G III APPAREL GROUP LTD /DE/ (GIII) stock intrinsic value fair value estimate & owner earnings analysis

G-III designs and sources apparel and accessories and sells them mainly to department stores and off-price chains. Macy's (including Bloomingdale's) took 20.6% of fiscal 2026 sales, TJX 11.4% and Ross 11.0%, and the ten largest customers took 67.6%. The company sells brands it owns outright (DKNY, Donna Karan, Karl Lagerfeld, Vilebrequin, G.H. Bass) and brands it licenses (Nautica, Halston, Champion, Converse, BCBG, team-sports apparel, and French Connection from fiscal 2027). Its fiscal year ends January 31. The defining fact today is the loss of its biggest licenses. Calvin Klein and Tommy Hilfiger products were 28% of fiscal 2026 sales, and those licenses expire in stages: $436 million of sales lapsed December 31, 2025, $372 million lapses December 31, 2026, and $19 million lapses December 31, 2027. G-III and PVH, which owns both brands, are also suing each other over the women's suits license. G-III's own fiscal 2027 sales outlook is about $2.71 billion, against $2.96 billion in fiscal 2026 and $3.18 billion in fiscal 2025. How we measure earnings. We start from operating cash flow and remove working-capital swings, which are very large here. In fiscal 2023 the company built about $306 million of inventory and receivables, and in fiscal 2024 it released $345 million. We subtract stock compensation and the capital spending needed to maintain the business (capex has run about 1% of sales). Non-cash write-downs are added back: the fiscal 2023 Donna Karan impairment and $48.6 million of fiscal 2026 impairments, mostly investments hurt by the Saks bankruptcy. Rent is treated as an operating cost. On this basis, cash earnings before lenders over the last ten years were roughly $93M, $131M, $206M, $206M, $107M (the 2020 shutdown year), $289M, $196M, $231M, $235M and, in fiscal 2026, $131M. Interest is now negligible because the company has carried almost no debt since fiscal 2025. The middle of that record, about $200 million a year, describes a business that no longer exists: it included roughly $800-900 million a year of Calvin Klein and Tommy Hilfiger sales. So we anchor on what is left after the transition rather than the ten-year median. The post-license level. Fiscal 2026 produced $131 million with the first license tranche gone for only one month and tariffs costing roughly 200 basis points of wholesale margin. Two more corroborating quarters are now in hand. Gross margin was 45.7% in the first quarter excluding the tariff refund and 45.2% in the second, against 40.8% a year earlier, which management attributes to price increases and the shift toward owned brands. The company's own non-GAAP outlook implies about $95 million of cash earnings for fiscal 2027, and that year still contains most of the $372 million tranche expiring this December. Taking out that tranche at a mid-to-high single-digit contribution margin, we set the base case at about $80 million in fiscal 2027, then $78 million a year once the licenses are gone, or about $1.75 per share. That is a fall of roughly 39% from fiscal 2026's $131 million. It is a smaller decline than the 44% drop from fiscal 2025 to fiscal 2026, because fiscal 2026 absorbed tariff costs that the higher pricing in the first two quarters and the refund now offset. What we credit and what we do not. We credit no organic growth. New licenses (Converse, BCBG, French Connection), owned-brand expansion and international growth all depend on things that have not yet happened at scale, and management's targets are not evidence. After year ten we fade earnings by 3% a year in the base case. This is a wholesaler whose brands need constant reinvestment and whose largest customers keep shrinking: Macy's plans to close 150 stores through 2028. Its record of brand write-downs (Donna Karan, Sonia Rykiel, the Saks-related investments) shows that owned brands are wasting assets unless renewed. On those terms the operating business is worth about $1.05 billion. Marc Jacobs and the balance sheet. On September 1, 2026, G-III and WHP Global closed the roughly $925 million purchase of Marc Jacobs from LVMH. G-III paid about $500 million from cash and its revolving credit line. It owns 50% of the joint venture holding the brand's trademarks, owns and runs the operating business, and holds a long-term license from the joint venture. Marc Jacobs' revenue and profit have not been disclosed, and management expects the deal to reduce earnings for its first twelve months. So we value it separately rather than inside the earnings stream: about $300 million in the base case, roughly 60% of what G-III paid. This credits the half-share of a trademark that earns licensing royalties, not management's $1 billion long-term revenue target. On July 31, 2026 the company held $529 million of cash against $7.8 million of debt. After the Marc Jacobs payment that leaves roughly $20 million of net cash. A further $103 million pre-tax ($78 million after tax) refund of tariffs paid under the International Emergency Economic Powers Act has been booked as recoverable. We credit it in the base and bull cases but not in the bear case. Operating leases of about $333 million are already paid inside the cash flows above and are not deducted again. The base case is a business worth about $1.05 billion, plus $300 million for Marc Jacobs and about $98 million of net cash including the refund, with essentially nothing owed to lenders: about $1.44 billion, or $32.58 per share on 44.3 million diluted shares. Bear case: $17.40 per share. The licensed business disappears on schedule and the owned brands do not fill the gap. We add one full downturn of the kind this company has actually lived through. In the 2020 shutdown its sales fell 35% and its cash earnings fell from $206 million to $107 million. Starting from today's smaller base, we model two years at about $30 million in fiscal 2029 and 2030, recovering only to $50 million. The downturn coincides with further department-store consolidation and the loss of shelf space at a 20%-of-sales customer. After year ten, earnings fade 5% a year. The business is worth about $600 million, the Marc Jacobs stake about $150 million (the trademark half-share only), and net cash about $20 million, with no tariff refund. That gives roughly $770 million and nothing material owed. Even the trough years cover the company's tiny interest bill. If the revolver balance used for Marc Jacobs is larger than we estimate, the bear case is lower by roughly $0.23 per share for every $10 million. Bull case: $44.22 per share. The higher owned-brand margins seen in the first half of fiscal 2027 persist and the new licenses carry their share. Cash earnings hold near $95 million and settle at about $100 million, close to what the business earned in fiscal 2018 on similar sales, then fade 2% a year after year ten. Marc Jacobs is valued near its $450 million purchase-price share, and the tariff refund is collected. That gives about $1.41 billion for the business, $450 million for Marc Jacobs and $98 million of net cash: roughly $1.96 billion with no debt. We do not credit Marc Jacobs reaching $1 billion of sales, because nothing in the filings yet shows it can. Change since our previous analysis. Since our September estimate, the Marc Jacobs purchase has closed and the second quarter has reported higher margins and a seasonal cash build. Our earlier figures were built on a different basis and are not directly comparable. Previously we gave no value to Marc Jacobs and treated the purchase as consuming all surplus cash. Now that the terms are known, we value the half-share of the trademark and the operating business separately, at well below what was paid. Margin-of-safety price. We are moderately sure of the post-license earnings level. It is not yet a year the company has reported: fiscal 2028 will be the first clean year without Calvin Klein and Tommy Hilfiger. Two strong quarters of margin are encouraging, but part of that margin is pricing set against tariffs that may change again. The worst plausible outcome is a broad retail downturn that hits while the owned brands are still being built and Marc Jacobs is still losing money, with Macy's or an off-price chain cutting orders sharply. The structure survives this. There is almost no debt, inventory is mostly branded goods that can be cleared through the company's own off-price relationships, and fixed costs are mainly leases and staff that can be cut, as in 2020. The things we are most likely to be wrong about are the post-license earnings level and what Marc Jacobs is worth. If the business settles at $60 million rather than $78 million and Marc Jacobs proves worth only its trademark share, the shares are worth about $22. Add a downturn and they fall to the high teens. The price assumes a three-to-four-year holding period for value to show, through fiscal 2028 when the licensed business is fully gone. Meanwhile the company pays about $0.40 per share a year in dividends and has been buying back stock. The margin-of-safety price is $16. At that price, even the bear case gives a small cushion. If the base case plays out over about four years, it implies roughly 20% a year including dividends. The plausible downside of the $60-million-plus-downturn path implies little or no loss from that price. The bull case adds upside the price does not depend on.