G-III Apparel Group Ltd (GIII) 2014 Q3 法說會逐字稿

Welcome to the third quarter FY14 G-III Apparel Group earnings conference call. My name is Dawn and I will be the 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 that this conference is being recorded. I will now turn the call over to Neal Nackman. 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 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 and non-GAAP net income per share, which are both non-GAAP financial measures. We have provided a reconciliation of GAAP net income per share to non-GAAP net income per share and of GAAP net income to adjusted EBITDA in our press release and on our website. I will now turn the call over to our Chairman, President and Chief Executive Officer, Morris Goldfarb.

Good morning and thank you for joining us to discuss our third quarter. 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.

We had a very strong third quarter for both sales and profits. We shipped extremely well this quarter, including outerwear, which is key to our third-quarter results. Our strength is evident across the board, our designs are resonating and our product lines have been well received. Our specialty retail operations are also performing at a high level. Wilson's comped up double digits against a double-digit increase last year. Our Vilebrequin stores also performed well. In addition, we've added another strategic and a synergistic growth opportunity with our acquisition of G.H. Bass & Company.

Here are a few of our major highlights for the first -- for the third quarter. Revenues in the quarter were up 23% to $669 million. We're pleased to have delivered net income per share of $2.85 in the quarter. This was beyond our expectation and is an increase of 20% compared to last year's third-quarter net income per share of $2.37. We're raising our guidance for the year to fully incorporate our outperformance in the third quarter, which now includes expected dilution from G.H. Bass.

We're really pleased with the progression of the season thus far. Our designs and our price points are on target. The weather has cooperated and our mix of brands is as strong as ever. Standout performers in outerwear include Calvin Klein, Guess, Tommy Hilfiger and Levi's. This has been a very good coat season thus far with consistent demand and good turning inventory that supports the continuation of that trend into the fourth quarter. I'll note that we've diversified the well and coats now represent just over half of our third-quarter volume. Our team sports business had a very strong quarter. We're quite pleased with this business and look for further growth next year. Our dress business was also strong for the quarter. As we've previously discussed, the combination of great brands, quality and price is a winning formula. Key standouts in this business were Calvin Klein, Eliza J, Guess and Vince Camuto. Our overall dress business was up 12% over last year.

Our sportswear business was excellent. Calvin Klein Sportswear was up almost 40% in the quarter and Calvin Klein Performance grew better than 55%. Calvin Klein Sportswear is now in 890 doors and Performance in 1,100 doors. Our Kensie contemporary sportswear business is also doing well and is now in 900 doors. We're pleased with the momentum these businesses are showing. Our Calvin Klein suits and suit separate business is also very strong, almost doubling compared to last year. We continue to hold a commanding lead amongst other department store resources in that category, and we believe we can sustain our momentum through the holiday season and build on that for spring. These products are now in over 1,200 doors.

Our Ivanka Trump apparel collection has begun shipping to department stores and we have product in over 200 doors now. With a new showroom and great personnel in place, we're quite excited about the Ivanka Trump brand as we head into next year. Our Calvin Klein handbag business is also nearly double during the quarter, with added door growth increasing exposure. Our door count is now over 1,000 doors. We're excited to continue to add fully fixtured handbag shops to support this business. We expect to have 30 by year end. These range between 300 and 500 square feet and are great for the brand and our handbag business. We're continuing to improve our Andrew Marc business. We've installed a new President and we have a much improved line and business in 2014. In addition, we're opening a brand-new showroom for Andrew Marc in our New York City offices this month.

Moving on to Vilebrequin, we have continued to make investments to position this brand for what we see as a solid global opportunity. On the product side we now have introduced women's swimwear, although it's still too early to evaluate. We've launched suntan lotions and sandals. We've seen good results from some of these new Vilebrequin men's swimwear designs that we introduced to broaden our demographic reach. We're also investing in our retail strategy. We have a new showcase store and showroom that opened in Paris last week. Our US retail business has been particularly strong and global comps are up in the mid-single digits. As we go forward, we will continue to make investments across the Business in staffing, marketing, stores and systems.

Our Wilson's retail business is clearly showing the benefits of the investments and the improvements we've made over the past two years. Comps for the quarter were up 10% against a comp gain of 19% last year, with momentum continuing through November and clearly through Black Friday. We're looking forward to the results from our full price stores test and we have 18 stores open in time for the holiday season. We continue to believe that we have a substantial growth opportunity with Wilson's full price retail.

At the beginning of November, we closed on the strategic acquisition of the G.H. Bass business from PVH. This is a well-known iconic footwear brand founded in 1876 that we believe will support growth. We also believe we can improve the productivity of the Bass stores as we were able to do with Wilson's. We are already working on the significant product line improvements. In addition, once the transitional services agreement we have with PVH concludes in July of 2014, we expect to create significant integration cost savings. As we've discussed before, the ability to complete this kind of integration project constitutes a core competency for us. While we expect some dilution from the operation of the Bass business in the fourth quarter, we're confident that this acquisition will be accretive next year and then become another solid means of growth for retail and wholesale. I will reserve some comments for closing, but I will now turn the call over to Neal to discuss our financial performance in some detail.

Thank you, Morris. Net sales for the third quarter ended October 31, 2013 increased 23% to $669 million from $543 million in the same period last year. Net sales of licensed products increased 25% to $505 million from $402 million primarily driven by increased sales in our Calvin Klein licensed product categories, most significantly in our women's suits, sportswear, performance and handbag lines. Net sales of non-licensed products increased to $125 million this quarter from $109.5 million in the comparable quarter of last year. This increase is primarily attributable to including a full quarter of net sales from our Vilebrequin business in the current year compared to less than two months in the prior year's quarter. The prior year's results included Vilebrequin from August 6, the date of acquisition, through September 30, 2012. We do consolidate Vilebrequin's operations based on a calendar quarter.

Net sales of our retail operations increased 24% to $55.4 million from $44.7 million in the prior year's third quarter as a result of a combination of an increased store count as well as a comparative store sales increase of 10.1%. Much as anticipated, our overall gross margin percentage was 34% for the third quarter compared to 35% for last year's third quarter.

The gross margin percentage in our licensed product segment was 30.9% this quarter compared to 32.9% for the prior year period. The gross margin percentage in our non-licensed product segment was 34.9% compared to 32.5% in the prior year, which is primarily attributable to our Vilebrequin business which operates at a higher gross margin percentage than our other non-licensed businesses. The gross margin percentage in our retail segment was 50.3% compared to 49.8% in the prior year's quarter.

Selling, general and administrative expenses increased to $125 million in the quarter ended October 31, 2013 from $106 million in the same period last year. This increase is primarily attributable to increased personnel costs, advertising expenses and facility costs, which are primarily related to our increased profitability, increased sales volume, store growth in our retail business and the addition of the Vilebrequin business for the full quarter this year.

Net income for the third quarter was $59.6 million, or $2.85 per diluted share, compared to $48.3 million, or $2.37 per diluted share, in the same period last year. On an adjusted basis, excluding expenses associated with the acquisition of G.H. Bass & Company and other potential transactions in the current quarter, and expenses related to the acquisition of Vilebrequin in the prior year's period, non-GAAP net income per diluted share increased 19% and was $2.88 for the quarter compared to $2.43 in the prior year's quarter.

Regarding our balance sheet, our balance sheet remains in very good shape. Accounts receivable increased 10% to $398 million from $363 million at the end of the prior year's quarter. Inventory increased 5% to $323 million. Our revolving bank debt less cash on hand balance decreased to $186 million from $225 million at the end of last year's third quarter. In addition, we also have approximately $20 million in long-term debt relating to promissory notes issued as part of the purchase price of Vilebrequin.

We have spent approximately $15 million on capital expenditures during the first nine months of our fiscal year and expect our capital expenditures to be between $20 million and $25 million for the full fiscal year, primarily for additional retail stores at Wilson's and Vilebrequin, fixturing costs at department stores and leasehold improvements in one of our New Jersey distribution centers.

Lastly, I would like to discuss our revised guidance for the full fiscal year ending January 31, 2014. We are now forecasting net sales of approximately $1.73 billion, up from our previous forecast of $1.61 billion, resulting in an increase of approximately 24% from $1.4 billion of net sales in FY13. We now expect net income per diluted share for FY14 in the range of $3.47 to $3.57 per diluted share compared to our previous guidance of a range of $3.30 to $3.40 and to net income per diluted share of $2.80 in FY13. We are now forecasting non-GAAP net income per diluted share for FY14 of between $3.50 and $3.60, up from our previous forecast range of between $3.30 and $3.40. Our revised guidance compares to non-GAAP net income of $2.92 per diluted share in FY13.

We are forecasting adjusted EBITDA for fiscal 2014 to grow between 22% and 25% to between $139 million and $142.5 million, compared to $114 million in FY13. The full-year guidance includes a projected net loss of $0.10 to $0.15 per share in the fourth quarter in connection with the operations of our newly acquired G.H. Bass & Company business. That concludes my comments and I will now turn the call back to Morris for closing remarks.

Thank you again for joining us. It is gratifying to continue to report on our ongoing success. As Neal just described, we're confident that we will hold on to the gains we've made above our plan for the third quarter and stay on track with a good fourth quarter.

As we think about next year and the future in more general terms, we believe a few things are important and we try and remember that at some level for all our complexity our story remains simple. First, we remain very much a growth company. We're working to drive organic revenue growth and to add smart acquisitions that are accretive in the long-term. Second, we're focused on the principle of diversification. This has enabled us to generate strong results, maximize our opportunity, reduce our risk and broaden our potential. Third, we are going to continue to focus on building a great team, a strong group of partners and a powerful results-oriented culture.

More than anything, this is what makes our Company special. We're excited to deliver returns to our shareholders and we look forward to continuing to do so for a long time to come. Operator, we're now prepared to take some questions.

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

(Operator Instructions)

Erinn Murphy, Piper Jaffray.

Great, thanks. Good morning, guys, and congratulations on just a great quarter. Morris, for just the first question -- if you think about -- just very, very solid start to the outerwear season.

What are you hearing from your key accounts? Are the retailers already reordering? I recognize you've had a very lean inventory position heading into this, but if the cooler weather continues, what position are you to react as we get further into Q4 and into Q1?

The reorders started coming quite a while ago. We've been shipping through reorders from early October on. Our ability to service sensational reorders at this point are just not there. We've depleted a good deal of our inventory, whether dated or current, and we're in great shape. The sell-throughs at retail have been excellent.

The inventory position is great, and the conversations about booking forward product has started already. We're beginning to plan an aggressive outerwear season for next year. Retailers are short of inventory at the end of this year, and are planning a much larger business for next year. The outerwear season could not have been any better for us.

That's great to hear. And then just, Neal, just a quick question on the gross margin. Recognizing you guided it fairly conservatively, and it was down about 100 bps, can you just speak a little bit more about what some of the drivers were? And how should we think about that into the fourth quarter? It seemed like most of that deceleration was from the licensed segment?

Yes, Erinn, that's exactly right. And we had anticipated that. We did -- as Morris indicated, we cleaned up inventories, which probably cost us a little bit as far as the -- slightly more than what we had anticipated. But most of our gross margins across the Company are holding up very well.

I do expect that the non-licensed -- if you looked on a year-to-date basis, you'd see we're about 30 basis points down. And I think that the year will play out fair for the non-licensed segment of our Business.

In terms of fourth-quarter gross margins, we are going to be changing the mix of our Business. We're adding a GH Bass. So, in total, we'll see gross margin lift.

And I think our non-licensed and licensed businesses should be either flat -- maybe give up a hair depending upon how we continue to move inventories. But our gross margins in total are where we expected them and doing well.

That's helpful. And then just the last question for me -- back to Morris. Could you speak a little bit more about the Ivanka Trump line? You mentioned it's in about 200 doors so far. Is that mostly Macy's? And then, how should we think about the pathway over the next several years for door distribution gains?

And then last, from a category perspective, can you just remind us what categories you do with her currently? And then, are there opportunities to expand deeper into other categories over time? Thank you.

Thank you, Erinn. The Ivanka Trump launch is working very, very well. Product is currently in Macy's in approximately 100 doors. Bon-Ton has product in about two dozen doors. Nordstrom's is in about 20 doors. And The Bay, including Lord and Taylor's, in about 80 doors -- no, closer to 95 doors with Lord & Taylor.

We're very pleased with it. The product classifications that we have currently are pretty much all of women's apparel, short of coats. We launched suit separates, and a little bit of sportswear and dresses. We have the ability of doing intimates. We've produced a collection of swimwear that is not yet in the stores.

But we're very, very excited about this opportunity and this partnership. We will have Ivanka coats for Fall of 2014. That negotiation has taken place, and we will have some product in the stores for Fall of 2014.

We've just built an amazing new showroom for the Ivanka collection. There's a good deal of spirit, both internally and our customer base. And more importantly, the retail consumer has adopted it immediately. So, this will be a power brand for G-III.

That's great. Thank you, guys, and best of luck.

Thank you, Erinn.

Edward Yruma, KeyBanc.

Hi, thanks very much, and congratulations on a great quarter.

Morris, just really quickly, historically when you guys have had a really strong outerwear season that was preceded by a weaker outerwear season, what kind of orders do you see in that following year? I know you indicated that the discussions were very, very positive thus far, but just historically, what kind of step up do you see after a strong outerwear season?

The step up that we basically see is an environment that's more adoptive to bringing product in earlier, and planning their business to satisfy the misses and classifications that performed exceptionally well. The major call out was a shortage of down coats. I would tell you our down business that we've provided for on, I'd say, about a month ago, we've made some major commitments to satisfy the potential needs of our customers.

It is basically a planning business. We're planning to satisfy the misses in classifications. So, that's as best as I can respond to your question, Ed.

Got it. And as we think about gross margin, I know you've obviously provided guidance for the year, but what's the potential upside scenario, given that, if sell-throughs remain strong, presumably you're going to have much lower markdown support offered this year versus last year?

Ed, I don't know if I can quantify it. I think that it does run to one of the variables that we face as far as projecting out the fourth quarter. To the extent that we retail strongly, our markdown pressure becomes less, thus enhancing the gross margins. I think that it's something that we face each quarter.

Got it. And one last follow-up: On the Wilsons business, are you impacted negatively by having tight inventory? Do you have enough inventory there to supply demand through the remainder of the season? Thanks again.

Wilsons is historically operated autonomously. Management submits a budget, and they work toward that budget. Wilsons was very aggressive on the outerwear business. Their inventory levels are in much better shape than the average retailer.

They have the ability of continuing to blow out the -- call it blow out the fourth quarter. Their inventory levels are consistent with their stellar performance. So, there's a good deal of opportunity for Wilsons.

Thanks so much.

Thank you.

John Kernan, Cowen & Company.

Good morning, guys, and congrats on another strong quarter.

Just wondered if you could give us some clues in terms of what the Bass contribution will be, in terms of total top line? And where does the profitability potential lie for long term? And what are you guys going to be able to do differently than PVH in terms of improving the profitability of this business?

Well, what we immediately did was we adopted what we believe in our portfolio can be a trophy. I don't want to speak to PVH 's strategy, but they have some very important brands that maybe had greater leadership in their portfolio.

We're integrating Bass with our Wilsons operation. The operating entity will be based in Minneapolis.

Wilsons at one point operated 600 stores. Their physical plant can handle the integration. And the talent pool that's currently running Wilsons for us was basically there when Wilsons was a 600-store operation. So, we believe that the synergistic value is incredible in the integration of Wilsons and GH Bass.

The opportunity to better serve the apparel segment on Bass in 170 stores is huge for us. We've taken charge of sourcing and developing apparel, which is about 35% or 37% of the needs of the store. We took charge of that almost immediately, and you'll begin to see different product, different markdown cadence than PVH had adopted in running this Business.

And we've hired some dedicated talent to the store operations side, which was integrated into the PVH segment of retail. Our philosophy is that the store ops should be definitive to the brand, so we've allocated significant personnel into the Bass improvement.

Footwear needs improvement as well, and we've begun to travel to different areas of the world to educate ourselves on the needs and the possibility of developing footwear internally. Currently there's an existing license for the footwear.

PVH is signing a license for the men's apparel segment of the Business, and there's licensing -- there's wholesale licensing opportunity that's not been taken advantage of by PVH that we plan on moving forward with. So, this is a great brand for us. We see a good future with it.

Just in terms of the numbers, John, we expect top line is -- historically been running around $250 million. We'll be there and make improvements to that. It's probably about $250 a square foot. And we think that no reason why it shouldn't operate at high-single-digits and low-double-digit operating margins ultimately.

Okay, thanks. That's really helpful.

And then just back to last year's acquisition, Vilebrequin -- any update on the profitability there? I know when you bought the business, it was around a 15% operating margin, but you were making a lot of investments in retail and category expansion. When do you think the profitability for Vilebrequin will start to reach its potential?

The investment is still significant in Vilebrequin. We're aggressive in opening locations. We've formed an alliance with a franchisee in Korea this week. There'll be some stores opening in Korea, the first one in Seoul, second one in Jeju Island, and a duty-free location by the end of 2014.

We're spending time in developing the China market. And in the struggles that the European market is encountering, we still posted mid-single-digit increases.

So, the full potential of this brand probably won't benefit us, I would say, for another 18 months. We've got licensing that we're negotiating with providers for. There's an appetite to license this brand to classification (technical difficulty) really merits some consideration, and we're going through that internally right now.

So, we, again, see this as a growth potential for the future. This, again, would be one of our trophy pieces.

Okay, that's helpful.

And if I could just sneak one more question in. The performance in activewear has been a really healthy category for people -- for brands doing it correctly. How large is the CK performance business right now, and how big do you think this Business can become?

Well, we've reached, at wholesale, just over $100 million, and we've pretty much doubled the size of this Business in the last year. We're doing some buildouts that will continue to grow this area of business.

We've opened three retail locations in the United States, and approximately 20 in China. China is still a work in progress. We're getting great recognition for our development there with a joint venture partner, but premature to talk about profitability. It's still an investment in China, and we're very proud of it. We're negotiating with several other, call it, partnership relationships in different parts of the world as well.

So, we believe that the performance side of this Business will continue to grow. And we believe it's got the potential of being a $250-million business -- retail and wholesale blended.

Okay, great. Thanks, guys.

Thank you.

(Operator Instructions)

David Glick, Buckingham Research.

Yes, thank you. Good morning. Add another congratulations on the quarter to the team.

Neal, I just was wondering -- in Q4, the $0.10 to $0.15 loss from Bass, I'm just trying to get some sense for how much of that is being driven by the transition services agreement, which you said expires next July? So, I'm just trying to get a sense of that impact for the next three quarters, and how much is really the performance, which obviously you have a strategy to turn around? I was wondering if you could give some color on that?

David, I don't know if we're going to give you the specifics on it. I think what you've capsulated is correct. We expect to have higher transition services expenses for at least the next two quarters. It is going to impact us, we think, certainly by the second half of next year -- we come out from under that.

As far as the operations of the Business, as Morris said, we're making lots of changes, and we've got some things to improve there. So, I don't think it's fair to split that dime just yet, but we should see improvement in terms of SG&A expense at the second half of next year.

Okay. Thank you.

And then to follow up: The $0.03 charge in Q3 -- I think I heard you say it was from the Bass transaction and potential acquisitions. Just want to make sure I understood that correctly. Did that all show up in the SG&A line?

Yes, it does.

Okay. And then, Morris, a final question: When you listen to your results and the sell-throughs, you would think that the retail trends in department stores were very, very strong. I just wonder if you could give us some perspective, because obviously the headlines are one thing, and your performance is another. If you could maybe give us some perspective on what you're seeing last couple months versus what we're seeing earlier in the year?

I listen to the same news that you do, David, and the news is not the same as ours internally. We have a very, very huge market share in the coat business. I guess we benefited with appropriate weather. The climate was right for what we produce.

Our pricing was right. Our brands were appropriate. The hard work that we did on design worked out for us. We seem to have been operating on all cylinders in the coat area.

All our brands have performed, and they all serve different demographics. We've hired a whole team of planners in our Company that has made our Business a little bit more scientific than it has been historically. That's worked for us.

We've learned from operating sportswear businesses now how to apply the planning process in even a seasonal business such as coats. So, it's worked for us, partly because we're in the right classifications, partly because we're good at what we do. We're well financed. We've built appropriate surroundings for our product. We've spent a good deal of money in showcasing the product that we're proud of, and we're doing the same thing in every segment of our Business.

Dresses -- if you look at our Calvin Klein dress business -- I was on the phone with our largest account yesterday, and she said it's just a phenomenon. Just -- the more she buys, the more she needs. The product just sells incredibly well. And it's not dresses across the board; it's us. We're positioned right at retail. We designed appropriately.

We utilize brands as an opportunity to showcase our product. But the Business is not driven just by the brand. We marry amazing product to the brand, and that concept really works.

We've created shop in shops that have really shown their potential, and there's a good deal that we've learned over the last three years that we begin to apply to our other businesses. So, that might be an advantage to the rest.

I'm a little long-winded, but I guess you can tell we're excited about how we've done and how we've performed. And I guess the ending answer might be: We're better than the field.

Okay.

Thank you for the question.

Sure. And any color on --?

And letting me answer it.

(laughter) That was a good filibuster.

On Wilsons full-price stores -- I've seen a few of them in malls. What's your early take?

It's kind of early. The stores that have been opened a year are doing very well. The new stores that we've opened still need a little time before I can give you a clear call out that it's an absolute do.

As I said, we have about 6 that were opened a year ago. Those are doing well. Then we have 12 that we've opened recently. It's too early to judge.

Okay, great. Thank you, good luck this holiday.

Thank you, David. Thanks for your questions.

Rick Patel, Stephens.

Good morning, and congratulations on your solid quarter.

Can you talk about the outlook for the handbag business? You've obviously made a lot of progress there with Calvin Klein over the last year. How should we think about the incremental runway left for this Business, and perhaps your opportunity for other brands?

The runway for the handbag business is -- I think I stated two years ago that we have the ability of reaching $200 million in volume on the handbag business. I still stand by that, and that may be a low number.

We're doing very, very well. We're building market share. And again, consistent with my comment to David a couple of minutes ago, we've learned about the significance of store buildouts.

We've learned a good deal about positioning within retail stores. And with those learnings, we negotiate differently for the space at retail. We've gotten much better on how we build out locations. And we see immediate benefit when we execute well on decisions of where we belong in the store, how we price in the store, and the size of the space allocated to us.

So, for the Calvin piece, we're well on our way. As far as adding elements to that business or building on that platform, we've had a soft launch on Kensie, which is doing just okay. Andrew Marc is -- got a little bit of product out there. But we haven't even scratched the surface to the potential of the handbag and accessory business yet. Calvin is really the only important segment of business that we operate.

Great. And then, can you talk about the outlook for sourcing costs from both a material and labor perspective? How should we think about your ability to pass through any inflationary pressure that may come up, given your pricing strategies?

Generally, the commodities that we're in are not unique to us. We are the dominant provider of outerwear. We buy more outerwear than probably anybody in the country. So, we believe we negotiate at least as good as the next contender.

So, if there's a price increase, it really is common to everybody producing the commodity. We've been very competitive. We buy timely. We pay our bills on time, and we're the buyer of choice in most of the factories that we deal with.

So, we buy competitively. We've got warehouses that are positioned throughout the country that can help the factory needs of producing early. We received goods, and, as you've seen before, our inventory level sometimes peak at times of the year where it seems inappropriate, but they are appropriate because of strategies in buying right, buying on time.

So, we are very competitive. We don't see any pressure going forward that would impact a major price change at retail. And even in times where prices were increased significantly, there was not a major impact on our margins.

And any initial reads on the Spring season and how that's shaping up?

Spring season is good. Clearly we're not in a major coat cycle for Spring, but our dress business is good. Our sportswear business -- our suit separates. We have a new classification of swimwear that we're shipping, and we're feeling good about our Spring business.

Thank you, and good luck for holiday.

Thank you very much, Rick. Thanks for your questions.

Mike Richardson, Sidoti & Company.

Good morning, thanks for taking my call. Actually most of my questions have been answered, so I just have really one quick one. Just wondering how GH Bass gross margin compares to Wilsons'?

I guess the short answer -- it doesn't. We have a lot of work to do. The margins are short, and this is a bad time to ask because we just acquired the business November 4. We transitioned -- the Business transitioned over to G-III, and a good deal of what we're looking at is liquidation.

So, to compare margins in a company that's in liquidation versus one that is in aggressive profit mode, I'd say the timing is wrong now. But I'd be better suited to answer your question after the second quarter of next year.

For the long term, I think what we have in Bass is similar retail margins, and we have a wholesale opportunity that Wilsons does not. And we also have a licensing revenue stream that's likely to occur with Bass. So, this, as I said earlier, will be a very, very nice acquisition for G-III.

Okay. I think Neal mentioned longer term he thought that it could have certainly low-double-digit operating margin? Did I hear that correctly?

Yes.

Okay. Thanks, guys. Best of luck for holiday.

Thank you, Mike.

Thank you. At this time, we have no further questions. I will now turn the call back to Morris Goldfarb for closing remarks.

I thank you all for listening. I encourage you to stay with us. We have many great things to come.

We want to thank all our valued partners. Our licensed stores have been amazing in helping us develop our Business, and develop the profits that we're showing today. And we -- primarily, I'd like to thank PVH for their support of G-III continuously.

So, thank you very much for listening, and tune in. We've got a lot more coming. Have a good day.

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