Warnaco Group, Inc. Q2 2009 Earnings Call Transcript

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2009-08-11 16:51:06.0

Tags: Environment, Europe, Barclays Plc., Call Transcript, Strength, Earnings, Warnaco Group Inc., Seeking Alpha

Question-and-Answer Session

Operator

(Operator Instructions) Your first question comes from Matt McClintock – Barclays Capital.

Matt McClintock – Barclays Capital

You talked about the impact of FX on gross margin during the quarter. Can you give us a general idea of how much the mix shift impacted gross margin and also the promotional environment?

Lawrence Rutkowski

You brought up the fact that on gross profit, we talked about the roughly $23 million impact. In terms of the other, that accounts for roughly 40% of the decline in the gross margin for the period. The rest of it is a combination of channel mix and it being a bit more of a promotional environment.

Matt McClintock – Barclays Capital

It looked like comps came in overall for the company pretty well for the quarter which indicates that June was a pretty good month. Can you talk about that? Can you just talk about what drove the strength in June and maybe give us some reads for how well direct-to-consumer is doing so far in July?

Joseph Gromek

I think the June comps were driven as we got into more promotional environments. We saw positives across the board. As I indicated in the script, July came in at 3.1% and we saw particularly good strength in Europe where we were up about 8% and in Europe, I think out of the 13 countries we do business in, 12 out of the 13 were positive. The only place we had a negative was in Switzerland.

Places like the U.K. were up 18% and the Spanish market which has been very challenged was up about 1.5%. So we felt good about that. In Asia in July, we saw a great strength. In China we were up near 10% and we were up 10% in Australia, 5% in Korea. We had softness in Hong Kong however and that's probably been our most challenging market. It's not a large market for us, but clearly the most challenged.

In Latin America we saw good results. We've got a few stores in Mexico that aren't doing well, but all in all, given the strength in Europe right now, we're feeling very positive about the business.

Operator

Your next question comes from Sean Naughton – Piper Jaffray.

Sean Naughton – Piper Jaffray

Thinking about the direct to retail business long term, you have been growing square footage by 20% a year over the last few years. How much longer do you see the runway on that particular growth and which particular geographies are you most acutely focused on right now?

 

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