G-III Apparel Group was feeling some pressure in the fourth quarter.
The Saks Global bankruptcy led to $17.5 million in bad debt expenses as well as another $45 million in noncash impairment charges. And the company is in the middle of exiting the licensed Calvin Klein and Tommy Hilfiger businesses with onetime bestie PVH Corp.
But Morris Goldfarb, chairman and chief executive officer, told WWD that it was “a reasonably good quarter” and that the company he’s led for more than 50 years is ready for whatever comes next — the complete exit of the PVH brands, fallout from the war with Iran or something else.
“I don’t know that it could get much more difficult than we’ve faced in the last four or five years,” Goldfarb said. “I don’t know what else could be thrown at us. So we weathered the storm through COVID. G-III’s weathered the storm of losing 60-some odd percent of our business [in the PVH breakup]. So not too concerned, this is a good army [at G-III]. We’ve got very bright, calculated people in managing a business and they’re responsive when something just comes out of the woodwork.”
The company’s net income for the fourth quarter totaled $31.9 million and compared with net income of $48.8 million a year earlier. Sales for the three months ended Jan. 31 decreased 8.1 percent to $771.5 million.
Adjusted earnings per share came in at 30 cents, below the 59 cents analysts projected, according to Yahoo Finance.
That capped a year when net profits totaled $67.4 million and sales fell 7 percent to $2.96 billion.
The relaunched Donna Karan delivered roughly 40 percent growth and what the company described as “strong profitability from healthy AURs and sell-throughs.” The brand has 1,900 points of distribution in North America.
Karl Lagerfeld, which has 3,000 points of distribution in the region, grew in the high single digits.
This year, G-III is projecting slower growth as the company’s Saks Global business, which was always off-price-heavy, wanes and the business with PVH finally winds down.
G-III expects sales will fall 8 percent to $2.71 billion this year, incorporating the loss of $470 million of sales from Calvin Klein and Tommy Hilfiger.
Diluted earnings per share are slated to range from $2 to $2.10 — a good deal off the $2.93 Wall Street was forecasting.
The company is cutting back on some of its costs as the PVH licenses are phased out, identifying $25 million in run-rate savings that will be realized across its supply chain, organizational structure and discretionary expenses.
But Goldfarb doesn’t want to cut back too much as he’s looking to buy more brands to power the business higher.
“We’re a little top-heavy on [selling, general and administrative expenses], but SG&A can be affected immediately by laying off your people and giving up space,” Goldfarb said. “But when you’re G-III and you know inevitably you’re going to replace the PVH assets — if it’s not today, it’ll be tomorrow — you want your talent pool here. If you let them go, you’re likely to lose them and there’s no recapture. Effectively, they’re too good to lose.”
Goldfarb said the company could have identified $100 million in cost savings instead of just $25 million, but maintained, “We’re not in crisis. We have sufficient cash to execute our needs and even more than our needs, our dreams. We’re sitting with over $400 million in cash and another $700 million of availability untapped.”
What the plan for all that money?
The CEO said he’s looking at brands in the sports sector, having just signed licenses with Champion as well as Converse. G-III also recently signed a license with French Connection and Goldfarb said he’s looking at other contemporary brands.
“Every day there’s some sort of an opportunity and we have not found the perfect fit yet, but I assure you we will,” he said. “We’ve got people, we integrate companies well. We’ve shown that. We’re not new on the acquisition side, so the right deal will come our way.”
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