What changed in this filing

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Item 7. Management’s Discussion and Analysis

2022-03-28 compared with 2021-03-26 · 200 added, 231 removed, 257 unchanged (63% of the section changed)

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For example, our fiscal year ended January 31, 2022 is referred to as “fiscal 2022.”

We consolidate the accounts of all of our wholly-owned subsidiaries.

Fabco Holding B.V.

(“Fabco”) is a Dutch joint venture limited liability company that was 49% owned by us through November 30, 2020.

Effective December 1, 2020, we increased our ownership interest in Fabco to 75%.

As a result, Fabco is treated as a consolidated majority-owned subsidiary.

KL North America B.V.

(“KLNA”) is a Dutch joint venture limited liability that is 49% owned by us.

KLNA operates the Karl Lagerfeld business in the United States, Mexico and Canada and Fabco operates the DKNY/Donna Karan business in China through its subsidiary.

Karl Lagerfeld Holding B.V.

(“KLH”) is a Dutch limited liability company that is 19% owned by us.

KLH holds the worldwide rights to the Karl Lagerfeld brand.

We account for these two investments using the equity method of accounting.

Our Vilebrequin subsidiary, KLNA, KLH and Fabco report results on a calendar year basis rather than on the January 31 fiscal year basis used by G-III.

Accordingly, the results of Vilebrequin, KLNA, KLH and Fabco are and will be included in our financial statements for the year ended or ending closest to G-III’s fiscal year.

For example, for G-III’s fiscal year ended January 31, 2022, the results of Vilebrequin, KLNA, KLH and Fabco are included for the year ended December 31, 2021.

The Company’s retail stores report results on a 52/53-week fiscal year for the retail operations segment.

For fiscal 2021 and 2022, the retail operations segment reported based on a 52-week fiscal year.

The following presentation of management’s discussion and analysis of our consolidated financial condition and results of operations should be read in conjunction with our financial statements, the accompanying notes and other financial information appearing elsewhere in this Report.

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Our own proprietary brands include DKNY, Donna Karan, Vilebrequin, G.H.

Bass, Eliza J, Jessica Howard, Andrew Marc, Marc New York and Wilsons Leather.

Bass, Eliza J, Jessica Howard, Andrew Marc, Marc New York, Wilsons Leather and Sonia Rykiel.

We sell products under an extensive portfolio of well-known licensed brands, including Calvin Klein, Tommy Hilfiger, Karl Lagerfeld Paris, Levi’s, Guess?, Kenneth Cole, Cole Haan, Vince Camuto and Dockers.

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We also source and sell products to major retailers under their private retail labels.

Our products are sold through a cross section of leading retailers such as Macy’s, Dillard’s, Hudson’s Bay Company, including their Saks Fifth Avenue division, Nordstrom, Kohl’s, TJX Companies, Ross Stores and Burlington.

We also sell our products over the web through retail partners such as macys.com, nordstrom.com and dillards.com, each of which has a substantial online business.

In addition, we sell to pure play online retail partners such as Amazon and Fanatics.

We also distribute apparel and other products directly to consumers through our own DKNY and Karl Lagerfeld retail stores, as well as through our digital channels for the DKNY, Donna Karan, Karl Lagerfeld Paris, G.H.

Bass, Andrew Marc and Wilsons Leather businesses.

In June 2020, we commenced the restructuring of our retail operations, including the closure of the Wilsons Leather, G.H.

Our products are sold through a cross section of leading retailers such as Macy’s, including its Bloomingdale’s division, Dillard’s, Hudson’s Bay Company, including their Saks Fifth Avenue division, Nordstrom, Kohl’s, TJX Companies, Ross Stores and Burlington.

We also sell our products using digital channels through retail partners such as macys.com,

nordstrom.com and dillards.com, each of which has a substantial online business.

In addition, we sell to leading online retail partners such as Amazon, Fanatics, Zalando and Zappos.

We also distribute apparel and other products directly to consumers through our own DKNY and Karl Lagerfeld Paris retail stores, as well as through our digital channels for the DKNY, Donna Karan, Karl Lagerfeld Paris, G.H.

Bass, Andrew Marc, Wilsons Leather and Sonia Rykiel businesses.

In fiscal 2021, we restructured our retail operations and completed the closing of our Wilsons Leather, G.H.

Bass and Calvin Klein Performance stores.

We completed the closing of our Wilsons Leather, G.H.

Bass and Calvin Klein Performance stores in fiscal 2021.

We believe this restructuring will enable

us to reduce our losses and re-position our retail operations with a goal of becoming a profitable contributor to our business.

See “―Recent Developments ” for further information about our retail restructuring.

This restructuring enabled us to reduce our losses in our retail operations segment and re-position our retail operations with a goal of becoming a profitable contributor to our business.

We operate in fashion markets that are intensely competitive.

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We have increased the portfolio of brands we offer through licenses, acquisitions and joint ventures.

We focus our efforts on the sale of products under our five power brands, two of which we own and three of which we license.

Consumer recognition of our five power brands, two of which we own and three of which we license, is worldwide and very strong.

It is our objective to continue to expand our product offerings and we are continually discussing new licensing opportunities with brand owners and seeking to acquire established brands.

Recent Developments

Impact of COVID-19 Pandemic

The COVID-19 pandemic has affected businesses around the world for over a year.

A national emergency was declared in the United States as a result of the COVID-19 pandemic.

Federal, state and local governments and private entities mandated various restrictions, including closing of retail stores and restaurants, travel restrictions, restrictions on public gatherings, stay at home orders and advisories, and quarantining of people who may have been exposed to the virus.

The response to the COVID-19 pandemic has negatively affected the global economy, disrupted global supply chains, and created significant disruption of the financial and retail markets, including a disruption in consumer demand for apparel and accessories.

The COVID-19 pandemic has had multiple impacts on our business, including, but not limited to, the temporary closure of our and our customers’ stores, disruption to both international and domestic tourism and disruption to consumer shopping habits.

The COVID-19 pandemic impacted our business operations and results of operations throughout fiscal 2021 resulting in lower sales and profitability.

COVID-19 could continue to have an adverse impact on our results of operations and liquidity, the operations of our suppliers, vendors and customers, and on our employees as a result of quarantines, facility closures, and travel and logistics restrictions.

Even as businesses have reopened as governmental restrictions were loosened with respect to stay at home orders and various restrictions with respect to the operation of retail businesses, the ultimate economic impact of the COVID-19 pandemic is highly uncertain.

We expect that our business operations and results of operations, including our net sales, earnings and cash flows, will continue to be adversely impacted in fiscal 2022 .

During this crisis we have been focused on protecting the health and safety of our employees, our customers and our communities.

We have taken precautionary measures intended to help minimize the risk of COVID-19 to our employees, including requiring our employees to work remotely during the first half of fiscal 2021.

During the second half of fiscal 2021, our personnel have started to work in our offices on a part-time, capacity restricted basis.

Having our employees work remotely may disrupt our operations or increase the risk of a cybersecurity incident.

As a result, we have taken steps to mitigate the increased cybersecurity risks associated with remote working and reliance on videoconferencing platforms.

Most of our retail partners, including our largest customer, Macy’s, closed their stores in North America during the initial reaction to the pandemic in the Spring of 2020.

Some of our customers, such as Costco and Sam’s Club, remained open for business.

Our retail partners have since reopened with certain limitations and restrictions.

Our retail partners that closed stores asked to cancel orders and extend their payment terms with us.

We continue to negotiate resolutions with our retail partners that are equitable and fiscally responsible for each of us.

Certain of our retail partners have publicized actual or potential bankruptcy filings or other liquidity issues that could impact our anticipated income and cash flows, as well as require us to record additional accounts receivable reserves.

In addition, we could be required to record increased excess

and obsolete inventory reserves due to decreased sales or noncash impairment charges related to our intangible assets or goodwill due to reduced market values and cash flows.

Further, a more promotional retail environment may cause us to lower our prices or sell existing inventory at larger discounts than in the past, negatively impacting our margins.

There is significant uncertainty around the breadth and duration of business disruptions related to the COVID-19 pandemic, as well as its impact on the U.S.

and global economies and on consumer willingness to visit stores as they re-open.

Consumer businesses have re-opened in most areas of the United States under governmental social distancing and other restrictions that are expected to limit the scope of operations for an unknown period of time compared to pre-COVID-19 business operations.

These restrictions are expected to adversely impact sales even as retail stores are open again.

Impact of COVID-19

The COVID-19 pandemic has affected businesses around the world since the first quarter of fiscal 2021.

Federal, state and local governments in the United States and around the world, as well as private entities, mandated various restrictions, including closing of retail stores and restaurants, travel restrictions, restrictions on public gatherings, stay at home orders and advisories, and quarantining of people who may have been exposed to the virus.

The response to the COVID-19 pandemic negatively affected the global economy, disrupted global supply chains and created significant disruption of the financial and retail markets, including a disruption in consumer demand for apparel and accessories.

The COVID-19 pandemic continues to impact the global economy.

During fiscal 2022, consumer demand for apparel and accessories, as well as other consumer discretionary spending, increased as compared to the comparable quarters in fiscal 2021.

While businesses reopened as stay at home orders were lifted and various restrictions on the operation of retail businesses were loosened, the continued economic impact of the COVID-19 pandemic remains uncertain.

The spread of additional variants could result in the reimposition of restrictions on commercial and social activities that would adversely impact our business.

We have experienced significant improvements in our results of operations for fiscal 2022 as compared to fiscal 2021.

However, the COVID-19 pandemic could continue to adversely impact our business operations and results of operations.

The continued impact of the COVID-19 pandemic on our business operations remains uncertain and cannot be predicted.

The extent to which COVID-19 impacts our results will depend on continued developments in the public and private responses to the pandemic and the success and efficacy of efforts in the United States and around the world to vaccinate people against COVID-19.

The continued impact of COVID-19 remains highly uncertain and cannot be predicted.

New information may emerge concerning the severity of the outbreak and the spread of variants of the COVID-19 virus in locations that are important to our business.

Actions taken to contain COVID-19 or treat its impact may change or become more restrictive as additional waves of infections occur, or continue to occur, as a result of the loosening of governmental restrictions.

In response to these challenges, we have taken measures to preserve liquidity and contain costs that include, but are not limited to, employee furloughs, job eliminations, temporary salary reductions, reduced advertising and other promotional spending and deferral of capital projects.

We also reviewed our inventory needs and worked with suppliers to curtail, or cancel, production of product which we believed would not be able to be sold in season.

We have worked with our suppliers, landlords and licensors to renegotiate related agreements and extend payment terms in order to preserve capital.

During the second half of fiscal 2021, certain furloughed employees were reinstated and salaries that had been reduced were increased to their pre-pandemic levels.

We also received royalty relief from certain licensors.

Refinancing of our Term Loan and Revolving Credit Facility

On August 7, 2020, we completed a private debt offering of $400 million aggregate principal amount of our 7.875% Senior Secured Notes due 2025 (the “Notes).

The net proceeds of the Notes were used (i) to repay our prior term loan facility due 2022, (ii) to pay related fees and expenses and (iii) for general corporate purposes.

The Notes bear interest at a rate of 7.875% per year payable semi-annually in arrears on February 15 and August 15 of each year, commencing on February 15, 2021.

Also on August 7, 2020, we entered into the second amended and restated credit agreement (the “ABL Credit Agreement”) The ABL Credit Agreement is a five year senior secured credit facility and provides for borrowings in the aggregate principal amount of up to $650 million.

The ABL Credit Agreement refinances, amends and restates our prior Amended Credit Agreement which provided for borrowings of up to $650 million and was due to expire in December 2021.

For a description of the Notes, the ABL Credit Agreement and our other debt instruments, see “Liquidity and Capital Resources” under this Item 7 of this Annual Report on Form 10-K.

Restructuring of Our Retail Operations Segment

In June 2020, we commenced a restructuring of our retail operations segment, including the closing of the Wilsons Leather, G.H.

Bass and Calvin Klein Performance stores.

All store closings included in the restructuring have been completed as of the end of fiscal 2021.

After completion of the restructuring, our retail operations segment consists of our DKNY and Karl Lagerfeld Paris stores, as well as the digital channels for DKNY, Donna Karan, Karl Lagerfeld Paris, G.H.

Bass, Andrew Marc and Wilsons Leather.

Part of our restructuring plan includes making significant changes to our DKNY and Karl Lagerfeld retail operations.

In addition to the stores operated as part of our retail operations segment, as of January 31, 2021, Vilebrequin products were distributed through 98 company-operated stores and owned digital channels in Europe and the United States, as well as through 71 franchised locations.

In connection with the restructuring of our retail operations, we incurred an aggregate charge of approximately $100 million related to store operating costs, landlord termination fees, severance costs, store liquidation and closing costs, write-offs related to right-of-use assets and legal and professional fees.

The cash portion of this charge was approximately $65 million.

Our ongoing plan focuses on the operations and growth of our DKNY and Karl Lagerfeld Paris stores, as well as operating our digital business.

Our plan is based on the assumed continued strength of the DKNY and Karl Lagerfeld brands, changes in planning and allocation and improvements in gross margin.

We expect to reduce corporate headcount and administrative costs, while expanding our store base.

We need to successfully implement this strategy in order to significantly reduce the losses in our retail operations with the goal of ultimately attaining profitability in our retail operations segment.

Fabco Holding B.V (“Fabco”) is a Dutch joint venture limited liability company that was 49% owned by us through November 30, 2020.

Effective December 1, 2020, we acquired an additional ownership interest in Fabco for nominal consideration, resulting in an increase of our ownership interest in Fabco to 75%.

Effective December 1, 2020, Fabco is a consolidated majority-owned subsidiary of ours.

Prior to December 1, 2020, we accounted for our investment in Fabco using the equity method of accounting.

Fabco operates our DKNY business in China through its subsidiary.

New information may emerge concerning the severity of the outbreak and the spread of variants, including the Delta and Omicron variants, of the COVID-19 virus in locations that are important to our business.

Actions taken to contain COVID-19 or treat its impact may change or become more restrictive if additional waves of infections occur.

Inter Parfums

In September 2021, we entered into a long-term global licensing agreement with Inter Parfums, Inc.

for the creation, development and distribution of fragrances and fragrance-related products under the DKNY and Donna Karan brands.

Inter Parfums, Inc.

will become the exclusive licensee for these products effective July 1, 2022 with the initial term of the license extending through December 31, 2032.

We believe the fragrance category enables our brands to connect more broadly with global consumers.

In October 2021, we purchased European luxury fashion brand Sonia Rykiel.

Sonia Rykiel, who created this iconic brand, was one of the leading figures of Parisian fashion.

We plan to accelerate the relaunch of the brand in France in the fall of 2022, and then expand into Europe and other areas.

We believe this purchase further enables us to expand into the luxury space and that there is untapped potential for this brand.

Sonia Rykiel is a wholly-owned operating subsidiary that reports results on a calendar year basis rather than the January 31 fiscal year basis used by the Company.

Accordingly, the results of Sonia Rykiel are included in our consolidated financial statements beginning in the fourth quarter of fiscal 2022.

Change in Accounting Principle

Effective February 1, 2021, we elected to change our method of accounting for retail inventories from the lower of cost or market as determined by the retail inventory method to the lower of cost or net realizable value using the weighted average cost method.

We believe the new method is preferable as it provides better matching of cost of goods sold with revenue, improves the precision of inventory valuation at the balance sheet dates, and more closely aligns with the valuation methods used throughout the rest of the Company.

In addition, the change in inventory valuation better aligns with the way we manage our business with a focus on the actual margin realized.

We determined that it was impractical to apply this change in accounting principle retrospectively due to a lack of available information.

As a result, we applied the change prospectively as of February 1, 2021.

The cumulative adjustment as of February 1, 2021 was a decrease in both inventories and retained earnings of $0.3 million.

The change in accounting principle did not have a material effect on our consolidated financial statements as of and for the fiscal year ended January 31, 2022.

We report based on two segments:

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Our retail operations segment consists primarily of direct sales to consumers through our company-operated stores and through digital channels.

In June 2020, we commenced the restructuring of our retail operations, including the closure of the Wilsons Leather, G.H.

In fiscal 2021, we restructured our retail operations, including the closure of our Wilsons Leather, G.H.

Bass and Calvin Klein Performance stores.

The closure of these stores was completed during fiscal 2021.

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Significant trends that affect the apparel industry include retail chains closing unprofitable stores, an increased focus by retail chains and others on expanding digital sales and providing convenience-driven fulfillment options, the continued consolidation of retail chains and the desire on the part of retailers to consolidate vendors supplying them.

In addition, consumer shopping preferences have continued to shift from physical stores to online shopping and retail traffic remains under pressure.

All of these factors have led to a more promotional retail environment that includes aggressive markdowns in an attempt to offset declines caused by a reduction in physical store traffic.

The effects of the COVID-19 pandemic have accelerated these trends.

We sell our products over the web through retail partners such as macys.com, nordstrom.com and dillards.com, each of which has a substantial online business.

As digital sales of apparel continue to increase, we are developing additional digital marketing initiatives on our web sites and through social media.

We are investing in digital personnel, marketing, logistics, planning and distribution to help us expand our online opportunities going forward.

Our digital business consists of our own web platforms at www.dkny.com, www.donnakaran.com, www.ghbass.com, www.vilebrequin.com, www.andrewmarc.com and www.wilsonsleather.com.

We sell our products online through retail partners such as macys.com, nordstrom.com and dillards.com, each of which has a substantial online business.

As digital sales of apparel continue to increase, we are developing additional digital marketing initiatives on our websites and through social media.

We are investing in digital personnel, marketing, logistics, planning, distribution and other strategic opportunities to expand our digital footprint.

Our digital business consists of our own web platforms at www.dkny.com, www.donnakaran.com, www.ghbass.com, www.vilebrequin.com, www.andrewmarc.com, www.wilsonsleather.com and www.soniarykiel.com.

We also sell Karl Lagerfeld Paris products on our website, www.karllagerfeldparis.com.

In addition, we sell to pure play online retail partners such as Amazon and Fanatics.

A number of retailers are experiencing financial difficulties, which in some cases have resulted in bankruptcies, liquidations and/or store closings, such as the announced store closing plans for Macy’s, the bankruptcy and announced liquidation of Century 21 and Lord & Taylor, the announced bankruptcy filings of JC Penney, Neiman Marcus, Christopher & Banks and other retailers and the potential bankruptcy of additional retailers.

In addition, we sell to leading online retail partners such as Amazon, Fanatics, Zalando and Zappos and have made a minority investment in an e-commerce retailer.

A number of retailers have experienced financial difficulties, which in some cases have resulted in bankruptcies, liquidations and/or store closings.

The financial difficulties of a retail customer of ours could result in reduced business with that customer.

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Consumers have shifted their apparel purchases based on their adjusted lifestyle needs resulting from changes to the work environment and leisure activities caused by the COVID-19 pandemic.

We have revised our product offerings in response to this shift toward casual and comfortable work-from-home clothing, as well as to activewear and leisure attire.

We revised our product offerings in response to this shift toward casual and comfortable work-from-home clothing, as well as to activewear and leisure attire.

We continue to revise our product lines to satisfy the needs of our retail customers and consumers.

There has been an increase in demand for day and occasion dresses, as well as career wear such as suit separates, as businesses reopen offices and restrictions on social gatherings are loosened.

We are working diligently to satisfy this demand from our retail partners and consumers.

We have attempted to respond to general trends in our industry by continuing to focus on selling products with recognized brand equity, by attention to design, quality and value and by improving our sourcing capabilities.

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We believe that our broad distribution capabilities help us to respond to the various shifts by consumers between distribution channels and that our operational capabilities will enable us to continue to be a vendor of choice for our retail partners.

The apparel and accessories industry has been impacted by Section 301 tariffs imposed by the United States government on goods imported from China.

Tariffs on handbags and leather outerwear imported from China were effective beginning in September 2018.

These tariffs initially increased existing duties by 10% of the merchandise cost to us.

The level of tariffs on these product categories was later increased to 25% beginning May 10, 2019.

On August 1, 2019, the United States government announced new 10% tariffs that cover the remaining estimated $300 billion of inbound trade from China, including most of our apparel products.

On August 23, 2019, the United States government announced that the new tariffs would increase from 10% to 15%.

A portion of the new 15% tariffs went into effect on September 1, 2019.

Some of the additional tariffs on certain categories of products were delayed until December 15, 2019, but have not yet gone into effect as the United States and China signed their Phase One Deal trade agreement in January 2020.

It is difficult to accurately estimate the impact on our business from these tariff actions or similar actions or when additional tariffs may become effective.

For fiscal 2020, approximately 50% of the products that we sold were manufactured in China.

For fiscal 2021, approximately 33% of the products that we sold were manufactured in China.

Notwithstanding the Phase One Deal, the United States government continues to negotiate with China with respect to a trade deal, which could lead to the removal, lowering or postponement of additional tariffs.

and China are not able to resolve their differences, additional tariffs may be put in place and additional products may become subject to tariffs.

Tariffs on additional products imported by us from China would increase our costs, could require us to increase prices to our customers and would cause us to seek price concessions from our vendors.

If we are unable to increase prices to offset an increase in tariffs, this would result in our realizing lower gross margins on the products sold by us and will negatively impact our operating results.

We have reduced our reliance on China by moving product to other countries, including Vietnam and Indonesia.

We will continue to explore alternative production partners to further diversify our

sourcing network and to reduce our reliance on any one particular country.

These efforts may not enable us to offset the adverse effects of any increase in tariffs.

Use of Estimates and Critical Accounting Policies

Inflationary pressures have impacted our industry.

During the current fiscal year, we have experienced inflationary pressures, most significantly related to our freight costs as discussed below under “Supply Chain” .

We expect inflationary pressures to continue to impact our business beyond fiscal 2022.

We have implemented selected price increases on our products.

We believe we can continue to do so in an effort to mitigate higher costs.

The impact of price increases on consumer demand and on our business and results of operations is uncertain.

The effects of the COVID-19 pandemic on the shipping industry have negatively impacted our ability to import our products in a manner that allows for timely delivery to our customers.

Congestion at ports of loading and ports of entry

have caused significant delays in deliveries and changes to the itineraries of our steamship carriers.

Use of alternate routes or delivery methods would require additional trucking for us and our customers.

Truck driver shortages, shortages of truck equipment and the inability of ports to provide reliable pick up times, have also negatively impacted our ability to timely receive goods.

Contractual shipping rates have increased as a result of increased demand for container space and the logistical delays experienced by the shipping industry.

Our costs have increased as a result of higher contractual shipping rates and the need to purchase additional container space on the secondary market at higher spot rates.

Terminals are also now imposing additional fees on importers not picking up containers on time, even when equipment and labor shortages negatively affect the ability of importers to pick up in a timely manner.

Our longstanding relationships with our steamship carriers have facilitated our ability to secure space on vessels as demand for apparel increases, although at rates that are significantly higher than in the past.

We believe that the strength of our portfolio of global power brands will allow us to selectively raise prices to largely offset higher freight costs.

These supply chain challenges continued during our fourth fiscal quarter and, as a result, the receipt of a significant amount of goods ordered has been delayed until our first fiscal quarter of 2023.

We have not as yet experienced order cancellations as a result of these delays due to the strong demand for our products from our customers.

We anticipate that the current supply chain conditions will continue to cause our freight costs to be inflated and continue to cause delays in receipt of goods for at least the next three fiscal quarters.

We have recently executed new contracts with two of our long-term steamship carrier partners and are continuing to pursue new carrier relationships for additional capacity.

We expect that our existing carriers will manage the demand in a more efficient manner in fiscal 2023, and as a result, our reliance on the secondary market will be reduced.

We are actively managing shipments based on delivery dates to better utilize contracted cargo space and further reduce our reliance on the secondary market.

We have also accelerated production schedules to allow for longer lead times in anticipation of the aforementioned delays.

Critical Accounting Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and revenues and expenses during the reporting period.

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Revenue Recognition

On February 1, 2018, we adopted Financial Accounting Standards Board (“FASB”) Accounting Standard Codification (“ASC”) Topic 606 – Revenue From Contracts With Customers (“ASC 606”) using the modified retrospective method as of January 31, 2018.

We recognize revenue in accordance with Accounting Standard Codification (“ASC”) Topic 606 – Revenue From Contracts With Customers (“ASC 606”).

Under ASC 606, wholesale revenue is recognized when control transfers to the customer.

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Wholesale revenues are adjusted by variable considerations arising from implicit or explicit obligations.

Variable consideration includes trade discounts, end of season markdowns, sales allowances, cooperative advertising, return liabilities and other customer allowances.

Under ASC 606, we estimate the anticipated variable consideration and record this estimate as a reduction of revenue in the period the related product revenue is recognized.

Prior to adopting ASC 606, certain components of variable consideration were recorded at a later date when the liability was known or incurred.

Variable consideration includes trade discounts, end of season markdowns, sales allowances,

cooperative advertising, return liabilities and other customer allowances.

We estimate the anticipated variable consideration and record this estimate as a reduction of revenue in the period the related product revenue is recognized.

Variable consideration is estimated based on historical experience, current contractual and statutory requirements, specific known events and industry trends.

The reserves for variable consideration are recorded under customer refund liabilities.

Customer refund liabilities were recorded as a reduction to accounts receivable prior to the adoption of ASC 606.

Historical return rates are calculated on a product line basis.

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Both wholesale revenues and retail store revenues are shown net of returns, discounts and other allowances.

Under ASC 606, we now classify cooperative advertising as a reduction of net sales.

Previously, cooperative advertising was recorded in selling, general and administrative expenses.

We classify cooperative advertising as a reduction of net sales.

Licensing revenue is recognized at the higher of royalty earned or guaranteed minimum royalty.

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For all other wholesale customers, an allowance for doubtful accounts is determined through analysis of the aging of accounts receivable at the date of the financial statements, assessments of collectability based on historical trends and an evaluation of the impact of economic conditions.

On February 1, 2020, we adopted Accounting Standards Update (“ASU”) 2016-13, “Financial Instruments-Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments” which had no material impact on our financial statements.

Our financial instruments consist of trade receivables arising from revenue transactions in the ordinary course of business.

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Wholesale inventories are stated at the lower of cost (determined by the first-in, first-out method) or net realizable value, which comprises a significant portion of our inventory.

Retail inventories are valued at the lower of cost or market as determined by the retail inventory method.

In addition, the change in inventory valuation better aligns with the way we manage our business with a focus on the actual margin realized.

Vilebrequin inventories are stated at the lower of cost (determined by the weighted average method) or net realizable value.

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If these estimates or their related assumptions change in the future, we may be required to record impairment charges for our goodwill and intangible assets with an indefinite life.

We perform our annual test for goodwill as of January 31 of each year.

The process of evaluating the potential impairment of goodwill is subjective and requires significant judgment at many points during the analysis.

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In performing a qualitative evaluation, we consider many factors in evaluating whether the carrying value of goodwill may not be recoverable, including declines in our stock price and market capitalization in relation to our book value and macroeconomic conditions affecting our business.

In performing a quantitative evaluation, to estimate the fair value of a reporting unit for the purposes of our annual or periodic analyses, we make estimates and judgments about the future cash flows of that reporting unit.

In performing a quantitative evaluation, our first step in the goodwill impairment review is to compare the fair value of the wholesale operations reporting unit to our carrying value.

If the fair value of the reporting unit exceeds our carrying value, goodwill is not impaired and no further testing is required.

To estimate the fair value of a reporting unit for the purposes of our annual or periodic analyses, we make estimates and judgments about the future cash flows of that reporting unit.

Although our cash flow forecasts are based on assumptions that are consistent with our plans and estimates we are using to manage the underlying businesses, there is significant exercise of judgment involved in determining the cash flows attributable to a reporting unit over its estimated remaining useful life.

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Changes in judgment on these assumptions and estimates could result in a goodwill impairment charge.

In accordance with ASC 350, in the first step of our goodwill impairment review, we compare the fair value of the wholesale operations reporting unit to our carrying value.

If the fair value of the reporting unit exceeds our carrying value, goodwill is not impaired and no further testing is required.

Similar to many companies in our industry, our market capitalization was negatively impacted during certain periods during fiscal 2021 as stock prices dropped dramatically during the first quarter of fiscal 2021.

The uncertainty caused by the COVID-19 outbreak made it impracticable to forecast our business with any certainty during fiscal 2021.

Due to the impact of the COVID-19 pandemic on the Company’s operations, the Company performed a quantitative test of its goodwill as of April 30, 2020 using an income approach through a discounted cash flow analysis methodology.

The discounted cash flow approach requires that certain assumptions and estimates be made regarding industry economic factors and future profitability.

Under the income approach, we calculated the fair value of the reporting units based on the present value of estimated future cash flows.

Cash flows projections are based on management’s estimates of revenue growth rates and earnings before interest and taxes, taking into consideration industry and market conditions.

The assumptions used for the impairment analysis were developed by management of each reporting unit based on industry projections, as well as specific facts relating to the reporting units.

If the reporting units were to experience sales declines or be exposed to enhanced and sustained pricing and volume pressures there would be an increased risk of impairment of goodwill for the reporting units.

At January 31, 2021, 2020 and 2019, we performed a qualitative evaluation where we considered the measurable performance of the wholesale operations reporting unit, our stock price and market capitalization and the current macroeconomics regarding the retail industry where our products are sold.

We also performed quantitative tests of each of our indefinite-lived intangible assets using a relief from royalty method, another form of the income approach as of April 30, 2020.

The relief from royalty method requires assumptions regarding industry economic factors and future profitability.

There were no impairments identified as of April 30, 2020 as a result of these tests.

We performed our annual test for intangible assets with indefinite lives as of January 31 of each year using a qualitative evaluation or a quantitative test using a relief from royalty method, another form of the income approach.

We also perform our annual test for intangible assets with indefinite lives as of January 31 of each year using a qualitative evaluation or a quantitative test using a relief from royalty method, another form of the income approach.

The relief from royalty method requires assumptions regarding industry economic factors and future profitability.

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The fair values assigned to the identifiable intangible assets acquired were based on assumptions and estimates made by management using unobservable inputs reflecting our own assumptions about the inputs that market participants would use in pricing the asset or liability based on the best information available.

We performed our annual tests of our wholesale reporting unit and our indefinite-lived trademarks as of January 31, 2022, 2021 and 2020 and determined that no impairment existed at those dates.

The results of our annual tests determined that the estimated fair values of our wholesale reporting unit and our indefinite-lived trademarks were substantially in excess of their carrying values.

Our indefinite-lived trademark balance is primarily composed of the Donna Karan/DKNY trademark that was acquired in fiscal 2017.

The fair value of our goodwill and indefinite-lived intangible assets are considered a Level 3 valuation in the fair value hierarchy.

Impairment of Long-Lived Assets

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A potential impairment has occurred if projected future undiscounted cash flows are less than the carrying value of the assets.

In fiscal 2022, we recorded a $1.5 million impairment charge primarily related to leasehold improvements, furniture and fixtures and operating lease assets at certain DKNY, Karl Lagerfeld Paris and Vilebrequin stores as a result of the performance at these stores.

In fiscal 2021, we recorded a $20.1 million impairment charge primarily related to operating lease assets, leasehold improvements and furniture and fixtures at certain Wilsons Leather and G.H.

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Bass and DKNY stores as a result of the performance at these stores.

In fiscal 2019, we recorded a $2.8 million impairment charge related to leasehold improvements and furniture and fixtures at certain of our Wilsons Leather, G.H.

Bass and DKNY stores as a result of the performance at these stores.

Equity Awards

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This valuation is performed with the assistance of a third party valuation specialist.

PRSU’s are expensed over the service period under the requisite acceleration method.

PSU’s were granted to executives in fiscal 2020 and vest after a three year performance period during which certain earnings before interest and taxes and return on invested capital performance standards must be satisfied for vesting to occur.

PSU’s are also subject to a lock up period that prevents the sale, contract to sell or transfer shares for two years

subsequent to the date of vesting.

PSU’s are expensed over the service period under the requisite acceleration method and based on an estimated percentage of achievement of certain pre-established goals.

Stock Options

Compensation expense for employee stock options is recognized in the consolidated financial statements over the service period (generally the vesting period) based on their fair value.

Stock options are valued using the Black-Scholes option pricing model.

The Black-Scholes model requires subjective assumptions regarding dividend yields, expected volatility, expected life of options and risk-free interest rates.

These assumptions reflect management’s best estimates.

Changes in these inputs and assumptions can materially affect the estimate of fair value and the amount of our compensation expenses for stock options.

PRSU’s are expensed over the service period under the accelerated attribution method.

PSU’s were granted to executives in fiscal 2022 and 2020 and vest after a three year performance period during which certain earnings before interest and taxes and return on invested capital performance conditions must be satisfied for vesting to occur.

PSU’s granted in fiscal 2020 are also subject to a lock up period that prevents the sale, contract to sell or transfer shares for two years subsequent to the date of vesting.

PSU’s are expensed over the service period under the accelerated attribution method and based on an estimated percentage of achievement of certain pre-established goals.

Results of Operations

The following table sets forth our operating results as a percentage of our net sales for the fiscal years indicated below:

The following table sets forth our operating results both in dollars and as a percentage of our net sales for the fiscal years indicated below:

Year Ended January 31,

(In thousands, except for percentage of net sales amounts)

Cost of goods sold

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Year ended January 31, 2022 (“fiscal 2022”) compared to year ended January 31, 2021 (“fiscal 2021”)

Net sales for fiscal 2021 decreased to $2.06 billion from $3.16 billion in the prior year.

Net sales for fiscal 2022 increased to $2.77 billion from $2.06 billion in the prior year.

Net sales of our segments are reported before intercompany eliminations.

Net sales of our wholesale operations segment decreased to $1.92 billion from $2.86 billion in the comparable period last year.

We experienced a significant decrease in net sales across substantially all of our brands primarily due to the effects of restrictions that began in March 2020 on business and personal activities imposed by governments in connection with the COVID-19 pandemic.

As a result, most of our retail partners closed their stores in North America beginning in mid-March, 2020, including our largest customer, Macy’s.

Most of our retail partners began to reopen a majority of their stores in North America beginning in June 2020.

However, a majority of these stores continue to operate under governmental mandated social distancing restrictions as the COVID-19 pandemic continues to affect large portions of North America.

The governmental restrictions imposed in connection with the COVID-19 pandemic have resulted in significant increases in unemployment, a reduction in business activity and a reduction in consumer spending on apparel and accessories, all of which contributed to the reduction of our net sales which occurred during the majority of fiscal 2021.

Net sales of our wholesale operations segment increased to $2.71 billion from $1.92 billion in the comparable period last year.

This increase is primarily the result of a $207.9 million increase in net sales of our DKNY and Donna Karan products, a $193.6 million increase in net sales of Calvin Klein products, a $109.0 million increase in net sales of Tommy Hilfiger products and a $73.1 million increase in net sales of Karl Lagerfeld Paris products.

In the prior year period, we experienced a significant decrease in net sales across substantially all of our brands primarily due to the effects of restrictions that began in March 2020 on business and personal activities imposed by governments in connection with the COVID-19 pandemic.

As a result, most of our retail partners closed their stores in North America, beginning in mid-March 2020.

Most of our retail partners began to reopen a majority of their stores in North America beginning in June 2020 with a majority of these stores operating under government mandated limitations.

The governmental restrictions imposed in connection with the COVID-19 pandemic resulted in significant increases in unemployment, a reduction in business activity and a reduction in consumer spending on apparel and accessories, all of which contributed to the reduction of our

net sales which occurred during the majority of fiscal 2021.

During fiscal 2022 substantially all stores operated by our retail partners were open and governmental restrictions were eased in most regions of the United States due to the reduction of the severity of the COVID-19 pandemic.

The lessening of COVID-19 restrictions has resulted in an increase in business activity which has contributed to an increase in consumer spending on apparel and accessories.

Governmental restrictions could be reimposed as a result of the spread of additional variants of COVID-19.

Net sales of our retail operations segment decreased to $117.7 million from $170.4 million in the same period last year.

This decrease primarily reflected reduced demand as a result of disruptions related to COVID-19 and the liquidation of our Wilsons and G.H.

Same store sales decreased across all store brands due to the COVID-19 related store closures and reduced store traffic.

In addition, the decrease in domestic and international tourism resulting from COVID-19 travel restrictions also had a negative impact on net sales of our retail operations segment.

As we proceeded to liquidate

inventory and close stores in connection with the restructuring of our retail operations segment beginning during the second quarter of fiscal 2021, net sales were also negatively impacted by the significant promotional activity involved in liquidation sales of inventory in the stores we were closing.

Net sales of our retail operations segment also declined due to the decrease in the number of stores operated by us from 282 at January 31, 2020 to 50 at January 31, 2021.

Gross profit was $744.4 million, or 36.2% of net sales, for fiscal 2021 and compared to $1.12 billion, or 35.4% of net sales, last year.

This decrease is primarily due to the significant reduction in our store count as a result of the restructuring of our retail operations segment that resulted in the closure of 150 Wilsons, G.H.

Bass and Calvin Klein Performance stores during fiscal 2021.

We operated 282 stores as of January 31, 2020, 50 stores as of January 31, 2021 and 60 stores as of January 31, 2022.

Wilsons and G.H.

Bass stores contributed $91.8 million of net sales during the year ended January 31, 2021.

Net sales from our DKNY and Karl Lagerfeld Paris stores, which constitute our retail operations segment, increased by $39.1 million during the year ended January 31, 2022 compared to last year.

Gross profit was $988.2 million, or 35.7% of net sales, for fiscal 2022 and compared to $744.4 million, or 36.2% of net sales, last year.

The gross profit percentage in our wholesale operations segment was 34.2% for the year ended January 31, 2022 as compared to 35.9% for the year ended January 31, 2021.

The gross profit percentage for our wholesale segment was positively impacted by the reversal of previously anticipated markdown accruals that are no longer necessary due to the reduction in sales to our retail customers.

The gross profit percentage in the prior year was positively impacted by the reversal of previously anticipated markdown accruals that were no longer necessary due to the reduction in sales to our retail customers.

The gross profit percentage in the current year benefitted from less promotional activity and strategic price increases, partially offset by increased freight costs.

The gross profit percentage in our retail operations segment was 50.9% for the year ended January 31, 2022 compared to 33.6% for the same period last year.

The gross profit percentage for our retail segment was negatively impacted by the reduction of our net sales caused by COVID-19 related closures of our retail stores, increased promotional activity due to the COVID-19 pandemic and liquidation sales in connection with the restructuring of our retail operations segment.

Selling, general and administrative expenses decreased to $605.1 million in fiscal 2021 from $832.2 million in fiscal 2020.

The decrease in expenses was primarily due to a decrease of $138.6 million in personnel costs including salaries, bonuses, share-based compensation and other incentives and benefits as a result of employee furloughs, job eliminations and decreased profitability.

In addition, there were decreases of $40.5 million in advertising, $22.8 million in rent and facility costs and $19.3 million in third-party warehouse expenses.

These decreases were related to reduced sales driven by the COVID-19 pandemic and the restructuring of our retail operations segment.

These decreases were offset, in part, by a $14.0 million increase in bad debt expense primarily related to allowances recorded against the outstanding receivables of certain department store customers that have publicly announced bankruptcy filings or potential bankruptcy filings and $4.8 million of professional fees incurred in connection with the restructuring of our retail operations segment.

The gross profit percentage in our retail operations segment was negatively impacted in the prior year by increased promotional activity due to the COVID-19 pandemic and the restructuring of our retail operations segment which resulted in the liquidation of inventory.

For the year ended January 31, 2020, the gross profit percentage for our wholesale operations segment was 32.7% and for our retail operating segment was 46.7%.

Both segments experienced increased gross profit percentages compared to the pre-pandemic fiscal year ended January 31, 2020 due to less promotional activity and strategic price increases in the current period, partially offset by increased freight costs.

Selling, general and administrative expenses increased to $648.0 million in fiscal 2022 from $605.1 million in fiscal 2021.

The increase in expenses was primarily due to an increase of $43.1 million in compensation expense, primarily from bonus and stock compensation.

As a result of the adverse effect of the COVID-19 pandemic on our operating results, the prior year had a lower bonus accrual.

The increase in expenses was also due to a $30.6 million increase in contractual advertising and a $15.1 million increase in third-party warehouse expenses related to increased sales.

These increases were partially offset by a $36.6 million decrease in facility expenses primarily related to the retail restructuring that occurred in the prior year period.

In addition, there was a $13.8 million decrease in bad debt expense primarily related to allowances recorded against the outstanding receivables of certain department store customers in the prior year.

Depreciation and amortization expense was $27.6 million in fiscal 2022 and $38.6 million in fiscal 2021.

The decrease primarily relates to a reduction in capital expenditures as a result of the COVID-19 pandemic.

In addition, the prior year also experienced higher depreciation and amortization due to write-offs taken in connection with the reduction in the number of retail stores operated by us and store asset disposals as a result of the retail restructuring.

In fiscal 2022, we recorded a $1.5 million impairment charge, net of gain on lease terminations, related to leasehold improvements, furniture and fixtures and operating lease assets at certain DKNY, Karl Lagerfeld Paris and Vilebrequin stores as a result of the performance at these stores.

In fiscal 2021, we recorded a $17.9 million impairment charge, net of gain on lease terminations, related to operating lease assets, leasehold improvements and furniture and fixtures at certain Wilsons Leather and G.H.

Bass stores, primarily due to the retail restructuring, as well as at certain DKNY and Vilebrequin stores as a result of the performance at these stores.

In fiscal 2020, we recorded a $19.4 million impairment charge, net of gain on lease terminations, related to leasehold improvements, furniture and fixtures and operating lease assets at certain of our Wilsons Leather, G.H.

Bass and DKNY stores.

Other income was $3.2 million in fiscal 2021 compared to other loss of $1.2 million in fiscal 2020.

This increase is primarily the result of recording $2.7 million of income related to the increased equity interest we acquired in Fabco.

In addition, we recorded $0.1 million of foreign currency losses during fiscal 2021 compared to $1.5 million of foreign currency losses during fiscal 2020.

Other income was $9.5 million in fiscal 2022 compared to other income of $3.2 million in fiscal 2021.

This change is primarily due to other income of $8.1 million in income from unconsolidated affiliates during fiscal 2022 compared to $0.6 million in income from unconsolidated affiliates in fiscal 2021, as well as other income of $2.4 million from non-refundable European government-backed grants received by Vilebrequin for COVID-19 relief and other income of $1.6 million from the change in fair value of certain equity investments during fiscal 2022.

Other income was offset in part by

our recording of $2.6 million of foreign currency losses during fiscal 2022 compared to foreign currency losses of $0.1 million during fiscal 2021.

In addition, fiscal 2021 also had other income of $2.7 million related to the increased equity interest we acquired in Fabco.

Interest and financing charges, net for fiscal 2022, were $49.7 million compared to $50.4 million for fiscal 2021.

The increase is primarily due to a $6.5 million charge to interest expense to extinguish debt issuance costs upon the repayment of our term loan facility and amendment of our revolving credit facility.

The decrease is primarily due to a $6.5 million charge to interest expense in the prior year as a result of extinguishing debt issuance costs upon the repayment of our prior term loan facility and amendment of our revolving credit facility, partially offset by the senior secured notes outstanding in the current period having a higher principal balance and interest rate than the term loan that was outstanding in the majority of the prior year.

Income tax expense for fiscal 2022 was $70.9 million compared to $12.2 million for the prior year.

Our effective tax rate was 26.2% in fiscal 2022 compared to 34.2% in the prior year.

This increase in our effective tax rate is primarily the result of the significant reduction in pretax book income in relation to tax expense mainly because foreign taxable losses had lower rates of tax benefit.

This decrease in our effective tax rate is primarily the result of the significantly lower pretax book income in the prior year, as well as foreign taxable losses in the prior year having s smaller tax benefit as a result of lower income tax rates.

We believe that our current income tax rate is more representative of what we expect our prospective effective rate will be based on our current income and applicable federal, state and foreign income tax rates.

Liquidity and Capital Resources

Cash Requirements and Trends and Uncertainties Affecting Liquidity

We rely on our cash flows generated from operations and the borrowing capacity under our revolving credit facility to meet the cash requirements of our business.

The primary cash requirements of our business usually are the seasonal buildup in inventories, compensation paid to employees, payments to vendors in the normal course of business, capital expenditures, maturities of debt and related interest payments and income tax payments.

The rapid expansion of the COVID-19 pandemic resulted in a sharp decline in net sales and net income during fiscal 2021, which had a corresponding impact on our liquidity.

We were focused on preserving our liquidity and managing our cash flow during these unprecedented conditions.

We had taken preemptive actions to enhance our ability to meet our short-term liquidity needs including, but not limited to, reducing payroll costs through employee furloughs, job eliminations, salary reductions, reductions in discretionary expenses, deferring certain lease payments and deferral of capital projects.

During the quarter ended October 31, 2020, certain furloughed employees were reinstated and salaries that had been reduced where increased to their pre-pandemic levels.

We have received royalty relief from certain licensors.

Cash Availability

We rely on our cash flows generated from operations, cash and cash equivalents and the borrowing capacity under our revolving credit facility to meet the cash requirements of our business.

The cash requirements of our business are primarily related to the seasonal buildup in inventories, compensation paid to employees, payments to vendors in the normal course of business, capital expenditures, interest payments on debt obligations and income tax payments.

As of January 31, 2022, we had cash and cash equivalents of $466.0 million and availability under our revolving credit facility in excess of $560.0 million.

As of January 31, 2022, we were in compliance with all covenants under our senior secured notes and revolving credit facility.

We cannot be sure that our assumptions used to estimate our liquidity requirements will remain accurate due to the unprecedented nature of the disruption to our operations and the unpredictability of the COVID-19 outbreak.

As a result, the impact of COVID-19 on our future earnings and cash flows could continue to have a material impact on our results of operations and financial condition depending on the duration and scope of the COVID-19 pandemic.

We believe we have sufficient cash and available borrowings for our foreseeable liquidity needs.

Senior Secured Notes

On August 7, 2020, we completed a private debt offering of $400 million aggregate principal amount of our 7.875% Senior Secured Notes due 2025 (the “Notes).

In August 2020, we completed a private debt offering of $400 million aggregate principal amount of our 7.875% Senior Secured Notes due 2025 (the “Notes).

The terms of the Notes are governed by an indenture, dated as of August 7, 2020 (the “Indenture”), among us, the guarantors party thereto and U.S.

Bank, National Association, as trustee and collateral agent (the “Collateral Agent”).

The net proceeds of the Notes have been used (i) to repay our prior term loan facility due 2022, (ii) to pay related fees and expenses and (iii) for general corporate purposes.

The net proceeds of the Notes have been used (i) to repay the $300 million that was outstanding under our prior term loan facility due 2022 (the “Term Loan”), (ii) to pay related fees and expenses and (iii) for general corporate purposes.

The Notes bear interest at a rate of 7.875% per year payable semi-annually in arrears on February 15 and August 15 of each year, commencing on February 15, 2021.

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The Intercreditor Agreement restricts the actions permitted to be taken by the Collateral Agent with respect to the Collateral on behalf of the holders of the Notes.

The Notes are also subject to the terms of the seller note subordination agreement which governs the relative rights of the secured parties in respect of the Seller Note (as defined therein), the ABL Facility and the Notes.

The Notes are also subject to the terms of the LVMH Note subordination agreement which governs the relative rights of the secured parties in respect of the LVMH Note, the ABL Facility and the Notes.

At any time prior to August 15, 2022, we may redeem some or all of the Notes at a price equal to 100% of the principal amount of the Notes redeemed plus accrued and unpaid interest, if any, to, but excluding, the applicable redemption date plus a “make-whole” premium, as described in the Indenture.

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We incurred debt issuance costs totaling $8.5 million related to the Notes that will be amortized over the term of the Notes.

In accordance with ASU 2015-15, the debt issuance costs have been deferred and are presented as a contra-liability, offsetting the outstanding balance of the Notes, and are amortized over the remaining life of the Notes.

In accordance with ASC 835, the debt issuance costs have been deferred and are presented as a contra-liability, offsetting the outstanding balance of the Notes, and are amortized over the remaining life of the Notes.

In addition, we had unamortized debt issuance costs of $6.1 million associated with the Term Loan.

Upon repayment of the Term Loan, these debt issuance costs were fully extinguished and charged to interest expense in our results of operations.

Second Amended and Restated ABL Credit Agreement

On August 7, 2020, our subsidiaries, G-III Leather Fashions, Inc., Riviera Sun, Inc., CK Outerwear, LLC, AM Retail Group, Inc.

In August 2020, our subsidiaries, G-III Leather Fashions, Inc., Riviera Sun, Inc., CK Outerwear, LLC, AM Retail Group, Inc.

and The Donna Karan Company Store LLC (collectively, the “Borrowers”), entered into the second amended and restated credit agreement (the “ABL Credit Agreement”) with the Lenders named therein and with JPMorgan Chase Bank, N.A., as Administrative Agent.

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and Donna Karan Studio LLC (the “Guarantors”), are Loan Guarantors under the ABL Credit Agreement.

The ABL Credit Agreement refinances, amends and restates the Amended Credit Agreement, dated as of December 1, 2016 (as amended, supplemented or otherwise modified from time to time prior to August 7, 2020, the “Prior Credit Agreement”), by and among the Borrowers and the Loan Guarantors (each as defined therein) party thereto, the lenders from time to time party thereto, and JPMorgan Chase Bank, N.A., in its capacity as the administrative agent thereunder.

The ABL Credit Agreement refinanced, amended and restated the Amended Credit Agreement, dated as of December 1, 2016 (as amended, supplemented or otherwise modified from time to time prior to August 7, 2020, the “Prior Credit Agreement”), by and among the Borrowers and the Loan Guarantors (each as defined therein) party thereto, the lenders from time to time party thereto, and JPMorgan Chase Bank, N.A., in its capacity as the administrative agent thereunder.

The Prior Credit Agreement provided for borrowings of up to $650 million and was due to expire in December 2021.

The ABL Credit Agreement extends the maturity date to August 2025, subject to a springing maturity date if, subject to certain conditions, the LVMH Note is not refinanced or repaid prior to the date that is 91 days prior to the date of any relevant payment thereunder.

ABL Credit Agreement extended the maturity date to August 2025, subject to a springing maturity date if, subject to certain conditions, the LVMH Note is not refinanced or repaid prior to the date that is 91 days prior to the date of any relevant payment thereunder.

Amounts available under the ABL Credit Agreement are subject to borrowing base formulas and overadvances as specified in the ABL Credit Agreement.

Borrowings bear interest, at the Borrowers’ option, at LIBOR plus a margin of 1.75% to 2.25% or an alternate base rate margin of 0.75% to 1.25% (defined as the greatest of (i) the “prime rate” of JPMorgan Chase Bank, N.A.

from time to time, (ii) the federal funds rate plus 0.5% and (iii) the LIBOR rate for a borrowing with an

interest period of one month) plus 1.00%, with the applicable margin determined based on Borrowers’ availability under the ABL Credit Agreement.

from time to time, (ii) the federal funds rate plus 0.5% and (iii) the LIBOR rate for a borrowing with an interest period of one month) plus 1.00%, with the applicable margin determined based on Borrowers’ availability under the ABL Credit Agreement.

The ABL Credit Agreement is secured by specified assets of the Borrowers and the Guarantors.

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As of January 31, 2022, we had no borrowings outstanding under the ABL credit agreement.

As of January 31, 2021, interest under the ABL credit agreement was being paid at an average rate of 2.04% per annum.

The ABL Credit Agreement also includes amounts available for letters of credit.

As of January 31, 2022, there were outstanding trade and standby letters of credit amounting to $10.0 million and $4.0 million, respectively.

At the date of the refinancing of the Prior Credit Agreement, we had $3.3 million of unamortized debt issuance costs remaining from the Prior Credit Agreement.

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We have a total of $8.0 million debt issuance costs related to our ABL Credit Agreement.

As permitted under ASC 2015-15, the debt issuance costs have been deferred and are presented as an asset which is to be subsequently amortized ratably over the term of the ABL Credit Agreement.

Term Loan Credit Agreement

We had previously borrowed $350.0 million under a senior secured term loan facility (the “Term Loan”) that was scheduled to mature in December 2022.

We prepaid $50.0 million in principal amount of the Term Loan, reducing the principal balance of the Term Loan to $300.0 million.

On August 7, 2020, we used a portion of the proceeds from the issuance of the Notes to repay the outstanding principal balance of $300.0 million under the Term Loan.

At the date of repayment, we had unamortized debt issuance costs of $6.1 million associated with the Term Loan.

These debt issuance costs were fully extinguished and charged to interest expense in our results of operations.

We issued to LVMH, as a portion of the consideration for the acquisition of DKI, a junior lien secured promissory note in favor of LVMH in the principal amount of $125 million (the “LVMH Note”) that bears interest at the rate of 2% per year.

As permitted under ASC 835, the debt issuance costs have been deferred and are presented as an asset which is amortized ratably over the term of the ABL Credit Agreement.

We issued to LVMH, as a portion of the consideration for the acquisition of DKNY and Donna Karan, a junior lien secured promissory note in favor of LVMH in the principal amount of $125 million (the “LVMH Note”) that bears interest at the rate of 2% per year.

$75 million of the principal amount of the LVMH Note is due and payable on June 1, 2023 and $50 million of such principal amount is due and payable on December 1, 2023.

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This discount is being amortized as interest expense using the effective interest method over the term of the LVMH Note.

In connection with the issuance of the LVMH Note, LVMH entered into (i) a subordination agreement providing that our obligations under the LVMH Note are subordinate and junior to our obligations under the revolving credit facility and Term Loan and (ii) a pledge and security agreement with us and our subsidiary, G-III Leather, pursuant to which we and G-III Leather granted to LVMH a security interest in specified collateral to secure our payment and performance of our

obligations under the LVMH Note that is subordinate and junior to the security interest granted by us with respect to our obligations under the revolving credit facility and Term Loan.

Unsecured Loans

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A portion of the unsecured loans were to provide funding for operations in the normal course of business, while other unsecured loans were various European state backed loans as part of COVID-19 relief programs.

In the aggregate, TRB is currently required to make quarterly installment payments of €0.2 million.

Additionally, Sonia Rykiel borrowed funds under European state backed loans that were part of COVID-19 relief programs.

In the aggregate, the Company is currently required to make quarterly installment payments of €0.2 million.

Interest on the outstanding principal amount of the unsecured loans accrues at a fixed rate equal to 0% to 2.0% per annum, payable on either a quarterly or monthly basis.

Certain unsecured loans will require monthly installment payments beginning in fiscal 2022 and fiscal 2024.

The unsecured loans have maturity dates ranging from September 15, 2024 through October 22, 2026.

As of January 31, 2021, TRB had an aggregate outstanding balance of €7.4 million under these various unsecured loans.

As of January 31, 2022, the Company had an aggregate outstanding balance of €7.4 million ($8.4 million) under these various unsecured loans.

Overdraft Facilities

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As part of a COVID-19 relief program, TRB and its subsidiaries have also entered into several state backed overdraft facilities with UBS Bank in Switzerland for an aggregate of CHF 4.7 million at varying interest rates of 0% to 0.5%.

As of January 31, 2021, TRB had an aggregate €2.5 million drawn under these various facilities.

As of January 31, 2022, TRB had an aggregate €2.6 million ($2.9 million) drawn under these various facilities.

Outstanding Borrowings

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The primary sources to meet our operating cash requirements have been borrowings under this credit facility and cash generated from operations.

The reduction in net sales in the current year resulted in reductions in our seasonal inventory needs in the current year, and as a result, there were no borrowings outstanding under the ABL Credit Agreement as of January 31, 2021.

We had no borrowings outstanding under our ABL Credit Agreement at January 31, 2021 and January 31, 2020.

We had $400 million in borrowings outstanding under the Notes at January 31, 2021.

We had $300.0 million in borrowings outstanding under the Term Loan Credit Agreement at January 31, 2020.

We had no borrowings outstanding under our ABL Credit Agreement at each of January 31, 2022 and January 31, 2021.

We had $400 million in borrowings outstanding under the Notes at each of January 31, 2022 and January 31, 2021.

Our contingent liability under open letters of credit was approximately $14.0 million at January 31, 2022 and $10.5 million at January 31, 2021.

In addition to the amounts outstanding under these two loan agreements, at January 31, 2022 and 2021, we had $125.0 million of face value principal amount outstanding under the LVMH Note.

We had an aggregate of €7.4 million ($9.1 million) and €2.6 million ($2.9 million) outstanding under Vilebrequin’s various Unsecured Loans as of January 31, 2021 and January 31, 2020, respectively.

We also had €2.5 million ($3.0 million) outstanding under Vilebrequin’s Overdraft Facilities as of January 31, 2021.

We had an aggregate of €7.4 million ($8.4 million) and €7.4 million ($9.1 million) outstanding under the Company’s various unsecured loans as of January 31, 2022 and January 31, 2021, respectively.

We also had €2.6 million ($2.9 million) and €2.5 million ($3.0 million) outstanding under Vilebrequin’s overdraft facilities as of January 31, 2022 and January 31, 2021, respectively.

Share Repurchase Program

Our Board of Directors has authorized a share repurchase program of 5,000,000 shares.

Our Board of Directors authorized a share repurchase program of 5,000,000 shares.

Pursuant to this program, during fiscal 2022 we acquired 656,213 of our shares of common stock for an aggregate purchase price of $17.3 million and during fiscal 2020 we acquired 1,327,566 of our shares of common stock for an aggregate purchase price of $35.2 million.

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As of January 31, 2022, we had 2,293,149 authorized shares remaining under this program.

In March 2022, the Board increased the number of authorized shares under this program to 10,000,000.

As of March 23, 2022, we had approximately 47,915,388 shares of common stock outstanding.

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At January 31, 2022, we had cash and cash equivalents of $466.0 million.

We generated $185.8 million of cash from operating activities in fiscal 2022, primarily as a result of our net income of $200.6 million and non-cash charges relating

primarily to depreciation and amortization of $27.6 million, deferred income taxes of $21.1 million and share-based compensation of $17.4 million.

We also generated cash from operating activities from an increase of $124.6 million in accounts payable and accrued expenses.

These items were offset, in part, by increases of $112.8 million in accounts receivable and $95.7 million in inventories, as well as decreases of $12.6 million in customer refund liabilities.

At January 31, 2021, we had cash and cash equivalents of $351.9 million.

We generated $74.8 million of cash from operating activities in fiscal 2021, primarily as a result of our net income of $23.5 million, and non-cash charges in the aggregate amount of $136.5 million relating primarily to operating lease costs ($71.4 million), depreciation and amortization ($38.6 million), asset impairment charges ($20.4 million) and share-based compensation ($6.1 million).

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These items were offset, in part, by decreases of $136.4 million in customer refund liabilities, $94.2 million in accounts payable and accrued expenses and $86.4 million in operating lease liabilities.

At January 31, 2020, we had cash and cash equivalents of $197.4 million.

We generated $209.0 million of cash from operating activities in fiscal 2020, primarily as a result of our net income of $143.8 million, and non-cash charges in the aggregate amount of $151.4 million relating primarily to operating lease costs ($73.3 million), depreciation and amortization ($38.7 million), asset impairment charges ($21.8 million) and share-based compensation ($17.6 million).

We also generated cash from operating activities from decreases of $24.5 million in inventories and $15.9 million in prepaid expenses and other current assets.

These items were offset, in part, by a decrease of $79.8 million in operating lease liabilities, an increase of $28.0 million in accounts receivable, a decrease of $18.6 million in accounts payable and accrued expenses, and a decrease of $10.2 million in customer refund liabilities.

Cash from Investing Activities

In fiscal 2021, we used $20.1 million of cash in investing activities for capital expenditures and initial direct costs of operating lease assets.

Capital expenditures in the period primarily related to information technology expenditures and additional fixturing costs at department stores.

Operating lease assets initial direct costs in the period primarily related to payments of key money and broker fees.

In fiscal 2022, we used $51.5 million of cash in investing activities.

We used $25.0 million for a minority investment in an e-commerce retailer.

We subsequently sold a portion of that investment for $5.0 million.

In addition, we also had $18.3 million in capital expenditures primarily related to infrastructure and information technology expenditures and additional fixturing costs at department stores.

In addition, we used $13.2 million for our investment in connection with a brand acquisition.

In fiscal 2021, we used $20.1 million of cash in investing activities for capital expenditures and initial direct costs of operating lease assets.

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Cash from Financing Activities

In fiscal 2022, we used $23.4 million of cash in financing activities.

We used $17.3 million of cash to repurchase 656,213 shares of our common stock under our share repurchase program and $4.3 million for taxes paid in connection with net share settlements of stock grants that have vested.

In fiscal 2021, we generated $94.8 million of cash from financing activities primarily as a result of the proceeds of $400 million from the issuance of our Notes partially offset by the $300 million repayment of our term loan facility from the proceeds of the Notes.

We also made payments of $13.6 million in financing costs related to the issuance of our Notes and entering into the ABL Credit Agreement.

In fiscal 2020, we used $44.5 million of cash in financing activities.

We used $35.2 million of cash to repurchase 1,327,566 shares of our common stock under our share repurchase program and $12.2 million for taxes paid with respect to net share settlements.

Financing Needs

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Recent Accounting Pronouncements

See Note A.19 – Effects of Recently Adopted and Issued Accounting Pronouncements in the accompanying notes to our Consolidated Financial Statements in this Annual Report on Form 10-K for a description of recently adopted accounting pronouncements and issued accounting pronouncements that we believe may have an impact on our Consolidated Financial Statements when adopted.

Off Balance Sheet Arrangements

We do not have any “off-balance sheet arrangements” as such term is defined in Item 303 of Regulation S-K of the SEC rules.

See Note 1.19 – Effects of Recently Adopted and Issued Accounting Pronouncements in the accompanying notes to our Consolidated Financial Statements in this Annual Report on Form 10-K for a description of recently adopted accounting pronouncements and issued accounting pronouncements that we believe may have an impact on our Consolidated Financial Statements when adopted.

Tabular Disclosure of Contractual Obligations

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(2) Includes:

(a) $400.0 million related to our Notes that will mature in 2026, (b) $125.0 million in face principal amount of the note issued to LVMH payable in 2023, (c) $9.1 million in our various unsecured loans which have maturity dates ranging from 2025 through 2027 and requires us to make quarterly installment payments ranging from €0.1 million to €0.5 million and (d) $3.0 million in our various overdraft facilities.

(a) $400.0 million related to our Notes that will mature in 2026, (b) $125.0 million in face principal amount of the note issued to LVMH payable in 2023, (c) $8.4 million in our various unsecured loans which have maturity dates ranging from 2025 through 2027 and requires us to make quarterly installment payments of €0.2 million and (d) $2.9 million in our various overdraft facilities.

We had no borrowings outstanding under our revolving credit facility as of January 31, 2022.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis