The Warnaco Group, Inc. saw Net revenues rose 18% to $574.9 million compared to $485.9 million in the prior year period and gross margin increased to 44% compared to 42% in the prior year quarter. Swimwear Group revenues were $107.2 million, a 5% decline compared to the prior year period, and operating income decreased to $14.8 million, or 14% of Swimwear Group net revenues.


“We are off to a strong start in 2008. Our strategies to maximize the opportunities in our Calvin Klein businesses, continue our global expansion and grow our direct-to-consumer platform are clearly working,” commented Joe Gromek, Warnaco’s president and CEO. “The Company experienced powerful top line growth, with international revenues increasing to 54% of the Company total as a result of continued expansion of our direct-to-consumer businesses.”

Mr. Gromek concluded, “As we look ahead, we remain confident in our business and focused on the execution of our key growth strategies that led to our success this quarter. Our Calvin Klein® businesses have demonstrated strength across geographies, categories and consumers. While we are sensitive to the challenging economic environment, we believe our powerful portfolio of brands and diversified global business model leave us uniquely positioned to continue to drive profitable growth and enhance shareholder value. Accordingly, we have raised our fiscal 2008 adjusted guidance.”


Fiscal 2008 Outlook


Following its strong first quarter performance, for fiscal 2008, on an adjusted basis (excluding restructuring expense and the non-recurring repatriation tax charge, and assuming minimal pension expense) the Company now expects net revenues to grow 10% to 12% over comparable fiscal 2007 levels and diluted earnings per share from continuing operations in the range of $2.65 to $2.75.


The accompanying tables provide a reconciliation of expected revenue growth and diluted earnings per share from continuing operations on a GAAP basis (10-12% and $1.70 to $1.76 per diluted share (assuming minimal pension expense), respectively) to the adjusted fiscal 2008 outlook above.


First Quarter Highlights


Total Company


Net revenues rose 18% to $574.9 million compared to $485.9 million in the prior year period and gross margin increased to 44% compared to 42% in the prior year quarter. Operating income was $55.8 million (which includes the effect of $21.4 million of restructuring expense primarily related to the company’s previously disclosed transfer of the Calvin Klein Collection business), or 10% of net revenues, compared to $54.6 million, or 11% of net revenues, in the first quarter of fiscal 2007.


On an as adjusted basis, net revenues rose 21% to $568.2 million compared to $469.3 million in the prior year quarter and gross margin increased to 45% compared to 42% in the prior year quarter. Operating income increased 46% to $76.0 million, or 13% of net revenues, compared to $52.0 million, or 11% of net revenues, in the first quarter of fiscal 2007.


Income from continuing operations was $7.0 million, or 15 cents per diluted share compared to $30.6 million, or 66 cents per diluted share, in the prior year quarter. Income from continuing operations for the first quarter of 2008 includes the effect of approximately $21.4 million, or 44 cents per diluted share, of restructuring expense and a substantially non-cash tax charge of $19.5 million, or 42 cents per diluted share, associated with the repatriation of the proceeds from the sale of Lejaby. Net income was $17.7 million, or 38 cents per diluted share, compared to $38.0 million, or 82 cents per diluted share, in the prior year quarter.


On an as adjusted basis, income from continuing operations increased to $45.7 million, or 99 cents per diluted share, compared to $32.7 million, or $0.71 per diluted share, in the prior year quarter. Net income was $56.4 million, or $1.22 per diluted share, compared to $43.4 million, or $0.94 per diluted share, in the prior year quarter.


The translation of foreign currencies, primarily as a result of a stronger euro and Canadian dollar, increased first quarter 2008 net revenues, gross margin and operating income by approximately $27.6 million, $14.5 million and $3.9 million, respectively, compared to the first quarter of fiscal 2007.


Segment Results


Sportswear


Revenues for the Sportswear Group increased 28% to $300.1 million, driven by continued momentum in Calvin Klein Jeans, with notable strength in Europe and Asia. Operating income, however, decreased to $22.1 million, or 7% of Sportswear Group net revenues. Strong results in Calvin Klein Jeans were more than offset by $18.7 million of restructuring expense primarily related to the company’s previously announced transfer of the Calvin Klein Collection business.


Intimate Apparel


Intimate Apparel Group revenues rose 22% to $167.6 million and operating income increased to $32.4 million, or 19% of Intimate Apparel Group net revenues. Momentum at both retail and wholesale, in Calvin Klein Underwear, driven by ongoing strength in Calvin Klein Steel contributed to the strong results. Additionally, the company’s Core brands reported both top and bottom line growth. Expanded distribution and strong product offerings led to market share gains for both Warner’s® and Olga®.


Swimwear


Swimwear Group revenues were $107.2 million, a 5% decline compared to the prior year period, and operating income decreased to $14.8 million, or 14% of Swimwear Group net revenues. Calvin Klein swim revenues were sharply higher, driven by strong European demand. Speedo® revenues were flat while Speedo operating income was down. Speedo operating income was adversely affected by restructuring expense and the timing of certain manufacturing variances which favorably affected the prior year period.


Balance Sheet


Cash and cash equivalents at April 5, 2008 rose to $138.0 million from $105.2 million at March 31, 2007. During the quarter, the company used approximately $44 million in proceeds from the previously announced sale of Lejaby to reduce the principal amount of the company’s outstanding 8 7/8% Senior Notes due 2013.


Net inventories were $321.0 million at April 5, 2008, down from $380.9 million at March 31, 2007, primarily as a result of discontinued operations, and appropriate for the company’s needs to service its ongoing business.


“While our reported results include restructuring expenses (primarily related to our previously announced transfer of the Calvin Klein Collection business) as well as a substantially non-cash tax charge of $19.5 million associated with the repatriation of the proceeds from the sale of Lejaby, our as adjusted results exceeded our expectations and are reflected in our updated adjusted guidance,” commented Larry Rutkowski, Warnaco’s Executive Vice President and Chief Financial Officer.