommy Hilfiger and Calvin Klein continued to perform well at retail. We remain committed to supporting our retail partners and delivering what consumers expect from these brands. Our disciplined approach to inventory and focus on full price selling are helping us maximize profitability as we manage the exit. We anticipate that the remaining PVH brand sales will be approximately $400 million in next year's fiscal 2027. As licenses expire, we're redeploying talent and resources to accelerate growth in our go-forward brands. Thanks to our agile teams and flexible business model, we've already offset a substantial portion of the PVH sales reduction, and are confident in our ability to sustain long-term success. While the marketplace is full of brands with high potential, only a few operating companies like ours can help them reach it.
As we look ahead, we're deliberate in selecting those that align with our portfolio and support our long-term growth trajectory. In closing, we delivered a strong third quarter, with gross margins and earnings per diluted share far exceeding expectations despite the impact of tariffs. Our consumers continue to respond to newness and fashion, and we're encouraged by the solid trends we've seen throughout the holiday season to date. Looking ahead, we're updating our fiscal 2026 guidance to take into consideration our third quarter earnings outperformance, combined with the uncertainties around the consumer environment and tariff-related margin pressures. We now expect net sales to be approximately $2.98 billion, and importantly, we're raising our full year non-GAAP earnings per diluted share guidance to $2.80 to $2.90. I'm incredibly proud of our teams for executing on our priorities and delivering strong profitability amid uncertainty.
With a strong balance sheet and a proven track record, we have the flexibility to drive growth, pursue strategic opportunities, including acquisitions, and return capital to shareholders. As part of this strategy, we're proud to introduce our first-ever dividend program. I'll now pass the call to Neal to discuss our third quarter financial results as well as our fourth quarter and full year fiscal 2026 guidance.
Thank you, Morris. Net sales for the third quarter ended October 31, 2025, were $989 million compared to $1.09 billion in the same period last year, generally in line with our expectations. Net sales of our wholesale segment were $977 million compared to $1.07 billion last year. The decline in sales compared to the prior year is primarily a result of lower sales from Calvin Klein and Tommy Hilfiger license businesses, due largely to several expired licenses, specifically Calvin Klein jeans and sportswear, which we exited at the end of last year. Net sales of our retail segment were $46 million for the quarter compared to net sales of $42 million in the prior year despite operating fewer stores. The increase was driven by solid comparable sales increases across our North American DKNY and Karl Lagerfeld Paris stores, as well as strong sales growth on our Donna Karan website. Gross margin was 38.6% in the third quarter of fiscal 2026 compared to 39.8% in the previous year's third quarter.
The wholesale segment's gross margin was 36.7% compared to 38.4% in last year's comparable quarter. Gross margin declined 170 basis points this year compared to last year as a result of the impact of tariffs. Gross margins were better than our expectations, driven by a stronger mix of full-price sales. Gross margin in our retail segment was 50.8%, down from 52.3% in the prior year. This decline primarily reflects the liquidation of the G.H. Bass branded product, which is transitioning to a license arrangement with the Aldo Group beginning January 2026. Non-GAAP SG&A expenses were similar to the prior year at $258 million compared to $259 million in the previous year. We continue to stay vigilant with our expense management. We have rightsized our warehouse space and continue to prudently invest in people, marketing and technology to position the company for growth. Non-GAAP net income for the third quarter was $83 million or $1.90 per share compared to $116 million or $2.59 per share in the previous year.
These results were significantly better than our expectations. Turning to the balance sheet. Inventory levels remain in good shape. Inventories modestly increased 3% to $547 million at the end of the quarter from last year's $532 million. We continue to focus on disciplined inventory management with units down year-over-year, and our inventory is well positioned to meet holiday demand. We remain in a strong financial position, ending the quarter in a net cash position of $174 million after repurchasing approximately $50 million worth of shares year-to-date. This compares to a net debt position of $119 million in the same period of the previous year. Our total availability remains very strong at approximately $875 million. Our financial strength provides us flexibility to invest in our business and other strategic opportunities, including acquisitions to drive future growth. In addition, our Board has approved a new dividend program to further enhance our returns to stockholders.
The Board of Directors has declared an initial quarterly cash dividend of $0.10 per share. The company intends to pay dividends quarterly in the future, subject to market conditions and the approval of the Board of Directors. Turning to guidance. We now expect fiscal year 2026 net sales of approximately $2.98 billion, a decrease of approximately 6% from last year. We continue to expect our key owned brands, DKNY, Donna Karan, Karl Lagerfeld and Vilebrequin to grow at a mid-single-digit rate this year. Our updated view is that the gross impact of tariffs will amount to approximately $135 million, and we now estimate the unmitigated impact to be approximately $65 million for fiscal 2026. As a reminder, since we are primarily a North American wholesale business, we were limited in our ability to adjust pricing on inventory already sold into retailers for the fall and holiday seasons. As a result, we are absorbing a larger share of these costs in this fiscal year to remain competitive and protect market share.
Looking ahead, as we move through fiscal 2027, we expect gross margins to normalize and ultimately expand as we exit lower-margin licenses, increased penetration of our higher-margin owned brands and implement targeted price increases. Our owned brands, Donna Karan and Karl Lagerfeld, are well positioned to command greater pricing power in the marketplace. Non-GAAP net income for fiscal 2026 is expected to be between $125 million and $130 million, or diluted earnings per share between $2.80 and $2.90. This compares to non-GAAP net income of $204 million or diluted earnings per share of $4.42 for fiscal 2025. Adjusted EBITDA for fiscal 2026 is expected to be between $208 million and $213 million compared to adjusted EBITDA of $326 million in fiscal 2025. Let me add some context around modeling. We now expect gross margins for the full fiscal year 2026 to be down approximately 200 basis points.
The fourth quarter gross margin decline will reflect the highest penetration and impact from tariff inventory. We expect interest expense to be approximately $1.5 million for the full year, benefiting from the $400 million debt repayment last year. We expect capital expenditures of approximately $40 million, principally driven by the build-out of shop-in-shops for our new brand launches, leasehold improvements and technology investments. We are estimating a tax rate of approximately 29.5% for fiscal 2026. We have not anticipated any potential share repurchases for the fourth quarter in our guidance. That concludes my comments. I will now turn the call back to Morris for closing remarks.
Thank you, Neal, and thank you all for joining us today. I'm proud of our team's work this quarter, and I'm confident in G-III's future as a global leader in fashion. I'd also like to thank our entire organization and many partners and all our stakeholders for their support. Operator, we're now ready to take some questions.
分析師問答
Our first question comes from Bob Drbul with BTIG.
I guess can we unpack the gross margin performance a bit more? When you look at the results and you look at the performance and the upside to it, can you just give us some more color around how you did that, sort of the various buckets? And then I guess when you think about the unmitigated $65 million for this year, when you look at next year in gross margin, do you believe you'll be able to fully mitigate the tariff situation? And I guess just be very curious to hear about pricing.
Thank you, Bob. To frame this properly, at the beginning of the year, we expected pre-tariffs to increase by about 50 basis points in gross margin percentage. This was largely due to anticipated improvements in the mix of our own brands and higher gross margins. If we account for the impact of tariffs, we now expect to be down around 200 basis points, which aligns closely with the $65 million impact we've mentioned. Most of that decline in gross margin seems likely to occur in the fourth quarter, although we did experience a significant impact in the third quarter as well. One reason we outperformed our expectations in third quarter gross margins is that we performed very well in full price selling and chose not to engage in heavy discounting in the off-price market, which likely means we missed some sales opportunities. Our inventory levels are healthy, and we didn't feel the need to push them out excessively.
Regarding your last question about future gross margins, it's too early to say if we'll fully capture all our targets. However, going into each upcoming market week, we will have a clearer understanding of our costs, unlike last year when we were uncertain about the tariff costs affecting our products. We'll factor that information into our pricing strategy and aim for normal margins, which should reflect higher margins from our owned businesses, lower margins from the licensed portfolio, and an overall mix that continues to yield higher gross margins in the future.
We have increased our prices to a level we believe consumers will accept, and it's proving effective. However, we need to make some adjustments in a few areas where we are seeing some discontent. We will source more efficiently, and, as mentioned, our own brands are performing better. In our peak years, we generated approximately $1.5 billion with PVH brands, for which we paid royalties and advertising charges, amounting to over $150 million in royalties during an average year. That money is available within our company for marketing, margin enhancements, and improving products as needed. We have opportunities now that we didn't have before. Our own brands also provide a direct-to-consumer opportunity that we lacked with PVH licenses. Previously, we did not have a marketing site or global distribution, but now our own brands allow us to engage directly with consumers, which leads to better margins.
As we scale this, it will significantly impact our company. For the first time in over a decade, we are approaching breakeven in our physical store model, and there's a chance we could break even or achieve a small profit this year. I believe we have the right formula, and we are ready to grow this sector, presenting opportunities for margin enhancements. We are launching a more significant men's initiative and have hired talent to support the growth of men's and new initiatives. While it's challenging to replace half of our top line in a short time, especially with the economic factors and tariffs we face, we remain confident in our ability to accomplish our goals.
Great. If I could just ask a follow-up. As you look at next year, you mentioned that the PVH license business would be $400 million, and that gross margins are expected to improve next year. Do you have any other preliminary thoughts about the top line or bottom line goals you're considering for the upcoming year?
We've got a whole bunch of thoughts, quite honestly, and we're working toward executing some of them, which are possible. That might be an acquisition. It might be another license. It might be distribution through another channel. Too early to bring them to our investor group. It's all work in progress. We are not sitting by and bringing our business down to a nonproductive scale. But that said, there is no rush. We have a strong balance sheet, as you see. We're not desperate to sign on another license or acquisition. As we find it, we'll execute it. And for the moment, we're cautiously looking at the right synergistic action that we're likely to find in the coming months.
And our next question will come from Ashley Owens with KeyBanc.
Maybe just to follow up on PVH really quickly. I know you said it's now expected to come down to about $400 million next year. So effectively, another halving of the business declines accelerating quicker than you initially expected. Just be curious how that reshapes the mix and the residual drag into next year. And from your perspective, does this accelerate the timeline for reaching a cleaner base? I think you'll still have another chunk of roll-offs at the end of 2026. So would be curious on your thoughts here.
So the thoughts are really kind of mixed. We're not in control of our own destiny. We have partners. On one side, we have less than a great relationship with PVH. We're at the mercy of where the retailer wants to take our business and their business. Fortunately for us, we're outperforming expectations with our own brands. And if you track PVH's performance with their own brands, it appears from where I sit, they're not achieving what their goals were on taking in their own brands and producing them and servicing the marketplace. They highlighted the fact that their business in North America is 2/3 underwear. Well, God bless them, let them produce underwear, and we're in the fashion business. So the lanes that we created for fashion with PVH's brands, I believe, are open to ourselves and other fashion providers that they are not going to fill. So the opportunity to expand our own brands or newly acquired or licensed brands is there, I believe, because of PVH's inability to execute on what they thought they would.
Okay. Got it. Maybe just quickly then on owned brands, especially like Donna Karan, just given the information you've provided us, I think you said up 40% this year, but still early in the broader reset that you executed. Would just be curious as to what the priority levers to keep that momentum going into next year are and where the biggest opportunity is to scale from here?
We have achieved significant success with our launch. When you introduce a brand, there are always areas for improvement, and we continually enhance our margins and products. Our repeat customer base is impressive, with over 20% of our customers coming back for more. They are satisfied with their initial purchases and are expanding their shopping to include items like handbags after having a positive experience with dresses. The strength of the business overpoweringly for the moment is the dress side. We have a dress business that is not only retailing well, but it's retailing well at a much higher price point than our other brands, and that would be Tommy Hilfiger, Calvin Klein, DKNY, Karl Lagerfeld, Donna Karan, is at a premium price point turning as well as the lower price point brands that we're marketing. So we're finding opportunities in consumer acceptance. And as I stated in the script, we've also expanded distribution to pretty good penetration in Dillard's, Nordstrom's, Bloomingdale's, Saks, Neimans, so we're getting a healthier penetration of, call it, more premium department stores.
And the next question comes from Mauricio Serna with UBS.
Yes, I would like to get more detail on the performance of the other parts of your business. You've had several licenses that you're now past the launches for this year. Could you discuss Nautica a bit more? Also, any initial insights on what you've observed with Nike and BCBG would be very helpful.
Thank you, Mauricio. I'll begin with Nautica. We signed a license agreement with ABG for Nautica after unexpectedly reclaiming Tommy Hilfiger from PVH. We needed a brand with a similar identity to Tommy, and Nautica, with its American spirit and red, white, and blue colors, fits that bill. As we transition away from Tommy through our PVH license, we're excited to promote our newly licensed Nautica brand, which is experiencing good growth. Finding the right market space for it has been challenging, but its shipping performance is strong, exceeding our expectations. Additionally, we had a unique chance to invest in Halston, which allows us to build brand ownership over the long term. We are marketing it thoughtfully in appropriate venues, and while the initial launch wasn't a huge success, the second attempt performed better, and our upcoming third delivery seems well-received. We expect to start shipping it soon and see potential there.
Although it’s not significant at this moment, it holds a promising opportunity in the range of $250 million to $300 million for us, justifying our continued efforts. Building and launching brands comes at a cost, and while early spending can be substantial, if we make the right decisions, we can expect to see returns in the following years. We approached this with a capital-light strategy, investing more in talent and essential elements like samples and showrooms, rather than large acquisitions. Regarding BCBG, we recently shipped it with good distribution across over 300 stores. We know what needs to be improved, as always. Now, looking at Converse through Nike, it presents a unique global opportunity for us. We are working with worldwide distributors to understand and improve their operations, which is promising. This initiative, while related to skate culture, does not conflict with our current initiatives, as we see it as an entirely new venture, and we’re eager to see where it leads.
There will be one or two additional announcements regarding licenses that are scalable. We are not pursuing licenses that we estimate could yield $20 million or $30 million. We're in the process of refining those aspects. Our benchmark for evaluation is over a three-year period; if a brand doesn't surpass $100 million in sales, it likely won't remain on our radar. We also have a private label initiative that we are diligently working on, which is led by our international team that manages private label operations globally. We are putting more effort into this than ever before, and we are aware of what we need to do to maintain the sustainable scale of our business. If these initiatives don't succeed, we will focus on profitability rather than revenue growth. We are effectively managing the business without concentrating on reducing headcount. However, if some strategies do not prove effective, we may have to consider that option critically. Yet, there are opportunities throughout the company. I hope this provides some insight into what you were asking about.
It was very helpful. I would like to follow up on the gross margin. The guidance you provided suggests a margin contraction of slightly over 400 basis points for the fourth quarter. As we consider spring '26 and the pricing initiatives you're implementing, should we anticipate pressure more similar to Q3? I would expect it to be somewhat better than Q4, but I’m curious if it could be closer to Q3 or if we are still facing significant pressure.
Yes. Without getting into the specifics of the quarters for next year, I think, Mauricio, if you're interested generally, where we got impacted by tariffs was a little bit in the second quarter, more significantly in the third quarter and the most in the fourth quarter. So essentially, if you reverse those, that's where we expect to get the pickups into next year.
And the last question comes from Dana Telsey with Telsey Advisory.
Morris, considering the wholesale distribution channel, how have the order trends been evolving recently, especially for your brands such as Donna Karan and Karl Lagerfeld? Neal, regarding the gross margin, excluding tariffs, and the performance of your brands, I've noticed strong sell-through of Donna Karan and Karl. Are factors like extended sizing and handbags, along with improvements in retail, potential additional catalysts for growth in 2026 and beyond?
Thank you, Dana. Order trends can often be sensed intuitively, especially during the colder months when we typically see improved performance. We encountered a few unexpected developments this year. Our inventory levels are relatively low, and there's a shift in the proportion of off-price goods compared to full-price retail. Demand at the full-price channel has been significantly stronger this year than in previous years. When shopping in stores, we're proud of how our inventory appears; retailers who actively pursued products are thriving. Notable successes for us include our coat and dress categories, and this success is consistent across all our brands. The sell-through rates are historically high. Despite the challenges we've faced, I believe we've had an excellent year with more time still remaining, and we are pleased with how consumers are responding as well as with our retail partners. Our team has done an incredible job managing the situation, and I often share my admiration for their efforts. I apologize if I mention it too frequently, but this team consistently rises to the occasion, and it's crucial during times like these. We have all contributed, and I want to thank the team if they are listening. And you had another follow-up on that one on this question that I missed, Dana. Did I?
When considering next year, how do you view the impact of extended sizing, your efforts with Weekend, handbags, and your own retail on the incremental contributions of your brands, whether to revenue or profit margins?
We believe that all of our new-to-market brands, including Donna Karan, are showing strong potential. It's not just about introducing new elements and classifications, but also about enhancing the performance of our established brands. There's a necessary period for proof of concept, where we must see our dresses sell before we can expand within existing doors. We're optimistic about our initiatives with Donna Karan and anticipate growth in our dress, sportswear, handbag, and footwear segments. We're particularly excited about the Weekend line we just shipped, which we see becoming a standout in retail. Additionally, we have plans for increased international penetration with Donna Karan, as we begin testing products in Europe with a careful approach to full-price channel distribution. Similarly, Karl Lagerfeld has experienced significant growth this year, especially as we focus on expanding the men's line in North America for calendar 2026.
In response to your question about organic growth opportunities, all our brands possess considerable potential for organic expansion. This strategy has helped us manage the impacts of PVH givebacks, and we are not feeling pressured to seek acquisitions or new licenses at this time, as our existing assets have ample room to grow without margin pressure. Thank you, Dana. With that, I thank you all. I wish you all happy holidays, and thank you for your time and your support of our company.
This concludes today's conference call. Thank you for participating, and you may now disconnect.