Kenneth Cole Productions, Inc. reported strong financial results for the first quarter, ended March 31, 2002. The company reported net revenue of $92.9 million and earnings per fully diluted share of $0.27 versus the year-ago levels of $97.4 million and $0.21, respectively.
Chairman and Chief Executive Officer Kenneth Cole said, "We are off to a good start this year and I am pleased with the pace of our recovery. We have driven gross margin performance through our continued focus on product and with careful inventory management. We have also been able to control expenses and are pleased with the results we were able to bring to the bottom line."
Wholesale revenues for the first quarter decreased 3.3% to $53.9 million versus the same quarter last year. Consumer direct revenues during the first quarter decreased 8.6% to $33.4 million versus $36.6 million in the year-ago period. A 16.4% decline in comparable store sales offset increases generated by new and expanded stores. Licensing revenue for the first quarter was $5.6 million, versus $5.1 million in the year ago period.
Gross margin for the first quarter increased 190 basis points to 47.1% versus 45.2% in the first quarter of last year. SG&A expenses dropped to $35.3 million versus $37.5 million in the year-ago quarter, reflecting effective cost-reduction strategies. As a result of the above factors, operating income increased 31.7% to $8.5 million versus the year-ago level of $6.5 million. Earnings per fully-diluted share increased 28.6% to $0.27 versus $0.21 in the year-ago quarter.
The Company's consolidated inventories of $40.3 million on March 31, 2002 were 17.9% below the year-ago level of $49.0 million. Wholesale inventories were down 27.6% to $17.7 million and Consumer Direct inventories were down 8.1% to $22.5 million and down 20.9% on a per square foot basis.
President Paul Blum stated, "Sell through rates for many of our product classifications have improved significantly, although initiatives to improve results in our consumer direct division have not yet fully taken hold. We intend to remain focused on our diversification program and will be continuing to market the Reaction and Unlisted brands aggressively, with the goal of developing a healthier and more balanced mix of revenues by brand and distribution channel."
Mr. Blum also noted, "Our wholesale backlog at the end of the first quarter was up approximately 32%. While this is an imperfect indicator subject to timing issues, it is nonetheless a signal that our momentum continues and the reception to our products is very positive."
Kenneth Cole Productions, Inc. also updated guidance for the remainder of fiscal 2002. The company now believes it is likely to report sales and earnings for the second quarter in the range of $95 to $98 million and between $0.20 and $0.22 per fully-diluted share, respectively. This compares to prior guidance of $90 to $93 million in net revenues and earnings per share between $0.14 and $0.16. For the third quarter, the company believes that net revenues of $112 to $117 million and earnings of $0.35 to $0.37, are appropriate targets. Similarly, the company is comfortable with fourth quarter guidance of $103 million to $108 million in net revenues and $0.30 to $0.32 in earnings.
Mr. Cole concluded, "I am very pleased with the incremental strength of the business and our demonstration of an ability to move forward in difficult as well as favorable circumstances. We will continue to be responsive to the consumer, respectful of our brands, and appreciative of the support from our shareholders."
About Kenneth Cole Productions, Inc.
Kenneth Cole Productions, Inc. designs, sources, and markets a broad range of footwear, handbags, and accessories under the brand names Kenneth Cole New York, Reaction Kenneth Cole, and Unlisted, a Kenneth Cole Production. The company has also granted a wide variety of third party licenses for the production of men's and women's apparel, timepieces, eyewear, and several other accessory categories. The company's products are distributed through department stores, better specialty stores, and company-owned retail stores as well as direct to consumer catalogs and e-commerce.
Forward-Looking Statement Disclosure
The statements contained in this release, which are not historical facts, may be deemed to constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Actual future results might differ materially from those projected in such statements due to a number of risks and uncertainties, including but not limited to, demand and competition for the company's products, the ability to enter into new product license agreements, changes in consumer preferences or fashion trends, delays in anticipated store openings, and changes in the Company's relationships with vendors and other resources. The forward-looking statements contained herein are also subject to other risks and uncertainties that are described in the Company's reports and registration statements filed with the Securities and Exchange Commission.
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