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Wachner Sees New Growth for Warnaco, Authentic Fitness

NEW YORK -- Linda J. Wachner said Tuesday she expects new products, licenses, and distribution channels to drive strong growth for both companies she heads -- The Warnaco Group and Authentic Fitness Corp.<BR><BR>Speaking at an investor conference...

NEW YORK — Linda J. Wachner said Tuesday she expects new products, licenses, and distribution channels to drive strong growth for both companies she heads — The Warnaco Group and Authentic Fitness Corp.

Speaking at an investor conference sponsored by Smith Barney Shearson, Wachner went through each company, product by product.

She said she expects Warnaco to get a strong boost from its recent acquisition of Calvin Klein’s women’s intimate apparel and men’s underwear and accessories lines.

“Calvin is an enormous designer and a gentleman,” she said, noting that the company hired 35 employees from Calvin Klein Inc. in the deal.

She also expects Warnaco to continue to ride the strength of its intimate apparel brands, which carry “over 25 percent” operating margins, she said. She noted that market share of the company’s Warner’s brand in department stores increased to 35 percent in 1993 from 32 percent in 1992. She said Warnaco’s bra business got a boost from a sharp pickup in sales through Avon Products Inc. and Victoria’s Secret.

She said sales of intimate apparel to Victoria’s Secret reached $47 million last year, up from $400,000 in 1990. She expects sales to Victoria’s Secret to reach $75 million to $90 million this year with the aid of new products.

Avon sales reached about $320,000 last year, according to Wachner, and she projected growth in the range of 15 to 20 percent this year.

She cited explosive growth of the licensed Fruit of the Loom bra line sold to the mass market segment.

Fruit of the Loom bra sales last year vaulted 115 percent, to $32.9 million from $15.3 million the year before, its first year in operation. Wachner said the FTL brand already has a 10 percent share in the mass merchandising market.

“We want to be the Coca-Cola of the bra business,” she said. Overall, intimate apparel’s revenues grew 10 percent to $423.2 million last year, reflecting as well the over 8 percent increases in sales of the established Warner’s and Olga’s brands.

She also sees a viable business for Warnaco in men’s wear as the firm focuses on sportswear such as its Chaps by Ralph Lauren line.

Regarding Authentic Fitness, she said the retail chain is on track to reach “100 and maybe more” units by December 1995. It currently has 12 in operation.

She also said:

  • The company’s main store on Park Avenue and East 39th Street in New York is averaging $1,000 per square foot, with the rest of the stores averaging at least $400 a square foot.
  • The Speedo swimwear line now has a 50 percent market share in the competition swimwear market, and men’s water shorts market share in department stores rose to 30 percent last year from 20 percent in 1990.
  • The firm received a big boost from Victoria’s Secret’s recent launch of a swimwear catalog.
  • The Authentic Fitness line, which is sold primarily in the company’s retail stores, is expected to reach about $16 million in sales this year, up from $5.8 million in 1993.
  • Sales at the recently acquired Cole/Catalina swimwear line, which targets the mid-to-lower levels of distribution, is expected to double to $40 million for the year ended June 1995 from expected sales of $20 million this year.
  • Authentic Fitness, whose sales reached $132.9 million last year, is comfortable with Wall Street estimates of $170 million this year.
  • White Stag’s skiwear and activewear business has also seen a jump in sales since the company shifted the business to the mass market segment.
Wachner noted that despite the strong sales momentum at Authentic Fitness, the company will not give up margins. “We are not trying to be Gitano. If we’re not going to get the margins, we are not going to sell it,” she said.

Last year, Speedo’s revenues increased 18.3 percent, to $103.3 million, with competition swimwear up 20 percent, accessories, mainly goggles, rising 19.5 percent, and men’s swimwear moving up 5.3 percent. Sales at White Stag rose 109 percent, to $29.6 million. Wal-Mart contributed $9 million in sales of White Stag last year. As for other new channels of distribution, Wachner expects to be selling a Warner’s sleepwear line and “probably” a Speedo swimwear line on QVC by fall.

Wachner, who has the title of chief executive officer at both Warnaco and Authentic Fitness, emphasized that both companies have focused on cutting debt. She said Authentic Fitness is near an agreement that will reduce its debt by 1 3/4 percentage points, which will result in savings of $875,000 annually.

She also said she expects Warnaco to reach investment grade rating in about six to nine months.