Morris Goldfarb is making his stand against the coronavirus.
The veteran chairman and chief executive officer of G-III Apparel Group was clear-eyed, steady, confident and rational — at a hugely emotional moment for the world — when he gave his quarterly update to Wall Street on Thursday.
Fourth-quarter results showed bottom-line improvement, but seemed a distant afterthought as Goldfarb walked analysts on a conference call through the company’s $800 million financial cushion, how the China-heavy G-III supply chain is up and running, just where all this inventory is going to go with stores closed and the possibility of some dealmaking down the road.
In short, he laid out a vision for why G-III — a key apparel supplier that produces looks for PVH Corp.’s Tommy Hilfiger and Calvin Klein, among others, and owns DKNY and Donna Karan — is going to be a winner.
And investors liked what they heard.
The stock, which started the year above $30 a share and sank as low as $2.96 as the COVID-19 panic set in, rallied back strongly, gaining 69 percent to $7.61 on Thursday.
“Our business until a week ago was excellent,” Goldfarb told analysts. “Going beyond the first quarter, our order book was very strong for the entire year. We were tracking ahead of last year.
“We’re reviewing the merit of that order book today,” he said. “So we don’t know where we stand.…Today is kind of another day. Most stores are closed, but those that are open are selling our product and selling them fairly well.
“As far as what the future holds, not really certain of where we wind up,” he said. “But our styles are right, our brands are right, and the next focus is a little less about the fashion that we have. It’s more about survival, cash preservation and coming back and fighting another day. I believe we’re one of those companies that will live and may be prospering in this period of time.”
While the trade war was raging, G-III reduced its reliance on China, but much less drastically than many others and still gets about 50 percent of its goods from that country.
That was a problem during the trade war that looks like a benefit now that China is starting to reopen for business, having been hit first by COVID-19.
“We did not abandon these well-financed and loyal vendor relationships built over the past 40 years,” Goldfarb said of his partners in China. “It is these relationships that are providing us the ability to manage our receipt flow over this difficult time.”
G-III is anticipating only small delays in production and in transit times on goods from China.
But stores are closed and that has raised the question — being asked across the industry — of just where all this inventory is going to go and how steep the losses will be.
“We have store closures and pressure and at retail, and we’ll probably have credit issues that will also disarm us and probably prohibit us from shipping a lot of the accounts that we have orders on,” Goldfarb said. “So we’re spending a good deal of time adjusting the flow of product.”
That means getting creative.
Goldfarb said G-III was canceling pieces that haven’t left the mill, slowing production and warehousing product with vendors.
“We’re doing everything we can,” he said.
That also means counting every penny right now.
G-III has $197 million in cash and cash equivalents on its books, working capital of $754.7 million and long-term debts of $397.5 million.
In the fourth quarter ended Jan. 31, G-III saw net income rise to $25.3 million from $24.1 million as sales slipped to $754.6 million from $766.8 million.
But with COVID-19 bringing business in the U.S. and Europe to a virtual halt now, that seems like a very long time ago.
The company — like many others — did not provide financial guidance going forward.
But Goldfarb offered a different take on the future: “We’re not going to be somebody that’s pointed to as being collateral damage in this environment. There’ll be a host of people that will be. And who knows? We might be the acquirer of those companies. And maybe we partner with some of the brands that were never available to us because they were funded well for the period of time.”