Kellwood (NYSE: KWD) Reports Second Quarter Results

Kellwood (NYSE: KWD) Reports Second Quarter Results
Sales Up 10 Percent - Net Earnings Up 30 Percent



ST. LOUIS, Aug. 26  /PRNewswire-FirstCall/ -- Kellwood Company reported
operating results for the second quarter ended July 31, 2004, according to Hal
J. Upbin, chairman and chief executive officer.

(Logo: http://www.newscom.com/cgi-bin/prnh/20011220/CGTH038LOGO )

Sales for the second quarter increased $51 million, or 10 percent to $560
million, versus $509 million last year due to a combination of organic growth
of $34 million, or 7 percent, and the acquisition of Phat Fashions and Phat
Farm which provided $17 million of revenue.  Phat Fashions and Phat Farm were
acquired on February 3, 2004, and are being reported within the Men's
Sportswear segment.

The organic growth was driven by the new marketing initiatives put in place
during the last nine months of fiscal year 2003 including Calvin Klein(R),
IZOD(R), XOXO(R) and Lucy Pereda(TM) women's sportswear, Liz Claiborne(R)
Dresses and Suits, and Def Jam University(TM) urban sportswear which
collectively provided $43 million of growth in the second quarter. This growth
was partially offset by the planned elimination of certain low margin programs,
which reduced sales by $15 million.  Sales growth of the remaining businesses
in the second quarter was $6 million, or 1 percent.

The year-to-year organic sales growth for the quarter came from the Women's
Sportswear segment, up 10 percent, and the Men's Sportswear segment, up 13
percent.  These increases were partially offset by an 8 percent drop in sales
of Other Soft Goods.

Net earnings in the second quarter from continuing operations were strong,
increasing $2.3 million, or 30 percent, to $10.2 million, or $0.36 per diluted
share, versus $7.9 million, or $0.29 per share last year.  The increase in
earnings was driven by increased sales, a 1.5 percentage point increase in
gross profit as a percent of sales partially offset by higher SG&A spending
attendant with the new marketing initiatives and SG&A expense from the
acquisition of Phat Fashions and Phat Farm.  This is the ninth consecutive
quarter in which Kellwood has reported a significant year-to-year improvement
in gross profit as a percent of sales reflecting the continued underlying
strength of operations, improved sourcing, quality of inventory and improving
mix of business.

Kellwood ended the quarter with an exceptionally strong balance sheet with
ample liquidity to fund acquisitions to enhance its diversification and
capability to service the needs of the Company's customers.

Total inventory at the end of the second quarter including inventory from the
acquisition increased by only $4 million versus prior year and represented 57
days supply, versus 62 days at the end of the second quarter last year.

Sales for the first six months grew by $66 million, or 6 percent to $1.247
billion, versus $1.181 billion last year.  The increase came from organic
growth of $39 million, or 3 percent and $27 million from the acquisition of
Phat Fashions and Phat Farm made earlier this year.  The increase in organic
sales for the first half came from an 8 percent increase in Women's Sportswear
and a 7 percent increase in Men's Sportswear, partially offset by a 13 percent
drop in sales of Other Soft Goods.

Net earnings from continuing operations for the first six months increased $6.3
million, or 22 percent, to $35.3 million, or $1.26 per share on a diluted
basis, versus $29.0 million, or $1.08 per share last year.  The strong growth
in net earnings for the first half was driven by higher sales and by a 1.9
percentage point year-to-year improvement in gross profit. Kellwood's
investment in launching several new brands and the acquisition of Phat Fashions
and Phat Farm has resulted in higher SG&A spending.  These initiatives are
expected to generate an accelerating rate of growth in sales and operating
earnings during the second half of the year.

"As Kellwood looks ahead to the third quarter and total year, we remain
optimistic that the economy, the rate of job creation, and consumer confidence
and spending on apparel will continue to improve albeit at a slower pace than
experienced earlier this year.  We see this same sense of guarded optimism
expressed by our customers as they book orders for Fall and Holiday.  Like our
customers, Kellwood would rather focus on gross margin and inventory turnover
than get too far ahead of a cautious consumer with orders and inventory.

"As a result of the recent softening in consumer demand for apparel, as
indicated by Fall orders from customers and some delays in launching certain
new marketing initiatives from the third to the fourth quarter, we expect sales
in the third quarter to increase by 12 to 13 percent and be in the range of
$720-$730 million versus $644 million last year," said Upbin.

Net earnings from continuing operations are forecasted to increase by
approximately 5 percent and be in the range of $32.5 million, or $1.15 per
diluted share, versus $30.9 million, or $1.13 per share reported last year.

The Company expects to be on target with its financial plan for the fiscal year
which calls for sales to increase by 11 percent to approximately $2.6 billion,
versus $2.35 billion last year.  Net earnings from continuing operations for
the year are planned to increase by $16-$18 million, or approximately 24
percent to $89-$91 million, or $3.15-$3.25 per diluted share, versus $72.6
million, or $2.68 per share reported last year.

The Board of Directors declared a regular quarterly dividend of $0.16 per
common share, payable September 20, 2004 to shareholders of record September 7,
2004.

The Company will conduct a conference call on August 27 at 10:00 a.m. EDT.
Interested parties who wish to participate, may do so by dialing 888-396-2384
and entering participant code 89063521.  The call will also be broadcast live
over the Internet at http://www.kellwood.com/ .  Please go to the website at
least fifteen minutes prior to the call to register, download and install any
necessary audio software.  An updated version of Kellwood's analyst
presentation is available at http://www.kellwood.com/ .

Kellwood (NYSE:KWD), a $2.4 billion marketer of apparel and consumer soft
goods. Kellwood specializes in branded as well as private label products, and
markets to all channels of distribution with product specific to a particular
channel. Kellwood brands include Phat Farm(R), Baby Phat(R), Sag Harbor(R),
Koret(R), Jax(R), David Dart(R), Democracy(R), Dorby(TM), My Michelle(R),
Briggs New York(R), Northern Isles(R), David Brooks(R), Kelty(R), and Sierra
Designs(R). Calvin Klein(R), XOXO(R), Liz Claiborne(R) Dresses and Suits,
IZOD(R), Dockers(R), David Meister(TM), Gerber(R), Slates(R) and Bill Burns(R).
are produced under licensing agreements. For more information, visit
http://www.kellwood.com/ .

SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995. This press release contains "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995. The words
"believe," "expect," "will," "estimate," "project," "looks ahead," "forecast,"
"should," "anticipate" and similar expressions may identify forward-looking
statements. These forward-looking statements represent the Company's
expectations concerning future events, are based on various assumptions and are
subject to a number of risks and uncertainties. These risks include, without
limitation: changes in the retail environment; an economic downturn in the
retail market, including deflationary pressures; economic uncertainty due to
the elimination of quotas on Chinese imports; a decline in the demand for the
Company's products; the lack of customer acceptance of the Company's new
designs and/or product lines; the increasingly competitive and consolidating
retail environment; financial or operational difficulties of customers or
suppliers; disruptions to transportation systems used by the Company or its
suppliers; continued satisfactory relationships with licensees and licensors of
trademarks and brands; ability to generate sufficient sales and profitability
related to licenses containing minimum royalty payments; the economic impact of
uncontrollable factors, such as terrorism and war; the effect of economic
conditions and trade, legal social and economic risks (such as import,
licensing and trade restrictions); stable governments and business conditions
in the countries where the Company's products are manufactured; the impact of
acquisition activity and the ability to effectively integrate acquired
operations; and changes in the Company's strategies and expectations. These
risks are more fully described in the Company's periodic filings with the SEC.
Actual results could differ materially from those expressed or implied in
forward-looking statements. The Company disclaims any obligation to publicly
update or revise any of its forward-looking statements.

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

                          Three Months Ended        Six Months Ended
                       7/31/2004     8/2/2003    7/31/2004     8/2/2003
  Net sales by segment:
    Women's Sportswear  $319,555     $290,060     $757,531     $701,986
    Men's Sportswear     139,613      108,204      267,770      225,418
    Other Soft Goods     101,299      110,597      221,269      253,802

    Total net sales      560,467      508,861    1,246,570    1,181,206

  Costs and expenses:
    Cost of products
     sold                436,074      403,493      967,612      939,536
    Selling, general and
     administrative
     expenses             99,326       84,621      206,234      178,700
    Amortization of
     intangible assets     3,465        2,059        6,931        4,877
    Interest expense, net  6,752        5,911       13,039       12,354
    Other (income) and
     expense, net           (694)         655         (873)         831
  Earnings before income
   taxes                  15,544       12,122       53,627       44,908

  Income taxes             5,324        4,272       18,367       15,935

  Net earnings from
   continuing operations  10,220        7,850       35,260       28,973

  Net loss from
   discontinued
   operations, net of
   tax                         -       (1,164)           -       (1,459)

  Net earnings           $10,220       $6,686      $35,260      $27,514

  Weighted average shares
   outstanding:
    Basic                 27,585       26,432       27,336       26,303
    Diluted               28,150       26,970       27,990       26,762

  Earnings (loss) per share:
    Basic:
      Continuing
       operations           $.37         $.30        $1.29        $1.10
      Discontinued
       operations              -         (.05)           -         (.05)
      Net earnings          $.37         $.25        $1.29        $1.05

    Diluted:
      Continuing
       operations           $.36         $.29        $1.26        $1.08
      Discontinued
       operations              -         (.04)           -         (.05)
      Net earnings          $.36         $.25        $1.26        $1.03



  KELLWOOD COMPANY AND SUBSIDIARIES
  CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
  (Amounts in thousands)

                                                             As of
                                                   7/31/2004       8/2/2003
  ASSETS
  Current assets:
    Cash and cash equivalents                       $262,508       $111,201
    Receivables, net                                 341,820        303,781
    Inventories                                      346,761        343,187
    Prepaid taxes and expenses                        69,772         65,397
    Current assets of discontinued operations              -         24,471
      Total current assets                         1,020,861        848,037


  Property, plant and equipment, net                  98,603         96,423
  Intangible assets, net                             223,833        114,821
  Goodwill                                           185,508        163,071
  Other assets                                        34,199         33,587
  Long-term assets of discontinued operations              -          8,065
  Total assets                                    $1,563,004     $1,264,004

  LIABILITIES AND SHAREOWNERS' EQUITY
  Current liabilities:
    Notes payable and current portion of long-term
     debt                                               $252        $26,576
    Accounts payable                                 207,334        174,394
    Accrued expenses                                 112,864         98,532
    Current liabilities of discontinued operations     1,813         15,225
      Total current liabilities                      322,263        314,727

  Long-term debt                                     469,653        276,024
  Deferred income taxes and other                     77,315         69,214
  Long-term liabilities of discontinued operations         -          2,426
  Shareowners' equity                                693,773        601,613
  Total liabilities & shareowners' equity         $1,563,004     $1,264,004



  Kellwood Company and Subsidiaries
  CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
  (Amounts in thousands)

                                                       Six Months Ended
                                                   7/31/2004       8/2/2003
  OPERATING ACTIVITIES
  Net earnings                                       $35,260        $27,514

  Add/(deduct) items not affecting operating
   cash flows:
    Depreciation and amortization                     20,528         18,086
    Deferred income taxes and other                    5,324         17,381

  Changes in working capital components:
    Receivables, net                                 (18,439)        38,343
    Inventories                                      (30,104)        18,521
    Prepaid taxes and expenses                        (3,389)       (24,104)
    Accounts payable and accrued expenses             29,797        (49,963)
  Net cash from operating activities                  38,977         45,778

  INVESTING ACTIVITIES
    Additions to property, plant and equipment       (12,952)       (10,093)
    Acquisitions, net of cash acquired              (143,337)      (134,150)
    Subordinated note receivable                       1,375            688
    Dispositions of fixed assets                         202          1,923

  Net cash from investing activities                (154,712)      (141,632)

  FINANCING ACTIVITIES
    Borrowings of long-term debt, net of financing
     costs                                           195,390              -
    Repayments of long-term debt                      (4,448)        (2,948)
    Dividends paid                                    (8,758)        (8,428)
    Stock transactions under incentive plans          16,904          8,108
  Net cash from financing activities                 199,088         (3,268)

  Net change in cash and cash equivalents             83,353        (99,122)
  Cash and cash equivalents, beginning of period     179,155        210,323

  Cash and cash equivalents, end of period          $262,508       $111,201

  Supplemental cash flow Information:
    Interest paid                                    $12,403        $14,596
    Income taxes paid (refunded), net                 $7,927        $32,364

  Significant non-cash investing and financing
   activities:
    Issuance of stock for acquisitions                    $-        $11,891



  Note Regarding Discontinued Operations
  (Amounts in thousands, except per share data)



On October 30, 2003, the Company finalized an agreement to sell their domestic
and European hosiery (Hosiery) operations for $7,500 plus reimbursement of
$2,800 for costs incurred by the Company in connection with the closure of
certain facilities.  In addition, during the fourth quarter of 2003, the
Company decided to discontinue their True Beauty by Emme(R) (True Beauty)
operations.  This included the termination of the related license agreement
before its expiration.  The operations of True Beauty ceased in the fourth
quarter of 2003.  Accordingly, both the Hosiery and True Beauty businesses have
been accounted for as discontinued operations.  As such, their operating
results and assets and liabilities are segregated in the accompanying condensed
consolidated statement of earnings and condensed consolidated balance sheet. 
Prior to being classified as discontinued, the Hosiery operations were included
in the Men's Sportswear segment, and True Beauty was included in the Women's
Sportswear segment.

For the three and six months ended July 31, 2004, there was no operating
activity for the discontinued operations.  For the three and six months ended
August 2, 2003, the operating results for the discontinued Hosiery and True
Beauty businesses are as follows:

                       Three months ended             Six months ended
                         August 2, 2003                August 2, 2003
                 Hosiery  True Beauty  Total   Hosiery  True Beauty  Total

  Net sales      $16,224     $1,704   $17,928  $29,203     $5,602   $34,805
  Earnings (loss)
   before income
   taxes            (753)    (1,045)   (1,798)  (1,672)      (583)   (2,255)
  Income taxes      (266)      (368)     (634)    (592)      (204)     (796)
  Net earnings
   (loss)          $(487)     $(677)  $(1,164) $(1,080)     $(379)  $(1,459)


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DATASOURCE: Kellwood Company



CONTACT:  Financial, Roger D. Joseph, VP Treasurer & IR, [phone],

or fax, [phone],  , or W. Lee Capps III,

Executive VP Finance & CFO, [phone], or fax, [phone],

 ; Media, Donna Weaver, VP Corp. Comm., [phone], or

fax, [phone],  , all of Kellwood Co.



Web site:  http://www.kellwood.com/ 

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