Acquisition costs shifted Differential Brands Group Inc.’s bottom line to a third-quarter loss.
For the three months ended Sept. 30, the company said its net loss was $2.8 million, or 22 cents a diluted share, against net income of $36,000, or zero cents, year ago. On an adjusted basis, excluding costs connected to the merger with Robert Graham and Swims, as well as the non-cash inventory expense related to Swims, the net loss was $1.5 million, or 11 cents, for the quarter. Net sales more than doubled to $41.2 million from $17.6 million. The increase in sales was due to the inclusion of $19.5 million of sales from Hudson and $3.5 million of sales from Swims.
The company’s three brands are Robert Graham, Hudson and Swims.
In a telephone interview, Michael Buckley, chief executive officer, said, “We are pleased with what’s going on with the business and the [progress of our] strategic initiatives. At Robert Graham, president Andrew Berg is already seeing some great results, such as strong sell-throughs in the fashion basics, both in-store and in our wholesale accounts. We had three more stores than we did a year ago, and we expect to open a couple more next year. We are focused on driving the product across the wholesale channel.”
At Hudson, Buckley said the company has a working prototype for the new store concept it plans to open next year. The company is in negotiations with several parties over the store lease. The ceo said they are still tweaking the store design, noting that the concept is about “how to create a unique retail experience that creates buzz and draws traffic.”
Hudson is also making greater strides online. It’s direct-to-consumer site is currently outsourced, but will be taken in-house next year. Robert Graham’s direct-to-consumer channel is already in-house, and Swims’ was taken in-house just prior to Differential’s acquisition.
The Swims business, which Differential acquired in April, is still being integrated into the company’s infrastructure, which Buckley said should be completed over the next two months. After that’s done, the focus will be on “building the team in North America,” Buckley said.
While the ceo said he couldn’t “predict what’s going to happen [over holiday], the company continues to make innovative product. It’s about blocking and tackling in the wholesale channel and in the in-store model. It’s about getting them to shop and making the conversion [to a purchase].”
He said the company remains on the lookout for opportunities to acquire premium brands that are accretive and that complement the existing portfolio.