What changed in this filing

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Item 7. Management’s Discussion and Analysis

2023-03-27 compared with 2022-03-28 · 225 added, 203 removed, 254 unchanged (63% of the section changed)

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For example, our fiscal year ended January 31, 2023 is referred to as “fiscal 2023.”

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.

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

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.

(“KLH”) is a Dutch limited liability company that was 19% owned by us through May 30, 2022 and was accounted for during that time using the equity method of accounting.

Effective May 31, 2022, we acquired the remaining 81% interest in KLH that we did not previously own and, as a result, KLH began being treated as a consolidated wholly-owned subsidiary.

KL North America B.V.

(“KLNA”) is a Dutch joint venture limited liability that was 49% owned by us and 51% indirectly owned by KLH through May 30, 2022 and was accounted for during that time using the equity method of accounting.

KLNA operates the Karl Lagerfeld business in the United States, Mexico and Canada.

Effective May 31, 2022, KLNA became an indirect wholly-owned subsidiary of us as a result of our acquisition of the remaining 81% interest in KLH we did not previously own.

All material intercompany balances and transactions have been eliminated.

The results of KLH are included in our consolidated financial statements beginning May 31, 2022.

Each of Vilebrequin International SA (“Vilebrequin”), a Swiss corporation that is wholly-owned by us, KLH, Fabco Holding B.V.

(“Fabco”) and Sonia Rykiel, which we purchased in October 2021, 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, KLH, Fabco and Sonia Rykiel 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, 2023, the results of Vilebrequin, KLH, Fabco and Sonia Rykiel are included for the year ended December 31, 2022.

For the year ended December 31, 2022, the results of KLH, which includes KLNA, are included for the period from June 1, 2022 through December 31, 2022.

The results of the 49% ownership interest in KLNA and 19% ownership interest in KLH that we owned prior to our acquisition of the remaining interests in KLH that we did not previously own are included for the period from February 1, 2022 through May 30, 2022.

Our retail operations segment uses a 52/53-week fiscal year.

For fiscal 2023 and 2022, the retail operations segment reported based on a 52-week fiscal year that ended on January 28, 2023 and January 29, 2022, respectively.

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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G-III designs, sources and markets an extensive range of apparel, including outerwear, dresses, sportswear, swimwear, women’s suits and women’s performance wear, as well as women’s handbags, footwear, small leather goods, cold weather accessories and luggage.

G-III has a substantial portfolio of more than 30 licensed and proprietary brands, anchored by five global power brands:

DKNY, Donna Karan, Calvin Klein, Tommy Hilfiger and Karl Lagerfeld Paris.

G-III has a substantial portfolio of more than 30 licensed and proprietary brands, anchored by our global power brands:

DKNY, Donna Karan, Karl Lagerfeld, Calvin Klein and Tommy Hilfiger.

We are not only licensees, but also brand owners, and we distribute our products through multiple channels.

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

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

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.

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, Dockers and, as of January 2024, Nautica.

Through our team sports business, we have licenses with the National Football League, National Basketball Association, Major League Baseball, National Hockey League and over 150 U.S.

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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, 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.

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 its 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 pure online retail partners such as Amazon, Fanatics, Zalando and Zappos.

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

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.

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

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.

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.

Calvin Klein and Tommy Hilfiger License Extensions

In November 2022, we announced the extension of the licenses for Calvin Klein and Tommy Hilfiger products.

The amendments to the license agreements for these products provide for staggered extensions by category that expire beginning December 31, 2024 and continuing through December 31, 2027.

See the table in “Wholesale Operations-Licensed Products” above for information with respect to the new extension term, any potential renewal term or the existing current term for the Calvin Klein and Tommy Hilfiger license agreements.

PVH Corp., the owner of these two brands, has indicated that it intends to produce these products itself once the license agreements expire.

Unless we are able to increase the sales of our other products, acquire new businesses and/or enter into other license agreements covering different products, the inability to renew the Calvin Klein and Tommy Hilfiger license agreements would cause a significant decrease in our net sales and have a material adverse effect on our results of operations.

We continue to strategize near-term growth initiatives across our current owned and licensed brands including category, geographical and digital expansion.

Additionally, we are directing resources toward new growth areas, including building our own brands, broadening our European business, developing new licensing opportunities, such as our recently announced new license agreement with Nautica, and continuing to seek to acquire new businesses.

Karl Lagerfeld Acquisition

In May 2022, we acquired from a group of investors the remaining 81% in interests in the parent entity of the Karl Lagerfeld business that we did not already own, for an aggregate consideration of €202.0 million ($216.8 million) in cash, after

taking into account certain adjustments.

We funded the purchase price from cash on hand.

See Note 15 – Karl Lagerfeld Acquisition in the accompanying notes to condensed consolidated financial statements for more information.

The addition of the Karl Lagerfeld fashion brand to the G-III portfolio of owned brands advances several of our strategic initiatives, including increasing the direct ownership of brands, capitalizing on their licensing opportunities and further diversifying our global presence.

This acquisition represents a significant opportunity to expand our international growth by further developing our European-based brands, which also include Vilebrequin and Sonia Rykiel.

We believe that Karl Lagerfeld’s existing digital channel presence could enable us to enhance our omni-channel business and further accelerate our digital initiatives.

The influential legacy of the Karl Lagerfeld brand embodies a creative expression that aligns with our goal to provide innovative products for our customers.

License Agreement with Nautica

In March 2023, we announced the signing of a long-term license with Authentic Brands Group for the Nautica brand in North America.

We will produce across a number of categories starting with a full women’s jeanswear collection and then expanding in a phased approach into additional categories including sportswear, suit separates and dresses.

The new five-year license agreement, effective beginning in January 2024, includes three extensions, for five years each.

First deliveries are expected to hit the floor in January 2024.

The product is expected to be distributed in better department stores, digital channels and Nautica’s stores and website in North America and franchised stores globally.

We believe that significant opportunity exists in the better women’s apparel space in categories where we have strong expertise.

The Nautica brand joins our portfolio of some of the largest American brands in the world.

Repositioning and Expansion of Donna Karan

We acquired the DKNY and Donna Karan brands, two of the most iconic American fashion brands, in December 2016.

We initially repositioned and relaunched DKNY and have successfully grown the brand to approximately $600.0 million in annual net sales.

We are now focused on the repositioning and expansion of the Donna Karan brand for Spring 2024.

The new Donna Karan will be a modern system of dressing created to appeal to a woman’s senses on every level, addressing the full lifestyle needs of a new customer.

Our Donna Karan product is expected to be distributed in better department stores, digital channels and our own Donna Karan website in North America and internationally.

Donna Karan is widely considered a top fashion brand and is recognized as one of the most famous designer names in American fashion.

We believe that the strength of the Donna Karan brand, along with our success with the DKNY brand, demonstrates the potential for our new Donna Karan products.

We report based on two segments:

wholesale operations and retail operations.

Our wholesale operations segment includes sales of products to retailers under owned, licensed and private label brands, as well as sales related to the Vilebrequin business.

Wholesale revenues also include royalty revenues from license agreements related to our owned trademarks including DKNY, Donna Karan, Vilebrequin, G.H.

Our wholesale operations segment includes sales of products to retailers under owned, licensed and private label brands, as well as sales related to the Vilebrequin and Karl Lagerfeld businesses, other than sales of product under the Karl Lagerfeld Paris brand from our retail stores and digital outlets.

Wholesale revenues also include royalty revenues from license agreements related to our owned trademarks including DKNY, Donna Karan, Karl Lagerfeld, Vilebrequin, Sonia Rykiel, G.H.

Bass and Andrew Marc.

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

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

Bass and Calvin Klein Performance stores.

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.

Our company-operated stores consists primarily of 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.

Substantially all DKNY and Karl Lagerfeld Paris stores are operated as outlet stores.

Trends Affecting Our Business

Industry Trends

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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.

As sales of apparel through digital channels continue to increase, we are developing additional digital marketing initiatives on both our web sites and third party web sites 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 leading online retail partners such as Amazon, Fanatics, Zalando and Zappos and have made a minority investment in an e-commerce retailer.

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, www.soniarykiel.com, www.karllagerfeldparis.com and www.karl.com.

In addition, we sell to leading online retail partners such as Amazon, Fanatics, Zalando and Zappos and have made minority investments in two e-commerce retailers.

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

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Exclusive brands are only made available to a specific retailer, and thus customers loyal to their brands can only find them in the stores of that retailer.

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 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.

We have also responded with the strategic acquisitions made by us and new license agreements entered into by us that added to our portfolio of licensed and proprietary brands and helped diversify our business by adding new product lines and expanding distribution channels.

We have also responded with the strategic acquisitions made by us, such as our recent purchase of the interests not owned by us that resulted in Karl Lagerfeld becoming our wholly-owned subsidiary, and new license agreements entered into by us that added to our portfolio of licensed and proprietary brands and helped diversify our business by adding new product lines and expanding distribution channels.

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.

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.

Inflation and Interest Rates

Inflationary pressures have impacted the entire economy, including our industry.

We are experiencing increased costs in many aspects of our business, including our freight costs as discussed below under “Supply Chain” .

We have implemented price increases on many of our products.

Our price increases are an effort to mitigate the effect of higher costs, although, the impact of price increases on consumer demand and on our business and results of operations is uncertain.

We expect inflationary pressures to continue to impact our business throughout fiscal 2024.

Recent historic high rates of inflation, including increased fuel and food prices, has led to a softening of consumer demand and increased promotional activity in our categories and may lead to further challenges to grow our sales.

Ongoing inflation may also negatively impact our cost structure and labor costs in the future.

The Federal Reserve raised interest rates multiple times in fiscal 2023 in response to concerns about inflation and is expected to continue to do so in fiscal 2024.

Higher interest rates increase the costs of our borrowing under our revolving credit facility, may increase economic uncertainty and may negatively affect consumer spending.

Volatility in interest rates may adversely affect our business or our customers.

If the equity and credit markets deteriorate, it may make any necessary debt or equity financing more difficult to obtain in a timely manner or on favorable terms, or at all.

Foreign currency fluctuation

Our consolidated operations are impacted by the relationships between our reporting currency, the U.S.

Dollar, and those of our non-United States subsidiaries whose functional/local currency is other than the U.S.

Dollar, primarily the Euro.

We continue to expect volatility in the global foreign currency exchange rates, which may have a negative impact on the reported results of certain of our non-United States subsidiaries in the future, when translated to the U.S.

There were numerous factors disrupting the shipping industry that have negatively affected transit times from our overseas suppliers, as well as our ability to ensure that we were able to import our product in a manner that allows for timely delivery to our customers.

Congestion at ports of origin and ports of entry caused significant changes to the itineraries of our steamship carriers.

Truck driver shortages, shortages of truck equipment such as the chassis that the containers are transported on, and the inability of ports to provide reliable pick uptimes, also negatively impacted our ability to timely receive goods.

In addition, issues with respect to labor contracts for workers at certain ports on the west coast of the United States resulted in shifting delivery of goods to ports on the east coast of the United States which caused increased delays at east coast ports.

More recently, shipping costs have returned to comparable, and in some cases lower than, pre-pandemic levels.

Our ability to secure container space has improved as has the congestion at the ports around the world.

Transit times in general, while improving, remain longer than normal due to capacity decline and carrier schedule changes.

This is expected to remain a challenge in fiscal 2024 and may negatively impact our ability to deliver product to our retail partners and customers in a timely manner.

As a result of supply chain disruptions, we had accelerated production schedules to allow for more lead time and to accommodate the anticipated extended transit times from our overseas suppliers in an effort to import our product in a manner that allows for timely delivery to our customers.

As a result, our inventory levels are higher than in prior years.

Elevated inventory levels, lack of additional space in our distribution centers, port congestion and the logistical challenges related to trucking all contributed to us incurring significant demurrage charges in our third fiscal quarter.

Demurrage charges are charges paid to steamship carriers for freight remaining in the terminal for longer periods than initially agreed upon.

These charges had a significant impact on our statement of operations in our third fiscal quarter, and to a lesser extent, in our fourth fiscal quarter.

We are still expecting to have inventory levels that are higher than normal through the first half of fiscal 2024.

As a result, we expect our warehouse operations may be less efficient, and we expect to incur additional labor and storage costs related to our inventory in the first half of fiscal 2024.

We are actively negotiating new contracts with two of our long-term steamship carrier partners and are considering to add a third to insure minimal risk should rates increase.

We are presently securing all space needed through existing contracts and are no longer relying on the secondary market.

We believe that our existing carriers will be able to manage demand for fiscal 2024 and, as a result, our reliance on the secondary market will be greatly reduced if not eliminated.

Excess Inventory in the Marketplace

Higher marketplace inventories and a rapidly changing economic environment have caused retailers to rationalize their inventory levels.

As a result, retailers have increased promotional activity to reduce their inventory.

While we have planned for a certain amount of promotional activity, additional promotional activity in excess of what we have planned for could have an adverse effect on our results of operations.

Impact of COVID-19

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 United States and around the world in the public and private responses to the pandemic.

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.

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

We continue to monitor the latest developments regarding the COVID-19 pandemic and have incorporated certain assumptions regarding the duration, severity and global macroeconomic impact of the pandemic into our financial outlook.

The impact of COVID-19 on our business and operating results could differ materially from these assumptions based on a number of factors largely outside of our control.

War in Ukraine

The current war in Ukraine and the continued threat of terrorism, heightened security measures and military action in response to acts of terrorism or civil unrest has disrupted commerce and intensified concerns regarding the United States and world economies.

Less than 1% of our revenue in fiscal 2023 was generated in Russia and Ukraine.

However, the imposition of additional sanctions by the United States and/or foreign governments, as well as the sanctions already in place, could lead to restrictions related to sales and our supply chain for which the financial impact is uncertain.

In addition, the war has also led to, and may lead to further, broader unfavorable macroeconomic implications, including unfavorable foreign exchange rates, increases in fuel prices, food shortages, a weakening of the European economy, lower consumer demand and volatility in financial markets.

These implications of the war in Ukraine could have a material adverse effect on our business and our results of operations.

Critical Accounting Estimates

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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.

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.

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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.

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.

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

We continually evaluate the composition of our inventories, assessing slow-turning, ongoing product as well as fashion product from prior seasons.

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Fair value is generally determined using discounted cash flows, market multiples and market capitalization.

Significant estimates used in the fair value methodologies include estimates of future cash flows, future short-term and long-term growth rates, weighted average cost of capital and estimates of market multiples of the reportable unit.

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.

multiples of the reportable unit.

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

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

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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.

In addition, we make certain judgments about allocating shared assets to the estimated balance sheets of our reporting units.

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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.

Fiscal 2023 Annual Goodwill Impairment Testing

We performed our annual test of our wholesale reporting unit as of January 31, 2023 by electing to bypass the qualitative assessment and proceed directly to the quantitative impairment test using a discounted cash flows method to estimate the fair value of our wholesale reporting unit.

We made this election due to the decline in our market capitalization.

The fair value of the wholesale reporting unit for goodwill impairment testing was determined using an income approach and validated using a market approach.

The income approach was based on discounted projected future (debt-free) cash flows for the reporting unit.

The discount rate applied to these cash flows were based on the weighted average cost of capital for the wholesale reporting unit, which takes market participant assumptions into consideration, inclusive of a

Company-specific 7.5% risk premium to account for the additional risk of uncertainly perceived by market participants related to our overall cash flows.

Estimated future operating cash flows were discounted at a rate of 17.5% to account for the relative risks of the estimated future cash flows.

For the market approach, used to validate the results of the income approach method, we used the guideline company method, which analyzes market multiples of adjusted earnings before interest, taxes, depreciation and amortization for a group of comparable public companies.

As a result of our fiscal 2023 annual impairment test, we recorded a $347.2 million non-cash impairment charge during our fourth quarter of fiscal 2023 to fully impair the carrying value of our goodwill, which was included in asset impairments and gain on lease terminations in our consolidated statements of operations and comprehensive income (loss).

This impairment charge was recorded to our wholesale operations segment.

Fiscal 2022 and Fiscal 2021 Annual Goodwill Impairment Testing

We performed our annual tests of our wholesale reporting unit using a qualitative review as of January 31, 2022 and 2021 and determined that no impairment existed at those dates.

The results of our annual tests determined that the estimated fair value of our wholesale reporting unit was substantially in excess of its carrying value.

Fiscal 2023 Annual Indefinite-Lived Intangible Assets Impairment Testing

We performed our annual test of our indefinite-lived trademarks as of January 31, 2023 using a qualitative evaluation or a quantitative impairment 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.

We determined that the fair values of each of our indefinite-lived intangible assets substantially exceeded its carrying value and, therefore, there were no impairments identified as of January 31, 2023 as a result of these tests.

Fiscal 2022 and Fiscal 2021 Annual Indefinite-Lived Intangible Assets Impairment Testing

We performed our annual test of our indefinite-lived trademarks using a qualitative review as of January 31, 2022 and 2021 and determined that no impairment existed at those dates.

The results of our annual tests determined that the estimated fair values of 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 trademarks that were acquired in fiscal 2017 and the Karl Lagerfeld trademark that was acquired in fiscal 2023.

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

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In fiscal 2023, we recorded a $2.7 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 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.

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 $21.8 million impairment charge primarily related to leasehold improvements, furniture and fixtures and operating lease assets 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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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 were granted to executives beginning 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 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.

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Depreciation and amortization

Asset impairments, net of gain on lease terminations

Operating profit

Other income (loss)

Asset impairments and gain on lease terminations

Operating profit (loss)

Interest and financing charges, net

Income before income taxes

Income tax expense

Income (loss) before income taxes

Income tax expense (benefit)

Net income (loss)

Loss attributable to noncontrolling interests

Net income attributable to G-III Apparel Group, Ltd.

Net income (loss) attributable to G-III Apparel Group, Ltd.

Year ended January 31, 2023 (“fiscal 2023”) compared to year ended January 31, 2022 (“fiscal 2022”)

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Net sales of our wholesale operations segment increased to $3.16 billion from $2.71 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 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.

This increase is primarily the result of a $131.7 million increase in net sales of Calvin Klein licensed products, $130.4 million in net sales resulting from the inclusion of the results of the recently acquired Karl Lagerfeld business for seven months of fiscal 2023, a $32.4 million increase in net sales of Karl Lagerfeld Paris products, an $18.6 million increase in net sales of our DKNY and Donna Karan products and a $14.5 million increase in net sales of Tommy Hilfiger licensed products.

The increase in sales of Calvin Klein products was primarily related to dresses, women’s suits and men’s and women’s outerwear.

The increase in sales of Karl Lagerfeld Paris products was primarily related to handbags, men’s outerwear and shoes.

The increase in sales of DKNY and Donna Karan products was primarily related to dresses, women’s suits and luggage.

The increase in sales of Tommy Hilfiger products was primarily related to dresses and suits.

Net sales of our retail operations segment increased to $137.2 million from $117.7 million in the same period last year.

The number of retail stores in our retail operations segment decreased from 60 at January 31, 2022 to 59 at January 31, 2023.

While there was no significant change in our total retail store count compared to the prior year, the increase in net sales of our retail operations segment is primarily the result of an increase in the number of Karl Lagerfeld Paris retail stores and a decrease in the number of DKNY retail stores compared to the prior year.

Our Karl Lagerfeld Paris retail stores performed better than our DKNY retail stores, as our DKNY stores were adversely impacted by decreased tourism and spending from consumers in China.

Gross profit was $1.1 billion, or 34.1% of net sales, for fiscal 2023 and compared to $988.2 million, or 35.7% of net sales, last year.

The gross profit percentage in our wholesale operations segment was 32.6% for the year ended January 31, 2023 as compared to 34.2% for the year ended January 31, 2022.

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 addition of the recently acquired Karl Lagerfeld business for seven months of fiscal 2023 resulted in an increase of 1.4% to the gross profit percentage in our wholesale operations segment as this business operates at a higher gross profit percentage than our legacy wholesale operations segment.

The gross profit percentage in the current year period was negatively impacted by $41.6 million in charges resulting from our inability to pick up freight from port terminals and return containers to ocean carriers in a timely manner compared to an insignificant amount of similar charges in the same period last year.

Additionally, the gross profit percentage in the current year period was negatively impacted by higher promotional activity, inflationary pressure on product costs and increased freight costs, partially offset by the implementation of price increases by us.

The gross profit percentage in our retail operations segment was 49.9% for the year ended January 31, 2023 compared to 50.9% for the same period last year.

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.

The gross profit percentage in our retail operations segment was negatively impacted in the current year by increased promotional activity.

Selling, general and administrative expenses increased to $833.2 million in fiscal 2023 from $648.0 million in fiscal 2022.

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.

The inclusion of the results of the acquired Karl Lagerfeld business for seven months in fiscal 2023 represented $76.2 million of this increase.

The remainder of the increase in expenses was primarily due to increases of (i) $50.5 million in third-party warehouse and facility expenses, (ii) $27.3 million in advertising related to digital and brand promotional activities and (iii) $5.0 million in compensation expense, primarily from increased salary expenses.

Depreciation and amortization expense was $27.8 million in fiscal 2023 and $27.6 million in fiscal 2022.

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 2023, we recorded $349.7 million of asset impairments and gain on lease terminations.

This charge is primarily comprised of (i) a $347.2 million goodwill impairment charge as a result of our decline in our stock price and (ii) a $2.7 million impairment charge 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 2022, we recorded $1.5 million of asset impairments and gain on lease terminations 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.

Other income was $27.9 million in fiscal 2023 compared to other income of $9.5 million in fiscal 2022.

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.

Other income in the current period consisted primarily of a gain of $27.1 million during the year ended January 31, 2023 as a result of the remeasurement of our previously held 19% investment in the parent of Karl Lagerfeld and 49% interest in the North American operations of Karl Lagerfeld as of the effective date of the acquisition of the remaining interests in the parent of Karl Lagerfeld.

Additionally, other income consisted of $0.7 million in income from unconsolidated affiliates during fiscal 2023 compared to $8.1 million in income from unconsolidated affiliates in fiscal 2022.

Other loss in the current period consisted of $4.7 million of foreign currency losses during fiscal 2023 compared to $2.6 million in fiscal 2022.

Interest and financing charges, net for fiscal 2023, were $56.6 million compared to $49.7 million for fiscal 2022.

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.

The increase is primarily due to higher average borrowings on our revolving credit facility in the current year period.

We had no borrowings outstanding under our revolving credit facility in the same period last year.

Income tax benefit for fiscal 2023 was $3.8 million compared to income tax expense of $70.9 million for the prior year primarily due to our net loss position resulting from a $347.2 million goodwill impairment charge.

Our effective tax rate was 2.7% in fiscal 2023 compared to 26.2% in the prior year.

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.

This decrease in our effective tax rate is primarily due to the goodwill impairment charges which significantly decreased pretax book income in relation to tax expense.

Liquidity and Capital Resources

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

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.

The net proceeds of the Notes were used (i) to repay the $300 million that was outstanding under our prior term loan facility (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.

The Notes are unconditionally guaranteed on a senior-priority secured basis by our current and future wholly-owned domestic subsidiaries that guarantee any of our credit facilities, including our ABL facility (the “ABL Facility”) pursuant to the ABL Credit Agreement, or certain future capital markets indebtedness of ours or the guarantors.

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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.

On or after August 15, 2022, we may redeem some or all of the Notes at any time and from time to time at the redemption prices set forth in the Indenture, plus accrued and unpaid interest, if any, to, but excluding, the applicable redemption date.

In addition, at any time prior to August 15, 2022, we may redeem up to 40% of the aggregate principal amount of the Notes with the proceeds of certain equity offerings at the redemption price set forth in the Indenture, plus accrued and unpaid interest, if any, to, but excluding, the applicable redemption date.

In addition, at any time prior to August 15, 2022, during any twelve month period, we may redeem up to 10% of the aggregate principal amount of the Notes at a redemption price equal to 103% of the principal amount of the Notes redeemed plus accrued and unpaid interest, if any, to, but excluding, the applicable redemption date.

We may redeem some or all of the Notes at any time and from time to time at the redemption prices set forth in the Indenture, plus accrued and unpaid interest, if any, to, but excluding, the applicable redemption date.

If we experience a Change of Control (as defined in the Indenture), we are required to offer to repurchase the Notes at 101% of the principal amount of such Notes plus accrued and unpaid interest, if any, to, but excluding, the date of repurchase.

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The Indenture provides for customary events of default which include (subject in certain cases to customary grace and cure periods), among others, nonpayment of principal or interest, breach of other agreements in the Indenture, failure to pay certain other indebtedness, failure of certain guarantees to be enforceable, failure to perfect certain collateral securing the Notes, failure to pay certain final judgments, and certain events of bankruptcy or insolvency.

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

We incurred debt issuance costs totaling $8.5 million related to 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

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The ABL Credit Agreement provides for borrowings in the aggregate principal amount of up to $650 million.

We and our subsidiaries, G-III Apparel Canada ULC, Gabrielle Studio, Inc., Donna Karan International Inc.

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

We and certain of our subsidiaries (the “Guarantors”), are Loan Guarantors under the ABL Credit Agreement.

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.

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.

The 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.

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

In addition to paying interest on any outstanding borrowings under the ABL Credit Agreement, we are required to pay a commitment fee to the lenders under the credit agreement with respect to the unutilized commitments.

In addition to paying interest on any outstanding borrowings under the ABL Credit Agreement, we are required

to pay a commitment fee to the lenders under the credit agreement with respect to the unutilized commitments.

The commitment fee accrues at a tiered rate equal to 0.50% per annum on the average daily amount of the available commitments when the average usage is less than 50% of the total available commitments and decreases to 0.35% per annum on the average daily amount of the available commitments when the average usage is greater than or equal to 50% of the total available commitments.

As of January 31, 2023, interest under the ABL Credit Agreement was being paid at an average rate of 5.31% per annum.

The revolving credit facility contains covenants that, among other things, restrict our ability, subject to specified exceptions, to incur additional debt;

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As of January 31, 2023, the Company was in compliance with these covenants.

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

As of January 31, 2023, we had $80.1 million of borrowings outstanding under the ABL credit agreement.

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

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We extinguished and charged to interest expense $0.4 million of the prior debt issuance costs and incurred new debt issuance costs totaling $5.1 million related to the ABL Credit Agreement.

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

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

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.

Reference Rate Reform

The interest rate under our revolving credit facility is indexed to LIBOR.

LIBOR quotations will cease as of June 30, 2023.

We are in the process of transitioning the reference rate used in our ABL Credit Agreement from LIBOR to the Secured Overnight Financing Rate.

We expect this transition to be completed prior to the date LIBOR quotations cease.

We do not expect a material change to our interest expense or results of operations from the change in the reference rate used for our 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.

The LVMH Note is classified in current portion of notes payable in our consolidated balance sheet as of January 31, 2023.

Based on an independent valuation, it was determined that the LVMH Note should be treated as having been issued at a discount of $40 million in accordance with ASC 820 — Fair Value Measurements .

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Unsecured Loans

During fiscal 2020 and fiscal 2021, T.R.B International SA (“TRB”), a subsidiary of Vilebrequin, borrowed funds under several unsecured loans.

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.

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.

Several of our foreign entities borrow funds under various unsecured loans of which a portion is to provide funding for operations in the normal course of business while other loans are European state backed loans as part of COVID-19 relief programs.

In the aggregate, the Company is currently required to make quarterly installment payments of principal in the amount of €0.6 million.

Interest on the outstanding principal amount of the unsecured loans accrues at a fixed rate equal to 0% to 5.0% per annum, payable on either a quarterly or monthly basis.

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Overdraft Facilities

During fiscal 2021, TRB entered into several overdraft facilities that allow for applicable bank accounts to be in a negative position up to a certain maximum overdraft.

During fiscal 2021, T.R.B International SA (“TRB”), a subsidiary of Vilebrequin, entered into several overdraft facilities that allow for applicable bank accounts to be in a negative position up to a certain maximum overdraft.

TRB entered into an uncommitted overdraft facility with HSBC Bank allowing for a maximum overdraft of €5 million.

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The facility may be cancelled at any time by TRB or HSBC Bank.

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 part of a COVID-19 relief program, TRB and its subsidiaries 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, 2023, TRB had an aggregate €3.4 million ($3.7 million) drawn under these various facilities.

Foreign Credit Facility

KLH has a credit agreement with ABN AMRO Bank N.V.

with a credit limit of €15.0 million which is secured by specified assets of KLH.

Borrowings bear interest at the Euro Interbank Offered Rate (“EURIBOR”) plus a margin of 1.7%.

As of January 31, 2023, KLH had €7.3 million ($7.8 million) of borrowings outstanding under this credit facility.

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.

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

We had $80.1 million of borrowings outstanding under our ABL Credit Agreement as of January 31, 2023 and no borrowings outstanding under the facility as of January 31, 2022.

We had $400 million in borrowings outstanding under the Notes at each of January 31, 2023 and January 31, 2022.

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In addition to the amounts outstanding under these two loan agreements, at January 31, 2023 and 2022, we had $125.0 million of face value principal amount outstanding under the LVMH Note.

The amount outstanding under the LVMH Note is scheduled to be repaid during fiscal 2024.

We had an aggregate of €10.1 million ($10.9 million) and €7.4 million ($8.4 million) outstanding under the Company’s various unsecured loans as of January 31, 2023 and January 31, 2022, 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.

We also had €3.4 million ($3.7 million) and €2.6 million ($2.9 million) outstanding under Vilebrequin’s overdraft facilities as of January 31, 2023 and January 31, 2022, respectively and €7.3 million ($7.8 million) outstanding under our foreign credit facility as of January 31, 2023.

Share Repurchase Program

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

In March 2022, our Board of Directors authorized an increase in the number of shares covered by our share repurchase program to an aggregate amount of 10,000,000 shares.

Pursuant to this program, during fiscal 2023 we acquired 1,587,581 of our shares of common stock for an aggregate purchase price of $26.9 million and during fiscal 2022 we acquired 656,213 of our shares of common stock for an aggregate purchase price of $17.3 million.

No shares of common stock were acquired pursuant to this program during fiscal 2021.

The timing and actual number of shares repurchased, if any, will depend on a number of factors, including market conditions and prevailing stock prices, and are subject to compliance with certain covenants contained in our loan agreement.

Share repurchases may take place on the open market, in privately negotiated transactions or by other means, and would be made in accordance with applicable securities laws.

Share repurchases may take place on the open market, in privately negotiated transactions or by other means, and would be made in accordance with applicable

securities laws.

As of January 31, 2023, we had 8,412,419 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, 2023, we had approximately 46,488,488 shares of common stock outstanding.

Cash from Operating Activities

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 used $104.6 million of cash from operating activities in fiscal 2023, primarily due to our net loss of $133.1 million, increases of $163.7 million in inventories and $41.0 million in accounts receivable, as well as a decrease of $107.2 million in accounts payable and accrued expenses.

In addition, we had a non-cash charge of $55.1 million in deferred income taxes and a non-cash $27.1 million gain on our 19% investment in the parent of Karl Lagerfeld and 49% investment in the North American operations of Karl Lagerfeld in connection with our acquisition of the remaining interests in the parent of the Karl Lagerfeld business.

These items were offset, in part, by non-cash charges relating primarily to asset impairments and gain on lease terminations of $349.7 million, share-based compensation of $32.5 million and depreciation and amortization of $27.8 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).

We also generated cash from operating activities from decreases of $143.5 million in inventories, $38.9 million in accounts receivable and $24.5 million in prepaid expenses and other current assets.

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.

Cash from Investing Activities

In fiscal 2023, we used $218.0 million of cash in investing activities primarily as a result of cash paid, net of cash acquired, of $168.6 million for the acquisition of KLH.

We also used $25.0 million for a minority investment in an e-commerce retailer and had $21.5 million in capital expenditures primarily related to infrastructure and information technology expenditures and additional fixturing costs at department stores.

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

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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.

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.

Cash from Financing Activities

In fiscal 2023, we generated $51.6 million of cash in financing activities primarily as a result of borrowings of $587.3 million under our ABL Credit Agreement, partially offset by repayments of $507.2 million under that Agreement.

These borrowings were also offset, in part, by $26.9 million of cash used to repurchase 1,587,581 shares of our common stock under our share repurchase program and $9.8 million for taxes paid in connection with net share settlements of stock grants that have vested.

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.

Financing Needs

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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) $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.

(a) $400.0 million related to our Notes that will mature in fiscal 2026, (b) $125.0 million in face principal amount of the note issued to LVMH payable in fiscal 2024, (c) $10.9 million in our various unsecured loans which have maturity dates ranging from fiscal 2026 through fiscal 2029 and requires us to make quarterly installment payments of €0.6 million and (d) $3.7 million in our various overdraft facilities, (d) $7.8 million in our foreign credit facilities and (e) $3.7 million in our overdraft facilities.

We had $80.1 million borrowings outstanding under our revolving credit facility as of January 31, 2023.

(3) Includes outstanding trade letters of credit, which represent inventory purchase commitments, which typically mature in less than six months.

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