G-III Plans Donna Karan Expansion, Signs Nautica License
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G-III Apparel Group is preparing to move on from Tommy and Calvin with Donna and Nautica.
The company — which faced the prospect of losing half of its sales when PVH Corp. decided last year to transition out of licensing deals for its Tommy Hilfiger and Calvin Klein businesses — on Thursday laid out two new initiatives that will help it adjust.
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While releasing fourth-quarter results, which included losses driven by an impairment charge, G-III said it planned to expand on its small Donna Karan business and that it had also picked up a license for Nautica from Authentic Brands Group.
“Donna Karan and Nautica are two of the most recognized American lifestyle brands with significant opportunity in the women’s space,” said Morris Goldfarb, G-III’s chairman and chief executive officer, in a statement. “Our track record of having successfully grown major brands to more than $3 billion in net sales today gives us confidence in our ability to unlock the potential of both Donna Karan and Nautica.”
G-III bought Donna Karan in 2016 from LVMH Moët Hennessy Louis Vuitton. Donna Karan remained small while the spotlight shined on DKNY, which G-III repositioned and relaunched, building a roughly $600 million business.
That wasn’t necessarily the initial intent.
Goldfarb told analysts on a conference call on Thursday: “We were in a thought process of creating a halo brand out of Donna Karan and doing pretty much what many companies do. They take the halo piece and create derivatives out of it in the future. And the halo generally is an expense. It’s not a profit-making situation.”
After interviewing designers and considering spending $20 million to $25 million on the project, Goldfarb noted, “We stepped back and said, ‘No, we don’t need that halo. We’ll just softly launch Donna Karan, brought down from designer to the opening price points for Saks and Bloomingdale’s and Nordstrom.
“We’ve kept it alive in the small scale with the knowledge that if something happened with Calvin Klein, it would be a great brand to supplement our business and position a notch lower than it is now,” the CEO said. “So that is the strategy.”
It’s a strategy that he expects to pay off relatively quickly.
“We believe long term, it’s easily a $500 million business,” Goldfarb said. “And that’s not even long term. I would say that’s probably around three years from now, three to four years. And beyond that, it’s a $1 billion brand. There’s no question.”
While Donna Karan is not as big as Calvin Klein, it has the potential to be a more profitable business for G-III since it won’t have to make royalty payments to use the brand.
But licensing is still clearly part of the picture at G-III.
The company’s new five-year deal for Nautica starts in January and includes three extensions for five years each. G-III will start with a number of categories, including jeans, and then branch out into Nautica sportswear, suit separates and dresses.
“The odds are stacked in our favor to make this a very, very important brand in our portfolio,” Goldfarb said. “We’ll ship product at the beginning of calendar 2024. And we’ve got support from our existing partners, our retail partners. So no reason that this brand can’t be a significant piece of G-III’s business.”
In revealing the deal, G-III reported fourth-quarter net losses of $261.1 million, which included a non-cash impairment charge of $291.5 million, and compared with year-ago earnings of $48.4 million.
Adjusted earnings came in at 41 cents, slightly weaker than the 43 cents analysts projected and down from $1.06 a year ago.
Net sales for the quarter ended Jan. 31 rose 14.2 percent to $854.4 million.
This year G-III expects to drive sales of $3.23 billion — flat with last year.
Shares of the company slipped 1.3 percent to $15.27 on Wall Street.
The company also revealed that it spent $25 million on a couple digital opportunities.
Goldfarb clarified that G-III invested in a “pure-play aggregator of digital businesses” that is made up of “four unique situations,” which are all profitable.
Additionally, he said: “We own a stake in Saks Off 5th’s digital business, as was negotiated with Saks a couple of years ago. It’s almost two years at this point. That’s tucked into that dollar value as well.”
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