Sales and profits declined at Kenneth Cole Productions for the second quarter ended June 30. While the results were consistent with the management's short-term expectations, Paul Blum, who has returned to the company as its new chief executive, declared that he wants to improve the performance of each segment of its business, while creating great product and more effective marketing. The price of the company's shares on the stock exchange went up by 5.1 percent on the announcement.
Net revenues were off by 5.3 percent to $102.2 million in the quarter. While wholesale revenues were flat at $52.0 million, retail revenues fell by 11.5 percent to $39.6 million due to a 1.7 percent drop in same-store sales and the closing of unproductive full-price stores. Licensing revenues declined to $10.6 million, but they showed an increase of 4.5 excluding the recently terminated Le Tigre license.
The gross margin dropped by 3.1 percentage points to 40.6 percent due to higher sourcing costs, increased promotions to clear inventories and a higher mix of wholesale revenues. On the other hand, greater cost efficiencies and the elimination of unproductive stores allowed the company to report an essentially unchanged operating profit of $1,055,000. An impairment charge led Kenneth Cole to generate a net profit of only $579,000 for the period, down from $937,000 a year ago.