HONG KONG — Global Brands Group expects to complete its restructuring by the end of fiscal year 2020, it said Thursday, as it reported an operating loss of $50 million for the six months ended Sept. 30, shrinking the figure by over half of what it was at the same time last year.
“The losses, while still existing, are significantly improved from a year ago,” chief executive officer Rick Darling said on a conference call, adding that about $26 million of the half’s losses were in one-time expenses related to the company’s reorganization. “We’re actually very pleased with the progress that we’ve made on the financial situation for the first half of 2020, particularly in comparison to where we were in 2019,” Darling said.
About a year ago, GBG, which owns brands such as Spyder, Aquatalia and Frye, sold its North American business for $1.2 billion, and then embarked on a restructuring plan, reducing costs and staff, and optimizing efficiency in production and logistics.
The firm reported a 5.2 percent drop in revenue for the period, attributing the impact to brands that were discontinued last year, and some foreign exchange adjustment in Europe. Improved earnings before interest, taxes, depreciation and amortization, which Darling said has been a major focus during the six months, turned positive, to $79.5 million from a negative $39 million last year.
During the period, the group signed licensing deals with outdoor and sportswear brands Saga and Dakine to expand its reach across the category and across multiple seasons.
While the U.S. political environment is volatile, Darling believes the overall economy is strong and shows no evidence of any kind of economic downturn that is significant. He noted that U.S. retail sales had softened in the past three months in the key back-to-school sales season, although November is starting out a little better.
“I would say it’s still relatively soft, and indicates to us that there probably will be some growth in the Christmas selling season, but it won’t be nearly as robust as we might have anticipated,” Darling said.
The closing of brick-and-mortar stores in both the U.S. and Europe continues, and as management works to resurrect GBG, they’ll be shifting to focus the business more on e-commerce.
For GBG, the big question is Brexit, which has dampened consumer sentiment. “From a business standpoint, what we’re looking for is consistency, and whether there is a Brexit or there isn’t a Brexit, we’d like to know which one it’s going to be and be able to start to plan accordingly,” Darling said.
Despite the 15 percent tariff levied by the U.S. on most apparel and footwear categories from China, the impact on GBG this year from tariffs has been minimal, estimated at $2 million to $2.5 million for the second half should they stay in effect.
GBG started moving production out of China a year ago to countries like Vietnam, Bangladesh and India, so overall F.O.B. costs have been slightly reduced, and are reflected in improved margins. Today, China accounts for 35 percent of GBG’s total production for the U.S. market, including about 35 percent of footwear and about 20 percent of apparel.