(Filed Under Financial and General Interest News). Intimate apparel received much of the blame as sales and income fell at Warnaco in the second quarter.
For the quarter ended June 30, 2012, net income for Warnaco Group, Inc. plunged to $9.5 million on declining net revenue of $564 million, compared to net income of $46 million on sales of $591 million for the same quarter (ended July 2, 2011) last year.
According to a statement posted on the investor relations page of the company’s web site, intimate apparel contributed to the situation in two ways. First, “The company incurred a $12.0 million impairment charge pertaining to the note receivable related to its 2008 sale of Lejaby to Palmers Textil AG,” according to the statement. In addition, the company noted that “In the quarter, a 10% increase in Swimwear Group net revenues, fueled by a powerful performance from Speedo, were more than offset by declines in sportswear and intimate apparel net revenues. Challenging market conditions, particularly in the U.S. and Europe, a more promotional environment and the unfavorable effects of fluctuations in currency exchange rates adversely affected the Company’s net revenues.”
The Warnaco statement blames “the adverse effect of recent foreign currency exchange rates” for projected declines in net revenues and earnings for fiscal 2012. The statement reads, “Net revenues, on a reported basis, will be down 2% to flat (up approximately 2% - 4% based on constant currency) compared to fiscal 2011; and Adjusted, non-GAAP, diluted earnings per share from continuing operations (excluding restructuring expense, pension expense and the Lejaby impairment charge) in the range of $4.00 - $4.15.”
Helen McCluskey, Warnaco president and CEO is quoted on the company web site: “Our second quarter results were in line with our projections. As expected, a positive performance in Asia and Latin America during the quarter offset softness in Europe and the U.S. Despite a decline in comparable store sales, reflecting challenging macroeconomic conditions, our Calvin Klein direct-to-consumer business was up 6% in constant currency, further validating our core international and retail expansion strategies. Speedo had a great quarter reflecting the benefit of our Olympic initiatives as well as the kickoff of our segmentation strategy, which will drive future growth for the brand. In addition, we continued to exercise disciplined control over our expenses while continuing to invest in our direct-to-consumer expansion. We took further action in Europe, as we previously announced, to position the business for improved operating performance over time.”
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