HONG KONG — Global Brands Group saw its full-year net profit grow 5.6 percent as it improved its margins on a slight drop in sales. Meanwhile, executives said the company is on track to turn in an even stronger performance in the coming year.
The company, which manages brands such as Frye, Spyder, Juicy Couture, Coach, Calvin Klein and backs a new David Beckham-branded business, said net profit attributable to shareholders grew 5.6 percent to $110 million for the 12 months ended Dec. 31. Core operating profit grew 10.5 percent to $170 million. Sales dipped 0.9 percent to $3.42 billion.
Executives said trading conditions in the United States and Europe remained challenging for the first couple months of this year but Global Brands ceo and vice chairman Bruce Rockowitz said the company will expect to post “serious growth” in its top line in fiscal 2016-17. He declined to provide figures. Global Brands, a spinoff of Li & Fung, is currently shifting its fiscal year to end in March.
“We did a lot of heavy lifting to put us in great shape for 2016,” he told WWD in an interview following the company’s results presentation. Rockowitz referenced several deals the company completed last year including licensing pacts with Jones New York, Joe’s Jeans and Buffalo Brands. It also invested in the retail operations of Frye and Spyder, he added.
Rockowitz said the U.S. market, where the company does most of its business, is stable but not stellar. Unusual weather patterns adversely affected sales and many retailers are stuck with excess inventory from a weak Christmas season, which will lead to markdowns, he said. “We don’t see a huge down or up,” he said.
Rockowitz said the company will “embark upon 2016 with continued confidence” that it can optimize its operations and improve its margin levels. Global Brands said its total margin came in at 34.2 percent of sales in 2015, up from 33.9 percent in 2011, which hit the group’s target one year in advance.
While the depreciation of the euro hurt Global Brand’s business in Europe, it does mean that the region’s companies could become appealing acquisition targets, Rockowitz said. The ceo said Global Brands might look into buying companies to complement the product range or geographic reach of its character business, licensed from Disney, Lego and other entertainment companies. But he added that the company’s focus for now is on organic growth.
In 2014, Global Brands formed a joint venture with former footballer Beckham and his business partner Simon Fuller to develop brands for the former footballer himself and other celebrities. The joint venture, called Seven Global, inked a five-year agreement with the Kent & Curwen brand last year, giving Beckham a multifaceted role in expanding the British brand’s appeal to younger consumers. Earlier this week, Kent & Curwen announced that it has tapped Daniel Kearns to be the new creative director of the brand.
Dow Famulak, Global Brands president and chief operating officer, said Kearns and Beckham are already working on their first collection together, which will bow for spring 2017 and feature a logo of three lions. The design element references both Beckham’s connection to the English national team and Kent & Curwen’s historical connections to the world of cricket. Famulak said the first store for the Beckham-revamped brand will open in London late this year or early next year. Rockowitz said other Beckham-related deals are in the pipeline but it is too soon to announce specifics.
Last year Rockowitz revealed that Global Brands is in talks with both Alibaba and JD.com about strategic partnerships and joint-venture possibilities involving e-commerce. The executive said talks with both parties are still in progress.
“What all parties are trying to do is create something of the future, so that takes time,” he said. “But there’s a huge opportunity connecting a very big e-commerce player to a very big brand holder that has all the offline experience. They have all the online experience but nobody has really put it all together, especially in China,” he said. Currently Global Brands does just four percent of its business in Asia.
The fashion industry continues to debate the merits of a traditional fashion week system and the decision of some fashion houses to alter the schedule of their runway shows and cater directly to consumers. But the discussion doesn’t have much of an impact on Global Brands, deals with affordable luxury and mass-market brands, according to Rockowitz.
“I think it’s relatively late what the luxury brands are doing. I think they’re trying to catch up. They were very much antisocial media to some extent,” he said. “We’re looking at what the future is. We don’t have the baggage of the past, meaning a lot of retail stores…the idea of having these fashion shows…the way it’s been done is very expensive, probably archaic and doesn’t give the brand the bang for the buck, when at the end of the day you want the customer to see it firsthand.”