The Warnaco Group Inc. is taking steps to reduce the costs and improve the profitability of its struggling European business.
The company said Monday that it is in the midst of a “comprehensive review of its European-based operations with the aim of better positioning the company for future growth and improved profitability.”
The move comes after several quarters of challenging business conditions in Europe as well as the loss of the CK Calvin Klein bridge apparel and accessories business in the region beginning next year. Difficulties in Europe, particularly the southern portion of the continent, overlapped with declines in the women’s Calvin Klein Jeans business, contributing to a 18.4 percent decline in Warnaco’s first-quarter earnings, to $35.9 million, as revenues pulled back 7 percent to $615.5 million.
During the company’s conference call on May 3, Helen McCluskey, president and chief executive officer, told analysts that economic problems in southern Europe have “negatively affected our recent operating results but continue to be large and important markets for us. Our [first-quarter] operating margin in Europe was in the low-single digits. There’s certainly an opportunity for us to improve that and we’re working diligently against that and we expect to return that profitability to double digits over time.”
The international operating margin for 2011 was 13 percent. International revenues last year were up 15.4 percent to $1.5 billion from $1.29 billion in 2010, while operating profit dropped 27.2 percent, to $124.5 million from $171.1 million, but was essentially flat, at just over $176 million, when restructuring and special charges were excluded. European revenues last year rose 8.9 percent to $628.1 million but declined 13.2 percent, to $146.3 million, in the first quarter of 2012.
“Our Calvin Klein Jeans and Calvin Klein Underwear businesses are powerful and continue to resonate with European consumers,” McCluskey said Monday. “We expect these actions will enable the company to better execute against our strategic plans.”
More details about the European operating structure are expected when Warnaco reports its second-quarter results next month. Analysts expect earnings to drop to 65 cents a diluted share, excluding special charges, from 82 cents in the second quarter of 2011.
There’s a bit more urgency to the restructuring following the loss of the European CK business, which followed two years in which Warnaco failed to meet its sales minimums for the license. Calvin Klein Inc., owned by PVH Corp., will take over management of CK in Europe starting next year.
“Our transition out of the CK bridge required us to reevaluate our structure,” said a company spokeswoman. “Both macro- and microeconomic factors have adversely impacted our business and we’re looking at what needs to be done to right-size the business to successfully position it going forward.”
Shares of Warnaco closed Monday at $42.54, down 50 cents, or 1.2 percent.
“These collections continue to build on that vision, empowering differently abled adults to express themselves through fashion,” said @tommyhilfiger of his line of adaptive apparel, which launches today. The line consists of 37 men’s and 34 women’s styles based upon the pieces from the spring Tommy Hilfiger sportswear collection. #wwdnews
“Stranger Things” is getting a new cast member for season 2. Meet @sadiesink_, the 15-year-old who will be joining the Netflix series for its new season. You may recognize her from “The Glass Castle” with Brie Larson and Woody Harrelson, but the Texas native’s next role goes in an entirely different direction. She describes her character, Max, as “a rough and tumble skater girl [who] becomes friends with the boys at school.” The second season debuts on October 27. (📷: @jgreenery) #wwdeye
Amid the Harvey Weinstein controversy, there’s another sector that’s being put under the spotlight for sexual abuse: the modeling industry. While rumors about abuse and sexual harassment of female and male models — and the photographers, agents and others who perpetrated it — have circulated within the fashion world for years, model @cameronrussell started posting stories from models on Instagram last week about abusive situations they’ve encountered — from sexual harassment and molestation to attempted rape. Over 75 have weighed in so far. Read more on WWD.com. Link in bio. #wwdnews
To celebrate its 16th anniversary, @dylanscandybar tapped designers and celebrities to create mosaics out of candy. The mosaics will be auctioned off to support the philanthropic cause of each participant’s choice. Pictured here is the mural created by @aliceandolivia's Stacey Bendet. For a first look at some of the other artwork being unveiled tonight, go to WWD.com. #wwdeye
The annual Veuve Clicquot Polo Classic in Pacific Palisades this weekend drew Kate Hudson, Tracee Ellis Ross, Laura Dern and more. See pictures of the star-studded event on WWD.com. (📷: @chelsealaurenla) #wwdeye
In his new book “Hollywood Royale,” Andy Warhol’s Protégé Matthew Rolston celebrates the Eighties revival of Hollywood glamour. Featuring more than 100 portraits taken by Rolston from 1977 to 1993, the book contains photos of icons like Michael Jackson, Cyndi Lauper, and @drewbarrymore, pictured here in 1991. “Hollywood Royale,” out today, will be accompanied by an exhibition opening at Los Angeles’ Fahey/Klein Gallery on March 1. #wwdeye
"Nowadays when life is not so happy with everything going on in the world, I think people come to me for a little bit of whimsy and color and fun." - Designer Rebecca De Ravenel on her cult-favorite jewelry line. (📸 : @vsteves) #wwd40
“Everyone is talking about how the retail industry is struggling, but I think it’s an incredible time because brands who are doing something different and innovative are setting themselves up for the future,” said @adamgoldston, who founded the luxury athletic brand @apl with his brother @ryangoldsten. The Goldston’s are part of WWD’s 40 under 40: a group of industry notables. See the rest of the list on WWD.com. (📷: @vsteves) #wwd40
@eyeswoon blogger Athena Calderone debuted her first-ever cookbook, “Cook Beautiful,” which is heavily centered on the presentation and visual expression of food. Pictured here are her miso glazed carrots from the book. Get the recipe on WWD.com. (📷: @johnny_miller_) #wwdeye