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LOS ANGELES — Analysts last week said they are taking a wait-and-see approach with Kenneth Cole Productions Inc. after the company reported a first-quarter earnings loss and a decline in revenues.
“The company is still in the early stage of a turnaround and there is limited visibility into the timing scope of improved operating metrics,” Jeff Van Sinderen, an analyst at B. Riley & Co., wrote in an earnings note. “We do not have clear insight into what numbers will look like until consolidated trends begin to stabilize.”
Similarly, Scott Krasik, an analyst with C.L. King & Associates, remained neutral on the company, but said there are opportunities for the brand even in the current economy. “Retail prices are coming down in almost every category, in some instances significantly, which may appeal to consumers who want to trade down in this environment,” he wrote in a note. “This should benefit the brand’s value proposition, which has been seriously lacking since Kenneth Cole attempted its failed up-market strategy several years ago.”
For the three months ended March 31, the company reported a loss of $8.2 million, or 46 cents a diluted share, compared with a profit of $807,000, or 4 cents, in the year-ago quarter. Sales during the quarter declined 16 percent to $103.4 million from $122.5 million. Same-store sales declined 20 percent.
CEO Jill Granoff, who just passed her one-year anniversary as head of the firm, said during a conference call with investors and analysts that the company was engaged in a comprehensive strategy to improve future prospects.
“Our overarching goal,” she said, “is to evolve Kenneth Cole Productions from a predominantly U.S., wholesale-driven footwear company to a portfolio of global retail-driven lifestyle brands built upon a strong foundation in footwear. We have mapped out and are implementing a plan to realize the significant sales and profit potential of our business over the next several years.”
Among the initiatives is a smaller-footprint retail location that is currently being tested. “The seven test stores are running comps nearly 20 points above the balance of the chain,” said Granoff. “Just as important, our gross margin in the test stores is more than 5 [percent] higher than the rest of the full-price stores. These preliminary results are very encouraging.”