KENNETH COLE GROWS, FLYING PAST FORECASTS

Byline: Jennifer Weitzman

NEW YORK — Having blown past Wall Street expectations for the third quarter, Kenneth Cole Productions is forecasting sustained double-digit growth in sales and earnings next year.
The New York-based company earned $12.9 million, or 59 cents a share, a 60.2 percent jump from the $8.1 million, or 38 cents, reported in the year-ago period. Net sales jumped 28.2 percent to $104.2 million, while total revenues, including royalties, were up 29.2 percent to $110.6 million.
Cole beat consensus expectations by 9 cents, representing the 13th consecutive quarter the company has either met or beaten expectations.
By division, wholesale was up 27 percent to $70.9 million; consumer direct up 32 percent to $33.3 million; and licensing royalties up 50 percent to $6.3 million.
Operating margins were up 310 basic points to 18.6 percent, driven by greater licensing revenue, improved wholesale gross margins and expense leverage created by economies of scale.
“We are in a great position as brand and company,” said Kenneth Cole, president and chief executive, adding that a deliberate approach to growth — testing carefully before going after new businesses — had helped it achieve growth without surrendering profitability.
Cole noted that, with the strength of the casual trend, women want to simplify their wardrobes and men are taking greater responsibility for the way they dress.
Cole said on a conference call that the firm has been able to grow sales and profits in a difficult retail environment by generating brand loyalty through product diversification, appropriateness of price and inventory control.
Stating his contemporary and modern collections are “of the moment,” Cole said he is comfortable with a 25 percent growth rate in earnings and revenue next year.
The company said it sees the business shifting to be more consumer-direct, which is expected to account for 40 percent of sales by the end of next year.
Stanley A. Mayer, chief financial officer, said the company is on track to open seven to 10 new stores next year, which would generate a 25 percent increase in square footage.
Mayer said the men’s casual footwear collection is expanding at the expense of athletic and dress. For women, the opposite is true, as the company noted the return of the pump and tailored shoe.
Consumer direct operations increased 31.8 percent with comparable-store sales up 7.8 percent. The 50.1 percent expansion of licensing revenue resulted primarily from growth in existing licenses in apparel, including men’s sportswear and men’s tailored clothing, as well as accessories like watches and luggage. This quarter also marked the beginning of shipments of the Kenneth Cole New York women’s sportswear line by Liz Claiborne.
The company sees great opportunity to continue to roll out more retail locations, and believes the company can support 100 locations. It currently has 64 stores and outlets.
For the nine months, net income soared 65.6 percent to $27.1 million, as net sales grew 35.1 percent to $279.8 million.

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