Kenneth Cole Productions Reports Double-Digit Q2 Revenue Growth and Significant Profit Improvement

NEW YORK, Aug. 4 /PRNewswire-FirstCall/ -- Kenneth Cole Productions, Inc. (NYSE: KCP), a leading designer and marketer of fashion footwear, apparel and accessories, today reported financial results for the second quarter ended June 30, 2010.  

Earnings per fully-diluted share were $0.05 in the second quarter versus a loss of ($0.18) in the year-ago period, stronger than the Company's previous guidance of $0.00 to $0.03 per share.  The better than expected performance was the result of higher than anticipated comparable store sales, increased gross margins, effective inventory management and the ongoing, positive impact of the Company's streamlining initiatives.

Net revenues in the second quarter grew 15.0% to $108.0 million versus $93.9 million in the second quarter last year.  Each of the Company's operating segments achieved double-digit revenue growth in the quarter.

Wholesale sales grew 12.8% to $52.1 million.  Excluding the impact of exited businesses, Wholesale sales grew 16.0%.  Consumer Direct revenue for the second quarter increased by 16.2% to $44.8 million.  This improvement was driven by a comparable store sales increase of 8.4%, revenue associated with eight net new stores, and continued double-digit growth in e-commerce.  Licensing revenue in the second quarter increased 21.1% to $11.1 million.

Jill Granoff, Chief Executive Officer, commented, "We are pleased to report strong performance in the second quarter, as well as our fourth consecutive quarter of positive operating profit.  Our business has clearly turned the corner and is showing traction and positive momentum.  Each segment delivered double digit growth, demonstrating that our brands remain strong and that our products are resonating with consumers.  We also increased gross margin and achieved continued expense leverage, resulting in greater profitability."

Consolidated gross margin increased 130 basis points to 43.7% compared to 42.4% in the year-ago period.  Margins grew due primarily to improved product sell-through and effective inventory management.    

Selling, general and administrative expenses as a percent of sales improved by 520 basis points to 42.7% from 47.9% in the year-ago quarter.  The Company achieved these results through its streamlining initiatives and expense leverage, despite additional costs associated with operating eight net new stores and the Company's pay-for-performance annual bonus incentive.  

As a result of gross margin improvement and expense management, second quarter operating income rose by $6.3 million to $1.1 million compared to an operating loss of ($5.2) million in the same quarter of last year.

For the six months ended June 30, 2010, net revenues increased 10.2% to $217.5 million. Operating income improved by $19.8 million to $2.1 million versus a loss of ($17.7) million in the same period of fiscal 2009.  As a result, diluted earnings per share grew by $0.79 to $0.15 versus the year-ago loss of ($0.64).

The Company noted there was minimal tax expense in the quarter and six months ended June 30, 2010 due to the reversal of a portion of the Company's deferred tax valuation allowance.

The Company's balance sheet at June 30, 2010 remained strong with increased cash and no long-term debt.  Cash and cash equivalents at the end of the quarter were $79.2 million, up $21.3 million versus the $57.9 million at June 30, 2009.  Inventory was $35.2 million, approximately flat to the year-ago level compared to double-digit sales growth.

Third Quarter Guidance

The Company today also issued revenue and earnings per share guidance for the third quarter ending September 30th.  The Company currently expects third quarter net revenues to grow between 10% and 12%, and earnings per diluted share to be in the range of $0.08 to $0.10 versus the year-ago level of $0.01 per share.  

Kenneth Cole, Chairman and Chief Creative Officer, concluded, "We have made good progress in our business and I am proud of our team's effort.  We have continued to  improve our product offerings and are better serving the needs of today's modern, metropolitan consumer.  As we move forward, we will continue to explore all strategic avenues to enhance our customer relationships and maximize value for our stakeholders."

About Kenneth Cole Productions, Inc.

Kenneth Cole Productions, Inc. designs, sources, and markets a broad range of footwear, handbags, apparel and accessories under the brand names Kenneth Cole New York; Kenneth Cole Reaction; Unlisted; and Le Tigre, as well as footwear under the proprietary trademark Gentle Souls.  The Company has also granted a wide variety of third party licenses for the production of men's, women's and children's apparel as well as fragrances, watches, jewelry, eyewear, and several other accessory categories.  The Company's products are distributed through department stores, better specialty stores, company-owned retail stores and its e-commerce website.  Further information can be found at http://www.kennethcole.com/.

Forward Looking Statement Disclosure

The statements contained in this release, which are not historical facts, may be deemed to constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995.  Actual future results might differ materially from those projected in such statements due to a number of risks and uncertainties, including but not limited to, demand and competition for the Company's products, the ability to enter into new product license agreements or to renew or replace existing product licensee agreements, changes in consumer preferences or fashion trends, delays in anticipated store openings and closings, and changes in the Company's relationships with retailers, licensees, vendors and other resources.  The forward looking statements contained herein are also subject to other risks and uncertainties that are described in the Company's reports and registration statements filed with the Securities and Exchange Commission.

SOURCE Kenneth Cole Productions, Inc.