A $10.6 million impairment charge drove fourth-quarter results at Kenneth Cole Productions Inc. into the red.

The company’s board also approved a stock buyback of four million shares and cut its quarterly dividend in half to 9 cents.

The company posted a loss of $3.1 million, or 16 cents a diluted share, for the quarter ended Dec. 31, compared with earnings of $8 million, or 39 cents, a year earlier. Without the impairment charge, related to 23 full-price retail stores, the company said earnings would have come in at 17 cents a share. Revenues for the final three months of 2007 fell 2.1 percent to $132.1 million from $135 million.

Even without the charge, the company’s bottom line was pressured by a 630 basis-point rise in selling, general and administrative expenses to 43.1 percent of sales, up from 36.8 percent in the year-ago quarter due in part to development costs connected with the launch of a men’s sportswear line. One hundred basis points equals 1 percent.

For 2007, Kenneth Cole’s profits slid 73.5 percent to $7.1 million, or 35 cents a diluted share, from $26.8 million. Revenues fell 4.8 percent to $510.7 million from $536.5 million.

“We will continue to operate the business prudently,” said chairman and chief executive officer Kenneth Cole. “At the same time, we are confident that our brands remain strong and that our opportunities for growth are significant.”

During a conference call to Wall Street analysts after the market closed, David Edelman, chief financial officer, said the company has closed a number of stores since the beginning of last year and downsized one location.

“This leaves us with 86 stores today [or] 44 full-priced and 42 company outlets….But also note that the one store we downsized during the quarter was Walnut Street in Philadelphia. We cut the size of the store by 40 percent, but retained most of the sales volume, making excellent gains in store productivity,” Edelman said.

In addition to brands under the Kenneth Cole umbrella, the firm produces goods carrying the Gentle Souls, Le Tigre and Bongo names.

This story first appeared in the March 5, 2008 issue of WWD.  Subscribe Today.