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Reaction performs well at Kenneth Cole
11
Nov '10
Kenneth Cole Productions, Inc., a leading designer and marketer of fashion footwear, apparel and accessories, reported financial results for the third quarter ended September 30, 2010.

Earnings per fully-diluted share were $0.11 in the third quarter versus $0.01 in the year-ago period, slightly better than the Company's previous guidance of $0.08 to $0.10 per share. Diluted earnings per share for the nine month period grew by $0.89 to $0.26 versus the year-ago loss of ($0.63). The improved results for the quarter and year-to-date were driven by continued sales growth in all channels of distribution and ongoing expense leverage gained from the Company's streamlining initiatives.

Net revenues in the third quarter grew 14.7% to $119.0 million versus $103.8 million in the third quarter last year. Each of the Company's operating segments contributed to the growth in the quarter. For the nine months ended September 30, 2010, net revenues increased 11.8% to $336.5 million versus $301.0 million, with double-digit growth in the Company's Wholesale, Consumer Direct and Licensing business segments.

Wholesale sales in the third quarter grew by 21.0% to $62.5 million. This acceleration was driven by the launch of Reaction men's sportswear and double-digit growth in men's and women's footwear. Consumer Direct revenue for the third quarter increased by 8.0% to $45.0 million, resulting from a comparable store sales increase of 6.7% and continued strong double-digit growth in e-commerce. Licensing revenue in the third quarter increased 10.8% to $11.5 million.

Jill Granoff, Chief Executive Officer, commented, "We are pleased to report strong performance in the third quarter, as well as our fifth consecutive quarter of positive operating profit. On a year-to-date basis, we have achieved double-digit revenue growth in each of the Company's operating segments and significant improvement in earnings per share. Our brands remain strong and our operations are more efficient. We are excited by our recent initiatives to accelerate our growth, particularly the launch of Reaction men's sportswear and the strategic decision to bring our women's sportswear license in-house."

The Company noted that during the quarter, as previously announced, it reached an agreement with Bernard Chaus, Inc. (OTC Bulletin Board: CHBD) to terminate the women's sportswear license effective June 1, 2011. Total wholesale sales of Kenneth Cole women's sportswear are currently reported to be in excess of $50 million annually.

Consolidated gross margin in the quarter was 42.5% compared to 43.3% in the year-ago period. Margins declined slightly due to a higher mix of wholesale revenues in the quarter as well as a moderate increase of promotional activity in the Company's outlet stores versus the same period in the prior year.

Selling, general and administrative expenses as a percent of sales improved by 240 basis points to 40.6% from 43.0% in the year-ago quarter. The Company achieved these results through its streamlining initiatives and expense leverage on the revenue growth.


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