Morris Goldfarb: Ashley, I didn’t hear the back end of your second question, the follow-up. What was that? Was it Europe? Was the question skewed toward Europe?
Ashley Owens: Just new categories or products and where you think the most opportunity lies within those?
Morris Goldfarb: Okay. So, our order book is strong. And as I inferred a few minutes ago, it’s growing in Donna Karan. We’re working hard and trying to accommodate what the order book could look like if we’re able to service the demand. There’s — our budgets are basically based on our order book, and the timing is toward the back end of the year. We believe we’ve got a strong business in place. We have inventory that — we have sufficient inventory to service part of our coat business. We’re careful on how we’re buying into it. So, we’re looking at a good year. The forecast is good, barring the unforeseen. And unfortunately, in the last few years, there have been a bunch of unforeseens. Everything we can control really tells us that we’re in the middle of a reasonably good year.
As far as the categories, we’re expanding suit separates into Karl Lagerfeld, which is an important category for us throughout the company and we anticipate that’s going to turn out good. Everything we’re doing in Karl Lagerfeld, including the door count expansion, leads us to believe we’re going to have a very good year with Lagerfeld. DKNY is stronger than it’s ever been, and the launch of Donna Karan has been great. So, there’s — there aren’t additional categories that we’re exploiting. We’re expanding the penetration of the handbag business, the footwear business, the suit separate business. So, there’s a good deal of opportunity there. And I’d say, the one lumpy that’s a little bit outside of what we generally talk about, our team license business is expanding in categories.
We have Starter as a brand, and Starter is growing significantly. We’ve added distribution. We have a great cooperation with our licensing partner. So, that appears to have opportunities for the first time in a long time to expand.
Ashley Owens: Great. Thank you.
Morris Goldfarb: Thank you, Ashley.
Operator: Thank you. One moment for our next question, please. Our next question comes from the line of Will Gaertner with Wells Fargo. Your line is now open.
Will Gaertner: Hi. Good morning, Morris and Neal. Thanks for taking my question. So, maybe, you could just start by framing how big your owned brands are now as far as revenue goes?
Morris Goldfarb: Sure. Thank you. Thanks for your question.
Neal Nackman: We’re at about $1.5 billion now on the owned business, Will.
Will Gaertner: Is there any way you could parse out by brand, or where those brands are now?
Morris Goldfarb: We really don’t do that yet. I can tell you we’re just beginning to ship Donna Karan. So, Donna Karan, in pure dollar revenue, is not going to be the driver. It’ll be the growth stimulus for the future. We’ve never seen a launch this successful. We’re positioning it well. We’re — the product — I encourage you to be conscious of the marketing and the product that’s in the stores, and I think you’ll understand the potential of the brand. The DKNY business is growing strong double-digits. It’s forecasted to do that this year. Lagerfeld will grow even bigger as a percentage than DKNY. So, we were very comfortable with what we have in place and we see amazing growth. We’re shrinking the scale of Calvin and Tommy by design and by dilution of our ability going forward of delivering categories.
But we’re doing a sensational job of building our owned brands to accommodate the misses on Tommy and Calvin. We’ve given up about $0.5 billion of Tommy, Calvin top-line sales over the last two years, and we’re forecasting a 3% growth going forward. I’d say, that’s a major achievement in an environment that’s difficult.
Neal Nackman: Will, let me just add — I guess, let me add a little bit of framing for you. We’re at about $1.5 billion today. It’s about half the total business. We expect significant growth into next year, strong double-digit growth into next year. We could be as much as 55% of our owned businesses next year. But I think the thing to take away is if you look at the opportunities that we’ve talked about over the new initiatives, we see over $3 billion of opportunities. Between Donna Karan, we’ve called that as $1 billion; DKNY, we’ve also called that as $1 billion; Karl Lagerfeld, we think the total opportunity is $1 billion. We got Halston and Nautica, both at $0.5 billion. And let’s, for the moment, not even get into the Vilebrequin growth, which we think is also strong.
So, I think if you look at all those opportunities, without giving you the specifics of where we’re at on each specific brand today, we’ve got about $3 billion of potential opportunity. We’ve got to replace about $1 billion of Calvin and Tommy business. So, we’ve got plenty of runway to more than replace it. And of course, we expect to do that in short order. I think, if anything, we’ve sort of showed the last year and our projection into this next year is that we’re really able to replace significant chunks of declining Calvin and Tommy business really without a bump. And our hope is to be able to continue to do that.
Morris Goldfarb: We can’t forget your question keys in on our owned brands, we do have several licenses that are important. All our team licenses are important. We have a Levi’s license that is of scale. We have assets outside of our owned that are going to participate in the growth of the company. And one might consider the opportunity that’s out there of acquiring other assets and signing other deals. We’ve done a great job of integrating assets into our operating companies, our talent pool, just as good as it gets in our world, and we’re — well, our world being North America, and we’re going to achieve the same in Europe in the coming years. We have a mission. Our mission is to expand our footprint, our capabilities globally.
