NEW YORK — Kellwood Co., blaming a tough retail climate and problems with some of its key brands, said Thursday it expects to miss its previous earnings guidance for the third quarter by 15 cents a share.
Profits for the quarter ended Oct. 30 are now slated to be $28.5 million or $1 a diluted share, versus profit projections the firm made in August of $32.5 million, or $1.15. The new estimate is 7.8 percent below year-ago income of $30.9 million, or $1.13.
Kellwood attributed the slip to weak consumer demand for apparel, driven by high gasoline prices, abnormal weather and fashion miscues. These factors have spurred more wholesale and retail markdown pressure than anticipated.
The revision and its underlying reasons echo a report from Jones Apparel Group last week, which took third-quarter projections down to a range of 75 cents to 77 cents from 80 cents to 84 cents.
“The environment is certainly a major factor,” Kellwood chairman and chief executive officer Hal Upbin said in a statement. “We also have some work to do to further modernize the look of some of our core moderate brands in response to the consumer’s rapidly evolving taste level and some fine-tuning of the merchandise assortments offered by a few of our new marketing initiatives.”
Among Kellwood’s new collections are Calvin Klein better sportswear, O Oscar and XOXO junior sportswear, each produced under license.
“As with most new and transforming endeavors, the economic benefits always cost more and take longer to realize,” said Upbin. “This is true for the launching of some of our new higher profile and better price-point brands, and also true for the repositioning of our intimate apparel business.”
Kellwood said spring business, which ships in the fourth quarter, is also taking a hit. Accordingly, the firm is looking for full-year earnings of $77.5 million or $2.75 a diluted share, down from projections of $89 million to $91 million or $3.15 to $3.25. Last year, the vendor posted earnings of $72.6 million or $2.68.
Kellwood also completed a $400 million, five-year unsecured credit facility. The firm said the credit line with banks, along with about $263 million of cash as of July 31, provides it with ample liquidity and financial flexibility to meet operating, strategic and corporate development needs.