August 1st, 2012

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Kenneth Cole Q2 Weaker Than Expected

Wednesday, August 1st, 2012

New York designer Kenneth Cole Productions Inc. has swung to a second-quarter net loss on the back of lower sales and one-off costs. For the period ended June 30, the firm, which is in the process of going private at $15.25 a share, lost 20 cents a share, versus a net income of 3 cents in the same period a year ago.

The company reported a net loss of $3.7m for the second quarter versus income of $0.58m in the prior year’s quarter. Gross profit, as a percentage of revenues, was 40.6 percent for this quarter, unchanged from the year-ago period. The group posted a operating loss of $4.2m, compared to a $1.1m operating profit last year.

Net sales for the quarter slid 4.8 percent to $97.3m, versus the year-ago level of $102.2m. Analysts were expecting revenue to total $107.7m. Wholesale revenues fell 3.3 percent to $50.3m versus the year-ago period, as a result of lower demand for private label footwear and Reaction handbags. Consumer Direct revenues decreased 6.1 percent to 37.2 million dollars versus the year-ago period due to the operation of two fewer stores and a comparable store sales decline of 2.7 percent.

Licensing revenues in the second quarter declined 7.8 percent to 9.8 million dollars versus the prior year’s level due principally to the transition of the women’s apparel business to an in-house operation from a licensing model and the resetting of contractual minimum royalties of a licensee.

The bottom line was hit by costs associated with the proposed acquisition, to be led by chairman and chief creative officer Kenneth Cole, as well as one-time transition costs relating to changing distribution centers. During the quarter, the company incurred charges charges linked to a new distribution centre following the insolvency of one of its third-party logistics operators, as well as professional service costs related to a deal led by founder Kenneth Cole to take the company private.

For the half-year, Kenneth Cole’s net loss narrowed to $5.6m, compared to $16.6m the same period last year. Operating loss also narrowed to $8m, compared to a $16.1m loss last year. Net sales edged down 2.1% to $195.2m.

The company ended the quarter with 49 million dollars in cash and no long-term debt. Inventory increased 20.3 percent to 49.7 million dollars versus the prior year’s level of 41.3 million dollars.

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True Religion Shares Plunge 13% On Weak Outlook; Q2 Profit Edges Up

Wednesday, August 1st, 2012

Shares of True Religion Apparel, Inc. plunged nearly 13 percent in extended trade on Tuesday after the luxury jeanswear business lowered its full-year earnings outlook. The company also reported a profit for the second quarter that edged up from last year, reflecting lower expenses and improved sales. Earnings per share topped analysts’ expectations, while quarterly revenues missed their estimates.

The Vernon, California-based jeans and sports apparel retailer reported net income for the quarter ended 30 June edged up 0.7% to US$9.8m, or 0.39 dollar per diluted share, based on weighted average shares outstanding of 25.3 million for the second quarter of 2012. For the second quarter of 2011, net income attributable to True Religion Apparel Inc. was 9.4 million dollar or 0.38 dollar per diluted share. Operating income increased 9.6% to $16.6m.

Net sales were up 6.8 percent to $104.91 million from $98.26 million in the same quarter last year, but missed six Wall Street analysts’ consensus estimate of $107.31 million for the quarter. Net sales for the company’s U.S. consumer direct segment, which includes the company’s retail stores and e-commerce business, increased 9.4 percent to $64.4m and accounted for 61.3 percent of the company’s total net sales for the quarter. Offsetting declines in True Religion’s international segment.

Gross margin rate decreased 120 basis points to 64.3%, primarily due to increased markdowns in the company’s outlet stores to sell through slower moving women’s merchandise. Selling, general and administrative, as a percentage of sales, declined 160 basis points to 48.5 percent from last year.

The company’s board also approved a quarterly cash dividend of $0.20 per share, payable on August 29 to all stockholders of record as of August 15, 2012.

As a result, the company has lowered its full-year earnings outlook. True Religion now expects earnings per diluted share to be in the range of $1.80 to $1.86, on anticipated between $450 million and $455 million, with a mid-single digit same store sales growth in the U.S. Consumer Direct segment. This is compared to its earlier guidance of $1.88-1.95. Street is currently looking for full-year 2012 earnings of $1.97 per share on annual revenues of $467.84 million.

Jeffrey Lubell, CEO, stated, “I am pleased that our largest segment, U.S. consumer direct, had a same store sales increase. But we did not achieve our sales plan due primarily to a weaker response toward our spring and summer merchandise assortment. However, we carefully managed our business throughout the quarter, including the initiation of a semi-annual sale, expanded sales efforts to specialty accounts in the U.S. wholesale segment, and reinforced overhead cost discipline. These efforts allowed us to exceed our second quarter earnings per share forecast.”

California-based True Religion Apparel is a design-based jeans and jeans-related sportswear brand. The company has branded retail and outlet stores as well as department stores and boutiques in 50 countries on six continents. As of June 30, 2012, the company owned and operated 116 retail stores in the United States and 23 international stores.

TRLG closed Tuesday’s regular trading session at $26.24, down $1.03 or 3.78% on a volume of 0.89 million shares. The stock lost a further $3.30 or 12.58% in after-hours trading.

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Hanesbrands net sales rise 1 percent in Q2

Wednesday, August 1st, 2012

Basic apparel maker Hanesbrands recorded a diminished profit in its second quarter despite a slight sales increase, as the company continued to be impacted by historic high cotton costs.

The US company’s reported net profit of US$1.2m – down from $86.8m for the same period last year – was impacted by its sale of loss-making imagewear divisions earlier this year, but underlying figures also showed a profit decline of over 13%.

HanesBrands’ net sales were 1.18 billion dollars in the second quarter ended June 30, 2012. This was an increase of one percent over last year’s quarter. Earnings per diluted share were 0.67 dollars, a decrease of 14 percent. Outerwear segment net sales also increased one percent.

It blamed “substantially higher cotton costs” for the slump, but pointed to a stronger performance from its innerwear business, driven by growth in men’s underwear, children’s underwear and women’s panties and bras. Hanesbrands added that the majority of the cotton inflation was now behind it, leaving it to predict a stronger second half of 2012.

“Our business had a solid quarter, and we are performing slightly ahead of our plans for the year, especially in the innerwear segment,” said company chairman and CEO Richard Noll. “While we still have a long way to go, we are well positioned for the second half of the year.”

The company’s overall operating profit margin was 10.2 percent in the quarter, and its gross margin was 31.1 percent despite cotton costs of more than double those of the prior-year quarter.

Hanesbrands expects to report full-year earnings per diluted share of $2.50-2.60 on sales of $4.52-4.57bn.

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Clothing deflation slowed to 3.9% in July

Wednesday, August 1st, 2012

UK clothing and footwear deflation slowed in July to 3.9% from 4.8% in June, according to the BRC Shop Price Index, released today (1 August).

The British Retail Consortium said women’s wear was the only category to report an acceleration in its deflation rate. Widespread discounting continued across the sector as retailers made way for their new autumn/winter collections, with the BRC adding that retailers will be hoping the introduction of their new season collections will boost sales.

The price of cotton is currently 8% lower than the previous month, which is likely to provide further downward pressure to clothing prices in the coming months.

Overall shop price inflation slowed to 1% from 1.1% in June, while deflation in non-food was flat at 0.3%.

“Overall, non-food goods were cheaper than a year ago for a sixth month as retailers discounted to generate sales,” said BRC director general Stephen Robertson. ”Great news for customers who have spare money to spend on clothing, electricals and furniture. But many don’t have money available or the confidence to spend even with prices down.”

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Next increases FY forecasts on strong H1

Wednesday, August 1st, 2012

UK retailer Next Plc  has increased its full-year target after reporting a 4.5 percent rise in first-half sales from the prior year.

The clothing and homewares retailer today (1 August) said retail sales were 0.2% up on last year, with sales from new space offsetting lower sales from like for like stores. Growth was largely driven by its directory division, which includes online revenue, with sales up 13.3% on last year, another strong all round performance.

Besides, total stock for the End of Season Sale was up 8.7% with cash recovery in line with the company’s forecast.

Looking forward, Next said it is modestly increasing and narrowing its sales and profit guidance ranges for the full year.

The company now expects profit before tax to increase between £575-620m, up on previous forecasts of £560-610m, and anticipates sales growth of 2% to 4.5% over the year. The announcement came as sales rose 4.5% over the first half, better than the 1-4% increase it previously forecast.

The company further noted that it remains its intention to buy back around 200 million pounds of shares this year. The effect of share buybacks and lower UK corporation tax rates on these estimates is to increase earnings per share by around 6% more than the growth in profit before tax.

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PVH to hold license for Arrow

Wednesday, August 1st, 2012

Having successfully repositioned its Arrow brand in existing European markets and introduced it to new territories over the past few years, apparel maker PVH Corp is now expanding the label further. PVH has entered into an agreement with Seidensticker Private Label GmBH to license the Arrow brand.

The agreement between PVH’s Cluett, Peabody & Co unit and Seidensticker Private Label GmbH covers men’s woven and knit sport shirts and dress shirts, and begins with the spring 2013 collections. Under this agreement, distribution of the Arrow brand will include wholesale, retail, shop-in-shops, and e-commerce throughout selected countries in Europe. The licensed product categories include men’s woven and knit sport shirts and dress shirts, and will be designed, manufactured, and sourced by the Seidensticker Group.

The Seidensticker corporate group is one of the top three shirt producers worldwide today. The company founded in Bielefeld, Germany, has production facilities in 14 countries, both in Eastern Europe and Asia. Besides its own brands, Seidensticker, Schwarze Rose, Jacques Britt, Dornbusch, Lorenzo Calvino and Redford, the company also holds the master license for camel active and licenses for Joop!, Strellson, Bogner, Baldessarini and Michalsky. It annually produces an average of 16m shirts, primarily for distribution in the European market.

North America and Europe are the largest markets for the Arrow brand, followed by Asia (India, the Middle East, Thailand, and China) and Latin America. The first collections distributed under the license agreement are expected to be in stores in January 2013.

“We are pleased to enter into this license agreementwith Seidensticker,” said Ken Wyse, PVH’sPresident of Licensing. “Over the past few years, we have successfully repositioned the Arrow brand in existing European markets and introduced it to new territories. Partnering with Seidensticker, in the European dress shirt market, is a wonderful opportunity to reach new customers and to further evolve the Arrow business.”

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Geox H1 profits down on weaker sales

Wednesday, August 1st, 2012

Italian footwear company Geox saw first-half net income decline on the back of weakening sales. Geox first half 2012 consolidated net sales decreased by four percent (five percent at constant exchange rates) to 528.52247 million dollars. Footwear sales represented 87 percent of consolidated sales, amounting to 462.50335 million dollars, with a five percent decrease compared to the same period of 2011. Apparel sales accounted for 13 percent of consolidated sales equal to 66.01912 million dollars, with a two percent decrease.

Sales in Italy, the group’s main market, which accounted for 36 percent of sales (38 percent in the first half of 2011) amounted to192.88422 million dollars, showing a eight percent decrease. Sales in Europe, which accounted for 43 percent of sales (in line with the first half of 2011), declined by five percent to225.52427 million dollars, compared with 236.73274 million dollars in the first half of 2011. North American sales decreased by 4 percent at 31.28518 million dollars (-ten percent at constant exchange rates). Sales in the other countries increased by eight percent (+5 percent at constant exchange rates).

Analyzing sales by distribution, the Geox Shop channel (franchising and Directly Operated Stores – DOS) increased by eight percent. This channel represented 49 percent of sales (43 percent in the first half of 2011). The sales of Directly Operated Stores (DOS) that have been open for at least twelve months (comparable stores sales) increased by three percent during the first half of 2012. Comparable store sales related to the spring/summer 2012 collections (from February 27 to July 22) increased by six percent. Franchising channel reported an increase of eight percent in the first half of 2012 to117.25784 million dollars, equal to 22 percent of sales. Multibrand, the group’s main distribution channel, accounted for 51 percent of sales (57 percent in the first half of 2011).

Mario Moretti Polegato, chairman and founder of Geox, commented: “Geox has closed the first half of 2012 with a slight reduction in turnover of four percent in line with expectations. There has also been a good improvement in margins which we have invested in the product, in the development of emerging markets and in communication. The profitability, in percentage terms, is substantially in line with last year and the cash position is solid, at 80 million euro. As previously announced, the second half of the year is proving to be difficult due to the economic downturn in Mediterranean countries where the contraction in consumption is most widespread and in the wholesale channel. However, the dynamic development of many countries such as Russia, Eastern Europe and the Far East, the new direct store openings in China and Hong Kong and the encouraging trend in sales at our direct stores in general, showing comparable growth of six percent in the spring/summer season, confirm the validity of our growth strategy focused on these emerging markets and on opening new retail stores.”

As of June 2012 the overall number of Geox Shops was 1,172 of which 261 were DOS. New openings include shops in Rome, Amsterdam, Paris, London, Madrid, Budapest, Hong Kong, Tianjin.

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