Warnaco reported that its Swimwear Group, which includes Speedo, Ocean Pacificm and a number of designer brands, held back total company consolidated growth for the first quarter as sales in the division rose just 1.4% for the period to $157.4 million, compared to $155.3 million in the year-ago quarter. WRNC said that gains from Ocean Pacific and Calvin Klein swimwear in Europe were offset by lower sales of other Designer swimwear brands and Speedo.
Speedo brand sales declined 3.4% for the quarter to $94.7 million, compared to $98.0 million in Q1 last year. Ocean Pacific, which was acquired in August of last year, contributed $4.1 million in sales for Q1. The designer business was up 1.4% to $57.1 million. Excluding the addition of OP, total Swimwear Group sales would have declined 1.3% for the quarter.
The decrease in Speedo net revenues reflects a $7.4 million increase in sales to membership clubs which more than offset a $10.7 million decrease across other channels of distribution. WRNC said the decline was due to delays in receiving orders from certain customers, due primarily to poor weather conditions. The increase in Designer swimwear net revenues primarily reflects increases of $4.0 million related to the company's choice Calvin Klein and CK signature labels that were launched in Europe in Q4 2004, partially offset by a decrease of $3.2 million resulting from lower off-price sales and decreases in other designer lines.
Gross margins for the Swimwear Group inched up 20 basis points in the quarter to 39.3% of sales, compared to 39.1% in the year-ago period. The division easily outpaced the other divisions on the GM line, with Intimates posting 36.9% margins and Sportswear posting a 30.0% margin for the period. Operating income for the Swimwear Group was up 3.1% in the first quarter to $38.1 million, netting a 24.2% group operating margin for the period.
Management pointed to NPD data that had Speedo ranked #1 in womens swimwear at sporting goods with a 39% share, while Speedo Men's also ranked #1 with a 68% share. In the mid-tier, Speedo Men's was said to rank #1 and outperform department averages at Kohl's, J.C. Penney's, Sears, and Mervyn's. The Molano product at Target is leading department increases.
This summer, Warnaco will show for spring 2006 delivery the first collection of OP swimwear and young men's and junior apparel developed by its in-house design team. OP swim and OP juniors and young men will be distributed in the department store channel.
Total Warnaco net revenues increased 11.7% to $439.5 million in Q1, with approximately $7.0 million of the gain related to FX rate benefits. Net income jumped 45.1% to $29.4 million, or 63 cents per diluted share, versus $20.2 million, or 44 cents per diluted share.
