G-III Apparel Group, Ltd.
Q4 2016 Earnings Call Transcript
Published:
- Operator:
- Welcome to the G-III Apparel Group Fourth Quarter and Full Year 2017 Earnings Conference Call. My name is Nicole and I'll be your operator for today's call. At this time, all participants are in a listen-only mode. Later we'll conduct a question-and-answer session. Please note that this conference is being recorded. I will now turn the call over to Neal Nackman, Chief Financial Officer. Mr. Nackman, you may begin.
- Neal Nackman:
- Thank you. Before we begin, I would like to remind participants that certain statements made on today's call and in the Q&A session may constitute forward-looking statements within the meaning of the Federal Securities Laws. Forward-looking statements are not guarantees and actual results may differ materially from those expressed or implied in forward-looking statements. Important factors that could cause actual results of operations or the financial condition of the company to differ are discussed in the documents filed by the company with the SEC. The Company undertakes no duty to update any forward-looking statements. In addition, during the call we will refer to non-GAAP net income, non-GAAP net income per share and adjusted EBITDA, which are all non-GAAP financial measures. We have provided reconciliations of these non-GAAP financial measures to GAAP measures in our press release and on our website. I will now turn the call over to our Chairman and Chief Executive Officer, Morris Goldfarb.
- Morris Goldfarb:
- Good morning, and thank you for joining us to discuss our Fourth Quarter and Full Year results. With me today on the call are Sammy Aaron, our Vice Chairman and President; Wayne Miller, our Chief Operating Officer; Neal Nackman, our Chief Financial Officer; and Jeff Goldfarb, our Executive Vice President and Director of Strategic Planning. In addition to reviewing our results, we will discuss our view of the market, detail key strategic initiatives under way and provide our fiscal 2018 guidance. Let's start with financial highlights from the fourth quarter and full year. Total sales for the full year were $2.4 billion, up 2% from last year. Our fourth quarter sales were up 14% [ph] to $603 million from $527 million last year. Achieving revenue growth this past year has been challenging across the industry. A second consecutive year of soft retail traffic and unseasonably warm weather, combined with accelerated consumer migration to ecommerce all cause pressure on traditional retailers this past year. Our own retail businesses had negative comp sales including during the holiday season. In wholesale, our continued growth and success was in all categories other than Coach. Our GAAP net income for the full year was $52 million or $1.10 per diluted share compared to $114 million or $2.46 per diluted share last year. Our non-GAAP net income for the full year was $57 million or $1.42 per diluted share compared to $114 million or $2.44 per diluted share last year. Our fourth quarter GAAP net loss was $0.42 per share, compared to net income of $0.17 per diluted share last year. Our fourth quarter non-GAAP loss was $0.16, compared to the net income of $0.17 per diluted share last year. Neal will provide the detail with respect to the specific acquisition-related items and the retailer asset impairment charge that affected our GAAP results both for fourth quarter and full year. Our full year results were also negatively impacted by $57 million of losses in our Wilsons and Bass retail businesses, compared to $2 million of losses in the prior year. I want to share some details with respect to our overall strategies to address the evolving market environment. The losses we're incurring in our Wilsons and Bass retail businesses are unacceptable and as I've said in our previous earnings call, we're taking decisive action. First, we're closing nearly a third of our Wilsons and Bass stores. Combined through lease expirations, we expect to close 60 Wilsons and Bass stores by the end of this fiscal year and then another 55 in the following year. A third of this year's closing will occur before the end of the fiscal first quarter. Second, we're cutting costs. We're integrating Wilsons, Bass and the Donna Karan back in retail infrastructure on a shared and efficient platform. In addition, we're looking at other ways to run the retail operations more efficiently. We've already achieved annual run rate savings of $4 million and expect to reach $12 million in annual run rate savings by the beginning of the third quarter this year. Third, we're making product and merchandising changes to outerwear and accessories in our stores to improve our retail results. Fourth, we're repurposing some of our existing stores to Karl Lagerfeld Paris and also expect to ultimately repurpose some stores to DKNY. We've experienced dramatically better results for the select Karl Lagerfeld Paris stores that have already been repurposed from either Bass or Wilsons. To summarize, these actions are designed to reduce our risk and exposure in our own retail operations and to substantially improve the bottom line performance of our retail business. Another key pillar of our overall strategy is to become the premier wholesale provider of women's apparel to retailers across the country. We continue to see success and we now operate with five global power brands
- Neal Nackman:
- First, with regard to the fourth quarter results. Net sales for the fourth quarter ended January 31, 2017 increased 14% to $603 million from $527 million. We were approximately $25 million short of our previous forecast, primarily due to less than anticipated wholesale shipping related to the initial launches of Tommy Hilfiger products. Net sales of our wholesale operations segment increased 19.5% to $476 million from $399 million. Increases on our Calvin Klein handbags and sportswear categories and the new launches of Karl Lagerfeld and Tommy Hilfiger, as well as the inclusion of net sales from a Donna Karan wholesale business were the main drivers of our improvement compared to the prior year. Our fourth quarter results include the operations of Donna Karan, commencing with the completion of the acquisition on December 1, 2016. Net sales and licensing revenue included form Donna Karan were $17 million in the wholesale operation segment. Net sales of our retail operation segment decreased to 2% to $172 million from $175 million primarily due to same store sales decreases of 10% to our Wilsons stores and 4% for our G.H. Bass stores. Net sales included from Donna Karan were $12 million in the retail operation segment. Our gross margin percentage was 32.8% compared to 33.9% in the prior year's fourth quarter. The gross margin percentage in our wholesale operation segment was 26%, compared to 24.7% in last year's quarter. The Donna Karan licensing revenues are included in our wholesale operation segment which contributed to the increased gross margin percentage. Excluding the Donna Karan business, our gross margin in the segment improved slightly to 25% from 24.7% in the prior year's quarter. Gross margin percentage in our retail operation segment was 41.8% compared to 45.9% in the prior year's quarter. Gross margin decreased in both our Bass and Wilsons businesses as a result of the highly promotional environment and efforts to meet our objectives to keep our inventories in line for the upcoming season. Gross margins of the Donna Karan retail business also negatively impacted our overall retail gross margin percentage as the Donna Karan retail business transitions out of existing product in anticipation of our new product expected to be in stores later in the year. Our new product lines are anticipated to positively impact the second half of fiscal 2018. Total SG&A expenses increased to $200 million in the quarter from $159 million. This increase includes approximately $20 million of expenses related to the Donna Karan business, professional fees and severance expenses associated with the acquisition of approximately $9 million, expenses associated with our increased sales volume and increased expenses related to the new Tommy Hilfiger and Karl Lagerfeld initiatives. These expenses were offset in part by reduced bonus expense in the quarter. As a result of poor performance in certain existing retail stores, we recorded an impairment charge to furniture, texture and leasehold improvements with new amount of $10.5 million in the fourth quarter. Net loss for the fourth quarter was $20.1 million or $0.42 per share compared to net income of $8 million or $0.17 per diluted share in last year's fourth quarter. On a non-GAAP basis, we incurred a net loss of $0.16 per share, compared to a net income of $0.17 per share in the prior year's fourth quarter. Non-GAAP result exclude the impact in the current fourth quarter of professional fees and severance expenses aggregating $9 million relating the DKI acquisition. Impairment charges of $10.5 million in our retail operations segment and non-cash imputed interest of $1 million related to the note issued to the seller as part of the consideration for the DKI acquisition. Included in both GAAP and non-GAAP results for the fourth quarter of this year are losses of $9.2 million and additional interest expense of $7.5 million related to the operation and ownership of the Donna Karan business, equal to an aggregate of $0.21 per share. Full year results; for the full fiscal year, net sales increased by 2% to $2.39 billion from $2.34 billion last year. Net sales of our wholesale operation segment increased 3.3% to $2.01 billion from $1.95 billion. Our non-outerwear and new brand launches were responsible for the increases. These increases were offset by a reduction of net sales of outerwear. Net sales in our retail operation segment decreased 8% to $474 million from $514 million due to a decrease in same store sales of 7.5% for G.H. Bass and 14% in Wilsons as compared to the prior year. The Donna Karan sales included in the quarter were the same for the whole year. Our gross margin percentage was 35.2% in fiscal 2017, compared to 35.8% in fiscal 2016. The gross margin percentage in our wholesale operation segment improved to 31.4% from 30.9% in the prior year. Gross margin percentage in our retail operation segment was 43.6%, compared to 46.1% in the prior year. Selling general and administrative expenses increased to $705 million or 29.5% of net sales in fiscal '17, from $629 million or 26.8% of net sales in the prior year. This increase includes approximately $20 million of expenses related to the Donna Karan business during the last two months, professional fees and severance expense associated with the DKI acquisition of approximately $11.7 million, expenses associated with our increased wholesale volume and increased expenses related to the new Tommy Hilfiger and Karl Lagerfeld initiatives. We also spend more from marketing initiative related to the G.H. Bass business. These expenses were offset by reduced bonus expenses. Our corporate bonuses were down 60% as compared to the prior year. Our effective tax rate was 33.2% in the current year, compared to 36.2% in the prior year. The lower rate in the current year was impacted by tax benefits from the vesting of restricted stock in accordance with the effective accounting rules. We are anticipating a 37% tax rate in our outlook for fiscal 2018. Net income for the year decreased to $52 million or $1.10 per diluted share from $114 million with $2.46 per share on the prior year. The current year's net income includes the effect of the impairment charge of approximately $10.5 million related to our retail operation segment and professional fees and severance expense of $11.7 million related to the Donna Karan acquisition and non-cash imputed interest of $1 million related to the note issued to the seller as part of the consideration for the DKI acquisition, equal to $0.32 per diluted share. Included in our Netcom [ph] in the prior year is approximately $1.1 million of other income, equal to $0.02 per diluted share which primarily consist of the reduction of the estimated contingent consideration, payable in connection with the acquisition of Vilebrequin. On an adjusted basis, excluding these items from the current and prior year's results, non-GAAP net income per diluted share was $1.42 for fiscal '17, compared to $2.44 for fiscal '16. Included in both GAAP and non-GAAP results for fiscal '17 are operating losses of $9.2 million, an additional interest expense of $7.5 million related to the operation and ownership of the Donna Karan business, equal to an aggregate of $0.24 per diluted share. Regarding our balance sheet; accounts receivable at year end increased to $267 million, compared to $221 million at the end of the prior year as a result of the fourth quarter sales increase. Inventory decreased slightly to $483 million from $485 million. We spent approximately $25 million on capital expenditures this year, primarily due to lease hold improvements, the new and remodeled Wilsons, G.H. Bass and Vilebrequin stores, as well as fixturing cost at department stores. At the end of the year, we have long term debt outstanding of $462 million, which we incurred in relation to the purchase of Donna Karan. This figure takes into account a calculated $40 million discount on our $125 million phase value debt due to the seller which has a coupon rate of 2%. In addition, our cash balances were $79 million at the current year's end compared to $133 million last year. Regarding our guidance; for the fiscal year ending January 31, 2018, we are forecasting net sales to increase approximately 15% to approximately $2.73 billion, compared to $2.39 billion in fiscal '17. We expect net income to be between $40 million and $45 million or between $0.80 and $0.90 per diluted share as compared to net income of $52 million or $1.10 per diluted share in fiscal '17. We are anticipating our additional expenses of $9 million and non-cash imputed interest expense of $6 million in our forecasted results. On an adjusted basis excluding transitional and imputed interest expenses, we are anticipating non-GAAP net income of between approximately $49 million and $54 million or between $0.99 and $1.09 per diluted share. The forecasted GAAP and non-GAAP results reflect expected operational losses of $31 million, an additional interest expense of $36 million or an aggregate of $0.85 per diluted share associated with the Donna Karan business. The forecast also includes the full year impact of the issuance of approximately 2.6 million shares of new GIII common stock to the seller of the Donna Karan business. We are projecting full year adjusted EBITDA for fiscal '18 of between $162 million to $171 million compared to adjusted EBITDA of $148 million in fiscal '17. This adjusted EBITDA guidance includes a full year loss of approximately $20 million, associated with the Donna Karan business. Regarding our retail performance at both Wilsons and Bass for the full year, we are anticipating low single-digit comp decreases. For the first fiscal quarter ending April 30, 2017, we are forecasting net sales of approximately $500 million and a net loss between $20 million and $25 million or between $0.41 and $0.51 per share. This forecast compares to net sales of $457 million and net income of $2.8 million or $0.06 per diluted share reported in the first quarter of fiscal '17. The first quarter forecast assume transitional expenses of $3 million and non-cash imputed interest expense of $1.4 million. On an adjusted basis excluding transitional and imputed interest expenses, we are forecasting a non-GAAP net loss between $0.35 and $0.45 per share. The forecasted GAAP and non-GAAP results for the first quarter reflect expected operational losses of $26 million and additional interest expense of $9 million or an aggregate of $0.45 per share associated with the Donna Karan business. Included in our consolidated forecasts, our forecast for the Donna Karan operations which reflect net sales of $285 million and operating losses of approximately $40 million. On a non-GAAP basis, excluding estimated transitional expenses, operating losses for Donna Karan business are forecasted at approximately $31 million. Net sales are approximately $40 million lower and non-GAAP operating losses are approximately $20 million higher than our previously-issued guidance. We are now anticipating that the legacy pricing strategy will have a larger negative impact on the coming year's revenue and operating income in both the wholesale and retail performance of the Donna Karan operations. We anticipate that we will incur losses from the Donna Karan operations during the first half of fiscal 2018 that will be partially offset by operating profitability beginning in the third quarter as we begin shipments of product design by us and we relaunch the DKNY and Donna Karan business. The company anticipates the second quarter impact of the Donna Karan business will be similar to the impact during the first quarter for both operating losses and additional interest expense. Regarding our retail performance and both Wilsons and Bass for the first quarter, we are anticipating high single to low double digit comp decreases against negative comps of 14% for Wilsons and 5% for Bass in the previous year's first quarter. That concludes my comments and I will now turn the call back to Morris for closing remarks.
- Morris Goldfarb:
- Thank you, Neal. We believe we have what's needed to prosper in a disrupted retailing environment. We have great design and merchandised planning, efficient sourcing, responsive customer service, expense management, financial discipline, careful inventory management -- all of these elements are essential to driving sales and profit. Our power brand Calvin Klein, Tommy Hilfiger, Karl Lagerfeld, Vilebrequin and now DKNY and Donna Karan -- these are special lifestyle brands known the world over. These five brands comprise the foundation that will drive out growth over the long term. Having these brands in our portfolio is a testament to the abilities and dedication of our team to the strong relationships we have developed over many years. Our strategic focus on proprietary access to a diversified set of power brands is the critical element of our go-forward strategy. To be this well-diversified, with this caliber of brands at this degree of scale positions us to offer our customers an unmatched value proposition with differentiated product in every major category for each major retailer. The upcoming year should reflect organic and acquired growth in our wholesale businesses, reduced losses in our retail businesses and the turning point in the financial results of our newly acquired Donna Karan business. Thank you, operator. We're now ready for some questions.
- Operator:
- Thank you. We will now begin the question-and-answer session. [Operator Instructions] Our first question comes from Ed Yruma from KeyBanc Capital. Your line is open, sir.
- Ed Yruma:
- Hi, guys. Thanks for taking my question. I guess first, could you give a little bit more color on the change in the EBIT guidance at Donna Karan? I know you said it was due to the legacy pricing, but could you give a little bit more color as to why there were such a delta and then contextualize it with a longer term guidance you gave for DK. Does that materially change? When do you expect the business to become profitable?
- Neal Nackman:
- As I mentioned, we took sales down about $40 million from our original forecast. That's really the main driver. I think that our first half -- I think we saw the business tail off larger than we had originally expected. So our first half is probably weaker than we would have expected, our second half is really where we expect it to be. The performance of this business in the second half really jumps to about what GIII would expect for any one of our wholesale operating business very strong. In terms of going forward into the future, it's a little early for us to give you a specific guidance on the second year, but we continue to feel very strong about where those businesses after three years and the profitability which we put in that mid-15% type operating margin ranges.
- Morris Goldfarb:
- Ed, to add to Neal's comments, we had some issues with some of our distributors. One of them changed their model. They no longer function as distributor. They prefer a management model and on a go-forward basis, the purchases are not what was anticipated or even contractual. We've renegotiated an exit for our distributor and the other part of it is most of the other distributors, because as Neal said, legacy pricing were over inventoried and have tempered their buys for the early segment of the year simply because of space and the need to liquidate their existing inventory. But their visits to New York and their view of what we're doing going forward is quite exciting and they're very, very supportive in this new initiative, in this new pricing policy.
- Ed Yruma:
- Great. And a follow up if I may. Could you contextualize with the retail business now how much structural profitability left you should get from the store closures you've announced and what's baked into this fiscal year's guidance in terms of improvement in the overall retail business? Thank you.
- Neal Nackman:
- Yes, Ed. The losses on the closed store businesses are probably about $2 million or $3 million. We're probably looking for improvement to the magnitude of around $15 million to $20 million in terms of the operating loss from the current year and that's going to be again significantly driven by the expense reductions that we've got, we are still as I mentioned planning low single digit comp for both businesses, we are looking for a little bit of a margin improvement baked upon some of the things that we're doing in terms of product and people in the store.
- Operator:
- and our next question comes from Eric Beder from Wunderlich. Your line is open, sir.
- Eric Beder:
- Hi. Good morning.
- Neal Nackman:
- Good morning, Eric.
- Morris Goldfarb:
- Good morning.
- Eric Beder:
- Can you talk about how the Macy's business changes what you're going to do strategically with the Donna Karan business? What should be the biggest brand here now when going forward?
- Morris Goldfarb:
- They'll both be great brands. We have a contractual commitment from Macy's that pretty much achieves what we were setting out to do with the entire company. What we have done is we've worked tirelessly. Sammy Aaron and his team of people have built two collections rather than just one to bring to market. One is the Macy's initiative. We clearly know what that means, the potential of it, we know how to manage the business jointly with Macy's, the excitement that's in the air for the last two weeks. Forget about all the pain that went on prior to that is absolutely great. I encourage you to come visit and see what we've developed in the short period of time. Macy's is easy to calculate. All the other department stores have come in and shopped what Donna Karan represents and they're beginning to rate very, very aggressively and it's a global initiative, not just a U.S. initiative. There's excitement for Mexico, for Canada, for Europe, for China. The scale of this will be significant. It may take a little bit longer. When I say a little bit, I'm not talking about years, I'm talking about months. Unfortunately, our report card comes out every quarter if this tips the quarter into the following year is not a terrible thing the way I look at the future of this acquisition. It's on the right path, we've done all the right things for it and we have support and need from the retail community to support something new and this is it.
- Eric Beder:
- Okay. And changing gears a little bit. What are you seeing from the initial Tommy Hilfiger sportswear roll out and how should we be thinking about that opportunity for this year beyond?
- Neal Nackman:
- [Indiscernible].
- Morris Goldfarb:
- We continue to describe the Tommy Hilfiger initiative as one of our power brands. Certainly is PBH is power brand. We're going to match up to it on the women's side the same way that we did with Calvin Klein. Anything that I said the day we took this over remains the same. We're on a good path, we have good retail selling, we've brought product to market again in record time. It's what we do best at the right price, we were pushed back a little bit unexpectedly because we needed to give PVH the appropriate time to liquidate their inventory which is their issue and it bleed it a little bit into our first quarter. Other than that, we are thrilled with the license and we're on plan to make the numbers that I've stated in the past. Nothing has changed.
- Eric Beder:
- Okay. Good luck for 2017.
- Morris Goldfarb:
- Thank you, Eric.
- Operator:
- And our next question comes from Erinn Murphy from Piper Jaffray. Your line is open.
- Erinn Murphy:
- Great. Thanks. Good morning. Sorry if I missed this, but I just want to clarify. Are you guys thinking now about fiscal '19 that's $550 million in revenue and $55 million in EBIT for DKNY? Has that effectively pushed out just given the change in how you're thinking about DKNY this year and then when we think about the longer term potential, how should we be thinking about the licensing, the retail and the wholesale opportunity to hit your long term plans for this brand?
- Morris Goldfarb:
- To respond, we're okay with the guidance that we've given on $550 million for 2019. As I said, we're launching two brands. They're global and we believe we can get there. We're working on repairing the retail pieces of DKNY. For the first time, we're witnessing reasonable selling with better product or more appropriate product for outlets being shipped. So we believe we can change that. The reception that we're getting from every retailer that has shopped either DKNY or Donna Karan as I said before -- I'm not sure you caught it -- was excellent. The attitude in the showroom from the retailers is positive as I could imagine. We're very pleased with the direction of it. Our licensing income is growing. We just did a great photo shoot with Emily Ratajkowski and Emily supported an initiative that we have with Hanes. The Emily as some of you know is an incredible model with -- I guess I'm told she has 12 million Instagram followers. On our shoot, we got 3 million direct impressions and I'm not sure what this means, but we got 900 million global impressions. The numbers that I would focus at would be the 3 million direct impressions and the 12 million Instagram followers. We're thrilled with the shoot. It's beginning to make a difference for Hanes in their intimate business and we're working aggressively in doing another shoot hopefully with Emily. The marketing, the improvement in licensing and the confidence level that we're getting from the distributors globally is going to push this business forward in the appropriate manner.
- Erinn Murphy:
- Okay. And then to the $55 million EBIT for fiscal '19, is that still on the table then? Even the revenue is? Or is that what we should think about is in a pairing down a little bit?
- Morris Goldfarb:
- I think you might pair it down a little bit. Again, that might be what I'm describing as the bleed into the following quarter. We're working incredibly hard. We're hitting all the targets, but as you take over a brand, a company that has been developed for 15 years with a different culture, there are some unexpected delays. But this is the absolute right acquisition for this company. As I've said earlier -- maybe you missed that as well, the worst thing that happens is we push back the quarter. We're not at all concerned about the validity of the acquisition.
- Erinn Murphy:
- Okay. And then just last question, maybe for Neal, on the outerwear order book for fiscal '18. Where is that trending now and then what's embedded for the total category in the guidance? Thanks.
- Neal Nackman:
- Right. Erinn, the full year, we're anticipating a low single-digit positive increase for outerwear. We've got about 55% of the order book in at this time and our order book is consistent with our projections at this point as far as the forecasted revenues.
- Operator:
- And our next question comes from John Kernan from Cowen. Your line is open, sir.
- John Kernan:
- Good morning, everyone. Thanks for taking my question. Neal, I wonder if we could back up to the wholesale business excluding Donna Karan and what's embedded in your guidance this year both from a sales and more importantly from an operating margin standpoint. I'm trying to figure out what you're embedding from a profitability improvement in that business' segment.
- Neal Nackman:
- If we exclude the Donna Karan business, the GIII core -- let's call the core business -- would be up mid to high single digits the next year. I would expect that we'll be somewhat neutral on gross margin, somewhat neutral on SG&A expenses and have again high single digit operating margin performance for the core business.
- John Kernan:
- Okay, that's helpful. Morris, I guess one thing we continue here is the department stores are in the early innings of door closure cycles. Can you just talk about where you think the total department store footprint is going? You seem to be upping your exposure to that channel, so I'm just trying to understand where you dramatically think this channel is going in terms of its overall brick and mortar footprint?
- Morris Goldfarb:
- John, we all read the same papers and we agree there are concerns about the scale of the brick and mortar business and the effect of the online business to brick and mortar. We have a big bet on brick and mortar that has as its partner an online presence. Almost every retailer we trade with has an online presence. Our largest, Macy's, I'm told they are the third largest online provider of apparel. So it's not just brick and mortar. [Indiscernible], whether it's The Bay, or whether it's Dillard, they all have sites that are growing. They have not conceded the online business to Amazon. The battle is fierce. The store closures for me represent stores that need to be closed. They're not the premier profit-making stores that are going away. There are stores that have been open for many decades that don't belong there. So we do an assessment. Every time we see a group of stores closing, we try to rationalize the significance to our business and we looked at Macy's and we found that the store closures that they had announced, we independently looked at it and we found that it affected about 3% of our fails on existing situations if that went to zero. But there's view that the online business in those regions would grow. So we're not sure that it has any effect. There will be consolidations, the specialty store sector announces store closures as we did today and they'll be repurposed for another use or maybe another concept. But we're not giving up on brick and mortar at all. It's an important part of our business and as you see today, we've made a big bet on Macy's and all other department stores in the country.
- John Kernan:
- Understood. That's helpful to get your perspective. Neal, just one final question. How your cash balance this year, I guess given the losses in the first half of the year, do you expect any additional debt needs in calendar '17?
- Neal Nackman:
- No, John. The revolver we have is up to $650 million. It's more than ample to support the business operation and while we probably slipped a little bit in terms of our anticipated cash, the company's leverage is still very modest for what we see as still tremendous growth opportunity and tremendous improvement in cash flow going forward.
- John Kernan:
- Did you mention CapEx, Neal? Just one final.
- Neal Nackman:
- It was $26 million for last year.
- John Kernan:
- Okay. And it's similar for this, too?
- Neal Nackman:
- Yes. I would expect somewhere in the $25 million to $30 million range again for this year.
- John Kernan:
- Okay, thank you.
- Operator:
- [Operator Instructions] Our next question comes from David Glick from Buckingham Research. Your line is open, sir.
- David Glick:
- Thank you. Morris and Neal, just a question about beyond 2017. I think investors were assuming that the calendar '17 was going to be a transition year and that the guidance could reflect that. Obviously DKNY was more dilutive than we all expected, but I think there is an expectation that it has to make at least $2 in calendar '18 or you call in fiscal '19. When you look at your guidance for this year ex-DKNY, it's about $1.90, the midpoint. Is it reasonable to think that while you may not make your original plans for next year in DKNY, that the business after this coming year could at least be earnings neutral as you transition the business? Thanks.
- Morris Goldfarb:
- Yes. Absolutely, David. Our business is really in good shape. The pieces that we are working on repairing are very clear. It's our retail business. Our coat business is in good shape. It's right-sizing some of the brands, we're combining some of the divisions, we're going to operate much more efficiently and we're fine. We make money in our outerwear business and we're targeted to make more in the future. The strength of the power brands and the focuses of power brands will probably tip some of the business toward the major brands versus some of the secondary brands. But that would be the only change in outerwear and if we look at our biggest bet which is Donna Karan and DKNY, it is the future of this business. We believe that we've balanced the business appropriately between owned and licensed brands, we've solidified the future of the business for the next generation with a balance of licensed and owned brands. So we're comfortable that '19 will be an excellent year for us. We've just given ourselves the ability of marketing toward Europe and Hong Kong with a couple of great brands. Most of what we hear in growth and prosperity in our universe as apparel is targeted toward Europe and China. We've had very little of our own that we could market there. Today, we have pretty much control of our own destiny without a licensor dividing the world for us by store distribution and by continent distribution. Other than the earnings that we're showing you today, this is the best period of GIII. It's hard work, it's people that are self-committed to what they're doing. It's unimaginable to see the effort that has been put into Donna Karan and DKNY and maintaining the rest of our businesses. But it's a great day. I wish I didn't have to give you these earnings. It would be a little bit better, but we're good.
- David Glick:
- To be clear, you can...
- Morris Goldfarb:
- I was a little wordy, but you gave me an opening to brag about what we're doing. Thank you.
- David Glick:
- Okay. So to be clear, you think you can wipe out that delusion in the out year with DKNY?
- Neal Nackman:
- Yes.
- David Glick:
- Okay. Thank you. Good luck.
- Neal Nackman:
- Thank you, David.
- Operator:
- And we have no further questions at this time. I'd like to turn the call back over to management for any additional or final remarks.
- Morris Goldfarb:
- Thank you. Thanks for listening to our story and thank you for remaining shareholders of our company.
- Operator:
- Thank you. Ladies and gentlemen, this concludes today's conference. Thank you for participating. You may now disconnect.
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