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Kenneth Cole Q2 EPS slightly ahead of consensus

06
Aug '08
Kenneth Cole Productions Inc reported financial results for the second quarter ended June 30, 2008. The Company reported second quarter net revenues of $111.2 million and a loss per fully-diluted share of $(0.11), which was in-line with the Company's most recent guidance, and slightly ahead of consensus.

Consumer Direct revenues for the quarter increased 4.2% to $43.0 million, reflecting a 1.3% comparable store sales gain, revenues associated with new stores and growth in internet retail. Licensing revenues were off 3.3% to $10.3 million versus the prior year, with gains in many categories offset by the Company's transition of men's sportswear to a wholesale model. The Company's Wholesale business declined 13.7% to $57.9 million, primarily as a result of softness in the department store channel.

The Company's second quarter gross margin was 41.4% versus the year-ago rate of 44.3%, again reflecting pressure from the tough market environment. The Company noted that SG&A expenditures were approximately flat to the year- ago level. SG&A as a percentage of revenues increased to 44.2% from 41.1% in the second quarter of 2007 due to deleveraging and increased costs associated with sportswear development.

The Company's consolidated inventories decreased 0.9% to $48.8 million at June 30, 2008. Consumer Direct inventories increased 11.1% to $23.6 million to accommodate planned same store sales increases and new stores, while Wholesale inventories decreased by 9.9% to $25.2 million.

The Company's balance sheet remains strong at June 30, 2008 with cash and cash equivalents of $72.9 million and no long-term debt.

Jill Granoff, Chief Executive Officer, said, "We have conducted an extensive analysis of the business and are enthusiastic about the Company's opportunities to increase sales and profitability. We are under-penetrated on a global basis with potential to grow across categories, geographies, and distribution channels. Importantly, we continue to have the financial resources to pursue nearly any strategic path deemed appropriate."

Kenneth Cole, Chairman and Chief Creative Officer, commented, "While we are not satisfied with our results we continue to make progress and believe we have significant near and long-term opportunities to improve our performance. With the addition of Jill and our energized management team, we look forward to what lies ahead."

The Company noted that it had repurchased 868,600 shares at an aggregate cost of $13.2 million under its share buyback program during the second quarter and currently 3.1 million shares remain available for repurchase under prior authorizations of the Company's Board of Directors.

In addition, the Company announced that its board of directors had approved its quarterly dividend of $0.09 per share. The dividend is payable on September 10, 2008 to shareholders of record as of August 21, 2008.

Also, the Company issued financial guidance for the third fiscal quarter; the Company expects to report net revenues in the range of $125 million to $130 million and earnings per share of $0.07 to $0.09.

Kenneth Cole Productions Inc


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