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Warnaco Reports $6.7M Loss in Quarter

The firm posted restructuring charges that were in part connected with its transition out of its European CK/Calvin Klein bridge line.

The Warnaco Group Inc. posted a fourth-quarter loss, in part due to a restructuring charge as it transitioned out of its European CK Calvin Klein bridge line, but managed to report income for the year.

For the three months ended Dec. 31, the loss was $6.7 million, or 16 cents a diluted share, against income of $19.2 million, or 42 cents, a year ago. Restructuring costs, including those related to the European CK Calvin Klein bridge line, were $41.9 million, including $38.9 million in noncash charges. Diluted earnings per share from continuing operations on an adjusted, non-generally accepted accounting principles basis rose 31 percent to 97 cents versus 74 cents in the year-ago quarter. Revenues rose 3.9 percent to $614.7 million from $591.5 million. By operating group, sportswear rose 1.7 percent to $322.1 million, while intimate apparel grew 8.7 percent to $236.8 million. Swimwear dipped by 2 percent to $55.8 million.

For the year, income fell 8 percent to $127.5 million, or $2.90 a diluted share, from $138.6 million, or $2.99, in 2010. Revenues increased 9.5 percent to $2.51 billion from $2.3 billion.

In her first conference call to Wall Street analysts as president and chief executive officer, Helen McCluskey said, “Our key metrics all moved in the right direction. Revenue was up 4 percent, fueled primarily by growth in direct-to-consumer. Our owned retail was up 14 percent, including a 3 percent increase in comp-store sales contributing to an increase in gross margin.”

McCluskey said the Calvin Klein operations continued to drive Warnaco’s business. For the year, Calvin Klein saw a 12 percent growth in revenues to $1.9 billion. Calvin Klein Jeans revenues rose 11 percent, while Calvin Klein Underwear revenues grew 13 percent. The firm’s heritage brands saw a 3 percent rise in revenue, with positive results in core intimates and Speedo offsetting a soft year for Chaps, McCluskey said.

In addition, much of the career-focused bridge line that was discontinued in Europe was in company-owned stores, and Warnaco plans to “put CK Jeans product in the space,” McCluskey said.

She noted that internationally, revenues rose 17 percent in 2011, and accounted for 60 percent of the firm’s revenues.

The company expects net revenues will grow between 4 and 6 percent in fiscal 2012 on an adjusted, non-GAAP, basis. Adjusted diluted EPS from continuing operations is expected at between $4.20 and $4.45, and in the range of $3.64 to $3.70 on a GAAP basis.