Our business momentum will continue - Kenneth CEO
Kenneth Cole Productions, Inc. reported financial results for the quarter ended March 31, 2010. Earnings per fully-diluted share were $0.10 in the first quarter versus a loss of ($0.46) in the year-ago period, ahead of expectations. The year-over-year improvement was largely driven by revenue growth, continued gains in gross margin, and expense reduction.
Net revenue in the first quarter grew by 5.9% to $109.5 million versus $103.4 million in the year-ago period. Excluding businesses exited in 2009, the Company's revenue was up 9.3% from the prior year. The Company noted that revenue increased in all three of its business segments for the first time in 19 consecutive quarters.
Wholesale sales grew 1.3% to $62.4 million. Excluding the impact of exited businesses, Wholesale sales grew 6.8%. Consumer Direct revenue for the first quarter increased by 13.0% to $37.0 million. This improvement was driven by a comparable store sales increase of 5.6%, 15 net new stores, and double-digit growth in e-commerce. Licensing revenue in the first quarter increased 12.4% to $10.1 million.
Jill Granoff, Chief Executive Officer, commented, "The strong performance we achieved this quarter was driven by growth across categories, genders, and distribution channels. We have seen an increase in Wholesale backlog and reorders, and we are expecting continued comparable store sales growth. Based on these trends and an improving environment, we have confidence that our business momentum will continue."
Consolidated gross margin increased 770 basis points to 41.6% compared to 33.9% in the year-ago period. Margins grew in both the Consumer Direct and Wholesale business segments due primarily to improved product, reduced promotional activity, and continued effective inventory management.
Selling, general and administrative expenses ("SG&A") improved 540 basis points to 40.7% compared to 46.1% in the year-ago quarter, with expenses down by $3.1 million. The Company achieved this reduction despite additional expenses associated with operating 15 net new stores versus the prior year's period.
The Company's first quarter operating income increased by $13.6 million to $1.0 million versus the prior year loss of ($12.6) million. Net income for the first quarter was $1.8 million or $0.10 per diluted share versus a year-ago net loss of ($8.2) million or ($0.46) per share.
The Company noted that first quarter earnings per share include a $0.05 gain on the sale of an investment in equity securities while the year-ago period contained a charge of approximately $0.05 per share for restructuring and other unusual charges. Additionally, there was minimal tax expense in the current quarter due to the reversal of a portion of the Company's deferred tax valuation allowance.
The Company's balance sheet at March 31, 2010 remained strong with no long-term debt. Cash and cash equivalents were $66.3 million versus $46.3 million at the close of the prior year's period. Inventory at the close of the quarter was down 20% to $35.2 million compared to $44.1 million at the end of the first quarter last year.