LOS ANGELES — Analysts last week lauded Kenneth Cole Productions Inc.’s third-quarter earnings results as a sign the company is in a full-fledged turnaround.
“They are experiencing growth in their wholesale channel, solid comps in their retail channel and their licensing channel continues to grow in double digits,” said Steve Marotta, an analyst at C.L. King & Associates. “The building blocks of their turnaround are well in place, and they continue to execute well on them.”
Others worried that the company might be underestimating the potential for sourcing, freight and production cost increases hitting later this year. “They’re making very good product, but they might get pressed because they are so focused on price,” said Sam Poser, an analyst at Sterne Agee. “They might be guaranteeing certain prices and get caught with the prices going up higher than they would like.”
For her part, Kenneth Cole CEO Jill Granoff said during a conference call with investors and analysts that the company was prepared to manage rising costs. “While we are seeing some price increases in raw materials and freight, we believe we can mitigate these by consolidating factories,” she said.
Overall, Granoff said she was pleased that the firm was growing and was profitable across the board. “All our operating segments posted solid results in the quarter, despite a still-challenging economic environment,” she said. “We are seeing growth in each of the company’s operating businesses and ongoing profit improvement. … Our brands remain strong and our products are resonating with consumers.”
Net earnings during the quarter were $2 million, or 11 cents a diluted share, compared with $186,000, or 1 cent, for the same quarter of 2009. Sales during the quarter jumped 15 percent to $119 million, from $103.8 million a year ago.
Kenneth Cole’s wholesale business increased 21 percent to $62.5 million during the quarter, partly due to double-digit growth in sales of men’s and women’s footwear, as well as strong consumer response to the launch of the Reaction men’s sportswear line. Licensing revenues rose 11 percent to $11.5 million, while the consumer-direct business grew 8 percent to $45 million.
Same-store sales at the firm’s retail stores advanced 7 percent during the quarter. The company plans to open four outlet stores and one full-price store in the next three months.
Kenneth Cole ended the quarter with $69.8 million in cash and no long-term debt. Looking to the fourth quarter, the firm said it anticipates revenues to be up 10 percent to 12 percent.