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Kenneth Cole retains strong balance sheet with $46 mn in cash

May '09
Kenneth Cole Productions Inc reported results for the quarter ended March 31, 2009. As anticipated, net revenues in the first quarter declined 15.6% to $103.4 million versus $122.5 million in the year-ago quarter. Revenue was down in all segments, including a comparable store sales decline of 20.4%. Sales performance was significantly impacted by the severe pullback in consumer spending and inventory cutbacks at major wholesale partners in response to the difficult macroeconomic environment.

The Company reported an operating loss of $(0.46) per share compared to earnings per share of $0.04 in the year-ago quarter. This quarter's results include $0.05 per share of restructuring and other unusual items. Excluding these items, the loss per share would have been $(0.41), in line with prior guidance.

Kenneth Cole, Chairman and Chief Creative Officer commented, "While we continue to be disappointed with our financial results, we are encouraged by some of the progress we are making in some of the new strategic initiatives that we believe will appropriately position the Company to be able to operate profitably in any business environment. The Company continues to have a strong balance sheet, with no long-term debt, and a talented and motivated organization focused on executing."

Consolidated gross margin, which was 33.9% in the quarter compared to 41.0% in the year-ago period, reflected the Company's continued promotional efforts to realize appropriate inventory levels in response to the current soft market environment in all channels.

Selling, general and administrative expenses declined in the first quarter to $47.7 million versus the year-ago level of $49.1 million. The Company achieved $4.0 million of expense reduction versus the prior year's quarter offset by new store expenses, severance, and other unusual items.

The Company also noted that during the first quarter it completed its previously announced initiative to reduce existing annual expenses. During this process, the Company further rationalized its wholesale portfolio and terminated its unprofitable Bongo license effective December 31, 2009. As a result of the Company's effort to become more focused and certain cost cutting initiatives undertaken over the past twelve months, the Company expects annual savings in excess of $20 million per year. The Company further noted that it expects to reinvest approximately $5 million of these savings into new initiatives designed to generate improved results consistent with its strategic plan.

Jill Granoff, Chief Executive Officer of Kenneth Cole Productions, commented, "We are taking decisive steps to make us a stronger, more focused business that delivers increased profitability and shareholder value. We have placed tighter controls on expenses, inventory and capital investment. At the same time, we are pursuing product innovation and an enhanced customer experience in all channels of distribution to build our brand for the long-term."

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