Kenneth Cole Productions, Inc. Reports Better than Expected Q3 Results --- Q3 Profit of $0.01 Per Share Exceeds Guidance of a Loss of $(0.03) to $(0.08) ---- Gross Margin Gain and Expense Reduction Drives Improvement ---- Inventory Down 36% Versus Year-Ago Quarter -

NEW YORK, Nov 03, 2009 /PRNewswire-FirstCall via COMTEX/ -- Kenneth Cole Productions, Inc. (NYSE: KCP) today reported financial results for the third quarter ended September 30, 2009. The Company reported earnings per fully-diluted share of $0.01 for the quarter versus its prior guidance of a loss of between $(0.03) and $(0.08) per share and the year-ago loss of $(0.09) per share. The better than expected profit performance was the result of improved gross margins, effective inventory controls, and significant reductions in operating overhead versus the prior year's period.

As anticipated, third quarter net revenues decreased to $103.8 million versus $132.1 million in the year-ago period. This was largely due to a decline in wholesale sales resulting from the planned exit from the Company's Tribeca and Bongo businesses as well as reductions in associated private label programs and in off-price distribution.

Consolidated gross margin increased 220 basis points to 43.3% compared to 41.1% in the year-ago period, driven by improved margins in the Company's consumer direct business. Selling, general and administrative expenses declined $7.3 million, or 14.1%, in the third quarter to $44.6 million versus the year-ago level of $51.9 million as a result of various streamlining initiatives.

Inventory levels at the close of the quarter continued to improve and were down 35.5% to $36.4 million compared to $56.5 million at the end of the third quarter last year. The Company noted that its balance sheet remained strong at September 30, 2009 with cash of $50.0 million and no long-term debt.

Kenneth Cole, Chairman and Chief Creative Officer, commented, "Our business is improving, although we still have much work yet to do. Our renewed focus on product innovation is creating new opportunities for our brands and our business, which should accelerate our strategic transformation and drive increased value to our shareholders." Jill Granoff, Chief Executive Officer, said, "I am pleased that our business returned to profitability in the third quarter. Through the collective efforts of our talented team, we have carefully managed our inventories, improved margins and reduced expenses, while maintaining a strong balance sheet. At the same time, we have begun a comprehensive effort to ensure that we have the right product, at the right price, in the right distribution to meet the needs of today's discerning consumer." Also today, the Company issued financial guidance for the fourth quarter. The Company expects to report net revenues in the range of $107 million to $112 million versus the year-ago level of $127 million and operating earnings per share of between $0.04 and $0.08. A year ago, the Company reported a loss of $(0.67) per share, which included $(0.40) per share of non-operating charges.

About Kenneth Cole Productions, Inc.

Kenneth Cole Productions, Inc. designs, sources, and markets a broad range of footwear, handbags, apparel and accessories under the brand names Kenneth Cole New York; Kenneth Cole Reaction; Unlisted; and Le Tigre, as well as footwear under the proprietary trademark Gentle Souls. The Company has also granted a wide variety of third party licenses for the production of men's, women's and children's apparel as well as fragrances, watches, jewelry, eyewear, and several other accessory categories. The Company's products are distributed through department stores, better specialty stores, company-owned retail stores and its e-commerce website. Further information can be found at http://www.kennethcole.com.

Forward Looking Statement Disclosure The statements contained in this release, 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 licensee agreements, changes in consumer preferences or fashion trends, delays in anticipated store openings, and changes in the Company's relationships with retailers, licensees, vendors and other resources. The forward looking statements contained herein are also subject to other risks and uncertainties that are described in the Company's reports and registration statements filed with the Securities and Exchange Commission.

Kenneth Cole Productions, Inc.

(unaudited) (In thousands, except Quarter Ended Nine Months Ended per share & outstanding ------------- ----------------- share amounts) 09/30/09 09/30/08 09/30/09 09/30/08 -------- -------- -------- -------- Net sales $93,336 $120,161 $272,458 $333,669 Licensing and other revenue 10,416 11,947 28,569 32,087 ------ ------ ------ ------ Net revenue $103,752 $132,108 $301,027 $365,756 ======== ======== ======== ======== Gross profit 44,881 54,351 119,766 150,622 Selling, gen'l & administrative 44,595 51,896 136,507 150,113 Severance (Salary, Taxes, Restricted Stock & Benefits - - 1,235 - Net Lease Termination Benefit - - (509) - --- --- ---- --- Total Operating Expense 44,595 51,896 137,233 150,113 Operating income (loss) 286 2,455 (17,467) 509 Interest income 94 395 414 1,637 Investment impairment (287) (3,282) (727) (4,114) ---- ------ ---- ------ Total Interest & Other Expense 193 2,887 313 2,477 Income (loss) before taxes 93 (432) (17,780) (1,968) Income tax (benefit) expense (93) 1,122 (6,532) 831 --- ----- ------ --- Net income (loss) $186 ($1,554) ($11,248) ($2,799) ==== ======= ======== ======= Net income (loss) per share: Basic $0.01 ($0.09) ($0.63) ($0.15) ===== ====== ====== ====== Net income (loss) per share: Diluted $0.01 ($0.09) ($0.63) ($0.15) ===== ====== ====== ====== Average shares outstanding: Basic 18,018,000 17,903,000 17,954,000 18,604,000 Average shares outstanding: Diluted 18,423,000 17,903,000 17,954,000 18,604,000 Balance Sheet Data: 09/30/09 09/30/08 ------------------- -------- -------- Cash & Cash Equivalents $50,036 $50,992 Due from Factor/Accounts Receivable 40,691 55,948 Inventory 36,397 56,462 Total Assets 306,061 331,324 Working Capital 81,292 112,780 Accounts Payable & Accrued Expenses 44,869 44,338 Long-term Debt - - Total Shareholders' Equity 193,677 213,040 SOURCE Kenneth Cole Productions, Inc.

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