• Swings to Q1 profit of $186,000
  • Revenues dropped 21.4% to $103.8m
  • Sees Q4 revenue of $107-$112m

Kenneth Cole Productions has exceeded its previous guidance for the third quarter by reporting a small profit for the period.

The company said that reported earnings per fully-diluted share were $186,000 or $0.01 for the quarter, compared to its prior guidance of a loss of between $0.03 and $0.08 per share and the year-ago loss of $1.56m or $0.09 per share.

The company said the better than expected profit performance was the result of improved gross margins, effective inventory controls, and significant reductions in operating overheads versus the prior year's period.

However, as anticipated, third quarter net revenues dropped 21.4% to $103.8m versus $132.1m 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 programmes and in off-price distribution.

Inventory levels, the company said, at the close of the quarter continued to improve and were down 35.5% to $36.4m .

Kenneth Cole, chairman and chief creative officer, said: "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, CEO, 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."

The company also issued financial guidance for the fourth quarter, saying it expects to report net revenues in the range of $107m to $112m versus the year-ago level of $127m 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.