The Calvin Klein mojo keeps working its magic, with Warnaco Group Inc. the latest beneficiary.
Warnaco on Tuesday posted second-quarter gains that were fueled by increases in its Calvin Klein business, which in turn drove improved results in its sportswear and intimate apparel groups and helped offset declines in its swimwear operation.
"We believe our Calvin Klein businesses are the cornerstone of our growth strategy, and that was clearly evident this quarter," said Joseph R. Gromek, president and chief executive officer, in a conference call to Wall Street analysts.
Gromek said in an interview that the plan is to have Calvin Klein revenues grow to more than $1.5 billion over the next three years and, eventually, $2 billion globally within the next five to six years. The business is primarily direct-to-consumer, "so we are a retailer in much of the world outside of the U.S., with 740 points of distribution," Gromek said, boasting that Calvin Klein has some of the highest margins in the business.
The ceo said Calvin Klein Underwear is the number-one global designer underwear brand. "In 2006, we set a three-year goal to reach $500 million in worldwide Calvin Klein Underwear sales and we are close to achieving that objective this year."
Gromek also said Calvin Klein Jeans in the U.S. was a strong performer. As for the acquired Calvin Klein Jeans businesses, the second quarter had the operation posting a profit against a loss in the year-ago period. "In the Calvin Klein Jeans Europe and Asia businesses, revenues were up and profitability increased to $3 million from a loss of $1 million" last year, Gromek said.
The ceo pointed out that the Calvin Klein businesses are exceeding plan.
"For the quarter, our total Calvin Klein businesses grew 15 percent, and year-to-date revenues are up $100 million on a comparable basis. We plan to grow our Calvin Klein business 15 percent annually, and over the next five years, we believe our organic Calvin Klein businesses can more than double from 2006, as we expand and optimize our current properties," Gromek said.
For the three months ended June 30, income jumped to $13.8 million, or 30 cents a diluted share, from $3.4 million, or 7 cents, in the same year-ago quarter. Revenues rose 4.4 percent to $465.1 million from $445.6 million.For the six months, income was $51.8 million, or $1.11 a diluted share, from $17.3 million, or 37 cents, in the same year-ago period. Revenues rose 12.6 percent to $1.01 billion from $898.7 million.
"We're feeling good. Calvin Klein is one of the real drivers. Chaps is also strong, with revenue up 14 percent. In the U.S., our intimates business is also doing very well. We feel good about the quarter," Gromek said.
The swimwear division, which saw an 11 percent decline in the quarter to $111.8 million in revenue, saw some realignment of management recently, with Helen McCluskey, president of Warnaco Intimate Apparel, adding the division to her oversight responsibilities.
Gromek, who said the company is in the process of evaluating the 14 brands in its swimwear portfolio, didn't rule out the possibility of a brand acquisition or even the sale of a brand or two.
Currently, nearly 50 percent of Warnaco's total business operations are from outside of the U.S. "We have an infrastructure around the globe that supports our brands. Our position is that we are not totally dependent on our domestic operations," said Gromek.
The ceo said the company is "very interested" in adding to its global portfolio, and one criteria is that a brand have strong opportunities in Europe and Asia that would allow Warnaco to take advantage of its overseas infrastructure.
While Gromek said the company is fortunate in that its domestic brands are doing well, he added, "Our growth initiative is outside the U.S."
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