Revenues Increase to $132 million with Positive Comp Store Sales of 2.1%
Board Approves Quarterly Dividend of $0.09 per Share
Company Unveils Long-Term Strategic Plan
NEW YORK, Nov. 4 /PRNewswire-FirstCall/ -- Kenneth Cole Productions, Inc. (NYSE: KCP) today reported financial results for the third quarter ended September 30, 2008. The Company reported third quarter net revenues rose 1.4% to $132.1 million versus the year-ago level. While the Company reported a loss of ($0.09) per share on a GAAP basis due to a non-operating impairment charge, excluding this charge earnings were $0.09 per share, the high end of the Company's prior guidance. The charge of ($3.2) million, or ($0.18) per share, reflected an other than temporary decline in an investment in common stock held by the Company.
Chairman and Chief Creative Officer Kenneth Cole said, "We are pleased that we achieved our targets for sales and operating profitability for the quarter, despite current economic conditions. We will proceed cautiously for the time being, but continue to believe that this is a time of great opportunity for our business."
Jill Granoff, Chief Executive Officer, added, "Our strong brands and balance sheet provide meaningful competitive advantages. We have recently completed our long-term strategic plan to accelerate growth and improve profitability. We are determined to drive tremendous value to consumers, customers, partners, and our shareholders."
The Company has set a goal to double its revenues and profitability and generate at least $1 billion in reported revenues with double digit operating margins. Its long-term strategic plan calls for the implementation of six core initiatives. These are: to energize the brand, create compelling product, accelerate retail growth, revitalize its wholesale business, prepare for global expansion and to build upon its strong corporate culture.
Third Quarter Detail
Consumer direct sales for the third quarter increased by 6.9% to $42.6 million from the year-ago quarter. The increase was driven by a comparable store sales gain of 2.1% and by revenues associated with new stores. Wholesale sales during the third quarter were $77.6 million, a 1.6% decrease versus the year-ago level. Licensing revenues were up 2.4% to $11.9 million versus the prior year's level.
The Company's third quarter gross margin was 41.1% versus 44.4% in the prior year's quarter, largely attributable to increased markdowns and lower initial gross margins in the wholesale business. SG&A expenses during the quarter were $51.9 million versus $53.8 million in the year-ago quarter. As a percentage of revenues, SG&A improved to 39.3% from 41.3% in the third quarter of 2007 due primarily to cost control as well as lower levels of non-cash expenses associated with compensation, depreciation and amortization.
Interest income during the quarter was $0.4 million versus $1.5 million in the year-ago quarter, driven by lower interest rates and on lower average cash balances due to share repurchase and the acquisition of Le Tigre.
The Company also booked a non-operating impairment charge of ($3.2) million, or ($0.18) per share, as detailed above. As a result of this charge, the net loss for the quarter under GAAP was ($1.6 million), or ($0.09) per share. Excluding this charge, the Company noted that earnings per share would have been $0.09, consistent with the high end of its prior guidance.
The Company's consolidated inventories increased slightly to $56.5 million at September 30, 2008 versus the year-ago level of $56.2 million. Wholesale inventories decreased by 6.8% to $28.1 million, consistent with the business trend. Consumer Direct inventories increased 8.7% to $28.4 million primarily to support new stores.
The Company's balance sheet remained strong at September 30, 2008 with cash and cash equivalents of $51.0 million and no long-term debt. In addition, the Company announced today that its board of directors had approved its quarterly dividend of $0.09 per share. The dividend is payable on December 11, 2008 to shareholders of record as of November 20, 2008.
Reconciliation
Quarter Ended Nine Months Ended
9/30/08 9/30/08
GAAP EPS ($0.09) ($0.15)
Impairment Charge ($0.18) ($0.17)
Non-GAAP EPS* $0.09 $0.02
* In addition to providing financial results and guidance in accordance
with GAAP, the Company has provided non-GAAP adjusted earnings per share
information for three and nine months ended September 30, 2008. This non-
GAAP financial information is provided to enhance the user's overall
understanding of the Company's current financial performance.
Specifically, the Company believes the non-GAAP adjusted results provide
useful information to both management and investors by excluding charges
that the Company believes are not indicative of the Company's core
operating results. The non-GAAP financial information should be
considered in addition to, not as a substitute for or as being superior
to, operating income, cash flows, or other measures of financial
performance prepared in accordance with GAAP. A reconciliation of this
non-GAAP information to the Company's actual and expected results is
included in the above table.
About Kenneth Cole Productions, Inc.
Kenneth Cole Productions, Inc. designs, sources, and markets a broad range of footwear, handbags, accessories and apparel under the brand names Kenneth Cole New York,Kenneth Cole Reaction,Unlisted, and Tribeca, as well as footwear under the proprietary trademark Gentle Souls and under the licensed trademark Bongo. The Company recently acquired the Le Tigre trademark and has launched several classifications of the Le Tigre brand at JCPenney stores nationwide. 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 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.
Kenneth Cole Productions, Inc.
Unaudited
(In thousands, except per
share & outstanding Quarter Ended Nine Months Ended
share amounts) 9/30/08 9/30/07 9/30/08 9/30/07
Net sales $120,161 $118,644 $333,669 $346,849
Licensing and other
revenue 11,947 11,669 32,087 31,751
Net revenue $132,108 $130,313 $365,756 $378,600
Gross profit 54,351 57,851 150,622 163,130
Selling, gen'l &
administrative 51,896 53,794 150,113 150,921
Operating (loss) income 2,455 4,057 509 12,209
Interest income 353 1,525 763 4,340
Investment impairment (3,240) - (3,240) -
(Loss) Income before
taxes (432) 5,582 (1,968) 16,549
Income tax expense 1,122 2,149 831 6,372
Net (loss) income ($1,554) $3,433 ($2,799) $10,177
Net (loss) income per
share: Basic ($0.09) $0.17 ($0.15) $0.50
Net (loss) income per
share: Diluted ($0.09) $0.17 ($0.15) $0.50
Average shares
outstanding: Basic 17,903,000 20,213,000 18,604,000 20,172,000
Average shares
outstanding: Diluted 17,903,000 20,431,000 18,604,000 20,464,000
Balance Sheet Data: 9/30/08 9/30/07
Cash & Cash Equivalents $50,992 $88,074
Due from Factors/
Accounts Receivable 55,948 53,635
Inventory 56,462 56,205
Total Assets 331,139 371,468
Working Capital 112,780 159,909
Accounts Payable &
Accrued Expenses 44,338 36,656
Long-term Debt 0 0
Total Shareholders'
Equity 213,040 260,122
