G-III Apparel Group, LTD. (GIII)

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G-III Apparel Group, Ltd. (GIII)

F2Q10 Earnings Call

September 3, 2009 4:30 pm ET


Neal S. Nackman - Chief Financial Officer, Treasurer

Morris Goldfarb - Chairman of the Board, Chief Executive Officer

Wayne S. Miller - Chief Operating Officer, Secretary

James Palczynski - Investor Relations


Todd Slater - Lazard Capital Markets

Jim Duffy - Thomas Weisel Partners

Mimi Barto - Telsey Advisory Group

Edward Aruma - Keybanc

Eric Beder - Brean Murray, Carret & Co.



Good afternoon, ladies and gentlemen. Thank you for standing by and welcome to the G-III Apparel Group Limited second quarter 2010 earnings call. (Operator Instructions) I would like to turn the conference to Mr. Neal Nackman, Chief Financial Officer of G-III Apparel Group. Please go ahead, sir.

Neal S. Nackman

Thank you. Before we begin, I would like to remind participants that certain made on today’s call and in the Q&A session may constitute forward-looking statements within the meaning of the federal securities laws. Forward-looking statements are not guarantees and actual results may differ materially from those expressed or implied in forward-looking statements. Important factors that could cause actual results of operations or the financial conditions of the company to differ are discussed in the document filed by the company with the SEC. The company undertakes no duty to update any forward-looking statements.

In addition, during the call we will refer to EBITDA, a non-GAAP number. We have provided a reconciliation of our EBITDA numbers to our net income according to GAAP in our press release and on our website.

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

Morris Goldfarb

Good afternoon and thank you for joining us to discuss our second quarter results. With me today are Neal Nackman, our Chief Financial Officer, and Wayne Miller, our Chief Operating Officer.

We had a good second quarter. Our revenues for the quarter were $135 million, up 20% versus the second quarter of last year. Our revenue performance was driven by continued gains in dresses and sportswear. Both remain strong businesses for us, as well as net sales from our Wilson’s outlet stores which were owned for the whole quarter this year compared to 20 days in last year’s quarter.

Our net loss for the quarter was $0.17, a good performance compared to last year’s net loss of $0.23 per share. Please keep in mind that we only had 20 days of Wilson’s losses last year as compared to a full quarter’s normal seasonal loss this year.

Our order book is consistent with our expectations and we are currently booked at about 90% to plan, which is comparable to this same time last year. In general, we have posted good results and positioned both our wholesale businesses and our Wilson’s outlet retail stores for the upcoming fall and holiday season with what we think is the right mix and the right level of inventory.

The dress category is one of the hot categories at retail today. Our Calvin Klein dresses continue to increase their penetration in the marketplace as the line exceeds expectations for us and our retail partners. Our Jessica Howard dress line is also exceeding expectation. We believe we are on the right track with the design and placement of the Jessica Simpson dress line and are seeing door expansion for holiday and spring. The fall line was showcased in several windows at Macy’s Harold Square.

Our sportswear business is also strong and our first year of Calvin Klein sportswear, we will also exceed our initial expectation. The line is selling well and we are growing both by increasing our turn in existing doors and through penetrating more doors. For all of 2009, we expect to be in over 300 doors versus only 150 last fall.

Sell-through, margin and door count are the profit drivers of this business and we are pleased with each one of them.

Overall, our outerwear business is healthy. We have some excellent properties and although there continues to be some softness in sales and in orders for private label and the luxury brands, the business is very diversified and therefore we believe we will perform well again this year.

Highlighted brands which have booked especially well are Calvin Klein, Mark New York, Guess, and Kenneth Cole.

Additionally, in our Andrew Mark business, we are continuing to build the outerwear business and we are bringing the dress collection for Mark New York into select distribution through this fall.

We have made very good progress in using the Mark New York label to appeal to a wider audience. We’ve expanded our range of price points to give consumers a lower entry point and an excellent value.

We’ve increased our penetration in department stores. We are protecting the integrity of Andrew Mark label, which we expect to have a more challenging season because of its luxury position. We will continue to maintain its premium reputation and preserve growth and licensing opportunities.

We’ve made significant changes in our Wilson’s outlet retail operation, which should favorably impact second half results. We have reconstructed the merchandising of the Wilson stores to match our vision of what that concept should be. We have shifted in more leather with the strong assortment of private label. We have improved the margin structure and focused on better initial markets. Recent results, which reflect this new position are validating these changes. I believe our organization across the board has adapted to the pressures of today’s retailing environment. We’ve focused on delivering great product at the right price point and margin structure. We believe we will demonstrate excellent value to consumers in each tier of distribution for this fall and holiday season. We have streamlined our infrastructure, increasing efficiencies in some areas while investing in growth in other businesses, particularly in the dress and sportswear area, which we consider major opportunities over the long-term.

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