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But the company said Thursday disappointing fall and holiday orders, combined with start-up costs for its new businesses, helped dampen expectations for the rest of the year.
At the same time, Kellwood executives remained tight-lipped about a possible acquisition of Phat Fashions, but sources indicated Kellwood is still the front-runner and a deal could be right around the corner. Founder and chief executive officer Russell Simmons is said to be asking $300 million for the firm, which includes the Phat Farm and Baby Phat brands, and wants to remain at the helm.
Kellwood’s net income for the quarter shot up to $6.7 million, or 25 cents a share, from $3.9 million, or 16 cents, a year ago. Sales for the three months ended Aug. 2 increased 13.7 percent to $526.8 million from $463.3 million a year ago.
Kellwood’s largest business, women’s sportswear, saw a 9.3 percent rise in sales to $291.8 million, while sales of men’s sportswear advanced 24.7 percent to $121.1 million.
The quarter’s robust results, though, were paired with a reduction in sales and earnings forecasts. Investors traded down shares of the firm $1.70, or 4.6 percent, to $35.30 on the New York Stock Exchange Thursday.
For the full year, Kellwood is looking for earnings of $2.60 to $2.65 a diluted share versus $2.08 a year ago, before certain one-time items in both periods. Going into the year, Kellwood forecast profits of $2.70 to $2.80. Sales for the year are expected to rise 15 percent to $2.53 billion.
In addition to lower-than-expected fall and holiday bookings and start-up costs for new initiatives, expectations for the back half were deflated by the discontinuation of the company’s European Hosiery unit, which has seen its sales fall to $10 million, while operating losses were higher than expected.
Fall and holiday orders came in about $30 million below plan. About half of the shortfall resulted from promotional-item programs for its Sag Harbor and Koret brands not repeated by J.C. Penney Co. and Kohl’s Corp. The other half of the drop was due to the loss of some low-margin private label programs.