Warnaco Announces Initiatives Designed to Accelerate Strategic Growth and Enhance Profitability

The Warnaco Group, Inc. (NASDAQ: WRNC) today announced a repositioning of its Swimwear Group designed to enhance the Company’s future growth and profitability. Additionally, the Company announced that it will explore strategic alternatives for its Lejaby business. Swimwear Repositioning Consistent with its previously articulated strategy to rationalize its swimwear portfolio and implement supply chain initiatives to increase efficiencies, the Company is repositioning its Swimwear Group as follows: The Company has entered into a binding letter of intent to transfer its Mexican manufacturing operations to a company controlled by a local business partner. In connection with this transfer, and to ensure a smooth transition, the Company will enter into a production agreement with the new owner. Upon consummation of the transaction, all of Warnaco’s swimwear manufacturing will be outsourced. The Company intends to sell certain of its designer swimwear brands, including Catalina®, Anne Cole® and Cole of California®. Financo, Inc. has been engaged to advise the Company in connection with these sales. The Company intends to exit all of its private label and designer swimwear businesses (with the exception of Calvin Klein® swimwear) by June 30, 2008. Following the completion of the repositioning, Warnaco Swimwear Group will consist of the Calvin Klein and Speedo® swimwear brands. In connection with this repositioning, the Company expects to incur between $30 and $32 million in restructuring charges (of which approximately half are expected to be non-cash items) primarily related to the transfer of ownership of its swimwear manufacturing operations. "We believe the actions announced today will enhance the productivity and profitability of Warnaco. Going forward, our portfolio will consist of compelling brands that we believe are positioned for sustainable long-term growth,” said Joseph Gromek, Warnaco’s President and Chief Executive Officer. "Our global Calvin Klein businesses, including more than 660 points of retail distribution and our dominant Speedo business, offer us significant expansion opportunities. In particular, today’s announcement enables us to focus on maximizing this potential. Additionally, we expect to reduce our cost base as we exit from owned manufacturing and capitalize on our international sourcing infrastructure." Lejaby The Company also announced that it has engaged Goldman Sachs to explore strategic alternatives for its Lejaby businesses, made up of the Lejaby, Rasurel® and Elixir® intimate apparel and swimwear brands. "Lejaby is a premium French brand with a solid history in Europe,” Mr. Gromek said. "However, we are investing our financial resources and management focus on those brands that we believe provide the greatest long-term growth opportunities for Warnaco.” Guidance The Company announced that it is updating its Fiscal 2007 guidance to give effect to these actions and to take into account the continuing positive momentum in our business. On an adjusted (non-GAAP) basis, the Company now expects revenues for Fiscal 2007 to grow 9 - 11% over comparable Fiscal 2006 levels and expects income per diluted share from continuing operations of $2.05 - $2.15 (assuming minimal pension expense). The Company notes that, in addition to reflecting its improved performance outlook, the updated guidance is based upon the exclusion from Fiscal 2007 results of: (i) Lejaby and all private label and designer swimwear (with the exception of Calvin Klein swimwear); and (ii) restructuring expenses, both previously incurred and anticipated through year-end. The attached Schedule A contains a reconciliation of the Company’s revised estimate of net revenue growth for fiscal 2007 (based on US GAAP) to expected net revenue growth on an "as adjusted” basis (non-GAAP) and a reconciliation of the Company’s projected income per diluted share from continuing operations (based on US GAAP) to projected income per diluted share from continuing operations on an "as adjusted” basis (non-GAAP). Conference Call Information The Company will hold a conference call and webcast scheduled for Wednesday September 19, 2007 at 9:00 a.m. ET. To participate in Warnaco’s conference call, dial (877) 692-2592 approximately five to ten minutes prior to the 9:00 a.m. start time. The call will also be broadcast live over the Internet at www.warnaco.com. An online archive will be available following the call. This press release was furnished to the SEC (www.sec.gov) and may also be accessed through the Company’s internet website: www.warnaco.com. ABOUT WARNACO The Warnaco Group, Inc., headquartered in New York, is a leading apparel company engaged in the business of designing, marketing and selling intimate apparel, menswear, jeanswear, swimwear, men's and women's sportswear and accessories under such owned and licensed brands as Warner's®, Olga®, Lejaby®, Body Nancy Ganz®, Speedo®, Anne Cole®, Cole of California® and Catalina® as well as Chaps® sportswear and denim, Ocean Pacific® swimwear, Nautica® swimwear, Michael Kors® swimwear and Calvin Klein® men's and women's underwear, men’s and women’s bridge apparel and accessories, men's and women's jeans and jeans accessories, junior women's and children's jeans and men’s and women's swimwear. FORWARD-LOOKING STATEMENTS The Warnaco Group, Inc. notes that this press release, the conference call scheduled for September 19, 2007 and certain other written, electronic and oral disclosure made by the Company from time to time, may contain forward-looking statements that are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The forward-looking statements involve risks and uncertainties and reflect, when made, the Company's estimates, objectives, projections, forecasts, plans, strategies, beliefs, intentions, opportunities and expectations. Actual results may differ materially from anticipated results or expectations and investors are cautioned not to place undue reliance on any forward-looking statements. Statements other than statements of historical fact are forward-looking statements. These forward-looking statements may be identified by, among other things, the use of forward-looking language, such as the words "believe," "anticipate," "estimate," "expect," "intend," "may," "project," "scheduled to," "seek," "should," "will be," "will continue," "will likely result," or the negative of those terms, or other similar words and phrases or by discussions of intentions or strategies. The following factors, among others and in addition to those described in the Company's reports filed with the SEC (including, without limitation, those described under the headings "Risk Factors" and "Statement Regarding Forward-Looking Disclosure," as such disclosure may be modified or supplemented from time to time), could cause the Company's actual results to differ materially from those expressed in any forward-looking statements made by it: the Company's ability to execute the repositioning and sale initiatives (including achieving enhanced productivity and profitability) announced in this release; economic conditions that affect the apparel industry; the Company's failure to anticipate, identify or promptly react to changing trends, styles, or brand preferences; further declines in prices in the apparel industry; declining sales resulting from increased competition in the Company’s markets; increases in the prices of raw materials; events which result in difficulty in procuring or producing the Company's products on a cost-effective basis; the effect of laws and regulations, including those relating to labor, workplace and the environment; changing international trade regulation, including as it relates to the imposition or elimination of quotas on imports of textiles and apparel; the Company’s ability to protect its intellectual property or the costs incurred by the Company related thereto; the Company’s dependence on a limited number of customers; the effects of consolidation in the retail sector; the Company’s dependence on license agreements with third parties; the Company’s dependence on the reputation of its brand names, including, in particular, Calvin Klein; the Company’s exposure to conditions in overseas markets in connection with the Company’s foreign operations and the sourcing of products from foreign third-party vendors; the Company's foreign currency exposure; the Company’s history of insufficient disclosure controls and procedures and internal controls and restated financial statements; unanticipated future internal control deficiencies or weaknesses or ineffective disclosure controls and procedures; the effects of fluctuations in the value of investments of the Company’s pension plan; the sufficiency of cash to fund operations, including capital expenditures; the Company's ability to service its indebtedness, the effect of changes in interest rates on the Company's indebtedness that is subject to floating interest rates and the limitations imposed on the Company's operating and financial flexibility by the agreements governing the Company's indebtedness; the Company’s dependence on its senior management team and other key personnel; disruptions in the Company's operations caused by difficulties with the new systems infrastructure; the limitations on purchases under the Company's share repurchase program contained in the Company's debt instruments, the number of shares that the Company purchases under such program and the prices paid for such shares; the Company’s inability to achieve its strategic objectives, including gross margin, SG&A and operating profit goals, as a result of one or more of the factors described above or otherwise; the failure of acquired businesses to generate expected levels of revenues; the failure of the Company to successfully integrate such businesses with its existing businesses (and as a result, not achieving all or a substantial portion of the anticipated benefits of such acquisitions); and such acquired businesses being adversely affected, including by one or more of the factors described above and thereby failing to achieve anticipated revenues and earnings growth.       Schedule A   Reconciliation of Guidance and Non-GAAP Measures for Fiscal 2007   NET REVENUE GUIDANCE Percentages Estimated growth in net revenues in fiscal 2007 over comparable fiscal 2006 levels. (Unaudited) Guidance provided on August 7, 2007 (GAAP basis) 7.0 % to 9.0 % Effect of classifying certain operations as discontinued: Elimination of Designer Swimwear revenue - discontinued in 2007 (a), (b) 1.4 % to 1.4 % Elimination of Lejaby revenue (c), (d)   0.1 % to   0.1 %   As revised (GAAP basis) 8.5 % to 10.5 % Effect of classifying certain operations as discontinued: Elimination of Designer Swimwear - discontinued in 2008 (e), (f)   0.5 % to   0.5 %   As adjusted (Non-GAAP basis) (g)   9.0 % to   11.0 %     EARNINGS PER SHARE GUIDANCE U.S. Dollars Diluted Income per common share from continuing operations (Unaudited) Guidance provided on August 7, 2007 (GAAP basis) (h) $ 1.90 to $ 2.00 Restructuring charges (i) (0.50 ) to (0.52 ) Increase in guidance related to continuing businesses 0.05 to 0.05 Effect of classifying certain operations as discontinued: Elimination of Designer Swimwear loss - discontinued in 2007 (a) 0.08 to 0.09 Elimination of Lejaby income (c)   (0.10 ) to   (0.12 )   As revised (GAAP basis) $ 1.43 to $ 1.50 Effect of classifying certain operations as discontinued: Elimination of Designer Swimwear - discontinued in 2008 (e) 0.06 to 0.07 Restructuring Charges (j)   0.56   to   0.58     As adjusted (Non-GAAP basis) (g) $ 2.05   to $ 2.15       (a) Includes certain Designer Swimwear brands (Anne Cole, Catalina, Cole of California and Ocean Pacific) which the Company intends to classify as discontinued operations for financial reporting purposes in fiscal 2007.   (b) Reflects an estimated decrease of $17 million in net revenues from $71 million in fiscal 2006 to approximately $54 million projected in fiscal 2007 relating to the Designer Swimwear businesses which the Company intends to classify as discontinued in fiscal 2007.   (c) The Company intends to classify its Lejaby business as a discontinued operation for financial reporting purposes in fiscal 2007.   (d) Reflects an estimated increase of $8 million in net revenues from $102 million in fiscal 2006 to approximately $110 million projected in fiscal 2007 relating to the Lejaby business which the Company intends to classify as discontinued in fiscal 2007.   (e) Includes the remaining Designer Swimwear brands (with the exception of Calvin Klein) and the Company's Designer Swimwear private label business which the Company intends to classify as discontinued operations for financial reporting purposes in fiscal 2008.   (f) Reflects an estimated decrease of $4 million in net revenues from $44 million in fiscal 2006 to approximately $40 million projected in fiscal 2007 relating to the Designer Swimwear businesses which the Company intends to classify as discontinued in fiscal 2008.   (g) The Company believes it is useful for users of financial statements to be made aware of the "adjusted" net revenue growth and per share amounts related to the Company's income from continuing operations as such measures are used by management to evaluate the operating performance of the Company's continuing businesses on a comparable basis. Management does not, nor should investors, consider such non-GAAP financial measures in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. The Company presents such non-GAAP financial measures in reporting its projected results to provide investors with an additional tool to evaluate the Company's operating results.   (h) The Company's previously reported guidance on August 7, 2007 assumed per share amounts for net income and income from continuing operations would be equal for fiscal 2007. In addition, the previously reported guidance included $3 million (net of income tax benefits of approximately $1 million) of restructuring charges incurred during the first half of fiscal 2007 primarily related to initiatives undertaken by management to increase the productivity and profitability in the Swimwear Group.   (i) Includes approximately $23-$24 million (net of income tax benefits of approximately $9 million) of restructuring charges primarily related to the sale of the Company's Mexican swimwear manufacturing plants expected to be incurred during the second half of fiscal 2007.   (j) Reflects approximately $26-$27 million (net of income tax benefits of approximately $10 million) of restructuring charges for fiscal 2007 primarily related to management's initiatives to increase productivity and profitability in the Swimwear Group including (i) the closure of a swim goggle manufacturing facility in Canada and the rationalization of the Company's workforce in California and Mexico incurred during the first half of fiscal 2007 and (ii) the sale of the Company's Mexican manufacturing plants expected to be incurred during the second half of fiscal 2007.