G-III Apparel Group continues to move on.
The company — which nearly two years ago faced the prospect of losing half its business when PVH Corp. decided to pull back its licenses for Calvin Klein and Tommy Hilfiger — has scrambled to build back.
And according to second-quarter profits, the buzzy relaunch of Donna Karan and growth at Karl Lagerfeld (both owned brands), and a new license to make Converse apparel, G-III is succeeding.
Net income for the second quarter rose 47.3 percent to $24.2 million, or 53 cents a diluted share, from $16.4 million, or 35 cents, a year earlier. And adjusted earnings of 52 cents per share came in 25 cents ahead of the 27 cents analysts projected, according to Yahoo Finance.
Sales for the three months ended July 31 slipped 2.3 percent to $644.8 million, short of the $649.4 million penciled in by analysts.
Wholesale account for $620 million of the topline, with increased sales from the company’s owned brands offset by declines in the Calvin Klein and Tommy Hilfiger licensed businesses, which are still transitioning back to PVH.
DKNY saw a high-single-digit sales boost in the quarter, while Karl Lagerfeld logged a mid-teens increase and the Donna Karan relaunch, now in over 500 doors, saw strong sell throughs.
“We’re very happy with the results,” said Morris Goldfarb, G-III’s chairman and chief executive officer, in an interview with WWD. “We’ve achieved so much in a short period of time with so many hurdles.”
In addition to the operational and logistical challenges of replacing so much business (G-III expects 70 percent of its sales to be from its go-forward brands by the end of the year), the company is prevailing in a very tough U.S. wholesale environment.
“At the end of the day, there are winners and losers and, in a difficult environment, retailers focus on the opportunities for prosperity,” Goldfarb said. “I guess the dart board’s got us in the center. We achieved success for ourselves, we achieved success for the retailer and therefore that formula helps us prosper.”
The department store environment that G-III caters to in the U.S. has been in a state of dramatic flux. Macy’s Inc. is closing stores, Saks Fifth Avenue parent Hudson’s Bay Co. is buying Neiman Marcus and merging the two and, just on Wednesday, the Nordstrom family moved to take Nordstrom Inc. private.
“Change is not always a bad thing,” Goldfarb said. “There’s either new management, new ownership has a goal to out-achieve what prior management did. Maybe using Nordstrom’s as an example, there’s fire in their bellies right now. It looks like it’ll be a privately held company that the ownership has just a lot they’ve taken on and a lot to achieve.
“If you look at potentially Saks taking over Neiman’s, same thing,” he said. “People kind of get lazy in the same spot. The concern over the last few years for Neiman’s had been how to stay alive [with] financing intact. And maybe as all this levels out [with] more opportunity both for the vendors or retailer.”
Morris Goldfarb
George Chinsee/WWD
Goldfarb certainly seems pleased with the changes he’s made over the past couple years, even if it was need that pressed him to get moving.
“When we licensed Calvin and Tommy, we were limited to North America,” the CEO said. “We were limited solely to department stores and some off-price and specialty stores. When you own your own brand, you have the world and we’ve done a really nice job, not without a couple of hiccups, but the hiccups go away.
“Donna Karan today has got great distribution in North America, great sell-throughs in North America, has developed a broad range of clientele and we’ve done a nice job in Europe and the Middle East,” he said.
“We are who we are,” Goldfarb said. “You can lose a license, but you’re not losing your heritage or your way of life. That doesn’t go back. Clearly there’s significant value in the 70 years that this company has been in business. We retain that.”
For the year, G-III held on to its sales forecast — anticipating a 3 percent top line increase — and boosted its earnings outlook to a range of $3.94 to $4.04 a share, up from the $3.58 and $3.68 previously forecast.
The outlook continues to anticipate $60 million in incremental expenses, primarily to launch Donna Karan, Nautica and Halston. Nearly two-thirds of that money went into marketing to support the rollout of Donna Karan as well as DKNY.
