Kenneth Cole Narrows Q4 Loss on Higher Sales

Kenneth Cole

Kenneth Cole will act as interim ceo. Paul Blum returns as vice chairman.

New York–Kenneth Cole Productions Inc. has narrowed its fourth quarter loss thanks to higher sales and merchandise margins and the closing of underperforming stores.

The company, which separately announced the departure of its chief executive officer Jill Granoff, reported a net loss of $2.7 million or $0.15 per share in the three months ending Dec. 31,2010. This compares with a loss of $52 million or $2.88 per share, a year earlier.

Quarterly revenues rose 10.5% to $120.8 million, helped by an 18.9% increase in licensing and a 1% increase in wholesale revenues. There was also a 16% increase in Consumer Direct revenues, largely driven by a 14.1% gain in same-store sales. Liquidation activities, however, dented gross margin, pushing this down by 330 basis points to 43.5% compared to 46.8% in the year-ago quarter.

“We believe that our business is now positioned to take advantage of significant untapped opportunities for growth,” noted David Edelman, chief financial officer. “We have closed our underperforming stores, put new leadership in place and, once the near-term impact of our decision to close underperforming stores is behind us, we expect to see a financial benefit that far outweighs these short-term costs.”

Cole To Serve as Interim CEO

For the year, Kenneth Cole Productions earned $2.1 million or $0.11 per share, compared with a loss of $63.2 million or $3.52 per share the year before. Full year revenues increased by 11.4% to $457.3 million. Beginning in the second quarter of fiscal 2011, the company expects an annual recurring benefit of about $8 million, or 40 cents per share, from the closings.

The company’s first quarter forecast includes one-time charges of $13 to $14 million for lease termination, store closing and layoffs, a company executive said on a conference call. Granoff’s severance payment is included in this estimate.

Kenneth Cole, chairman and chief creative officer, will act as interim chief executive officer, while former president Paul Blum is returning to assume the role of vice chairman. Blum, who had been with Cole for 15 years, had been ceo at David Yurman for four years until he resigned last year.

“I am confident Paul will play a critical role in executing the company’s goals and strategic agenda, building on the momentum of our current business partnerships, and capitalizing on global opportunities,” Cole said.

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