Morris Goldfarb said he has plenty of growth teed up — and is ready to move on.
The chairman and chief executive officer who has steered G-III Apparel Group through nearly five decades of major changes, said the loss of the Tommy Hilfiger and Calvin Klein licenses could open up new opportunities for the company.
On Wednesday, G-III said licenses for the Tommy and Calvin women’s wholesale businesses in North America were extended to provide for a smooth transition back to PVH Corp. by the end of 2027.
Shares G-III dropped 22.3 percent to $16.80 in after-hours trading after the company missed Wall Street’s profit mark and acknowledged the pending licensing change.
“This is not stress time,” Goldfarb told WWD of the switch. “The stress is finishing up what will be a reasonably good year and, moving forward, having our people fully engaged on what’s yet to come. We’re on to the next, we have an important quarter to finish.”
In the meantime, he said “everything stays the same” at Tommy and Calvin. “The big changes are the other company has to find the people to do what he’s planning on executing.”
PVH CEO Stefan Larsson is taking full control of the Tommy and Calvin businesses to push forward his brand-centric PVH+ strategic plan.
Goldfarb said the change was no “amazing amount of challenge.”
“We’ve done our job of building brands, taking on situations that others couldn’t achieve and profiting through it,” he said.
Last year, Calvin Klein and Tommy Hilfiger made up 50.7 percent of G-III’s net sales.
Luckily for G-III, Goldfarb has been expanding in other areas and this year consolidated control of the Karl Lagerfeld brand, giving it a promising European luxe base alongside Vilebrequin, acquired in 2012, and Sonia Rykiel, acquired in 2021.
G-III also owns the DKNY brand.
“We’re at the early stage of all our assets,” Goldfarb said. “There’s plenty of organic growth, there’s plenty of opportunities to supplement them.”
He said there was a “compelling case” that G-III could make more money than it planned by focusing on other businesses.
“We enjoyed our relationship with PVH, it was certainly prosperous,” Goldfarb said. “We’re committed to a smooth transition for both companies, the relationships are in place, the intent is to evolve the business as times goes on into the hands of PVH, if they still want it when the term is done.
“There’s nothing pressing,” Goldfarb said. “We’re financially sound, we’ve got a little work to do operationally that doesn’t relate to this. Our greater disappointment is how we managed the quarter in terms of inventory receipts and processing the inventory through our facilities.”
That’s a hiccup Goldfarb swore would not happen again.
For the third quarter, G-III’s net income fell to $61.1 million from $106.7 million a year earlier. Adjusted earnings per share came in at $1.35 — 46 cents below the $1.81 analysts projected. Revenues for the three months ended Oct. 31 increased to $1.08 billion from $1.02 billion.
Inventories at the end of the quarter rose to $901 million from $449 million. Goldfarb in the statement said: “Our higher inventory levels are due to our accelerated production calendar, which was in anticipation of longer supply chain lead times. Our inventory is comprised of current purchases and guided by our order book. During the quarter, the higher inventory levels caused logistical challenges within our distribution centers. This resulted in significant onetime charges in the third quarter, that were above our expectations, which adversely impacted our bottom line by approximately 40 cents per diluted share. For the fourth quarter of fiscal-year 2023, our order book is strong and we are well positioned to meet the demand of our retailers for the holiday season.”