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Q2 net revenues up by 14% at Warnaco
06 Aug '10
5 min read
Fiscal 2010 Outlook
Based on its positive first half results and outlook for the balance of the year, the Company is again raising its 2010 earnings outlook. For fiscal 2010, on an adjusted non-GAAP basis (excluding restructuring expense, pension expense, cost related to repurchase of debt and certain tax related items):
• The Company currently anticipates net revenues will increase 9% - 11% compared to fiscal 2009
• The Company now expects diluted earnings per share from continuing operations in the range of $3.40 - $3.50
• The Company's prior guidance was for net revenue growth in the range of 8% - 10% compared to fiscal 2009 and diluted earnings per share from continuing operations in the range of $3.30 - $3.40
Schedule 7 of the accompanying tables provide a reconciliation of expected diluted earnings per share from continuing operations, on a GAAP basis of $3.28 - $3.36 (assuming minimal pension expense), to the adjusted fiscal 2010 outlook above.
Second Quarter 2010 Highlights
Net revenues rose 14% in the quarter to $519.3 million. All three segments (Sportswear Group, Intimate Apparel Group and Swimwear Group) and all key geographies in which we operate contributed to the growth. New product launches and ongoing global expansion drove mid-teens revenue growth in the Company's Calvin Klein businesses, and was complemented by mid-teens revenue growth in Chaps, primarily reflecting its expanded distribution.
Gross margin increased 270 basis points, to 44% of net revenues, compared to the prior year quarter, driven by strong sell through and higher margin associated with expansion in our direct to consumer and international operations.Selling, general and administrative expense (SG&A), as expected, increased compared to the prior year quarter.
The increase of $26.6 million to $171.9 million, primarily reflects planned investments in direct-to-consumer operations, marketing, infrastructure and costs associated with performance-based employee compensation. SG&A as a percent of net revenues increased 120 basis points to 33% compared to the prior year quarter.
Operating income increased 35% to $55.3 million compared to $41.0 million in the prior year quarter.
The Company recorded income from continuing operations of $30.0 million, or $0.65 per diluted share in the quarter, compared to $18.6 million, or $0.40 per diluted share, in the prior year quarter.
Income from continuing operations, on an adjusted non-GAAP basis (excluding costs related to restructuring expenses, pension expense, costs related to repurchase of debt, certain tax related items and other items), as detailed in the accompanying schedules, was $0.71 per diluted share in the quarter compared to $0.47 per diluted share in the prior year quarter.
The effect of fluctuations in foreign currency exchange rates increased fiscal 2010 second quarter net revenues, gross profit, and operating profit by approximately $5 million, $8 million, and $9 million, respectively, and increased income from continuing operations by approximately $0.07 per diluted share.
Based on its positive first half results and outlook for the balance of the year, the Company is again raising its 2010 earnings outlook. For fiscal 2010, on an adjusted non-GAAP basis (excluding restructuring expense, pension expense, cost related to repurchase of debt and certain tax related items):
• The Company currently anticipates net revenues will increase 9% - 11% compared to fiscal 2009
• The Company now expects diluted earnings per share from continuing operations in the range of $3.40 - $3.50
• The Company's prior guidance was for net revenue growth in the range of 8% - 10% compared to fiscal 2009 and diluted earnings per share from continuing operations in the range of $3.30 - $3.40
Schedule 7 of the accompanying tables provide a reconciliation of expected diluted earnings per share from continuing operations, on a GAAP basis of $3.28 - $3.36 (assuming minimal pension expense), to the adjusted fiscal 2010 outlook above.
Second Quarter 2010 Highlights
Net revenues rose 14% in the quarter to $519.3 million. All three segments (Sportswear Group, Intimate Apparel Group and Swimwear Group) and all key geographies in which we operate contributed to the growth. New product launches and ongoing global expansion drove mid-teens revenue growth in the Company's Calvin Klein businesses, and was complemented by mid-teens revenue growth in Chaps, primarily reflecting its expanded distribution.
Gross margin increased 270 basis points, to 44% of net revenues, compared to the prior year quarter, driven by strong sell through and higher margin associated with expansion in our direct to consumer and international operations.Selling, general and administrative expense (SG&A), as expected, increased compared to the prior year quarter.
The increase of $26.6 million to $171.9 million, primarily reflects planned investments in direct-to-consumer operations, marketing, infrastructure and costs associated with performance-based employee compensation. SG&A as a percent of net revenues increased 120 basis points to 33% compared to the prior year quarter.
Operating income increased 35% to $55.3 million compared to $41.0 million in the prior year quarter.
The Company recorded income from continuing operations of $30.0 million, or $0.65 per diluted share in the quarter, compared to $18.6 million, or $0.40 per diluted share, in the prior year quarter.
Income from continuing operations, on an adjusted non-GAAP basis (excluding costs related to restructuring expenses, pension expense, costs related to repurchase of debt, certain tax related items and other items), as detailed in the accompanying schedules, was $0.71 per diluted share in the quarter compared to $0.47 per diluted share in the prior year quarter.
The effect of fluctuations in foreign currency exchange rates increased fiscal 2010 second quarter net revenues, gross profit, and operating profit by approximately $5 million, $8 million, and $9 million, respectively, and increased income from continuing operations by approximately $0.07 per diluted share.
Warnaco Group Inc.
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