WWD.com/fashion-news/fashion-features/a-new-era-at-warnaco-kinder-more-creative-to-woo-back-retailers-747632/
government-trade
government-trade

A New Era at Warnaco: Kinder, More Creative To Woo Back Retailers

NEW YORK — The Warnaco Group is getting a major facelift.<br><br>The company, once seemingly destined to be broken up, is now working to regain its footing with a strong foundation of brands.<br><br>The new corporate-wide image is designed to be...

NEW YORK — The Warnaco Group is getting a major facelift.

This story first appeared in the October 15, 2002 issue of WWD.  Subscribe Today.

The company, once seemingly destined to be broken up, is now working to regain its footing with a strong foundation of brands.

The new corporate-wide image is designed to be more friendly to retailers, as well as more attractive to suppliers and the financial community, all of which need to be won back following a rough period that led to Warnaco’s bankruptcy in June 2001.

The new executive team at the innerwear and jeans specialist said creativity also suffered, impacting its brands’ performances in stores. Inside the company, a new spirit also has emerged since turnaround specialist Tony Alvarez took over as chief executive officer 11 months ago.

Now, workers are encouraged to take creative risks, build long-lasting retail partnerships, share information and work as a team for the corporation and its shareholders, said Tom Wyatt, president of the Warnaco Intimate Apparel Group.

“We truly are a new Warnaco,” Wyatt said in an interview at the Warnaco offices here at 90 Park Avenue. “Our objective is to be a proactive and a collaborative partner with retailers, suppliers and consumers in the future. The actual structure of the company is not changing.”

“We’ve gone through an incredible repositioning of people internally and hired 12 senior executives from the outside. Now, we feel very confident with the core group of employees and associates here, and with the cultural changes we’ve put in place such as respect, trust and empowerment. Because of that, we’ve seen a phenomenal surge in productivity and a willingness to work, not like the old Warnaco.”

This fresh attitude became more visible after Warnaco’s plan for reorganization was filed Oct. 1, outlining plans for its exit from bankruptcy by the end of January as a stand-alone firm. As reported, the plan documents Warnaco as having an enterprise value of $800 million, combining $750 million for the operations plus $50 million in cash.

Upon emergence from bankruptcy, Warnaco will hold $265 million in debt, which includes senior subordinated notes, plus its borrowings under an exit financing facility. At its peak, Warnaco’s market capitalization in June 1998 was $2.8 billion.

Wyatt acknowledged a number of bridges had been burned and needed rebuilding.

“Over time, we lost the respect and trust of many of our key retail partners, and we are spending a lot of time with them now,” he said. “We are pleased to now see a groundswell of support from retailers for the new Warnaco team and its vision.”

Wyatt also noted the company had “aggressive new plans” for the firm’s intimate apparel businesses, which in some cases will integrate the product development and marketing synergies of other lines of business, such as sister firm Authentic Fitness Corp.

On the drawing board are plans to resuscitate a once-thriving private-label business in intimates, which generated annual volume of $150 million four years ago but is now dormant, said Wyatt.

“We are aggressively going after the private-label business with former partners Victoria’s Secret, Wal-Mart, J.C. Penney and Sears, as well as new partners,” said Wyatt. “We see a $50 million opportunity within the next 1 1/2 to two years.”

Wyatt said the company will consolidate all its businesses into one location by early 2003. However, it has not determined whether the Calvin Klein Underwear and Calvin Klein Jeanswear operations, which are located at the Calvin Klein Inc. offices and showrooms at 205 West 39th Street, will be moved.

Wyatt, an apparel and retail veteran whose résumé includes 23 years at the Vanity Fair intimates division of VF Corp.; president of the Parisian department store chain for four years, and a nine-month stint at Warnaco in 1997, is among the key executives at Warnaco who is said to be on the short list as its new chief executive officer.

As reported, a search committee, with the assistance of executive search firm Heidrick & Struggles, has been retained to find a replacement for Alvarez, who led Warnaco’s turnaround charge and has served as Warnaco’s ceo since last November, as well as Jim Fogarty, Warnaco’s chief financial officer.

The post of ceo will be decided by Warnaco’s board and banks “by Christmas,” Wyatt said.

Another ceo candidate is John Kourakos, president of the Sportswear Group, which includes the Chaps by Ralph Lauren men’s wear label and the Calvin Klein Underwear and Jeanswear businesses, who said part of the makeover will be to not sell Calvin Klein innerwear and jeanswear “to the Costcos of the world or the clubs.”

“We just relaunched Calvin Klein men’s underwear at 33 doors at Parisian in September and will introduce Calvin Klein women’s underwear at Parisian in spring 2003,” Kourakos said. “We’ll also be relaunching Calvin Klein men’s and women’s underwear at 239 doors at Dillard’s on October 25.”

Kourakos would not discuss the status of Calvin Klein underwear at J.C. Penney, a move that angered a number of department store executives in 1999. But according to sources, that distribution was stopped last spring.

As for the ongoing question of a potential sale of the Calvin Klein Underwear and/or Calvin Klein Jeanswear businesses, Kourakos said: “We are proceeding with the reorganization plan. It’s yet to be determined. But it’s not to say that any business couldn’t be sold to an interested party.”

Wyatt said the core Olga and Warner’s bra brands, the Bodyslimmers shapewear label, and Lejaby, a French bra and swimwear brand will be transformed into thriving businesses.

Addressing the question of any sell-offs of some or all of Warnaco brands or businesses, Wyatt said: “A year ago, the businesses were at risk of being sold. But the amazing turnaround that Tony Alvarez has achieved is so significant and has increased the integral value of Warnaco as a company and its brands, that it has thwarted any bids we have had. We will be in a cash position to invest in all of our businesses, and over time, evaluate opportunities to build and layer a portfolio of brands in all of our businesses.”

So far, Warnaco has completed the sale or liquidation of several noncore units. The disposal of the Hong Kong-based GJM sleepwear operation, which specialized in silk and produced the majority of Calvin Klein sleepwear and the Penhaligon’s bath and beauty chain, have generated gross proceeds of about $20 million, and IZKA, a $1 million French maker of seamless lingerie and bodywear.

Regarding the restructuring of Warnaco’s intimates business, Wyatt, who has been at the firm since May, laid to rest rumors that the Lejaby foundations and its Rasurel swimwear brand, which generate annual wholesale volume of $90 million in France, are still on the selling block.

“We see Lejaby as a significant business opportunity in the U.S.,” he said. “The products will have a sophisticated French flair, will be very high fashion and extremely well engineered.”

Sales projections in the U.S. market the first couple of years are $30 million to $50 million, he said. Shipments are scheduled for fall 2003. Distribution will be aimed at major specialty stores, as well as a select number of major department stores.

Combined sales for Warnaco’s bread-and-butter brands, Olga and Warner’s, is $250 million, split evenly. The 61-year-old Olga brand is known for its full-figure and demicut bra styles, while the trademark of the 128-year-old Warner’s name is seamless bras, average sizes and proprietary post-molding applications. The Olga brand is the second-best-selling bra brand and Warner’s is the third at department stores, he said.

“We are in the process of spending $1 million to repackage and revamp what our brands communicate at point-of-sale,” Wyatt said. “In the past with Warner’s, we rushed product to market. We had not seen any newness for three years. Now, we are validating the fit, function and quality, and supporting new products that have a longer life cycle. We’ll begin seeing positive results for spring 2003.”

Wyatt said the Olga name is being repositioned as a more sophisticated, engineered bra label, with some coordinating daywear pieces. A line of shapers called Secret Shapers is being phased out, while a line of panties bearing the Olga name will be reintroduced the first half of 2003.

“Five years ago, the Olga [panties] business was $80 million at retail. Now it’s $10 million,” he said. “We see a $50 million opportunity in the next 1 1/2 to two years.”

Wyatt said he believes the Bodyslimmers shapewear brand has “tremendous potential,” citing an ambitious spring 2003 launch of core categories, such as control briefs that offer light, medium and heavy control in a new microfiber he declined to name.

“We want Bodyslimmers to become an everyday-wear product,” Wyatt said. “It’s doing $40 million at retail. We feel this business could easily double in two years.”

“We see Lejaby as a significant business opportunity in the U.S.,” he said. “The products will have a sophisticated French flair, will be very high fashion and extremely well engineered.”

Sales projections in the U.S. market the first couple of years are $30 million to $50 million, he said. Shipments are scheduled for fall 2003. Distribution will be aimed at major specialty stores, as well as a select number of major department stores.

Combined sales for Warnaco’s bread-and-butter brands, Olga and Warner’s, is $250 million, split evenly. The 61-year-old Olga brand is known for its full-figure and demicut bra styles, while the trademark of the 128-year-old Warner’s name is seamless bras, average sizes and proprietary post-molding applications. The Olga brand is the second-best-selling bra brand and Warner’s is the third at department stores, he said.

“We are in the process of spending $1 million to repackage and revamp what our brands communicate at point-of-sale,” Wyatt said. “In the past with Warner’s, we rushed product to market. We had not seen any newness for three years. Now, we are validating the fit, function and quality, and supporting new products that have a longer life cycle. We’ll begin seeing positive results for spring 2003.”

Wyatt said the Olga name is being repositioned as a more sophisticated, engineered bra label, with some coordinating daywear pieces. A line of shapers called Secret Shapers is being phased out, while a line of panties bearing the Olga name will be reintroduced the first half of 2003.

“Five years ago, the Olga [panties] business was $80 million at retail. Now it’s $10 million,” he said. “We see a $50 million opportunity in the next 1 1/2 to two years.”

Wyatt said he believes the Bodyslimmers shapewear brand has “tremendous potential,” citing an ambitious spring 2003 launch of core categories, such as control briefs that offer light, medium and heavy control in a new microfiber he declined to name.

“We want Bodyslimmers to become an everyday-wear product,” Wyatt said. “It’s doing $40 million at retail. We feel this business could easily double in two years.”