The Warnaco Group, Inc. reported Swimwear Group net revenues increased 10% (8% on a constant currency basis) in the fourth quarter to $50.8 million, reflecting gains in both Speedo and Calvin Klein Swim. Operating income increased to $2.3 million, or 4% of Swimwear Group net revenues, compared to a loss of $0.8 million in the prior year quarter
Overall, Warnaco reported the following results for the fourth quarter:
- Net revenues were $505.4 million, up 14% from the prior year quarter
Net revenues, on a constant currency basis, rose 8% compared to the
prior year quarter
Gross margin increased 160 basis points from the prior year quarter to
44% of net revenues
Selling, general and administrative (SG&A) expense decreased 360 basis
points to 34% of net revenues
Operating income was $28.0 million compared to an $11.9 million loss
in the prior year quarter, and operating margin was 6% of net revenues.
Income per diluted share from continuing operations was $0.29 compared
to a loss of $0.27 in the prior year quarter and includes costs
related to pension expense, restructuring expenses, certain tax
related items and other items of $0.35 and $0.55 per diluted share,
respectively
On an adjusted, non-GAAP basis excluding the items above, income per
diluted share from continuing operations was $0.64 compared to $0.28
for the prior year quarter.
For the year:
Net revenues were $2.0 billion, down 2% from the prior year
Net revenues, on a constant currency basis, were up 2% from the prior
year
Gross margin decreased 180 basis points from the prior year to 43% of
net revenues
SG&A expense decreased 420 basis points to 32% of net revenues
Operating income was $193.5 million, up 37% compared to the prior
year, and operating margin increased 270 basis points to 10% of net
revenues
Income per diluted share from continuing operations was $2.19 compared
to $1.08 in fiscal 2008, and includes costs related to pension
expense, restructuring expenses, certain tax related items and other
items of $0.63 and $1.56 per diluted share, respectively
On an adjusted, non-GAAP basis excluding the items above, income per
diluted share from continuing operations was $2.82 for fiscal 2009
compared to $2.64 for fiscal 2008
Cash & cash equivalents were $320.8 million and net operating cash
flow generated from continuing operations was $263.9 million
The accompanying tables provide a reconciliation of actual results to
the adjusted results.
The Company believes it is valuable for users of the Company’s financial
statements to be made aware of the adjusted financial information, as
such measures are used by management to evaluate the operating
performance of the Companys continuing businesses on a comparable basis.
Joe Gromek, Warnacos President and Chief Executive Officer, commented, “We are very proud of our Fiscal 2009 results. Our record earnings
performance was fueled by the strength of our brands, continued
implementation of our growth strategies and superior execution. The
ongoing success of our long term growth initiatives, namely growth of
our Calvin Klein businesses, international expansion and continued
development of our direct-to-consumer channel, along with disciplined
expense and balance sheet management, enabled Warnaco to achieve strong
results in one of the most challenging economic periods in recent
history. We recognize our 5,000 associates around the globe for their
hard work and achievement in helping us deliver these record results.“
“During the fourth quarter,“ Mr. Gromek continued, “our strategies
clearly worked with net revenues from our Calvin Klein businesses
growing by 17%, international net revenues rising 21% and net revenues
from our direct to consumer business increasing 31%.“
“Looking ahead, we begin 2010 in a position of strength and confidence,“
Mr. Gromek concluded. “Our brands and businesses are performing at a
high level and are supporting our long term growth objectives. We remain
committed to our current strategies which we believe position us to
achieve both our near and long term goals and increase value for our
shareholders.“
Fiscal 2010 Outlook
For fiscal 2010, on an adjusted basis (excluding restructuring expense
and assuming minimal pension expense) and based on recent exchange rates:
The Company anticipates net revenues will grow 5% – 7% compared to
fiscal 2009 and
The Company expects adjusted diluted earnings per share from
continuing operations in the range of $3.10 – $3.20.
The accompanying tables provide a reconciliation of expected diluted
earnings per share from continuing operations, on a GAAP basis and based
on 2009 average exchange rates of $3.06 – $3.15 per diluted share
(assuming minimal pension expense), to the adjusted fiscal 2010 outlook
above.
Fourth Quarter Highlights
Total Company
Net revenues in all major international markets grew by double-digits,
with particular strength in Latin America. Comparable store sales in the
Companys direct to consumer segment increased 4% and the Companys
heritage (non Calvin Klein) businesses achieved 4% net revenue growth.
Net revenues were up 14% (up 8% on a constant currency basis) to $505.4
million. Gross margin, which benefited from retail expansion, increased
160 basis points to 44% of net revenues. SG&A decreased 360 basis points
to 34% of net revenues, primarily the result of the Companys cost
cutting initiatives. Operating income was $28.0 million compared to an
operating loss of $11.9 million in the prior year quarter. Operating
income for the fourth quarter of fiscal 2009 was adversely affected by
$20.3 million of pension and restructuring expense, compared to
$37.0 million for the fourth quarter of fiscal 2008.
Income from continuing operations was $13.8 million, or $0.29 per
diluted share, compared to a loss from continuing operations of $12.3
million, or $0.27 per diluted share, in the prior year quarter.
On an adjusted, non-GAAP basis, as detailed in the accompanying tables,
income from continuing operations was $ 30.1 million, or $0.64 per
diluted share, compared to $13.2 million, or $0.28 per diluted share, in
the prior year period.
The Companys adjusted non-GAAP effective tax rate in the quarter was
approximately 34% compared to 32%, in the prior year quarter. The
increased tax rate reflects the shift in earnings from lower to higher
taxing jurisdictions.
The impact of foreign currency exchange rates, due to the strength of
the U.S. Dollar, increased fourth quarter 2009 net revenues, gross
profit and SG&A by approximately $26.7 million, $8.6 million and
$11.3 million, respectively, and decreased operating income and income
from continuing operations by approximately $2.7 million and $1.0
million, respectively, or $0.02 per diluted share.
Segment Results
Sportswear
Sportswear Group net revenues increased 17% (9% on a constant currency
basis) to $275.6 million. Net revenues for Calvin Klein grew 22%, with
notable strength in Europe and Latin America, offsetting a 4% decline in
Chaps net revenues. Sportswear Group retail net revenues grew 31% in the
quarter. Operating income increased to $24.1 million, or 9% of
Sportswear Group net revenues, up 700 basis points compared to the prior
year quarter.
Intimate Apparel
Intimate Apparel Group net revenues increased 10% (5% on a constant
currency basis) to $179.1 million, driven by double digit growth in Core
Intimates and high single digit growth in Calvin Klein intimates.
International growth in Calvin Klein net revenues, both wholesale and
retail, helped offset modest declines in the U.S., due primarily to
lower department store replenishment. Operating income rose to $28.6
million, or 16% of Intimate Apparel Group net revenues, resulting in the
Group remaining the Companys most profitable segment.
Swimwear
Swimwear Group net revenues increased 10% (8% on a constant currency
basis) to $50.8 million, reflecting gains in both Speedo and Calvin
Klein Swim. Operating income increased to $2.3 million, or 4% of
Swimwear Group net revenues, compared to a loss of $0.8 million in the
prior year quarter. Stronger sales coupled with expense reductions and
lower restructuring expense contributed to the improved results.
Fiscal 2009 Highlights
Total Company
Net revenues declined 2% on a reported basis and rose 2% on a constant
currency basis to $2.0 billion. Gross margin, which was adversely
affected by currency exchange rates, decreased 180 basis points to 43%
of net revenues, and SG&A, driven by cost cutting initiatives lower
restructuring expense and fluctuations in currency exchange rates,
decreased 420 basis points to 32% of net revenues. Operating income was
$193.5 million, including $20.9 million of pension expense, compared to
income of $141.4 million, including $31.6 million of pension expense, in
the prior year.
The Companys income from continuing operations increased to $102.2
million, or $2.19 per diluted share, more than double the $51.0 million,
or $1.08 per diluted share, in the prior year. Income from continuing
operations was adversely affected by pension and restructuring expense
of $33.0 million pre-tax and $66.9 million pre-tax for fiscal 2009 and
fiscal 2008, respectively.
On an adjusted, non-GAAP basis, as detailed in the accompanying tables,
income from continuing operations was $131.7 million, or $2.82 per
diluted share, compared to $124.7 million, or $2.64 per diluted share in
fiscal 2008.
The Companys effective tax rate was 38% compared to 54% for fiscal
2008. The effective tax rate for fiscal 2009 was adversely affected by
prior period adjustments. The effective tax rate for fiscal 2008 was
adversely affected by restrictions on the deductibility of certain
restructuring expenses and discontinued operations as well as
repatriation of the proceeds from the divestiture of the Companys Lejaby®
business. The adjusted non-GAAP effective tax rate for fiscal 2009
was approximately 34%, compared to 32% for fiscal 2008. The increase in
the adjusted tax rate reflects the shift in earnings from lower to
higher taxing jurisdictions.
The impact of foreign currency exchange rates, due to a weak U.S.
Dollar, decreased fiscal 2009 net revenues, gross profit, SG&A and
operating income by approximately $85.0 million, $72.4 million,
$31.9 million and $40.5 million, respectively, and decreased income from
continuing operations by approximately $26.8 million, or $0.57 per
diluted share.
Segment Results
Sportswear
Sportswear Group net revenues fell 1% (increased 4% on a constant
currency basis) to $1.1 billion. Operating income, however, increased to
$124.9 million, or 12% of Sportswear Group net revenues, compared to
$89.8 million, or 8% of Group net revenues in fiscal 2008. Improved
profitability at Chaps and Calvin Klein, primarily driven by lower SG&A
and restructuring expenses, contributed to the positive results.
Intimate Apparel
Intimate Apparel Group net revenues fell 4% (flat on a constant currency
basis) to $677.3 million. Continued growth of Calvin Klein retail helped
to partially offset declines in the wholesale business, while fewer
product launches adversely affected Core Intimates net revenues.
Operating income was $117.1 million, or 17% of Intimate Apparel Group
net revenues compared to $126.1 million, or 18% Group net revenues in
fiscal 2008.
Swimwear
Swimwear Group net revenues declined 3% (decreased 2% on a constant
currency basis) to $251.1 million. Operating income increased to $15.6
million, or 6% of Swimwear Group net revenues compared to $11.5 million,
or 4% of Swimwear Group net revenues in the prior year. Disciplined
execution and lower SG&A and restructuring expense contributed to the
improved operating results, notwithstanding the $3.6 million charge to
write-down inventory related to suits banned by FINA.
Balance Sheet
Cash and cash equivalents at January 2, 2010 more than doubled to $320.8
million from $147.6 million at January 3, 2009.
For the year ended January 2, 2010, net cash flow generated from
continuing operations was $263.9 million. The Company was $110.0 million
net cash positive as of January 2, 2010.
Inventories were $253.4 million at January 2, 2010, down $72.9 million
from $326.3 million at January 3, 2009. The reduction was consistent
with the Companys plan to reduce the quantity of its inventory.
“In response to the challenging market conditions in 2009 we took
actions to reduce expenses, lower inventory levels and improve our cash
position,“ commented Larry Rutkowski, Warnacos Chief Financial Officer. “We start 2010 in a strong financial position. Our healthy balance sheet
will allow us to invest in our business and in those opportunities that
further our growth prospects while building long term shareholder value.”
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Schedule 1 | ||||||||||
| THE WARNACO GROUP, INC. | ||||||||||||||||||||||
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| CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS | ||||||||||||||||||||||
| (Dollars in thousands, excluding per share amounts) | ||||||||||||||||||||||
| (Unaudited) | ||||||||||||||||||||||
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As Reported |
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Restructuring |
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As Adjusted | ||||||||||
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Three Months Ended |
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Charges and |
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Three Months Ended | ||||||||||
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January 2, 2010 | Pension (b) | Other (c) | Taxation (d) | January 2, 2010 (e) | ||||||||||||||||
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Net revenues |
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$ |
505,445 |
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$ |
– |
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$ |
505,445 |
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Cost of goods sold |
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284,204 |
(46 |
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284,158 |
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Gross profit |
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221,241 |
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46 |
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– |
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– |
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