Underwear has long been The Warnaco Group's foundation. One of the top marketers of bras, the company designs and distributes intimates, swimwear, and sportswear under its own and licensed brands, including Calvin Klein, Speedo, Olga, and Warner's. Warnaco also makes menswear under the Chaps by Ralph Lauren brand. The manufacturer sells apparel to department stores, mass merchandisers, warehouse clubs, and specialty retailers in North America, as well as Asia, Europe, and South America. As part of its business, Warnaco also operates about 1,760 Calvin Klein retail stores worldwide and markets Calvin Klein and Speedo brand merchandise online. Warnaco was acquired by PVH in February 2013.
Change in Company Type
Formerly a publicly traded company, Warnaco emerged as a wholly owned subsidiary of PVH in 2013 as a result of its $2.9 billion acquisition and subsequent merger with and into a PVH subsidiary. The cash-and-stock deal brings various Calvin Klein brands under one roof -- Warnaco held the Calvin Klein jeans and underwear licenses, while PVH controlled design and product development for the Calvin Klein brands. The acquisition comes two years after PVH acquired the Tommy Hilfiger brand for $3 billion. PVH is now one of the largest global branded lifestyle apparel companies in the world, bringing together Warnaco's established operations in Asia and Latin America and PVH's strong presence in North America and Europe.
Leveraging distribution facilities and distribution contractors worldwide, Warnaco provides its products to wholesale customers and retail stores. It enlists the help of its distribution partners located in the US, Canada, and Mexico, as well as in China, Hong Kong, Australia, Singapore, Taiwan, the Netherlands, South Africa, Argentina, Brazil, Chile, and Peru. As part of its business, Warnaco also owns one distribution facility, leases about 10 others, and uses third-party services for more than 20 of its distribution warehouses.
Faced with increased competition from retailers and tough economic conditions in certain markets, the company has seen improved demand and rising profits. Net sales increased more than 9% in 2011 as compared to 2010 due to several factors. While comparable store sales rose 4% in 2011, its Sportswear Group net revenues increased more than 8%, thanks to the favorable effects of fluctuations in certain foreign currency exchange rates and significant sales boosts for its Calvin Klein products in Mexico and Central and South America. Calvin Klein is Warnaco's top-selling brand, accounting for nearly 75% of sales.
Mergers and Acquisitions
Contributing to those improved results has been Warnaco's growing international direct-to-consumer business. The company has targeted regions of Asia, Europe, and South America that can tout rising income levels. To this end, Warnaco in mid-2011 acquired a 51% stake in its Indian distributor in a deal valued at more than $20 million. Buying into the Calvin Klein products distributor there allows Warnaco to extend its retail reach in Northern Europe, Asia, and South America.
Previous purchases include the operations of Calvin Klein products distributors in Italy, Singapore, and China for $31 million in 2010, and at the start of 2011 Warnaco acquired inventory and leases of retail stores from its Calvin Klein distributor in Taiwan for $1 million. Warnaco's direct-to-consumer business has contributed a growing portion of sales in recent years, from 15% of total revenues in 2006 to about 25% in 2010. The amount of revenues generated internationally has also increased during this time, from about 40% of total sales to more than 55%.