G-III Apparel Group, Ltd. (NASDAQ:GIII) Q2 2020 Earnings Conference Call Transcript

Sep 05, 2019 • 08:30 am ET

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G-III Apparel Group, Ltd. (NASDAQ:GIII) Q2 2020 Earnings Conference Call Transcript

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Q & A
Operator
Operator

Thank you. We will now begin the question-and-answer session. [Operator Instructions] And our first question comes from Ed Yruma from KeyBanc Capital Markets. Please go ahead.

Analyst
Edward Yruma

Hey, good morning, and thanks for taking the questions. I guess, first on the net impact of tariffs, I know there are a couple of moving pieces in guidance, including just kind of continued weakness in your owned retail operations. Can you give us what the incremental impact from tariffs was with the revision of guidance and what the implied loss is on the retail business given the updated numbers?

Executive
Neal S. Nackman

Yeah, so the -- it's about a $12 million impact that we are absorbing for the forecasted period. And with respect to the retail operations, I would tell you that we took down -- we took down top line sales essentially in the low-single digit zone incrementally so that we're now really looking at high-single digit negative comps for the second half. It's approximately $4 million of additional losses in the back half.

Analyst
Edward Yruma

Got it. And Morris it sounds like you've got some really exciting momentum in the denim business. I guess if you step back, I know you gave some of the components of denim, but kind of if we look out longer term, what is denim as a percent of sales or kind of what's the total denim opportunity and how does the denim business differ in from margin perspective from some of your other kind of wholesale warehouses? Thank you.

Executive
Morris Goldfarb

Thanks for the question. And we look at denim as as a huge opportunity for the Company. Uniquely, we again have the best brands for giving us the ability of marketing denim with each one of them and what hopefully would be housed in denim classification where we're working closely with our retailers. We believe, clearly, I said that the CK Jeans opportunity over the next several years is possibly $250 million. If you take Tommy, I think Tommy is in that zone as well. And I believe that with the DNA of DKNY hitting another customer base, we again have a similar $200 million to $250 million possibility. So the entire classification has the ability of reaching $500 million to $750 million in sales. We can clearly look at -- we're approaching the business a little differently than call it a pure play denim vendors. The Levi's model is different than each one of ours. Ours will be more focused on tops than denim as a fabrication. It will be young, it will be active, it will be spirited in a similar fashion, but I believe that you'll see a definitive difference in how we market when we finally hit the stores which is soon to come. We will be poised in the fourth quarter for you to get a good view of what we will look like for the future and it is unique, it is exciting, and our retailers share the same -- the same attitude that we do.