CK Biz Elevates Warnaco Q3 Results

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NEW YORK – The acquisition of the Calvin Klein Jeans business in Europe and Asia (CKJEA) helped drive Warnaco Inc. to stellar third-quarter results despite a nearly $8 million charge for its soon-to-be-sold Ocean Pacific operation.

For the three months ended Sept. 30, net income landed at $14.6 million, or 31 cents a share, more than twice the $6.9 million, or 15 cents, registered during the comparable 2005 period. The most recent figure was reduced by $7.9 million, or 17 cents, after taxes due to the classification of OP as a discontinued operation. Last year, discontinued operations reduced the bottom line by $2.1 million, or 5 cents. As reported, the company has agreed to sell the OP brand to Iconix for $54 million but continue to market women’s swimwear under the brand.

Net revenues soared 38.5% to $452 million from $326.3 million in last year’s period but were up a more modest 6% excluding the $106 million sales contribution of CKJEA. The acquisition helped push European sales up 108.6% in Europe, to $131.4 million, and 373.3% in Asia, to $56.6 million.

Gross profit rose to 39.3% of net revenues, up heartily from 34.4% in 2005.

Joe Gromek, president and chief executive officer, said that the intimate apparel group led the strong quarterly performance, and that it and CKJEA exceeded projections.

“The implementation of our key strategies for our continuing operations, including geographic diversification and direct to consumer expansion, drove solid gains in our top line and bottom line performance,” the CEO stated. “Our international businesses continued to grow in the quarter, generating approximately half of this quarter’s net revenues, and revenues from our direct to consumer business climbed to just over 16%.

“We will continue to evaluate our portfolio and focus our efforts on those businesses that provide the greatest opportunity to create shareholder value,” he continued. “Our decisions to sell Ocean Pacific and discontinue certain other non-core businesses reflect this commitment. These decisions will allow management to focus attention and resources on our key brands and international opportunities, which are the foundation of our growth strategy.”

Among the businesses slated to be discontinued are Lejaby Rose, JLO by Jennifer Lopez Lingerie and Axcelerate Activewear.

In the nine months, net income fell 25.2% to $31.9 million, or 68 cents a diluted share, from $42.6 million, or 92 cents, a year earlier. Sales advanced 19.7% to $1.36 billion during the time frame.

Larry Rutkowski, chief financial officer, said revenue growth for the year among the company’s ongoing operations would be in the low single digits and that the profitability would be favorably affected in the future by the elimination of investment in OP and the discontinuation of the other non-core businesses.

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