Morris Goldfarb, chairman and CEO of G-III, said on a call with analysts that at the end of fiscal 2019 on Jan. 31, the company had roughly 308 stores, down from 411 units a year earlier.
In the coming fiscal year, Goldfarb said G-III plans to close an additional 43 locations, which will leave it with a store fleet of approximately 265. The company is also in the process of converting about 10 locations to DKNY stores this year. Currently, G-III has 41 DKNY units and 11 Karl Lagerfeld stores.
“We are actively working toward additional conversions to DKNY and Karl Lagerfeld, as we continue to see significant upside operating performance from both nameplates,” Goldfarb said.
In January, the company hired Fran Della Badia, formerly head of North American retail at Coach, as president of retail to help transform the business. G-III operates stores under the DKNY, Wilsons Leather, G. H. Bass, Vilebrequin, Karl Lagerfeld Paris and Calvin Klein Performance names.
The DKNY and Karl Lagerfeld stores each had double-digit positive comp performance for the fourth quarter and full-year.
“We’ve taken a hard look at our back-office support functions and have already eliminated approximately $5 million of annualized expenses in salaries from our retail operation,” Goldfarb told analysts. “Fran and our merchant teams are very focused on merchandise offerings and are planning to make significant changes for the upcoming fall season. Our goal is to significantly reduce the losses in our retail business this year and we will take whatever steps are necessary to get there, including continued store closures, obtaining additional operating efficiencies and implementing further product design changes.”
Goldfarb said the first full-year of having control of DKNY and Donna Karan product in stores “was a big success.” Overall, he said the sales growth was led by DKNY, Tommy Hilfiger and Karl Lagerfeld.
“Calvin Klein, our largest and most profitable business, also had a very good year in spite of the loss of business due to the closing of Bon-Ton department stores,” Goldfarb added.
On Thursday, G-III reported net sales for the fourth quarter increased 7.3 percent to $766.8 million. For the full year, net sales rose 9.6 percent to $3.08 billion. Net income in the fourth quarter was $24.1 million compared to a net loss of $500,000 in the prior-year period. Net income for the year more than doubled to $138.1 million from $62.1 million in the prior year.
Discussing the wholesale businesses, Goldfarb said net sales for Calvin Klein products topped $1 billion. Calvin Klein’s fourth quarter performance was led by dresses, and men’s and women’s outerwear.
“On the heels of more than doubling our Tommy Hilfiger business in fiscal 2018, we registered significant sales growth of 45 percent in fiscal 2019,” he said. “Annual net sales are now approximately $400 million. Tommy did well in the fourth quarter with net sales growing by about 40 percent, led by dresses, sportswear, performance and outerwear. These results illustrate the powerful combination of our strong execution and expertise in design, merchandising, sourcing and selling combined with the marketing and brand management of our partners at PVH.”
The Karl Lagerfeld Paris brand capped off 2019 with fourth quarter net sales growth of 20 percent, which was driven by sportswear and handbags. For fiscal 2019, net sales grew more than 40 percent, are now in excess of $100 million.
“We are big believers in this brand, which we introduced the North American market in the beginning of 2016,” Goldfarb said, while paying homage to the designer, who died last month. “The momentum for Karl Lagerfeld continues and we see significant growth opportunities ahead for us over the next several years.”
Following the integration of the DKNY and Donna Karan brands and the successful launch of a wide range of categories, the businesses grew by more than 50 percent, according to Goldfarb, reaching $400 million in annual net sales. Fourth quarter business growth was led by handbags, shoes, sportswear and outerwear.
“This past year was the first full-year of our brand repositioning and distribution, and we’ve learned much about how we can continue to build this business going forward,” he said. “On the international front with DKNY, we are building good businesses with our distribution partners in the Middle East, Russia, Southeast Asia and [South] Korea. In China, a joint venture partner now has over 50 points of sale and continues to see meaningful growth opportunities. In Europe, we have over 700 points of sale in 36 countries and continue to expand our distribution into additional accounts.”
Licensing for DKNY and Donna Karan brands are not only profit drivers, he said, but an important way to expand their global presence through the introduction of additional lifestyle product categories. For example, the company recently executed a license for DKNY men’s underwear, lounge wear, swimwear and socks for Europe, the U.K. and Russia.
The spring DKNY campaign just kicked off with high-impact outdoor media units in key global cities, including New York, London, Toronto, Dubai and Mexico City, Goldfarb noted, adding that they the brand will continue to have print presence in core U.S and U.K. fashion and lifestyle publications and significant digital exposure. DKNY now reaches more than 5 million followers across social media channels.
“We will continue to invest significantly in the marketing and advertising of DKNY over the next several years,” Goldfarb told analysts. “Further, I’m excited to share the news of our collaboration of DKNY Sport with the major sports leagues to launch DKNY’s first ever women’s cobranded product capsule this spring…The distribution will include dkny.com, fanatics.com, the leagues e-commerce sites, Stadium Stores and Macy’s.”