G-III Apparel Group’s rebound strategy is paying dividends — or at least it’s about to.
While the company continues to work through the transition of the Calvin Klein and Tommy Hilfiger licenses back to PVH Corp. — and feels the pain of that on the top line — Morris Goldfarb, chairman and chief executive officer, has solidified the group’s financial profile.
Third-quarter earnings were down, but well ahead of analysts’ estimates, the company has cut its debt load by 95 percent from a year ago and, for the first time ever, it is going to start paying a dividend.
Shoppers are hanging on pretty well too — better than many expected.
“The consumer is spending. You give them product that has value, you give them fashion, they’re out there buying,” Goldfarb told WWD. “We are not seeing a lack of interest.”
Third-quarter net income slipped 29.8 percent to $80.6 million, but adjusted earnings per share came in at $1.90 — 29 cents ahead of the $1.61 forecast by analysts, according to FactSet.
The bottom line took a $2.4 million hit from “professional fees related to a potential strategic opportunity that did not come to fruition.”
While that “strategic opportunity” was not revealed, sources pointed to the company’s work to pick up some Marc Jacobs business had Authentic Brands Group’s talks to buy the brand from LVMH Moët Hennessy Louis Vuitton not fallen through last month.
G-III’s had luck with former LVMH brands before, having bought Donna Karan and DKNY from the luxe powerhouse in 2016.
DKNY is now the company’s largest business and the more elevated Donna Karan has helped G-III make up some ground lost as the relationship with PVH frayed.
G-III’s net sales for the quarter ended Oct. 31 fell 9 percent to $988.6 million.
In just under two years, the company has taken the Donna Karan business from the back burner to about 1,700 points of distribution at wholesale, with 200 more planned by spring.
The brand is expected to show 40 percent growth this year, with accessories picking up momentum with average unit retail prices approaching $500.
“Donna Karen is doing great scale-wise,” Goldfarb said “It hasn’t reached the level that we believe it will reach, but it exceeded expectations for being in business less than two years with the brand, building the brand in record time, accessing the archives, getting the cooperation of our entire team on developing product, sourcing it efficiently, bringing it to market.”
Hailey Bieber for DKNY.
Courtesy G-III
Elsewhere in the portfolio:
- DKNY has grown into the company’s biggest and most important business, fueled by a big marketing campaign led by Hailey Bieber.
- Karl Lagerfeld, which G-III also owns, is establishing itself more and more on its own since the designer died in 2019. Goldfarb said the business has probably doubled over the past six years. “We didn’t want to radically change what he stood for,” the CEO said of his company’s relationship with the iconic designer. “We communicated with him on directions that we took and we steered away from Chanel and Fendi. Today, there’s less caution in the wind.”
- G-III’s own retail business is “a minute away from profitability,” according to Goldfarb. “There’s a lot of growth. Once we’ve got the model right, we have the CapEx capability of expanding door count very quickly. What’s kept us back is the model was never right.”
- And there’s G-III’s licensed businesses with Converse, Champion, Levi’s, BCBG and many other brands.
The third quarter was strong enough for the company to boost its outlook for the full year.
Adjusted earnings per share are now slated to hit $2.80 to $2.90, up from the $2.55 to $2.75 the company previously forecast. Sales are slated to fall 6.3 percent to $2.98 billion.
The company estimated that the gross impact of tariffs for the year will be about $135 million, about $65 million of which was offset by “vendor participation, strategic sourcing shifts and targeted price increases.”
G-III has fared better than many feared since PVH decided to take back its Hilfiger and Calvin Klein licenses in late 2023, essentially walking away with half of its business over time.
At its peak, G-III’s Calvin Klein and Tommy Hilfiger businesses represented a total of over $1.5 billion in annual wholesale sales. But this year, they’ll be roughly $800 million and are phasing out completely.
G-III has replaced about 70 percent of what’s been lost so far.
And Goldfarb is continuing to make up the difference.
Marc Jacobs might have fallen through, but Goldfarb said he’s close to signing another license soon and has the balance sheet to make an acquisition.
“We have the capital to buy back,” the CEO said. “We have the capital to acquire companies, grow companies, work on systems improvements, which are not capital-light. And in spite of all that, we thought the prudent thing to do is remind our shareholders that we’re around and we think of them and we will have, for the first time ever, any sort of dividend. I think that speaks to comfort and strength.”
The company’s board approved a quarterly dividend of 10 cents a share, opening the door to some of the big stock investors that are mandated to only invest in companies that pay dividends.
