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. There have been no changes to the Company's significant accounting policies from the policies previously disclosed in the Company's Consolidated Financial Statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2008 except as follows:

Income Taxes

Income taxes are accounted for in accordance with SFAS No. 109, "Accounting for Income Taxes" ("SFAS 109"). Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.
SFAS 109 requires that deferred taxes be evaluated for future realization and reduced by a valuation allowance to the extent that management believes a portion will not be realized. The Company's assessment of deferred tax assets is performed quarterly and many factors are considered when assessing the likelihood of future realization of deferred tax assets, including the recent earnings experience and expectations of future taxable income by taxing jurisdiction, the carryforward periods available for tax reporting purposes, tax planning strategies and other relevant factors. The actual realization of deferred tax assets may differ significantly from the amounts the Company has recorded.

The Company's income taxes are routinely under audit by federal, state or local authorities. These audits include questioning of the timing and amount of deductions and the allocation of income among various tax jurisdictions. Based on its quarterly evaluations of tax positions, the Company believes it has appropriately accrued for probable exposures. To the extent the Company is required to pay amounts in excess of recorded income tax liabilities, the Company's effective tax rate in a given financial statement period could be materially impacted. The Company adopted Financial Accounting Standards Board Interpretation No. 48 "Accounting for Uncertainty in Income Taxes" ("FIN 48") on January 1, 2007 which requires financial statement recognition and measurement of a tax position taken or expected to be taken in a return.

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 and specialty 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 year, 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. 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 $93.9 million for the three months ended June 30, 2009. Diluted loss per share was $(0.18) for the three months ended June 30, 2009 compared to $(0.11) for the three months ended June 30, 2008. As of June 30, 2009, the Company had $57.9 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 and six months ended June 30, 2009 and June 30, 2008.


                             Three Months Ended June 30,        Six Months Ended June 30,
                                2009            2008               2009            2008
Net sales                   $84,748  90.3% $100,893  90.8%    $179,122  90.8% $213,508  91.4%
Royalty revenue               9,152    9.7   10,258    9.2      18,153    9.2   20,140    8.6
Net revenues                 93,900  100.0  111,151  100.0     197,275  100.0  233,648  100.0
Gross profit (1)             39,813   42.4   46,044   41.4      74,885   38.0   96,271   41.2
Selling, general and
administrative expenses      44,965   47.9   49,102   44.2      92,638   47.0   98,217   42.0
Operating loss              (5,152)  (5.5)  (3,058)  (2.7)    (17,753)  (9.0)  (1,946)  (0.8)
Interest income, net            114    0.1      354    0.3         320    0.1    1,242    0.5
Impairment of Investments      (41)    0.0    (238)  (0.2)       (440)  (0.2)    (832)  (0.3)
Loss before income taxes    (5,079)  (5.4)  (2,942)  (2.6)    (17,873)  (9.1)  (1,536)  (0.6)
Income tax benefit          (1,813)  (1.9)    (890)  (0.8)     (6,439)  (3.3)    (291)  (0.1)
Net loss                   $(3,266) (3.5)% $(2,052) (1.8)%   $(11,434) (5.8)% $(1,245) (0.5)%


_______________________

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 June 30, 2009 Compared to Three Months Ended June 30, 2008

REVENUES: Net revenues decreased $17.3 million, or 15.5%, to $93.9 million for the three months ended June 30, 2009 from $111.2 million for the three months ended June 30, 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 "ROYALTY REVENUE".

NET SALES: Wholesale net sales (excluding sales to the Company's Consumer Direct business segment) decreased $11.8 million, or 20.3%, to $46.1 million for the three months ended June 30, 2009 from $57.9 million for the three months ended June 30, 2008. The decrease was attributable to a decline in sales across primarily all of the Company's wholesale businesses as a result of factors including retailer destocking, a challenging retail environment and continued stress in the macro-economic marketplace. In addition, the decline included the exiting of the Company's Tribeca business and terminating its Bongo business.

Net sales in the Company's Consumer Direct segment decreased $4.4 million, or 10.2%, to $38.6 million for the three months ended June 30, 2009 from $43.0 million for the three months ended June 30, 2008. Comparable store sales decreased 14.7%, or $5.4 million. 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 seven Company Stores ("outlets") and closed one full-priced retail store during the three months ended June 30, 2009.

ROYALTY REVENUE: Royalty revenue decreased $1.1 million, or 10.8%, to $9.2 million for the three months ended June 30, 2009 from $10.3 million for the three months ended June 30, 2008. The decrease in royalty 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, increased to 42.4% for the three months ended June 30, 2009 from 41.4% for the three months ended June 30, 2008. The increase, as a percentage of net revenues, was primarily the result of an increase in the Wholesale segment margins, coupled with a 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, increased revenues as a percentage of net revenues to 41.1% for the three months ended June 30, 2009 compared to 38.7% for the three months ended June 30, 2008, while the Wholesale segment revenues, as a percentage of net revenues, decreased to 49.2% for the three months ended June 30, 2009 from 52.1% for the three months ended June 30, 2008. The revenues in the Licensing segment, which carries less cost of goods sold, increased as a percentage of revenues, to 9.7% for the three months ended June 30, 2009 compared to 9.2% for the three months ended June 30, 2008.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES: Selling, general and administrative ("SG&A") expenses, including warehousing and receiving expenses, decreased $4.1 million to $45.0 million for the three months ended June 30, 2009 from $49.1 million for the three months ended June 30, 2008. The decrease in SG&A expenses was primarily attributable to a 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 47.9% and 44.2% for the three months ended June 30, 2009 and 2008, respectively. The increase was due to loss of leverage on the decline in sales in Wholesale and Consumer Direct segments 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.

INTEREST INCOME, NET: Interest income, net decreased $0.2 million to approximately $0.1 million for the three months ended June 30, 2009 as compared to $0.3 million for the three months ended June 30, 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 approximately $0.1 million during the three months ended June 30, 2009 as compared to $0.2 million during the three months ended June 30, 2008.

INCOME TAXES: The Company's effective tax rate increased to a 35.7% benefit for the three months ended June 30, 2009 from a benefit of 30.3% for the three months ended June 30, 2008. The increase in the tax benefit is primarily a result of an increase in the Company's net loss primarily offset by the impact of interest and penalties on tax reserves for uncertain positions. The Company currently has $44.9 million of net deferred tax assets as of June 30, 2009 inclusive of $12.3 million of net operating loss carryforwards that expire between 2028 and 2029 and valuation allowances of $3.0 million for unrealized tax losses on available for sale securities.

NET LOSS: As a result of the foregoing, net loss increased by $1.2 million to $(3.3) million, or (3.5%) of net revenues, for the three months ended June 30, 2009 as compared to $(2.1) million or (1.8)% of net revenues, for the three months ended June 30, 2008.

Six Months Ended June 30, 2009 Compared to Six Months Ended June 30, 2008

REVENUES: Net revenues decreased $36.3 million, or 15.6%, to $197.3 million for the six months ended June 30, 2009 from $233.6 million for the six months ended June 30, 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 "ROYALTY REVENUE".

NET SALES: Wholesale net sales (excluding sales to the Company's Consumer Direct business segment) decreased $24.2 million, or 18.3%, to $107.8 million for the six months ended June 30, 2009 from $132.0 million for the six months ended June 30, 2008. The decrease was attributable to a decline in sales across primarily all of the Company's wholesale businesses as a result of factors including retailer destocking, a challenging retail environment and continued stress in the macro-economic marketplace. In addition, the decline included the exiting of the Company's Tribeca business and terminating its Bongo business.

Net sales in the Company's Consumer Direct segment decreased $10.2 million, or 12.5%, to $71.3 million for the six months ended June 30, 2009 from $81.5 million for the six months ended June 30, 2008. Comparable store sales decreased 17.4%, or $12.3 million. 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 eight Company Stores ("outlets") and closed three full-priced retail stores during the six months ended June 30, 2009 as compared to opening six Company Stores ("outlets") and opening two full-priced retail stores and closing two during the six months ended June 30, 2008.

ROYALTY REVENUE: Royalty revenue decreased $1.9 million, or 9.9%, to $18.2 million for the six months ended June 30, 2009 from $20.1 million for the six months ended June 30, 2008. The decrease in royalty 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 38.0% for the six months ended June 30, 2009 from 41.2% for the six months ended June 30, 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, increased revenues as a percentage of net revenues to 36.1% for the six months ended June 30, 2009 compared to 34.9% for the six months ended June 30, 2008, while the Wholesale segment revenues, as a percentage of net revenues, decreased to 54.7% for the six months ended June 30, 2009 from 56.5% for the six months ended June 30, 2008. The revenues in the Licensing segment, which carries less cost of goods sold, increased as a percentage of revenues, to 9.2% for the six months ended June 30, 2009 compared to 8.6% for the six months ended June 30, 2008.
The decrease in the Wholesale and Consumer Direct segment margins for the six months ended June 30, 2009 compared to the six months ended June 30, 2008 was primarily due to a promotional and challenging retail environment and the macro-economic marketplace.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES: SG&A expenses, including warehousing and receiving expenses, decreased $5.6 million to $92.6 million for the six months ended June 30, 2009 from $98.2 million for the six months ended June 30, 2008. The decrease in SG&A expenses was primarily attributable to a 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 47.0% and 42.0% for the six months ended June 30, 2009 and 2008, respectively.
The increase was due to loss of leverage on the decline in sales in the Wholesale and Consumer Direct segments 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.

INTEREST INCOME, NET: Interest income, net decreased $0.9 million to $0.3 million for the six months ended June 30, 2009 as compared to $1.2 million for the six months ended June 30, 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 six months ended June 30, 2009 as compared to $0.8 million during the six months ended June 30, 2008.

INCOME TAXES: The Company's effective tax rate increased to a 36.0% benefit for the six months ended June 30, 2009 from a benefit of 18.9% for the six months ended June 30, 2008. The increase in the Company's tax rate is a result of the tax benefit from the Company's net loss offset by the impact of interest and penalties on income tax reserves for uncertain positions. The Company currently has $44.9 million of net deferred tax assets as of June 30, 2009 inclusive of $12.3 million of net operating loss carryforwards that expire between 2028 and 2029 and valuation allowances of $3.0 million for unrealized tax losses on available for sale securities.

NET LOSS: As a result of the foregoing, the Company recorded a net loss of $(11.4) million for the six months ended June 30, 2009 ((5.8%) of net revenues) compared to $(1.2) million ((0.5%) of net revenues) for the six months ended June 30, 2008.

New Accounting Pronouncements

In June 2009, the FASB issued SFAS No. 168 "The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles - a replacement of FASB Statement No. 162" ("SFAS 168"). The FASB Accounting Standards CodificationTM("Codification") will become the source of authoritative U.S. generally accepted accounting principles ("GAAP") recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the Securities and Exchange Commission ("SEC") under authority of federal securities laws are also sources of authoritative GAAP for SEC registrants. The Codification will supersede all then-existing non-SEC accounting and reporting standards. All other nongrandfathered non-SEC accounting literature not included in the Codification will become nonauthoritative. SFAS 168 is effective for financial statements issued for interim and annual periods ending after September 15, 2009. The Company expects that SFAS 168 will not have a material impact on the Company's consolidated financial statements.

In May 2009, the FASB issued SFAS No. 165 "Subsequent Events" ("SFAS 165").
SFAS 165 is intended to establish general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. SFAS 165 sets forth the period after the balance sheet date during which management of a reporting entity should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements, the circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its financial statements, and the disclosures that an entity should make about events or transactions that occurred after the balance sheet date. SFAS 165 is effective for interim and annual periods ending after June 15, 2009. The Company adopted SFAS 165 on June 15, 2009 and determined that is did not have a material impact on the Company's consolidated financial statements.

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.
FSP 115-2 also requires increased and timelier 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 adopted FSP 115-2 during the quarter ended June 30, 2009 and recorded a balance sheet reclassification between Retained Earnings and Accumulated Other Comprehensive Loss of $2.3 million related to previous writedowns of auction-rate securities in the Statements of Operations that would not have been recorded if FSP 115-2 was in effect in prior periods. This amount relates to the non-credit component of the $4.0 million impairment. The remaining $1.7 million of the impairment reflects credit losses and was recorded in the Statements of Operations.

In April 2009, the FASB issued Staff Position FAS 157-4, "Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly" ("FSP 157-4"). FSP 157-4 provides guidance on estimating fair value when market activity has decreased and on identifying transactions that are not orderly. Additionally, entities are required to disclose in interim and annual periods the inputs and valuation techniques used to measure fair value. FSP 157-4 is effective for interim and annual periods ending after June 15, 2009. The implementation of FSP 157-4 did not have a material impact on the Company's consolidated financial statements.

In April 2009, the FASB issued the Staff Position FAS 107-1 and APB 28-1, "Interim Disclosures About Fair Value of Financial Instruments" ("FSP 107-1").
FSP 107-1 requires disclosures about fair value of financial instruments in interim reporting periods of publicly-traded companies that were previously only required to be disclosed in annual

financial statements. FSP 107-1 is effective for interim reporting periods ending after June 15, 2009. The implementation of FSP 107-1 did 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 was through December 31, 2010. In April 2009, the Company terminated the agreement effective December 31, 2009 which eliminates any future obligation for 2010. Management believes that the license agreement with Iconix was entered into at arm's length. The Company is obligated to pay Iconix a percentage of net sales based upon the terms of the agreement. The Company recorded approximately $37,000 and $257,000 in aggregate royalty and advertising expense under the agreement for the three and six months ended June 30, 2009, respectively. The Company recorded approximately $284,000 and $573,000 in aggregate royalty and advertising expense under the agreement for the three and six months ended June 30, 2008, respectively.

The Company recorded expenses of approximately $163,000 and $206,000 for the three and six months ended June 30, 2009, 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. During the three and six months ended June 30, 2008, the Company recorded expenses of approximately $91,000 and $266,000, respectively, for hire and use of aircraft partially owned by Emack LLC. 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 June 30, 2009, the Company had $57.9 million in cash and cash equivalents, . . .