Kellwood Company Q2 net sales totaled $465.4 million, as compared to $459.6 million in the second quarter last year. Net loss from continuing operations was $66.3 million, or $2.56 per diluted share, versus net earnings of $7.9 million, or 31 cents per diluted share, last year. Total net loss was $65.8 million, or $2.54 per diluted share, versus
net earnings of $7.2 million, or 28 cents per diluted share, in the second
quarter last year.

Included in net loss from continuing operations for the current quarter were restructuring charges of $0.3 million (after tax), or $0.01 per diluted share associated with the previously announced closure of the Company's Chico, California distribution center and non-cash impairment charges of $76.1 million (after tax), or $2.94 per diluted share related to goodwill and intangible assets of certain moderate women's brands. Net earnings from continuing operations for the second quarter last year included restructuring and other non-recurring charges of $1.6 million (after tax), or $0.06 per diluted share associated with the Company's completed 2005 strategic restructuring initiatives.

Included in total net loss for the second quarter were net earnings from discontinued operations of $0.5 million, or $0.02 per diluted share. Total net earnings for the last year second quarter included a loss from discontinued operations of $0.8 million, or $0.03 per diluted share.

For the second quarter, on an ongoing basis (continuing operations excluding the impairment, restructuring and other non-recurring charges), net sales were $465.4 million as compared to $459.6 million in the second quarter last year. Operating earnings (gross profit less selling, general & administrative expense before stock option expense, amortization and impairment, restructuring and other non-recurring charges) for the second quarter were $22.6 million compared to $21.0 million, last year.

Net earnings on an ongoing basis were $10.1 million, or $0.39 per diluted share, compared to $9.5 million, or $0.37 per diluted share. Included in second quarter results was a gain of $1.1 million after tax, or $0.04 per diluted share associated with the previously announced sale of a building. Net interest expense totaled $5.0 million and reflected lower interest income on cash balances having utilized $225.9 million in the quarter for the Hanna Andersson and Royal Robbins acquisitions. The second quarter tax rate from ongoing operations was 42.0% compared to 33.5% last year. The second quarter rate was impacted by the expected full year rate increase and includes a “catch-up” for the first quarter. The Company's full year rate is expected to increase to approximately 35% due to a higher percentage of earnings now anticipated to come from domestic operations. The acquisitions of Hanna Andersson and Royal Robbins did not have a significant impact on net sales, operating earnings or net earnings from ongoing operations in the second quarter.

Second Quarter Highlights From Ongoing Operations

Net sales of $465.4 million were slightly higher than last year. Organic sales growth was mainly realized from Gerber Childrenswear, My Michelle® and XOXO® juniors and girls businesses and Sag Harbor®. The launch of O Oscar, an Oscar de la Renta Company, exclusively at Macy's, as well as the acquisition of Vince® also led to improved sales in the quarter. This was offset by the anticipated impact of lower sales volumes of certain private brands of women's sportswear, continued softness in Briggs New York® women's bottoms business and the repositioning of the Phat Farm® men's wholesale business.

Gross profit as a percent of net sales rose by approximately 90 basis points to 21.9%, from last year. This increase was primarily driven by improved performance by many of the Company's brands led by Sag Harbor, XOXO, My Michelle and Gerber Childrenswear, as well as the acquisition of Vince. Manufacturing inefficiencies at Smart Shirts, the repositioning of the Phat Farm men's wholesale business and promotional pricing within the Koret division to clear excess inventory counterbalanced much of this improvement. Both Women's Sportswear and Other Soft Goods segments achieved a higher gross profit as a percent of net sales compared to last year.

Selling, general and administrative costs increased approximately 60 basis points from last year to 17.1% of net sales due to the acquisitions of Vince and HOLLYWOULD, the addition of 22 new retail stores since the second quarter last year, and activities to fund new and re-launched brand initiatives to support future growth.

Operating earnings (gross profit less selling, general & administrative expense before stock option expense, amortization and impairment, restructuring and other non-recurring charges) as a percent of net sales increased by approximately 20 basis points from last year to 4.8%.

“Many of our brands achieved solid results this quarter, with particular strength in our XOXO and My Michelle juniors branded sportswear and dress businesses, demonstrating our ability to bring trend right product to market,” commented Mr. Skinner. “Gerber Childrenswear and Baby Phat continued their positive performance, delivering better than anticipated results. While the softening retail environment and in particular, the women's better sportswear segment, required us to provide higher than planned markdown allowances to our customers, we believe that our general retail performance for Calvin Klein women's better sportswear was in line with industry trends. We also believe we have identified the manufacturing inefficiencies that affected our Smart Shirts business this quarter and are working diligently to ensure this business operates optimally in the future.”

Second Quarter Business Segment Review From Ongoing Operations

Women's Sportswear

Women's Sportswear net sales decreased 2% to $253.5 million in the second quarter of 2007. Organic sales growth was realized from My Michelle and XOXO junior and girls businesses and Sag Harbor. Sales also rose due to the acquisition of Vince and the launch of O Oscar. Lower sales volumes of certain private brands of women's sportswear and continued softness in Briggs New York women's bottoms business more than offset the sales improvements. Operating earnings (gross profit less selling, general & administrative expense before stock option expense, amortization and impairment, restructuring and other non-recurring charges) increased $5.9 million to $18.0 million. Operating earnings as a percent of net sales rose to 7.1% from 4.7% last year. The increase in operating earnings as a percent of net sales is principally due to improvements at Sag Harbor, XOXO, My Michelle and the acquisition of Vince. Promotional pricing at the Koret division to clear excess inventory and higher markdowns for certain brands dampened this improvement, as compared to last year.

Men's Sportswear

Net sales of Men's Sportswear decreased 2% to $114.7 million during the 2007 second quarter principally related to the repositioning of the Phat Farm men's wholesale business. Operating earnings (gross profit less selling, general & administrative expense before stock option expense, amortization and impairment, restructuring and other non-recurring charges) during the second quarter declined 75% to $3.2 million. Operating earnings as a percent of net sales decreased to 2.8% from 10.8% last year due to manufacturing inefficiencies at Smart Shirts and to a lesser extent the repositioning of the Phat Farm men's wholesale business.

Other Soft Goods

Other Soft Goods continued its strong performance in the second quarter of 2007 achieving a 16% increase in net sales to $97.2 million. Growth was realized from improved layette performance of Gerber Childrenswear. Operating earnings (gross profit less selling, general & administrative expense before stock option expense, amortization and impairment, restructuring and other non-recurring charges) grew 28% to $12.0 million in the second quarter of 2007. Operating earnings as a percent of net sales increased to 12.3% from 11.2% last year driven by the continued strong performance and execution of Gerber Childrenswear and American Recreation Products divisions.

Reorganization of the Women's Sportswear Business and Other Restructuring Actions

Separately, the Company announced today that it will reorganize its Women's Sportswear businesses, creating three operating divisions, from seven presently. The three ongoing divisions are: “Lifestyle Alliance”, “Designer Alliance” and “Modern Alliance”. This will reduce the total number of operating divisions for all business segments from 12 to eight.

“While we have made progress during the past year, we need to create a more agile organization to better service the needs of our consumers and retail partners,” stated Mr. Skinner. “This will also enable us to enhance our supply chain and improve our speed to market. The reorganization of our Women's Sportswear business will create an operating structure that is consistent with our five year corporate strategy — to reinvigorate our core business, expand into higher profile, better and above price point brands, connect more directly with consumers and utilize our operating infrastructure more efficiently to fund our growth.”

The Company also expects to benefit in the future from the previously announced refocusing of the Phat Farm business solely on licensing in conjunction with its license of the sportswear and outerwear collections under the Phat Farm and XV brand names to Longstreet Industries as well as the closure of its Chico, CA distribution center.

On a preliminary basis, the Company expects annual savings associated with the reorganization of women's sportswear, refocusing of the Phat Farm business solely on licensing and distribution center closure to range from $25 million to $35 million on an ongoing basis before tax. These savings are expected to be realized beginning in the fourth quarter of 2007. The Company plans to reinvest a portion of these savings to support the growth of its brands, primarily in marketing. The restructuring costs associated with these actions will approximate $30 million to $40 million before tax, or $0.70 to $0.93 per diluted share to be incurred during the 2007 third quarter through 2008. The estimates of restructuring savings and costs will be refined over the next quarter as detailed plans are put in place. The Company will present its more refined estimates of amounts and timing in conjunction with the third quarter earnings release.