Warnaco Group Inc. is cutting its corporate staff 7 percent, reducing capital expenditures 20 percent and will eliminate $40 million in selling, general and administrative spending in 2009.
Warnaco chief executive officer Joe Gromek disclosed the cost-cutting plans Wednesday at a Morgan Stanley conference. He also affirmed Warnaco’s full-year earnings and sales targets, which the company lowered this month in response to the strengthened U.S. dollar and the softening economic environment.
“We will control the things that we can control,” Gromek said. “We will align our costs to reflect current economic conditions.”
The vendor of Calvin Klein Underwear and Speedo has fewer than 5,000 employees, according to Reuters data.
The company said it no longer believes the cost of goods will rise in 2009 and it is closely examining its supply chain.
Despite the cuts, Warnaco plans to add 100,000 square feet of retail selling space for its Calvin Klein businesses next year, after adding about the same amount this year.
“Calvin Klein is the growth engine for Warnaco,” said Gromek, adding that the Calvin Klein business represents about 70 percent of its estimated $2 billion in sales, which year-to-date has grown 28 percent.
For the three months ended Oct. 4, Warnaco’s net income rose to $26.5 million, or 56 cents a diluted share, from $4.4 million, or 10 cents, in the year-ago period. Excluding restructuring charges and other expenses, earnings from continuing operations increased to $34.7 million, or 74 cents. Revenues gained 16 percent to $548.7 million from $473.2 million, led by a 20 percent sales gain in Warnaco’s Calvin Klein business. But heading into the fourth quarter, Warnaco cited weakening economic conditions and lowered expectations for adjusted earnings to a range of $2.50 to $2.65 a share this year, compared with previous guidance of $2.80 to $2.90. Warnaco projected revenue gains of 12 to 14 percent over last year, versus the prior guidance of 13 percent to 15 percent.
Warnaco shares fell 14 percent, or $2.11, to close at $13.29 on the New York Stock Exchange Wednesday.�
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