Calvin Klein Jeans could be on the move very soon.
G-III Apparel Group Ltd. has confirmed it’s in talks to acquire the license for Calvin Klein Jeans brand for North America.
Speaking to WWD, Morris Goldfarb, chairman and chief executive officer of G-III, which has the license for many Calvin Klein products, excluding jeans and underwear among others, said that he is hopeful a deal can be done, although nothing has been signed as of yet.
“We’re in conversations. It’s something we would appreciate having,” he said. “We’re headed down that path, but nothing has been signed.”
WWD was first to report earlier this month that G-III, which has the Calvin Klein license for women’s ready-to-wear, accessories, outerwear, swimwear and dresses in North America, has an executive search out for a president of women’s Calvin Klein Jeans.
It’s not known if G-III wants to acquire just the women’s jeans license or men’s as well. Both are currently done in-house by Calvin Klein Inc., which got the jeans business back when its parent firm, PVH Corp., acquired Warnaco Group in 2012.
G-III has an array of businesses, including the DKNY and Donna Karan brands, which it owns outright, and Calvin Klein, Tommy Hilfiger and Karl Lagerfeld, which it produces goods for under license. It also has a stake in the Lagerfeld business.
While Goldfarb described Calvin Klein as the best performing part of his business, it has not been so rosy for the brand’s owner PVH.
PVH admitted in December that Raf Simons’ high-concept overhaul of CK Jeans was a “fashion miss” and investments in his halo runway collection, dubbed 205W39NYC, will be cut as marketing budgets shift to influencers and more approachable messaging.
It has since parted ways with Simons and made a number of other changes, including shuttering its traditional collection business.
Goldfarb, however, explained to investors during a call Thursday that it’s a different story at G-III.
“I read the press the same way you do. There seems to be some feel that the brand is maxed out. You can’t tell that by us. We don’t believe that’s the case at all. It’s our best performing piece of business,” he said.
His comments came as the company released a stellar set of financial results, with net income of $24.1 million, or 48 cents per share, compared to a net loss of 1 cents a year earlier. On an adjusted basis, earnings per share were 55 cents, beating Wall Street expectations for 43 cents per share, according to FactSet data. That news pushed its stock up over 11 percent to close at $39.07.
At the same time, net sales increased 7.3 percent to $766.8 million in the fourth quarter, a touch below estimates for $768 million. For the year as a whole, it hit a new record, surpassing the significant $3 billion mark, led by DKNY, Tommy Hilfiger and Karl Lagerfeld.
“Calvin Klein, our largest and most profitable business, also had a very good year in spite of the loss of business due to the closing of Bon-Ton department stores,” added Goldfarb.
For fiscal 2020, it’s forecasting net sales of approximately $3.28 billion and net income between $162 million and $167 million, or between $3.18 and $3.28 per diluted share.
In particular, this year will be focused on improving G-III’s retail business, with the goal of bringing it closer to profitability. While part of this will involve store closures, more Karl Lagerfeld and DKNY stores are in the works. The former currently has 10 stores in the U.S., but Goldfarb thinks it has the potential to be a 50-store chain.
But while this is going on, all retailers face uncertainty over tariffs as the talks between China and the U.S. rattle on and the possibility of apparel levies are still on the table, and G-III is no exception.
To get around this, G-III has been working hard for a large chunk of the past year to find solutions for production outside of China and has had some luck.
“We’ve succeeded and we’ve brought down the percentage of dependency on China to a major degree, and it continues,” Goldfarb told WWD.