Global Brands Group Launches Restructuring Program
Global Brands Group (GBG), fresh from the $1.2 billion sale of its North America children’s, accessories and West Coast fashion (Buffalo Jeans, Joe’s Jeans) businesses, has embarked on a restructuring plan aimed at cutting $100 million in operating costs by the middle of next year, CEO Rick Darling said today in releasing first-half earnings.
GBG wants to speed manufacturing and move production, sourcing and technical design closer to factories in Asia.
The shift of jobs to Asia, which will affect about 140 positions in GBG’s New York office, will occur over the next several months. The new product development plans include greater use of 3D design and “virtual sampling” so that “we can show more SKUs while producing fewer samples,” Darling said. As a result, GBG will have a broader line while spending less on development, he said. The strategy is similar to that implemented by former parent Li & Fung, from which GBG was spun off in 2014.
“The key for us in the U.S. will be making sure we are with the retail winners and not the losers and that we are able to adapt the business to an ecommerce environment as opposed to a brick and mortar environment,” Darling said. GBG also will have to “adapt a little quicker” to the emerging direct-to-consumer business.
As a result of the sale of children’s and fashion and accessories businesses to Centric Brands, GBG is placing greater emphasis on licensed footwear (Calvin Klein, Katy Perry and others), men’s and women’s fashion apparel (Sean Jean, Jones New York, Spyder) and brand management, through its CAA-GBG venture with Creative Artists Agency (CAA). As part of the restructuring, GBG also sold its loss-making children’s business in China to a Li & Fung affiliate for $20 million. CAA-GBG will be a “key pillar” of the restructured GBG as it moves to expand business in China and extend the roster of brands it represents (Coca-Cola, Playboy, Jennifer Lopez, David Beckham and Carrie Underwood’s Calia), Darling said. “It will become a real driver of growth going forward.” CAA-GBG’s operating profit rose to $16 million from $4 million in the first half ended Sept. 30, despite revenue declining 9.7% to $22 million.
In the U.S., GBG will continue to focus on Calvin Klein, Sean Jean and others, while seeking to boost its business with the Aquatalia brand, which generates about $50 million in annual sales, Darling said.
GBG swung to a $284 million first-half net loss from a $26 million profit earlier. First-half sales slipped 4.1% to $699 million, due largely to a downturn in revenue in China and the sale of its home business.
GBG’s men’s and women’s apparel (Juicy Couture, Jones New York, Kenneth Cole and other licenses) businesses reported a $33 million operating loss in the first-half against a $3 million profit a year earlier while revenue rose 1.8% to $265 million. In footwear, GBG swung to a $44 million operating loss from a $37 profit a year earlier as revenue fell 4.5% to $270 million. The children’s business, which continues in Europe and Asia, reported a $97 million operating loss, up from $30 million a year ago as revenue decreased 11.9% to $142 million.
Global Brands Group, Rick Darling, CEO, +852 2300 2787, email@example.com