Warnaco shores up margins

By

Olivier Guyot

Published
Nov 8, 2012

Warnaco, the global license holder of Calvin Klein Jeans and Underwear, suffered a period of unfavorable exchange rates like many American companies. For its third quarter ended September 2012, the group owner of the Speedo, Olga, Chaps and Warner's brands posted sales at a constant exchange on par with the prior year quarter. However, the brand saw its net revenues fall by 5% to 611 million U.S. dollars (477 million euros) under the current exchange rate.

After drastically reducing its raw material costs and expenses, Warnaco operating income still rose from 65 to 67 million dollars. Following the loss of its CK license from Calvin Klein last spring, the group reorganized its European structure in July, closing its Italian offices and basing its teams in London.

"Our third quarter results reflect the efforts of our team to efficiently operate our global business," explained Helen McCluskey, president and CEO of the group. "Gross margin expansion and expense discipline more than offset a decline in net revenues, driven primarily by the impact of currency and macro challenges."

McCluskey is a new member of the board of PVH Corp., which acquired Warnaco last week. "Internationally, net revenues in constant dollars were up slightly, led by growth in Latin America and Asia offsetting a slight decline in Europe," she cited as good news. "We saw some progress in Europe, where direct-to-consumer net revenues rose 6%, in constant dollars, including positive comparable store sales for the quarter.”

Regarding the group's segments, Speedo played a skillful hand for swimwear with $42 million in sales, an increase of nearly 7%. PVH Corp. made a special mention that it did not want to drop that license for now. Warnaco's major branches of sportswear and underwear both saw declines of around 6%, or 337 and 232 million respectively.

On the other hand, swimwear operating income fell 1%, and the segment is in the negative by about a half-million dollars. The underwear segment increased nearly 18% to $41 million. Sportswear grew nearly 9% to $29 million.

For the full year 2012, the group expects results to be flat or even a decline of 2% in its turnover.