Kellwood reported sales for the second quarter increased $2 million to $562 million, as compared to $560 million last year. The net loss for the second quarter was $(79.4) million, or $(2.86) per diluted share, as compared to net earnings of $10.2 million, or 36 cents per diluted share last year. Included in the loss for the quarter were impairment, restructuring and related non-recurring charges of $(93.4) million, or $(3.36) per share related to the Company's previously announced strategic initiatives that focus on increasing its penetration of consumer lifestyle brands while reducing exposure to smaller volume brands and certain private label businesses. Partially offsetting this charge was a one- time tax benefit for the repatriation of foreign earnings of $13 million, or $0.47 per diluted share.

For the second quarter, on an ongoing basis, (excluding the impairment, restructuring and related non-recurring charges, repatriation tax benefit and losses from businesses that the Company plans to exit):


     -- Net sales totaled $488 million, rising $5 million from $483 million in
        the second quarter of fiscal 2004;
     -- Net earnings were $5.6 million, or $0.20 per diluted share, compared
        to $10.9 million, or $0.39 per diluted share from ongoing operations
        last year.

On an ongoing basis, second quarter sales from Kellwood's growing portfolio of better plus price point brands increased by $12 million, or 16% to $89 million and at quarter end represented 18% of total Company sales versus 16% last year. Sales from the Company's popular-to-moderately priced branded and private label business decreased by $7 million, or 2% to $399 million versus $406 million last year.

By segment, on an ongoing basis for the second quarter sales were driven by a 9% increase in men's sportswear sales to $120.9 million and a 10% rise in other soft goods sales to $83.4 million. This was offset by a 4% decline in women's sportswear sales to $284.0 million. Within men's sportswear, sales rose due to solid gains in the Company's Smart Shirts operations. Sales growth in the other soft goods category was due to sales growth in both Gerber Childrenswear and American Recreation Products.

Mr. Skinner stated, “Our second quarter results were in line with our revised expectations. We increased sales and managed our expenses well, however these improvements were tempered by increased promotional activity resulting in reduced gross profit and operating income versus the prior year.

“Importantly, the second quarter marked a critical period for Kellwood,” Mr. Skinner, continued. “We set in place a number of strategic initiatives aimed at improving the performance of our portfolio of lifestyle brands while identifying divisions and brands that no longer fit our corporate objectives. While not evident in this quarter's results, we are progressing well toward correcting the fashion and merchandising issues that have affected certain of our brands at retail and are currently experiencing better sell through rates in our Sag Harbor women's sportswear brand. We have received some interest from buyers for the properties we plan to exit and are pursuing each opportunity.”

Kellwood ended the quarter with a strong balance sheet with ample liquidity. At July 30, 2005, total inventory was $283 million compared to $347 million at July 31, 2004. Cash and marketable securities increased by $31 million to $293 million from $262 million, at July 31, 2004. The Company's credit agreement was amended to accommodate the impact of the 2005 restructuring plan.

The Company has started the process of repatriating approximately $150 million of foreign earnings in the third and fourth quarters as part of the 2004 American Jobs Creation Act. The $13 million tax benefit relating to this repatriation was recognized in the second quarter.

Sales for the first six months of fiscal 2005 were $1.201 billion, declining 4% from $1.247 billion in the first six months of fiscal 2004. Net loss for the first six months of fiscal 2005 was $(66.9) million, or $(2.41) per diluted share, compared to net earnings of $35.3 million, or $1.26 per diluted share in the first six months of fiscal 2004. Included in the net loss for the first six months of fiscal 2005 were impairment, restructuring and related non-recurring charges of $(93.4) million or $(3.36) per share. Partially offsetting this charge was a one-time tax benefit for the repatriation of foreign earnings of $13 million, or $0.47 per diluted share.

For the first six months of fiscal 2005, on an ongoing basis, (excluding the impairment, restructuring and related non-recurring charges, repatriation tax benefit and losses from businesses that the Company plans to exit):


     -- Net sales totaled $1.042 billion, declining 4% from $1.085 billion in
        the first six months of fiscal 2004;
     -- Net earnings were $21.3 million, or $0.76 per diluted share, compared
        to $36.4 million, or $1.30 per diluted share from ongoing operations
        last year.

The Board of Directors declared a regular quarterly dividend of $0.16 per common share, payable September 23, 2005 to shareholders of record September 12, 2005.

Under Kellwood's share buyback program, the company repurchased 504,800 shares through September 1, 2005 at an average price of $24.61 per share completing approximately 18% of the Board approved program.

For the third quarter, the Company estimates sales of $630-640 million, as compared to actual sales of $717 million in the third quarter last year. Net earnings in the third quarter of fiscal 2005 are currently expected to approximate $16.0 million, or $0.55-$0.58 per diluted share, which is prior to impairment, restructuring and related non-recurring charges. This compares to actual third quarter fiscal 2004 net earnings of $28.4 million, or $1.01 per diluted share. On an ongoing basis, the Company expects third quarter sales of approximately $555 million, versus $619 million last year and net earnings to be in the range of $15.0-$16.0 million, or $0.53-$0.57 per diluted share versus $27.2 million or $0.97 per share last year. (see non-GAAP reconciliation).

For the fiscal 2005 year, the Company expects sales in the range of $2.4 billion. This compares to actual fiscal 2004 sales of $2.56 billion. The Company's current sales guidance for the year includes sales from divisions and brands that will be exited or restructured. Sales for Kellwood's ongoing operations are forecasted to be approximately $2.1 billion versus $2.2 billion last year.

Net earnings for the fiscal 2005 year continue to be estimated in the range of $37 million to $38 million, or approximately $1.35 per diluted share, which is before recognition of the tax benefit from the repatriation of foreign earnings and prior to the impairment, restructuring and related non- recurring charges. On an ongoing basis, the Company continues to expect net earnings of approximately $43.5 million, or approximately $1.55 per diluted share (see non-GAAP reconciliation). This compares to actual fiscal 2004 net earnings of $70.1 million, or $2.50 per diluted share and earnings from ongoing operations of $67.7 million or $2.42 per diluted share.

Impairment, restructuring and related non-recurring charges for fiscal 2005 are estimated to be $155 million after tax, or approximately $5.65 per diluted share. The increase from $132 million and $4.70 per diluted share guidance previously given is that the Company now anticipates incurring substantially all such charges by year end. The total amount of such charges did not change.


    KELLWOOD COMPANY AND SUBSIDIARIES
    CONDENSED CONSOLIDATED STATEMENT OF EARNINGS (UNAUDITED)
    (Amounts in thousands, except per share data)

                            Three Months Ended         Six Months Ended
                         7/30/2005    7/31/2004    7/30/2005    7/31/2004
     Net sales by segment:
       Women's Sportswear $297,169     $319,555     $657,216     $757,531
       Men's Sportswear    154,251      139,613      318,767      267,770
       Other Soft Goods    110,417      101,299      225,232      221,269
       Total net sales     561,837      560,467    1,201,215    1,246,570

     Costs and expenses:
       Cost of products
        sold               518,311      436,074    1,023,567      967,612
       Selling, general and
        administrative
        expenses            94,857       99,326      200,985      206,234
       Amortization of
        intangible assets    3,206        3,465        6,407        6,931
       Impairment,
        restructuring and
        related non-recurring
        charges             71,862            -       71,862            -
       Interest expense, net 5,911        6,752       12,545       13,039
       Other (income) and
        expense, net          (334)        (694)        (513)        (873)
     (Loss) earnings before
      income taxes        (131,976)      15,544     (133,638)      53,627

     Income tax (benefit)
      provision            (52,565)       5,324      (46,697)      18,367

     Net (loss) earnings  $(79,411)     $10,220     $(66,941)     $35,260

     Weighted average
      shares outstanding:

       -Basic               27,812       27,585       27,785       27,336

       -Diluted             27,812       28,150       27,785       27,990

     Basic (Loss) Earnings
      per Share:            $(2.86)       $0.37       $(2.41)       $1.29

     Diluted (Loss) Earnings
      per Share:            $(2.86)       $0.36       $(2.41)       $1.26