Kenneth Cole Productions, Inc. Reports Better than Expected Q3 Results

NEW YORK, Nov. 3 /PRNewswire-FirstCall/ -- Kenneth Cole Productions, Inc. (NYSE: KCP) today reported financial results for the third quarter ended September 30, 2009. The Company reported earnings per fully-diluted share of $0.01 for the quarter versus its prior guidance of a loss of between $(0.03) and $(0.08) per share and the year-ago loss of $(0.09) per share. The better than expected profit performance was the result of improved gross margins, effective inventory controls, and significant reductions in operating overhead versus the prior year's period.

As anticipated, third quarter net revenues decreased to $103.8 million versus $132.1 million in the year-ago period. This was largely due to a decline in wholesale sales resulting from the planned exit from the Company's Tribeca and Bongo businesses as well as reductions in associated private label programs and in off-price distribution.

Consolidated gross margin increased 220 basis points to 43.3% compared to 41.1% in the year-ago period, driven by improved margins in the Company's consumer direct business. Selling, general and administrative expenses declined $7.3 million, or 14.1%, in the third quarter to $44.6 million versus the year-ago level of $51.9 million as a result of various streamlining initiatives.

Inventory levels at the close of the quarter continued to improve and were down 35.5% to $36.4 million compared to $56.5 million at the end of the third quarter last year. The Company noted that its balance sheet remained strong at September 30, 2009 with cash of $50.0 million and no long-term debt.

Kenneth Cole, Chairman and Chief Creative Officer, commented, "Our business is improving, although we still have much work yet to do. Our renewed focus on product innovation is creating new opportunities for our brands and our business, which should accelerate our strategic transformation and drive increased value to our shareholders."

Jill Granoff, Chief Executive Officer, said, "I am pleased that our business returned to profitability in the third quarter. Through the collective efforts of our talented team, we have carefully managed our inventories, improved margins and reduced expenses, while maintaining a strong balance sheet. At the same time, we have begun a comprehensive effort to ensure that we have the right product, at the right price, in the right distribution to meet the needs of today's discerning consumer."

Also today, the Company issued financial guidance for the fourth quarter. The Company expects to report net revenues in the range of $107 million to $112 million versus the year-ago level of $127 million and operating earnings per share of between $0.04 and $0.08. A year ago, the Company reported a loss of $(0.67) per share, which included $(0.40) per share of non-operating charges.

About Kenneth Cole Productions, Inc.

Kenneth Cole Productions, Inc. designs, sources, and markets a broad range of footwear, handbags, apparel and accessories under the brand names Kenneth Cole New York; Kenneth Cole Reaction; Unlisted; and Le Tigre, as well as footwear under the proprietary trademark Gentle Souls. 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, watches, jewelry, eyewear, and several other accessory categories. The Company's products are distributed through department stores, better specialty stores, company-owned retail stores and its e-commerce website. 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)


    (In thousands, except         Quarter Ended          Nine Months Ended
     per share & outstanding      -------------          -----------------
     share amounts)           09/30/09    09/30/08     09/30/09     09/30/08
                              --------    --------     --------     --------
    Net sales                  $93,336    $120,161     $272,458     $333,669

    Licensing and
     other revenue              10,416      11,947       28,569       32,087
                                ------      ------       ------       ------

    Net revenue               $103,752    $132,108     $301,027     $365,756
                              ========    ========     ========     ========

    Gross profit                44,881      54,351      119,766      150,622

      Selling, gen'l &
       administrative           44,595      51,896      136,507      150,113
       Severance (Salary,
       Taxes, Restricted
       Stock & Benefits              -           -        1,235            -
      Net Lease Termination
       Benefit                       -           -         (509)           -
                                   ---         ---         ----          ---
      Total Operating Expense   44,595      51,896      137,233      150,113

    Operating income (loss)        286       2,455      (17,467)         509

    Interest income                 94         395          414        1,637
    Investment impairment         (287)     (3,282)        (727)      (4,114)
                                  ----      ------         ----       ------
    Total Interest & Other
     Expense                       193       2,887          313        2,477

    Income (loss) before taxes      93        (432)     (17,780)      (1,968)

    Income tax (benefit)
     expense                       (93)      1,122       (6,532)         831
                                   ---       -----       ------          ---

    Net income (loss)             $186     ($1,554)    ($11,248)     ($2,799)
                                  ====     =======      ========      =======


    Net income (loss) per
     share:  Basic               $0.01      ($0.09)      ($0.63)      ($0.15)
                                 =====      ======       ======       ======

    Net income (loss) per
     share:  Diluted             $0.01      ($0.09)      ($0.63)      ($0.15)
                                 =====      ======       ======       ======

    Average shares
     outstanding:  Basic    18,018,000  17,903,000   17,954,000   18,604,000

    Average shares
     outstanding:  Diluted  18,423,000  17,903,000   17,954,000   18,604,000



    Balance Sheet Data:       09/30/09    09/30/08
    -------------------       --------    --------
    Cash & Cash Equivalents    $50,036     $50,992
    Due from Factor/Accounts
     Receivable                 40,691      55,948
    Inventory                   36,397      56,462
    Total Assets               306,061     331,324
    Working Capital             81,292     112,780
    Accounts Payable
     & Accrued Expenses         44,869      44,338
    Long-term Debt                   -           -
    Total Shareholders'
     Equity                    193,677     213,040