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NEW YORK — Executives of the Warnaco Group Inc., speaking at the company’s first shareholders meeting since emerging from bankruptcy in February, said the firm has made many critical changes over the past few years and contended it would continue on a strong footing.
This story first appeared in the May 29, 2003 issue of WWD. Subscribe Today.
“We are proud of the fact that we have met or exceeded the goals set during our reorganization,” said non-executive chairman Stuart D. Buchalter, who added that 2002 “marked a period of intense scrutiny of our people, processes, brands and strategies.”
Joseph R. Gromek, who last month was named president and chief executive officer, noted the company recorded improved financial results on an operating basis last year, and added, “the positive momentum continued into the first quarter.”
He said in 2002 the firm generated $226 million in cash flow from its operations, although it ended the year $964.9 million in the red, partly because of an $801.6 million write-off from an accounting change. Gross profit was up to 29.5 percent of sales compared with 17.8 percent the prior year. Sales were $1.48 billion. On a pro-forma basis, Warnaco was profitable in the first quarter of 2003.
Gromek said a key advantage for Warnaco is that “We are partnered with some of the most recognized brands in the industry: Calvin Klein and Polo Ralph Lauren.”
Warnaco owns the rights to produce Calvin Klein underwear and also produces the Calvin Klein jeans label under license. It also has the license for Chaps Ralph Lauren men’s sportswear.
Plans for this year, he said, include a “more focused marketing effort to raise the images and heighten awareness of our brands and product offerings.”
In an interview after the Wednesday meeting, Gromek said, “We will continue to invest more energy” into marketing, but added that doesn’t necessarily mean a hefty increase in advertising budgets. He said many factors went into an effective marketing effort, adding, “it’s not necessarily just about a national advertising campaign.”
In a separate interview, John Kourakos, president and chief executive officer of Warnaco’s Sportswear Group, said of the Calvin Klein Underwear business, “We continue to be fashion leaders in product and style. The focus this year is on the men’s side with new Pro Stretch products by Calvin Klein and the Sheer Body launch by Calvin Klein this spring.”
Kourakos further noted that the redistribution of Calvin Klein Underwear to Dillard’s department stores in October 2002 was “successful,” noting, “The launch was in 289 doors and now we’re in 330 doors.”
Four motions on the company’s proxy statement were approved by shareholders at the meeting, which was held in a Midtown Manhattan hotel and lasted less than half an hour.
Shareholders elected as directors Buchalter, Gromek, former ceo Antonio C. Alvarez, David A. Bell, Richard Karl Goetz and Charles R. Perrin. They also approved the company’s stock incentive plans and incentive compensation plan and ratified the choice of Deloitte & Touche LLP as auditors.
This week, Warnaco executives are also set to begin their road show for $210 million in senior notes due in 2013, which will be used to refinance other outstanding debt, a move executives described as a piece of financial housekeeping.
Only one shareholder at the meeting addressed the group and in keeping with the post-Enron era of Corporate America, it focused on corporate governance.
“We’ve gone most of the way, but I want to be sure we don’t get too giddy about the improvements” in company performance, said Daniel Loeb, managing member of Third Point Management Co. LLC, an investment group with a 4.7 percent stake in the firm. He told executives, “We’d like to see an increased level of communications between the company and our shareholders.”
He also encouraged the board to seek members who had purchased large stakes in the firm, presuming they’d be more accountable to shareholders. The remarks seemed to reflect concerns left over from the era when Linda J. Wachner ran the company as chairman and ceo, until being forced out in November 2001.
Buchalter assured Loeb, “Your comments will be taken seriously.”
While much has changed about Warnaco since Wachner’s exit, the company still appears to carry some baggage from that era — literally. After the meeting, as staffers packed up their paraphernalia, they loaded extra copies of the firm’s proxy statement into a large beige canvas tote back, labeled in black with the initials LJW.