Warnaco Group Inc.
(WRC) registered fourth quarter 2011 adjusted earnings of 97 cents
per share, which missed the Zacks Consensus Estimate by a penny.
However, it exceeded the prior-year earnings of71 cents per share
by 31%. For fiscal 2011, income per diluted share from continuing
operations on an adjusted, non-GAAP, basis increased 11% to $3.96
compared with$3.57 in fiscal 2010. It also missed the Zacks
Consensus estimate by a penny.
The upswing came on the back of
success in Calvin Klein business. Additionally, expansion into
emerging markets globally coupled with enhanced direct-to-consumer
business also helped the company’s performance.
The adjusted earnings excludes
restructuring expenses, pension expenses, tax related items and
other items. On a GAAP basis, the company reported loss per diluted
share from continuing operations of16 cents compared with income
per diluted share from continuing operations of 61 cents in the
prior-year quarter.
Based on the fourth quarter,
Warnaco continues to anticipate its fiscal 2012 adjusted earnings
per share to be$4.20-$4.25. Including one-time expenses and based
on foreign currency exchange rates, Warnaco expects its reported
earnings per share to be in the range of $3.64-$3.70 for fiscal
2012.
The current Zacks Consensus
Estimate is pegged at$1.07 per share for the first quarter of 2012.
The estimate for full year 2012 is $4.47.
Consolidated Revenue and
Margins
Warnaco’s quarterly net sales
climbed 4% to $614.7 million compared with $591.5 million in the
prior-year period, driven by the company’s investment in the
long-term growth strategies, which contributed4% of the Company’s
international businesses, a 5% increase in the domestic business
and a 14% gain in the direct to consumer net sales.
The Company’s non-Calvin Klein
businesses went down 5% year on year. Growth in the Company’s Core
Intimates business was offset by a decrease in the Company’s Chaps
business, which declined primarily due to weaker demand in the
moderate priced channel.
For fiscal 2011, the company
reported 9.5% higher earnings of $2,513.5 million compared with the
prior year.
However, the increase in sales were
driven mainly by Calvin Klein net revenues, which were up 12%
compared with the prior year, fuelled by international and
direct-to-consumer expansion. International net revenues were up
17% and direct-to-consumer revenues increased 28%. These increases
were more than offset by the 3% reduction in U.S. net sales. Sales
were short of the Zacks Consensus Estimate of $656 million.
A 2% increase in comparable store
sales drove a substantial 28% year-over-year growth in
direct-to-consumer net revenues for the fiscal year.
The segments of Sportswear,
Intimate Apparel reported revenue gains of 1.7%and 8.7%
respectively. However, the Swimwear group declined 2% year over
year to $55,831 million in the quarter
Warnaco continues to expect its
total net sales growth of 4%-6% in fiscal 2012 compared with the
previous year.
Gross profit increased 5.4% to
$267.8 million in the fourth quarter of, while gross margin
declined 60 basis points to 44% on the back of increased product
costs, increasing level of customer allowances and weak business
environment in select markets, offsetting strong gross margins in
the company’s Asian business.
Year-over-year, operating income
has shrunk 112.1% to a negative $5,464 million, while operating
margin contracted 850 basis points in the quarter to a negative
0.9%.
The foreign currency fluctuation
led to a $59.0 million increase in net sales and a dip in reported
income per diluted share from continuing operations of
approximately 12 cents.
Other Financial
Updates
The company exited the quarter with
cash and cash equivalents of $232.5 million as on December 31,
2011, which was higher than $191.2 million as on January 1,
2011.
Inventories increased 13% to $350.8
million from $310.5 million, driven by the company’s expansion of
direct-to-consumer business and rise in product costs.
For fiscal 2011, the Company
purchased 4.3 million shares of its common stock for approximately
$217.1 million pursuant to its share repurchase programs
Warnaco designs, sources, markets,
licenses, and distributes a range of intimate apparel, sportswear,
and swimwear worldwide. The company offers its products primarily
under the Calvin Klein, Speedo, Chaps, Warner’s, and Olga brand
names.
The company operates in a highly
competitive apparel industry with tough competitors like
Limited Brands, Inc. (LTD) and Maidenform
Brands, Inc. (MFB). Moreover, Warnaco depends on license
agreements with third parties for generating a significant portion
of its revenues, which have inherent risks.
Warnaco currently holds a Zacks #3
Rank, which translates into a short-term Hold rating. On a
long-term basis, we have a Neutral rating for Warnaco.
LIMITED BRANDS (LTD): Free Stock Analysis Report
MAIDENFORM BRND (MFB): Free Stock Analysis Report
WARNACO GRP INC (WRC): Free Stock Analysis Report
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