Kenneth Cole Swings to Gain

Despite $8 million fourth-quarter profit, firm posts loss for year.

NEW YORK — Shares of Kenneth Cole Productions Inc. inched up 1.3 percent after the firm posted a fourth-quarter profit due to an increase in revenues and a reduction in operating expenses.

This story first appeared in the March 2, 2012 issue of WWD.  Subscribe Today.

For the three months ended Dec. 31, income was $8 million, or 43 cents a diluted share, against a loss of $2.7 million, or 15 cents, a year ago. Total operating expenses fell 18 percent to $45.4 million from $55.4 million a year ago.

Total revenues in the quarter rose 8.6 percent to $131.2 million from $120.8 million, which included an 8.5 percent gain in sales to $117 million from $107.9 million. More than 75 percent of the revenue gain was due to the inclusion of non-comp Kenneth Cole New York women’s sportswear in the wholesale category, increased doors in Reaction men’s sportswear and a one-time holiday handbag program. Its consumer direction revenues fell 16.6 percent to $54.7 million due to the closure of unproductive full-price stores earlier in the year. Comparable-store sales fell 5 percent.

RELATED STORY: Kenneth Cole Offers to Buy Namesake Company >>

For the year, the loss was $2.9 million, or 16 cents a diluted share, against income of $2.1 million, or 11 cents, in 2010. Total revenues rose 4.7 percent to $478.9 million from $457.3 million.

The company didn’t host a conference call.

Shares of Kenneth Cole closed at $15.90 in trading on the Big Board, near its 52-week high as investors are expecting the firm’s namesake designer to sweeten his $15 a share offer to take the company private. That offer values the company at $280 million.

Analyst Steven Marotta at C.L. King & Associates, said, “The better-than-expected Q4 results support our premise…that Mr. Cole will likely ‘sweeten the bid’ at least once in an effort to satiate minority shareholders.”

The designer owns 47 percent of the company and controls 89 percent of the voting power.

In a Feb. 24 note, the analyst left open the possibility that the firm could very well stay public: “We think Mr. Cole will likely offer an attractive premium to the $15 starting point, but is notably still mercurial enough to leave the public entity intact should the public market price trade at above his unknown ‘drop-dead’ level.”