G-III Apparel Group, LTD.

Thank you for standing by and welcome to the G3 Apparel Group fourth quarter and full year fiscal 2021 conference call. At this time, all participants are on a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press the star then the one key on your touch-tone telephone. Please be advised that today's conference may be recorded. If you recall our persistence, please press star then zero. I would now like to hand the conference over to your speaker host, Mr. Neil Nachman, CFO of G3 Apparel Group. Please go ahead, sir.

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 or the financial condition of the company to differ were 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.

Good morning, and thank you for joining us. Also joining me today are Sammy Aaron, our Vice Chairman and President, Wayne Miller, our Chief Operating Officer, Neil Nachman, our Chief Financial Officer, Jeff Goldfob, Executive Vice President, Priya Trivedi, Vice President of Investor Relations. For all of us, 2020 was a year like no other. We've had to manage through a global pandemic, which has lasted for more than 12 months, The pandemic has impacted the way we live our lives and conduct our business. At the outset, the pandemic caused significant disruption to our business as retailers were required to shut their doors across the country for an extended period of time. As stores began to reopen, we've seen a steady improvement in our business. At G3, we powered through this tremendous adversity, adjusted our strategy, and adapted to the changing conditions with determination and grit. The resiliency and flexibility demonstrated by our high-performing teams has been nothing short of amazing. Throughout the pandemic, our warehouses remained operational, and I'm grateful to the staff who managed that process. The wellbeing and safety of our employees has always been important to us. Our human resources team did a great job engaging our people and sparing no resources in implementing safety protocols throughout our operations. I'm so incredibly proud and thankful to our employees who have collectively enabled G3 to emerge from this past year as a leaner and more efficient organization. Our entrepreneurial culture with a merchant-led focus on product selection and development proved to be invaluable. As the casual outdoor and work-from-home trends took over the world, we quickly reallocated resources and revised our product lines to capitalize on the changes in consumer demand that accelerated throughout the year. We were able to provide the right merchandise to our retail partners, gain market share, and further elevate our position as a key supplier of choice for a broad range of casual and comfortable clothing and accessories. This past year, we also completed the liquidation of our GH Bass and Wilson leather stores. This was a project that we were working on pre-pandemic and are pleased to have the restructuring completed. Looking ahead, we feel good about our remaining stores under the DKNY and Karl Lagerfeld Paris nameplates. Our new retail model is now positioned on a path to profitability. We ended our 2021 fiscal year on a positive note with improvement in our wholesale operations. As we enter the 2022 fiscal year, we're managing our business with cautious optimism and closely working with our retail partners to match our product offerings with consumer preferences. We will continue to lean into the casual trends that remain strong sellers. We are already beginning to see the signs of recovery for dressier apparel. Our designers are developing great product and newness in categories like social dresses and suit separates and career sportswear. Our year-end inventories ended down 25% and are in excellent shape, positioning us well going into the new fiscal year. We are aggressively working to grow our digital business with the goal of becoming best in class with this increasingly important distribution channel. With a portfolio of global brands, we understand the importance of e-commerce. The pandemic has accelerated our efforts. Over the past year, our marketing, IT, and logistics teams have keenly focused on supporting digital sales. Overall, our strong financial position and liquidity provides us with significant flexibility to run our overall business and, again, look at acquisitions. Now, let's look at the fourth quarter and full year fiscal 2021 results. Net sales for the full fiscal year were $2.06 billion compared to $3.16 billion last year. Net sales for the fourth quarter were $526 million, down 30 percent compared to last year's fourth quarter net sales of $755, and in line with our internal expectations. Importantly, in the wholesale segment, net sales for the quarter were $488 million, down 23% compared to last year's $635 million. Full fiscal year gap net income per diluted share was 48 cents compared to last year's $2.94 cents. These results include the impact of operations and restructuring costs for the GH Bass and Wilson's leather retail operations of $1.14 in the current year and $0.65 in last year. Fourth quarter GAAP net income was $0.30 per diluted share compared to $0.52 per diluted share in the fourth quarter last year. These results include the impact of $0.17 in the current year and 33 cents in last year's results related to the operating results and restructuring costs for GH Bass and Wilson's Leather Stores. Now let's look at our wholesale business and take a closer look at the product categories that drove our sales and results for the quarter. As expected, we saw demand for athleisure continue to accelerate across our brands throughout the fourth quarter. This is exactly what our customer is wearing on a day-in, day-out basis as she works from home or spends time outdoors. With that in mind, we designed our athleisure collections to provide a wide range of design choices and a variety of looks and functionality. For example, our expanded sweatshirt collections included fashionable styles for that important virtual meeting as well as styles that incorporated technical functionality to support the active and outdoor lifestyle. We continue to see significant opportunities to grow athleisure for our power brands, Calvin Klein, Tommy Hilfiger, DKNY, and Karl Lagerfeld Paris. As for our new jeans collection, the recent launch for three of our global power brands Calvin Klein, Tommy Hilfiger, and DKNY happened at an opportune time. A significant entry into the jeans category enabled us to negotiate some prime placement on our retailers' sales floors, as well as their digital sites. The jeans category lends itself perfectly to casual and comfortable fashion. Our offerings span a wide variety of woven and knit tops, as well as relaxed bottoms. These lines are off to a very good start and expected to garner much more success in 2022. We are a dominant player in jeans and are well-positioned to capture greater market share. As the fourth quarter progressed and the weather turned cooler, we saw good sell-throughs in our outerwear business. As expected, the business was driven by mid-weight styles featuring packable puffer and layered jackets. The weather continued to be cold into the first quarter of this year, further fueling outerwear sell-throughs. We have a clean inventory position, which sets us up well for the fall 2021 outerwear season. We believe consumers will maintain active outdoor lifestyles for the foreseeable future and we will continue to provide trend-right product to meet that demand. Our casual offerings continue to drive the sportswear category. Our knit product lines have remained strong sellers. We also saw growth in casual bottoms featuring some great stretch fabrics that offered functionality and variety. Sneaker dresses. which are essentially extended knit T-shirts that are easy to wear and comfortable, also performed well. As a matter of fact, we're seeing early signs of good selling in social dresses both online and in stores in many parts of the country. We're in good position in the casual assortment of our sportswear collections and look forward to improving trends as this year progresses. The footwear and handbag businesses also continue to outperform based on our strategic shift to focus on casual offerings. In our footwear business, we saw notable strength in strong south roofs and booties and soft-soled shoes such as fashion sneakers. As for handbags, our assortments featured a good mix of casual and tailored styles with a contemporary aesthetic. The handbag collections were merchandised well and resonated with consumers, also resulting in great sell-throughs. In both these categories, higher conversions resulted in improved margins. We'll continue to drive growth in footwear and handbags. I'm pleased to announce that a couple of weeks ago, we launched the Karl Lagerfeld Paris women's brand and 75 new doors at Macy's. We've developed a casual collection that works well with the brand's Parisian chic DNA. The early results of selling have been really good. In Karl Lagerfeld Men's, where we began with just outerwear, we have now expanded the collection to include sportswear and footwear. These collections have gained good traction and have quickly found distribution at Macy's, Bloomingdale's, Nordstrom's Online, and Neiman Marcus. We look forward to continuing to grow the brand's distribution in both women's and men's apparel and accessories. Our digital businesses continue to experience accelerated growth. Our power brands are also participating in the growing digital businesses of our retail partners, where digital sales penetration is now approaching 40%, up from last year's approximately 25%. Our own websites delivered another quarter of strong results for both DKNY and Karl Lagerfeld Paris, posting comparable sales increases of approximately 40%. As for GH Bass, although we closed the brick-and-mortar stores, we will build the brand's digital business. We remain focused on capturing market share opportunities across the digital landscape with investments in internal talent, a new CRM and loyalty program, replatformed e-commerce sites, and enhanced logistics capabilities. These efforts are supplemented with increased spending on focused digital marketing to target customers where they're shopping. The CRM and loyalty programs will help us better analyze the behavior of our customers online and in stores and will aid us in communicating with them more effectively. The REAP platform of our own e-commerce sites will upgrade the technical operations as well as the visual look of the sites. The sites will fully be revamped to offer rich experiential content and better showcase our products. We're looking to create a more seamless shopping experience and strengthen the customer connection and brand affinity for both DKNY and Karl Lagerfeld Paris. We're also working to further develop our direct-to-consumer logistics capabilities to enhance the customer's experience of receiving product from our brands. Internationally, our own brands are developing a digital presence as well. For DKNY, we have a global site service from North America. In Europe, DKNY product is also distributed via premier online sites such as ASOS, Zalando, and Farfetch. In China, digital sales penetration increased sequentially each quarter this year. A status resort and swimwear brand, Vilbrecan, also saw significant traction in their global digital business, with digital sales up nearly 30% as compared to last year. We're really excited about the significant digital opportunities that lie ahead for us. With the liquidation of our GH Bass and Wilson's Leather stores completed, we expect to eliminate a substantial portion of approximately $50 million of annualized losses. We currently operate 36 DKNY and 13 Karl Lagerfeld Paris locations. Similar to trends we experienced in the third quarter, store traffic remained challenged but our product continues to resonate, driving higher shopping conversions and AURs as well as expanded margins. We added a capsule collection that is exclusive to our DKNY direct-to-consumer channels. Our store teams have begun to use virtual selling techniques, which gained additional momentum in the quarter and are helping to offset reduced traffic and improve store sales. Our objectives are clear, improve store productivity and increase sales online to ultimately bring the retail business to profitability. Let me discuss our international opportunities next and start with our status swimwear brand, Villebrequin. The brand is celebrating its 50th anniversary this year and has an incredible slate of innovative product launches and collaborations planned. We're proud of the great job Villebrecan has done to incorporate sustainable fabrics developed from recycled plastic bottles and plastics removed from the oceans. Impressively, this coming year, 60% of their globally recognizable swimsuits will incorporate these sustainable materials with the goal to get to 80% of total products made with sustainable fabrics in 2025. As for DKNY, sales of our international franchisees were up 10% in the fourth quarter, predominantly driven by the Middle East. DKNY in China saw significant growth in fourth quarter sales. Further, as I previously mentioned, China e-commerce sales also grew significantly during the quarter. We remain very optimistic regarding our DKNY businesses in China. Our DKNY business in Europe continues to be challenged with widespread COVID shutdowns. As DKNY is a well-recognized brand throughout Europe, our goal is to establish a substantial business in that market as well. International represents a significant growth opportunity for G3. We're in the early stages of developing this business. As brand owners, DKNY and Donna Karan licensing income continues to represent an important profit driver. We've created a solid licensing base with world-class partners in categories including fragrance, watches, intimates, and sleepwear, bedding and baths, and children's apparel. In Europe, we're now growing DKNY men's through licenses for underwear, sports, and golf apparel. We will continue to strategically develop and grow our licensing business. We see tremendous opportunity to expand our reach and grow through our ability to take market share with our global power brands and diversified product offering. For the upcoming year, we are optimistic about the business. but there continues to be some uncertainty as to how the pandemic will impact shopper behavior and our business. As a result, we are only providing guidance for the first quarter of fiscal 2022. Looking ahead to the remainder of the year, we're confident that when more opportunities open up, we will be in a position to work with our vendor and retail partners to capitalize on them. I'll now pass I'll pass the call to Neil for a detailed discussion of our fourth quarter and full-year financial results, as well as the guidance for first quarter of fiscal 2022. Thank you, Morris.