G-III Apparel Group Ltd (GIII) 2014 Q2 法說會逐字稿

Welcome to the second quarter fiscal 2014 G-III Apparel Group earnings conference call. My name is Larissa, 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. Please note, this conference is being recorded. I'll now turn the call over to Neal Nackman, Chief Financial Officer. Mr. Nackman, you may begin.

Thank you. 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 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 adjusted EBITDA, which is a non-GAAP number. We have provided a reconciliation of adjusted EBITDA to our net income according to GAAP in our press release and 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; Wayne Miller, our Chief Operating Officer; Neal Nackman, our Chief Financial Officer; and Jeff Goldfarb, our Director of Strategic Planning. Our results in the second quarter were outstanding, and we are pleased to have performed well in a challenging environment. I would like to start the call today by going right to the financial highlights. Sales of $304 million in the quarter were above planned. This was up 21% compared to last year with broad-based growth. We've done a great job of positioning for the fall and holiday season, and we are now booked 89% to planned. The year really looks good. Gross margin in the quarter was up three points versus last year, improving to 32.7% from 29.8%. We continue to achieve balance between cost control and continued investments in capabilities, and as a results, net income per share exceeded our plan and improved to $0.17 per share in the second quarter versus $0.07 last year.

It's gratifying to see this kind of performance in a tough environment. I think it demonstrates clearly that we are a best-in-class company. We certainly have a great assortment of brands, a high level of diversification, outstanding partners, and loyal customers. While all of those things contribute to our strong performance, I believe our greatest single advantage, and what really sets us apart and above most of our industry, is the incredible corporate culture we have built here at G-III. Our people are driven to success. We've worked hard to create a corporate culture that encourages, enables, recognizes, and incentives a powerful roll-up-your-sleeves work ethic. It's not that difficult to find great ideas or great businesses. It's very challenging to move those ideas forward profitably quickly. We do that exceptionally well.

Now, let's talk about some specifics in our business. Wilsons posted a comp sales gain in the quarter of 13.7%, a significant performance compared to the outlet channel. I will note that this comp gain was on top of 12.7% increase in the same quarter last year. The team at Wilsons has worked hard very on nearly aspect of their business. They have the merchandise assortments right, systems and store operations are in line and positioned for further growth. Our sales productivity is now at $350 per square foot and still climbing. When we bought this business, it was approximately $250 a square foot and was losing money. We added depth and talent to our team, created better incentive structures, gave them better tools, and the results are great. We believe there is an additional opportunity in full-price retail, and as we discussed last quarter, we are expecting to have 15 full-priced mall stores opened in time for holiday.

The full-priced stores will clearly be differentiated in their mix, the quality of the products, the price points, and the look and feel of the concept. While we will not be able to gauge the success of these full-priced stores until after the holiday season, a viable full-price retail model would represent a significant growth opportunity for us. We're excited about the future for our specialty retail business, and believe we have established a scalable platform that can support significant growth. Led by Calvin Klein, our wholesale is our largest and best diversified business. Great execution across categories drove much of our overall strength in the quarter, as did our continued investment in fixtured shops. This drives margins and improves turns and productivity, both for ourselves and our retail partners. We grew Calvin Klein Sportswear at a fast pace again this quarter, with sales up more than 50% over prior year. We increased penetration in existing doors, and ended the second quarter with 890 doors, up from 662 last year. We are utilizing fixtured shops to maximize penetration in key doors, and we expect to open 27 more in the second half, to finish the year with 140 in total.

Our Calvin Klein dress business continue to dominate in department stores this past quarter. We shipped well and performed well at retail. Doors were stable at just over 1200 in total. The dress market had a tough season, and we felt that in some of our brands, but Calvin Klein continued to be a standout. We grew our Calvin Klein women's suit and separates by 70% over last year, and we are really excited about the future for this business. Our teams are doing a great job of delivering products that create newness for our customers' assortments. Our door counts in suits as of the end of the second quarter was 1100, compared to 800 last year. Calvin Klein handbags was up 40% over last year's second quarter with improved gross margins. This is in an area where fixtures can be very important and we expect to have eight new handbag fixtures -- fixtured areas installed in our strongest doors by year-end.

We also continue to grow our Calvin Klein performance wholesale business, with a 20% increase over last years second quarter. Our door count in Calvin Klein performance is up to 1100, compared to 1000 last year. As in sportswear, we're using fixtured performance shops to maximize penetration, and we should have 490 doors by year-end. The partnership we have developed with PVH and the job we have done with Calvin Klein are a great showcase for what we can do. This partnership has been powerful for our overall business and our position in the market. We are confident that Vilebrequin, like Calvin and Wilsons, will ultimately be another success story for G-III. We executed well in the second quarter and continue to move in the right directions to fulfill our long-term vision for the brand. Financially, we are achieving our expectations. We're make investments across the business, in-store buildouts and fixtures as well as personnel and systems. New initiatives, such as our e-commerce site for the US market, and our new women's products and suntan lotions, are just getting, started but are promising. We continue to see this as a dual-gender brand with a significant presence across many adjacent categories in the global status market.

Our team sports business is another great success story within our Company. It continued to perform well in the quarter, and our product mix is now about 50% sportswear and 50% coats. We're approaching $100 million in total volume in team sports, and I'll point our that sportswear was nonexistent five years ago. We see continued growth for several years in the future. I talked about Calvin Klein, but I would also like to discuss other dress and sportswear businesses. In dresses, our business includes Jessica Howard, Eliza J., Jessica Simpson, Vince Camuto, Guess, Ellen Tracy, Kensie, and Andrew Marc, and we are excited to soon add Ivanka Trump. The standout among these was Eliza J., which continues to be an amazing performer at Nordstrom's and other retailers throughout the country. Our Kensie contemporary sportswear continues to be a solid performer in major retailers, and can now be found in 900 department stores.

We are excited about our Ivanka Trump launch in dresses, suit separates, and swimwear. We think there's a big potential for Ivanka in apparel. We continue to invest in personnel and development for this important fashion brand. Ivanka Trump showrooms will be opening in the beginning of the fourth quarter. As you know, our biggest businesses is still outerwear, which we started shipping toward the end of second quarter. With approximately 30 licensed, owned, and private label brands and a presence at every tier of retail from luxury to mass market, we are the dominant resource in this category. We believe we have planned the outerwear season well, and it will continue to be a strong and stable business for us. I will reserve a few comments for closing, and now I'll turn the call over to Neal.

Thank you. Net sales for the quarter ended July 31, 2013 increased 21% to $304 million from $251 million in the same period last year. Net sales of licensed products increased to $202.5 million from $178.4 million, driven by increased sales of Calvin Klein licensed product, primarily in our women's suits and sportswear lines. Net sales of nonlicensed product increased to $70.4 million this quarter from $48.3 million in the comparable quarter of last year. This increase is primarily attributable to the addition of net sales from our Vilebrequin business acquired in August 2012. Net sales of our retail operations increased to $41.1 million from $32.9 million in the prior year's second quarter as a result of a combination of a higher store count, as well as a comparative store sales increase of 13.7%. Our gross profit percentage was 32.7% in the three-month period ended July 31, 2013 compared to 29.8% in the prior year's period.

The gross profit percentage in our licensed product segment was 27.1% this quarter compared to 26.2% in the prior year. The increase is primarily attributable to improved gross margin of Calvin Klein women suits and sportswear. The gross profit percentage in our nonlicensed product segment was 34.8% compared to 25.6% in the prior year, which is primarily attributable to our new Vilebrequin business, which operates at a higher gross margin percentage than our other nonlicensed businesses. The gross margin percentage in our retail operations segment was 49% compared to 48%. Total SG&A excluding depreciation and amortization increased to $89 million in the quarter from $69 million in the same period last year. This increase is primarily attributable to increased personnel costs, facility costs, and third-party warehousing expenses as a result of our new Vilebrequin business, our increased retail store count, and increased shipping volume.

Net income for the second quarter was $3.6 million, or $0.17 per diluted share, compared to net income of $1.4 million, or $0.07 per diluted share, in the prior year's comparable period. Net income in the prior's period included $1.8 million of expenses associated with the Company's acquisition, equal to $0.06 per share net of taxes. Regarding our balance sheet. Accounts receivable decreased to $163 million from $185 million at the end of the prior year's second quarter. Inventory increased approximately 21% to $406 million compared to $336 million at the end of the second quarter last year. Inventory increases are consistent with our forecasted sales growth. Our bank debt, less on-hand cash balances, increased to $106 million from $64 million at the end of last year's second quarter, primarily as a result of the financing of the purchase of Vilebrequin in August 2012. We also have approximately $20 million in long-term debt relating to promissory notes issued as part of the acquisition.

We have spent approximately $11 million on capital expenditures during the first six months of our fiscal year, and continue to expect our capital expenditures to be between $20 million and $25 million for fiscal 2014. That's primarily for retail store development at Wilsons and Vilebrequin, and fixturing costs at department stores. Lastly, I would like to discuss our guidance for the full fiscal year and the third quarter. In the fiscal year ending January 31, 2014, we are now forecasting net sales of approximately $1.61 billion, up from our previous forecast of $1.57 billion. This results in an increase of approximately 15% from the $1.4 billion of net sales in fiscal 2013. We are increasing our forecasted net income to be between $68.6 million and $70.6 million compared to our previous forecast of between $66.3 million and $68.4 million.

We are now forecasting net income per share of between $3.30 and $3.40 per diluted share, up from our previous forecast range of between $3.20 and $3.30. Our revised guidance compares to net income of $2.80 per share in fiscal 2013, which included effect of expenses associated with our acquisition equal to $0.12 per share, net of taxes. We are forecasting adjusted EBITDA for fiscal 2014 to grow between 16% to 19% to between $132.3 million and $135.4 million compared to $114 million in fiscal 2013. With respect to our third quarter guidance, we are forecasting net sales to increase to approximately $620 million in this year's third quarter, an increase of 14% from the $543 million in net sales in the comparable quarter in the prior-year. We are forecasting net income between $52.2 million and $54.2 million, or between $2.52 to $2.62 per diluted share, for the third quarter compared to net income of $48.3 million, or $2.37 per diluted share, in the previous years third quarter. Net income per diluted share for the last year's third quarter fiscal quarter included the effect of expenses associated with the Vilebrequin acquisition equal to $0.06 per share, net of taxes. That concludes my comments. I will now turn the call back to Morris for closing remarks.

Thank you, Neal. We are as confident as ever about our strategic path and our continued growth opportunities. We have that confidence because no matter what the environment looks like, we have a team and a drive that can deliver. We have held firm to a vision for the Company as a highly diversified, dual-gender, all-season apparel company. This is exactly what has been developed. As we go forward, we will continue to leverage the operating platforms and core capabilities we have built. Our strategic expansion will continue where we find the right opportunities. Some will be deeper in existing categories where we will see benefits of scale, and others will be in new categories where we see an opportunity to replicate our success and further diversify. Our strategy to combine organic growth with good acquisitions has been very effective, and will also continue. We have a very strong balance sheet, and our ability to successfully acquire and integrate new businesses continues to be an important core competency. Thank you for your time today, and your support. We are pleased with the results from the first half of our fiscal year, and we're looking forward to demonstrating a strong second half. Thank you. Operator, we are now ready to take some questions.

Thank you. We will now begin the question-and-answer session.

(Operator Instructions)

Erinn Murphy from Piper Jaffray.

Great, thank you, good morning, and congratulations on a great second quarter. I guess Morris, for you. I was hoping if you could talk a little bit more on the color of the fall order book. I guess at this point, just given all the volatility in the market, how are retailers feeling about the outwear season in general? Then I guess you mentioned in your pre-prepared remarks, about 89% of the season is booked. Can you just remind us how we should think about the timing of these shipments? Any key notable changes year-over-year? That is my first question, thanks.

No. No real notable changes. I will deal with your last comment first. There are no notable changes. Our bookings are a little bit ahead for same time last year to plan. We are very pleased with it. We got some very strong indications on early shippings, and we are doing some research now to see if we are capable of delivering some reorders for fourth quarter that could change a profile of how we look, but all the indicators are very strong for an outerwear business. There's been a little bit of pressure on one of our strong categories, which is the down business. The pressure there is more price pressure than anything else. There's production capability, but it is at a higher price than last year, and certainly a higher price than we took our early orders. We are concerned about the retailer coming back and reordering down coats at a higher price point than they started the season with. Shy of that, I would say everything looks great.

That's really helpful. I guess one of the earlier comments you just said was that there has been some talk already about potential reorders that could change the profile of Q4. Could you talk about, is that a specific channel, or are you seeing that more broad-based, or are you seeing it more dedicated to a specific type of channel, whether it is the mid-tier department stores, the better department stores, just how should we think about that comment?

We are seeing in at the mass, the mid-tier, and the moderate department stores. I have not seen it yet on the luxury side. And that is surprising, everything we were reading really leads us to believe that there is greater pressure on the mass and mid-tier, yet we're getting very good reads at the mid and moderate side of our business.

That's really helpful. Then I guess secondly on the Wilsons Leather Group, that just continues to be a very, very solid performer within your portfolio. Two questions on the comp. Again, strong on strong double-digit last year. Could you just speak to the drivers of that comp? Is it more traffic? Is it more ticket? And then any early reads on how August has trended thus far would be helpful.

Our business at Wilsons is a commendation of higher average unit retail, driven by pretty much a resurgence of the leather business at Wilsons. That is driving a higher price point. Better product, better assortments, clearer signage, and better value, coupled with our ability to garner better margin. We are very happy with Wilsons' performance. August again was, I believe it was 13% comp increase compared to last year off of about a similar increase to the year before. I would say that Wilsons is also primed for growth. We're very excited about that performance. As I stated, we're opening some mall locations. We've got 6 opened, and we believe we will be north of 15 before year-end. The 6 are performing better than the outlets in square footage performance. We believe there is a huge opportunity on getting back into traditional mall locations.

Thank you. As a reminder, please limit yourself to one question and one follow-up. Edward Yruma from KeyBanc.

Hi. Thanks for taking my question, and congratulations on a great quarter. Morris, how do feel about the broader opportunity within the swim category? Obviously, you have purchased Vilebrequin. I believe you're doing Calvin Swim. How should we think about other opportunities for you to create a swim platform?

The beauty of swim as it relates to a dominant outwear company is that in the department store sector, the moderate department store sector, generally the coat buyer and the coat merchandiser oversee the swim department. Our relationships clearly are very strong. The ability to build space that skews from coats to swimwear with the same brand is a huge opportunity for us. And currently, we have an initiative clearly with Macy's that gives us better signage for coats, simply because we are able to maintain that space for coats during the coat season and swim during the swim season, and that will enable us to better the business in both sectors. I would say that watch us. We're going to do basically the same thing that we did in coats and dresses in the swim area as time goes on. This really doesn't play into the Vilebrequin situation. This is totally different than Vilebrequin. Vilebrequin's product is different, distribution is different, price points are different. This is, again, trying to be the dominant player in a classification that we believe we can dominate over a short period of time.

Got it. There seems to be an industry trend focused on greater transitional kind of outerwear or layering pieces, maybe given the unfavorable weather we've seen over a couple years. How are you positioned to meet this industry trend, and is it something that could materially change the flow of your business? Thanks.

Transitional outerwear is a very, very important classification for us. The good news is, it was a weak point for the Company pretty much in every brand over the last couple of years. So we are very aggressive on how we develop for it. We are winning some of the battles where people had some dominance in that classification, we are now breaking in. That's a huge opportunity for us. And you will see different weight, different attitude type outerwear, both in men's and ladies in the stores for -- currently we shipped some, not enough depth, but clearly you will see the fashion, and our opportunities for next year are huge. We are talking about delivering transitional weight product earlier next year in great depth. So good fallout. It is something that the entire Company is focused on.

Great, thanks so much.

Thank you, Ed.

Rick Patel from Stephens.

I will add to everyone's congratulations in a very tough environment. Can you talk about general trends you're seeing within the department store channel? I know several retailers in that pocket have posted weaker results than expected for the second quarter. So we would like to hear your views on how you think the channel is holding up in general, and how your inventory specifically are trending as it relates to your product and what your outlook might be for the channel in the next few months.

Our business in that channel is quite good. They're always has to be a winner. When business is tough, I guess the consumer radiates to a brand that they trust, fashion that they trust. And we believe we are successful because we have those brands. We don't design simply out of an insulated box. We take success stories of the past, we are great students of history, and of fashion history specifically. I would say that we generally win, and there is a level of (technical difficulties) we all saw our numbers released for the month of August, and July was not much better. Yet we just released our numbers that indicated a different trend. So I would say that we are conscious of what needs to be done. We execute quickly, we change as the consumer tells us to change. So there -- it all boils down to being reactive and responsive, and we are that company.

Can you also talk to us about the dress business? It's something that I know you are very well established in, but you continue to post some very strong growth in. Perhaps remind us of what the incremental opportunity might be for Calvin Klein in terms of the number of doors that you could additionally add to, as well as what the initial reactions might be to some of your newer lines, like Jessica Simpson?

Clearly, the Calvin business, the Calvin dress business is the leader at retail. We continue to grow the business, not necessarily by door expansion, but more so by door penetration. The initiative that we have in building out space for our important retailers is working well. The presentation is better, performance is better. We are managing our inventory and flowing our product much better than we ever have. And with the support of the retailers, we are accomplishing growth in an area that really is calling down to the strongest. A lot of resources have faded away, and we continue to grow. We are suffering in some of our areas. Some of the third tier moderate brands are less essential than they ever were. The retailer is leaning on growth through their primary brands. Fortunately again for us, we have those primary brands. We work well with the retailer, and again, no different than the coat area, no different than Wilsons, no different than anything that this Company takes on, we execute well. If we are given good information, we have the skill set, we have the cooperation of our vendors, we have an infrastructure that supports immediate response. So we are in good shape.

Thanks very much.

Eric Beder from Brean Capital.

Good morning. Let me add my congratulations on a solid quarter.

Thanks Eric.

Could you talk a little bit about Vilebrequin? Where you -- you spent a lot of time and effort updating the business. Where should we think about, as we go into next year, to Vilebrequin to start to take the next step, and how should we look at that as a next up for them?

There are a couple of initiatives that are beginning to work. We have broadened some of the product that we are offering. We will have flip-flops in all our stores by November of this year. We feel strongly about the development of the footwear business. We have a small initiative on women's swim, and call it apres swim, that is working. We have -- we're concentrating on a different fit to enable a broader customer to be satisfied when they walk into our store. When I say broader, I don't necessarily mean bigger, I mean maybe a more fashionable and a younger customer finding their choice. We are managing our inventory differently than ever before. We are culling down our franchisees overseas. Over a period of years, franchisees were signed on without great consideration for their ability to execute. So we are cooperating with franchisees, we're training them, and we're getting some immediate results.

We are managing their inventory better than they have over the last probably four or five years. It is not about trying to accomplish immediate success. I don't think the growth through the franchise area is anything that we would be proud of for the, probably for the next 18 months. Our individual store growth, stores that we own, Company-owned stores, that's moving quite rapidly. We're pleased with the new store openings. We're building new fixturing. We'll have a brand new store in, a brand new outfitted store in Paris on Rue St. [Andre] at the end of October, and that will be a good example of what our future stores will look like. It won't be a very expensive buildout, but it will be quite different than we currently have.

Our US growth, we have opened five stores this year, where we are in negotiations for several more leases. Our wholesale business is growing. We're developing new fixturing for our department stores. Sachs has done a very nice job, Bloomingdale's has done well, Barneys has reposition us, and Bergdorf Goodman is doing a new buildout for us as well. We have got a great deal of opportunity. We are reworking our e-commerce site that's about, I would say, about 60 days away from being operative, And business is good. Our comp sales globally are high single digits, and in an area where we are just learning the business, I would say that's a good accomplishment. We have the ability of licensing classifications, we have many offers on the table, and we are considering several of them.

In terms of the Wilsons Leather full-price stores, in the near-term are those going to be a slight drag from pre-opening [costs] and other pieces? Longer term, I know it's very early, but do you think this could be the same size that Wilsons used to be, maybe with a different product mix and a slighter higher-end customer that was?

Again, let me start with your last question. I don't believe we have a desire to build it to the same size that Wilsons was. At one point Wilsons did well in B&C centers. We're not really interested in going into those. We're not that operator today. But we clearly see an opportunity of 300 stores in malls versus the 600 that existed years ago. We don't see a drag on earnings in the first year. The Wilsons stores are immediately accretive. We open them, they perform well. It's not about brand building, it's not about getting the formula right. We have the formula right. We have the product, we have all the essentials that are needed for a prosperous business. The unique choice is the real estate, and we have a strong real estate department that is careful on their choices. I would say that growth hits the charts immediately.

Great. Thank you, and congrats on a solid quarter.

Thank you.

John Kernan from Cowen.

This is Jerry Gray on for John. I was hoping you could walk us through the margin recovery that you are assuming in your wholesale nonlicensed business as you lap Vilebrequin acquisition going into Q3 and Q4.

I think overall we're looking for kind of steady gross margin performance and steady operating margin performance in total. You have seen some of the shift this year because we picked up Vilebrequin in the middle of our third quarter last year. We'll start to lap that. The third quarter, as Morris alluded to before, we do see some pressure in our main wholesale business in the third quarter. But we think that come the fourth quarter that sort of normalizes for us, and we will be comparable to the prior year.

Okay, great. And with the progress you have made in Vilebrequin, have you changed your outlook for a breakeven contribution from that business for this year?

No, we have not.

Okay, thank you.

Joan Payson from Barclays.

Hi. Good morning, and I will add my congratulations on the great results. Could you, first off, provide a little more detail on your out-performance on sales in the quarter? Maybe what the biggest surprises were compared to your plans? And then on third quarter assumptions, do you think there are any areas at this point that seem conservative, given your quarter-to-date performance so far?

Yes, I think that certainly the Wilsons business comes to mind. Their [like-to-likes] were stronger than we would have been forecasting them. And then our two stronger performers were the Calvin business. We mentioned both sportswear and suits were stronger than we had been anticipating, as well. I think in terms of the guidance for the third quarter, you really have an order book that's in place. We really need to execute on that now, and of course if retail and consumer is strong, then we've got a little bit of upside there. So we feel pretty bullish about our guidance for the third quarter, as well.

Okay. Thanks, Neal. And also thinking about the upcoming launches with Ivanka and Calvin Swim, how should we thinking about the timing of when you launch a new brand and that begins to gain scale and benefit overall profitability, just in terms of what you have seen with past launches.

In this specific launch, I think you see profitability very, very quickly. It's the same year we launch, we generate a profit. We've got -- we've hired an amazing team to design and source the product, and the retailer is very supportive. We're building some fixtured shops right out of the box. I would say that you would -- you'll see profitability immediately, within six months we're there.

Okay, great. Thanks very much.

Jim Duffy from Stifel.

Thanks. Good morning, guys. Strong quarter. A few questions for you. Neal, the guide, more ambitious for revenue, but the EPS flow-through is limited. Is that a function of reinvestment, and if so, what are some of the areas where the reinvestment will be focused?

Well, it's not so much reinvestment. I think it is just fine-tuning our guidance. We had nothing out there [with] third quarter. So where we landed, we do see a little bit of gross margin pressure that we just spoke about, and that's probably the slight hint of softness in the third quarter.

Okay. Morris, a few questions for you. With respect to the investment in fixturing and in-store shops, you spoke to this in the context of Calvin Klein. Are you also investing in fixtures for the other brands, and if so, could you elaborate a little bit on that, please?

Sure, good question. We are. As I said earlier, we spoke about Vilebrequin to some degree. Vilebrequin is investing in fixturing. We are working with Jessica Simpson. The stores are very, very cooperative on expanding the floor space and letting us help them on the department design and buildout. And Kensie, which is an important contemporary brand for us, has got quite a few buildouts at Macy's. I can't give you the exact number right now, but will get back to you on it. It's my miss, I should have that. But Kensie is an important developer of some of the property that we are in. Clearly out of the box, Ivanka Trump is very much the same way. We are a believer that you spend a little bit of money and you get rewarded for it. Signage is made unique. Where you are positioned on the floor is equally important, and because we are a dominant resource we are finding that we can command better retail space, as well as fixturing. It's an important initiative for us. The geographic location of our real estate, as well as our participation in doing the buildout. We are seeing major success where we participate on the buildout.

Great, that is encouraging. Last question for you, what are you seeing from input cost as you look into spring '14?

Okay.

At this point, Jim, we're still not anticipating any significant increases that we won't be able to deal with. We're not looking at any significant change in forecasted future gross margins.

Okay, thank you.

Thank you Jim.

Mike Richardson from Sidoti.

Good morning, and congratulations on a very strong first half of the year. I just wanted to follow-up, actually, on a previous question, Morris. I was hoping you could give us a little bit of color on how the new women's collection performed at Vilebrequin.

Well, quite honestly, it wasn't a lot of units. We distributed into about 25 doors, some of our own doors and a couple of franchises. Some of the hiccups were the European fit that was distributed into the United States was not the right fit on the bottoms. We're working on a new fit. They did sell, they didn't sell as well as I would have hoped. There was an outcry for women's product, and I would have expected a line-up at the door. There wasn't quite that line-up, yet it sold. So we're doing a good -- we had a meeting yesterday with pretty much all our stores that carried women's and got their input. And the input ranged from we needed a little bit more on the print side that was closer to the men's side of the business. The bottom fit, but there is clearly, clearly, clearly a strong demand for it. And we did not spend a nickel on advertising the women's side of the product. Our Vilebrequin brand is about father-and-son, and our new entry into the game was mother-and-daughter, yet we did not promote it at all. And we did, as I said, we did okay. We see the opportunity, we see our mistakes, and we're working toward building an important women's brand.

Okay, great. And then just with regard to Ivanka Trump, how should we be thinking about that as a longer-term opportunity?

You should be thinking of Ivanka as a power brand. We believe we can help Ivanka build this into a mega-brand. The retailer loves it. We believe the consumer is enthralled by Ivanka, who she is, how she acts, and how she dresses. And she will be front and center promoting this brand with us. We are sensitive to the price points that are necessary. We clearly identify with the fashion that is needed, And the early indicators, this will probably be one of our largest launches. We see, I would be surprised if this wasn't $100 million business in two years, with a couple of classifications. We're launching it with our strength, which is the dress side of the business and the suit separates side, and the icing on the cake will be a swim business that could be $15 million in the first year, as well. Those numbers will put a little pressure on the group that is running this, but I believe we are there.

Thank you very much.

(Operator Instructions)

David Glick from Buckingham Research.

Thank you, and Morris, congratulations to you and your team on a strong quarter. I have a follow-up question on the department store sector. Morris, clearly the second quarter you guys increased share in what was overall a challenging quarter for that channel. But to Neal's point, clearly there could be upside if department stores perform better in Q3. Most of these companies talked about some improvement in August relative to Q2. Now that we are through Labor Day, would you concur with that? Do you feel better about that channel? Obviously, you can win and gain share even in a tough quarter, but could be upside obviously here if you see better performance in the second half. Just wondering if you can give us some additional color on that?

We saw some good business last week in pretty much all our sectors. It's a little bit early to respond with a hard yes, business is off the charts, the weather is cooperating. I mean, there is an influence of politics, there's so many things that we are conscious of, but overall, the prognosis from where I sit and from where this Company sits is we are off to a great start. We believe we have a strong season ahead of us, and this Company generally does well in tough environments. We've got a history of performing well. Not losing less, but performing well in difficult environments. So we move -- our Company is quite larger than it was several years ago when we were able to move like a speedboat, but we are still very flexible. We accommodate the needs of the retailer, we accommodate the needs of our vendors, and that is because our staff works endlessly to gather information to influence change, if needed. I would say -- I'm not really answering your question as a macro question about retail, the department store sector. I am skewing it back to G-III. That's the piece that I can answer easier than the overall department store sector.

Thanks for that overview. Neal, I had a quick question. I'm not sure if I missed it, but did you guys give the increase in Calvin Klein dresses for the quarter? I'm sorry if I [ask] you to repeat the gross margin in the licensing segment on a this year/last year basis.

Sure. We did not give the specifics on the Calvin Klein dress. The licenses gross margin was 27.1% against 26.2% over last year.

Okay, great. Thank you very much. Good luck in the second half.

Thank you David.

We have no further questions at this time. I'll now turn the call back to management for any additional closing remarks.

Thank you very much. Thanks for your great questions, and have a great day.

Thank you, ladies and gentlemen. This concludes today's conference. Thank you for participating. You may now disconnect.