G-III Apparel Group Ltd (GIII) 2009 Q2 法說會逐字稿

Good afternoon, ladies and gentlemen, and thank you for standing by. Welcome to the G-III Apparel Group second quarter earnings 2009 conference. Today's call is being recorded. At this time, all participants are in a listen-only mode. Following the presentation, we will conduct a question and answer session. Instructions will be provided at that time for you to queue for questions.

And now I would like to turn the conference over to Mr. Neal Nackman, Chief Financial Officer of G-III Apparel Group . Please go ahead, sir.

Thank you. Good afternoon everybody. Before we get started, I want to remind you of the company's Safe Harbor language. Some statements made today on the call are forward-looking statements as that term is defined under the federal securities law.

Forward-looking statements are subject to risks, uncertainties and factors which include, but are not limited to, reliance on licensed products, reliance on foreign manufacturers, the nature of the apparel industry including changing customer demands and taste, customer concentration, seasonality, customer acceptance of new products, weakness in the retail sector, risks related to the operation of a retail chain, and the impact of competitive products and pricing, dependence upon existing management, possible business disruption from acquisitions and general economic conditions, as well as other risks detailed in the company's filings with the Securities and Exchange Commission.

The company assumes no obligation to update information in this call.

I will now turn the call over our Chairman and Chief Executive Officer, Morris Goldfarb.

Good afternoon, and thank you for joining us. With me today are Wayne Miller, our Chief Operating Office, and Neal Nackman, our Chief Financial Officer. I'll start with some of the financial highlights from the second quarter, with Neal Nackman providing more details in a few minutes.

Net sales for the quarter were $113.5 million compared to $84 million in last year's comparable quarter. The increase in net sales was due to the strength of our dress businesses and sales by our newly acquired Andrew Marc and Wilsons outlet division. Our net loss for the quarter was $3.9 million compared to the year ago loss of $884,000. This increase was primarily the result of the seasonal losses of the Andrew Marc business acquired in 2008 and the Wilsons outlet retail business acquired in July 2008. The loss was in line with our expectations.

We are excited about the strategic direction of our business. With the acquisition of Wilsons 116 outlet stores, we've realized one of our strategic milestones. Besides now having over $100 million outlet division, Wilsons will be our foundation for future retail expansion. The CEO that led this change during its most successful years, Joel Waller, is now back at the helm of Wilsons Outlet Stores. This acquisition fits directly into our core competency, and it'll enable us to more quickly move forward with Andrew Marc retail sites.

The purchase of Andrew Marc completes another of our long stated goals, to own a brand. A multitiered national advertising campaign can be seen in Vogue, W, GQ and the New York Times Style Magazine. Our e-commerce web site went live August 20th in time to take full advantage of our national campaign.

Our first license agreement was signed in June 2008 with the Camuto Group for Andrew Marc and Marc New York women's footwear, and this will launch in the fall of 2009. We believe that both Wilsons and Andrew Marc leverage our core strength and better position us as a vertically integrated business providing us with new avenues for growth.

In addition to these acquisitions, we've recently signed the Women's Better Sportswear license for Calvin Klein. This really may be the largest opportunity yet with Calvin Klein. The strategic partnership we've developed with Calvin Klein and Phillips-Van Heusen is something that we are really proud of. Calvin Klein is quite simply one of the world's greatest brands. We currently produce outerwear for women and for men, dresses, women's suits and women's performance wear under the Calvin Klein brand.

We've proven that we can enter into new categories of products efficiently, and we're confident we can execute in the same manner in the sportswear category. We've been able to utilize existing showroom space, and, again, we were able to retain the best talent of the existing sportswear team to help in our transition and the startup of this new category. The combination of the strength of the Calvin brand, as well as designing and sourcing products, and pricing it fairly for the consumer, will be the right formula for success.

Lastly, on the new initiatives of the current year, we're really excited about our newest edition, Jessica Simpson dresses, licensed from the Camuto Group which will be in stores this spring. The Camuto Group has done an incredible job in building the Jessica brand with huge successes in shoes, handbags and fragrance. The early response from our retail partners to our first dress line has been very positive, and we believe we will be in a position to select the best stores to rapidly grow this business.

With respect to our core outerwear business, we are excited about the upcoming season. While we expect the challenging retail environment to continue, we've received significant orders from all tiers of retail. We're about 90% booked to our year's plan, and we're positioned to achieve our year's stated goal. The consumer is buying our product. We have the best brands including Calvin Klein, Andrew Marc, Guess?, Kenneth Cole, Cole Haan, and Sean John.

Our concentrated focus by brand on appropriate designs has always made us a leader in providing fashion. We execute at a high level in design, sourcing, manufacturing, quality control, and in distribution. Our products were received early this year to enable us to meet the shipping requirements as we enter into the peak shipping season. Not wanting to chance the restrictions in China during the Olympics, we brought in our inventory at an accelerated pace. We planned the business at a detailed level with our major customers. And while we have been careful with our inventory plan, we think we have the right product in the right quantities to create a successful season and to serve our customers well.

As I look back at the last couple of years, we have done a great job and met or exceeded our plans despite some really challenging times. I'm really pleased to be in a position to reiterate our guidance for the year despite, again, what is a difficult consumer environment. This shows that we can plan effectively, offer the consumer great product, execute well for our customers, and deliver good results to our shareholders.

I will now turn the call over to Neal Nackman, our Chief Financial Officer, to review the quarter and provide some detail on our guidance.

Thanks, Morris. First for the quarter review. Net sales for the quarter were $113.5 million, up 35% compared to $83.9 million last year. Net sales of licensed apparel in the quarter increased to $67.8 million from $52.1 million. Net sales of nonlicensed apparel in the quarter increased to $38 million, from $32 million in the prior year. Net sales for our new retail segment were approximately $7 million from the Wilsons Outlet Stores which we acquired on July 8, 2008.

Similar to our first quarter, net sales of our expanded non outerwear product offerings continue to show good increases in both the licensed and nonlicensed segments. The increase in our net sales of licensed apparel in the quarter was primarily attributable to sales of our Calvin Klein dresses. In addition, we started shipping Ellen Tracy dresses, and Dockers outerwear in this quarter, and continue to ship Calvin Klein performance products which started shipping in the fourth quarter of last year. The increase in net sales of nonlicensed apparel were primarily attributable to increased sales from our Jessica Howard dress division and our Andrew Marc division. The Jessica Howard acquisition was completed on May 24th, 2007. And we only include sales from that date in last year's comparable quarter. The acquisition of Andrew Marc was completed in February 2008, and accordingly there are no sales of Andrew Marc products in the prior year.

Our net loss for the quarter of $3.9 million or $0.23 per share, compared to a net loss of $884,000 or $0.05 cents per share in the same period last year. The increased loss is primarily attributable to seasonal losses associated with the two new acquisitions, Andrew Marc and the Wilsons Outlet business. Our gross margin percentage decreased to 25.5% in the quarter, compared to 26.1% last year. Gross margin percentages were down in both our licensed and nonlicensed segments, with our licensed apparel percentage decreasing to 25.5%, from 27.3% in last year's quarter. And our nonlicensed apparel percentage decreasing to 22.2% in the quarter, from 24.4% in the previous year's period.

Gross margin in our resale segment was 42.9%. Gross margins in the licensed and nonlicensed segments were negatively impacted by increased closeout volume, softness in the women's suit business, and delaying certain private label programs. SG&A expenses increased $10.4 million to $32.5 million for the quarter from $22.1 million in the prior year second quarter. This quarter's expense increases are primarily attributable to SG&A expenses associated with the company's new acquires. Again, we did not own the Wilsons Outlet business or Andrew Marc last year, and owned Jessica Howard for less than a full quart last year.

Turning to the six month period. For the first six months of fiscal 2009, we reported net sales of $189 million, up 59%, compared to $119 million last year. Net sales of licensed apparel increased to $109 million from $82 million. And net sales of nonlicensed apparel increased to $72 million from $37 million in the prior year's period. Net sales in our retail segment were approximately $7.6 million for the six-month period this year. Increased sales in the first half were most favorably impacted by a increase in sales of Calvin Klein licensed products, and sales from our Jessica Howard division. The Jessica Howard businesses were only owned for a little more than two months in last year's first half.

Our net worth of $10.7 million, or $0.65 per share in the first six months of fiscal 2009, compares to a net loss of $7.3 million or $0.46 per share in last year's comparable period. The increased loss is the result of the loss in the second quarter.

Gross margin percentages for the year-to-date six month period were the same at 24.6% and were impacted by the same factors previously mentioned for the quarter. SG&A expenses for the six months increased $21.2 million to $59.7 million from $38.5 million in the prior year. This increase is attributable primarily to expenses with the three businesses we acquired since May 2007. We expect that our SG&A will continue to increase during the remainder of the year as a result of our Andrew Marc and Wilsons acquisitions, and to a much lesser extent, the continued expansion of our business.

Our balance sheet continues to be a source of strength for the company. We have a good capital base and a sound and supportive bank group. Our inventory levels at July 31 were up approximately 59% which was a higher increase than normal, and higher than our forecasted 35% second half sales growth. The large increase is a result of early receipts, in line with projected high August and September wholesale shipping, and the acquisition of the retail inventory.

Lastly, with expect to our guidance. We are expecting to achieve approximately $730 million in net sales volume which equates to a 41% increase over the prior year. EBITDA is forecasted to range between $54 million to $55.5 million, or and increase of 43% to 47% from the prior year. We are currently forecasting net income per diluted share of $1.35 to $1.40 on an increase of 29% to 33% for the current fiscal year ending January 31, 2009. The reconciliation of EBITDA to our GAAP net income is included in our press release which is posted on our web site.

I will now turn the call back over to Morris.

Thank you, Neal. And thank you to everyone on this call for your continuing interest in G-III. I believe we are demonstrating to you that G-III is a special company. I'm very proud of the way our organization has responded to challenges we faced and taken advantages of the opportunities to fuel our future growth. We look forward to another strong year.

Operator, we are now ready to take some questions.

Thank you. The question and answer session will be conducted electronically. (OPERATOR INSTRUCTIONS) We will pause momentarily. The first question will come from Eric Beder with Brean Murray.

This is Alex Rosenfeld for Eric Beder. I have some questions. First of all for Wilsons Leather, how is the integration of that acquisition going?

The integration is going quite well. This is a different type of integration than we are accustomed to. We recognized early, prior to the acquisition, that this is a retail venture requiring retail talent, retail distribution and retail systems, and therefore there has been a greater retention of the systems personnel and space as it relates to Wilson. All said, the integration and transition is going quite well.

Good. Another question, more on the line of Jessica Simpson, how has the response to the dress line been, for the Jessica Simpson dress line?

We previewed the collection at Magic in Las Vegas ten days ago, and the response was excellent at the specialty store level. We received as many as 40 individual orders from specialty stores. And this week, for the first time, we presented to the department store groups, and the reception is far greater than I had anticipated. We had a wonderful meeting with the Dillard's group, and there is a commitment to far more doors than I intend to ship. I believe that our early shipping should be very well calculated. There is a risk in shipping a launch in great depth. But the good news is the excitement is in the air at Dillard's, at Lord & Taylor, at Macy's, at Belk. And that's all happened in the last 48 hours.

In terms of Calvin Klein, how is the better women's line doing?

Again, the first viewing of the better sportswear line is no more than 48 hours, and the early previews and the commitment by door count is far greater than I had originally anticipated. So that is the good news. Our challenge is to get the product produced in a timely fashion and quality form which is really our signature for business. We are on it. We are excited. We've got an invigorated team of people that came from Kellwood that are so energized, it's just amazing. It's a beautiful site to see.

Are you still looking for more acquisitions?

It is always our intention to expand our offerings. Yet today, I could comfortably tell you that this company has assets that could double the size of the company in several years as they mature. So there is no need to acquire companies to grow. Yet, if they fit the profile of what we might be looking for, our balance sheet affords us the luxury of acquiring companies.

In terms of the Calvin Klein active wear, do you have any plans to expand it beyond the department store channel?

The active wear component?

Yes.

Yes, we do. We do have a specialty store business. We have some tests in the sporting goods sector. We have several other initiatives that are a little premature for me to discuss. But the short answer is yes, the product will be distributed broader than department stores.

In terms of inflation at the production level, are you seeing any? If you are, are you raising prices?

We raise our prices as they need to be raised. We are in a competitive environment. We have a challenged consumer, and today is not the day that we have the ability or the liberty to arbitrarily raise -- it may not be arbitrarily, it may be out of need -- but today is not the day that we can raise our prices. This year is not a problem. A lot of our commitments, most of our commitments were made early. We have some advantageous pricing. We are in a competitive industry. Fortunately for us we lead the industry. We don't have a great deal of sensitivity to price fluctuation.

One last question. In terms of the spring dress season, how is Calvin Klein doing? Is it still going strong?

I'm sorry, will you please repeat that? Oh, Okay. Our Calvin Klein spring dress business is I believe out performing the department dramatically. I think I feel comfortable in telling you, it might be leading the department, the classification dress department in department stores. Again, we will easily beat our internal plans for the Calvin Klein dress business.

Congratulations on a great quarter. I'll talk to you next quarter.

Thank you very much. Thanks for your questions.

Our next question will come from Jody Kane with Sidoti & Company.

Can you talk a little bit about the gross margin for the new Calvin Klein business just based on what's happened to the better women's sportswear over the last couple of years, and where it's going, where the gross margin is compared to your current margins and where it can go?

The gross margin, that's kind of a wild card, quite honestly. I can tell you where they can go. What we are doing is--I'll give you the background how the acquisition occurred and the significance of the acquisition to us. We did not -- it is not an acquisition, by the way, it t's licensing agreement -- the licensing agreement is not one that was transferred in its entirety from Kellwood to G-III. It's one that was negotiated in modified form with modified guarantees. There is not a driver in the contract that forces us to do $100 million in volume. Our minimums are very achievable and therefore our strategic calculations on how to manage the business are different that what Kellwood had been forced to do to manage a business.

We are going out at prices that are less than Kellwood had gone out, and it could be as much as 20% less. Our buying is better. Our evaluation of what pricing needs to be to the consumer is a little different than what might have been evaluated and decided on at Kellwood. And our margins should be very much in line with what we are doing in dresses, suits and coats. We are not looking at this as a different business. The beatify of our business is we generally simplify it. We don't over-complicate our businesses. We provide great design, great product, we deliver it on time. We understand the consumer and the retail needs. That formula has helped us prosper for a long time. We believe that our operating profit will be positive due to the larger size.

Are you bringing in any new design people to the team or is it going to be primarily the same people from Kellwood?

We've got great talent onboard, both the G-iii talent as it relates to Calvin Klein. Sammy Aaron leads the charge. He's done a wonderful job over the years, and he has some great merchants that can help the acquired team from Kellwood in building the right product. We just signed the agreement but we've been negotiating through this for months and in the process, true to G-III form, we have been developing products.

You might have seen that we just signed this agreement but there is a complete collection that is showcased in our showrooms today. The showroom is complete. The samples are impeccable. And the reception towards the samples, the collection and what we have in mind for the future has been excellent from the retailer.

One last question just on the Wilson store side. What products are going to be sold through it? Is it going to be only the outerwear products or are you going to be able to sell some other products through there as well?

The Wilsons stores historically have traded in handbags, accessories, travel items, leather cleaning products. And all those components added to as much as 50% of their overall business. Coats (inaudible) that G-III plans on buying a good part of, will be a combination of many things. It'll be a combination of private label, opportunistic situations that exist both overseas and in our warehouse, and some regular goods that are a combination of proprietary brands and licensed fashion brands.

Thank you very much.

Our next question comes from Susan [Sanfay] with Miller & [Tayback]. Your line is open.

Yes, thanks very much. On the inventories, can you share with us how much of the 59% increase reflects the timing shift by bringing in the goods early? And how much reflects the acquisitions?

We can tell you clearly on the acquisition side of it, it's very clear what we have on the Wilsons side. We acquired a great deal of inventory in the acquisition. That number was approximately $20 million. So that accommodation is close to 20% of our inventory. That's a clear answer on Wilson.

As it relates to Andrew Marc and some of the new businesses, I think totally -- Neal?

In terms of the percentage increase, if you look at a total increase of about 60%, about 20% of that increase was attributable to Wilsons business. The Andrew Marc business is probably about 17% of that business. But, as I mentioned in my remarks, if you look at the wholesale increase, which is about 40%, that's pretty consistent with our sales expectations for the first two months of the third quarter. So even though we did bring in goods early, as a result of concerns over the China Olympics, it actually has married up with our anticipated sales growth as well.

That's what I was fishing for. Can you discuss -- thank you, can you discuss the extent of the losses from the acquisitions, or the amount of the dilution from the acquisitions in the second quarter or year to date?

Let me tell you what we've said publicly about this before. The Wilsons acquisition, we expect to it be accretive for the year. I think after we did the acquisition we implied that that was going to be about a positive source to the tune of about a dime. We've mentioned before that the Andrew Marc business was also going to be accretive, less so than that. And clearly those two businesses did go as a significant portion of the losses in the second quarter. And that's because those are off seasons for both of those businesses.

And then just finally, going back to the Calvin Klein better women's sportswear business, are you going to be in the same number of doors as Kellwood is, or have you also, are you starting out at a lower base?

Uniquely, we will be in, I believe, many more doors than Kellwood. There will be some contraction of door counts in some of the accounts. And there are opportunities where Kellwood clearly didn't do any business in some of the accounts that we have significant commitments for today. So on a total door count, I would tell you we will have an increase situation.

Can you identify who the new account or accounts are?

We can tell you that clearly Dillard's is very much behind it. They have not had Calvin Klein sportswear for several seasons. I just left a meeting where it's a very large commitment in door counts from them. Vinton will be carrying the products. They did not carry it in the past. The Macy's stores, some of them will be aggressive, some of them will wait and see how we perform. We believe our products, our pricing will make the difference very, very quickly. Okay.

Will it be in both Macy's East and West?

And South.

And South. You're wonderful. This is exciting. Thanks ever so much.

We will take our next question from Todd Slater with Lazard Capital.

Good afternoon and nice numbers.

Thank you, Todd.

Start with just a revenue assumption for the year. How much CK sportswear is assumed in that guidance?

Very little.

It's my thinking it's got to be very little. Is that because you're being conservative or you're really planning on shipping very, very on the back half?

We just started to show the product. We have a team of people that have their visas and passports ready. And before I can respond or put it into a plan or even put it into a thought process, they need to come back and tell me how much product we can deliver in January. Clearly there is no opportunity for October, November, December. If we catch a piece of it, it is on the tail end of our year.

Understood. If my advanced math skills are working for me, the guidance for the year implies $2.00 a share I think in the second half. Can you give us sense of how this should fall between third and fourth quarters?

Todd, we didn't update, statistically come out with the third quarter because we are comfortable with the street expectations for the third quarter. and that should give you the -- obviously, they were comfortable for the fourth quarter, as well.

Okay. I'm pulling that up now. What's that? $1- ?

The third quarter street expectation was $353 million in sales, and $1.74 for earnings per share.

Okay, perfect. Does this assume -- gross margins obviously were negatively impact by the three items you mentioned. Do you think in the second half, do your numbers have to assume that gross margins recover and are up nicely?

I think we should see -- I don't think we'll have the same kinds of pressure we had in the first half. I don't know if I want to get specific to the specifics. But obviously we're going to be impacted positively by the retail business. But even when you exclude the retail business, if you look at margins for the full year, we expect those to be up over the previous year.

But why do you think -- what is it that gives you confidence that the same issues won't affect you in the second half, or some of them any way -- i.e., suits and increased closeout or what have you?

Generally, our first and second quarters are periods of time that we liquidate the product. We are in our peak shipping cycle with premium margins at this point. So I would say the back end of the year should be better.

So any residual, if the environment is materially weaker than we expect, will really flow into, let's say, the first half of 09? In your closeout period?

That's not necessarily right. There is a concept called givebacks and markdowns and allowances that really falls into play. We never know the severity of that. It's always a risk to our business. Historically, we've managed it incredibly well, but again you just never know.

What is nice about our business is it's fairly well balanced. It is not all department store. There is several tiers of distribution that we ship that don't require givebacks. We are comfortable. I think we'e stated that. Our bookings are 90% of our stated plan which, at this time, is quite good. In this environment, I would say is excellent. There is not a lot out there that poses more challenges than we believe we can surpass.

Okay. Your markdown reserve or accrual that you're assuming, for the back half, is that larger than it was last year, the same, either in dollars or percent terms? How can you give us comfort that that's a nice conservative reserve?

Todd, this is Neal. I think that we have, as Morris mentioned, 90% of our bookings are in. We've look at the gross margins by division. We did try to anticipate, really, a similar markdown rate to where we have been before. We don't really accelerate that. But we also are influenced by the current state of affairs and the current bookings. As we say, we've got a lot of the year booked and we feel comfortable with our guidance.

Could you guys give us a little more color on the private label delay issue? How sizable was this? How confident are you that the goods will ship? And is that a third quarter shipping?

It was not that large. Again, you're in a quarter that's not that large for the year, so. But we did have some softness. It was not that large. And those orders will ship, in fact probably have shipped already, in the month of August.

That was just the retailer saying, "Guys, give me a couple of more weeks. Ship that in July," or something like that?

There were several different programs with several different reasons.

A lot of which is shipping a little production into India out of China, so we incurred some delays. We have gotten over it and not significant.

Okay. Then, lastly, where do you now see the co-penetration by the end of this year? Where has it been the last 12 months? How is it evolving? How is your diversification evolving?

I was out in the stores last week and shopped fairly intensely. I've got to tell you, our penetration is great. We are in every store with one brand, two brands, three brands. We dominate the sectors. Our sell-throughs have been very good. We've gotten great reorders from the department stores on Calvin Klein and Guess?. We've gotten reorders at the (inaudible). The clubs are reordering products. I would tell you that our penetration, our exposure, our performance is great. I think if I stop my subscriptions to the newspapers and turned off the TV I'd even be more aggressive.

I think I misstated the question. Perhaps if I rephrase it in terms of mix to your total business.

We are still -- I think I mis-answered your question. So in fairness to you. It wasn't a bad response, anyway.

No, I appreciated that one, too.

Todd, we still dominate that sector. We totally as a company, there is some overlap in some of the divisions. I would tell you that we are still between 70% and 75% coats. Clearly, some of the acquisitions accelerated that. Andrew Marc today is a coat business. It will not be a coat business down the road. And we --

You mean, it won't be entirely a coat business down the road?

Yes, exactly. So we -- I would say within the next two years our goal would be getting near the 50/50 range.

Okay. Got it. Great, that's very helpful, thank you and all the best in the back half.

Thank you, Todd.

We will take our next question from Jim Duffy with Thomas Weisel Partners.

Thanks, hello everyone. You mentioned you're 90% booked for the outerwear season. How does that compare to where you were last year at this time? Help us understand the dynamics for the other 10%.

Jim, I'm sorry, I can't hear you. Can you speak a little louder, please?

Sure. You mentioned that you're 90% booked for the outerwear season. Can you help us understand the dynamics for the remaining 10%. And do you currently have the inventory for that? Some color there would be helpful. Thank you.

Number one, we are not 90% booked for the outerwear segment for our business. We're 90% booked for our internal plan of total business.

Okay.

So that's number one. We have, as we stated earlier, we have a pretty good plan on receiving inventory to take the plan and beat the plan. We have some contingency situation. Our dominance overseas can delay shipment. Our relationships with our factories can slow down production of anticipated product and hold piece goods for a later date. Most of our product is not specific for one season. It can be held if it's -- strangely, if you're producing Calvin Klein you have to assume a good deal of inventory is in black, and if we see a slowdown, that anticipated inventory to service reorders can be held for next year. So strategically, we've played this one out really, really well.

So it sounds like that 90% figure is ahead of where you were a year ago? Is that fair?

It's in line. It's a much bigger business. The scary part is that if you don't achieve it, in a business that is 35% to 40% larger than the year before. On a percentage basis, the percentage is similar.

Okay. Then Neal, where do you expect D&A for the year? And can you give us the split between depreciation and amortization?

We got the D&A forecast in the press release at $7 million. And that is mostly amortization of acquired trademarks and intangibles over the previous years.

With regards to the retail accounting, it sounds like from the gross margins you're booking the occupancy expense in the SG&A. Is that true?

That's right.

We have been in some of the Wilsons stores and it looks like you're trying to purge through some of the older inventory. Where are you in terms of repositioning the merchandising on those stores?

We're about a month away from being where we want to be. Your sense of what is going on is correct. I would assume you were in the outlet stores and not at the mall stores.

Correct.

So your sense is right. Part of the advantage was that we were able to, and are able to, purge through some of the inventory that was troubled on the wholesale side. So the advantage is there, as we had anticipated when we made the decision to acquire it.

This is Neal again. I just want to clarify. On the occupancy, the store occupancy expenses are in SG&A.

Okay. Great. With regard to the gross margins for the retail segment that you shared with us, I presume that's weighted down by some of the efforts to purge the inventory. I'm sure you would expect it to be higher on a go forward basis?

That's correct.

In terms of reporting for that segment, are you going to share comp store sales figures with us for those stores?

No, we are not.

Okay. All right. Then, Morris, you spoke in your prepared remarks about further retail expansion opportunity. Can you give us a sense about what your thinking might be there? Rough concepts? That would be helpful.

Clearly the acquisition of Andrew Marc had a retail component in mind. We are consistent with that. If we had the appropriate inventory and breadth, currently we only have outerwear and handbags. That does not make a full store for us. But when we have our licensees onboard, and we have a breadth of product,, our goal is to open up several stores, and the world of Andrew Marc will fold into our retail platform, the Wilson platform.

We plan on opening up two airport stores that we recently signed leases for. They will initially continue to be Wilson stores but we will convert them to Andrew Marc as soon as possible. We plan on taking several of the outlet stores in the appropriate areas and convert those to Andrew Marc. And there is a desire to open up several downtown locations to showcase what Andrew Marc should look like in retail venues. It'll be a marketing tool as well as standalone retail.

With that you never know. In this retail environment, opportunities do arise for retail acquisitions, and we've not been strangers to that. If there is a retail opportunity that's appropriate, we might consider that, as well. We would utilize the retail systems, the retail management team that we put together to oversee that sector. Let me not lead you to believe that I've identified one. That's not the case.

Okay. Then, final question for you, Morris, if you could just share with us what you see as the key success factors for the Calvin Klein sportswear, and how quickly you think that will, A, what the potential for that business could be, and how quickly you think it could be realized.

The beauty of our contract with PVH is that it doesn't need to be overnight. The minimums that we created with the kindness of PVH gives us the luxury of doing it right. We don't have to be a $100 million business tomorrow. That said, I think we can be a $100 million business tomorrow. It's a very, very large opportunity for us. As I've said, the walk throughs that we've had with retailers and the approximate store count that they've indicated to us, leads me to believe that in two or three years this is a $200 million opportunity.

We have seasoned management that operates under the culture of G-III, and we've seeded it with the appropriate sportswear people to build the product. so I'm very, very proud of how fast this has evolved. It's seems as if -- it almost scares me. If you came here, we seem to have had a Florida we were transitioning from closure of another sportswear collection. The urban piece that we had with Sean John. The space was perfect for Calvin Klein. The CapEx expenditure was south of -- I don't want to discuss that, but it was very, very affordable. Done in record time and, again, true to our form, we're in business.

And then the last piece of that, the key success factors near term?

Design, quality, simplicity, affordable pricing, appropriate pricing. And we have all of that. That is the culture that we operate under. It's a formula that we use to launch Calvin Klein women's suits, dresses, and pretty much every business that we go into. We don't over-complicate it. We look at it pragmatically, and we bring it to market in record time with no nonsense. And that formula works for us.

We have seasoned management. The company is composed today of people that have been in business for themselves in the apparel industry. They understand the significance of timing, savings. They know how to motivate. And the process has been accomplished before. And in the last two or three years, we've achieved success in similar situations. So there should be no reason that this does not succeed under our watch.

Very good. Sounds like you have tremendous opportunity ahead of you, good luck.

That is our final question on our question roster. At this time, I would like to turn the program back to our speakers for any additional or closing comments.

Again, I thank you very much for staying with us this afternoon. Thank you all for your questions. Have a good day.

Thank you, everyone, for your participation on today's conference call. You may disconnect at this time.