By  on June 11, 2007

Kellwood Co.'s first-quarter earnings fell 19.7 percent, driven by softness in women's sportswear.

For the quarter ended May 5, the St. Louis-based manufacturer posted earnings of $7.4 million, or 28 cents a diluted share, from $9.2 million, or 36 cents, in the corresponding quarter last year.

Sales for the quarter dipped 1.9 percent to $484.4 million from $493.8 million.

Kellwood's women's sportswear, which still makes up more than half of the $1.9 billion firm's business, led the losses. Earnings fell 13.3 percent to $12.9 million from $14.8 million, and sales slipped 3.2 percent to $281.4 million from $272.5 million.

The company blamed retail consolidation plus weak performance in certain private brands, as well as Halmode dresses and suits and the Briggs New York bottoms business. But the launch of O Oscar, the Vince acquisition, and organic growth in Calvin Klein white label, My Michelle and XOXO partially offset those losses, according to the company.

"While moderate women's sportswear presents a core competency for Kellwood, we have also succeeded in expanding our better and above-price brands," Robert C. Skinner Jr., president and chief executive officer of Kellwood Co., said in a conference call Friday morning. "Kellwood has always prided itself in a diversification of its sales by channel, by customer and by price point. This allows us to maximize growth while limiting exposure to any one brand or channel. Today, we have strategies in place to improve challenging areas of our company."

With acquisitions like Vince and Hollywould, Kellwood is continuing to grow its better and above-price brands, and as of the first quarter, those higher-margin offerings made up 34 percent of net sales, up from 29 percent last year.

Meanwhile, soft goods, including Gerber Childrenswear, proved strong for the company. Earnings climbed 29 percent to $9 million from $7 million, and sales grew 5.8 percent to $83.6 million from $79.1 million.

"Overall, it's a disaster, but I was impressed by the gross margins," said Brad Stephens, an analyst for Morgan Keegan & Co. Inc. "But the increased operating margins are coming from Gerber baby and camping products, while women's sportswear profits continue to decline, and women's makes up more than half of its business, so that's a big problem."The company said it predicts sales for the second quarter will be between $460 million and $470 million, compared with $459.6 million in the second quarter last year. Kellwood projects slightly lower women's and men's sportswear, and higher soft goods sales. For fiscal year 2007, the company continues to expect sales in the range of $2 billion to $2.03 billion, up from $1.96 billion last year.

In other news, Robert J. Baer, 69, has retired from Kellwood Co.'s board. Baer has served on the Corporate Governance Committee since 2004, and the Compensation Committee since 2005. Prior to joining Kellwood's board in 2004, he spent more than 30 years in the transportation industry and was president and chief operating officer at UniGroup, Inc. Kellwood is seeking his successor.

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