G-III CEO Morris Goldfarb built his business the old-fashioned way: hard work, good instincts, great people.
When Morris Goldfarb arrived at a UJA benefit luncheon a few years back, he thanked execs at Gucci, Prada and Dolce & Gabbana for coming to honor him. They looked at him sheepishly, before admitting that they weren’t there for him but rather for Saks’ chairman Ron Frasch. On the podium, Goldfarb admitted that he’d thought they came for him. “After all, my wife has more of their product in her closet than Frasch has on his entire selling floor…”
As chairman of G-III Apparel, a healthy $1.5 billion conglomerate known to be one of the better-operating companies in the industry (with virtually no debt and a strong licensing model), Morris Goldfarb is still making people smile, especially investors, licensors and the many retailers who now carry his product.
Goldfarb explains how his business model has changed more than a half dozen times in recent years. “We were a leather coat company for most of our existence (from 1956 through 1992). Even worse, we were a leather bomber jacket company; this single item was 90 percent of our sales—one style in one color in four sizes. Then that era ended and we figured out that our best entry into department stores would be licensing well-known brands. We started early setting up a matrix to clearly identify target customers. Nothing was random: we built the business steadily through the ’90s; by 2005, we felt we could incorporate other venues into our platform.”
So he bought a few companies: Marvin Richards (with its trophy—the license for Calvin Klein outerwear), Winlet (Guess license), Andrew Marc (to own and develop a lifestyle brand) and Wilson’s (for a widespread retail presence).
But not satisfied with just outerwear, Goldfarb also bought a dress company (Jessica Howard) to develop a platform with year-round sales potential. “We chose a moderate brand with a strong team that could create, source and sell dresses. That accomplished, we signed a license with PVH for Calvin Klein dresses. We’ve since expanded our dress business to be almost as large as our coats; I believe we’re the number one or two dress company in the country.”
What’s more, G-III’s women’s suit separates have grown, as have sportswear, handbags and luggage. “Sportswear took a little longer,” Goldfarb confides. “It was a license we took over from Kellwood that they’d had for years.” Their fastest growing business at the moment is Calvin Klein performance/yoga/après-gym. And keep an eye on recently acquired Geneva-based Vilebrequin, a swim and resortwear company Goldfarb purchased to gain strength in the luxury and international markets. He expects to add retail locations throughout the world (there are now 185 owned and franchised stores) and develop the product beyond swimwear.
But once an outerwear exec always an outerwear exec, and Goldfarb is delighted with this year’s coat season. (Coats still generate 40 to 45 percent of company volume, with both wholesale and retail components; Wilson’s business is two-thirds outerwear.) “Our sell-throughs at retail were good; our inventory levels low. If you’d asked me end-November, my concern might have been too much inventory on wool coats (due to carry-over from 2011) but it turned out fine: our retail margin support was very manageable. So it’s all new fashion into 2013! And judging from early showings, retailers are very excited about our fall offerings, especially downs, active-inspired styles with new treatments and trims, and wools in new models.”
Asked his success secrets (other than the obvious: having all the best names in the industry), Goldfarb doesn’t hesitate. “It’s about managing with the merchants and staying attuned to performance at retail. We do this by putting planners on all our large accounts to work alongside the salespeople. This is not the norm in the coat business and it’s made a huge difference. We learned from sportswear the importance of planners, and while it’s too expensive to put a planning department into a seasonal business, we now have our 12-month planners also working on the coat side.”
Is there a way to extend the selling season or somehow make coat business less promotional? “Don’t even go there,” Goldfarb advises when asked the percent of business sold at ticket price. “But in fact, a lot of stores have shifted to later receipts and that’s a good thing. Much of the promotional pre-season business has disappeared (with the exception of Nordstrom’s Anniversary Sale, a great event that kicks off the season and provides early indicators). When we were just a coat company, there was always pressure to ship as early as possible in order to generate revenue for those months. Fortunately, we no longer feel that pressure.”
Having a 12-month business has helped G-III in other ways as well. “With year-round premier brands, we’re getting not only more floor space in major stores, but also in-store shops, improved lighting, signage, fixturing. When we were a four-month business, we never got these things and they make a world of difference in performance!”
In fact, while many apparel execs these days express dissatisfaction with the traditional wholesale to retail to consumer model (and are thus selling direct to consumer), Goldfarb is more than satisfied with it. “We have a few pieces of business that are completely vertical, but the traditional wholesale to retail to consumer model works well for us. We license brands; we own brands; we’re a licensor in classifications that seem tricky to execute. Our future is not based on selling direct.”
Their future is based, says Goldfarb, on an exceptional management team. “One of our company’s greatest strengths is our consistent DNA—most of the people who built it have been here 20-plus years. I’ve been here 40. So in 2011, when we were having a tough year (we missed our plan, the stock didn’t do well), it turned out to be our second best year ever. The weather didn’t go our way but it was nothing to be embarrassed about. Our operating units function well in all environments; they know how to make the best of tough seasons.
“You know, 10 years ago investors might have been worried about continuity. They’d ask ‘Morris, what happens if you get hit by a truck? It’s all over…’ Today, nobody worries that I could get hit by a truck! We’re a very solid organization.
“Still, I work incredibly hard: I’m the first one in the building each morning and the last out. But I totally enjoy my life, my vacations, my time with friends and family (wife of 40-years Arlene, children Jeff and Laura, five grandchildren). There’s nothing I would change.”
Goldfarb attributes much of his world view to his father Aron, who died just last year. “I worked side by side with this amazing man (a Holocaust survivor born in Poland who followed his brothers to America in 1956 and started a little leather factory) for 18 years; we shared an office. I started working there right out of school and by the time I was 24, I was running the front end of the business. My father had very little ego. He let me run the company and sat at my side to guide the process.
“Among the many lessons he taught me was to be fair. He’d say ‘Put yourself in the shoes of your customers or suppliers: a fair deal is generally the best deal.’”
Morris the Man
“Morris is a uniquely competent, compassionate, visionary executive who is driven to succeed. The respect and affection his colleagues feel for him, which is the mark of a great leader, is profound. They follow him into battle with vigor and pride. He is just as respected by his retail accounts, suppliers and industry peers.
“I first met Morris 13 years ago when we went to look at his business (then a $300-million leather coat company; now a $1.5 billion apparel giant), never expecting to invest. But I was so impressed with Morris personally, with his intelligence, integrity and solid sense of what’s right. He’s the type of CEO I’m always willing to bet on: an exceptional leader and an exquisitely fine human being.”
—Laurence Leeds, chairman, Buckingham Capital Management
“I’ve been working with Morris at G-III for 32 years: he is a most interesting and complicated man. For as wonderful as he is (devastatingly charming, witty, smart, generous to a fault), he is also a taskmaster with extremely high standards. He’s incredibly supportive but at the same time critical and demanding. His standards are so high that he’s never completely satisfied.
“Yet as tough as he can be, he has this inexplicable ability to draw people to him. And to motivate: he always inspires us to do more, not necessarily longer hours but by cutting to the heart of matters and getting the job done efficiently. (But on personal matters, if you need to talk to him about your child or your mother, there’s no clock.)
“His father Aron was also tough. I called him the ‘White Tornado’ because he’d often turn the place upside down, but always with a twinkle in his eye that let the humanity shine through.”
—Jeanette Nostra-Katz, president, G-III