The Warnaco Group said it expects fiscal 2005 revenues to increase 5.7% to approximately $1.5 billion over fiscal 2004, but that growth is less than the previously announced plans for high-single-digit sales growth. The Swimwear group was the main culprit as more than $15 million in planned Q4 sales fell into the 2006 first quarter, but issues in the Intimate Apparel group also impacted the numbers.
Gross margin is expected to improve less than the targeted 100 basis points from the prior year. SG&A expenses as a percentage of net revenues are expected to be comparable or slightly above the prior year, resulting in operating margins that will come in less than the targeted double-digit improvement.
WRNC said it expects that reported operating income will include pension expense of approximately $2 million in the full year fiscal 2005 results, compared to $6.2 million of pension income recorded in fiscal 2004.
K2 Inc. is in no hurry to chase any more big deals in the near-term, but may look at some other tuck-in deals to round out its current portfolio. The company is clearly focused on integrating its businesses to drive down SG&A and enhance margins. As part of that strategy, KTO is centralizing its worldwide distributorships, which are reflected in the improved operating margins in the back half of 2005. K2 sees a 30% increase in H2 EPS on a 1% to 2% increase in sales.
Company CFO Dudley Mendenhall said the company still has significant upside with Rawlings/Worth, Brass Eagle, Volkl/Marker, and continued China integration.
Mendenhall said the decline in the paintball category has been felt most in the mass channel, which has catered to the marginal consumer base. He said they are more focused on the better goods now that address the needs of the committed participant. He said the paintball cost structure has been reduced to make it profitable in 2006.
The companys in-store merchandising program is now covering 15% of the U.S. retail store base.
Wolverine CEO Tim ODonovan said that Merrell is expected to continue with high-single-digit to low-double-digit growth going forward. He said that expecting the apparel category representing 25% of the Merrell business within four to five years would not be reasonable.
Merrell is now doing $300 million+ in sales versus $26 million when they were acquired.