Warnaco profit tops view and gives better outlook

NEW YORK (Reuters) - Apparel maker Warnaco Group Inc (WRC.N) posted a higher-than-expected quarterly profit on Tuesday, helped by cost cuts, and said full-year results were tracking at the high end of its projections.

Warnaco, which makes Calvin Klein jeans and Speedo swimwear, has seen the department stores it sells its merchandise to post months of weak sales and cut inventory as recession-hit shoppers slash spending.

The company also operates Calvin Klein retail shops mostly outside the United States, and pointed to demand for the brand as it expands overseas. Calvin Klein sales rose in a double-digit percentage range in the past quarter.

"The equity and power of the brand is even more apparent in a challenging environment where Calvin Klein defines affordable luxury," said Warnaco Chief Executive Joe Gromek, noting demand for Calvin Klein jeans, underwear and accessories.

Based on Warnaco's results so far, "we believe we are at the top end of both our revised revenue and earnings guidance," Gromek said during a conference call.

Warnaco tightened its full-year outlook, saying it now expects to earn $2.50 to $2.66 per share from continuing operations. It also expects revenue to decline 9 percent to 12 percent.

Its earlier forecast called for earnings of $2.40 to $2.66 per share and net revenue to fall 9 percent to 14 percent, hurt mainly by foreign currency exchange rates.

Analysts, on average, expect it to earn $2.48 per share.

"We view this guidance as appropriately conservative, leaving room for upside if the global environment doesn't worsen," Lazard Capital analyst Todd Slater said in a note.

PROFIT BEAT

Warnaco's net income rose to $37.6 million, or 81 cents a share, in the first quarter ended on April 4 from $17.7 million, or 38 cents per share, a year earlier.

Excluding costs such as those tied to restructuring, pension expense and some tax-related items, Warnaco's profit of $1 per share topped the analysts' average expectation of 74 cents, according to Reuters Estimates.

Sales fell 5.1 percent to $538.4 million.

All of Warnaco's business units -- sportswear, underwear and swimwear -- saw net revenue fall, hurt by the effect of the stronger dollar, which reduces the value of overseas sales. International markets account for a significant portion of Warnaco's business.

In November, New York-based Warnaco unveiled a cost-cutting plan that included cutting about 45 jobs.

During the first quarter, Warnaco slashed selling, general and administrative expenses by 510 basis points as a percentage of net revenue.