Kellwood to Exit 3 Divisions in Overhaul, Cuts Earnings Outlook

Kellwood Co. said it was closing several units, including intimate apparel, representing $335 million in sales, and lowered guidance for the year.

Kellwood also plans to restructure the Oakland Operation, which includes brands such as Beliza and Jax, and to make licensed women's tops for Dockers. Kellwood said it plans to exit some of these labels to focus on Koret.

The company anticipates the costs associated with withdrawing from the businesses to be $225 million before tax, or $155 million on an aftertax basis. Included in the charge is a write-off of intangible assets.

"We have been retained by Kellwood to provide financial advisory services in their sale and exiting of these three groups. We have been reviewing the information on the three divisions and feel that each of them create strategic opportunities for a variety of potential buyers," Financo's Harrison said in an interview.

Kellwood has already begun the restructuring and hopes to complete the plan over the next 12 months. It expects to take a $110 million aftertax restructuring charge in the second quarter and to book the remainder of the charge for the restructuring in the second half of the year.

For the second quarter, the company revised earnings at $600,000, or 2 cents a diluted share, on estimated sales of $560 million to $570 million. The estimates are before both the recognition of tax benefits from repatriation of foreign earnings and the restructuring charge. The previous guidance was for earnings of $10.5 million, or 38 cents. Kellwood will post its second-quarter results on Sept. 1.

For fiscal year 2005, the company reaffirmed its sales guidance in the range of $2.43 billion, which includes sales from divisions and brands that it will exit or restructure. Kellwood forecast earnings in the range of $37 million to $38 million before both the recognition of the tax benefit from the repatriation of foreign earnings and the restructuring charge.

The sale of the intimate apparel business was anticipated by several executives familiar with Kellwood's intimates business, which is part of a $421.5 million unit comprising intimate apparel, Gerber Childrenswear and American Recreation Products. The unit also consists of the LA Intimates operation based in Los Angeles, which produces private label and Dentelle lingerie, as well sleepwear and loungewear bearing the Sag Harbor name. The company also holds the licenses for Oscar de la Renta foundations, which have been distributed at Federated Department Stores, and Izod sleepwear and loungewear.
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