G- III Leaning More On Donna Karan After Split With PVH
CEO Morris Goldfarb turned in better fourth-quarter earnings and said the company is bouncing back even though sales were weaker than expected.
Morris Goldfarb is bouncing back with Donna Karan — and some tricks that his G-III Apparel Group picked up from former bestie PVH Corp.
G-III took a body blow in late 2022 when PVH decided to take its Tommy Hilfiger and Calvin Klein businesses back in house over a number of years, and walk away with what was about half of G-III's sales.
The group did a fair bit of scrambling last year to make that up, reawakening the Donna Karan brand, cutting a deal with Halston and taking on licenses for Nautica, Champion and more.
Now G-III is on a much easier glide path, with plans to grow revenues by 3 percent this year even with a tough consumer climate and the loss of hundreds of millions of dollars in sales of Tommy and Calvin looks.
“The consumer environment is not stellar,” said Goldfarb, who leads G-III as chief executive officer and chairman, in an interview with WWD. “But we are always looking at that as a measuring point to how we plan our business, how we are performing, but there are always winners. We bob and weave and we make it happen.”
That was the case in the fourth quarter.
Net earnings totaled $28.9 million — a big bottom-line bounce back from losses of $261.1 million a year earlier. Adjusted earnings per share rose to 76 cents, coming in 8 cents ahead of the 68 cents analysts had penciled in, according to FactSet.
But the top line didn't fare as well.
Sales fell 10.5 percent to $764.8 million, below company guidance as well as the $817 million Wall Street expected.
G-III said the top line was “impacted by warmer weather as well as the consumer environment which remains challenging.”
Investors wanted a more and traded shares of the company down 12.1 percent to $26.67 on Wall Street.
This year, G-III is predicting sales will grow to about $3.2 billion from $3.1 billion last year. EPS is slated to slip to $3.50 to $3.60, down from $3.75 (or $4.04 on an adjusted basis).
“Bringing down several hundred million dollars of sales with PVH and simultaneously building our own brands and forecasting growth of 3 percent — in my mind that is a huge accomplishment,” Goldfarb said. “And the margins alongside of that are improving.”
About 60 percent of G-III's total sales last year came from its “go-forward” brands, with the proportion seen inching up closer to 70 percent this year.
But as G-III pushes more of its own brands, it's having to pay to build up those businesses and to handle the marketing responsibilities.
This year, $60 million is going into the launches of Donna Karan, Nautica and Halston. About 65 percent of that, or $39 million, is going to marketing to support Donna Karan and DKNY.
One of the company's most important initiatives, the relaunch of Donna Karan, just hit the sales floor in recent weeks backed by an ad campaign featuring supermodels Cindy Crawford, Linda Evangelista, Carolyn Murphy, Amber Valletta, Karlie Kloss and more that was shot by Annie Leibovitz. DKNY's marketing is following a similar high-profile path, featuring Kaia Gerber, Cindy Crawford's daughter.
G-III sees the brand as a $1 billion opportunity over time.
“We're not making a couture brand,” Goldfarb said. “We're making a brand that is affordable, in tune with many people.”
It's a launch that PVH helped push along in a way, by making it something of a necessity when it took back Tommy and Calvin and by giving G-III a big fashion marketing lesson — delivered almost by osmosis as the two worked together over the years.
“Whatever innate feelings that we have with PVH, we accomplished both financial rewards as well as many learnings that we're going to capitalize on,” Goldfarb said. “I'd say we took a page from their book. We're doing the same with DKNY.”
G-III has also been creating a broader base for its business.
“There's been a serious effort into building our business globally,” the CEO said. “As a licensee, we were confined to North America for PVH.
“There's nobody like us in Europe, so we're taking an aggressive stand in building the European business,” he said. “We're fine-tuning what we do in Southeast Asia and we're building relationships with distributors and franchisees and agents pretty much throughout the globe.”
And the portfolio, which also includes brands like Karl Lagerfeld and Vilebrequin, could continue to grow.
“Yes, there's more to come,” Goldfarb said when asked about future acquisitions. “Is it tomorrow? Maybe. Then again, it may be six months or a year down the road.”
G-III is said to be interested in Champion, a brand HanesBrands Inc. is selling and one that G-III already does business with under license, but Goldfarb declined to comment on the speculation.