Kenneth Cole Momentum Continues

Improved sales lifted Kenneth Cole Productions Inc. in the second quarter, and analysts said the company is making more progress.

“This was a strong quarter, with solid beats on both the top and bottom lines. Backlog is up in the double-digits,” said Jeff Van Sinderen, an analyst at B. Riley & Co. “The turnaround’s foundation appears to be firmly in place, as improvements were seen in all categories and through all channels.”

After tweaking the wholesale strategy, the New York-based firm also is making changes in retail.

Kenneth Cole plans to open an undisclosed number of new stores and close five to 10 underperforming units, most notably its flagship in Rockefeller Center.

CEO Jill Granoff also noted that the company will continue to explore strategic alliances, looking at new territories and new licensing opportunities.

“We are well down the path on a few of these projects and hope to share specific details soon,” Granoff said on a conference call with analysts. “Our domestic and international licensing business should continue to show growth even with tougher short-term comparisons because of the elimination of Le Tigre royalties from JCPenney.”

To mitigate rising costs emerging from China, the company said it is “looking to rebalance geographically” and believes it has “an opportunity in footwear and accessories to consolidate [its] vendor base.”

For instance, the entire Reaction sportswear line was recently sourced in India, Bangladesh and Indonesia, instead of in China.

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Kenneth Cole Productions reported last Wednesday a second-quarter net income of $937,000, a reversal from a $3.3 million loss in the same period a year ago. Earnings per share were 5 cents, up from a previous loss of 18 cents.

Net revenue grew 15 percent to $108 million, driven by improvements across the board in wholesale, retail and e-commerce.

Wholesale revenue rose 13 percent in the quarter, mainly driven by strong performance in Reaction men’s and women’s footwear, the company said.

On the retail side, comparable-store sales registered an 8.4 percent increase from the previous corresponding period.

“Our business has clearly turned the corner and is showing traction and positive momentum. Each segment delivered double-digit growth, demonstrating that our brands remain strong and that our products are resonating with consumers,” said Granoff.

Kenneth Cole had a cash balance of $79.2 million as of June 30 and no long-term debt.

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