Kenneth Cole Sees Sales Uptick in Q1

NEW YORK — Kenneth Cole Productions Inc.’s loss widened during the fourth quarter, though early reads on the first quarter of 2010 appear promising.

The loss was largely driven by one-time charges for severance, asset impairment and an adjustment in the firm’s deferred tax asset balance.

The New York-based company said it now expects first-quarter revenues to be up in the mid-single digits and for earnings per share to range between break-even to 4 cents. Analysts were expecting a profit of 4 cents at press time.

If the company stays focused on new initiatives, such as launching its 925 footwear collection in Nordstrom this week, the year’s results will be good, said Sam Poser, an analyst at Sterne Agee.

The company “did make more progress than what I expected,” he said regarding the fourth quarter.

Still, Poser was hesitant to say the company’s recent successes mean a full-fledged recovery is coming for Kenneth Cole. “At best, this is a 2011 story,” he said.

The analyst added, “It’s interesting that they mentioned that their comp-store sales were up so far year-to-date, which was positive both in their full line and outlet businesses. They still face a tough time on the wholesale side, at least for the first half [of 2010].”

Indeed, Kenneth Cole CEO Jill Granoff said the firm plans to continue with wholesale initiatives and to focus on additional channels in the coming year.

“We are looking to really expand our global reach. We think there is a lot of opportunity in the international marketplace, and retail also is important to us. So there will be a lot of initiatives across all three channels,” she told Footwear News.

Footwear, including the 925 line, has been doing well for the company, according to Granoff. “We are seeing nice traction in our women’s footwear business.

It’s up significantly in sales and margins from last year at this time,” she said.

Kenneth Cole, meanwhile, also announced last week a men’s Reaction sportswear collection, which will be exclusively available at 150 Macy’s locations for holiday ’10.

“We are very pleased with the product performance of many of our licensees, who continue to provide us with a stable stream of high-margin revenue. And we are excited about the Macy’s men’s sportswear deal,” said Granoff on the firm’s conference call. “With respect to energizing the brand, we have crystallized our position as the quintessential metropolitan lifestyle brand. We’ve created compelling product, focused advertising, all while retaining our unique social voice, which is very important to the brand and the company. We’ve also achieved greater consistency in our marketing across all consumer touch points, increasing both spending efficiency and share of mind.”

Last Tuesday at the close of the market, the company reported a net loss of $52 million, or $2.88 a diluted share, which compared with a loss of $12 million, or 67 cents, for the same quarter the prior year.

Quarterly revenues decreased 14 percent to $109.4 million. The drop was partially attributed to exits from unprofitable businesses.

For the year, the firm lost $63.2 million, or $3.52, on total revenues that slid 17 percent to $410.4 million.

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