Forward-Looking Statements Disclosure

The statements contained in this report which are not historical facts, including, without limitation, statements that relate to future performance and/or statements regarding the Company's anticipated results or level of business for 2009 or any other future period, may be deemed to constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are based on current expectations only, and actual future results might differ materially from those projected in such statements due to a number of risks and uncertainties, including, but not limited to, demand and competition for the Company's products, the ability to enter into new licensee agreements, to maintain and renew existing licensing agreements, and to open new stores, changes in consumer preferences or fashion trends, events causing disruption in product shipment, change in import regulations, dependence on certain large customers, changes in the Company's relationships with vendors and other resources, the launching or prospective development of new business initiatives, future licensee sales growth, gross margins, store expansion, renovation and openings, changes in distribution centers, and the implementation of management information systems.
The forward-looking statements contained herein are also subject to other risks and uncertainties that are described in the Company's reports and registration statements filed with the Securities and Exchange Commission. The Company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future results or otherwise.

Update on Critical Accounting Policies and Estimates

The Company's consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States, which require the Company to make estimates in the application of its accounting policies based on the best assumptions, judgments and opinions of management. For a summary of the Company's significant accounting policies, see the Company's Consolidated Financial Statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2008.

Overview

Kenneth Cole Productions, Inc. designs, sources and markets a broad range of fashion footwear, handbags and apparel and, through license agreements, designs and markets apparel and accessories under its Kenneth Cole New York, Kenneth Cole Reaction, Unlisted and Gentle Souls brand names. The Company also designs, develops, markets and sources sportswear, footwear, handbags and other accessories under the Le Tigre brand name. In addition, the Company designs, develops and sources private label footwear and handbags for selected retailers.
The Company's products are targeted to appeal to fashion conscious consumers, reflecting a modern metropolitan perspective and a lifestyle uniquely associated with Kenneth Cole. These products include core basics that generally remain in demand from season to season and fashion products that are designed to establish or capitalize on market trends. The combination of core products and fashion styles provides freshness in assortments and maintains a fashion-forward image, while a multiple brand strategy helps diversify business risk.

The Company markets its products to approximately 5,700 department, specialty and off-price store locations, as well as through its Consumer Direct business, which includes full-priced retail stores, Company Stores ("outlets") and e-commerce. The Company believes the diversity of its product offerings distinguishes the Company from its competitors in terms of product classifications (men's, women's and children's footwear, handbags, apparel and accessories), prices ("bridge", "better" and "moderate") and styling. The Company believes the diversity of its product mix provides balance to its overall sales and increases opportunities in all channels of distribution.

The popularity of the Kenneth Cole brand names, including Kenneth Cole New York, Kenneth Cole Reaction and Unlisted, among consumers has enabled the Company to expand its product offerings and channels of distribution

through licensing agreements. The Company offers, through these agreements, a lifestyle collection of men's product categories, including tailored clothing, dress shirts, dress pants, neckwear, outerwear, sleepwear, underwear, socks, belts, sunglasses, prescription eyewear, watches, fragrance, jewelry, luggage, business cases and small leather goods. Women's product categories currently being sold pursuant to license agreements include sportswear, outerwear, swimwear, sleepwear, small leather goods, belts, sunglasses, prescription eyewear, watches, jewelry, fragrance and luggage. In addition, the Company licenses its children's apparel.

The Company's opportunities for long-term growth are accompanied by challenges and risks, particularly in the current recessionary environment. The Company's results are dependent on consumer demand for its products and may be influenced by economic factors not within the Company's control, including general economic and business conditions, interest rate fluctuations, consumer credit availability, energy costs, geopolitical stability, customer traffic, tax law, stock market activity and other consumer impacting conditions. Over the past several months, these economic factors have resulted in an environment of unprecedented volatility and disruption in both capital and consumer markets.
National unemployment and wealth and income declines, among other factors, have reduced consumer confidence to levels that have not been seen in decades. In the aggregate, customer spending on fashion and fashion-related products has reduced dramatically in the economic environment. The Company cannot predict the duration of the current economic downturn but believes it will continue at least through the end of 2009. The macroeconomic environment and related factors could have a material adverse effect on the Company's results of operations and financial condition.

The Company recorded net revenues of $103.4 million for the three months ended March 31, 2009. Diluted loss per share was $(0.46), including $(0.05) related to impairment of investments, severance charges and other items for the three months ended March 31, 2009 compared to diluted earnings per share of $0.04 for the three months ended March 31, 2008. As of March 31, 2009, the Company had $46.3 million in cash and cash equivalents and no long-term debt.

Results of Operations


The following table sets forth the Company's Condensed Consolidated Statements
of Operations in thousands of dollars and as a percentage of net revenues for
the three months ended March 31, 2009 and March 31, 2008.



                                                 Three Months Ended March 31,
                                                     2009             2008
    Net sales                                   $  94,374  91.3% $112,615 91.9%
    Royalty revenue                                 9,001    8.7    9,882   8.1
    Net revenues                                  103,375  100.0  122,497 100.0
    Gross profit (1)                               35,072   33.9   50,227  41.0
    Selling, general & administrative expenses     47,673   46.1   49,115  40.1
    Operating (loss)/income                      (12,601) (12.2)    1,112   0.9
    Interest income, net                              206    0.2      888   0.7
    Impairment of Investments                       (399)  (0.4)    (594) (0.5)
    (Loss)/Income before income taxes            (12,794) (12.4)    1,406   1.1
    Income tax (benefit)/expense                  (4,626)  (4.5)      599   0.4
    Net (loss)/income                          $  (8,168) (7.9)% $    807  0.7%


_______________________

Gross profit may not be comparable to other entities, since some entities include the costs related to their distribution network (receiving and warehousing) in cost of goods sold and other entities, similar to the Company, exclude these costs from gross profit, including them instead in a line item such as selling, general and administrative expenses.

Three Months Ended March 31, 2009 Compared to Three Months Ended March 31, 2008

REVENUES: Net revenues decreased $19.1 million, or 15.6%, to $103.4 million for the three months ended March 31, 2009 from $122.5 million for the three months ended March 31, 2008. The decrease in revenues occurred in each of the Company's business segments as further described below in the sections entitled "NET SALES" and "LICENSING REVENUE".

NET SALES: Wholesale net sales (excluding sales to the Company's Consumer Direct business segment) decreased $12.4 million, or 16.8%, to $61.7 million for the three months ended March 31, 2009 from $74.1 million for the three months ended March 31, 2008. The decrease was primarily attributable to a decline in sales across most of the Company's branded footwear and handbag businesses as well as exiting its Tribeca business and terminating its Bongo business. The challenging retail environment and continued stress in the macro-economic marketplace, particularly the department store channel, resulted in declines in most of the Company's Wholesale businesses.

Net sales in the Company's Consumer Direct segment decreased $5.8 million, or 15.1%, to $32.7 million for the three months ended March 31, 2009 from $38.5 million for the three months ended March 31, 2008. Comparable store sales decreased 20.4%, or $6.9 million, while sales related to new stores opened in 2009, and that portion of 2009 sales for stores not open for all of 2008, increased by $1.5 million for the three months ended March 31, 2009 compared to the three months ended March 31, 2008. Comparable stores are defined as new stores that are open for longer than thirteen months. A store that stops operations is included in the comparable sales calculation through the date of closing. The Company opened one Company Store ("outlet") and closed two full-priced retail stores during the three months ended March 31, 2009. The Company continues to refine its assortments, inventory levels, in-store-merchandising and the customer experience.

LICENSING REVENUE: Royalty revenue decreased $0.9 million, or 8.9%, to $9.0 million for the three months ended March 31, 2009 from $9.9 million for the three months ended March 31, 2008. The decrease in licensing revenues was primarily attributable to a reduction in contract initiation fees and a decrease in certain international licensee sales.

GROSS PROFIT: Consolidated gross profit, as a percentage of net revenues, decreased to 33.9% for the three months ended March 31, 2009 from 41.0% for the three months ended March 31, 2008. The decrease, as a percentage of net revenues, was primarily the result of a decrease in the Wholesale and Consumer Direct segment margins, partially offset by the revenue mix shifting to Consumer Direct and Licensing as a percentage of total revenues. The Consumer Direct segment, which operates at a higher gross profit level than the Wholesale segment, had increased revenues as a percentage of net revenues to 31.7% for the three months ended March 31, 2009 compared to 31.4% for the three months ended March 31, 2008, while the Wholesale segment revenues, as a percentage of net revenues, decreased to 59.6% for the three months ended March 31, 2009 from 60.5% for the three months ended March 31, 2008. The revenues in the Licensing segment, which carries minimal cost of goods sold, increased, as a percentage of revenues, to 8.7% for the three months ended March 31, 2009 compared to 8.1% for the three months ended March 31, 2008. The decrease in the Wholesale segment margins was due to soft sell-thrus and higher dilution from a very promotional department store and challenging retail environment. Consumer Direct segment margins decreased primarily from higher markdowns in a difficult retail environment, as the Company continued its promotional efforts to balance its inventories to current demand patterns.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES: Selling, general and administrative ("SG&A") expenses, including warehousing and receiving expenses, decreased $1.4 million to $47.7 million for the three months ended March 31, 2009 from $49.1 million for the three months ended March 31, 2008. The decrease in SG&A expenses was primarily attributable to a $4.0 million reduction in payroll and various cuts in discretionary spending offset by costs associated with new stores and other expenses associated with the Company's strategic initiatives. Total SG&A expenses, as a percentage of revenues, were 46.1% and 40.1% for the three months ended March 31, 2009 and 2008, respectively. The increase was due to loss of leverage on the decrease in Wholesale and Consumer Direct sales and the greater portion of revenues from the Consumer Direct segment which carries a higher SG&A expense level than the

Wholesale and Licensing segments due primarily to store occupancy and payroll costs. The Company's recent cost reduction activities are expected to result in decreased SG&A expenses in the upcoming quarter compared to last year.

INTEREST INCOME, NET: Interest income, net decreased $0.7 million to approximately $0.2 million for the three months ended March 31, 2009 as compared to $0.9 million for the three months ended March 31, 2008. The decrease is primarily due to the Company's lower average cash balances and lower interest rates.

IMPAIRMENT OF INVESTMENTS: The Company recorded an other-than-temporary impairment of auction-rate securities of $0.4 million during the three months ended March 31, 2009 as compared to $0.6 million during the three months ended March 31, 2008.

INCOME TAXES: The Company's effective tax rate decreased to 36.2% benefit for the three months ended March 31, 2009 from 42.6% expense for the three months ended March 31, 2008. The decrease in the Company's effective tax rate is a result of the tax benefit from the Company's net loss offset by a valuation allowance reserved against tax assets for certain other-than-temporary investment impairments and the impact of interest and penalties on tax reserves for uncertain positions.

NET (LOSS)/INCOME: As a result of the foregoing, net (loss)/income decreased by $9.0 million to $(8.2) million, or (7.9%) of net revenues, for the three months ended March 31, 2009 as compared to net income of $0.8 million. or 0.7% of net revenues, for the three months ended March 31, 2008.

New Accounting Pronouncements

In April 2009, the FASB issued Staff Position FAS 115-2 and FAS 124-2, "Recognition and Presentation of Other-Than-Temporary Impairments"("FSP 115-2").
FSP 115-2 is intended to bring greater consistency to the timing of impairment recognition, and provide greater clarity to investors about the credit and noncredit components of impaired debt securities that are not expected to be sold. The measure of impairment in comprehensive income remains fair value. The FSP also requires increased and more timely disclosures sought by investors regarding expected cash flows, credit losses, and an aging of securities with unrealized losses. FSP 115-2 is effective for interim and annual periods ending after June 15, 2009, but entities may early adopt for interim and annual periods ending after March 15, 2009. The Company expects that FSP 115-2 will not have a material impact on the Company's consolidated financial statements.

In May 2008, the FASB issued SFAS No. 162, "Hierarchy of Generally Accepted Accounting Principles" ("SFAS 162"). This statement is intended to improve financial reporting by identifying a consistent framework, or hierarchy, for selecting accounting principles to be used in preparing financial statements of nongovernmental entities that are presented in conformity with GAAP. This statement will be effective sixty days following the U.S. Securities and Exchange Commission's approval of the Public Company Accounting Oversight Board amendment to AU Section 411, "The Meaning of Present Fairly in Conformity with Generally Accepted Accounting Principles." The Company expects that SFAS 162 will not have a material impact on the Company's consolidated financial statements.

Related Party Transactions

The Company has an exclusive license agreement with Iconix Brand Group, Inc. and its trademark holding company, IP Holdings, LLC ("Iconix"), to use the Bongo trademark in connection with the manufacture, sale and distribution of women's, men's and children's footwear in certain territories. The Chairman and Chief Executive Officer of Iconix is the brother of the Company's Chairman and Chief Creative Officer. The term of the agreement is through December 31, 2010.
Management believes that the license agreement with Iconix was entered into at arm's-length. During this period, the Company is obligated to pay Iconix a percentage of net sales based upon the terms of the agreement. The Company recorded approximately $220,000 and $289,000 in aggregate royalty and advertising expense

under the agreement for the three months ended March 31, 2009 and 2008, respectively. In April 2009, the Company terminated the agreement effective December 31, 2009.

The Company recorded expenses of approximately $43,000 and $175,000 for the three months ended March 31, 2009 and 2008, respectively, to a third-party aviation company which hires and uses an aircraft partially owned by Emack LLC, a company which is wholly owned by the Company's Chairman and Chief Creative Officer. Management believes that all transactions were made on terms and conditions similar to or more favorable than those available in the marketplace from unrelated parties.

Liquidity and Capital Resources

As of March 31, 2009, the Company had $46.3 million in cash and cash equivalents, which consist primarily of government money market funds. The Company uses cash from operations as the primary source of financing for its capital expenditures and seasonal requirements. Cash requirements vary from time to time as a result of the timing of the receipt of merchandise from suppliers, the delivery by the Company of merchandise to its wholesale customers and the level of inventory, accounts receivable and due from factors' balances.
At March 31, 2009 and December 31, 2008, working capital was $86.6 million and $97.5 million, respectively.

Cash used in operating activities was $15.5 million for the three months ended March 31, 2009, compared to $9.0 million for the three months ended March 31, 2008. The decrease in cash flows provided by operations is primarily attributable to a decrease in net income and the timings of receivables and payables.

Net cash used in investing activities totaled $2.9 million for the three months ended March 31, 2009 compared to $1.6 million for the three months ended March 31, 2008. The increase was primarily attributable to a $1.3 million increase in capital expenditures during the three months ended March 31, 2009 compared to March 31, 2008. Included in capital expenditures for the three months ended March 31, 2009 and 2008 were approximately $2.0 million and $0.7 million, respectively, for amounts associated with furniture, fixtures and leasehold improvements for existing and new stores.

Net cash provided by financing activities was $0.1 million for the three months ended March 31, 2009 compared to $8.4 million used in financing activities for the three months ended March 31, 2008. The increase was primarily attributable to no repurchases of treasury shares during the three months ended March 31, 2009 as compared to $6.8 million used to repurchase 413,400 treasury shares during the three months ended March 31, 2008. The Company also did not pay a quarterly dividend during the three months ended March 31, 2009 compared to a $1.7 million quarterly dividend paid during the three months ended March 31, 2008.

The Company has a revolving credit facility ("the Facility") with various lenders, which provides up to $100.0 million to finance working capital requirements and letters of credit to finance the Company's inventory purchases based on a maximum leverage ratio of 2.25 to 1.0 of consolidated debt to consolidated earning before interest, non-cash compensation, income taxes and depreciation as defined in the Facility. During the three months ended March 31, 2009, the Company did not borrow under the Facility. Amounts available under the Facility were reduced by $4.1 million of standby and open letters of credit. The Company did not borrow under the Facility during the three months ended March 31, 2009 and 2008 and currently has no availability under this credit line at March 31, 2009.

The Company believes that it will be able to satisfy its current expected cash requirements for 2009 with cash flow from operations and cash on hand. The Company did not have any off-balance sheet arrangements as of March 31, 2009.

The foregoing commentary should be considered to fall within the coverage of the "Safe Harbor Statement" under the Private Securities Litigation reform Act of 1995 included in this report.