Warnaco Group Inc., the $1.8 billion apparel firm, is exiting parts of its swimwear and Lejaby divisions to focus its efforts on its Calvin Klein business.
After tough earnings in its swimwear group last year, Warnaco is repositioning the $390 million division by:
Outsourcing its Mexican manufacturing operations to a company controlled by a local business partner.
Selling Catalina, Anne Cole and Cole of California, with the help of Financo Inc.
Exiting by June 30 all of its private label and Michael Kors and Nautica swimwear businesses.
“We are clearly focusing on our Calvin Klein businesses, which make up almost $1.2 billion of our revenues,” said Joseph Gromek, Warnaco’s president and chief executive officer. “The resources of Warnaco should be focused on the businesses with the largest growth potential.”
With the help of Goldman Sachs, Warnaco is also exploring strategic alternatives for its Lejaby businesses, which include the Lejaby, Rasurel and Elixir intimate apparel and swimwear brands.
Following the repositioning, Warnaco Swimwear Group will consist of only Calvin Klein and Speedo, brands which Warnaco believe have the most growth potential. These two brands contributed about $260 million in volume last year, and the company hopes to see double-digit growth from them.
“Speedo is the dominant player in the swimwear business, and with the new management in place under Helen McCluskey [who was promoted in June], we think it has great growth potential,” Gromek said. “Calvin Klein is the single most important brand to Warnaco right now, and we think the swim license fits well with our Calvin Klein underwear and jeans. We think it can reach $50 million in the next few years.”
Warnaco expects to incur between $30 million and $32 million in restructuring charges, primarily from transferring ownership of its swimwear manufacturing operations.
According to Warnaco’s 2006 annual report, the swimwear group revenues increased while operating income fell. “As the largest provider of swimwear in the United States, we are not satisfied with these results and have identified opportunities to deliver measurable improvement in the years ahead,” the report said.
The annual report singled out Speedo, noting “we will take advantage of the momentum in Speedo as we begin to gear up for the 2008 Beijing Olympics.”
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