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Kenneth Cole Productions. Q2 2010 Earnings Call Transcript

Kenneth Cole Productions. Q2 2010 Earnings Call Transcript

Kenneth Cole Productions (KCP)

Q2 2010 Earnings Call

August 04, 2010 08:30 AM ET


Sam Kevin of ICR

Jill Granoff – Chief Executive Officer

David Edelman – Chief Financial Officer and Treasurer


Jeff Van Sinderen – B. Riley

Sam Poser – Sterne, Agee

Janet Kloppenburg – JJK Research



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» Kenneth Cole Productions, Inc. Q1 2010 Earnings Call Transcript
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Good Day Ladies and Gentlemen and welcome to the Second Quarter 2010 Kenneth Cole Earnings Conference Call. My name is Chris and I’ll be your operator for today. At this time all participants are in a listen only mode. Later we will conduct the question and answer session. [Operator Instruction]. As a reminder this conference is being recorded for replay purposes. I will now like to turn the conference over to your host for today’ call Sam Kevin of ICR [ph].Please proceed.

Sam Kevin

Good morning everyone. Before we get started, I’d just like to remind you of the company’s forward-looking statement disclosure. Statements made in today’s conference call, 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 license agreements; changes in consumer preferences or fashion trends; delays in anticipated store openings; and changes in the company’s relationship with retailers, licensees, vendors and other resources.

The forward-looking statements contained in today’s call are also subject to other risks and uncertainties that are described in the company’s reports and registration statements as filed with the Securities and Exchange Commission.

With that out of the way, I'd like to turn the call over to Jill Granoff, Chief Executive Officer.

Jill Granoff

Good morning and thank you for joining us to review our second quarter 2010 results. With me today is David Edelman, our Chief Financial Officer. We are please to report strong performance in the second quarter, as well as our fourth consecutive quarter of positive operating profit.

Our business has clearly turn the corner and is showing traction and positive momentum. Each segment delivered double-digit growth demonstrating that our brands remains strong and that our products are resonating with consumers.

We also increased gross margin and achieved continued expense leverage resulting in grater profitability. Here are a few highlight from the quarter. Total net revenues in the second quarter grew 15% to $108 million. Gross profit margin increased by 130 basis points to 43.7%.

SG&A expenses improve nearly 520 basis points. Earnings per share increased by $0.23 rising to a profit of $0.05 compared to a loss of $0.18 last year and for the first six months of the year earnings per share improved by $0.79 to a profit of $0.15 versus a lost of $0.64 in the same period last year. This represents an operating profits swing of nearly $20 million.

Our balance sheet also remained strong, cash at the end of the quarter with $79 million, up $21 million versus last year. Inventory was flat to the year as level even though we had a double-digit sales increase as we continue to operate with no long-term debt. The improvements we have made through out our organization are paying off. Our business performed well across categories, brands and operating segment. We believe this across the board performance reflects the trend product and compelling value we are providing to consumers. Also revenues grew by 13% in the second quarter, these results were driven by strong performance in several category, especially reaction men’s and women’s footwear.

Or enhanced sell-through not only help margin but also drove a 25% increase in EDI deliveries. This solid performance is largely due to Kenneth’s brand and product vision and our talented, creative and wholesale team.

Our designs assortment and campaign have been on the mark and we’re excited to be demonstrating our leadership position in our core wholesale categories. Our consumer direct business also showed impressive growth. Totaled sales were up 16% in the second quarter with a comparable store sales increase of 8.4%. The balance of the sales increase is generated by new store and continued double-digit growth in e-commerce. Apparel was our best performing category for both men and women. We are pleased to see about 4-5 stores and outlet comping well. Traffic continued to be down in both channels but our conversion was up. Our focus on head-to-toe looks seasonless product and versatile style from multiple wear occasions are resonating with consumers. While the outlets stores were slightly more promotional than we’d like to see, inventory is clean on both side of this business. The consumer direct segment continues to get healthier.

Finally our licensing business performed well again this quarter growing by 21% versus last year second quarter. Stand out performers win the categories of men’s dress shirts, men’s tailored clothing, watches, optical and small leather bag. We also saw continued growth in Canada and the U.K.

Well David would go through a second quarter results in greater detail and provide third quarter guidance in a few moments. I’d like to say a few words about our outlook in each segment. With respect to wholesale backlog is up double-digit and we are projecting continued momentum through out performing holiday season.

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