Kenneth Cole achieves Comparable Store sales increase of 3.4%
May 07, 2008 - United States Of America
Kenneth Cole Productions Inc reported financial results for the quarter ended March 31, 2008. The Company reported first quarter net revenues of $122.5 million and earnings per fully-diluted share of $0.04, both in line with its recent guidance.
Consumer Direct revenues for the quarter were $38.5 million, an increase of 4.3%, reflecting both a 3.4% comparable store sales gain and revenues associated with new stores.
Licensing revenues were up 4.4% to $9.9 million, despite the effect of the Company's transition of men's sportswear from a licensing model to a wholesale model. The Company's wholesale business, however, saw softness in the quarter with a revenue decline of 10.7% to $74.1 million.
The Company's first quarter gross margin rose to 41.0% versus the year-ago rate of 40.6%, driven primarily by a shift in revenue mix toward Licensing and Consumer Direct.
SG&A, as a percentage of revenues, increased to 40.1% from 37.3% in the first quarter of 2007 due to increased marketing expenses associated with the launch of the Company's 25th anniversary campaign, its continuing investment in men's sportswear development, and deleveraging that resulted from the wholesale shipment decline.
The Company noted that, excluding the incremental marketing and sportswear expenses, it had reduced operating costs versus year-ago levels.
The Company's consolidated inventories decreased 2.1% to $45.8 million at March 31, 2008. The Company noted that inventory aging had improved versus the prior year. Consumer Direct inventories increased 8.6% to $23.8 million to accommodate same store sales increases and new stores, while Wholesale inventories decreased by 11.5% to $22.0 million.
The Company's balance sheet remained strong at March 31, 2008 with cash and cash equivalents of $71.5 million versus $92.2 million a year ago. The Company noted that the decrease in cash reflected approximately $26 million used for stock repurchase as well as $13 million used to date in the acquisition of Le Tigre. The Company continues to have no long-term debt.
The Company noted that the soft wholesale business trend will likely result in lower shipments and reduced margins in the second quarter. To reflect this, the Company expects second quarter net revenues in the range of $108 million to $113 million and a loss per share of between $(0.11) and $(0.13).
During the first quarter the Company repurchased 413,000 shares of its common stock. It also noted that it is authorized to buyback up to 4.3 million additional shares and expects to continue to execute against its repurchase program during the second quarter.
The Company also announced that its board of directors had approved a quarterly dividend of $0.09 per share. The dividend is payable on June 12, 2008 to shareholders of record as of May 22, 2008.
Chairman Kenneth Cole said, "Although we met our guidance for the first quarter, we are not satisfied with our current financial performance or near-term outlook.
We believe, however, that a combination of continued progress in our Consumer Direct and Licensing businesses, overall expense reduction, and improved merchandising and marketing for our Wholesale business will result in our return to profitability in the second half of the year.
I am happy to welcome Jill Granoff, our new Chief Executive Officer, to work with me and our talented management team to drive improved performance."