G-III Apparel Group, LTD.

Good day, and thank you for standing by. Welcome to the G3 Apparel Group's fourth quarter fiscal 2022 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there'll be a question and answer session. To ask a question during this session, you'll need to press star one one on your telephone. You will then hear an automated message advising you your hand is raised. To withdraw your question, press star one one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Neil Nachman, CFO. 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 security laws. Forward-looking statements are not guarantees. and actual results may differ materially from those expressed or implied in forward-looking statements. Important factors that could cause actual results of operations or the financial condition of the company to differ are discussed in the documents filed by the company with the SEC. The company undertakes no duty to update any forward-looking statements. In addition, during the call, we will refer to non-GAF net income, non-GAF 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. Also, disclosed in our press release for your reference are last year's GAAP and non-GAAP results by quarter. I will now turn the call over to our Chairman and Chief Executive Officer, Morris Goldmark.

Thank you, Neil. And thank you, everyone, for joining us. I want to start by thanking the G3 team for their dedication and hard work last year. I am proud of their expertise, entrepreneurial spirit, and ability to move quickly, working as a team across functions to capture opportunities in a dynamic environment. G3 has a proven track record of successfully evolving over the years to drive our business and meet the needs of our customers in an ever-changing landscape. Once thought of solely as a leather coat business, we've become a highly diversified apparel company. I'm extremely proud of the G3 we've built, and I'm looking forward to sharing with you two of our newest growth initiatives. This past year, we made significant progress on our strategic priorities. Despite a challenging operating environment, Across our brands, we successfully shifted our category focus based on market demand. We expanded our portfolio with the Karl Lagerfeld acquisition, which also grew our European business and brought in new international expertise, and we advanced our digital capabilities. Now let's review our full year and fourth quarter fiscal 2023 results. Net sales for the full fiscal year were $3.23 billion, up 17% from $2.77 billion last year. Full fiscal year non-GAAP net income per diluted share was $2.85 compared to last year's $4.20. Adjusting for higher than planned taxes, we would have met our non-GAAP EPS guidance for the year. For the fiscal 2023 fourth quarter, net sales reached $854 million, an increase of 14% from $748 million last year. Fourth quarter non-GAAP net income per diluted share was 41 cents compared to last year's $1.06. This past year, we experienced unique supply chain disruptions that impacted our bottom line performance. Today, port congestion has meaningfully eased, lead times from factories to our warehouses have decreased, freight costs have declined, and we've obtained adequate third-party warehousing, and we've moderated our inventory levels. Furthermore, we aggressively sold inventory in the fourth quarter that would have otherwise shipped in the first quarter of fiscal 2024. This enabled us to reduce inventory levels and the associated impact on our warehouse operation. We're now starting the year in a better inventory position and created cash profitably while avoiding the associated elevated warehousing, handling, and interest costs. We ended the year in a strong financial position with approximately $750 million in cash and availability. This is after we utilized $260 million in cash for several important investments, including $200 million to complete the Karl Lagerfeld acquisition, $27 million for stock repurchases, and $25 million for a digital opportunity. Further, we sequentially decreased our inventories by $192 million from the third quarter, ending the year with inventory levels up 39% to fourth quarter fiscal 2022. This sequential improvement compares to third quarter inventory levels that were up 100% to fiscal 2022 third quarter. As of today, We fully paid off our revolver and currently have over $175 million of cash on our balance sheet. The decrease in supply chain lead times and our adjusted inventory purchases should allow us to see significant improvement in our fiscal 2024 inventory levels, further providing a source of cash. Our balance sheet strength provides us the flexibility to continue to invest in the future growth of our own brands and consider acquisitions of new businesses. Looking ahead to guidance for this coming year, with the inclusion of a full year of the acquired Karl Lagerfeld business, our top line is expected to be $3.23 billion flat to last year. We expect non-GAAP net income per diluted share to be in the range of $2.55 to $2.65, compared to $2.85 in fiscal 2023. Let me provide some context around how we're planning the quarters and the full year. For the first half of the year, we're taking a more conservative approach, especially in the first quarter, which will be challenged due to several reasons. First, in last year's first quarter, there was a significant surge in demand coming out of the pandemic. There were industry-wide inventory delays. Retailers were light on inventory and were accepting inventory as it became available. Fortunately for us, we had inventory on hand to service the demand. This resulted in significantly higher sales than we would have expected in last year's first quarter, which ended up approximately 20% up to pre-pandemic Q1 levels. We'll now be copying these strong increases in the first quarter of fiscal 2024. Due to the rebalancing of our categories based on consumer demand, we're planning significant decreases in the athleisure and jeans category in the first quarter. We then expect to see these categories grow, ending the year with sales approximately the same as last year. Lastly, as I just mentioned, We took advantage of early selling opportunities and shipped a significant amount of inventory in the past fourth quarter that otherwise would have shipped in the first quarter of 2024. Then in the back half of the year, as we count the moderation in consumer demand, we expect to see normalized growth rates and importantly, higher profitability. Neil will review our financial results and provide additional detail on guidance for fiscal 2024 shortly. Let me walk through the progress we've made with respect to our five strategic priorities. Our first priority is to drive our power brands across categories. Our strength across design, merchandising, sourcing, supply chain, marketing, and retail relationships has enabled us to significantly grow. We continue to seize opportunities to expand our largest brands and bring in additional brands that fit our long-term strategic vision. Continuing the trend from the past few quarters, our performance this quarter was led by strength in outerwear, dresses, and suit separates. Our category mix is shifting back to pre-pandemic penetration levels. Additionally, we've added and developed strong handbag, footwear, and jeans divisions, which have all become significant contributors to our business. This is a testament to the agility and diversification of our model. Last quarter, we announced the staggered category extensions for Calvin Klein and Tommy Hilfiger licenses which begin in January of 2024 and will continue through December of 2027. This extended timeline allows us to strategically transition out of these licenses. We've been directing resources towards several new initiatives, including further leaning into building our own brands, acquiring new businesses, developing new long-term licenses, and expanding our private label business. WE ALREADY HAVE A NUMBER OF SUBSTANTIAL GROWTH OPPORTUNITIES, TWO OF WHICH WE ANNOUNCED TODAY. FIRST IS THE SPRING 2024 REPOSITIONING AND EXPANSION OF THE DONNA KAREN LABEL. I'LL PROVIDE MORE DETAILS ON THIS SHORTLY. SECOND, OUR NEWLY ANNOUNCED LONG-TERM LICENSE WITH AUTHENTIC BRANDS GROUP FOR NORTH AMERICA. Since being acquired in 2018 by Authentic, Nautica's relevance has expanded substantially and it has become one of the company's most important global brands. Celebrating its 40th anniversary, Nautica is available in approximately 1,300 freestanding stores and shopping shops globally, along with a strong digital presence across more than 30 countries. G3 will produce Nautica products across a number of categories, starting with jeanswear apparel, which includes jeans and a full range of corresponding lifestyle products, and then expanding in a phased approach with additional categories, including sportswear, suit separates, and dresses. The new five-year license, which begins in January 2024, includes three extensions, for five years each, with first deliveries expected to hit the floor in January of 2024. The product will be sold across G3's distribution network, including Better Department stores, Digital Channels, and Nautica's stores and website in North America, and franchise stores globally. The brand joins our portfolio, which includes some of the largest and most recognized American brands in the world. A second priority is to expand our portfolio through ownership of brands and drive their licensing opportunities. Owned brands have become a critical part of the company's strategy, having expanded net sales to over $1.3 billion this year, with higher operating margins than our licensed brands. We ended the fiscal year with DKNY generating approximately $600 million in net sales. Since it launched under our ownership in 2017, we've doubled sales and turned it from the unprofitable business we acquired into one of the most profitable brands. This expansion was achieved by building a best-in-class team with expertise in introducing new high-performing products. We achieved scale rapidly through our wholesale strategy, supported by our investments in marketing, which continues to keep the brand top of mind for consumers. We see a tremendous runway for growth of this brand with a long-term sales potential with over a billion dollars. Our own Donna Karan business is small today. We're repositioning and expanding the brand aggressively beginning spring 2024. The new Donna Karan will be a modern system of dressing created to appeal to a woman's senses on every level, addressing the full lifestyle needs of a new consumer. It will be more widely distributed in better department stores, digital channels, and our own Donna Karan website in North America and internationally. Early reads on a product have been well received, and we have the support to roll out across our major retail partners. Our recent market research has shown that Donna Karan is widely considered a top fashion brand and is recognized as one of the most famous designer names in American fashion. Further, it clearly indicates that consumer demand exists for the brand and reinforces our opportunity. This, coupled with our track record of having successfully grown major brands to more than $3 billion in annual net sales today, gives us confidence in the growth potential of Donna Karan. We believe that it can approach annual net sales of over $500 million in the midterm. As an own brand, Donna Karan is expected to develop into a more profitable contributor to our business because we do not pay a licensing fee and have full control of global distribution. Further, we can expand the brand into additional license categories with the possibility of a highly accretive royalty income stream. Our Karl Lagerfeld business had strong growth last year, reaching $400 million in annualized global sales. This coming year, we're forecasting double-digit sales growth. We see long-term brand potential of $1 billion in net sales. Bilbrecan and the European Karl Lagerfeld brand are two additional key owned businesses with significant upside, which I will discuss further. Licensing and partnerships of our own brands are highly profitable and are up strong double digits in fiscal 2023, generating approximately $65 million in royalty income, while also broadening brand recognition. We work with best-in-class partners who produce and distribute product in specialized categories such as fragrance, home, and kids. For example, in Interparfum, our new fragrance partner is focused on growing our iconic fragrances for DKNY, Donna Karan, and Karl Lagerfeld. Additionally, we have unique hospitality and real estate partnerships for Karl Lagerfeld and Vilberkand. We see many licensing opportunities across our entire own portfolio and can leverage this capability for brands that we acquire. As we move into fiscal 2024, we are focused on capitalizing on the opportunities for our own brands. We intend to grow them through our focus on global expansion in wholesale distribution with new categories, omnichannel, and licensing. Our next priority is to further expand our global reach. The Karl Lagerfeld acquisition significantly expanded our European operations and accelerated G3's global presence. The European management team of Karl Lagerfeld has made strong progress this year, having grown sales by 25%. They transitioned their digital business in-house from an outsourced model enabling the expansion of product offerings, operational efficiencies, and further global reach. They also launched jeans, which is expected to contribute nicely to their top line. With our partners, we launched the first ever Karl Lagerfeld Hotel in Macau. Branded luxury real estate concepts are in development in Spain and in Malaysia, with more expected to follow. This year, Vogue's Met Gala, fashion's most globally recognized event, along with the museum's summer exhibition, will pay tribute to Karl himself. This is one of the greatest honors for a designer, and the Karl Lagerfeld name will appear in extensive global news stories, social media, and throughout the museum itself, significantly benefiting our global brand reach and our business as well. We are planning the largest marketing campaign we've ever done for Karl Lagerfeld. In addition, we're creating special products, have lined up a number of collaborations with celebrities, and are producing content for our website and social channels. Our largest accounts around the world In New York, Paris, Milan, London, and Dubai are hosting events, pop-up shops, and dedicating windows. Here in New York City, Karl Lagerfeld will take over the windows of two of the city's largest department stores. This will be the most significant moment for the brand to date, and we expect the halo effect to drive awareness, interest, and sales for the Karl Lagerfeld brand. Additionally, we're in the process of developing a film of Carl's life, co-produced by us and starring Jared Leto, who's expected to positively impact the brand awareness. Silver Can achieved a record year of sales and profitability with strong double-digit comp growth. This coming year is an exciting one for the brand. We'll continue to expand with store openings in global key markets and reinforce the luxury status of Vilbrecan with unique partnerships and immersive brand experiences. This summer, we're scheduled to open a restaurant and beach club in the south of France that is being designed to lend itself to franchising. Last year, we opened a branded beach cabana club and store in the Boca Raton Hotel. We see long-term potential of $250 million in sales for the brand. DKNY's international growth was in the high single digits, with global sales now over 30% of the total brand. We've implemented an accelerated growth strategy for Europe with the help of great partners who've committed to open approximately 25 freestanding stores in key European cities by the end of next year. This will complement our department store footprint and further penetrate the region. Overall, the international market represents significant opportunities. We're reviewing best practices across our brands and expect to realize cost synergies and to strengthen our international platform. Our next priority is to maximize omnichannel opportunities and leverage data. We continue to expand in digital, having grown total sales by approximately 15% in fiscal 2023 through a focus on our pure play presence across a number of partners, including Amazon, Zalando, and Fanatics, by developing our own global sites. We added a dedicated team for our business with pure play digital retailers, which has helped us scale quickly. In Amazon alone, we were able to grow by 50% despite a challenging digital environment. We're receiving more data than ever from our retail partners, enabling us to make smarter decisions. Additionally, we've made investments in our DKMY and Karl Lagerfeld sites in the U.S. and Europe, along with enhancing our CRM tools. We have a sizable business with department stores, including Macy's, Dillard's, Nordstrom's, Bloomingdale's, and Hudson Bay, with a strong online presence. Customers returned to stores, which brought about a shift from digital to in-store sales. The availability of our products across both channels at department stores and pure play retailers continues to drive omnichannel sales for our business. The development of vendor direct shipping capabilities remains on track, and we see this initiative providing additional opportunities to grow in digital. Our final and recent strategic priority is to continue to scale our private label business. Last year, or last quarter, I mentioned the significant opportunity we see for this area of G3. Through our overseas office and strong relationships with the retailers and brands, we've built a solid business which increased by 50% this year alone. We currently service private label customers across the department store, specialty retailers, off-price clubs, and we recently expanded into mass retail. We have very strong and well-developed infrastructure where we are experts in market research, sourcing, technical design, merchandising, quality control, and logistics. Our 40-year relationships with best-in-class manufacturing partners and overseas offices with more than 400 employees and more than 40 markets have established a platform that enables us to sell our services to retailers. By leveraging our existing expertise across a broad range of consumer products and price points, private label product development represents another growth engine for G3. In conclusion, We ended fiscal 2023 in a solid financial position and made significant progress implementing our strategic priorities, which expanded our own portfolio and grew our global reach. We've been directing resources towards several new initiatives, two of which we announced today. For the long term, we're confident and optimistic about the runway for profitable future growth. I'll now pass the call to Neil for a discussion of our fourth quarter financial results, as well as guidance for the first quarter and full year fiscal 2024. Thank you, Morris.