Charges Cut Kellwood’s Q4 Net

NEW YORK – Special items and charges due to discontinued operations reduced Kellwood Company’s fourth-quarter profits.

Net income dropped 44.3% to $7 million, or $0.27 a diluted share, in the three months ended Feb. 3 from $12.5 million, or $0.49, during the final quarter of 2005. Earnings per diluted share for continuing operations were up to $0.25 from $0.16. Adding $0.19 in restructuring and other charges for the more recent quarter, EPS was $0.44, above the consensus estimate of $0.42.

Net sales in the quarter rose 10.2% to $491.9 million, well above analysts’ expectations of $451.4 million, versus $446.5 million in the last quarter of the prior year. Gross margin improved to 21.2% of sales from 19.5% in the year-ago period.

Men’s sportswear revenues were up 13% to $134.1 million, principally on growth from Smart Shirt and the Phat Fashions licensing business. Men’s operating margin moved up to 6.4% of sales from 5.1% in the 2005 period, with Baby Phat helping to elevate results. Women’s sportswear sales rose 9% to $273.3 million as operating margin rose to 6.8% of sales from 5.1%.

“The fourth quarter marks the third consecutive quarter of year-to-year improvement in gross margin and better bottom-line profitability,” said Robert Skinner, chairman and chief executive officer of Kellwood. “This demonstrates that our efforts to revitalize our core brands, increase our penetration of brands serving the better market and improve business processes are gaining traction with the consumer and producing tangible results for Kellwood.”

He said Kellwood was “encouraged” but “not yet satisfied” with Sag Harbor women’s sportswear and Calvin Klein women’s sportswear, but expected improvements based on upcoming product offerings.

In guidance, Kellwood said that, in the first quarter, net earnings from continuing operations should hit $0.19 to $0.21 a diluted share on sales of between $490 million and $500 million. Men’s sales are expected to decline to $130 million and women’s to be flat at $280 million.

For the year, sales are forecast to reach $2.0 billion to $2.025 billion with earnings from continuing operations reaching $1.80 to $1.89.

For the full year, Kellwood had net income of $31.4 million, or $1.21, versus a net loss of $38.4 million, or $1.42, in 2005. The deficit in 2005 included a $57.2 million loss from discontinued operations. Sales were flat at $1.96 billion for both years. Women’s sportswear sales dropped 3.4% to $1.11 billion, men’s sportswear sales were up 5.4% to $525 million, and revenues from other soft goods were up 3.1% to $329.2 million.

Following the release of results early Friday, shares of Kellwood dropped $0.41, or 1.3%, in New York Stock Exchange trading to close at $31.24.