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Hey, Kenneth Cole: Congrats on Your Macy's Deal. Now Keep Up Your Bottom Line

Oh Kenneth Cole (KCP), how I love your edgy ads, social justice campaigns, and sexy (but comfortable!) shoes. But things are changing. Your signature menswear, once so sophisticated and urban, is now more apropos of the club scene than a corporate setting. And though your ladies handbags are lovely, unfortunately you've priced them out of my reach.

I want you to know I'm not giving up on you yet. Oh sure, your revenues fell 16.6 percent last year. But I'm keeping an eye on your (ahem) bottom line and I'm encouraged by your new deal with Macy's (M).

It's admirable that you've managed to weather the downturn and keep your balance sheet as strong as it is. You've brought inventory down 33 percent compared to the end of the fourth quarter last year. And while others are cash poor, your cash went up $68.5 million versus $64.7 million at the end of last year. Best of all you continue to operate with no long-term debt.

You say your best opportunities are in front of you. It was certainly smart to hook your wagon to Macy's engine. After all, the department store chain's sales are improving and investors are as optimistic about it as they are about that perennial winner Target (TGT).

I was also pleased to see you mining the twenty- to thirty-something demographic for this exclusive REACTION Men's Sportswear collection (launching in time for holiday 2010 in 150 Macy's stores â€"- also savvy). Department store distribution for menswear makes sense -â€" especially with young guys who want to one-stop shop for clothes, shoes, cologne and unmentionables.

The only thing to keep in mind going forward is the cost-conscious consumer. Though plenty of celebs trot the red carpet in your threads, remember you bill your company's goods as "affordable luxury," and REACTION is your mid-priced brand. Well, the definition of affordable has changed in this economy. And your competitors at Structure/Express would only be too happy to sell young men their version of fitted button downs and graphic tees at lower prices.

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