Powerful performance of Warnaco
The Warnaco Group, Inc. reported results for the third quarter ended October 2, 2010.
Highlights for the quarter:
• Net revenues increased 15% compared to the prior year quarter to $596.8 million
• Gross margin improved 120 basis points compared to the prior year quarter to 45%
• Income per diluted share from continuing operations increased 36% to $0.90 compared to $0.66 in the prior year quarter
• Income per diluted share from continuing operations on an adjusted, non-GAAP basis increased 41% to $1.04 compared to $0.74 in the prior year quarter (both of which exclude restructuring expenses, pension expense, certain acquisition costs and tax related items and other items)
• The Company purchased 247,000 shares of its common stock for approximately $11.8 million pursuant to a share repurchase program.
The accompanying tables provide a reconciliation of actual results to the adjusted, non-GAAP, results.
The Company believes it is valuable for users of the Company's financial statements to be made aware of the adjusted financial information, as such measures are used by management to evaluate the operating performance of the Company's continuing businesses on a comparable basis and to make operating and strategic decisions. In addition, the Company uses performance targets based, in part, on non-GAAP operating income and diluted earnings per share from continuing operations as a component of the measurement of certain employee incentive compensation.
"Our powerful third quarter results speak to the continued success of our diversified global business model and our long-term growth strategies," commented Joe Gromek, Warnaco's President and Chief Executive Officer.
"Our global Calvin Klein business grew 12% compared to the prior year quarter, bolstered by the continued success of Calvin Klein X Underwear, the launch of X Jeans and the launch of Calvin Klein Envy, coupled with the continued execution of our international and direct to consumer initiatives. Compared to the prior year quarter, net revenues of our international businesses grew 12%, driven by a 21% increase in our direct-to-consumer business. Comparable store sales increased 9% in the quarter, with notable strength in Europe, Latin America and China.
“Our Heritage business, led by Chaps and Core Intimates, delivered a very strong performance in the quarter, reporting a 24% increase in net revenues and significant growth in operating margin. We were particularly pleased with the growth in gross margins, which increased 120 basis points to 45%, and our ability to absorb the rising product and transportation costs affecting our industry. Our strong top line and gross margin growth, contributed to a 36% increase in diluted earnings per share from continuing operations over the prior year quarter."
Mr. Gromek continued, "As we begin the fourth quarter, we are especially encouraged by our brand performance in the face of continuing macro-economic uncertainty in certain markets. We remain optimistic about our prospects for growth, both organic as well as through acquisitions, such as the recently announced acquisition of retail operations from our largest European franchise partner. Supported by our continued success and strong balance sheet, we will continue to make incremental investments in our business in the fourth quarter intended to support the long-term growth of our business and our continued creation of long-term shareholder value."