Kellwood fought a softening consumer apparel market and delayed marketing initiatives to post a 10.1% increase in group sales to $560.5 million for the second quarter of 2004 compared to $508.9 million last year. Organic sales growth accounted for a 7% increase in sales while the balance was attributed to the Phat Farm and Phat Fashions Acquisitions.

Gross margin increased by 150 basis points to 22.2% of sales compared to 20.7% last year while SG&A expenses increased by 110 basis points to 17.7% of sales compared to 16.6% last year. This added up to a 52.2% increase in net earnings to $10.2 million for the 2004 second quarter compared to $6.7 million LY.

Sales of American Recreation products for the second quarter were down 10% percent from last year. According to Hal J. Upbin, Chairperson & CEO of Kellwood, “Most of the year-to-year drop in volume was concentrated in two areas — tents and the mass-market channel of distribution… Tents are the most expensive camping product, and therefore, the easiest item to postpone for a family on a budget in a year when rising gasoline prices are taking a toll on discretionary disposable income.”

Mr. Upbin also stated that until recently the mass-market channel has been outperforming the specialty store channel, but because of a sharp drop off in demand at the ass market channel and a wide-spread consumer willingness to spend more on recreation products, the Specialty channel is making a comeback.

“After three years of severe price deflation which resulted in a 15 to 20% drop in selling prices, we're beginning to see a willingness on the part of our customers to modestly increase selling prices in the spring of '05,” he said. “We have also recently seen an up-tick in the retail sales of camping products, which is good as we look ahead into the new season.”