Warnaco Group reported revenues in its swimwear group, which includes Speedo and Calvin Klein, rose 1.9% in the second quarter, to $81.7 million from $80.2 million. Operating earnings for the segment reached $7.7 million, well above earnings of $937,000 a year earlier. Restructuring charges amounted to $144,000 in the latest period versus $3.2 million a year ago.
In a statement, Warnaco said strong European demand, driven by fashion right design, continued to drive Calvin Klein swim revenues higher. While Speedo revenues decreased $1.5 million in the quarter, Speedo operating income was up significantly to $6.9 million, or 10% of Speedo net revenues. The swimwear group’s results benefited from a lower restructuring expense as well as a reduction in SG&A expense, as compared to the prior year period.
Overall, net revenues at Warnaco Group rose 22% to $503.8 million compared to $412.5 million in the prior year period and gross margin increased to 45% compared to 42% in the prior year quarter. Operating income was $48.9 million, or 10% of net revenues, compared to $28.2 million, or 7% of net revenues, in the second quarter of fiscal 2007.
Income from continuing operations was $26.5 million, or 57 cents a share, compared to $21.6 million, or 46 cents, in the prior year quarter. Income from continuing operations for the second quarter of 2008 and 2007 includes approximately $6.0 million and $3.2 million, respectively, of pre-tax restructuring expense (the second quarter of 2007 also benefited from $6.3 million of other income related primarily to net gains on intercompany loans denominated in currency other than that of the foreign subsidiaries functional currency). Net income was $19.4 million, 41 cents per diluted share, compared to $13.8 million, or 30 cents per diluted share, in the prior year quarter.
On an adjusted, non-GAAP basis (excluding certain tax items, restructuring expenses and pension income), income from continuing operations was $33.4 million, or 71 cents per diluted share, compared to $21.4 million, or 46 cents per diluted share, in the prior year period. Net income was $26.3 million, or 56 cents per diluted share, compared to $13.6 million, or 29 cents 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 second quarter 2008 net revenues, gross margin and operating income by approximately $17.0 million, $8.1 million and $2.0 million, respectively, compared to the second quarter of fiscal 2007.
The companys adjusted non-GAAP effective tax rate (excluding certain non-recurring items, the non-cash tax charge associated with the repatriation of the proceeds from the sale of Lejaby®, and certain restructuring expenses for which there was no tax benefit) in the quarter was 32% compared to an adjusted rate of 26% in the first quarter. The increased rate reflects additional tax expense to attain the Companys anticipated annualized non-GAAP effective tax rate of 29% (compared to an annualized non-GAAP effective tax rate of 25% in fiscal 2007).
