Kenneth Cole Productions, Inc. reported that first quarter net revenues were $129.3 million, an increase of 5.5% versus the year ago level of $122.6 million. Operating income in the quarter increased by 18.7% to $4.3 million versus $3.7 million in last year's first quarter. First quarter earnings per fully-diluted share were 17 cents versus the year-ago first quarter earnings of 15 cents per share.

First quarter wholesale revenues were $82.9 million, up 9.3% versus the prior year's level of $75.9 million. The year-ago period was negatively affected, as the company has previously noted, by approximately $7 million of delayed shipments, due to the start-up of a new distribution facility.

Consumer direct revenues for the first quarter increased 1.6% to $36.9 million versus $36.3 million in the same quarter last year, with a comparable store sales decline of 1.5% versus the year-ago quarter. Licensing revenue for the first quarter decreased by 8.7% to $9.5 million versus $10.4 million in the same quarter of the prior year due to a previously announced change in the men's sportswear license.

Gross margin for the first quarter was 40.6%, versus the year-ago level of 41.9%, due to slightly lower wholesale margins as well as the shift in mix toward wholesale. SG&A expense as a percent of sales for the first quarter was 37.3% of sales versus 38.9% in the year-ago quarter.

The company's consolidated inventories decreased 13.0% to $46.7 million on March 31, 2006 versus the year-ago level of $53.7 million, in part reflecting the wholesale shipping timing issue from the year-ago period. Consumer direct inventories decreased 13.8% to $21.9 million from $25.4 million in the prior year, while wholesale inventories decreased 12.3% to $24.8 million from $28.3 million last year. The company said it is comfortable with the level and content of its inventories.

KCP will assume control of its men's collection sportswear business and plans to commence shipments beginning with the Spring 2008 season. The collection will be marketed under the Kenneth Cole New York brand and will incorporate a wider range of price points than previously available under that label. This effort is expected to require approximately $7 million of normal operating costs, which are incremental in fiscal 2007, during which the company expects to record few, if any, revenues associated with the business.

Chairman and Chief Executive Officer Kenneth Cole said, “We are enthusiastic about men's collection sportswear. This is a unique opportunity to take control of an existing, developed, yet under-penetrated business with significant growth opportunities. It is also an opportunity to further enhance and evolve a classification of product paramount to the overall stature of each of our brands.”

Mr. Cole continued, “We are confident that our new collection will excite both retailers and consumers. The launch will coincide with our company's 25th Anniversary, which will be promoted with the largest marketing campaign in our company's history. At the same time, we are pleased by the ongoing performance and acceptance of the Reaction brand. We are confident that Reaction, which continues to represent the largest portion of our business at retail, will benefit from this initiative.”

KCP also issued financial guidance for the second fiscal quarter, announcing that it expects to report net revenues of approximately $120 million and earnings per fully diluted share in the range of 14 cents to 16 cents for the period. The company said its board of directors had authorized its quarterly dividend of 18 cents per share. The dividend is payable on June 14, 2007 to shareholders of record as of May 24, 2007.