Calvin Elevates Warnaco’s Q4

by MR Magazine Staff Feb 27, 2007

NEW YORK – What do Phillips-Van Heusen and Warnaco have in common, other than rumors that they may be part of the same company one day?

Answer: Both benefited from their respective stakes in the Calvin Klein trademark in a major way last year.

The Warnaco Group, powered by its acquisition of the Calvin Klein Jeans business in Europe and Asia, saw its fourth-quarter profits nearly triple in the three months ended Dec. 30. Net income was $18.9 million, or 41 cents a diluted share, versus $6.9 million, or 15 cents, during the comparable 2005 period. Excluding discontinued operations, net income was $25.1m, or 55 cents a share, above the analyst estimate for EPS of 49 cents.

Revenues were up 35.6% to $480.6 million from $354.5 million. Excluding the purchase of the overseas Calvin Klein Jeans business, net revenues would have risen 11.9% to $396.7 million.

Gross profit was 38.3% of sales versus 34.7%, with favorable currency translation and substantial increases in the margins of both the Calvin Klein Jeans business in the US and the CK underwear division contributing strongly to the improvement.

“We finished the year on a high note, led by the performance of our Calvin Klein businesses which collectively surpassed $1bn in revenues for fiscal 2006,” said Joe Gromek, president and chief executive officer of the New York-based company.

The company expects net revenues to grow in the mid-single digits during fiscal 2007, with earnings per diluted share ascending to between $1.70 and $1.79, assuming minimal pension expense and a tax rate of approximately 29%.

For the full year, net income was up 2.5% to $50.8 million, or $1.11 per diluted share, from $49.5 million, or $1.08. Income from continuing operations was up 32.6% to $73.6 million.

Revenues leaped 23.8% to $1.93 billion from $1.48 billion. Without the overseas Calvin Klein jeans business, 2006 revenues would have been $1.5 billion. The company tagged the after-tax loss from discontinued operations, such as the Ocean Pacific business sold during the year, at $22.9 million, or 49 cents a share.

The firm noted that revenues for the year declined for its Chaps and North American Calvin Klein Jeans businesses but benefited about $9 million from currency translations based on the strength of the euro and Canadian dollar.