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Kenneth Cole Reports Double Digit Revenue Growth
Consolidated Revenues Up 15 Percent

NEW YORK--Kenneth Cole Productions, Inc. has reported positive financial results for the second quarter ended June 30, 2010.


Earnings per fully-diluted share were $0.05 in the second quarter versus a loss of ($0.18) in the year-ago period, stronger than the company's previous guidance of $0.00 to $0.03 per share. The better than expected performance was the result of higher than anticipated comparable store sales, increased gross margins, effective inventory management and the ongoing, positive impact of the company's streamlining initiatives.

Net revenues in the second quarter grew 15.0 percent to $108.0 million versus $93.9 million in the second quarter last year. Each of the company's operating segments achieved double-digit revenue growth in the quarter.

Wholesale sales grew 12.8 percent to $52.1 million. Excluding the impact of exited businesses, Wholesale sales grew 16.0 percent. Consumer direct revenue for the second quarter increased by 16.2 percent to $44.8 million. This improvement was driven by a comparable store sales increase of 8.4 percent, revenue associated with eight net new stores, and continued double-digit growth in e-commerce. Licensing revenue in the second quarter increased 21.1 percent to $11.1 million.

CEO Jill Granoff said, "We are pleased to report strong performance in the second quarter, as well as our fourth consecutive quarter of positive operating profit. 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. We also increased gross margin and achieved continued expense leverage, resulting in greater profitability."

Consolidated gross margin increased 130 basis points to 43.7 percent compared to 42.4 percent in the year-ago period. Margins grew due primarily to improved product sell-through and effective inventory management.

Selling, general and administrative expenses as a percent of sales improved by 520 basis points to 42.7 percent from 47.9 percent in the year-ago quarter. The company achieved these results through its streamlining initiatives and expense leverage, despite additional costs associated with operating eight net new stores and the company's pay-for-performance annual bonus incentive.

As a result of gross margin improvement and expense management, second quarter operating income rose by $6.3 million to $1.1 million compared to an operating loss of ($5.2) million in the same quarter of last year.

For the six months ended June 30, 2010, net revenues increased 10.2% to $217.5 million. Operating income improved by $19.8 million to $2.1 million versus a loss of ($17.7) million in the same period of fiscal 2009. As a result, diluted earnings per share grew by $0.79 to $0.15 versus the year-ago loss of ($0.64).

The company's balance sheet at June 30, 2010 remained strong with increased cash and no long-term debt. Cash and cash equivalents at the end of the quarter were $79.2 million, up $21.3 million versus the $57.9 million at June 30, 2009. Inventory was $35.2 million, approximately flat to the year-ago level compared to double-digit sales growth.

The company also issued revenue and earnings per share guidance for the third quarter ending September 30th. The company currently expects third quarter net revenues to grow between 10 percent and 12 percent, and earnings per diluted share to be in the range of $0.08 to $0.10 versus the year-ago level of $0.01 per share.

Kenneth Cole, chairman and CEO, concluded, "We have made good progress in our business and I am proud of our team's effort. We have continued to improve our product offerings and are better serving the needs of today's modern, metropolitan consumer. As we move forward, we will continue to explore all strategic avenues to enhance our customer relationships and maximize value for our stakeholders."


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