Kenneth Cole Productions, Inc. Reports 2008 First Quarter Results

NEW YORK, May 6 /PRNewswire-FirstCall/ -- Kenneth Cole Productions, Inc. NYSE: KCP today reported financial results for the quarter ended March 31, 2008. The Company reported first quarter net revenues of $122.5 million and earnings per fully-diluted share of $0.04, both in line with its recent guidance.

Consumer Direct revenues for the quarter were $38.5 million, an increase of 4.3%, reflecting both a 3.4% comparable store sales gain and revenues associated with new stores. Licensing revenues were up 4.4% to $9.9 million, despite the effect of the Company's transition of men's sportswear from a licensing model to a wholesale model. The Company's wholesale business, however, saw softness in the quarter with a revenue decline of 10.7% to $74.1 million.

The Company's first quarter gross margin rose to 41.0% versus the year-ago rate of 40.6%, driven primarily by a shift in revenue mix toward Licensing and Consumer Direct. SG&A, as a percentage of revenues, increased to 40.1% from 37.3% in the first quarter of 2007 due to increased marketing expenses associated with the launch of the Company's 25th anniversary campaign, its continuing investment in men's sportswear development, and deleveraging that resulted from the wholesale shipment decline. The Company noted that, excluding the incremental marketing and sportswear expenses, it had reduced operating costs versus year-ago levels.

The Company's consolidated inventories decreased 2.1% to $45.8 million at March 31, 2008. The Company noted that inventory aging had improved versus the prior year. Consumer Direct inventories increased 8.6% to $23.8 million to accommodate same store sales increases and new stores, while Wholesale inventories decreased by 11.5% to $22.0 million.

The Company's balance sheet remained strong at March 31, 2008 with cash and cash equivalents of $71.5 million versus $92.2 million a year ago. The Company noted that the decrease in cash reflected approximately $26 million used for stock repurchase as well as $13 million used to date in the acquisition of Le Tigre. The Company continues to have no long-term debt.

The Company noted that the soft wholesale business trend will likely result in lower shipments and reduced margins in the second quarter. To reflect this, the Company expects second quarter net revenues in the range of $108 million to $113 million and a loss per share of between $(0.11) and $(0.13).

During the first quarter the Company repurchased 413,000 shares of its common stock. It also noted that it is authorized to buyback up to 4.3 million additional shares and expects to continue to execute against its repurchase program during the second quarter.

The Company also announced today that its board of directors had approved a quarterly dividend of $0.09 per share. The dividend is payable on June 12, 2008 to shareholders of record as of May 22, 2008.

Chairman Kenneth Cole said, "Although we met our guidance for the first quarter, we are not satisfied with our current financial performance or near-term outlook. We believe, however, that a combination of continued progress in our Consumer Direct and Licensing businesses, overall expense reduction, and improved merchandising and marketing for our Wholesale business will result in our return to profitability in the second half of the year. I am happy to welcome Jill Granoff, our new Chief Executive Officer, to work with me and our talented management team to drive improved performance."

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; Kenneth Cole Reaction; Unlisted, a Kenneth Cole Production; and Tribeca, a Kenneth Cole Production, as well as footwear under the proprietary trademarks Gentle Souls and Le Tigre and under the licensed trademark Bongo.

The Company has also granted a wide variety of third party licenses for the production of men's, women's and children's apparel as well as fragrances, 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. Further information can be found at http://www.kennethcole.com.

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 or to renew or replace existing product licensee agreements, changes in consumer preferences or fashion trends, delays in anticipated store openings, and changes in the Company's relationships with retailers, licensees, 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.

                        Kenneth Cole Productions, Inc.

                                                         Unaudited
                                                       Quarter Ended
    (In thousands, except
     per and outstanding
     share amounts)                             3/31/08             3/31/07

    Net sales                                   $112,615            $119,868

    Licensing and other revenue                    9,882               9,470

    Net revenue                                 $122,497            $129,338

    Gross profit                                  50,227              52,554

    Selling, gen'l & administrative               49,115              48,221

    Operating income                               1,112               4,333

    Interest income, net                             294               1,261

    Income before taxes                            1,406               5,594

    Income tax expense                               599               2,154

    Net income                                      $807              $3,440

    Net income per share:  Basic                    $.04                $.17

    Net income per share:  Diluted                  $.04                $.17


    Average shares outstanding:  Basic        19,325,000          20,079,000

    Average shares outstanding:  Diluted      19,527,000          20,393,000


    Balance Sheet Data:                          3/31/08             3/31/07

    Cash  & Cash Equivalents                     $71,538             $92,192
    Due from Factor/Accounts Receivable           60,379              65,635
    Inventory                                     45,778              46,736
    Total Assets                                 342,308             363,354
    Working Capital                              133,505             175,030
    Accounts Payable & Accrued Expenses           35,039              29,723
    Long-term Debt                                     0                   0
     Total Shareholders' Equity                  234,809             262,167