Morris Goldfarb on Changing With the Times at G-III
The ceo of the company, which posted solid first-quarter gains, has changed its business model “probably a dozen times” to keep up with shoppers.
G-III Apparel Group’s ongoing evolution — the integration and expansion of Donna Karan — is just the latest in a long series of changes that have helped the company transform from a leather company into an international player.
“In troubled times the great companies step up, they’re not passive, they create better product, they create better value,” Goldfarb told WWD in an interview Tuesday. “I think we’re finding the product is more attractive to the customer. We’ve all realized you can’t just be passive and expect the best, you have to do the best. When we were solely a leather company, if we sat back and said, ‘This is what we do, this is all we ever do,’ It’s not likely that we would be here today.”
Goldfarb, who’s been an executive at G-III and its predecessors since 1974, knows transformation and clearly likes the kind of change he’s seeing today with an improving economy, job gains, tourists coming back into the U.S. and a rebound at Donna Karan, which the company bought for $650 million in late 2016 from LVMH Moët Hennessy Louis Vuitton.
On a call with Wall Street going over first-quarter results, the ceo noted, “This company has changed its model probably a dozen times in my career.”
G-III’s net income totaled $9.9 million, or 20 cents a share, for the quarter and compared with year-ago losses of $10.4 million, or 21 cents. Sales for the three months ended April 30 increased 15.6 percent to $611.7 million from $529 million.
The company’s wholesale business drives results in the quarter with double-digit gains from both Calvin Klein and Tommy Hilfiger, which are operated under a license from PVH Corp. G-III’s retail operations are paring back with plans to close a total of
105 of the 350 stores that were open at the beginning of the last fiscal year by the end of January 2019.
The DKNY and Donna Karan businesses are starting to see stronger performance and expand, including through licenses with The Estée Lauder Cos. Inc., PVH, HanesBrands Inc. and Fossil Group Inc.
“The development of scale in our business will also be important and we’ve begun to see this benefit as our net sales of DKNY and Donna Karan product doubled in the quarter,” Goldfarb said on the call. “We launched DKNY dresses this spring and we’re satisfied with the launch performance. Additionally, we launched DKNY luggage in approximately 200 Macy’s doors. Although a small business, it extends the brand into an additional lifestyle category that broadens our customer base for the brand.”
The designer business is set to add $140 million in sales this year to hit a total of $400 million and be slightly profitable after logging a $25 million loss last year.
“We didn’t have a time horizon of five or six years,” Goldfarb said in the interview. “LVMH’s pockets are far deeper than ours and their outlook on luxury is very unique, very successful. Our way seems to work differently, but it does work. I think we were better suited for an American brand then they were.”
As for another acquisition, the ceo said, “We have plenty of organic growth in this company,” but also added that he would look at opportunities.
In the meantime, G-III is now looking for sales this year of $2.97 billion, where previously it projected a topline of $2.94 billion. Profits expectations were also upgraded to a range of $112 million to $117 million, up from $97 million to $102 million.