Shares of the owner of the Marc Jacobs and DKNY brands plummeted. How did he disappoint investors?

Shares of the fashion conglomerate G-III Apparel Group, which owns the Marc Jacobs, DKNY, and Donna Karan brands, among others, plummeted 11% on September 2, and its market capitalization fell to $1.2 billion. The company reported quarterly revenue that fell short of Wall Street’s expectations. G-III’s full-year forecast anticipates a further decline in revenue due to losses incurred by its Calvin Klein and Tommy Hilfiger brands.

G-III shares fell 11.5% on the Nasdaq on September 2, to $28.47. This is the lowest level since mid-May.

The company reported that for the second quarter of fiscal year 2027, which ended on July 31, its net revenue declined 10% year-over-year to $554.1 million. Wall Street, like the company itself, had expected this figure to be $570 million.

Actual revenue fell short of forecasts due to lower-than-expected sales in Europe, G-III CEO Morris Goldfarb said during a conference call with analysts (transcript provided by GuruFocus). This is due, among other things, to a sharp decline in cargo volume and macroeconomic weakness, he said.

On the stock market, the decline in quarterly revenue even overshadowed the increase in profitability, notes the StockStory portal. For the quarter, net earnings per share came in at $0.26, exceeding analysts’ consensus estimate of $0.23.

Revenue forecasts also turned out to be disappointing. Based on third-quarter results, G-III Apparel Group expects this figure to decline by approximately 12% year-over-year, to $870 million. The Wall Street consensus estimate is $898.9 million, according to Yahoo Finance.

According to the press release, annual revenue will decline by more than 8% to $2.71 billion. This figure includes a loss of approximately $460 million from sales of products under the Calvin Klein and Tommy Hilfiger brands. For a long time, the conglomerate manufactured and sold these products under license from PVH. However, in 2022, the parties agreed on a phased return of the brand rights to the conglomerate.

However, G-III did not include the financial results of the Marc Jacobs brand—which it acquired from the LVMH fashion house in a deal that was not finalized until September 1. The company expects this brand to generate more than $1 billion in revenue in the long term.

Since the beginning of the year, G-III prices have fallen by 1.6%.

Two Wall Street analysts recommend buying the stock, and one recommends holding it. The average price target is $39.33, which is 38% higher than the most recent closing price.