The Warnaco Group Earnings: Profitability Remains Intact

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The Warnaco Group Inc. (NYSE:WRC) reported its results for the third quarter. Warnaco Group designs, sources, markets, licenses and distributes a line of intimate apparel, sportswear and swimwear worldwide.

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The Warnaco Group Inc. Earnings Cheat Sheet

Results: Net income for The Warnaco Group Inc. fell to $41.1 million (98 cents per share) vs. $44.6 million ($1.13 per share) a year earlier. This is a decline of 7.8% from the year-earlier quarter.

Revenue: Fell 5.2% to $611.5 million from the year-earlier quarter.

Actual vs. Wall St. Expectations: The Warnaco Group Inc. fell short of the mean analyst estimate of $1.14 per share. It fell short of the average revenue estimate of $655.6 million.

Quoting Management: “Our third quarter results reflect the efforts of our team to efficiently operate our global business,” said Helen McCluskey, Warnaco’s President and Chief Executive Officer. “Gross margin expansion and expense discipline more than offset a decline in net revenues, driven primarily by the impact of currency and macro challenges. As a result, we delivered an increase in operating margin and adjusted non-GAAP income per share from continuing operations compared to the prior year quarter. “Internationally, net revenues in constant dollars were up slightly, led by growth in Latin America and Asia offsetting a slight decline in Europe. Our direct-to-consumer net revenues, in constant dollars, were up 5% and comparable store sales for the quarter were relatively flat. We saw some progress in Europe, where direct-to-consumer net revenues rose 6%, in constant dollars, including positive comparable store sales for the quarter. “Looking forward, our reported 3Q results support our outlook for the balance of the year. As was announced last week, we entered into a merger agreement with PVH Corp. and look forward to the opportunities the transaction with PVH brings to our business. In the meantime, we intend to continue to operate the business effectively for the next several months as we work collaboratively with PVH to ensure a smooth integration,” concluded McCluskey.

Key Stats:

Revenue has fallen for the last three quarters in a row. In the second quarter, revenue declined 4.6% to $563.9 million while the figure fell 7% in the first quarter from the year earlier.

The company fell short of estimates last quarter after beating the mark the quarter before with net income of 72 cents versus a mean estimate of net income of 65 cents per share.

Margins rose in the second quarter after falling the quarter before. Gross margins grew to 43.7%, up 0.3 percentage point from the year-earlier quarter. In the first quarter, the figure rose 1.3 percentage points to 42.4% from the year earlier quarter.

Looking Forward: Over the past sixty days, the outlook for the company’s performance next quarter has become increasingly unfavorable. The average estimate for the fourth quarter is $1.24 per share, a drop from $1.25. For the fiscal year, the average estimate has moved up from $4 a share to $4.05 over the last ninety days.

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(Company fundamentals provided by Xignite Financials. Earnings estimates provided by Zacks)

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