Kenneth Cole Productions' chief executive, Jill Granoff, stepped down with immediate effect on Feb. 28 after about three years in the job. Kenneth Cole, the company's chairman and chief designer, is acting as interim CEO. The departure was mutually agreed upon but Cole stressed that the group's past results were not acceptable.
The management team has been reinforced by the return of Paul Blum, who worked for the company for 15 years. He served as president from 2002 to 2006 before moving to a jeweler, David Yurman, where he was CEO until last year. Blum has been appointed to the new role of vice chairman of the American footwear company. Cole said he has not started looking for another CEO and there is the possibility that Blum could obtain the job.
Kenneth Cole has also hired Carol Masone to head up its retail business. She previously worked for Jones New York and is expected to boost KCP's e-commerce platform and to improve efficiency in company stores. Cole said the sell-through of its best performing products is improving but admitted that store and inventory management has not been very effective in the past.
In reviewing its store network, the group closed down eight underperforming full-price stores last year, and seven more are following the same fate in the first quarter of 2011. An additional two stores are planned be shut later in the first half, bringing the tally to 17 closures. These 17 stores represent annual sales of about $23 million but will lead to $8 million in annual savings. The group plans to open five to six outlets in the course of the second and third quarters.
The closures impacted the group's fourth quarter results and will continue to do so in the first quarter. In the fourth quarter, KCP booked a 10.5 percent rise in revenues to $120.8 million, thanks to an 18.9 percent increase in licensing, a 1.0 percent rise in wholesale revenues and a 16.0 percent surge in retail. Wholesale revenues were driven by men's apparel while footwear and handbags declined slightly. Comparable store sales grew by 14.1 percent due to the liquidation and clearance of goods associated with the store closings, but the clearance lowered the gross margin to 43.5 percent from 46.8 percent.
The bottom line showed a net loss of $2.7 million, including non-recurrent charges of $6.3 million. It was a big improvement from the $52.0 million loss booked a year earlier.
In the full financial year, KCP's revenues rose to $457.3 million from $410.4 million and the group posted a net profit of $2.1 million compared with a $63.2 million loss in 2009.
In the first quarter of this year, the group will book onetime charges totaling $13-14 million related to the store closures and Granoff's severance pay. Results will be more normal from the second quarter and will benefit from the shutdown of the unprofitable stores. From the beginning of the third quarter, results will be supported by a more extensive presence of KCP's Reaction sportswear line. The company forecasts that the wholesale business will grow by a low single digit in the first half and by a double-digit figure in the second part of the year.