NEW YORK — While G-III Apparel Group Ltd. would like to do an acquisition, it’s not planning on doing one.
This story first appeared in the March 26, 2014 issue of WWD. Subscribe Today.
That may seem like an oxymoron, but according to Morris Goldfarb, G-III’s chairman, president and chief executive officer, “You can’t plan it.”
The firm’s track record of periodic deals, such as Vilebrequin, Andrew Marc and G.H. Bass & Co., suggests a company that’s acquisitive in nature, and Goldfarb doesn’t disagree. It’s getting the right deal that seems to be the hitch in the road for the broad-based apparel firm.
Goldfarb said, “We do quite well in the mergers and acquisitions market. It’s a big part of our lives. We pretty much know the important deals that surround us, and the bankers know that we are acquisitive.
“Our balance sheet supports that strategy, so we are pitched regularly [but we] don’t plan for acquisitions. They will happen when the right company crosses our path, and then we will work toward making it happen.”
The ceo said his firm is not currently in acquisition talks with anyone, and doesn’t have a preference for expanding in either its women’s or men’s categories.
What G-III does have a preference for are brands in a business segment it’s not currently in. “We want a company that has rights to different classifications. We would look for a lifestyle brand. It doesn’t have to produce in all the classifications that we [are in]. If a footwear brand is for sale and we believe we could expand it into multiclassifications, we’d do well [with it],” the ceo explained.
G-III started as a leather coat firm in 1956, founded by Goldfarb’s father. The ceo joined in 1972, and said the company went public in 1989 based on a bomber jacket with limited stockkeeping units. Today, G-III has annual volume of $1.72 billion, with outerwear representing 40 to 45 percent of its business. Its strongest coat brands for women are Calvin Klein and Jessica Simpson. Dresses represent 22 percent of the overall business. Calvin Klein is a key dress brand for the firm. The newest addition to its dress lineup is Ivanka Trump. G-III now has an emerging sportswear wholesale segment, and it also sees potential in its latest category, handbags.
Goldfarb noted that while there are good brands up for sale, not all are desirable acquisitions for G-III: “Some we believe have valuations that are out of hand….Others have existing management that, if you can’t replace, could crumble if you can’t retain the existing [team], and others have no management and you have to go identify management that you can bring in to build the team.”
The ceo was also candid about what’s doable, noting that if the brand is good and well-run, there’s a good chance the multiple wanted is “not affordable for us.”
G-III said Tuesday for the fourth quarter ended Jan. 31, net income jumped 61.8 percent to $13.1 million, or 62 cents a diluted share, from $8.1 million, or 40 cents, a year ago. Wall Street’s consensus estimate was 49 cents for the quarter. Revenues for the quarter rose 26 percent to $472.8 million from $375.3 million, boosted by its G.H. Bass & Co. acquisition from PVH Corp.
For the year, net income rose 36 percent to $77.4 million, or $3.71 a diluted share, on a revenue gain of 22.8 percent to $1.72 billion.
Even though the company beat Wall Street’s fourth-quarter earnings per share estimate by 13 cents, shares of G-III on Tuesday fell 3.6 percent to close at $71.79 in Nasdaq trading, in part due to its first-quarter guidance. The company expects a loss between 10 and 20 cents a diluted share, impacted by acquisition costs related to its G.H. Bass & Co. acquisition.
According to Goldfarb, those costs are related mostly to transitional fees paid to PVH. He believes that it’ll be in the third and fourth quarters that there will be accelerated deliveries of new G.H. Bass product under G-III.