G-III Apparel (US:GIII)2021-03-25 16:00Business Operations - G-III Apparel Group operates in the fashion market with a portfolio of over 30 licensed and proprietary brands, including five global power brands: DKNY, Donna Karan, Calvin Klein, Tommy Hilfiger, and Karl Lagerfeld Paris[19]. - G-III Apparel Group's wholesale operations include sales to retailers under owned, licensed, and private label brands, with revenues also coming from royalty agreements related to owned trademarks[24]. - The company has established relationships with approximately 1,300 customers, including major retailers like Macy's, Nordstrom, and Costco, enhancing its distribution channels[51]. - The company has increased its ownership interest in the joint venture for DKNY and Donna Karan products in China to 75%, indicating a strategic move to enhance market presence[171]. - The company plans to expand its retail locations and increase wholesale distribution of Vilebrequin products worldwide[70]. Financial Performance - The company reported a restructuring of its retail operations, completing the closure of Wilsons Leather and G.H. Bass stores, incurring an aggregate charge of approximately $100 million related to this restructuring[40]. - G-III's net sales in fiscal 2021 were significantly dependent on the third and fourth quarters, accounting for approximately 66% of total net sales[128]. - Sales to the ten largest customers represented 73.3% of net sales in fiscal 2021, with Macy's alone contributing 20.9%[118][119]. - The retail operations segment reported an operating loss of $126.8 million in fiscal 2021, $74.6 million in fiscal 2020, and $49.0 million in fiscal 2019, indicating a trend of increasing losses[158]. - The company expects fiscal 2022 results to be materially adversely affected by the ongoing impacts of COVID-19[145]. COVID-19 Impact - The impact of the COVID-19 pandemic resulted in lower sales and profitability, with expectations of continued adverse effects on net sales, earnings, and cash flows in fiscal 2022[28]. - The COVID-19 pandemic resulted in the majority of stores being closed for an average of 8 to 10 weeks during the first half of fiscal 2021, significantly impacting operating results[140]. - The company has taken measures to preserve liquidity during the pandemic, including employee furloughs, job eliminations, and deferral of capital projects[34]. - The company recorded a significant reduction in consumer traffic at outlet stores due to the COVID-19 pandemic, adversely affecting retail sales[163]. - The company has experienced a resurgence in COVID-19 cases, which could lead to further shutdowns and business disruptions[140]. Restructuring and Strategy - The restructuring plan includes a focus on the operations and growth of DKNY and Karl Lagerfeld Paris stores, with an emphasis on reducing corporate headcount and administrative costs[41]. - G-III's restructuring plan includes closing underperforming stores and focusing on the growth of DKNY and Karl Lagerfeld brands[76]. - The company aims to enhance the digital business of DKNY and Donna Karan, indicating a focus on e-commerce growth and digital marketing strategies[66]. - The company aims to increase digital channel business opportunities, investing in digital personnel, marketing, logistics, and distribution to adapt to the evolving retail landscape[43]. - The company is investing in digital marketing and logistics to expand online sales opportunities[80]. Product and Brand Development - G-III Apparel Group launched the DKNY Jeans denim collection during fiscal 2021 as part of its strategy to unlock the potential of its iconic brands[43]. - The company launched its first DKNY Jeans collection in fiscal 2021, indicating a focus on expanding product offerings within the DKNY brand[64]. - The company continues to seek new licensing opportunities to broaden its brand reach and product offerings, reflecting a proactive growth strategy[61]. - The company has a long-term license agreement with Calvin Klein for women's jeanswear, which was expanded in June 2019, demonstrating commitment to key partnerships[55]. - Net sales from Calvin Klein and Tommy Hilfiger brands constituted approximately 53.5% of total net sales in fiscal 2021[151]. Diversity and Inclusion - G-III employed approximately 2,800 full-time and 500 part-time employees as of January 31, 2021[97]. - 70% of G-III's total workforce self-identify as women, and 49% self-identify as people of color[101]. - The company aims to enhance diversity and inclusion, pledging support for 10 scholarships annually starting spring 2021[103]. Sustainability and Corporate Responsibility - The company has made a commitment to sustainable practices, with over 20% of Vilebrequin's products made from sustainable fabrics in fiscal 2021, aiming for 80% by 2025[113]. - G-III provided substantial support to non-profit organizations, including hundreds of thousands of masks and medical supplies during fiscal 2021[113]. - The company has implemented a social compliance program to protect a larger labor force through shared audits and training sessions[111]. Risks and Challenges - The apparel industry is cyclical, with purchases declining during recessionary periods, which could adversely affect sales and profitability[186]. - The company faces risks related to maintaining material license agreements, which are crucial for revenue generation[148]. - The competitive nature of the apparel industry may result in lower prices and decreased gross profit margins, adversely affecting sales and profitability[189]. - The company faces risks associated with leasing real estate, including obligations under leases for unprofitable stores, which could affect financial stability[161]. - Fluctuations in raw material prices and transportation costs could materially impact the cost of goods sold and profitability, posing a risk to financial performance[177][178]. Digital Transformation - The company is focused on enhancing its digital presence, aiming to increase digital sales through its own websites and retail partners[127]. - The digital business is a focus for investment, with the aim to increase sales derived from digital operations, which is critical for future growth[167]. - Increased cybersecurity threats pose risks to the company's information technology systems and the confidentiality of stored data[210]. - A significant data security breach could damage the company's reputation and result in lost sales, fines, or lawsuits[212]. - The company must comply with Payment Card Industry (PCI) Data Security Standards, and failure to do so could restrict its ability to process payments[208].