After 50 years as a chief executive officer of G-III Apparel Group, Morris Goldfarb has developed a zen-like approach to fashion — an industry that’s always chasing the next new thing and is filled with quarter-to-quarter ups and downs.
That goes for the impact of warm weather on the coat business, the threat of higher tariffs when President-elect Donald Trump gets into office or the newly unveiled activist campaign at Macy’s Inc., a major wholesale customer of G-III.
“Every change creates a little bit of discomfort,” Goldfarb told WWD.
And there was some discomfort evident in the company’s third quarter and G-III’s take on the fourth quarter is somewhat cautious.
But Goldfarb is feeling as bullish as ever and projecting increases for the year and is confident that the company he’s led for half a century and lately fortified with its own brands is prepared to take on whatever comes.
Net income for the quarter slipped 10.1 percent to $114.8 million, or $2.55 a diluted share, from $127.6 million, or $2.74, a year earlier. Sales for the three months ended Oct. 31 ticked up 1.8 percent to $1.09 billion from $1.07 billion.
While sales were a tad below the $1.1 billion analysts forecast, adjusted earnings per share of $2.59 were 31 cents ahead of the $2.28 Wall Street anticipated, according to Yahoo Finance. The company had forecast earnings of just $2.20.
About a third of G-III’s business is tied to outerwear — a segment that consumers shied away from given the unseasonably warm weather in much of October and November.
But because G-III is still mostly a wholesaler and had already shipped many of its coats to retailers, that warmer weather translated mostly into some caution for the rest of the year.
G-III said its annual sales would rise about 2 percent this year to $3.15 billion, down from the $3.2 billion previously projected. And adjusted earnings per share are slated to rise to just $4.10 to $4.20, up from the $3.95 to $4.04 previously forecast, despite the larger third-quarter jump.
“I’m the guy that always jumps up and down and says, ‘I don’t want to talk about the weather,’” Goldfarb said. “But the weather, the way it’s been really for the entire year — only the last two weeks or so have really indicated that there is some sort of a weather change.”
But the CEO said the coat business has finally opened up and that Black Friday and Cyber Monday were good while sales this past week were “excellent.”
“Our margins are always very good in our ability to sell through coats,” he said. “Even if there’s a level of carryover, I can’t recall a period of time where we’ve lost money on a coat risk.”
Morris Goldfarb
George Chinsee/WWD
Goldfarb said the company’s inventories were down 10 percent at the end of the quarter and were in “great shape.”
“Coat inventory is higher than I would like, but certainly not out of control and it’s gotten better post Q3,” he said.
While coats are important to G-III, the company has been diversifying into and growing with its owned brands, including DKNY, Karl Lagerfeld, Donna Karan and Vilebrequin.
The third quarter also saw some disruption from the brief East Coast port strike in the U.S. and the fourth quarter could be in for more of the same as port labor negotiations face another deadline in mid-January.
“I don’t want to forecast it, but there probably will be some sort of an interruption,” Goldfarb said. “It’s before we get a new president and the old president might not be as focused on resolving a port issue as he was in October.”
Trump has promised to resume his tariff-heavy approach to international relations next month, but Goldfarb said G-III is ready now for any changes that might come.
Five years ago, about 90 percent of G-III’s production was done in China, he said, noting today it was barely 30 percent and closer to 20 percent outside the coat business.
“Today, we produce in countries all over the world,” Goldfarb said. “Anybody that has a sewing machine available is in danger of getting our business. So we’re aggressive.
“The best differentiator that I could give you on this company versus the competition is we were born in a factory,” he said. “We weren’t born in a design room. This company was started by an entrepreneur who was an immigrant, needed to make some money, had no fashion background, built a factory and succeeded and expanded the factory, cared very much about the people that worked within the factory.”
G-III is also in the process of transitioning out of the PVH Corp.-owned Tommy Hilfiger and Calvin Klein women’s businesses in department stores — replacing what was about half of its business with new initiatives, including the relaunch of Donna Karan.
The brand was backed by a big marketing campaign and might be ready to get into retail, if not the catwalk.
“Not ready for the runway yet, but getting ready for the stores,” Goldfarb said of the Donna Karan business. “We have real estate meetings to discuss the potential of opening up some flagships and the beginning of global distribution as well.
“We launched only in North America,” he said. “It was the single best launch this company has ever had. The digital business is doing incredibly well for us.”
And the change keeps coming.
On Monday, Macy’s Inc. was being pressured again by activist investors, this time Barington Capital and Thor Equities, which want the retailer to cut expenditures, look into selling off Bloomingdale’s and more. Already the retailer is closing stores.
“Tony Spring has his way of doing things,” Goldfarb said, referring to the Macy’s CEO who used to head up Bloomingdale’s. “He’s done an amazing job at Bloomingdale’s, and I guess it’s his turn to try to turn around Macy’s and we’re aligned where Macy’s goes. If they’ll have us, we’ll travel with ’em.
“Tony is an incredibly smart guy with good merchants surrounding him, and it’s not time to grade his strategy yet. He hasn’t had time to implement what he believes is going to take Macy’s to the next generation store.”
