Both wholesale and retail results benefited from Europe’s contribution, the report said, although licensing revenues were necessarily lost due to its incorporation as part of the company. Despite that, licensing revenues, which include the firm’s Far East buying office, advanced 11.7 percent last year, to $122.7 million from $109.9 million in fiscal 2002. Segment profits rose 24 percent to $80.1 million.
With its higher margins, Europe also helped elevate corporate gross margin to 43.9 percent of sales last year from 42.8 percent in 2002 and 40.7 percent in 2001. The firm also credited improved margins in domestic wholesale and retail operations with the improvement.
Operating expenses leapt to 45.4 percent of sales from 32.9 percent of sales, and the firm cited investments and costs associated with its European expedition as among the causes of the increase. Various special charges, including those for impairment and specialty store closures, as well as the cost of opening 21 new stores last year, lifted expenses as well. Total operating expenses came to $858.9 million versus $617.9 million in 2002.
The breakdown of wholesale revenues by segment showed that, over the last two years, women’s wear has grown and men’s wear contracted at nearly identical rates — a 16.4 percent growth in the case of women’s and a 16.7 percent decline in men’s wear.
The annual report blames the decline in wholesale revenues to “an overall volume reduction in the United States. Within the men’s wear component in the U.S., a reduced level of consumer spending, together with the loss of some market share to a variety of new competitors and the promotional environment of retailers contributed to the decrease in net revenue.”
Women’s wear, meanwhile, “continued to benefit from the expansion of the company’s women’s casual division, mainly due to the growth of the company’s plus-size line. Partially offsetting this increase was a decrease in net revenue of the junior jeans division.”