Kellwood Company expects net earnings in the third quarter to be in the range of $28.5 million, or approximately $1.00 per diluted share, which is below the guidance provided in August of $32.5 million, or $1.15 per share. Last year the Company reported net earnings of $30.9 million and earnings per share of $1.13 in the third quarter.
The slippage in earnings forecasted for the third quarter, versus the guidance provided in August, is due to a combination of weak consumer demand for apparel, caused partially by high gasoline prices, abnormal weather, and some of the Company's brands not being fully on target in terms of fashion look and appeal. As a result, markdown pressure at retail and wholesale levels has been more severe than earlier expected.
Some of these issues are also impacting Spring 2005 business, which the Company is currently booking and will begin to ship in the fourth quarter. Much of the growth forecasted for the fourth quarter is still expected to come from the new marketing initiatives, which sell at higher margins. However, based on orders booked to date, it now would appear that sales in the fourth quarter from these higher margin initiatives will be less than anticipated in August. As a result, the Company now expects sales for the year to be approximately $2.57 billion, versus its earlier forecast of $2.6 billion. Last year Kellwood reported sales of $2.35 billion.
Net earnings are now forecasted to be in the range of $77.5 million, or approximately $2.75 per diluted share. In August Kellwood provided net earnings guidance of $89-$91 million, or $3.15 to $3.25 per share. Last year the Company reported net earnings of $72.6 million, or $2.68 per share.
“We are disappointed in our near term results and in having to reduce our expectations for the year. The environment is certainly a major factor. However, we also have some work to do to further modernize the look of some of our core moderate brands in response to the consumers' rapidly evolving taste level, and some fine-tuning of the merchandise assortments offered by a few of our new marketing initiatives. We will not see the benefits of these efforts until Fall 2005 which we begin shipping next July due to the seasonality and lead-time attendant with the apparel business,” said Upbin.
“Finally, as with most new and transforming endeavors, the economic benefits always cost more and take longer to realize. This is true for the launching of some of our new higher profile, and better price point brands and also true for the repositioning of our Intimate Apparel business. We are committed to all of these endeavors because they will better position the Company for more profitable growth in 2005 and beyond,” added Upbin.
