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Powerful performance of Warnaco
10 Nov '10
5 min read
Fiscal 2010 Outlook
The Company is 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, certain acquisition costs and tax related items and other items):
• The Company currently anticipates net revenues will increase 11-13% compared to fiscal 2009
• The Company now expects diluted earnings per share from continuing operations in the range of $3.45 - $3.55, a 24% increase compared to fiscal 2009.
• The Company's prior guidance was for net revenue growth in the range of 9% - 11% compared to fiscal 2009 and diluted earnings per share from continuing operations in the range of $3.40 - $3.50.
Schedule 7 of the accompanying tables provide a reconciliation of expected diluted earnings per share from continuing operations, on a GAAP basis of $3.10 - $3.17 (assuming minimal pension expense), to the adjusted fiscal 2010 outlook above.
Third Quarter 2010 Highlights
Net revenues rose 15% compared to the prior year quarter to $596.8 million. The Company's Calvin Klein businesses, which represented 79% of the Company's total net revenues, grew 12% compared to the prior year quarter, reflecting the strength of the new product launches as well as continued momentum in its international and direct-to-consumer businesses. The growth in Calvin Klein was complemented by robust growth in the Company's Heritage businesses. Compared to the prior year quarter, Chaps net revenue grew by 32% while Core intimates reported mid-teens growth. Both businesses continued to benefit from expanded distribution as well as positive consumer response to new product offerings.
Gross margin increased 120 basis points, to 45% of net revenues, compared to the prior year quarter. The Company achieved higher gross margins partially from the expansion in its direct-to-consumer and international businesses, which more than offset the effects of increased product and transportation costs.
Selling, general and administrative expense (SG&A) was $198.1 million, or 33% of net revenues (a 140 basis point increase compared to the prior year quarter). The Company's expanded direct-to-consumer footprint, incremental marketing in support of the Company's growth initiatives, infrastructure costs and performance-based employee compensation were the largest components of the increase.
Operating income increased 13% to $67.9 million compared to $60.3 million in the prior year quarter and includes an additional $3.3 million of restructuring expenses, certain acquisition and tax related items and other items compared to the prior year quarter.
The Company recorded income from continuing operations of $41.4 million, or $0.90 per diluted share in the quarter, compared to $31.2 million, or $0.66 per diluted share, in the prior year quarter.
The Company is 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, certain acquisition costs and tax related items and other items):
• The Company currently anticipates net revenues will increase 11-13% compared to fiscal 2009
• The Company now expects diluted earnings per share from continuing operations in the range of $3.45 - $3.55, a 24% increase compared to fiscal 2009.
• The Company's prior guidance was for net revenue growth in the range of 9% - 11% compared to fiscal 2009 and diluted earnings per share from continuing operations in the range of $3.40 - $3.50.
Schedule 7 of the accompanying tables provide a reconciliation of expected diluted earnings per share from continuing operations, on a GAAP basis of $3.10 - $3.17 (assuming minimal pension expense), to the adjusted fiscal 2010 outlook above.
Third Quarter 2010 Highlights
Net revenues rose 15% compared to the prior year quarter to $596.8 million. The Company's Calvin Klein businesses, which represented 79% of the Company's total net revenues, grew 12% compared to the prior year quarter, reflecting the strength of the new product launches as well as continued momentum in its international and direct-to-consumer businesses. The growth in Calvin Klein was complemented by robust growth in the Company's Heritage businesses. Compared to the prior year quarter, Chaps net revenue grew by 32% while Core intimates reported mid-teens growth. Both businesses continued to benefit from expanded distribution as well as positive consumer response to new product offerings.
Gross margin increased 120 basis points, to 45% of net revenues, compared to the prior year quarter. The Company achieved higher gross margins partially from the expansion in its direct-to-consumer and international businesses, which more than offset the effects of increased product and transportation costs.
Selling, general and administrative expense (SG&A) was $198.1 million, or 33% of net revenues (a 140 basis point increase compared to the prior year quarter). The Company's expanded direct-to-consumer footprint, incremental marketing in support of the Company's growth initiatives, infrastructure costs and performance-based employee compensation were the largest components of the increase.
Operating income increased 13% to $67.9 million compared to $60.3 million in the prior year quarter and includes an additional $3.3 million of restructuring expenses, certain acquisition and tax related items and other items compared to the prior year quarter.
The Company recorded income from continuing operations of $41.4 million, or $0.90 per diluted share in the quarter, compared to $31.2 million, or $0.66 per diluted share, in the prior year quarter.
Warnaco Group Inc
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