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Q2 2012 Earnings Call Transcript

Transcript Call Date 08/06/2012

Operator: Good afternoon. My name is Jackie, and I will be your conference operator today. At this time I would like to welcome everyone to The Warnaco Second Quarter 2012 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session.

Thank you. I would now like to turn the call over to Deborah Abraham, Vice President of Investor Relations. Please go ahead.

Deborah Abraham - VP, IR: Thank you, Jackie, and good afternoon everyone. Joining me on the call today are Helen McCluskey, our President and Chief Executive Officer; and Larry Rutkowski, our CFO. Helen will begin with some comments on the quarter and discuss our strategy followed by Larry who will walk you through the financials and discuss our outlook. Following our remarks, we will hold the question-and-answer session. Mark Whyman, our Chief Commercial Officer for Calvin Klein is here and will join us for the Q&A. Martha Olson, our Group President will not be able to join us as she is still (indiscernible).

Today's comments are based on Warnaco's adjusted results on a continuing basis, which exclude restructuring expense, pension expense, certain tax-related items and for the current quarter the Lejaby impairment charge. A reconciliation of actual results to adjusted is available in the schedule accompanying our press release.

Additionally, today's call includes comments concerning Warnaco's business outlook and contains forward-looking statements. Any forward-looking statements and all other statements that may be made on this call that are not based on historical facts are subject to risks and uncertainties, information concerning a number of the factors that could cause actual results to differ materially from the information that will be discussed is available in Warnaco's filings with the SEC, including Warnaco's Form 8-K furnished today.

Now, let me turn the call over to Helen McCluskey.

Helen McCluskey - President and CEO: Thanks, Deb. Good afternoon, everyone. Our second quarter results were in line with our expectations. Net revenues in constant currency were flat with the prior year. As anticipated diluted earnings per share were adversely impacted by higher product cost, a promotional environment and unfavorable currency but met our projections.

During the quarter we concentrated our investments on high return opportunities, especially the expansion of our retail footprint. At the same time to mitigate gross margin pressure, we exercised disciplined controlled expenses to enable us to maximize our operating profit.

Our core strategies of international expansion and direct-to-consumer growth continue to serve us well. Growth in emerging markets offset declines in Europe and the U.S. and growth in retail compensated for a decrease in wholesale revenue. For more specifics on the business trends we saw in the first quarter continued through the second quarter.

Looking by region, Asia revenues were up 5% in constant dollars led by growth in China and Hong Kong where we continue to optimize our direct and franchise businesses. In Korea, comparable store sales in the second quarter, while negative were better than the first quarter and continue to improve in July.

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