Kellwood Company's fourth-quarter profits fell on a series of charges but rose when discontinued operations and special items were excluded.

During the three months ended 3 February, net income dropped 44.3% to US$7m, or $0.27 diluted share, from $12.5m, or $0.49, during the final quarter of 2005.

Earnings per diluted 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 $491.9m, well above analysts' expectations of $451.4m, versus $446.5m in the last quarter of the prior year. Gross margin improved to 21.2% of sales from 19.5% in the year-ago period.

Women's sportswear sales rose 9% to $273.3m as operating margin rose to 6.8% of sales from 5.1%. Men's sportswear revenues were up 13% to $134.1m, 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.

"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 revitalise 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 $490m and $500m. For the year, sales are forecast to reach $2.0bn to $2.025bn with earnings from continuing operations reaching $1.80 to $1.89.

For the full year, Kellwood had net income of $31.4m, or $1.21, versus a net loss of $38.4m, or $1.42, in 2005. The deficit in 2005 included a $57.2m loss from discontinued operations.

Sales were flat at $1.96bn for both years. Women's sportswear sales dropped 3.4% to $1.11bn, men's sportswear sales were up 5.4% to $525m, and revenues from other soft goods were up 3.1% to $329.2m.

Following the release of results early Friday (16 March), shares of Kellwood dropped $0.41, or 1.3%, in New York Stock Exchange trading to close at $31.24.
By Arnold J Karr.