NEW YORK — The financial picture at Kenneth Cole is brightening. The firm almost tripled its profit in the third quarter, but analysts said major progress won’t come until next year.
With revenues still under pressure, market watchers said the key will be reinvigorating product.
“The [reorganized design team] will really own the product only in the back half of next year, and the business should improve significantly based on that,” said B. Riley & Co. analyst Jeff Van Sinderen.
Steven Marotta, analyst at C.L. King & Associates, agreed: “It’s a small step in the right direction, and things are definitely stabilizing there.”
Kenneth Cole CEO Paul Blum said in a call with analysts last week that starting in this holiday season, “you will begin to see a much clearer price and positioning differential between Kenneth Cole New York and Reaction product. We believe this clarity will increase growth opportunities for both brands. We are already seeing better and more-frequent editorial coverage in the trades, major fashion magazines, blogs and online publications.”
A bright spot for the New York-based firm is its licensing revenues, which advanced 2 percent in the quarter. “That’s a revenue stream that drops right down to the bottom line,” noted Van Sinderen.
The firm also is looking to opportunities to grow the Kenneth Cole brands overseas. Blum said its new venture in India with Reliance Brands Ltd. “will further demonstrate the exportability of our brand to a very large, new consumer base. [It is] critical that our wholesale categories continue to serve as strong brand-defining businesses, as well as platforms for future growth.”
Kenneth Cole earned $5.8 million, or 31 cents a share, in the third quarter, up from $2 million, or 11 cents a share, a year ago. The firm expects fourth-quarter EPS to be between 37 and 39 cents, versus the prior year’s loss of 15 cents.