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Warnaco Buys Op, Reports Profit

Warnaco reported an improved second quarter, posting income versus a year-ago loss, and also confirmed that it is buying Ocean Pacific.

NEW YORK — Due to a solid performance in its sportswear and swimwear segments, The Warnaco Group Inc. on Wednesday reported an improved second quarter by posting net income versus a year-ago loss.

Separately, the company also confirmed an item first reported in WWD that Warnaco is buying Ocean Pacific. The acquisition is expected to close during the third quarter.

For the three months ended July 3, the company posted income of $4.4 million, or 10 cents a diluted share, against a $9 million loss, or 20 cents in the same year-ago quarter. Revenues rose 4 percent to $332.1 million from $319.3 million.

The company said the quarter produced solid revenue gains in both its swimwear and sportswear groups, which helped offset a decline in revenue in its intimate apparel group. Calvin Klein jeans delivered revenue and income gains, and executives during a conference call to Wall Street said the business had “double-digit operating margins.”

Helen McCluskey, the newly hired group president of the intimate apparel group, noted during the call that results for the business were disappointing. In the past, the core Olga and Warner brands have been challenged, and the company said this didn’t change in the latest quarter.

For the six-month period, income was $24.7 million, or 53 cents a share, against a loss of $9.1 million, or 20 cents, in the comparable year-ago period. The year-ago results on an adjusted basis include the firm’s five months as a successor company and a one-month contribution of the predecessor operation while it was still in bankruptcy. Revenues fell 2.4 percent to $725.3 million from $742.8 million.

Warnaco said in a statement that it is acquiring Ocean Pacific, or Op, for $40 million in cash and the assumption of $1 million in debt. The agreement provides for future performance-based payments if certain business targets are met. Those payments, if made, could kick up the total price to $45 million to $50 million, financial sources said.

Dick Baker, president of Op, will join Warnaco and remain as president of the operation while reporting primarily to Roger Williams, president of Warnaco’s swimwear group. While the Op operation will be included in the results for the swimwear group, Baker will also co-report to Joe Gromek, Warnaco’s president and chief executive officer.

Gromek said during the conference call, “We are very excited by this transaction. Op is the leader in the surf and beach lifestyle category.”

He disclosed that Op has annual worldwide wholesale revenues of $210 million, and that Op is expected to be accretive in its first year as part of the Warnaco umbrella of brands.

Op’s Baker said in a statement, “We are very excited to be part of the Warnaco team. We believe Op will benefit greatly from the talent, infrastructure and global reach of their organization.”