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Warnaco’s Q2 Profits, Sales Drop

Warnaco's net income for the three months ended July 4 fell 8.2 percent to $17.8 million.

A drop in second-quarter sales and earnings isn’t disrupting Warnaco Group Inc.’s plans for retail expansion.

This story first appeared in the August 12, 2009 issue of WWD.  Subscribe Today.

Net income for the three months ended July 4 fell 8.2 percent to $17.8 million, or 38 cents a diluted share, from $19.4 million, or 41 cents, a year earlier. Revenues for the three months pulled back 9.4 percent to $455.9 million from $503.3 million.

After adjusting for restructuring and other expenses, earnings per share came in as analysts tracked by Yahoo Finance projected, at 48 cents.

Warnaco opened 43 stores during the second quarter and is on a course to expand its retail footprint by 24 percent this year, adding 120,000 square feet of space.

The company, which has 1,003 Calvin Klein stores and has focused its direct efforts on the international markets, sees plenty of retail growth ahead.

“Over the next three years, 20 percent [growth] a year seems like it’s doable for us,” said Joe Gromek, president and chief executive officer, on a conference call with Wall Street analysts.

Gromek said “white space” remained in Asia, Latin America and parts of Western Europe. “The good news is we have the balance sheet to support it,” he said.

Warnaco ended the quarter with cash and cash equivalents of $177.6 million, a war chest that could also come in handy as the firm evaluates potential acquisitions.

In addition to growing the direct business, Warnaco is working to expand its Calvin Klein business generally and to further increase its international presence, which already accounts for about 53 percent of the company’s revenues, adjusting for currency fluctuations.

Sales in the sportswear group fell 10.4 percent to $223.5 million, as intimate apparel sales dropped 8.2 percent to $158.1 million and swimwear sales declined 9.1 percent to $74.2 million.

For the first half, income shot up 49.2 percent to $55.3 million, or $1.19 a diluted share, on a 7.2 percent decline in revenues to $994.3 million. Lower expenses helped boost results earlier in the year.

Profits for the year are expected to be somewhat better than previously indicated. The company now expects earnings of $2.60 to $2.75 a diluted share this year, up from a range of $2.50 to $2.66.