G-III Apparel Group Ltd. has already started raising prices in a bid to offset tariffs.
The company, which 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 under license, made the admission during an earnings call with investors.
“We have obtained price increases from some of our customers here in the U.S.,” said Morris Goldfarb, chairman and chief executive officer of G-III, on how the company is trying to deal with the increase of levies on handbags from 10 percent to 15 percent.
Handbags represented 7 percent of its annual net sales and G-III estimates that the 15 percent increase in tariffs for the remainder of fiscal 2020 will increase its costs by approximately $6 million.
As well as price increases, the company is also looking at how to diversify its supply chain in order to reduce its reliance on China.
As for the Trump administration’s proposed 25 percent tariffs for apparel and footwear, which could come into force at the end of the summer, Morris said it has had conversations with its vendors and retailers and although there will likely be short-term disruption, all parties are willing to share the increased costs.
“Should these increases come into effect, we believe that our customer who is shopping in department stores is one who appreciates aspirational brands and is willing to pay more for our products,” he added.
His comments came as the company unveiled its first-quarter results.
Net sales for the quarter ended April 30 increased 3.6 percent to $633.6 million, from $611.7 million last year. This was below analysts expectations for $650 million, according to FactSet data.
Net income for the first quarter was $12 million, or 24 cents per diluted share, compared to $9.9 million, or 20 cents per diluted share in 2018.
G-III’s stock was down almost 10 percent to $24.43 in midmorning trading.