(Filed Under Financial and General Interest News). For the first quarter of 2012, Warnaco net revenues declined 7% from the same quarter last year, to $615.5 million, a decline of 7% compared to the prior year period, while income per diluted share from continuing
operations was $0.78 compared to $0.98 in the prior year period.
“Income per diluted share from continuing operations on an adjusted, non-GAAP, basis was $0.90 compared to $1.10 in the prior year quarter (both of which exclude
restructuring expenses, pension expense and tax related items),” the statement continued. “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 company’s continuing businesses on a comparable basis and to make operating and strategic decisions. In addition, the company uses performance targets
based, in part, on non-GAAP income from continuing operations and non-GAAP operating income as a component of the measurement of certain employee incentive compensation.”
Helen McCluskey, Warnaco’s president and CEO declared, “First quarter adjusted earnings were in line with our plan, however, revenue results were below our expectations. Our team very effectively managed expenses in a difficult environment to deliver
the earnings results we are reporting today. We had anticipated a year-over-year decline in net revenues in the quarter due to planned reductions to value retailers and the impact of fluctuations in foreign currency exchange rates. However, more challenging
market conditions in Europe, higher markdowns in U.S. Sportswear and softer than expected comparable store sales in our owned retail stores, particularly in Korea, resulted in net revenues below our plan,” continued McCluskey. “We anticipate some of these trends to continue and with better visibility to our forward bookings, we have tempered our growth expectations for the balance of the year and adjusted our guidance accordingly.
“Our key strategic initiatives continued to contribute positively to our results in the quarter. Direct-to-consumer net revenues, representing 29% of total company, were up 7% with new stores, including 39,000 feet added in the quarter, more than offsetting a 2% decline in comp store sales. International net revenues represented 60% of total company net revenues and Latin America and Asia continued to post year-over-year growth.
“We will continue to effect the significant structural changes to our organization and the recruitment of new design and merchandising talent that we believe are essential to moving our business forward. We remain confident in our business and strategies and believe that these investments in
our people and product will contribute to our long term success,” concluded McCluskey.
Looking ahead, the company statement noted, “For fiscal 2012, based on recent foreign currency exchange rates, the Company now anticipates: Net revenues will be flat to up 2% (up 2%-4% based on 2011 average exchange rates) compared to fiscal 2011; and Adjusted, non-GAAP, diluted earnings per share from continuing
operations (excluding restructuring expense and pension expense) in the range of $4.00- $4.25.”
The company acknowledged that “Prior guidance was for net revenue growth in the range of 4%-6% (and 6%-8% based on 2011 average exchange rates) compared to fiscal 2011 and adjusted, non-GAAP, diluted earnings per share from continuing operations (excluding restructuring expense and pension expense) in the range of $4.20- $4.45.”
The Warnaco statement explained that “Net revenues declined 7% compared to the prior year period to $615.5 million. Growth in the company’s intimate apparel segment was more than offset by declines in the
sportswear and swimwear segments. Net revenues in the company’s Calvin Klein businesses declined 7%, compared to the prior year period, primarily in Calvin Klein Jeans, which reflects planned reductions in
value channel sales, the effects of macroeconomic
challenges and our performance at retail. Direct-to-consumer net revenues grew 7% (notwithstanding a decline in comparable store sales of approximately
2%), while wholesale net revenues fell 12%, which includes the anticipated reduction in Sportswear net revenues.
“Gross margin decreased 110 basis points to 43% of net revenues, due primarily to product cost inflation and increased customer allowances. Gross profit decreased 9% compared to the prior year quarter to
$267.5 million, while SG&A expense was down 4%, compared to the prior year quarter, to $212.6 million. However, as a percentage of net revenues SG&A expense
increased 90 basis points to 35% of net revenues,
which reflects the expansion of the company’s direct-to-consumer business as a percentage of total company net revenues and lower net revenues in the quarter.
“Operating income was $52.2 million, a 25% decline compared to the prior year quarter. Income from continuing operations decreased to $32.9 million, or $0.78 per diluted share, compared to $44.5 million, or
$0.98 per diluted share, in the prior year quarter. On an adjusted, non-GAAP basis (excluding costs related to restructuring expenses, pension expense and tax related items), income from continuing operations was $37.9 million, or $0.90 per diluted share, compared to $49.8 million, or $1.10 per diluted share, in the prior year period.
“The effect of fluctuations in foreign currency
exchange rates for the quarter compared to the prior year quarter resulted in a decrease in net revenues of approximately $7.6 million and an increase in income per diluted share from continuing operations of approximately $0.03. An additional discussion
regarding the effects of fluctuations in foreign currency exchange rates on operating results can be found in the Company’s Form 10-Q, for the quarter ended March 31, 2012, which will be filed with the
Securities and Exchange Commission.”
Warnaco reported that its “Cash and cash equivalents were $224.2 million at March 31, 2012 compared to $174.1 million at April 2, 2011. At quarter end, the Company had a net debt position of $62.6 million
compared to a net cash position of $27.7 million at April 2, 2011. In June 2011, the Company entered into a Term loan for $200 million. During the period from April 2, 2011 to March 31, 2012, the Company used
approximately $188.0 million to repurchase 3.7 million shares of its common stock pursuant to its share repurchase programs.
“Accounts receivable were $346.9 million at March 31, 2012 compared to $396.0 million at April 2, 2011. The reduction primarily reflects lower net revenues in the quarter and the impact of foreign currency exchange
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