Xcel, G-III Sign Licensing Pact on Halston
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Xcel Brands Inc. has signed a master licensing partnership with G-III Apparel Group Ltd. whereby G-III will design, produce and distribute all Halston categories and products.
G-III has options to renew the agreement after five years and purchase the Halston brand after 25 years. The deal involves an upfront cash payment in the second quarter of 2023, future guaranteed minimum royalties, and “significant” minimum net sale requirements.
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“The timing was right for us to either do a capital raise and keep going, or partner with someone like G-III that has a track record of building half billion to one billion dollar brands,” Robert W. D’Loren, chairman and chief executive officer of Xcel Brands, told WWD. “We felt that G-III was the best option for us and there was a need for them. So this is going to be a great collaboration.”
”Halston is an American brand with a rich legacy in fashion and we are proud to partner with Xcel to develop the brand to its full potential,” Morris Goldfarb, chairman and CEO of G-III, said in a statement released Tuesday. “We see great opportunity for the brand across multiple channels and geographies of distribution.”
G-III is scheduled to report its first-quarter results on Tuesday when its executives should also discuss plans for Halston. They were not available to discuss Halston at press time.
Licensing remains a significant part of G-III’s strategy. Earlier this year the company picked up a license for Nautica from the Authentic Brands Group, though last December G-III disclosed that licenses for Tommy Hilfiger and Calvin Klein’s women’s North American wholesale business would transition back to PVH Corp. by the end of 2027. PVH plans to bring the licenses in-house after the expiration date.
Goldfarb has told analysts he did not expect significant reductions in sales, net income and cash generation from the Tommy Hilfiger and Calvin Klein businesses for the next three years. The Halston opportunity could make up for some of the lost business from the Tommy Hilfiger and Calvin Klein transitions. G-III’s first deliveries of Halston product are expected for the fall 2024 season.
G-III reported a 2022 fourth-quarter net loss of $261.1 million, which included a non-cash impairment charge of $291.5 million, compared to year-ago earnings of $48.4 million. Adjusted earnings came in at 41 cents, 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 sales of $3.23 billion, which would be flat with last year.
At Xcel, “We have invested close to an additional $10 million into Halston over the last three years above what we paid for it to build relevancy and premium distribution,” to Bergdorf Goodman and Bloomingdale’s, D’Loren told WWD. The Halston distribution is also growing with Macy’s and other similarly positioned retailers, he said. Halston also sells at Saks Fifth Avenue, Neiman Marcus, Nordstrom and on the brand’s website.
Xcel purchased Halston in two tranches, in 2014, when the H by Halston and H Halston diffusion labels were bought, and in 2019 when the Halston and Halston Heritage brands were bought. The total price was about $40 million.
Ken Downing, creative director for Xcel and Halston, will continue as such. “He will be advising G-III, like any licensor would, on the overall direction of the brand, but as the licensee, G-III has control of the design, subject to reasonable approvals,” D’Loren said.
Through its long-term Halston license with G-III, D’Loren said he hopes to bring some of Xcel’s livestreaming expertise to G-III “to help them in their d-to-c businesses.”
Current categories for Halston includes dresses, tops, knits, pants, jewelry, intimates, bags and footwear.
“I think there’ll be additional categories added, and additional domestic and international distribution,” D’Loren said, citing potential to grow Halston’s midtier distribution, meaning better department stores. Xcel had been doing the product development, design, systems, warehousing, sourcing and merchandising for Halston women’s sportswear, dresses, and fine jewelry, while licensing out other categories.
In the first quarter of 2023, Xcel began to restructure and streamline its business by entering into licensing agreements, including licensing wholesale production of its C Wonder Brand to the One Jeanswear Group, which also produces the apparel for Xcel’s Logo by Lori Goldstein brand.
For the first quarter, Xcel reported revenues of $6.1 million, compared to $8.8 million in the year-ago period, primarily due to decreased licensing revenue stemming from the sale of the Isaac Mizrahi brand to WHP Global in the second quarter of 2022. Xcel reported a first-quarter net loss of $5.6 million, or 29 cents per share, compared to a net loss of $3.5 million, or 18 cents a share, in the year-ago period.
“Halston is one of the last remaining iconic American brands that has the ability to scale and to be in the zeitgeist again,” D’Loren said. He credited the 2021 Netflix series on Halston for furthering interest in the brand.
Xcel owns the Judith Ripka, Halston, Logo by Lori Goldstein and C. Wonder by Christian Siriano brands and a minority stake in the Isaac Mizrahi brand. It also owns and manages the Longaberger brand through its controlling interest in Longaberger Licensing LLC. The company’s brands have generated in excess of $4 billion in retail sales via livestreaming in interactive television and digital channels alone.
G-III’s portfolio of owned brands includes DKNY, Donna Karan, Karl Lagerfeld, Vilebrequin, G.H. Bass, Eliza J, Jessica Howard, Andrew Marc, Marc New York and Sonia Rykiel. G-III has fashion licenses under the Calvin Klein, Tommy Hilfiger, Nautica, Kenneth Cole, Cole Haan, Guess, Vince Camuto, Levi’s and Dockers brands. Through its team sports business, G-III has licenses with the National Football League, National Basketball Association, Major League Baseball, National Hockey League and more than 150 U.S. colleges and universities.
G-III also distributes direct-to-consumer through its DKNY, Karl Lagerfeld, Karl Lagerfeld Paris and Vilebrequin stores and its digital channels for the DKNY, Donna Karan, Vilebrequin, Karl Lagerfeld, Karl Lagerfeld Paris, Andrew Marc, Wilsons Leather and G.H. Bass brands.
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