G-III Finds a Way Forward, Building With Donna Karan and Boosting Q1 Earnings

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Morris Goldfarb is finding new retail territory to explore as he hits the accelerator on Donna Karan and his other brands, filling the void left as licenses for Calvin Klein and Tommy Hilfiger transition back to PVH Corp.
The effort is starting to pay off, even as the trade war scrambles the market and supply chains.
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G-III Apparel Group, which Goldfarb has led for more than 50 years as chief executive officer, saw first-quarter sales fall 4 percent to $583.6 million, but made up for it on the bottom line, with earnings rising to $7.8 million, or 17 cents a diluted share, from $5.8 million, or 12 cents, a year earlier. Adjusted earnings per share rose to 19 cents from 12 cents.
'I can't control the tariffs, but it's not unique to G-III,' Goldfarb told WWD in an interview. 'It's a global issue that nobody's got their arms wrapped around.' China, which is most impacted by President Donald Trump's trade war, will represent less than 20 percent of the firm's production by the end of the year, down from nearly 90 percent several years ago.
But Goldfarb said despite the tariffs, macroeconomics and some unfavorable weather, business is manageable.
'We are finding that price points are not an issue,' the CEO said. 'Our brands — Donna Karan and Karl Lagerfeld, particularly — have higher price points….They are unique, well-crafted, quality product and they're paying for it. There's no pushback at all. We're expanding the categories in Donna Karan and certainly further penetrating the categories that we've launched. We've found our way back into people like Nordstrom's and Saks and their full-price areas. Historically, we've not shipped pretty much any product from the PVH assets into full-price, Nordstrom's or Saks.'
G-III, which relaunched the Donna Karan business once PVH started to withdraw, sees the potential to grow the business up to $1 billion over the long run.
'There's a world that goes beyond the current distribution that we're penetrated in,' Goldfarb said. 'It's opened up a new field for us on our own acquired brands. We will be in approximately 50 doors of Nordstrom's full-price for Donna Karan. We have no distribution in the off-price channel, which is an attraction to people like Nordstrom's and Dillard's and even Macy's.
'We like that,' he said. 'It kind of inhibits a little bit of the top-line sales, but bottom line, if you look at the margins that we're attaining, they are significantly improved over the portfolio that we managed prior.'
G-III has also been strengthening its financial base. Total debt fell by 96 percent to $18.7 million after the firm redeemed $400 million in senior secured notes last year.
Given the uncertainy in the back half, the company pulled its profit forecast for the year, as many other companies have.
But G-III also reaffirmed its sales outlook at $3.14 billion, down slightly from $3.18 billion last year.
If the tariffs put in place held at their current rates, G-III said it would have an 'unmitigated cost' of about $135 million — a number the company would look to bring down with supply chain tweaks.
'We are shifting production into different countries,' Goldfarb said. 'We're making the best of what's retained in China through price concessions from our vendor base and some increased prices for our customers, our retail customers. And we're achieving some success doing that. And I guess maybe part of the advantage we have is the new brands that don't have established price points. We're not raising prices, we're establishing price points that work with reasonable margins.
'We're doing well and building market share and delivering the most amazing product on the floor,' he said. 'Those are good formulas for the future. And as we stabilize pricing, as our retailers and our customers and consumers get acclimated to our price points and the industry's price points, we will do well. I have no doubt that we'll do well. It might be a hiccup for a quarter, but it all goes away as the world levels out.'
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