G-III Apparel Group, LTD.

Welcome to the G3 Apparel Group first quarter fiscal 2020 earnings conference call. My name is Cheryl and I will be your operator for today's call. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session. During the question and answer session, if you have a question, please press star then 1 on your touchtone phone. Please note that this conference call is being recorded. I will now turn the call over to Neal Nackman. Sir, you may begin.

Thank you. Good morning. Thanks 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 or the financial condition of the company to differ are 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 to 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.

Good morning and thank you for joining us. With me today are Sammy Aaron, our Vice Chairman and President, Wayne Miller, our Chief Operating Officer, Neal Nackman, our Chief Financial Officer, and Jeff Goldfarb, Executive Vice President. We are pleased to have begun the year with a good first quarter. Our first quarter performance was anchored by our winning formula of leveraging our power brands through successful design, development, and execution of great product that resonates with consumers. The strength of our business continues to be represented by our five global power brands, DKNY, Donna Karan, Calvin Klein, Tommy Hilfiger, and Karl Lagerfeld. In North America, we've achieved the status as a supplier of choice to our retail partners in many major apparel categories, including outerwear, sportswear, dresses, suit separates, and performance. We quickly have achieved great recognition for creating some of the best handbags and footwear in the marketplace. We're also expanding our international presence where we see a significant runway for future growth. Now that we've completed a full year of having our own DKNY and Donna Karan product in stores, and with the solid performance of our remaining power brands, G3 remains well positioned for continued growth into the foreseeable future. Before I review the results of our first quarter, I wanted to address the topic of tariffs. As you all know, the first level of tariffs at 10% which for us primarily impacted the handbag business was just increased to 25% as of export dates commencing with May 10th. This business represented approximately 7% of our annual net sales for fiscal 2019. We estimate that the incremental 15% increase in tariffs for the remainder of fiscal 2020 will increase our costs by approximately $6 million. We've included this increase into our reaffirmed guidance issued today. We've been seeking to diversify our sourcing network by arranging to move some production out of China and also succeeded in obtaining price concessions from our Chinese vendors. In addition, we've obtained price increases from some of our customers here in the U.S., As for the proposal to increase tariffs on the remaining categories imported from China, we've had in-depth conversation with our vendors and our retailers, and although there'll likely be short-term disruption, all parties are willing to share in the increased costs. We've not quantified the impact of the potential near-term disruption on our results of operations, should these increases come into effect. We believe that our customer shopping and department stores is one who appreciates aspirational brands and is willing to pay more for our products. These price increases will be supported by the fact that we have the best global power brands, well-designed product at the highest quality, better real estate positioning in the stores, and are always priced better than our competition. Looking ahead, we recognize the need to further reduce our production in China to a level where we can still maintain the consistent high quality and craftsmanship that we've developed with our vendors over the past 40 years. Now on a few financial highlights of our first quarter, our results were in line with our bottom line expectation and were led by continued outperformance in our wholesale business. Thank you for joining us. as compared to non-GAAP net income per diluted share of 22 cents in last year's first quarter. Now let's provide you some details on our results. In our own retail operations for Wilson's and Bass, we were disappointed with our results. Comparable store sales decreased by 23% for Wilson's and 11% for Bass. As we mentioned on our fourth quarter earnings call, We've so far eliminated approximately $5 million of annualized expenses and salaries, which better positions us to deliver on our goal of reducing our retail losses. The merchant teams have created a compelling product for the upcoming fall season. We're continuing to review every opportunity to accelerate our path to profitability, including continued store closures, Accelerating conversions of Wilson's and Bass stores into DKNY and Karl Lagerfeld Paris stores and implementing additional operating efficiencies. Now let's turn to our wholesale business. Our largest business, Calvin Klein, represented in excess of a billion dollars of our net sales in fiscal 2019 and performed well in the first quarter of this year. Calvin Klein Business is a dominant resource across the women's apparel market. Excluding the impact from sales to Bantam, we were pleased to deliver another quarter of solid top-line growth, which was led by dresses, sportswear, and suit separates. Additionally, as you may have seen the announcement this past Monday, we're thrilled to extend our partnership with PVH with our new women's CK jeans license. We have all read about the resurgence of denim and we believe we are well positioned to leverage our market expertise in women's apparel to tap into the momentum and build a substantial lifestyle jeans collection. Our retail partners are quite excited about the initial products they've seen. I know it's early, but based on our past experience with significant product launches, This business has the potential to get to $250 million in annual sales over the next several years. We expect a full launch for spring 2020 and do not expect a material impact on our results in this fiscal year. Our Tommy Hilfiger business remained quite strong during the first quarter with greater than 50% year-over-year sales growth. The strength in the business was broad-based and was led by sportswear dresses and suit separates. The strength of the business showcases our continued strong execution and expertise in design, merchandising, sourcing, and selling, combined with compelling brand management and marketing by our partners at PVH. We continue to expand the distribution and reach of our Tommy Hilfiger products. I'm also pleased to highlight that this spring we launched various Tommy Hilfiger categories into approximately 150 Dillard's doors. We've also expanded Tommy Hilfiger Sport into numerous specialty stores including Urban Outfitters, JD Sport, and PacSun with additional launches still to come. We remain very excited about the meaningful opportunities to grow this business over the next several years. Karl Lagerfeld Business did well in the quarter, and we continue to be excited by the success of this brand that we introduced to the North American market. Looking ahead, Corinne Rothfeld, the former editor-in-chief of Vogue Paris, stylist, fashion director, and entrepreneur who has had a long history of collaborating and influencing Karl Lagerfeld himself, Thank you for joining us. which expanded beyond fashion to include design, photography, publishing, illustration, and architecture. As I mentioned on our year-end earnings call, fiscal 2000 was the first full year of our brand repositioning and distribution of G3 developed product for our own DKNY and Donna Karan brands. We've learned much about how we can continue to build this business going forward. At $400 million in annual net sales in fiscal 2019, this has quickly grown into a meaningful business and represents one of our biggest growth drivers. For the first quarter of this year, we registered stellar double-digit growth with strength across all categories, led by sportswear, handbags, and shoes. On the DKNY marketing front, We continue to leverage the momentum of the 100% DKNY campaign. Our digital branding efforts and high-impact premium outdoor media placements are ongoing and not only performing well, but also exceeding benchmarks of success across media channels. Last week, we launched a DKNY Pride capsule collection Playing off the 100% DKNY concept, celebrating the arrival of world pride in New York City and raising awareness. Licensing is an important part of our DKNY and Donna Karan business. We recently renewed DKNY's partnership with our watch licensee, Fossil. We have a new eyewear licensee, Marchand, who showcased their newly designed DKNY eyewear line and launched the product line globally in April. DKNY and Donna Karan offer the opportunity for significant domestic and international growth over the next several years. We've accomplished a lot in a short period of time and have planned to accomplish a great deal more with these two brands. Overall, spring outerwear performed well for us and we expect that we again will have a good upcoming fall and holiday season. At G3, we continue to focus on capturing our share of the ever-growing market for online sales, whether it be on our own brands, websites of our retail, or our websites of retail customers. Our brands are on demand, and we continue to allocate more investment and personnel in the online space. Our status swimwear and resort brand had worldwide comparable sales increases in the mid-single digits and continues to do well. This quarter we opened two new stores, one at the Hudson Yards here in New York City and the second in Silt, Germany. We continue to focus on selectively expanding the brand brick-and-mortar and digital footprint. I'll now pass it to Neal for a detailed discussion of our first quarter and our guidance for the second quarter and for fiscal 2020.