G-III Apparel Group, LTD. (GIII)

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G-III Apparel Group Ltd. (GIII)

F2Q09 Earnings Call

September 9, 2008 4:30 pm ET


Morris Goldfarb - Chairman, Chief Executive Officer

Neal Nackman - Chief Financial Officer, Treasurer

Wayne Miller - Chief Operating Officer, Secretary


Analyst for Eric Beder - Brean Murray

Jody Kane - Sidoti & Company

Susan Sansbury - Miller Tabak

Todd Slater - Lazard Capital

Jim Duffy - Thomas Weisel Partner



Welcome to the G-III Apparel Group second quarter earnings 2009 conference. (Operator Instructions) I’d like to turn the conference over to Neal Nackman, Chief Financial Officer of G-III Apparel Group.

Neal Nackman

Before we get started I want to remind you of the company’s Safe Harbor language. Some statements made today on the call are forward-looking statements as that term is defined under the Federal Securities Laws.

Forward-looking statements are subject to risks, uncertainties and factors which include, but are not limited to reliance on licensed products, reliance on foreign manufacturers, the nature of the apparel industry including changing customer demands and tastes, customer concentration, seasonality, customer acceptance of new products, weakness in the retail sector, risks related to the operation of a retail chain, the impact of competitive products and pricing, dependence upon existing management, as well as business disruption from acquisitions and general economic conditions, as well as other risks detailed in the company’s filings with the Securities and Exchange Commission. The company assumes no obligation to update information in this call.

I will now turn the call over to our Chairman and Chief Executive Officer, Morris Goldfarb.

Morris Goldfarb

With me today are Wayne Miller, our Chief Operating Officer and Neal Nackman our Chief Financial Officer. I will start with some of the financial highlights from the second quarter with Neal Nackman providing more details in a few minutes.

Net sales for the quarter were $113.5 million compared to $84 million in last year’s comparable quarter. The increase in net sales was due to the strength of our dress business and sales by our newly acquired Andrew Marc and Wilsons Outlet division. Our net loss for the quarter was $3.9 million compared to the year ago loss of $884,000.

This increase was primarily the result of the seasonal losses of the Andrew Marc business acquired in 2008 and the Wilsons Outlet Retail business acquired in July 2008. The loss was inline with our expectations. We’re excited about the strategic direction of our business. With the acquisition of Wilsons 116 outlet stores, we’ve realized one of our strategic milestones. Besides now having over $100 million outlet division Wilsons will be our foundation for future retail expansion.

The CEO that lead this change during it’s most successful years Joel Waller is now back to the home of Wilsons outlet stores. This acquisition fits directly into our core competencies and it will enable us to more quickly move forward with Andrew Marc retail size.

The purchase of Andrew Marc completes another of our long stated goals to own a brand, a multi-period national advertising campaign can be seen in both WGQ and the New York Times Style magazine. Our e-commerce website went live August 20, the time to take full advantage of our national campaign.

Our first license agreement was signed in June 2008 with the Camuto Group for Andrew Marc and Marc New York women’s footwear and this will launch in the fall of 2009. We believe that both Wilsons and Andrew Marc leverage our cost trends and better position us as a vertically integrated business providing us with new avenues for growth.

In addition to these acquisitions, we recently signed the women’s better sportswear license with Calvin Klein; this really maybe the largest opportunity yet with Calvin Klein. The strategic partnership we’ve developed with Calvin Klein and Phillips-Van Heusen is something that we’re really proud of. Calvin Klein is quite simply one of the world’s greatest brands. We currently produce outerwear for women’s and for men’s, dresses, women suits and women’s performance wear under the Calvin Klein brand.

We have proven that we can enter into new categories of products efficiently and we are confident we can execute in this same manner in the sportswear category. We’ve been able to utilize existing showroom space and again we were able to retain the best talent of the existing sportswear team to help in our transition and to startup this new category. A combination of the strength of the Calvin brand as well as designing and sourcing products and pricing it fairly for the consumer will be the right formula for success.

Lastly on the new initiatives for the current year, we are really excited about our newest tradition, Jessica Simpson dresses, license from the Camuto Group which will be in store for strength. The Camuto Group has done an incredible job in building the Jessica brand with huge successes in shoes, handbags and fragrance. The early response from our retail partners to our first dress line has been very positive and we believe we will be in a position to select the best stores to rapidly grow this business.

With respect to our core outerwear business, we’re excited about the up coming season. While we expect the challenging retail environment to continue, we received significant orders from all tiers of retail. We’re about 90% booked through our years plan and we’re positioned to achieve our years stated goal.

The consumer did buy in our products. We have the best brands including Calvin Klein, Andrew Marc, Guess, Kenneth Cole, Cole Haan and Sean John. Our concentrated focus by brand on appropriate design has always made us a leader of providing fashion. We execute at a high level in design, sourcing, manufacturing, quality control and in distribution. Our products were received early this year to enable us to meet the shipping requirement as we enter in the peak shipping season.

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