NEW YORK — Management at Warnaco Group’s second annual investor meeting Tuesday said over the next few years, the company could grow revenue to $2 billion by expanding its brands in new markets while growing its existing business, and also by looking at possible acquisitions.
Warnaco chief executive Joseph Gromek told investors the company has an “opportunity” for $2 billion in annual revenues over the next three or four years. Warnaco, like other suppliers, faces a consolidating retail environment, which challenges prospects for growth.
In fiscal year 2003, Warnaco posted annual revenues of $1.4 billion. By segment, swimwear contributed 26 percent to the total; sportswear, 32 percent, and intimate apparel represented 42 percent of sales.
Gromek said the 2004 goals accomplished so far include the introduction of Chaps’ denim line; the launch of Axcelerate by Speedo; the relaunch of Calvin Klein Underwear in China and Russia; new licensing agreements with JLo, Nautica and Michael Kors, and the recent acquisition of Op/Ocean Pacific.
Currently, about 36 percent of revenues are generated from sales to department and specialty stores, while 33 percent are derived from sales to Wal-Mart, Target, Sam’s Club and Costco.
The company is looking to grow sales in the chain store channel of distribution, which includes companies such as Sears, Mervyn’s, J.C. Penney and Kohl’s. Sales in this channel represent about 6 percent of revenue. Warnaco expects to increase this to 10 percent next year.
Gromek also said Calvin Klein Underwear represents the “greatest growth potential within Warnaco.” He predicts sales will go from about $280 million now to “$500 million over the next few years through product and geographic expansion.”
Frank Tworecke, president of the Sportswear Group, described Calvin Klein Underwear as the company’s most balanced business. The business is split between the U.S. and overseas, and evenly between men’s and women’s wear.
Fall 2004 included the introduction of Choice Calvin Klein, and earmarked for fall 2005 is Sensual Support, for “women who want the aesthetics of Calvin Klein, but need additional support.” Tworecke said Calvin Klein Underwear will be sold online by mid-November of this year.
In sportswear, Calvin Klein Jeans has been a disappointment in the past. Sales are about $280 million, and the focus centered on cost-cutting initiatives, design and sourcing.
For spring 2005, the company will launch CK39, a premium upper-tier department and specialty store brand with price points between $125 and $200 at retail. New products for spring 2005 also include a collection focused on the junior customer. So far, the sales momentum generated by the spring Calvin Klein men’s jeans line alone is “ahead by 44 percent year-over-year,” according to Tworecke.
In swimwear, the aim is to expand Speedo offerings and its designer swimwear lines. While the swimwear business could “double over the next four years,” Warnaco still isn’t ruling out the possibility of more swimwear acquisitions, according to Gromek.
Roger Williams, president of the swimwear group, said Warnaco’s advantage is owning manufacturing plants in Central Mexico, which enables the company to turn inventory within four weeks. The highlight of his presentation, however, centered on Warnaco’s Op acquisition.
Key initiatives for the brand, Williams said, include “geographic expansion with new licenses either through new licensee [arrangements] or new territories.” The company is reviewing opportunities for the Op brand in swimwear, sportswear and intimate apparel. Eventually, the company will change Op’s business model from a licensing firm to a hybrid operation that owns licenses and produces select product lines that take advantage of Warnaco’s core competencies.
Dick Baker, president of the Op business who co-reports to Williams and Gromek, said there are plans to expand Op into women’s sportswear in 2006. He also said there were opportunities in intimate apparel as well as the junior swimwear markets.
Helen McClusky, president of the intimate apparel group, said the number one priority within the intimates business, which hasn’t been performing to plan, is product. Also high on the agenda is the restoration of the Warner brand as a key resource for consumers. One bright spot is JLO, which she said was “well received by our retail partners.”