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Kellwood 3rd-Qtr Net Slips

Kellwood Co. reported a drop in third-quarter earnings on an ongoing basis, while management expressed confidence in meeting its financial targets as the...

Kellwood Co. reported a drop in third-quarter earnings on an ongoing basis, while management expressed confidence in meeting its financial targets as the company works to right itself.

Separately, the firm announced additions and changes to its executive lineup: Hope Brick and Steve Powers were named chief merchandising officer and chief customer officer, respectively, of Kellwood’s Lifestyle alliance. Sandra Campos was named president of O Oscar, an Oscar de la Renta company, and Wendy Chivian was named president of Calvin Klein women’s sportswear.

For the quarter ended Nov. 3, the apparel vendor said net earnings on an ongoing basis were $4 million, or 15 cents per diluted share, which compares with $10.6 million, or 41 cents, in the prior year. Earnings were ahead of analysts’ estimates by 1 cent, according to analysts polled by Reuters. Sales on an ongoing basis rose to $404.1 million from $397 million in the prior year.

On the income statement, Kellwood swung to a loss of $1.1 million, or 4 cents, for the quarter, down from earnings of $8.1 million, or 31 cents, last year. The net loss from continuing operations was $5.9 million, or 23 cents, versus a loss of $1.5 million, or 6 cents, last year.

The company also reported earnings of $4.9 million from discontinued operations. That was a 49 percent decline from last year when the company reported earnings of $9.6 million from discontinued operations.

In a conference call with analysts, management said the net loss from continuing operations was driven by lower sales in women’s sportswear and restructuring costs connected to the reorganization of that business. The restructuring followed a loss of $66.3 million from continuing operations in the second quarter of this year.

Kellwood said the transformation of the Phat Farm men’s business to a strictly licensing model also impacted results for the quarter.

As previously reported, Kellwood faces a potential hostile takeover from its largest shareholder. Sun Capital Securities group made a $543 million bid for the vendor earlier this fall. Kellwood rejected the offer, but Sun Capital has reiterated its intention to buy the company.

On the call, the company said sales growth in the third quarter was generated by its junior brands Gerber Childrenswear, XOXO, My Michelle, Candies juniors and girls’ businesses, and increased licensing revenues from Baby Phat. Men’s sportswear also had a positive impact.

Kellwood also acquired Vince, Hanna Andersson and Royal Robbins during the third quarter, which helped improve sales, the vendor said.

The organization reiterated its guidance for fiscal year 2007. It expects earnings from ongoing operations to be between 66 and 76 cents a diluted share. That compares with actual earnings of 90 cents a diluted share in 2006.

Net sales from ongoing operations for fiscal year 2007 are projected to be close to $1.5 billion.

"We are successfully executing on our strategic plan and believe that the financial targets we set out for the company are real and achievable," said Robert C. Skinner Jr., chairman, president and chief executive officer of Kellwood, in a statement. Skinner said the company’s results were on target with expectations.

"All these individuals come to Kellwood with strong backgrounds, which should benefit us greatly as we execute our growth strategies," said Skinner.