Q3 2024 G-III Apparel Group Ltd Earnings Call

December 5, 2023

[music].

Good day, and thank you for standing by welcome to the G. III apparel group third quarter fiscal 'twenty 'twenty four earnings call.

At this time all participants are in a listen only mode. After the speaker's presentation, there will be a question and answer session.

I ask a question. During this session you will need to press star one one on your telephone.

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Please be advised that today's conference is being recorded I would now like to turn the conference over to Neal Nachman Chief Financial Officer. Please go ahead.

Good morning, and thank you for joining us 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.

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 diluted 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, which is also available on our website.

I will now turn the call over to our chairman and Chief Executive Officer Morris Goldfarb.

Thank you Neil and thank you everyone for joining us.

We recorded strong profitability in the third quarter, well exceeding our bottom line guidance.

Our strong year to date results showcase <unk> ability to successfully navigate challenging market conditions.

Over the years, we have a proven track record of evolving to drive our business and to meet the needs of customers in an ever changing landscape.

Before I review, our third quarter results.

I want to take a moment to recognize all of that we have done over the last 12 months since we announced the staggered license terminations of the Calvin Klein and Tommy Hilfiger brands.

We noted that this change will allow us time to accelerate our long term strategic priorities.

Since then we've delivered.

Real quickly to develop four new initiatives and have made significant progress with our existing business.

Our new initiatives include the repositioning and expansion of Donna Karan, which will launch this spring and over 200 doors.

We will build a 150 branded shop in shops, and develop new licenses to extend the brand's new positioning and reach.

Our long term license for Nautica and North America.

Beginning with jeans and expand into a broad range of additional categories is set to launch early next year and over 200 doors.

We'll quickly install 60 branded shop in shops.

Our master a global license with the option to purchase cost and is expected to launch in the fall of 2024 with new positioning across a broad range of categories. We will also be a license or other brands, creating another income stream for us.

And a multiyear license to produce outerwear for champion that fits seamlessly into our already well developed outerwear operations with first deliveries available for fall of 2024.

We've been able to secure these new initiatives as rapidly as we are a vendor of choice for retailers with a strong balance sheet importantly.

Importantly, these plans are already underway and will result in new sales starting this spring because of the hard work of our design and merchandising teams led by Sammy Aaron Sami and his teams have done an incredible job capturing the DNA of each of these brands and authentically trans.

Relating that into full collection by category in such a short period of time the product looks great.

Additionally, Jeff Goldfarb and his teams have successfully enabled us to quickly identify and develop new opportunities to expand our reach and impact.

He has secured a number of deals for the business develop that global distribution partner network.

Significantly grown our digital business.

All of this work demonstrates our ability to deliver to our shareholders our partners and our associates.

I'm confident that we're moving in the right direction.

As we continue to focus on new opportunities to evolve our business model I am pleased to announce that we've hired Dana Perlman as chief growth and operations officer.

In this newly created role she will bring her impressive experience to drive innovation optimize operations and help identify new opportunities for G. III.

I am confident that Dana has 20 year career with a strong track record of success in our industry will help us execute our go forward plans.

The team and I look forward to working with her when she joins us in January.

Now turning to the results of the third quarter of fiscal 2024.

non-GAAP net income per diluted share was $2 78.

Compared to $1 35 per diluted share last year, well exceeding our guidance by 70 cents at the midpoint.

Our outperformance was a result of several factors.

Including gross margins, which were meaningfully better than last year exceeding our internal expectations.

We move through our inventory more profitably than planned and benefited from further moderation in freight costs.

We also lapped the bulk of last year's onetime logistics costs.

As we work through our inventory, we were able to obtain warehousing efficiencies faster than we expected.

Our warehousing is now well aligned with our current and planned inventory levels. Importantly, we were able to avoid expected deleverage in SG&A, which as a percentage of sales is now comparable to last year's third quarter.

As a result, we delivered strong operating margins of 18% in the quarter as compared to 9% in the third quarter of last year.

Net sales.

We're a $1 $7 billion compared to 1.1 billion last year 1.8 billion last year.

While the retail environment has been challenging across the board with its consumers.

Consumers facing inflation as well as unseasonable warm weather, we feel good about our decision to focus on profitable sales.

We did not need to chase additional promotional sales as we exceeded our bottom line profit expectations.

The combination of these factors resulted in missing our topline guidance, yes, we well exceeded our bottom line guidance.

We ended the third quarter and a significantly better inventory position with total inventory is down 34% to $592 million compared to $900 million last year.

With pressures on supply chains, having eased workplace, we're placing inventory buys closer to need.

This combined with our lower inventory levels are enabling us to turn inventory more efficiently and chase favorable sales trends.

Looking ahead this will enable us to realize additional warehouse cost efficiencies.

We ended the quarter in a strong financial position with $840 million in cash and availability.

This is after we utilized the $100 million to pay down $75 million of debt and $26 million to repurchase shares we have 10 million shares available in our buyback program.

Now I'll provide an update on our strategic priorities.

Our first priority is to drive our power brands across categories.

Our performance this quarter continues to be led by outerwear sportswear dresses and suit separates across our key brands DKNY, Karl Lagerfeld, Calvin Klein, Tommy Hilfiger, as well as Levi's.

We also saw a nice pickup in handbags and team sports.

We are a significant global supplier with a diversified distribution network across across stores and digital channels from luxury and better department stores.

C stores and the off price channel, we continue to be able to make quick transitions, where necessary and manage inventory to deliver the right product at the right time to maximize profits along with sales.

As we continue planning our transition with Calvin Klein and Tommy Hilfiger.

Our new Nautica, and Halston brands, along with newly repositioned Donna Karan will giant DKNY and Karl Lagerfeld as power brands.

We're comfortable that they will replace the topline and bottomline as key growth drivers of that portfolio.

They each bring a distinct point of view to our portfolio for a wide range of consumers with tailored distribution strategies and dedicated design teams.

We continue to seize opportunities to expand these business and.

And bring in additional brands that fit our long term strategic vision.

Shifting to our next priority growing our own brands.

Our own brands represented $1 $3 billion in annual revenue last year.

And they are on track to reach one 5 billion this year.

We believe we can grow these brands to over $3 billion in annual revenue over time and continue to direct more resources to this area.

They are the most profitable businesses in our portfolio as we do not pay a royalty fees may provide highly accretive licensing income opportunity.

For the third quarter, our own brands DKNY, Karl Lagerfeld, Donna Karan in <unk> <unk>.

Our registered another period of sub solid double digit.

Year over year growth as collections are resonating with customers.

We're on track to earn $75 million in royalty income this year, which is highly accretive revenue stream.

We will have four new fragrances with our partner into pro form.

Karl Lagerfeld, DKNY and Donna Karan will launch a new sense next year. This past August we introduced the brand extension for DKNY be delicious, which has performed exceptionally well. Additionally, DKNY expanded into new licensed categories, including <unk>.

Men's underwear and loungewear.

And tech accessories, and and we re signed our South Korean territory lives.

Our marketing efforts this past quarter for DKNY highlighted the brand's inherent connection with New York City across multimedia campaign.

We acquired the total Karl Lagerfeld brand over a year now.

We're extremely pleased with its performance, which has been accretive from the beginning.

Fall campaign focuses on a new icon K.

<unk> K handbag and last month, we launched a new holiday campaign, featuring carlyle's beloved cat Chew bed.

Further we brought the world of Karl Lagerfeld to life during European fashion weeks.

Through some high impact the level of activities in Paris aligned Dubai and Bangkok.

These events resulted in over 200, social stories and 90 million impressions.

Extending our global reach is an important priority this year a key international brands have registered solid sales growth.

Karl Lagerfeld is expanding into new lifestyle categories with genes, which targets a younger consumer and there is a natural fit for the brand.

The collection embodies caused confidence self awareness and the independent spirit of this street art for both men and women across ready to wear accessories and footwear.

We just opened our first Karl Lagerfeld gene store in Madrid, and it's off to a good start.

To support the launch and engage with younger consumers, we took over at nightclubs in Paris, Berlin and imagery.

We now have six unique Karl lagerfeld branded lifestyle projects with more in the works. In addition to two hotels, one of which opened this year, we have agreements before residential properties in Dubai in Lisbon, and two in Spain.

BELBUCA and further expanded its reach with franchise partners, having opened two new stores and prominent beach vacation destination.

One of the Atlantis hotel in the Bahamas, and the other is Kosta <unk> Greece.

The brand now has a total of 104 company operated stores and 88 franchisee operated stores.

Further <unk> has three lifestyle projects a beach club in time.

Which opened this summer and is becoming a major success.

A bulk of return Beach club that opened last year and today, we're excited to announce that we've just entered into a multiyear licensing agreement with a developer of a luxury lifestyle hotel in Florida.

Expected to open in spring 2020 for <unk>.

<unk> has designed the approximately 15000 square feet combined indoor and outdoor rooftop pool.

<unk> and restaurant will open and will open a retail store.

These beach clubs demonstrate the brand's power and the versatility to adapt our lifestyle concept owned franchised or licensed opportunities for clubs restaurants, and even hotels in the future.

For both of these brands hospitality has become a new opportunity for us.

These initiatives provide additional income drives significant global awareness and enhance the status appeal of the brand.

We've also laid a strong foundation for DKNY international expansion with new partner stores.

Thus far five a bulk of this year and we expect to open seven more by the end of next year.

In September DKNY introduced the first European designed collection.

Which will launch in September 2024.

The collection will feature a range of iconic street wear and sports inspired the women's piece.

We hosted an exclusive press preview.

During Milan fashion week and garnered rave reviews.

Levering over $18 million global presence social impressions.

This line will launch in key European cities with exclusive partners like Harrods laterals in the UK and Italy. The Lando will also become a key digital partner for the brand in Europe.

Digital and Omnichannel growth remains an important priority.

We've continued to invest in our capabilities, including an increased focus and rapid expansion with the pure play channel, which has helped offset the moderation in traditional digital channels now that customers are returning to stores.

This work has paid off with those sales increasing by 30% this year.

Our Amazon business alone is up over 80% to last year.

The speed at which they've grown mix makes clear how much runway we have with this channel.

In conclusion, we ended our third quarter, delivering non-GAAP earnings that exceeded our expectations and have done a great job successfully executing our strategic priorities.

We feel it prudent to take a cautious view of our forecasted sales. We now expect fiscal 2020 for net sales to be $3 $1 5 billion based.

Based on the strong outperformance in the quarter, which resulted in higher operating margins, we have a confidence to raise fiscal 2024 non-GAAP EPS outlook.

We are raising our non-GAAP net income per diluted share guidance to be in the range of $3 90.

$4 compared to our prior guidance of $3 20 to $3 30.

This compares to $2 85 in fiscal 2023.

I'll now pass the call to Neal for a discussion of our third quarter financial results as well as guidance for the full year fiscal 2024.

Thank you Morris net.

Net sales for the third quarter ended October 31, 2023, with $1 7 billion compared to $1 8 billion in the same period last year net.

Net sales of our wholesale segment were one 5 billion compared to $1 $7 billion last year.

Net sales of our retail segment were $33 million for the third quarter compared to net sales of $29 million in last year's third quarter.

Our gross margin percentage was 46% in the third quarter of fiscal 2024 compared to 32% in the previous year's third quarter.

The wholesale segment gross margin percentage was 39, 6% compared to 37% in the previous year's comparable quarter.

The gross margin percentage last year was negatively impacted by significant onetime demurrage charges of approximately $27 million, which we incurred in the third quarter of last year.

The gross margin percentage in the current year period was positively impacted by lower freight costs compared to the same period last year.

We have been forecasting higher gross margin percentages throughout the year and they came in even better than we had anticipated.

The gross margin percentage in our retail operation segment was 49, 1% compared to 54, 9% in the previous period.

SG&A expenses were $236 million compared to $240 million in last year's third quarter.

We were able to achieve strong warehousing efficiencies compared to our expectations and actually had lower warehousing cost compared to the prior year.

These reductions offset the inflationary pressures we have incurred throughout the current year.

Current warehouse capacity is now well aligned with our current and planned inventory levels.

non-GAAP net income for the third quarter was $130 million or $2 78 per diluted share compared to $66 million were $1 35 per diluted share in last year's third quarter.

Driven by improvements in gross margins SG&A and less interest expense.

non-GAAP net income per diluted share were significantly above the midpoint of our guidance of $2.08 per diluted share.

Turning to the balance sheet, we made good progress with respect to our inventory levels.

Inventory decreased 34% to $592 million at the end of the quarter when last year at $901 million.

We made strong progress right sizing our inventory levels as we had appropriately adjusted our buys to account for the higher than usual inventory, we carried over from the previous year.

We expect to have lower comparable inventory levels at the end of the year as well.

We ended the quarter with a net debt position of approximately $265 million compared to $729 million in the prior year's quarter and.

This decrease in net debt is primarily a result of cash flows from operations as well as the large decrease in our inventory levels.

Set by $26 million used for stock repurchases.

We had cash and availability under our revolving credit agreement.

<unk> $840 million at the close of the quarter.

Last week, we repaid the remaining $50 million of debt outstanding under the seller's note related to the Donna Karan acquisition.

We believe our liquidity and financial position provide us the flexibility to invest in our future growth and take advantage of opportunities in the marketplace.

As for our guidance.

Based on our performance in the third quarter and our current view of the fourth quarter. We are raising our non-GAAP earnings per diluted share guidance. We expect non-GAAP net income for the full fiscal year 2024 of between $180 million to $187 million or between $3 90, and $4 per diluted share.

This is substantially above our previous full fiscal year guidance of net income in the range of 152 and $157 million or between $3 20.

$3 30 per diluted share.

This compares to non-GAAP net income of $139 million with $2 85 per diluted share for fiscal 2023.

We now expect fiscal 2020 net sales to be $315 billion.

Full year fiscal 2024, adjusted EBITDA is expected to be between 317 and $322 million up from our previously guided range of $284 million to $289 million.

And compared to adjusted EBITDA of $266 million in fiscal 2023.

Let me add some context around modeling.

We expect continued gross margin improvement in the fourth quarter. However, at a more moderated pace than we saw in the third quarter.

In the fourth quarter of last year, we had started to realize the benefits from decrease in freight rates and we lap a much smaller amount of onetime logistics costs.

We anticipate ending the year with gross margin percentage is up approximately 600 basis points compared to the fiscal 2023 right.

We anticipate SG&A will delever in the fourth quarter as it was.

As inflationary pressures on cost.

We expect non-GAAP interest expense to be approximately $38 million for the full year.

We are estimating a tax rate of 28% for the balance of the year.

We have not anticipated any potential share repurchases in our guidance.

That concludes my comments I will now turn the call back to more so closing remarks.

Thank you Neil and thank you all for joining us today.

The past 12 months are a testament to our ability to thoughtfully adjust quickly create and bring to market new opportunities for our business.

I feel great about our product.

Strength across our wholesale segment digital and increases in our prudent inventory management and our financial discipline. We have strong plans in place to drive G. III with our focus on our strategic priorities and these new growth drivers the strength of our balance sheet affords.

The financial flexibility to invest in our business and consider additional opportunities.

I'd like to thank our entire organization for all their hard work I'm proud of what the team has been able to achieve this year I'd also like to thank our many partners and all our stakeholders for their continued support.

Operator, we're now ready to take some questions.

Thank you.

Minor to ask a question. Please press star one on your telephone and wait for your name to be announced.

To withdraw your question. Please press star one again.

Please standby, while we compile the Q&A roster.

Our first question comes from Edward <unk> with Piper Sandler Your line is open.

Hi, guys just abbvie on for Ed. Thanks, So much for taking our question you touched briefly on the timeline for all said Ed jumped yet can you contextualize how big.

Our revenue opportunity could be and then as a follow up what investment will be required to really maximize the potential of both of those brands. Thank you.

Thanks for your questions actually a really good one.

The champion brand is.

For us as a coat licenses.

So the.

I would say the brand would probably mature.

Between 80 and $100 million in sales and that would probably.

Go out.

Three to four years.

The the Halston brand.

As we described we're going to classify that as a power brand for us and the opportunity is significant.

Believe there's an opportunity to bring that north of $500 million.

Just on product that we will create produce and ship.

And alongside of that we're going to create an income stream that derive the licensing income.

Probably could be north of $20 million in the <unk>.

Next three years.

And the expense attached to these.

They are there.

They're very very modest.

One is an option to buy which is Austin.

In the.

The.

The cost of that option is nominal and alongside of paying for that option. It's a discounted licensing rate that we pay.

The current brand older which is itself.

And as far as.

The cost of entry for champion.

It's a license to.

Guaranteed.

Sales number.

Our guaranteed royalty that we must pay which is nominal so.

<unk>.

The.

The capex expenditure of the acquisition cost.

Both of these brands is very nominal.

Got it that's very helpful. Thank you.

Yes.

Please standby for the next question.

The next question comes from will Gartner with Wells Fargo. Your line is open.

Hey, guys. Thanks for thanks for taking my question.

I guess first just maybe talk a little bit about what drove the upside to gross margin SG&A and then on that how do we think about the puts and takes into next year any big callouts almost thinking about modeling these two months.

So thanks.

Thank you for your question.

Thanks for joining.

The margin enhancements occurred as we were.

Developing and further maturing our brands.

We found that the pricing power.

Our brands.

We are underestimated and as we tested pricing the consumer accepted it.

Sales were good and we stayed.

Stayed on course, there was no need to take markdowns to move inventory was not a promotional period.

And at work that absolutely great we were able to move through.

Sure.

Millions of units of inventory that we carried over and we would assume that when you do that you need to take a markdown to achieve it.

We didn't take markdowns as Youll see in our results.

So it was a great.

Picture.

New canvas that was really created for us.

We are.

Now liking the.

The margin.

Format versus top line sales so we've.

We feel the same way as you see.

Q4 forecast shows margin enhancement as well.

Sure.

We're adjusting top line.

Adjusting top line down yet bottomline.

There are enhancements due to margin improvements as well as buying a little bit better as well as some freight costs coming down.

But we're in a margin business.

Yes.

Okay.

Neil.

As far as well as far as the SG&A I would say the most significant category that we had great success in was our warehousing costs.

Really based upon a couple of different factors certainly helps when you can drive inventory down or as Morris mentioned, the strength of the inventory and being able to move it.

And look we've been looking very hard at every aspect of our third party warehousing from space utilization when negotiating rates.

Moving inventory as properly as possible.

We were very very fortunate and inefficient warehousing spin.

Last item I'd call out to our advertising spend I think we've been prudent in terms of placing that where its been most effective.

Got it and then any any color into go ahead I'm sorry.

I was just going to say any color onto into next year anything that we should be thinking about puts and takes.

It's a little bit early.

What I do like is the.

Percentage of business that we're forecasting on our owned brands versus licensed brands.

Our own brands are going to derive.

Do today.

Better margins than our license brands.

So.

It's.

It's really kind of cool too.

The focus on on better margin businesses distribution is going to change a little bit.

And our own brands.

So.

We're seeing some with some good things I cant.

I can't really speak to the stuff that I can't control, there's a lot going on in the world.

You all see it we all read it we all live it.

And that makes us a little bit.

Conservative.

Outlook for the future.

But short of that our company is in great shape.

Talent pool.

Has been here for years consistency and talent that we measure is.

An important factor in how we grow and how we.

We.

Re create businesses create new businesses.

Our people know how we think they respond immediately and there is no there is no learning curve.

So this is a great great time, and a great company due to transition into new assets.

And then maybe just one more for me the hire of Dana.

It sounds like Youre thinking about M&A, a little bit more going forward I mean, what's what is out there I mean is there any attractive opportunities that you guys have identified I know you want to speak specifically to any but just maybe talk to sort of the M&A environment and how you are thinking about that.

Our culture has always been to acquire companies we've done a really good job of that.

Even before Dana.

Sure.

Thats.

We continue looking at.

<unk>, whether it's licensed or owned.

We shop globally, we're astute buyers it shows up in pretty much every acquisition. We've made since the nineties has turned out to be.

Be good acquisition there is nothing that sits in my mind there was.

That was poorly calculated in.

For them.

Made use of every acquisition we made.

Sure.

One of our company's strengths, so enhancing it and putting somebody.

From the financial World.

On our team.

And do nothing but improve.

<unk>.

And Dana as Dan has a known commodity to us we've dealt with Dana for many years.

PVH PVH, who as you know.

A great partner for years, and Dana was an important part of the.

Communication and helping us understand PVH and how we work with PVH and she'll do the same for G III and output with our partners.

We look forward.

The company.

Great. That's great. Thank you I'll pass it on.

Please standby for our next question.

Okay.

The next question comes from Mauricio Serna with UBS. Your line is open.

Great. Good morning, Thanks for taking my question and congratulations on a result, I just wanted to ask about the sales guidance, maybe I missed it but maybe you could comment a little bit what youre seeing from your wholesale partners I am curious just because I think it was lowered and.

And what are the dynamics, there and maybe if you could remind us.

I know youre not guiding next year, but if you could give us a little bit detail on how we should be thinking on when the new licenses and new business initiatives will be.

Materializing in your in your company.

Now I'll be very helpful. Thank you.

Thanks for your question Mauricio.

The.

The outlook.

As we.

We all look at.

Retail earnings forecast.

As is conservative for the future.

For all of the same reasons.

The consumer is not out there buying aggressively traffic is down.

The.

The economy is.

Not on spending mode housing costs are up.

Mortgage rates are up.

<unk>.

We have the.

The never ending.

College tuition issues. So there's there's a lot that's impacting the consumer that's not in our control.

Everything that we're controlling is doing well.

Difficult to forecast.

How deep the consumers going into their pocket.

Also have another element that we consider where we are still.

A large outerwear company.

Whether when weather doesn't work our way we are impacted.

But the good news is the recovery as quick.

Adding over deliveries on coach doesn't necessarily initiate a markdown.

No.

Its timing and its amazing how you get a couple of days of cold weather.

And.

The pain of warm weather has gone and instantaneously. So it's hard to forecast that but we we saw it.

As the weather change.

Last week, our business in the coat area got very good.

So.

It's.

It's a good place for the pieces that we control all the pieces that we don't again.

It's hard to give.

<unk>, four and a little bit early for us to forecast.

Next year.

But where we're the same company with more assets with a consistent talent pool with.

Sure.

Our balance sheet being.

Stronger than it's ever been.

Those factors all make me comfortable that went down a good path for the coming year.

Mario This is Neil just to add to the specific timing Nordic of genes.

As well as the Donna Karan launch will be in spring. So you can expect those to start hitting in our first quarter.

The Halston is launched before.

As well as the champion outerwear businesses. So I would expect that both of those are hitting primarily in the third starting in the third quarter of next year.

Great. Thank you thank.

Thank you Mauricio please.

Please standby for our next question.

Okay.

Our next question comes from Paul Kearney with Barclays. Your line is open.

Good morning, everybody. Thanks for taking my question congrats on the results.

My first question is on the margins a bit of a follow up so just looking at the model it looks like margins on a multiyear high I guess can you maybe help us think about what we'll hear is a structural improvement what's more transitory and anything you can kind of help parse out on the year over year drivers how much was <unk>.

Pricing, how much was lower cost how much was better distribution and I have a follow up thanks.

Sure.

So Paul.

Look I think the margins are structurally in place while the increase to the prior year has some one times.

One time benefits the actual achieved margin I think and our ability to maintain it goes back to edmar said before that.

The ability for us to price strong and maintain those prices. We did have lower freight. This year, we don't really anticipate that that scenario will change dramatically on us I think that we can continue to maintain pricing in terms of input costs, we're not seeing anything structurally that should give us pause.

This is somehow a unique one time high for us. So we will certainly endeavor to maintain these kinds of margins go forward and that will be based significantly on our ability to maintain price I think we've always been able to do a good job in terms of managing the cost side of that equation.

Okay. Thanks, and then my follow up is on price and I guess trying to.

Square with the comments on the pressures on the consumer.

Inventory purchases are still.

<unk>.

What gives you confidence that as costs come down prices won't have too soon follow convenience or immediate term.

<unk>.

We don't we don't really sell commodities.

We're a fashion business.

We sell fashion, we create demand.

And fashion is in demand and you do your job appropriately get paid for.

If you don't do you need to take the markdown and move product.

We have a history of doing the right thing as far as the creative side.

We add amazing quality to our product.

Consumer sees always sees value in our pricing, it's not our Charlie just raising your price and saying, we're going to get $10 more for the stress because we can we.

We add value.

Whether it's accessory value whether it's.

Branding value.

We're spending a good deal of money on marketing going forward.

That generates demand.

<unk> demand and generate sales.

If all of the pieces.

<unk> put together and done appropriately you get the price that you're trying to achieve.

We have a history, we have a long history.

It's a consistent it's consistent thesis.

Yeah.

Thank you for your question Paul.

Please standby for our next question.

The next question comes from Ashley <unk> with Keybanc. Your line is open.

Okay. Thanks for taking my question just on Karl Lagerfeld useful good momentum this year and have several initiatives in place there, but just like to hear your thoughts on how your opportunity within that brand for next year and then any additional color on how the other brands are currently performing internationally versus domestically and how thats progressing would be helpful.

Thanks.

Thanks for your question nationally.

We have a big internal bet on lagerfeld.

The bad is going to be our biggest percentage growth brand.

Doing great.

It had a good year, it's having a good year.

The guidance that we're getting from our retail partners is.

There is amazing amount of growth opportunity with the brand.

In door count and penetration within doors.

The product is selling all the categories.

Working it's a brand that makes you smile and you see it.

Scott It's got unique attributes.

And we love that acquisition.

We're expanding licensing opportunities as I spoke to.

Sure.

The lifestyle opportunities that we have in hospitality food and beverage and unique unique situations.

Really originated.

Bye Bye lagerfeld, there's a high demand for unique situations. So also other than the demand for our product is a demand for for opportunities with the brand.

I think.

Sooner or later and I'm going to bet the sooner within the next 90 days, we'll probably announce.

Hotel development in New York City. So there is some really exciting things.

That are going on with the brand.

And as far as global.

The weather was tough.

Throughout Europe from.

From what I understand.

Yes.

The warmest weather in 150 years.

And despite of that we're growing DKNY, we're growing lagerfeld and we're growing bell broken.

So the weather impacted parts of our business our boot business is soft.

Coat business is soft sweater businesses.

But the fast moving fashion pieces.

It worked well.

So.

We're learning how to operate globally.

Not having the same success in China.

But Europe.

The far east.

Been really good markets for us.

Great really appreciate it thanks.

Thank you Ashley.

The last please standby for our next question.

The last question comes from Dana Telsey with Telsey Advisory Group. Your line is open.

Good morning, everyone and so nice to see the progress and congratulations on the hiring of Dana Perlman.

That will be a terrific addition, and Mark you use one of my favorite words grow on growing.

<unk> brand, whether by channel, our wholesale department stores off price or whatever it maybe.

What are you seeing there.

Do you see that strength continuing does that continue because the category does it continue because of pricing how do you think of the levers moving forward. Thank you.

There.

It continues.

Because there are many factors primarily the.

Underlying talent that makes it happen.

And aggressive group that discovers the opportunities that most people just overlook.

We are beyond just a brand I think we're proving that out now.

Give our company a startup situation with.

Putting a focus putting our people on our focus of building it.

We can build the startup and make it effective very quickly.

We're proving that out brands.

Were underachievers.

In the hands of competition or.

Other people.

And we take them on.

Embellish them, we give them loving care.

Put a little money behind it relationships that we have with retailers.

Sure.

Amazing.

We get support the moment the moment we.

We pivoted brand.

First question is well what do you want us to do we're in.

That's really not the norm that comes with many years of building that trust.

They would.

I would venture to bet, if you spoke to any major retailer in the United States.

We're aware of us they trade with us.

They are happy with the relationship.

<unk>.

We put.

As a paramount focus the profitability of the retailer with without there being able to be profitable. We have no shot. So our first focus is understanding what they need to be profitable build around it.

<unk> the DNA of what we're marketing.

And.

There's a huge payback.

Theres loyalty there are orders there is.

This cooperation.

So it's.

Not.

Not a practice that everybody follows.

It comes from continuity of culture.

Same management team running the company for decades.

It's not it's not a bait and switch situations.

The good part.

Oh Glenn.

That's it it's a great place to be it's been fun building it in.

This phase.

Many companies that could survive.

Looking at giving up 50% of their top line sales and forecast increases and be more profitable.

In a period of time, when Theyre looking at maintenance and growth at the same time.

I'd say, it's an amazing story.

Just one other thing when you think about other additions to the licensing portfolio.

Is there a cap on how many you could do.

You think of it as size or number.

Yes, there certainly is a cap when we're not in the.

Business.

The days of us looking at.

Our license random license.

We're creating.

First revenue.

Extent that $20 million to $30 million is really not us.

Got to be it's got to be a.

An important brand for us to either acquire or license. It. There are some unique situations champion is a little bit unique.

It's a relationship that we needed.

Other.

Another co brand to shore up what.

We ultimately get back.

Champion turns out to be just a great solution.

Elution for part of what we're giving back but we're not out there shopping for a multitude of brands.

We need we need scale, we need focus.

And.

Each each brand has an entire management team it doesn't cost.

That doesn't cause their company and much more to build a $1 billion brand is to maintain a $100 million Brent.

So the focus is large.

Thank you.

Thank you Dana Thanks for your question.

With that operator.

I think we are done and thank you everyone for your interest and support we wish you and your families a wonderful holiday season, and a happy healthy new year.

Thank you.

This concludes today's conference call. Thank you for participating you may now disconnect.

Yes.

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Good day, and thank you for standing by welcome to the G. III apparel group third quarter fiscal 'twenty 'twenty four earnings call.

At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During this session you wouldn't each press star one one on your telephone you will then hear an automated message advising your hand is raised to lift.

Your question. Please press star one again.

Please be advised that today's conference is being recorded.

I would now like to turn the conference over to Neal Nachman Chief Financial Officer. Please go ahead.

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.

I will now turn the call over to our chairman and Chief Executive Officer Morris Goldfarb.

Thank you Neil and thank you everyone for joining us.

We recorded strong profitability in the third quarter, well exceeding our bottom line guidance.

Our strong year to date results showcase <unk> ability to successfully navigate challenging market conditions.

Over the years, we have a proven track record of evolving to drive our business and to meet the needs of customers in an ever changing landscape.

Yes.

Before I review, our third quarter results.

I want to take a moment to recognize all of that we have done over the last 12 months since we announced the staggered license terminations of the Calvin Klein and Tommy Hilfiger brands.

We noted that this change will allow us time to accelerate our long term strategic priorities.

Since then we've delivered.

Quickly to develop four new initiatives and have made significant progress with our existing business.

Our new initiatives include the repositioning and expansion of Donna Karan, which will launch this spring and over 200 doors.

We will build a 150 branded shop in shops, and develop new licenses to extend the brand's new positioning and reach.

Our long term license for Nautica and North America.

Beginning with jeans and expand into a broad range of additional categories.

Set to launch early next year and over 200 doors.

We will quickly installed 60 branded shop in shops.

Our master global license with the option to purchase half than is expected to launch in the fall of 2024 with new positioning across a broad range of categories.

We'll also be a license or other brands, creating another income stream for us.

And a multiyear license to produce outerwear for champion that fit seamlessly into our already well developed outerwear operations with first deliveries available for fall of 2024.

We've been able to secure these new initiatives rapidly as we are a vendor of choice for retailers with a strong balance sheet.

Accordingly. These plans are already underway and will result in new sales starting this spring because of the hard work of our design and merchandising teams led by Sammy Aaron Sami and his teams have done an incredible job capturing the DNA of each of these brands and authentically translate.

Adding that into full collection by category in such a short period of time the product looks great.

Additionally, Jeff Goldfarb and his teams have successfully enabled us to quickly identify and develop new opportunities to expand our reach and impact is.

He has secured a number of deals for the business develop that global distribution partner network and significantly growing our digital business.

All of this work demonstrates our ability to deliver to our shareholders our partners and our associates I am confident that we're moving in the right direction.

As we continue to focus on new opportunities to evolve our business model I am pleased to announce that we've hired Dana Perlman as chief growth and operations officer.

In this newly created role she will bring her impressive experience to drive innovation optimize operations and help identify new opportunities for G. III.

I am confident that Dana has 20 year career with a strong track record of success in our industry will help us execute our go forward plans.

The team and I look forward to working with her when she joins us in January.

Now turning to the results of the third quarter of fiscal 2024.

non-GAAP net income per diluted share was $2 78.

Compared to $1 35 per diluted share last year, while exceeding our guidance by 70 cents at the midpoint.

Our outperformance was the result of several factors, including gross margins, which were meaningfully better than last year exceeding our internal expectations.

We move through our inventory more profitably than planned and benefited from further moderation in freight costs.

We also lapped the bulk of last year's onetime logistics costs.

As we work through our inventory, we were able to obtain warehousing efficiencies faster than we expected.

As a result, we delivered strong operating margins of 18% in the quarter as compared to 9% in the third quarter of last year.

Net sales.

We're a $1 $7 billion compared to 1.1 billion last year, a 1.8 billion last year.

While the retail environment has been challenging across the board with its consumers.

Consumers facing inflation as well as unseasonable warm weather, we feel good about AD decision to focus on profitable sales.

We did not need to chase additional promotional sales as we exceeded our bottom line profit expectations.

The combination of these factors resulted in missing our topline guidance, yes, we well exceeded our bottom line guidance.

We ended the third quarter and a significantly better inventory position with total inventory is down 34% to $592 million compared to $900 million last year.

With pressures on supply chains, having eased workplace, we're placing inventory buys closer to need.

This combined with our lower inventory levels are enabling us to turn inventory more efficiently and chase favorable sales trends.

Looking ahead this will enable us to realize additional warehouse cost efficiencies.

We ended the quarter in a strong financial position with $840 million in cash and availability.

This is after we utilized the $100 million to pay down $75 million of debt.

And $26 million to repurchase shares we have 10 million shares.

Available in our buyback program.

Now I'll provide an update on our strategic priorities.

Our first priority is to drive our power brands across categories.

Our performance this quarter continues to be led by outerwear sportswear dresses and suit separates across our key brands DKNY, Karl Lagerfeld, Calvin Klein, Tommy Hilfiger, as well as Levi's.

We also saw a nice pickup in handbags and team sports.

We are a significant global supplier with a diversified distribution network.

Across stores and digital channels from luxury embedded department stores.

<unk> stores and the off price channel, we continue to be able to make quick transitions, where necessary and manage inventory to deliver the right product at the right time to maximize profits along with sales.

As we continue planning our transition with Calvin Klein and Tommy Hilfiger.

Our new Nautica, and Halston brands, along with newly repositioned Donna Karan will giant DKNY and Karl Lagerfeld as power grids.

We're comfortable that they will replace the topline and bottomline as key growth drivers of that portfolio there.

They each bring a distinct point of view to our portfolio for a wide range of consumers with tailored distribution strategies and dedicated design teams.

We continue to seize opportunities to expand these business and.

And bring in additional brands that fit our long term strategic vision.

Shifting to our next priority growing our own brands.

Our own brands represented $1 $3 billion in annual revenue last year.

And they are on track to reach one 5 billion this year.

We believe we can grow these brands to over $3 billion in annual revenue over time and continue to direct more resources to this area.

They are the most profitable businesses in our portfolio as we do not pay a royalty fees and they provide highly accretive licensing income opportunity.

For the third quarter, our own brands DKNY, Karl Lagerfeld, Donna Karan and <unk> at <unk>.

Our registered another period of sub solid double digit.

Year over year growth as collections are resonating with customers.

We're on track to earn $75 million in royalty income this year, which is highly accretive revenue stream.

We will have four new fragrances with our partner into pro form.

Men's underwear and loungewear.

And tech accessories, and and we re signed our South Korean territory license.

Our marketing efforts this past quarter for DKNY highlighted the brand's inherent connection with New York City across multimedia campaign.

We acquired the total Karl Lagerfeld brand over a year now.

We're extremely pleased with its performance, which has been accretive from the beginning.

The fall campaign focuses on a new icon K and.

<unk> K handbag and last month, we launched a new holiday campaign, featuring Carl's beloved cat Chew bed.

Further we brought the world of Karl Lagerfeld to life during European fashion weeks.

Through some high impact the level of activities in Paris, Milan, Dubai and Bangkok.

These events resulted in over 200, social stories and 90 million impressions.

Extending our global reach is an important priority this year a key international brands have registered solid sales growth.

Karl Lagerfeld is expanding into new lifestyle categories with genes, which targets a younger consumer and there is a natural fit for the brand.

The collection embodies caused confidence self awareness and the independent spirit of this street art for both men and women across ready to wear accessories and footwear.

We just opened our first Karl Lagerfeld gene store in Madrid, and it's off to a good start.

To support the launch and engage with younger consumers, we took over at nightclubs in Paris, Berlin and imagery.

We now have six unique Karl lagerfeld branded lifestyle projects with more in the works and then addition to two hotels one of which opened this year, we have agreements before residential properties in Dubai in Lisbon, and two in Spain.

Bill Burton further expanded its reach with franchise partners, having opened two new stores and prominent beach vacation destination.

One of the Atlantis hotel in the Bahamas, and the other in and posted <unk> Greece.

The brand now has a total of 104 company operated stores and 88 franchisee operated stores.

Further <unk> has three lifestyle projects a beach club in time.

You opened this summer and is becoming a major success.

Above the return Beach club that opened last year and today, we're excited to announce that we've just entered into a multiyear licensing agreement with a developer of a luxury lifestyle hotel in Florida.

Expected to open in spring 2020 for BELBUCA.

<unk> has designed the approximately 15000 square feet combined indoor and outdoor rooftop pool.

<unk> and restaurant and will open and will open a retail store.

These beach clubs demonstrate the brand's power and the versatility to adapt our lifestyle concept owned franchised or licensed opportunities for clubs restaurants, and even hotels in the future.

For both of these brands hospitality has become a new opportunity for us.

These initiatives provide additional income drives significant global awareness and enhance the status appeal of the brand.

We've also laid a strong foundation for DKNY international expansion with new partner stores.

Thus far five a bulk of this year and we expect to open seven more by the end of next year.

In September DKNY introduced the first European designed collection, which will launch in September 2024.

The collection will feature a range of iconic street wear and sports inspired the women's piece.

We hosted an exclusive press preview.

During Milan fashion week, and garnered rave reviews, delivering over $18 million level presence social impressions.

This line will launch in key European cities with exclusive partners like Harrods laterals in the UK and Italy. The Lando will also become a key digital partner for the brand in Europe.

Digital and Omnichannel growth remains an important priority.

This work has paid off with those sales increasing by 30% this year.

Our Amazon business alone is up over 80% to last year.

Speed at which they've grown mix makes clear how much runway we have with this channel.

In conclusion, we ended our third quarter, delivering non-GAAP earnings that exceeded our expectations and have done a great job successfully executing our strategic priorities.

We feel it prudent to take a cautious view of our forecasted sales. We now expect fiscal 2020 for net sales to be 315 billion.

Based on the strong outperformance in the quarter, which resulted in higher operating margins, we have a confidence to raise fiscal 2024 non-GAAP EPS outlook.

We are raising our non-GAAP net income per diluted share guidance to be in the range of $3 90.

So $4 compared to our prior guidance of $3 20 to $3 <unk>.

This compares to $2 85 in fiscal 2023.

I'll now pass the call to Neal for a discussion of our third quarter financial results as well as guidance for the full year fiscal 2024.

Thank you Morris.

Net sales for the third quarter ended October 31, 2023 were $1 <unk> 7 billion compared to $1 8 billion in the same period last year net.

Net sales of our wholesale segment were one 5 billion compared to $1 $7 billion last year.

Net sales of our retail segment were $33 million for the third quarter compared to net sales of $29 million in last year's third quarter.

Our gross margin percentage was 46% in the third quarter of fiscal 2024 compared to 32% in the previous year's third quarter.

The wholesale segment gross margin percentage was 49, 6% compared to 37% in the previous year's comparable quarter.

The gross margin percentage last year was negatively impacted by significant one time <unk> charges of approximately $27 million.

Which we incurred in the third quarter of last year.

The gross margin percentage in the current year period was positively impacted by lower freight costs compared to the same period last year.

We have been forecasting higher gross margin percentages throughout the year and they came in even better than we had anticipated.

The gross margin percentage in our retail operations segment was 49, 1% compared to 54, 9% in the previous period.

SG&A expenses were $236 million compared to $240 million in last year's third quarter.

We were able to achieve strong warehousing efficiencies compared to our expectations and actually had lower warehousing cost compared to the prior year.

These reductions offset the inflationary pressures we have incurred throughout the current year.

Our current warehouse capacity is now well aligned with our current and planned inventory levels.

non-GAAP net income for the third quarter was $130 million with $2 78 per diluted share compared to $66 million were $1 35 per diluted share in last year's third quarter.

Driven by improvements in gross margins SG&A and less interest expense.

Our non-GAAP net income per diluted share were significantly above the midpoint of our guidance of $2.08 per diluted share.

Turning to the balance sheet, we made good progress with respect to our inventory levels.

Inventory decreased 34% to $592 million at the end of the quarter when last year at $901 million.

We made strong progress right sizing our inventory levels as we had appropriately adjusted our buys to account for the higher than usual inventory, we carried over from the previous year.

We expect to have lower comparable inventory levels at the end of the year as well.

We ended the quarter with a net debt position of approximately $265 million compared to $729 million in the prior year's quarter and.

This decrease in net debt is primarily a result of cash flows from operations as well as the large decrease in our inventory levels.

Set by $26 million used for stock repurchases.

We had cash and availability under our revolving credit agreement of approximately $840 million at the close of the quarter.

Last week, we repaid the remaining $50 million of debt outstanding under the seller's note related to the Donna Karan acquisition.

We believe that our liquidity and financial position provide us the flexibility to invest in our future growth and take advantage of opportunities in the marketplace.

As for our guidance.

This is substantially above our previous full fiscal year guidance of net income in the range of 152 and $157 million or between $3 20.

$3 30 per diluted share.

This compares to non-GAAP net income of $139 million with $2 85 per diluted share for fiscal 2023.

We now expect fiscal 2020 net sales to be $315 billion.

Full year fiscal 2024, adjusted EBITDA is expected to be between 317 and $322 million up from our previously guided range of $284 million to $289 million.

And compared to adjusted EBITDA of $266 million in fiscal 2023.

Let me add some context around modeling.

We expect continued gross margin improvement in the fourth quarter. However, at a more moderated pace than we saw in the third quarter.

In the fourth quarter of last year, we had started to realize the benefits from decreasing freight rates and we lap a much smaller amount of onetime logistics costs.

We anticipate ending the year with gross margin percentage is up approximately 600 basis points compared to the fiscal 2023 right.

We anticipate SG&A will delever in the fourth quarter as it was.

<unk> of inflationary pressures on cost.

We expect non-GAAP interest expense to be approximately $38 million for the full year.

We are estimating a tax rate of 28% for the balance of the year.

We have not anticipated any potential share repurchases in our guide.

<unk>.

That concludes my comments I will now turn the call back to more closing remarks.

Thank you Neil and thank you all for joining us today.

The past 12 months are a testament to our ability to thoughtfully adjust quickly create and bring to market new opportunities for our business.

I feel great about our product.

Strength across our wholesale segment digital and increases in our prudent inventory management and our financial discipline. We have strong plans in place to drive G. III with a focus on our strategic priorities and these new growth drivers the strength of our balance sheet affords.

The financial flexibility to invest in our business and consider additional opportunities.

Operator, we're now ready to take some questions.

Thank you.

Minor to ask a question. Please press star one on your telephone and wait for your name to be announced.

To withdraw your question. Please press star one again.

Please standby, while we compile the Q&A roster.

Our first question comes from Edward <unk> with Piper Sandler Your line is open.

Hi, guys just abbvie on for Ed. Thanks, So much for taking our question you touched briefly on the timeline for that and Jeff can.

Can you contextualize, how big that revenue opportunity could be and then as a follow up.

<unk> will be required to really maximize the potential.

Thank you.

Thanks for your questions actually a really good one.

The champion brand.

Is for US is a coat licenses.

So the.

I would say the brand would probably mature.

Between 80 and $100 million in sales.

That would probably.

Go out.

Three to four years.

The the Halston brand as we described we're going to classify that as a power brand for us and the opportunity is significant.

We believe there is an opportunity to bring that north of $500 million.

Just on product that we will create produce and ship.

And alongside of that we're going to create an income stream that derive the licensing income.

<unk>, probably could be north of $20 million in the next three years.

And the expense attached to.

They're there.

Were very very modest.

One is an option to buy which is Austin.

And.

The.

The cost of that option is nominal and alongside of paying for that option. It's a discounted licensing rate that we pay.

The current brand older which is itself.

And as far as.

The cost of entry for champion.

It's a license to.

Guaranteed.

Sales number or guaranteed royalty that we must pay which is nominal so.

The capex expenditure of the acquisition cost.

Both of these brands is very nominal.

Got it that's very helpful. Thank you. Thank you.

Please standby for the next question.

The next question comes from will Gartner with Wells Fargo. Your line is open.

Hey, guys. Thanks for thanks for taking my question.

So I guess first just maybe talk a little bit about what drove the upside to gross margin and the SG&A and then.

On that how do we think about the puts and takes into next year any big callouts almost thinking about modeling these two months.

So thank.

Thank you for your question.

Thanks for joining.

The margin enhancements occurred as we were.

Developing and further maturing our brands.

We found that the pricing power.

Our brands.

We are underestimated and as we tested pricing the consumer accepted it.

Sales were good and we stayed.

Stayed on course, there was no need to take markdowns to move inventory was not a promotional period.

And it worked out absolutely great we were able to move through.

Sure.

Millions of units of inventory that we carried over and we would assume that when you do that you need to take a markdown to achieve it.

We didn't take markdowns as Youll see in our results.

So it was a great.

Picture.

New canvas that was really created for us.

We are.

Now liking the.

The margin.

Format versus top line sales so.

We feel the same way as you see.

Q4 forecast shows margin enhancement as well.

Sure.

Adjusting top line.

Adjusting top line down yet bottomline.

There are enhancements due to margin improvements as well as buying a little bit better as well as some freight costs coming down.

But we're in a margin business.

Yes.

Okay.

Neil.

As far as well as far as the SG&A I would say the most significant category that we had great success in was our warehousing costs.

Really based upon a couple of different factors certainly helps when you can drive inventory down or as Morris mentioned, the strength of the inventory and being able to move it.

And look we've been looking very hard at every aspect of our third party warehousing from space utilization when negotiating rates.

Moving inventory as properly as possible.

We were very very fortunate and inefficient warehousing spin.

Last item I'd call out to our advertising spend I think we've been prudent in terms of placing that where its been most effective.

Got it and then any any color into go ahead I'm sorry.

I was just going to say any color onto into next year anything that we should be thinking about puts and takes.

It's a little bit early.

What I do like is the.

Percentages business, though we're forecasting on our owned brands versus licensed brands.

Our own brands are going to derive.

Do today.

Better margin than our license brands.

No.

It's.

It's really kind of cool too.

The focus on on better margin businesses distribution is going to change a little bit.

And our own brands.

So.

We're seeing some with some good things I cant.

I can't really speak to the stuff that I can't control, there's a lot going on in the world.

You all see it we all read it we all live it.

And that makes us a little bit.

Conservative in our outlook for the future.

But short of that our company is in great shape.

Talent pool.

Has been here for years consistency and talent that we measure is an important factor in how we grow and how we.

How we.

Recreate businesses create new businesses.

People know, how we think they respond immediately and there is no there is no learning curve.

So this is a great great time, and a great company due to transition into new assets.

And then maybe just one more for me the higher Dana how.

It sounds like Youre thinking about M&A, a little bit more going forward I mean, what's what is out there I mean is there any attractive opportunities that you guys have identified I know you want to speak specifically to any but just maybe talk through sort of the M&A environment and how you are thinking about that.

Our culture has always been to acquire companies we've done a really good job of that.

Sure.

Before Dana.

<unk>.

Thats.

We continue looking at.

<unk>, whether it's licensed or owned.

We shop globally, we're astute buyers that shows up in pretty much every acquisition. We've made since the nineties has turned out to be.

A good acquisition there is nothing that sits in my mind there was.

That was poorly calculated and it didn't perform.

Made use of every acquisition we made.

Yes.

One of our company's strengths, so and enhancing it and putting somebody.

From the financial World.

On our team.

Can do nothing but improve what we have.

And Dana as Dan has a known commodity to us.

With Dana for many years.

PVH PVH, who as you know.

A great partner for years and they know is an important part of the.

Communication and helping us understand PVH and how we work with PVH and she'll do the same for G III and output with our partners.

We look forward.

We did the company.

Great. That's great. Thank you I'll pass it on.

Please standby for our next question.

Yes.

The next question comes from Mark <unk> with UBS. Your line is open.

Great Good morning.

Thanks for taking my question and congratulations on a result, I just wanted to ask about the sales guidance, maybe I missed it but maybe you could comment a little bit what youre seeing from your wholesale partners I am curious just because I think it was lowered and and what are the dynamics there and maybe if you could remind us.

I know youre not guiding next year, but if you can give us a little bit detail on how we should be thinking on when the new licenses.

The business initiatives will be.

Materializing in your in your company.

P&L all would be very helpful. Thank you.

Thanks for your question Mauricio.

The.

Yeah.

The outlook.

As we.

We all look at.

Retail earnings and forecast.

As is conservative for the future.

For all of the same reasons.

The consumer is not out there buying aggressively traffic is down.

The.

The economy is.

Not on spending mode housing costs are up.

Mortgage rates are up.

<unk>.

We have the.

The never ending.

College tuition issues. So there's there's a lot that's impacting the consumer that's not in our control.

Everything that we're controlling is doing well.

Difficult to forecast.

How deep the consumers going into their pocket.

Also have another element that we consider where we are still.

A large outerwear company.

Whether when weather doesn't work our way we are impacted.

But the good news is the recovery as quick.

Adding over deliveries on coach doesn't necessarily initiate a markdown.

So.

Its timing and its amazing how you get a couple of days of cold weather.

And.

The pain of warm weather has gone instantaneously, so it's hard to forecast that but we we saw it.

As the weather change.

Last week, our business in the coat area got very good.

So.

It's.

It's a good place for the pieces that we control all the pieces that we don't again.

Hard to give.

<unk>, four and a little bit early for us to forecast.

Next year.

But where we're the same company with more assets with a consistent talent pool with.

Sure.

Our balance sheet being.

Stronger than it's ever been.

Those factors make me comfortable that we're down a good path for the coming year.

Mario This is Neil just to add to the specific timing nautical genes.

As well as the Donna Karan launch will be in spring. So you can expect those to start hitting in our first quarter.

The wholesale is launched before.

As well as the champion outerwear businesses. So I would expect that both of those are hitting primarily in the third starting in the third quarter.

Next year.

Great. Thank you thank.

Thank you Marika. Please.

Please standby for our next question.

Okay.

Our next question comes from Paul Kearney with Barclays. Your line is open.

Good morning, everybody. Thanks for taking my question congrats on the results.

My first question is on the margins a bit of a follow up so just looking at the model. It looks like margins are a multiyear high I guess can you maybe help us think about what we'll hear us.

Structural improvement, what's more transitory and anything you can kind of help parse out on the year over year drivers how much was pricing how much was lower cost how much was that our distribution that I have a follow up thanks.

Sure.

So Paul.

Look I think the margins are structurally in place while the increase to the prior year has some one times.

One time benefits the actual achieved margin I think and our ability to maintain it goes back to what Morris said before about the ability for us to price strong and maintain those prices. We did have lower freight. This year, we don't really anticipate that that scenario will change dramatically on us I think.

We can continue to maintain pricing in terms of input costs, we're not seeing anything structurally that should give us pause. This is somehow a unique one time high for us. So we will certainly endeavor to maintain these kinds of margins go forward and that will be based significantly on our ability to maintain price I think we've all.

<unk> been able to do a good job in terms of managing the cost side of that equation.

Okay. Thanks, and then my follow up is on price and I guess trying to.

Square with the comments on the pressures on the consumer.

Inventory purchases are still.

<unk>.

What gives you confidence that as costs come down prices won't have too soon follow in the intermediate term.

<unk>.

We don't we don't really sell commodities.

We are a fashion business.

We sell fashion, we create demand and fashion.

Fashion is in demand and you do your job appropriately get paid for.

If you don't do you need to take the markdown and move product.

We have a history of doing the right thing as far as the creative side.

We add amazing quality to our product.

Consumer sees always sees value in our pricing, it's not our Charlie just raising your price and saying, we're going to get $10 more for the stress because we can we.

We add value.

Whether it's accessory value whether it's.

Branding value.

We're spending a good deal of money on marketing going forward.

That generates demand.

<unk> demand and generate sales.

So all the pieces.

<unk> put together and done appropriately you get the price that you're trying to achieve.

We have a history, we have a long history.

<unk>.

It is a consistent it's consistent thesis.

Yeah.

Thank you for your questions.

Please standby for our next question.

The next question comes from Ashley <unk> with Keybanc. Your line is open.

Okay. Thanks for taking my question just on Karl Lagerfeld useful good momentum this year and have several initiatives in place there, but just like to hear your thoughts on how you're sizing the opportunity within that band for next year and then any additional color on how the other brands are currently performing internationally versus domestically and how thats progressing would be helpful.

Thanks.

Thanks for your question actually.

We have a <unk>.

Internal bet on Lagerfeld.

The bad is going to be our biggest percentage growth brand.

Doing great.

It had a good year, it's having a good year.

<unk>.

The guidance that we're getting from our retail partners is.

There is there's an amazing amount of growth opportunity with the brand.

In door count and penetration within doors.

The product is selling all the categories are working it's a <unk>.

Brand that makes you smile and you see it.

Scott It's got unique attributes.

And we.

We love that acquisition.

We're expanding licensing opportunities as I spoke to the.

The lifestyle opportunities that we have in hospitality food and beverage and unique unique situations.

It was really originated.

Bye Bye lagerfeld, there's a high demand for unique situations. So also other than the demand for our product is a demand for for opportunities with the brand.

I think.

Sooner or later and I'm going a bit sooner within the next 90 days, we'll probably announce.

Hotel development in New York City.

So there there's some really.

Citing things.

That are going on with the brand.

And as far as global.

So weather was tough.

Throughout Europe from.

From what I understand.

No.

The warmest weather in 150 years.

And despite of that we're growing DKNY, we're growing lagerfeld, then we're growing <unk>.

So the weather impacted parts of our business that boot business is soft.

Coat business is soft sweater businesses.

But the fast moving fashion pieces.

Worked well.

So.

We're learning how to operate globally.

Not having the same success in China.

But Europe.

The far east.

Been really good markets for us.

Great really appreciate it thanks.

Thank you Ashley.

The last please standby for our next question.

The last question comes from Dana Telsey with Telsey Advisory Group. Your line is open.

Yes.

Good morning, everyone and so nice to see the progress and congratulations on the hiring of Dana Perlman I think that'll be a terrific addition, and Laura can use one of my favorite words grow on growing.

Think about the strength that you had this quarter and certainly the discussions with <unk> about wholesale even with more cautious or conservative borders how do you break down the wholesale strength, whether by brand whether by channel our wholesale department stores off price or whatever it maybe and what are you what are you seeing there.

Do you see that strength continuing rate does that include the cost of category does the continued cost of pricing how do you think of the levers moving forward. Thank you.

There.

It continues.

Because of the many factors primarily the.

Underlying talent that makes it happen.

And aggressive group that discovers the opportunities that most people just overlook.

We are beyond just a brand I think we're proving that out now.

Give our company.

Startup situation with.

Putting a focus putting our people on the focus of building it.

We can build a startup and make it effective very quickly.

We're proving that out brands.

Were underachievers.

In the hands of competition or.

Other people.

And we take them on.

Embellish them, we give them loving care.

Put a little money behind it relationships that we have with retailers.

Yeah.

There are amazing.

Get support the moment the moment.

We pivot a brand.

First question is well what do you want us to do we're in.

That's really not the norm that comes with many years of building that that trust.

They would.

I would venture to bet, if you spoke to any major retailer in the United States.

They are aware of us they trade with us.

They are happy with the relationship.

We put it.

Paramount focus the profitability of the retailer with without there being able to be profitable. We have no shot. So our first focus is understanding what they need to be profitable build around it retain the DNA of what we're marketing.

And there's a huge payback.

Theres loyalty there are orders there.

This cooperation.

So it's it's not.

Not a practice that everybody follows.

It comes from continuity of culture.

Same management team running the company for decades.

It's not a bait and switch situations.

The good time.

Well Glenn.

That's it it's a great place to be it's been fun building it.

This phase there aren't many companies that could survive.

Looking at giving up 50% of their top line sales and forecast increases and be more profitable.

In a period of time, when Theyre looking at maintenance and growth at the same time.

I'd say, it's an amazing story.

And just one other thing when you think about other additions to the licensing portfolio.

Is there a cap on how many you could do.

Can you think of it as size number.

Yes, there certainly is a cap when we're not in the.

Businesses.

Days of Us looking at.

Our license a random license.

In creating.

<unk> revenue to the extent that $20 million to $30 million is really not us it's got to be it's got to be a.

An important brand for us to either acquired or licensed it. There are some unique situations champion is a little bit unique.

It's a relationship that we need it.

Another.

Another coke brand to shore up what.

We ultimately get back.

Champion turns out to be just the.

Great solution for a part of what we're giving back but we're not out there shopping for a multitude of brands.

We need we need scale, we need focus.

And it's.

Each each brand has an entire management team it doesn't cost.

And it doesn't cause their company and much more to build a $1 billion brand is to maintain a $100 million brand.

So the focus is large.

Thank you.

Thank you Dana Thanks for your question.

With that operator.

I think we are done and thank you everyone for your interest and support we wish you and your families a wonderful holiday season, and a happy healthy new year.

Thank you.

This concludes today's conference call. Thank you for participating you may now disconnect.

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