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Kellwood Back to Profitability

NEW YORK — Benefiting from a long restructuring with a improved balance sheet, Kellwood Co. Thursday posted improved fourth-quarter and yearend results.<br><br>The company’s results were boosted in part by the June 25 acquisition of Gerber...

NEW YORK — Benefiting from a long restructuring with a improved balance sheet, Kellwood Co. Thursday posted improved fourth-quarter and yearend results.

This story first appeared in the March 7, 2003 issue of WWD.  Subscribe Today.

The company’s results were boosted in part by the June 25 acquisition of Gerber Childrenswear.

For the three months ended Jan. 31, the company earned $8.4 million, or 33 cents a diluted share, against a loss of $3.1 million, or 14 cents, in the same quarter a year ago. Excluding a pretax charge in the quarter of $2 million for business restructuring, earnings were $9.7 million.

Sales rose 14 percent to $537 million from $470 million, aided by organic growth of 6 percent in the men’s sportswear and intimate apparel categories and by the Gerber acquisition, which contributed $13 million of the year-to-year increase. The women’s sportswear business dipped by 1.2 percent to $294.6 million from $298.1 million, while men’s sportswear sales jumped by 48.9 percent to $120.6 million from $81 million. Aided by an 8 percent increase in intimate apparel revenues, sales in the other soft goods category, which includes Gerber, rose 34.4 percent to $122.1 million from $90.8 million.

The company ended the year with cash and cash equivalents at $212 million versus just $69 million a year ago. It also cut its total debt by $28 million to $306 million, representing just 35 percent of total capital. The St. Louis-based company said it was considering issuing between $75 million and $125 million in long-term debt mid-year to help fund internal marketing initiatives and acquisitions.

The company provided fiscal 2003 guidance of an earnings increase of 45 percent, to between $73 million and $76 million. Sales are expected to rise by 18 percent, or $400 million, to about $2.6 billion. The gain is expected from the first full-year contribution from the Gerber operation and between a 5 to 6 percent sales gain attributed from its announced purchase last month of Briggs New York, a moderate department store brand specializing in women’s bottoms. Briggs makes about 70 percent of its sales on a replenishment basis.

The company expects a first-quarter sales gain of about 17 percent and a 37 percent jump in earnings, based on contributions largely from Gerber and Briggs.

According to Jeffrey Edelman, apparel analyst at UBS Warburg, Kellwood appears to be on the road to earnings recovery. He wrote in a note this week that Kellwood has embarked on several major marketing initiatives to drive sales, such as a strategic alliance with Casual Male last year. In addition, he pointed out, “Kellwood has done an impressive job paring back its cost structure since the middle of 2001.”

Edelman also expects that Kellwood, with its focus in the moderate sector, will benefit somewhat from the shift in consumer focus on getting more value for the dollars they spend on apparel purchases. Kellwood, however, will be challenged by competing brands, with its success determined by how well it maintains market share of its existing brand portfolio, the analyst noted.

For the year, earnings gained 11.3 percent to $42 million, or $1.69 a diluted share, from $37.7 million, or $1.65, last year. Sales were down 3 percent to $2.2 billion from $2.28 billion. Excluding the contribution from Gerber, sales were down 8 percent.

In separate news, Kellwood also announced the promotions of Stephen L. Ruzow and Donna B. Weaver to corporate vice president. Ruzow joined Kellwood as president of Kellwood Womenswear in 2001, and Weaver — with Kellwood since 1980 — was most recently vice president for corporate communications.

In addition, Larry R. Katzen, formerly managing partner of Arthur Andersen’s Great Plains region until his retirement last year, was elected to Kellwood’s board.