Welcome to the G-III Apparel Group First Quarter Fiscal 2019 Earnings Conference Call. My name is John, and I’ll be your operator for today’s call. [Operator Instructions] Please note the conference is being recorded. And now I’ll turn the call over to Neal Nackman, Chief Financial Officer of G-III. Sir, you may begin.

Good morning and thank you for joining us. Before we begin, I would like to remind participants that certain statements made on today’s call and in the Q&A session may constitute forward-looking statements within the meaning of the federal securities laws. Forward-looking statements are not guarantees and actual results may differ materially from those expressed or implied in forward-looking statements. Important factors that could cause actual results of operations or the financial condition of the company to differ are discussed in the documents filed by the company with the SEC. The company undertakes no duty to update any forward-looking statements. In addition, during the call, we will refer to non-GAAP net income and loss, non-GAAP net income and loss per share and to adjusted EBITDA, which are all non-GAAP financial measures. We have provided reconciliations of these non-GAAP financial measures to GAAP measures in our press release, which is available on our website. I will now turn the call over to our Chairman and Chief Executive Officer, Morris Goldfarb.

Good morning and thank you for joining us. With me today are Sammy Aaron, our Vice Chairman and President; Wayne Miller, Our Chief Operating Officer; Neal Nackman, our Chief Financial Officer; and Jeff Goldfarb, Executive Vice President. We’re pleased to have begun the year with a solid first quarter performance. Although the retail landscape continues to change with consumers having unprecedented access to information and online and brick and mortar shopping options, we continue to demonstrate our ability to prosper in tough environments. Strong brands, great product and execution, and diversified distribution continue to be our winning formula. We know how critical it is for G-III to continue to be a supplier of choice that understands the marketplace, the trends, and the consumers’ shopping habits regardless of where the transaction occurs, whether in the store or online. To that point, today, we are a dominant resource to our retail partners in many major categories, including outerwear, sportswear, dresses, suit separates, performance apparel, handbags, and footwear in North America. We are also increasing our presence in important markets around the world. Our wholesale business continued to drive our results in the first quarter, which again, exceeded our expectations, with respect to both the top and bottom line. Our retail business performed as expected, and we continue to right size our operations as we push to return this business to profitability. A few financial highlights for the first quarter. Net sales were up 16% to $612 million, an $83 million increase compared to last year. This outperformed our plans for the quarter. Our first quarter non-GAAP net income per diluted share was $0.22 in our first quarter compared to a non-GAAP net loss of $0.18 per share in last year’s first quarter. Net sales and net income were both above our plans…

First, regarding our first quarter results. Net sales for the first quarter ended April 30, 2017, increased 16% to $612 million from $529 million in the same period last year. Net sales of our wholesale operation segment increased 16% to $528 million from $453 million. Net sales of our retail operation segment increased 5% to $105 million from $99 million. We reported a same-store sales increase of 19% for our Wilsons stores and a 2% comp decline at G.H. Bass. Our gross margin percentage was 38.5% in the three-month period ended April 30, 2018, compared to 38.1% in the prior year’s period. The gross margin percentage in our wholesale operation segment was 35.4%, compared to 34.2% in last year’s quarter. The gross margin was negatively affected by approximately 100 basis points, due to our new classification of deducting our co-op advertising expenses from net sales. The new classification is pursuant to the adoption of new accounting rules under Accounting Standard Codification Topic 606, commencing in fiscal 2019. The gross margin percentage in our retail operation segment was 46.3%, compared to 47.1% in the prior year’s quarter. Wilsons and G.H. Bass both saw increased gross margins in the quarter as compared to the first quarter last year. Donna Karan gross margins continued to be above the average for this segment but were down in the quarter compared to the prior year. The prior year gross margins for Donna Karan reflect the reversal of valuation reserves from the acquisition accounting. Total SG&A expenses increased to $203 million in the quarter from $197 million in the same period last year. This was significantly driven by employee costs, which increased $9 million, primarily related to increased bonus expense and salaries. In addition, the SG&A expenses in the quarter do not reflect approximately $6 million…

Before we take your questions, I’d like to take a moment to look beyond our excellent first quarter results. Disruption in the retail industry has never been greater. The increased level of competition, particularly from the new giants of e-commerce, has forced companies in our marketplace to raise their game to a new level or be left behind. We have always evolved our organization and remain keenly focused on execution. Over the past 15 years, we created opportunities and continued to develop skill sets that enabled us to diversify and expand in new directions. We were intensely focused on building a special company that is capable of pursuing growth wherever it exists. Ultimately, we supplemented a world-class portfolio of licensed and private label businesses with our own suite of powerful brands. As a result, we now have the ability to truly chart our course forward and to continue our own destiny. As we look to the future, we’re increasingly focused on a global set of opportunities. We’re now among the most important resources for the retail market here in the United States. And while there is certainly continued opportunities in the U.S., there are many throughout the world. We’ve only scratched the surface of what we believe we can become in the global arena. You can be sure that, as always, we will continue to push ourselves to be an extraordinary company. Thank you, operator. And now we’re ready to take some questions.

Thank you. [Operator Instructions] And our first question is from Edward Yruma from KeyBanc Capital Markets.

Okay, good morning guys, and congrats on the strong results. Some very interesting comments you made just now about international. I know that you’ve moved a senior leader for Donna Karan abroad. I know that you’ve, obviously, been abroad with VBQ, but how should we think about the longer-term opportunity internationally with your portfolio? And kind of what would an investment case look like or investment spend as you look to build out those capabilities? And then second, I know that you had an issue, so there was a $0.30 negative impact to Bon-Ton, just kind of any update on that based on maybe what you shipped before they finally closed? Thanks.

Thanks for your question, Ed. DKNY, when we acquired it, had a very important office based in Milan, with some incredible people. As we acquired the company, we learned that the luxury sector that was represented quite well by LVMH taught their associates how to think a little bit differently than we teach our associates. So, we were having some communication issues that needed to be cured. Thus, I sent one of our key associates, Jeanette Nostra, who is the prior president to G-III, to live abroad for six months. So, she was the point person to translate exactly what we were looking for from the New York side. The initiative worked well. Our people are communicating much more clearly today, and we’re on a path of growth, which was the intention. The office had great talent, didn’t have the best of all product when we acquired it. We bettered the product. We broadened the distribution. And I would say, one might term it, we’re kind of off to the races in Europe. We’re looking for some wonderful contributions from many of the European countries, as well as our distributors. We have distributors all over the world that we were faced with the similar problem with. They had a history – let’s say, a 3-year or 4-year history of nonperformance with the brand with the ownership of LVMH. We’re turning that around. It’s not as easy feat. I wouldn’t tell you today we’re in a perfect spot. But I would tell you, we’re in a much-improved spot. And as we get better at it, as we understand the product needs and we understand how to distribute on the calendar that is more appropriate to Europe, we’ll have a contained business that is European inspired, European fashion that is in broad demand. So, everybody, our associates, our distributors and our New York team, is excited by the prospects of the future in Europe. So, to respond – I get, your second question was the Bon-Ton question. Neal, you want to do that?

Yes. So, we have originally anticipated about $100 million falloff in sales, about $0.30. We did ship just under $20 million for the first quarter. And it probably contributed about $0.05 to our results. So, we are probably looking at now a $0.25 impact for the year, and probably still hurting to the extent of about $80 million for the balance of the year.

Great, thanks so much guys.

Thank you, Ed.

Our next question is from Erinn Murphy with Piper Jaffray.

Great, thanks. Good morning and let me add my congratulations. I guess my first question is for Neal. Just on the guidance, trying to understand what you’re seeing in the back half. If I look at how you’ve effectively guided the first half, I think, sales are up 13%. In the back half – your updated guidance would imply roughly a 2% gain in the back half. So, it seems very conservative, but just curious if you can help us whether it’s order book or just what you’re seeing at wholesale that creates that deceleration in the back half?

Sure, Erinn. I think the single most – the single largest impact would be the Bon-Ton loss, which is strongest in the third quarter, and that had a reasonable fourth quarter as well. The second thing to probably mention in terms of order book, we are forecasting the outerwear business to be probably down low-single digits. It had a very, very strong fourth quarter last year, and we’re also up against just stronger comps overall, as far as the retail business last year and even the Donna Karan performance as it rolled into the second half of the year. So, look, we continue to feel that our core company growth, absent Bon-Ton, would have been in the mid-to-high single-digit area. We see lots of strong growth continuing still in the Donna Karan business. And as we’ve mentioned, strong improvement in retail.

Erinn, to add a little bit to the Bon-Ton issue. Bon-Ton’s geography has been great for the coat business. The amount of business that we did with Bon-Ton was skewed into the third and fourth quarter, the bulk of it came there. And our concern is, we might miss that piece of business. Bon-Ton was always important on the coat side. So thus, maybe there’s a conservative number with anticipating maybe a loss of a little bit of their business there.

Okay. But then maybe just on the order book commentary, I guess, that Neal you mentioned – you said down low single, that includes the Bon-Ton fall off. If you were to back out Bon-Ton, just given where inventories and the channel are, are the rest of your retailers ordering outerwear up year-over-year or flat? Where is that trending?

Our business – our order book is up low-single digits comp to last year. We had a good coat year. Usually, there’s a concern that the buyers don’t go after a second good coat year. This year, they did. And I would tell you with fewer doors, some of our department stores have better than the flat business.

Got it. And then maybe just on the conversions, I would love to hear a little bit more. You talked about the 9 Karl Lagerfeld conversions to date, just maybe help us thinking about kind of their performance? And then, you continue to see kind of outside performance there., how do you think about the balance between retail and wholesale for the Karl Lagerfeld brand over time?

So, the conversions that we executed with Karl Lagerfeld were really our most expensive real estate. They were the best outlet centers in the country, the most populated with tourists and the highest traffic winter in town. Those stores performed extremely poorly for Bass. Bass is really not a tourist brand. And we were losing as much as $700,000, $800,000 in given doors. And what we did is we converted them to Karl Lagerfeld stores with the help of one of our key real estate developers. The CapEx was minimal. It was in a sense one would say, was shared. And today, we’ve made up in pretty much every door, those nine doors that we described, where they’re headed toward breakeven, where a year ago, I would have told you that the loss was approaching $3 million for that bulk of doors. So, we’re very happy with it. We recently converted our Soho DKNY store for a short-term effort. We’re testing it to see if flagships are going to be important for us. The store is working. That store is a hybrid of the European product and the U.S. product. And the higher the retail, the better the performance is in those stores. So, we’re learning that there is more room to expand to better product, higher retails, and much better margins than we were accustomed to in our outlet centers. So, there’s a lot to learn. Too early to say how many stores we would roll out or whether Karl Lagerfeld becomes direct-to-consumer through real estate that we might build out or through wholesale. We’re testing both and more to come. All I can say is that we’re extremely happy with the performance.

Thank you, guys. Best of luck.

Thank you.

Our next question is from John Kernan from Cowen.

Good morning guys and let me add my congratulations. Morris, just wanted to go to Donna Karan. Still approaching $400 million in sales this year. Just wondering what you’re thinking about the overall level of profitability that we should expect and model, not just for this year, but also as we go into next year? Because it’s obviously a big swing factor in the model.

So, we commented on before probably hasn’t changed, although Donna Karan did have a slightly better result first quarter to plan. Last year, they lost just under $25 million. We’re adding roughly $140 million of sales. I continue to think that the operating margin delta on that will be about 20%, give or take, so we will be up slightly profitable, small profits on the $400 million business. I think when you roll that into next year, there’s no reason to think. It’s early for us to give you specific guidance on sales, but again, this should be highly levered sales growth and highly profitable, probably in that similar range in terms of operating margin improvement per sales dollar.

John, what we touched on in our earlier presentation was the licensing royalty that we would begin to receive. That’s really not happened in most cases, it’s just beginning. So, maybe toward fourth quarter, I guess, we’d begin to see the benefit of that. And then, again, another opportunity. We have a partnership in China that hasn’t started yet. That’s about to be launched. So, there’s amazing opportunities with this brand that we really haven’t even scratched the surface with. So, we’re excited to own it. We’re excited to operate it. It doesn’t come for free. It’s contributed a great deal of stress to the company to try to execute our vision. But I think the worst is passed and this will turn out to be the best acquisition this company has ever made.

Exciting stuff. Can we shift back to retail? You, obviously, laid out what you expect from a profitability standpoint this year, I think, a $10 million to $15 million improvement. You’ve got about $4 million in losses going away from closed stores. How do we think about the profitability within the next couple of years in this retail segment? Because this again is another big swing factor in the overall company’s P&L. This used to be a mid-single-digit operating margin business when it peaked out. But it sounds like you have a lot of initiatives in place between repurposing stores, improving comps, closing unproductive stores where the profitability here could make a big improvement over the next couple of years. Can you just talk about what your internal expectations are around profitability for this business as we go beyond just this year?

John, if I could cite one thing that you missed and what we have today for retail that we didn’t have before, I would tell you it’s brands. We have DKNY, and I don’t think you could compare DKNY as a brand in the outlet centers to a Wilsons or a Bass. So, we have a premier brand for the first time to be able to utilize some of the great real estate that we do have. The real estate we have is really not the problem. The product, I would say, that’s our miss. We could have done better on the product execution. And we now have two brands that we can expand with and build a retail platform if we desire to do that. The second one, again, as we touched on, was Karl Lagerfeld. So, if we get serious about retail, and I can’t tell you that I’m there yet, because we still have our problems with the appropriate products and the appropriate execution on DKNY retail. And if we can’t figure that out, we’ll find another solution. We’re a resourceful company. We don’t stay focused on one path and beat it to death if it tells us, hey, this isn’t the path. So, we’re doing – in my book, I would tell you we’re doing extremely well on turning it around. We’re just not there yet.

Can I’ve just one more follow-up to Neal? The core Calvin and Tommy business growth rates you expect out of that kind of excluding the Bon-Ton business, it feels like there’s a lot of momentum for Calvin and Tommy right now in the U.S. wholesale channel, so I’m just wondering what your expectations are for top line out of those brands for the remainder of the year?

Yes. Again, the Bon-Ton business impact – the loss of the Bon-Ton business impacts Calvin a bit more this year, probably would have a mid-single-digit type – low to mid-single-digit type growth in the Calvin, except for Bon-Ton. I think without the Bon-Ton sales, unless they get picked up somewhere else, which is always possible, and not in our plan – not in our anticipation at this point, we would see a small decrease for this year in terms of the Calvin Klein business. And Tommy, we had sized that business up at $1 billion. There’s lots of growth. Without giving you a specific growth percentage, it’s a nice double-digit increase this year for us, coming off of nice double-digit increases before that, and again, with lots or runway for the brand overall.

That’s great. Thank you. Best of luck guys.

Thank you, John.

Our next question is from Eric Tracy from Buckingham Research.

Hi, everyone. Good morning and great execution. I guess, Morris for you, if I could just touch on – follow-up on Donna Karan, you sort of made some comments that you are satisfied with the Macy’s exclusive launch. Would just love to hear a little bit more on again sort of the learnings, maybe some of the execution issues? And then as we think about beyond just the license opportunity, just in the core, what that opportunity looks like?

So, my terminology of satisfied, let me explain that. First of all, we had two brands to launch, both Donna Karan and DKNY. And contrary to most mono-brand operators, we were very strong on creating classification businesses. So, now dissect every piece, DKNY and Donna Karan, we now have about 15 subclassifications, if you drill down to it. So, we had to launch the dress business. We had to launch a suit business. We launched denim business. We launched the footwear business. We launched the handbag business and we did that, and what I believe, and there are more, it’s just the beginning. We launched swimwear as well, believe it or not. So, to have executed, as well as we did on this broad array of classifications, I would say is a job extremely well done. Are they perfect? No. I would tell you, not one of the classifications is perfect. Are they good? Yes, I would tell you, they’re all good. What we have is a retailer that’s supporting it in the classifications that are exclusive to them. And we have a vendor base that stepped up and did miracles to create the product, delivery it on time. We’ve got a design team, merchant team that – it’s unimaginable that we were able to do all of this in this range of time. So, now we’re into call it the easier phase. We just have to make it a little bit better in each classification. So, if I were grading it, I’d tell you we did an excellent job. From an economic point of view, it kind of matches up. We did okay. We’re doubling our business from last year. Our margins are getting better. Our inventory levels are in check. So, I would say as the CEO of this company, I’m proud of what was accomplished. As far as – I’m sorry go ahead, Eric.

Oh, no. Sorry. No. Sorry, please go ahead; finish.

The backside of your question, which was license product. The PVH just launched the men’s apparel. They did a great job of staffing it quickly, creating the product and getting it into over 150 doors at Macy’s. There’s a team that’s excited about doing the product. It’s not often that you – we have the experience. This is a licensed category or a licensed brand for PVH. And for them to put passion in this when they have so many wonderful things going on, it’s a good vote. So – and the team that’s executing this has also done a wonderful job. If you look at Estée Lauder, who is our largest licensee, they launched a fragrance specifically because of the Macy’s initiative called stories. Their business with us is great. They’re high energy. They’re – I don’t want to speak for them. That might be a call you would make, but my belief is they’re very satisfied with the partnership. They’re satisfied with what we’re doing to help the brand and help them execute in areas that maybe we might be better suited for. We have a jewelry license that has done very well. And again, at a smaller scale launch, it’s pretty much sold through. We’ve got eyewear. We’ve got watches, and we have the kid’s area that has also launched and done well. So, I’d say, we’re giving you all this stuff to process, but go back to the calendar, we just bought this brand. We bought it from a European company, with a culture that is definitively different. We have signed on licenses. We’re executing our product. I don’t know that we’ve announced it yet, but we have a men’s underwear license that was signed by 2xist. So, there’s teams of people that are executing at every level, whether it’s marketing, whether – yes, the pieces that you’re not seeing yet, whether it’s licensing, marketing and production, our overseas team, this is selfishly, I’d tell you it’s a masterpiece. It’s been done really well.

That’s great to hear and I really appreciate the color. Just a quick follow-up on Bon-Ton. I want to – within the assumptions, is there any recapture rate sort of assumed within that be it rev or earnings hit to that?

Yes. We have not anticipated a recapture rate. So, where those dollars ultimately flow, I think that is an opportunity for us. But in our estimates, we have not anticipated a recapture rate.

Okay, great. Thanks guys. Best of luck.

Thank you, Eric.

Next question is from Susan Anderson from B. Riley FBR.

Good morning. This is Luke Hatton on for Susan. So, I just wondering, how should we be thinking about the outlook for marketing spend the remainder of the year? I believe, last quarter you talked about having been built a budget for an aggressive marketing campaign around DKNY. And, I was just looking for any update on how that is progressing against expectations?

It’s progressing well. We’re – I’m not going to give you the exact number, but we’re spending far more than we did last year. Last year, as we were focused on the getting the product right, we were – we felt that the spend would not have done us enough good. This year, we’re spending a good deal of money, more than a regular brand would to get the recognition and retain the stature that the brands have had historically. As the product matches up to what we want, we will spend much, much more. And we’re pretty close to it. If you’re familiar with Sammy Aaron, who has led the charge on the product side of not only DKNY, but most of the important brands of the company. It’s hard work that is finally beginning to pay off and matched with that as we see perfection. We were budgeted to spend a disproportionate amount of money on the marketing side. We’re just waiting for, let’s call it, the product to be a little bit more right. We’ve identified the marketing campaigns we’re going to due to launch, or I guess, relaunch some of what we attempted to do earlier. And we have a plan to do something that would be probably considered as a disruptor in the marketing side of the world. We’re just not there today.

Got it. And then, what sort of your longer-term expansion opportunity for the luggage beyond sort of the 200 doors it is now for DKNY?

Well, I don’t know if you’re aware, but we have a luggage business with Calvin Klein, with Tommy Hilfiger, a little bit of Karl Lagerfeld. And with our ownership of DKNY, we launched the luggage under DKNY. So, beyond Macy’s, our own outlet stores are doing exceptionally well with luggage. It’s a strong business for them. And there’s a department store business that we can service with luggage. And there’s a global initiative with luggage. And we have this – for the first time, we have the ability of taking a premier brand and marketing it globally with luggage. So – and I’m sure we haven’t tested that yet. We’re trying to get logistics correct for that. One of the biggest problems that we have in the luggage business is the logistics side of it. So, we’re trying to get to the bottom of what our best solution for the global distribution will be.

Great, thank you. Thanks for taking our questions. Good luck for next quarter.

Thank you.

Our next question is from Chethan Mallela from Barclays.

Hi, good morning. Just on the retail side of the business, can you talk about the traffic trends during the quarter, what you’re seeing from foreign tourism? And just how you’re thinking about that channel, in general, more broadly going forward?

For the quarter, our February traffic was better than last year. Our March traffic was okay. And our April traffic fell off the cliff. We were well behind for our traffic count in April in pretty much all our brands, so our business suffered in the month of April. Had April been a good month, we would have posted significant increases. April was the tough one. May turns out to be very much better than April. And I think we’re down a path to what we’re identifying as bettering the retail business and bringing it to profitability in the short term.

Okay. And then just on the wholesale side of the business, you’re still generating pretty good growth or very good growth in Tommy Hilfiger and Karl Lagerfeld even as you’re lapping the initial launch of kind of the new product categories. And so, can you just talk about how much more white space you see in terms of space gains for these businesses versus how much of the future growth will just be kind of velocity first per point of distribution?

So, space gains are difficult to get today. We have them identified. We have – we’re occupying some of the premier space in the department store sector today. Clearly, at Macy’s, Tommy is what would be considered a Macy’s brand. So, with Macy’s brands, they generally give us the best real estate in the house, and we have it. A bunch of it was procured by PVH. It is in place when we took over the distribution and the work involved in bringing Tommy to the market. And then, we have classifications that we never had before, which has become a little bit of battle to fight for space. But we have a great department and uniquely, believe it or not, it’s composed of some of the talent that worked at Macy’s that is negotiating with Macy’s for space and it’s succeeding. We’ve hired legions of people to help us execute at the store level. It’s not only products, it’s where the products sit’s, it’s how the product appears on the floor and how it’s kept on the floor versus the backroom and it’s hard work doing. We’re best-in-class today in getting products on the floor to what I would classify as some of the premier real estate in the stores. We focus a little bit too much on Macy’s, but I would tell you, it’s no different at a Dillard’s or a Lord & Taylor or the Bay. Our communications and our awareness of every department store of where we sit is key to our success. It’s another metric that we use on a weekly basis when we have our meetings to see if store appearance and department presence is where we want it to be. And as we gain scale and relevance to the retail world in the U.S., the respect is there to help us get some of the better space.

Very helpful, thank you so much.

Thank you.

Our next question is from Jim Duffy from Stifel.

Thank you. Good morning, guys. I have a question, one for Neal, and then a couple for Morris. Neal, on the retail business, in fiscal 2018 first quarter, you lost $23.4 million. Did you make good progress on profitability in the first quarter of fiscal 2019 in retail?

Yes, Jim, it’s approximately just under $5 million of improvement in the retail segment.

Specific to the first quarter?

First quarter.

Okay. And then Morris, you shared some good insights on where you stand with Donna Karan, some of the challenges that you’re going through, some of the opportunities. Can you give us an update on just the relative momentum you’re seeing within the components of the business, maybe more detail on DKNY versus Donna Karan and which classifications are getting the best traction?

Sure. DKNY is our major focus. The classifications that have picked up momentum, and I would say, maybe performing the best would be footwear. Footwear is doing extremely well. Our turns are best-in-class – best in the classification when you compare it to some of our universe of brands that we fit in. Handbags is doing well. Europe, the highlight of Europe would be handbags. And the U.S. is doing well with handbags. Dresses, we finally picked up momentum in dresses. Our dresses are performing exceptionally well. And our performance area is – actually, that’s doing great. Performance apparel never existed in some of the countries that we’re shipping it into. It’s performing exceptionally well in the Middle East. It’s doing well in Russia. It’s doing well in parts of the Far East. And it’s doing exceptionally well in the United States. So, we picked up – I would say, the – in retrospect, I would tell you the piece that is operating at close to perfection would probably be the performance area of what we have. To Donna Karan, Donna Karan came second. We had a commitment to launch DKNY for Macy’s. We accomplished that. They’re supporting everything they committed to. And as we achieved that, we hired a design team, a sales team. We now have Donna Karan launched, and Donna Karan is a smaller business. It’s a little bit better. It services all the other department stores and bits and pieces of Europe. The focus today should really be on DKNY.

Okay, great. And then, Morris, in your closing comments, you spoke about, I think you characterized is growing where the growth is. Can you elaborate on that some? For a big picture standpoint, I thought that was an interesting comment, and I’m just hoping you can share some more perspective on it.

So, you, of all people, who have watched this company, has basically seen that we’re not down one path, we’re generally down the best path. This company has changed its model, probably a dozen times in my career. As retail changes, we’ve kind of moved with that. We know who guides the business. It’s generally the retailer. The demands of the consumer go through retail, and then find their way to us. And what we do is try to service it best. If that means we become an online business and convert it to – more to online, that’s what we’ll do. If we need to become a vertical retailer down the line, that’s what we’ll figure out. You’ve got to remember, this company started out not as a mono brand, not as a private label company, this company started as one leather jacket. It was a brown bomber jacket. That’s all we did when we took this company public. So, to say that we have moved would be an understatement. Today, we’d probably be classified as pretty much close to all things for all people in our sector of business. We’re not a bomber jacket. We’re not a coat company. I remember being criticized for being just a coat company. And that’s what you do with the offseason. I remember being criticized for being a leather company. So today, there’s no criticism for the categories. We’re as broad as can be, and we’ve achieved success in pretty much all things that we’ve taken on. And the things that we failed with, we found a way out. We’ve discarded brands. We’ve discarded businesses, and we – we’re not about glory, we’re about executing to earn – at the end of the day, to earn money for ourselves as well as the investors.

Okay. I’ll leave you with that I suppose. Thank you.

Next question is from Rick Patel from Needham & Company.

Good morning, everyone. Very nice execution. Hoping you can provide some color on wholesale performance for department stores versus digital pure plays. Curious if there are any disparities in performance across brands or categories? And secondly, can you update us on how much digital pure plays represent in terms of your sales penetration? I’m assuming this penetration will fall this year as you ramp exclusive with Macy’s, but curious to get your thoughts.

Okay. So, most people forget that Macy’s has an online component to their business, and some of our categories, at given times, represents as much as 50% of the business. The coat business, during the height of the season, is 50% done online by Macy’s. So, if I were to give you pure play and include the retailers that have an online component to it, I would tell you that we’re probably north of 30% in pure play businesses. So, we’re building our own. We’re – it’s early on. And we have an online business with every department store group in the country in some form or another. And we don’t promote it as heavily as maybe we should to our investor, but we have a business with Amazon. We have marketplace on Amazon, as well as product that Amazon purchases. The brands that we do not have on Amazon are strategically kept from them for continuing to do, as well as we do in the brick-and-mortar that we have. We also have – in our team license business, we have a major initiative with Fanatics. Fanatics is probably 20% of our business in team license and they’re a pure-play retailer in team sports in the fan-based product. So, I would say, we’re probably around 30%. I don’t have the number handy, but if you’re curious, you can call back, and Neal would be happy to give it to you.

I appreciate it. And just a quick one on handbags. It sounds like Donna Karan is doing pretty terrific there. Are Calvin Klein handbags holding up well as DKNY ramps, just curious about how you think about these two brands coexisting in accessories?

Well, it’s not Donna Karan, by the way it’s DKNY that’s doing well. And they coexist, but they coexist alongside of Kors and Coach and Tommy Hilfiger and an assortment of many other brands. We find our way. They’re doing well and they’re performing at least, as well as DKNY is performing at least, as well as the department average. And Calvin Klein is doing fine. We are re-tooling some of our design. We were much more aggressive on the fashion side a year ago and we’re re-assorting it, and I believe we recapture and go well beyond where we were with Calvin Klein in the next few months. But today, if I were to take a snapshot, I would tell you it’s not at its peak, and we’ll bring it back to its peak very soon.

Thank you, very much. All the best.

Thank you. Operator, we will take one more question please.

Actually, at this time, we have no further question.

Thank you. Thank you for your time today, and thanks for staying with us.