G-III is closing its Wilsons Leather and G.H. Bass stores, as it focuses on wholesale operations and its DKNY and Karl Lagerfeld Paris units.
In a Nutshell: G-III Apparel Group Ltd., in reporting a sizable decline in first-quarter sales and a net loss for the period that included the pandemic-effected months of March and April, also announced the restructuring of its retail operations.
The retail reorganization includes the closing of 110 Wilsons Leather and 89 G.H. Bass stores. G-III said it has hired Hilco Global to assist in the liquidation of these stores to begin immediately or as stores reopen.
In connection with the retail restructuring, the company said it expects to incur an aggregate charge of approximately $100 million related to landlord termination fees, severance costs, store liquidation and closing costs, write-offs related to right-of-use assets and legal and professional fees. A significant portion of these charges will be incurred during its second fiscal quarter ending July 31, with the cash portion of this charge to be approximately $65 million.
After completion of the restructuring, the company’s retail operations segment will initially consist of 41 DKNY and 13 Karl Lagerfeld Paris stores, as well as the e-commerce sites for DKNY, Donna Karan, Karl Lagerfeld Paris, Andrew Marc, Wilsons Leather and G.H. Bass.
“We believe that this restructuring plan will enable us to greatly reduce our retail losses and to ultimately have this segment become profitable,” Morris Goldfarb, G-III’s chairman and CEO, said. “Our wholesale business, anchored by our five global power brands–DKNY, Donna Karan, Calvin Klein, Tommy Hilfiger and Karl Lagerfeld–will continue to be the primary growth and profit engine for the company.”
G-III also said as the developments associated with the pandemic continue to be fluid, it is difficult for the company to forecast the impact on net sales, results of operations and supply chain for fiscal 2021. As a result, it is not currently providing any guidance.
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Sales: Net sales for the first quarter ended April 30 decreased 36.1 percent to $405.1 million from $633.6 million in the same period last year.
Earnings: The company reported a net loss for the first quarter of $39.3 million, or 82 cents per share, compared to net income of $12 million, or 24 cents per diluted share, in the prior year’s comparable period.
G-III posted an operating loss for the quarter of $43.27 million compared to an operating profit of $25.56 million in the 2019 period. Gross profit fell 47.3 percent to $124.4 million compared to gross profit of $236.06 in the year-ago quarter.
CEO’s Take: Goldfarb said: “G-III is an adaptive and agile organization with an entrepreneurial culture that keeps us flexible. These traits have allowed us to quickly make prudent decisions to preserve our liquidity. We took proactive steps in response to the COVID-19 outbreak. We reduced our inventory exposure, furloughed a large portion of our employee base, and implemented significant temporary reductions in pay for our senior management and employees. We are in a strong financial position. We believe we will demonstrate our leadership position in the fashion industry as we emerge from this crisis.
“Additionally, in another significant step, today we announced the restructuring of our retail operations, which we believe will enable us to reduce our losses and position this segment to ultimately be a profitable contributor to our business,” Goldfarb added. “Importantly, we operate a sizable wholesale business that has globally recognized brands that are in demand. Our wholesale segment ended fiscal year 2020 with over $2.86 billion in annual net sales. We have a great base to build upon and, along with a more streamlined retail operation, will create a strong foundation for our future.”