S&P downgrades G-III

S&P said it lowered its ratings for G-III Apparel Group Ltd. and its $400 million of senior secured notes to BB- from BB. It also revised the notes’ recovery rating to 4 from 3 due to the decrease in emergence enterprise value to reflect the negative effect from the expiring licenses and less favorable business growth prospects.

The downgrade reflects our less favorable view of G-III business and expectation for higher adjusted leverage post the license expiration with PVH. G-III has license agreements with PVH for Calvin Klein and Tommy Hilfiger across several apparel and accessories categories in North America. As part of PVH's recently announced brand elevation strategies, it is bringing its CK and Tommy brands in-house and out of the discounted retail channel,” the agency said in a press release.

The CK and Tommy business is worth about $1.5 billion in revenue and about $150 million in EBITDA, which represents about half of G-III's revenue and 40% of adjusted EBITDA for the past 12 months ended Oct. 31.

“While we do not expect a significant negative impact to G-III's revenue and EBITDA within the next three years, we expect the company will likely experience the effects starting in 2026. Therefore, we have a less favorable view of G-III's competitive position as it is losing two strong brands and a sizeable piece of its current business,” S&P said.

The outlook is stable.

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