NEW YORK (The Deal) -- Executives at G-III Apparel Group (GIII - Get Report), which markets apparel brands such as Calvin Klein, Tommy Hilfiger and Ivanka Trump, are actively hunting for acquisitions.
At a recent conference in New York, Chief Operating Officer Wayne Miller and Chief Financial Officer Neal Nackman said they are focusing on women's wear businesses with sales of $100 million to $1 billion.
The "sweet spot" for G-III would be sales of around $500 million, and although women's apparel would be the most attractive, the company could consider other categories, Miller and Nackman said. And G-III has the balance sheet to make deals.
With about $200 million in annual Ebitda (earnings before interest, taxes, depreciation and amortization), the company could borrow up to four times that amount, or about $800 million, and still remain investment grade, according to an industry source. G-III listed no debt and nearly $86 million in cash in a 10-Q filed with the Securities and Exchange Commission on June 5.
G-III declined to comment on specific targets. The industry source said the potential acquirer was more likely to target wholesale brands that would fit well with the company's other businesses. One such target could be Anne Klein, the wholesale brand sold in major department stores and owned by New York-based private-equity firm Sycamore Partners, the source said. Less likely would be targets such as Nanette Lepore, which is considered too small for the likes of G-III, or banners such as Eddie Bauer, because those kinds of businesses are largely operating their own stores.
While many wholesale-apparel conglomerates have broken up or sold brands as their department-store customers retreat to online shopping, G-III has actually gone in the opposite direction. The company has a history of adding brands -- for instance, French swimwear label Vilebrequin in a 2012 deal worth more than $100 million. The company then bought men's apparel and footwear brand G.H. Bass & Co. from PVH Corp. (PVH - Get Report) for $50 million in 2013.
Now, the industry source said, G-III could be a bidder men's wear brand Ben Sherman, which parent Oxford Industries (OXM - Get Report) has on the auction block. Ben Sherman is also likely to attract bids from marketing and branding firms such as New York-based Authentic Brands Group, a portfolio company of Los Angeles-based private-equity firm Leonard Green & Partners. Authentic Brands bought the intellectual property of the women's wear brand Jones New York from Sycamore in late April for undisclosed terms. G-III could also be a contender for PVH's other businesses, such as Van Heusen, Izod, Arrow, Warner's, Olga and Speedo brands.
While department stores and their wholesale suppliers largely struggle, G-III has found a way to not only manage its current roster of brands profitably, but to make bolt-on acquisitions of businesses that other apparel groups have struggled operating. In fact, G-III saw its revenue jump to about $2.1 billion for its fiscal year ended Jan. 31, from about $1.7 billion for the same period a year prior, and almost $1.4 billion for fiscal 2013, according to the company's 10-K filed with the SEC on March 30. And net income increased to nearly $110 million for its most recent fiscal yea; it was almost $80 million for the same period a year prior and close to $60 million for fiscal 2013.
That kind of steady improvement in the company's financial performance demonstrates both the operating prowess of G-III over time, as well as its acquisition savvy. It's no wonder the company is bucking the trend against conglomerates.