2017 Annual Report & Form 10-K

2017 Annual Report & Form 10-K TEAM SPORTS READY TO WEAR & DRESSES RETAIL Calvin Klein DKNY DKNY G.H. Bass Donna Karan Wilsons Leather Tommy Hilfiger Vilebrequin Karl Lagerfeld Paris Karl Lagerfeld Paris Eliza J Calvin Klein Performance Guess? Ivanka Trump ACCESSORIES Jessica Howard Kensie Calvin Klein Vince Camuto DKNY Donna Karan Karl Lagerfeld Paris SWIMWEAR Marc New York Vilebrequin Vilebrequin Calvin Klein FOOTWEAR HANDBAGS & LUGGAGE G.H. Bass DKNY Calvin Klein Donna Karan DKNY Karl Lagerfeld Paris Karl Lagerfeld Paris G.H. Bass CASUAL, ACTIVE & PERFORMANCE Tommy Hilfiger (Luggage) Calvin Klein Performance OUTERWEAR DKNY Sport Donna Karan Calvin Klein Marc New York DKNY Tommy Hilfiger Donna Karan Tommy Hilfiger TEAM SPORTS Karl Lagerfeld Paris Andrew Marc Major League Baseball Cole Haan Major League Soccer Dockers National Basketball Association G.H. Bass National Football League Guess? National Hockey League Ivanka Trump Officially Licensed Collegiate Products Kenneth Cole GIII for Her Levi’s Starter Marc New York DEAR SHAREHOLDERS, In fiscal 2018, we continued our efforts to drive Tommy Hilfiger products began to be realized. The growth led by our five global power brands: DKNY, combination of our execution and great advertising Donna Karan, Calvin Klein, Tommy Hilfiger and Karl and marketing by PVH has made the Tommy Hilfiger Lagerfeld Paris. Our acquisition of Donna Karan brand the strongest it has been in many years in International in December 2016 fits directly into our the United States. We also nearly doubled our net strategy to increase our ownership of brands, expand sales of Karl Lagerfeld Paris products, another iconic our business and diversify. The relaunch of the DKNY designer brand, with accessible, but still edgy, fashion and Donna Karan brands into the market was our to which consumers really responded well. biggest accomplishment this past year. We leveraged our keen understanding of the marketplace and Our process of relaunching the DKNY and Donna Karan created product collections that offered a newness brands is an instructive example of what our talents, and differentiation that the market was seeking. reach and diversification enable us to do. DKNY As I will discuss in more detail below, Calvin Klein products are now available in over 400 of Macy’s remained our largest brand, our expanded Tommy best doors. We have also expanded into Canada Hilfiger licensed business continued its sales growth with Hudson Bay and Mexico with Liverpool. Our and Karl Lagerfeld Paris demonstrated significant ready-to-wear launch of DKNY sportswear at Macy’s potential. performed well this past Fall. Our shoe and handbag collection has gained momentum and is poised for We closed our fiscal year with record-breaking fourth accelerated growth. We also just launched DKNY quarter sales and net income that was higher than dresses and the Spring season read on that business last year and ahead of our plan. Our performance and is promising. The Donna Karan brand is positioned as the momentum we are carrying into the year ahead an aspirational luxury brand that is targeted to fine reflects continued growth across our wide portfolio department stores. We are excited about our initial of brands. A few highlights of our performance for launches of Donna Karan ready-to-wear, handbags the full fiscal 2018 year: and shoes. We are focused on a future where both DKNY and Donna Karan take their place among our •Our net sales increased by 18%, which brought largest and most profitable businesses. net sales to $2.81 billion from $2.39 billion in the prior year. Our customers continue to face challenges in this new paradigm for retail, as do we. While we are •We increased our operating income by 65% to seeing some baseline improvement in the retail $154.0 million from $93.5 million in the prior year. environment, retail traffic is still soft, the pressure on •Net income increased to $62.1 million, or $1.25 business models across the specialty and department per diluted share, from $51.9 million, or $1.10 per store world still exists, and we will have to work with diluted share, in the prior year. extra effort and intelligence to achieve our potential. That includes addressing our own points of exposure. •Net income includes the effect of (i) professional In fiscal 2018, we made progress with respect to fees and transitional expenses in connection with reducing losses in our Wilsons and Bass operations. the acquisition of Donna Karan International of While comparable store sales have shown some $2.1 million this year and $11.7 million last year, signs of improvement, we will continue our efforts (ii) non-cash imputed interest expense of $5.7 to mitigate these unacceptable losses. We intend to million this year and $1.0 million last year, (iii) continue our program of door count reduction and to asset impairment charges primarily related to increase the efficiency and productivity of our retail certain of our retail stores of $7.9 million this operations. We are planning to close approximately year and $10.5 million last year and (iv) income 60 stores this coming year. Our goals for our retail tax charges of $7.5 million this year related to the business are to decrease and ultimately eliminate enactment of the Tax Cuts and Jobs Act. These losses, reduce and mitigate risk and improve the expenses and charges equaled an aggregate of overall performance of the business. $0.35 per diluted share this year and $0.32 per diluted share last year. The success of our strategy has allowed us to become more diversified and less seasonal with each passing Our Calvin Klein business exceeded $1 billion in year. Our roots are in outerwear and outerwear is still annual net sales for the full year, driven by strong a big category for us. This year’s winter was conducive contributions from almost every category. We more to a good outerwear season and we experienced solid than doubled our annual net sales of Tommy Hilfiger performance across the board. products this past year to approximately $275 million as the benefit of our expanded license agreement for Vilebrequin, our status swimwear brand, had a much DILUTED NET INCOME PER SHARE NET SALES ($000’S) (Years Ended January 31) (Years Ended January 31) $3.00 $2,800,000 $2.48(2) $2.46(3) $2.50 $2,400,000 $2.00 $1.85(1) $2,000,000 $1.50 $1.25(5) $1,600,000 $1.10(4) $1.00 $1,200,000 $0.50 $800,000 14 15 16 17 18 14 15 16 17 18 (1) Includes expenses associated with the G.H. Bass acquisition and other potential transactions in the amount of $1.0 million, or $0.01 per share. (2) Includes other income in the amount of $11.5 million, or $0.22 per share. (3) Includes other income in the amount of $1.1 million, or $0.02 per share. (4) Includes professional fees and transitional expenses in connection with the acquisition of Donna Karan International (“DKI”) of $11.7 million, non-cash asset impairment charges related to certain of our retail stores of $10.5 million and non-cash imputed interest expense related to the note issued to the seller as part of the consideration for the acquisition of DKI of $1.0 million. These amounts equaled an aggregate of $0.32 per diluted share. (5) Includes professional fees and transitional expenses in connection with the acquisition of DKI of $2.1 million, non-cash asset impairment charges primarily related to certain of our retail stores of $7.9 million, non-cash imputed interest expense related to the note issued to the seller as part of the consideration for the acquisition of DKI of $5.7 million, and income tax charges of $7.5 million related to the enactment of the Tax Cuts and Jobs Act. These amounts equaled an aggregate of $0.35 per diluted share. + Share and per share data have been retroactively adjusted to reﬂect our two-for-one stock split efected on May 1, 2015. improved year with full year comps up low double- opportunity for us. We intend to emerge a winner in digits outside of the U.S. and mid-single digits in the this period of rapid change, and to assist our customers U.S. We continue to push for expanded wholesale in becoming winners as well. We have the kind of distribution in the best specialty stores in the world, culture, the kind of talented people on our team and as well as a more vibrant company-owned ecommerce exactly the kind of track record that demonstrate we business. We are particularly focused on developing can prosper regardless of the state of our industry. the business in China and have signed a key partner On behalf of the entire G-III organization, I would like for distribution in some of the best markets in China. to thank all of our shareholders for their continued interest and support. We are continuing to make changes to our business to address the additional challenges and opportunities Sincerely, created by the evolving role of the online marketplace in the retail sector and expect to increase the sale of our products in an omni-channel environment. We benefit from the growth our partners are experiencing from their well-developed web sites and have also increased sales to pure play online retail partners. We are further developing the web sites of our own proprietary brands as well. While not a significant contributor to our business at present, we plan on increasing sales from this channel. This past year was about demonstrating, despite the pressures on a disrupted retail industry, a superior ability to grow.

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