Fashion house KCP announces $20 mn of annual cost reduction
Kenneth Cole Productions Inc announced results for the fourth quarter and full fiscal year ended December 31, 2008. Revenues for the fourth quarter were $126.6 million, down (4.2)% compared to the fourth quarter of 2007, including a comparable store sales decline of (10.7)%.
These results were consistent with the numbers pre-announced by the Company on January 13, 2009. Revenues for the full year 2008 were $492.3 million, down (3.6)% from the full year 2007, including a comparable store sales decline of (2.0)% for the year.
As a result of one of the worst retail climates in decades and related margin pressure, the Company reported an operating loss for the fourth quarter of 2008 of $(0.67) per diluted share compared to a loss of $(0.16) per share in the same period last year.
These results include certain unusual items, described below, that negatively impacted the fourth quarter results by $(0.40) cents per diluted share. Excluding unusual items from both 2008 and 2007, the Company incurred a loss of $(0.27) per diluted share, which was in line with previous guidance, compared with earnings per diluted share of $0.20 in the prior year's quarter.
Unusual items include non-cash asset impairment charges, investment write-downs and severance, as well as charges related to the closure of the Company's office in Italy. The Company believes that it eliminated approximately $10 million of existing annual costs through a variety of restructuring activities associated with these charges, including a 10% net reduction in its corporate workforce.
For fiscal 2008, the loss from operations was $(0.80) per diluted share compared to a profit of $0.35 per diluted share in 2007. Excluding unusual items from both 2008 and 2007, the Company incurred a loss of $(0.19) per diluted share compared with earnings of $0.70 per diluted share in 2007. Total charges in 2008 for severance, asset impairment and investment losses were $(0.61) per diluted share. See reconciliation of adjusted earnings to reported earnings in the accompanying financial schedules.
Kenneth Cole, Chairman of Kenneth Cole Productions Inc, commented, "We recognize that these are unprecedented times and we are taking decisive and necessary steps to make us a better, stronger company. Our new organization will be leaner and more responsive to ensure we are a viable, vibrant company regardless of the external environment."
The Company proactively converted inventory to cash during the peak holiday shopping season to increase liquidity and enter the spring season with a more current inventory position. This resulted in a significant reduction in gross margin during the quarter, but the Company noted that its year-end inventory position was approximately 10% below the year-ago level.
Since the close of the fiscal year, the Company has taken incremental actions to reduce costs and streamline operations, including additional workforce reductions and compensation adjustments, a renegotiation of third-party distribution costs, and reductions in non-media related marketing expenditures. This most recent round of operational improvement will eliminate an additional $10 million of existing annual costs. Cost reductions enacted during 2008 and in Q1 2009 total in excess of $20 million on an annualized basis.