Kenneth Cole Productions Inc. said on Wednesday that it swung to a second-quarter profit as better product offerings boosted the bottom line.
This story first appeared in the August 5, 2010 issue of WWD. Subscribe Today.
For the three months ended June 30, the company reported income of $937,000, or 5 cents a diluted share, compared with a loss of $3.3 million, or 18 cents a share, in the same period last year. Total revenues climbed 15 percent to $108 million from $93.9 million, and sales rose 14.3 percent to $96.9 million from $84.7 million. Sales included a 12.8 percent gain in wholesale and a 16.2 percent rise in direct-to-consumer sales. Comparable store sales increased 8.4 percent.
Shares of Kenneth Cole fell 10.5 percent in New York Stock Exchange trading to close at $11.84 after the company disclosed during its conference call that July traffic fell by double digits. The company anticipates third-quarter EPS in the range of 8 to 10 cents compared with 1 cent a year ago.
Chief executive officer Jill Granoff said on the conference call that all of the company’s businesses — wholesale, retail and licensing — showed double-digit growth in the quarter.
Granoff told WWD that although improved inventory management helped margins, a more important factor was better product that resonated with consumers and helped drive sales.
“We’re really looking at wear occasion — what to wear for work, Saturday night, a barbecue on Sunday — apparel that has tremendous versatility and multiple wear,” she said, adding that a sweater program and small leather goods will be important for holiday selling.
Higher production costs faced by all manufacturers will continue through spring because of labor shortages in China and the rising costs of raw materials, said Granoff said higher production expenditures will be partially offset by shifting some production, such as sportswear, to Bangladesh, Indonesia and Vietnam.
For the year, income was $2.8 million, or 15 cents a diluted share, against a loss of $11.4 million, or 64 cents, in the previous period. Total revenues rose 10.2 percent to $217.5 million from $197.3 million.
In the overall market, retail stocks rallied 2.2 percent Wednesday after private-sector employment showed a stronger than expected gain last month.
The S&P Retail Index advanced 8.78 points to 414.45, more than making up for Tuesday’s 1.9 percent decline and outperforming the Dow Jones Industrial Average, which inched up 0.4 percent, or 44.05 points, to 10,680.43. Fashion’s gainers included Coach Inc., up 5.9 percent to $39.30; Saks Inc., 4.6 percent to $8.69; American Eagle Outfitters Inc., 4.3 percent to $12.63; and Phillips-Van Heusen Corp., 4.2 percent to $53.33.
International markets were relatively subdued, with the exception of Tokyo, where the Nikkei 225 fell 2.1 percent to 9,489.34.
Investors were encouraged by the ADP National Employment Report, which showed that nonfarm private employment rose by 42,000 in July from June. Economists had expected a smaller gain of 35,000.