Late-Day Selloff Precedes Warning at Kenneth Cole - TheStreet

Kenneth Cole


issued a postclose earnings warning Thursday, but its shares fell sharply before the press release came out.

Citing a "problematic retail environment," the company said second-quarter earnings will fall short of Wall Street's target by about 50%. The shoe and apparel seller will earn between 17 cents and 19 cents a share for the quarter ending June 30, barely half of the analyst consensus earnings estimate of 33 cents a share, according to

Thomson Financial/First Call


Hot Foot?
Cole shares fall ahead of warning

Shares closed at $23.70, down $2.10, or 8.1%, even though the release didn't hit the newswires until after the close of trading. Volume more than tripled the stock's daily average. (


recorded no action after hours in Kenneth Cole shares.)

Around 770,000 Cole shares changed hands Thursday. "That's big volume for Kenneth Cole," says Lee Backus, an analyst at Buckingham Research. (Backus has a neutral rating on the stock, and his firm does not do underwriting.) Average volume is around 212,000 shares.

Meanwhile, other retail stocks rallied: The


Retail Index rose 1.7%. Apparel manufacturers did even better, with

Ralph Lauren

(RL) - Get Report

rising 4% to $27.49 and

Liz Claiborne

( LIZ) up over 3% at $51.47.

Costly Development

In a statement, the company said gross margins will remain level. But general and administrative expenses as a percentage of sales are expected to rise from the same period a year ago due to revenue weakness.

"The continuing deterioration of the retail environment has prompted us, in light of the alternatives, to place further constraints on our distribution, limit inventory buys, and plan for lower levels of replenishment business," said Kenneth Cole, chief executive, in a statement.

Cole also said the New York-based company anticipates "continued adverse market conditions for the foreseeable future."

The company also sliced its full-year earnings estimate, saying it expects to earn $1.22 to $1.28 per share for the full year, considerably less than the consensus estimate of $1.85 a share.

Sales for the quarter will be between $81 million and $83 million, and in the range of $385 million to $396 million for the year. Analysts had forecast sales of $103 million for the quarter and $465 million for the year.

The company plans a conference call at 8:30 a.m. Friday to discuss the earnings warning.