G-III Apparel Group, Ltd., owner of brands include DKNY, Donna Karan, G. H. Bass, Andrew Marc and Marc New York, announced operating results for the first quarter of fiscal 2021 ended 30th April, 2020 and the restructuring of its retail operations segment.
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Morris Goldfarb, G-III’s Chairman and Chief Executive Officer, said, “These are challenging times for so many throughout our industry and country… We took proactive steps in response to the COVID-19 outbreak. We reduced our inventory exposure, furloughed a large portion of our employee base and implemented significant temporary reductions in pay for our senior management and employees. We are in a strong financial position. We believe we will demonstrate our leadership position in the fashion industry as we emerge from this crisis.”
Net sales for the first quarter ended 30th April, 2020 decreased 36.1% to $405.1 million from $633.6 million in the same period last year. The company reported GAAP net loss for the first quarter of $39.3 million, or $0.82 per share, compared to net income of $12.0 million, or $0.24 per diluted share, in the prior year’s comparable period.
Non-GAAP net loss per share was $0.75 for the first quarter of this year compared to non-GAAP net income per diluted share of $0.25 in the same period last year. Non-GAAP net income (loss) per diluted share excludes non-cash imputed interest expense related to the note issued to seller as part of the consideration for the acquisition of Donna Karan International of $1.4 million in this quarter and $1.3 million in the first quarter last year and a $3.2 million loss on lease terminations in this quarter compared to a $0.8 million gain in the first quarter last year. The aggregate effect of these exclusions was equal to $0.07 per share in the first quarter of this year and $0.01 per diluted share in the first quarter of fiscal 2020.
Mr. Goldfarb concluded, “Additionally, in another significant step, we announced the restructuring of our retail operations which we believe will enable us to reduce our losses and position this segment to ultimately be a profitable contributor to our business. Importantly, we operate a sizable wholesale business that has globally recognized brands that are in demand. Our wholesale segment ended fiscal year 2020 with over $2.86 billion in annual net sales. We have a great base to build upon and, along with a more streamlined retail operation, will create a strong foundation for our future.”
The restructuring of the retail operations segment includes the closing of 110 Wilsons Leather and 89 G.H. Bass stores. The company has hired Hilco Global to assist in the liquidation of these stores, which will begin immediately or as stores reopen.
Morris Goldfarb said, “With a focus on enhancing shareholder value, we have made the difficult decision to close all of the Wilsons Leather and G. H. Bass stores and have entered into agreements for the early lease termination of a significant majority of these stores. We believe that this restructuring plan will enable us to greatly reduce our retail losses and to ultimately have this segment become profitable. I am appreciative of all members of the retail team for their hard work and dedication over the years.”
Mr. Goldfarb concluded, “Our wholesale business, anchored by our five global power brands: DKNY, Donna Karan, Calvin Klein, Tommy Hilfiger and Karl Lagerfeld, will continue to be the primary growth and profit engine for the company. We have a great base of business which we believe creates a strong foundation for our future.”
“In connection with the restructuring of our retail operations, the company expects to incur an aggregate charge of approximately $100 million related to landlord termination fees, severance costs, store liquidation and closing costs, write-offs related to right-of-use assets and legal and professional fees. A significant portion of these charges will be incurred during its second fiscal quarter ending 31st July, 2020. The company expects the cash portion of this charge to be approximately $65 million,” added Mr. Goldfarb.
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After completion of the restructuring, the company’s retail operations segment will initially consist of 41 DKNY and 13 Karl Lagerfeld Paris stores, as well as the e-commerce sites for DKNY, Donna Karan, Karl Lagerfeld Paris, Andrew Marc, Wilsons Leather and G.H. Bass.