Shares of G-III Apparel Group Ltd. (GIII) took a sharp dive on Thursday. The reason? A fourth-quarter earnings report that landed with a thud, missing expectations on both profit and sales, coupled with a soft outlook for the year ahead that left investors wanting more.

Let's break down what happened.

The Numbers That Spooked the Market

For the quarter, G-III reported adjusted earnings of 30 cents per share. That's a problem when analysts were expecting nearly double that—59 cents per share. Sales came in at $771.5 million, which was down 8.1% from the same period last year and also missed the Street's estimate of about $792 million.

The profitability picture wasn't any prettier. Gross profit fell to $285.5 million from $331.6 million a year ago. More strikingly, the company swung to an operating loss of $29.09 million, compared to an operating profit of $71.77 million in the prior-year quarter. That's a swing of over $100 million in the wrong direction.

The One-Two Punch: Saks and Tariffs

So, what went wrong? On the earnings call, CFO Neal Nackman pointed to two main culprits.

First, there was the bankruptcy of Saks. "Relative to our guidance, sales results were negatively impacted by approximately $20 million as we stopped shipments to Saks in December ahead of the bankruptcy filing," Nackman said. In plain English, a major customer went under, and G-III was left holding the bag for $20 million in lost sales.

The second issue was tariffs. "Fourth quarter gross margins were 37% compared to 39.5% in the previous year, reflecting the negative impact of tariffs, which was the largest quarter impacted for the year," Nackman explained. The tariffs ate into margins, though the pain was "partially offset by a favorable mix shift toward more full price sales."

On a slightly brighter note, the company managed its inventory down 3.8% year-over-year to $460.0 million. It also ended the fiscal year with a solid cash position of $406.7 million.

A Cautious Roadmap for the Year Ahead

If the past quarter was rough, the guidance for the coming year suggests management is bracing for more challenges.

For the first quarter of fiscal 2027, G-III expects both GAAP and adjusted losses per share—between 40 cents and 30 cents. That's notably worse than analyst estimates, which were looking for a loss of 14 cents on a GAAP basis and just 4 cents on an adjusted basis. First-quarter sales are forecast at $530 million, slightly above the consensus estimate of $525.12 million.

Looking at the full fiscal year 2027, the company projected GAAP earnings between $2.00 and $2.10 per share, and adjusted earnings in the same range. Both figures fall short of the Street's expectations, which were $2.75 and $2.99, respectively. The sales outlook of $2.710 billion is essentially in line with the consensus estimate of $2.707 billion.

Chairman and CEO Morris Goldfarb framed the year as one of transition. "Looking to fiscal 2027, we are building on the momentum of our go-forward portfolio, which we expect to deliver high-single digit growth for the year, helping to offset the significant lost sales as we exit the Calvin Klein and Tommy Hilfiger businesses," he said.

He added that the focus is now on "driving gross margin expansion while streamlining our cost structure to unlock productivity and profitability across the business."

Part of that streamlining involves cost-saving initiatives. Management expects these efforts to generate run-rate savings of about $25 million, but not until fiscal 2028.

Investors reacted swiftly to the news. G-III shares were down 10.47% at $26.47 at the time of publication on Thursday.