COLE STOCK, ESTIMATES DOWNGRADED
Byline: Vicki M. Young
NEW YORK — Shares of Kenneth Cole Productions seesawed — but ultimately closed unchanged — Friday, a day after the stock was downgraded by Gruntal & Co.
In another sign that Wall Street has somehow managed not to become enamored with the fashion business, apparel manufacturers saw their stocks end the week on a mixed note even though some had recently posted strong quarterly results.
In intraday trading on the New York Stock Exchange on Friday, shares of Kenneth Cole hit a new 52-week low of $28.20 — below the $28.75 reached last Wednesday — and briefly rose to $29.80 before closing at $29.45, unchanged from Thursday’s close. The stock’s 52-week high is $50.50, reached Dec. 6
John P. Rouleau, equity analyst at Gruntal, on Thursday lowered the intermediate-term rating on Kenneth Cole to “market performer” from “outperformer” and reduced 2001 and 2002 earnings-per-share estimates to $2.05 and $2.50, respectively, from previous estimates of $2.20 and $2.75. He also lowered the six-month and 18-month target prices to $33 and $50 per share, respectively, from previous targets of $50 and $62. Shares of the stock on Thursday closed at $29.45, down $1.62.
Rouleau based his downgrade on near-term concern over the company’s ability to meet current earnings estimates over the next year because of possible lower sales, lower gross margins and higher expenses than currently forecasted.
Among the factors he cited which could hurt the company’s sales: “increasing demand for classically styled apparel, conservative forward buying on behalf of department stores, increased price deflations across the industry, the delayed opening of the company’s first Reaction store [and] lower than expected demand for the women’s Reaction line of apparel.”
The analyst also noted that gross margins could fall due to increasing pricing pressures across the industry and continued heavy promotional activity by department and specialty stores.
While Rouleau said there’s a chance Kenneth Cole could lower sales and EPS guidance when it releases fourth-quarter results on Tuesday, he also pointed out that the company is on its way to building a global lifestyle brand capable of generating total annual retail sales in excess of $3 billion. “We remain comfortable with the company’s long-term strategy and growth prospects,” the analyst wrote.
Another company that took a bit of a hit was Kellwood, losing 69 cents, or 3.05 percent, to close at $21.97 on the New York Stock Exchange. The manufacturer issued a warning on Thursday that it will post a loss of 7 cents a share in the quarter ended Jan. 31, or 10 cents lower than previously forecasted, against earnings of 20 cents in the comparable year-ago quarter.
Other vendors trading on the New York Stock Exchange that saw their stock prices slide were Polo Ralph Lauren, which closed at $29.18, down 82 cents, or 2.7 percent, and Tommy Hilfiger Corp., which closed at $14.62, down 5 cents, or .3 percent. Both recently reported earnings that beat Wall Street consensus estimates by 2 cents a share.
Shares of Liz Claiborne were up 25 cents, or 0.5 percent, to close at $48.46, while Jones Apparel Group was up by 76 cents, or 2.1 percent, to close at $37.76. Even though both stocks, which trade on the New York Stock Exchange, announced earnings results that met Wall Street’s expectations, the shares of Liz Claiborne and Jones Apparel have yet to surpass their 52-week highs of $50.31 and $40.38, respectively.