UNITED
      STATES


SECURITIES
      AND EXCHANGE COMMISSION


Washington,
      D.C.  20549





FORM
      10-Q








(Mark
      One)





X
            QUARTERLY
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                ACT OF
                1934





For
      the
      quarterly period ended November 3, 2007





OR





TRANSITION
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                ACT OF
                1934





For
      the
      transition period from ____________ to ____________








Commission
      File Number 1-7340





KELLWOOD
      COMPANY


(Exact
      name of registrant as specified in its charter)





DELAWARE
            
            36-2472410(State
                or other jurisdiction
            
            (IRS
                Employerof
                incorporation or organization)
            
            Identification
                Number)





600
                KELLWOOD PARKWAY, P.O. BOX 14374, ST. LOUIS, MO
            
            
            
            63178(Address
                of principal executive offices)
            
            
            (Zip
                Code)Registrant's
              telephone number, including area code
            
            
            (314)
              576-3100




Indicate
      by check mark whether the registrant (1) has filed all reports required to
      be
      filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
      the
      preceding 12 months (or for such shorter period that the registrant was required
      to file such reports), and (2) has been subject to such filing requirements
      for
      the past 90
      days.  YES  [X]    NO  [   ]





Indicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer, or a non-accelerated filer.  See definition of
“accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange
      Act.  (Check one):


Large
                Accelerated Filer  [   ]
            Accelerated
                Filer  [X]
            Non-Accelerated
                Filer  [   ]





Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange
      Act).  YES  [   ]    NO
      [X]





Number
      of
      shares of common stock, par value $0.01, outstanding at November 3, 2007:
      25,825,866.






1
 KELLWOOD
        COMPANY





INDEX


Page
      No.


PART
      I. FINANCIAL INFORMATION





Item
                1.
            Financial
                Statements (Unaudited):





Condensed
                Consolidated Balance
                Sheets
            3Condensed
                Consolidated Statements of
                Operations
            4Condensed
                Consolidated Statements of Cash
                Flows
            5Notes
                to Condensed Consolidated Financial
                Statements
            6





Item
                2.
            Management's
                Discussion and Analysis ofFinancial
                Condition and Results of Operations
            21





Item
                3.
            Quantitative
                and Qualitative Disclosures about Market Risk
            38





Item
                4.
            Controls
                and Procedures
            38





PART
      II. OTHER INFORMATION





Item
                2.
            Unregistered
                Sales of Equity Securities and Use of Proceeds
            40Item
                6.
            Exhibits
            41SignaturesCertification
                of Chief Executive Officer, pursuant to Section 302Certification
                of Chief Financial Officer, pursuant to Section 302Certification
                of Chief Executive Officer and Chief Financial Officer,pursuant
                to Section 906











2





**PART
      I.  FINANCIAL INFORMATION**


**Item
      1. Financial Statements**





KELLWOOD
      COMPANY AND SUBSIDIARIES


CONDENSED
      CONSOLIDATED BALANCE SHEETS
      (UNAUDITED)


(Amounts
      in thousands)




February
                3,
            
            
            October
                28,
            
            
            November
                3,2007
            
            
            2006
            
            
            2007ASSETSCurrent
                assets:Cash
                and cash equivalents
            
            $
            341,077
            
            
            $
            394,354
            
            
            $
            130,984Receivables,
                net
            
            
            235,582
            
            
            
            262,394
            
            
            
            216,143Inventories
            
            
            152,578
            
            
            
            133,665
            
            
            
            160,608Current
                deferred taxes and prepaid expenses
            
            
            52,194
            
            
            
            38,997
            
            
            
            56,562Current
                assets of discontinued operations
            
            
            191,131
            
            
            
            185,234
            
            
            
            183,262Total
                current assets
            
            
            972,562
            
            
            
            1,014,644
            
            
            
            747,559Property,
                plant and equipment, net
            
            
            41,990
            
            
            
            41,113
            
            
            
            44,222Intangible
                assets, net
            
            
            202,704
            
            
            
            152,335
            
            
            
            249,478Goodwill
            
            
            228,168
            
            
            
            200,887
            
            
            
            251,035Other
                assets
            
            
            25,227
            
            
            
            17,833
            
            
            
            62,831Long-term
                assets of discontinued operations
            
            
            43,925
            
            
            
            42,927
            
            
            
            39,291Total
                assets
            
            $
            1,514,576
            
            
            $
            1,469,739
            
            
            $
            1,394,416LIABILITIES
                AND STOCKHOLDERS’ EQUITYCurrent
                liabilities:Notes
                payable and current portionof
                long-term debt
            
            $
            -
            
            
            $
            -
            
            
            $
            42Accounts
                payable
            
            
            131,709
            
            
            
            118,757
            
            
            
            94,757Accrued
                salaries and employee benefits
            
            
            25,759
            
            
            
            27,045
            
            
            
            22,729Other
                accrued expenses
            
            
            70,246
            
            
            
            42,843
            
            
            
            47,532Current
                liabilities of discontinued operations
            
            
            102,396
            
            
            
            98,588
            
            
            
            99,016Total
                current liabilities
            
            
            330,110
            
            
            
            287,233
            
            
            
            264,076Long-term
                debt
            
            
            469,961
            
            
            
            469,922
            
            
            
            470,220Deferred
                income taxes and other
            
            
            62,366
            
            
            
            66,891
            
            
            
            78,490Long-term
                liabilities of discontinued operations
            
            
            17,013
            
            
            
            19,444
            
            
            
            19,548Stockholders’
                equity:Common
                stock
            
            
            280,236
            
            
            
            278,176
            
            
            
            282,071Retained
                earnings
            
            
            514,559
            
            
            
            511,717
            
            
            
            442,608Accumulated
                other comprehensive loss
            
            
            (8,259
            )
            
            
            (9,331
            )
            
            
            (9,118
            )Less
                treasury stock, at cost
            
            
            (151,410
            )
            
            
            (154,313
            )
            
            
            (153,479
            )Total
                stockholders’ equity
            
            
            635,126
            
            
            
            626,249
            
            
            
            562,082Total
                liabilities and stockholders’ equity
            
            $
            1,514,576
            
            
            $
            1,469,739
            
            
            $
            1,394,416





See
      accompanying notes to condensed consolidated financial statements.






3


KELLWOOD
      COMPANY AND SUBSIDIARIES


CONDENSED
      CONSOLIDATED STATEMENTS OF OPERATIONS
      (UNAUDITED)


(Amounts
      in thousands, except per share data)




Three
                  months ended
              
              
              Nine
                  months endedOctober
                  28,
              
              
              November
                  3,
              
              
              October
                  28,
              
              
              November
                  3,2006
              
              
              2007
              
              
              2006
              
              
              2007Net
                  sales
              
              $
              397,007
              
              
              $
              404,055
              
              
              $
              1,139,031
              
              
              $
              1,143,109Cost
                  of products sold
              
              
              301,904
              
              
              
              293,260
              
              
              
              879,289
              
              
              
              847,320Gross
                  profit
              
              
              95,103
              
              
              
              110,795
              
              
              
              259,742
              
              
              
              295,789Selling,
                  general and administrative expenses
              
              
              72,689
              
              
              
              93,443
              
              
              
              215,506
              
              
              
              245,231Stock
                  option expense
              
              
              468
              
              
              
              332
              
              
              
              3,877
              
              
              
              986Amortization
                  of intangible assets
              
              
              2,628
              
              
              
              3,942
              
              
              
              7,692
              
              
              
              10,678Impairment,
                  restructuring and othernon-recurring
                  charges
              
              
              19,041
              
              
              
              15,820
              
              
              
              25,957
              
              
              
              130,098Interest
                  expense, net
              
              
              2,903
              
              
              
              7,035
              
              
              
              9,819
              
              
              
              15,667Other
                  income, net
              
              
              (106
              )
              
              
              (46
              )
              
              
              (358
              )
              
              
              (27
              )Loss
                  before income taxes
              
              
              (2,520
              )
              
              
              (9,731
              )
              
              
              (2,751
              )
              
              
              (106,844
              )Income
                  taxes
              
              
              (1,037
              )
              
              
              (3,782
              )
              
              
              (1,119
              )
              
              
              (33,315
              )Net
                  loss from continuing operations
              
              
              (1,483
              )
              
              
              (5,949
              )
              
              
              (1,632
              )
              
              
              (73,529
              )Net
                  earnings from discontinued operations
              
              
              9,558
              
              
              
              4,867
              
              
              
              26,067
              
              
              
              14,016Net
                  earnings (loss)
              
              $
              8,075
              
              
              $
              (1,082
              )
              
              $
              24,435
              
              
              $
              (59,513
              )Weighted
                  average shares outstanding:Basic
                  and diluted
              
              
              25,722
              
              
              
              25,857
              
              
              
              25,682
              
              
              
              25,895Earnings
                  (loss) per share:Basic:Continuing
                  operations
              
              $
              (0.06
              )
              
              $
              (0.23
              )
              
              $
              (0.06
              )
              
              $
              (2.84
              )Discontinued
                  operations
              
              
              0.37
              
              
              
              0.19
              
              
              
              1.02
              
              
              
              0.54Net
                  earnings (loss)
              
              $
              0.31
              
              
              $
              (0.04
              )
              
              $
              0.95
              
              
              $
              (2.30
              )Diluted:Continuing
                  operations
              
              $
              (0.06
              )
              
              $
              (0.23
              )
              
              $
              (0.06
              )
              
              $
              (2.84
              )Discontinued
                  operations
              
              
              0.37
              
              
              
              0.19
              
              
              
              1.02
              
              
              
              0.54Net
                  earnings (loss)
              
              $
              0.31
              
              
              $
              (0.04
              )
              
              $
              0.95
              
              
              $
              (2.30
              )Dividends
                  paid per share
              
              $
              0.16
              
              
              $
              0.16
              
              
              $
              0.48
              
              
              $
              0.48




See
        accompanying notes to condensed consolidated financial
        statements.
  4
  KELLWOOD
        COMPANY AND SUBSIDIARIES
 CONDENSED
        CONSOLIDATED STATEMENTS OF CASH
        FLOWS (UNAUDITED)
 (Amounts
        in thousands)


Nine
                  months endedOctober
                  28,
              
              
              November
                  3,2006
              
              
              2007**Operating
                  activities:**Net
                  earnings (loss)
              
              $
              24,435
              
              
              $
              (59,513
              )Add/(deduct)
                  items not affecting operating cash flows:Depreciation
                  and amortization
              
              
              26,689
              
              
              
              33,362Stock-based
                  compensation expense
              
              
              3,877
              
              
              
              986Gain
                  on sale of business
              
              
              -
              
              
              
              (535
              )Deferred
                  income taxes and other
              
              
              1,143
              
              
              
              (3,571
              )Incremental
                  tax benefits from stock options exercised
              
              
              (256
              )
              
              
              (35
              )Non-cash
                  adjustments related to impairment, restructuringand
                  other non-recurring charges (net of tax benefit)
              
              
              15,097
              
              
              
              86,587Changes
                  in working capital components:Receivables,
                  net
              
              
              (14,923
              )
              
              
              22,051Inventories
              
              
              (1,314
              )
              
              
              26,785Prepaid
                  expenses
              
              
              (3,804
              )
              
              
              3,567Accounts
                  payable and accrued expenses
              
              
              (4,549
              )
              
              
              (51,160
              )Payment
                  of liabilities associated with restructuring activities
              
              
              (23,626
              )
              
              
              (23,570
              )Current
                  deferred and accrued income taxes
              
              
              1,613
              
              
              
              2,799Net
                  cash provided by operating activities
              
              $
              24,382
              
              
              $
              37,753**Investing
                  activities:**Additions
                  to property, plant and equipment
              
              $
              (13,875
              )
              
              $
              (17,162
              )Acquisitions
                  (including additional cash purchase consideration)
              
              
              (8,541
              )
              
              
              (235,048
              )Proceeds
                  from sale of business
              
              
              -
              
              
              
              9,984Receipts
                  for note receivable
              
              
              2,063
              
              
              
              688Dispositions
                  of fixed assets
              
              
              392
              
              
              
              3,530Net
                  cash used in investing activities
              
              $
              (19,961
              )
              
              $
              (238,008
              )**Financing
                  activities:**Borrowings
                  of notes payable
              
              $
              67,391
              
              
              $
              80,209Payments
                  of notes payable
              
              
              (69,956
              )
              
              
              (72,709
              )Change
                  in bank overdraft
              
              
              (3,767
              )
              
              
              548Repayments
                  of long-term debt
              
              
              -
              
              
              
              (2,778
              )Dividends
                  paid
              
              
              (12,331
              )
              
              
              (12,439
              )Stock
                  purchases under stock repurchase programs
              
              
              (5,006
              )
              
              
              (4,940
              )Stock
                  transactions under incentive plans
              
              
              6,387
              
              
              
              2,237Incremental
                  tax benefits from stock options exercised
              
              
              256
              
              
              
              35Net
                  cash used in financing activities
              
              $
              (17,026
              )
              
              $
              (9,837
              )**Net
                  change in cash and cash equivalents**
              
              $
              (12,605
              )
              
              $
              (210,092
              )Cash
                  and cash equivalents, beginning of period
              
              
              406,959
              
              
              
              341,076Cash
                  and cash equivalents, end of period
              
              $
              394,354
              
              
              $
              130,984
  See
        accompanying notes to condensed
        consolidated financial statements.
    5
 KELLWOOD
              COMPANY AND SUBSIDIARIES
 NOTES
              TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 (Dollars
              in thousands, except per share data)
  **Note
        1. Basis of presentation.**The condensed
        consolidated financial statements include our accounts and the accounts of
        our
        majority-owned subsidiaries.  All significant intercompany accounts
        and transactions have been eliminated.  These financial statements
        have been prepared on a condensed basis, and accordingly, certain information
        and note disclosures normally included in financial statements prepared in
        accordance with generally accepted accounting principles have been condensed
        or
        omitted pursuant to the rules and regulations of the Securities and Exchange
        Commission.  The amounts and disclosures included in the notes to the
        condensed consolidated financial statements, unless otherwise indicated,
        are
        presented on a continuing operations basis.  In the opinion of
        management, the financial statements contain all adjustments (consisting
        solely
        of normal recurring adjustments) and disclosures necessary to make the
        information presented therein not misleading.  These financial
        statements should be read in conjunction with the consolidated financial
        statements and accompanying footnotes thereto included in our Annual Report
        to
        Stockholders on Form 10-K for 2006 (the fiscal year ended February 3,
        2007).  As used in this Report, unless the context requires otherwise,
“our”, “us” and “we” refer to Kellwood Company and its
        subsidiaries.
 
 The
        preparation of financial statements in conformity with generally accepted
        accounting principles requires management to make estimates and assumptions
        that
        affect reported amounts and related disclosures.  Actual results could
        differ from those estimates.  Certain prior year amounts have been
        reclassified to conform to the current year presentation.  Our fiscal
        year ends on the Saturday closest to January 31.  Operating results
        for any quarter are historically seasonal in nature and are not necessarily
        indicative of the results expected for the full year.
 
 **Note  2.
        Business combinations.**On July 2, 2007, we completed the
        acquisition of Royal Robbins, Inc., a division of Phoenix Footwear Group,
        Inc.  Royal Robbins® designs and markets premium quality active
        sportswear and travel apparel for men and women.  The purchase price
        (including acquisition costs) for Royal Robbins was $37,610 in
        cash.
 
 On
        July
        13, 2007, we completed the acquisition of Hanna Andersson
        Corporation.  Hanna Andersson® is a leading brand in the specialty
        children's apparel market and expands our children’s business platform into
        upscale brands with an important direct-to-consumer focus.  The
        purchase price for Hanna Andersson (including acquisition costs) was $187,604
        in
        cash, net of cash acquired.
 
 In
        connection with the Hanna Andersson and Royal Robbins acquisitions, we are
        in
        the process of determining the fair value of the assets acquired and liabilities
        assumed.  We are in the process of finalizing third-party valuations
        of certain intangible assets and other estimates of assets acquired and
        liabilities assumed; thus, the allocations of purchase price are subject
        to
        refinement.  During the third quarter, there were no significant
        changes to the preliminary purchase price allocation. The following table
        summarizes the estimated fair values of the assets acquired and liabilities
        assumed at the date of acquisition.
  Hanna
                    Andersson
                
                
                
                
                
                Royal
                    RobbinsCash
                
                $
                89
                
                
                
                
                
                $
                -Receivables
                
                
                721
                
                
                
                
                
                
                3,009Inventories
                
                
                24,655
                
                
                
                
                
                
                5,172Other
                    current assets
                
                
                6,509
                
                
                
                
                
                
                122Property,
                    plant and equipment
                
                
                7,367
                
                
                
                
                
                
                88Intangible
                    assets
                
                
                62,000
                
                
                ****
                **(1)**
                
                
                
                22,000
                
                
                ****
                **(2)**Goodwill
                
                
                97,584
                
                
                
                
                
                
                
                9,483Other
                    assets
                
                
                1,498
                
                
                
                
                
                
                
                134Total
                    assets acquired
                
                
                200,423
                
                
                
                
                
                
                
                40,008Total
                    liabilities
                
                
                12,730
                
                
                
                
                
                
                
                2,398Net
                    assets acquired
                
                $
                187,693
                
                
                
                
                
                
                $
                37,610
 
 See
        footnotes on next page.
  6
 KELLWOOD
              COMPANY AND SUBSIDIARIES
 NOTES
              TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
              (continued)
 (Dollars
              in thousands, except per share data)
  (1)
                Preliminary
                    identified intangible assets related to the acquisition of Hanna
                    Andersson
                    are trademarks and customer relationships.  We are in the
                    process of finalizing such valuations and defining their respective
                    useful
                    lives.  No goodwill is expected to be deductible for tax
                    purposes.
 (2)
              Preliminary
                  identified intangibles assets related to the acquisition of Royal
                  Robbins
                  are trademarks and customer relationships.  We are in the
                  process of finalizing such valuations and defining their respective
                  useful
                  lives.  The amount of goodwill that is expected to be deductible
                  for income tax purposes is approximately
                  $2,000.
 
 Royal
        Robbins and Hanna Andersson are part of the Other Soft Goods
        segment.  These acquisitions have been accounted for under the
        purchase method of accounting.  Accordingly, their results have been
        included in the consolidated financial statements from their respective
        acquisition dates.  Unaudited consolidated results of operations on a
        pro forma basis, assuming these acquisitions had occurred at the beginning
        of
        the year in which they occurred, are not required as they are not significant
        to
        our consolidated results of operations.
 
 **Note
        3. Impairment, restructuring and other non-recurring
        charges.**Restructuring and other non-recurring charges
        consist of expenses associated with our efforts to continuously improve
        operational efficiency along with other non-recurring
        items.  Impairment, restructuring and other non-recurring charges are
        detailed below.
 
 During
        the second quarter of 2005, we announced a restructuring plan (the 2005
        Restructuring Plan).  We have substantially completed the business
        dispositions and shutdown activities contemplated by the 2005 Restructuring
        Plan. For additional information regarding the 2005 Restructuring Plan, refer
        to
        the footnote accompanying the financial statements contained in the Annual
        Report to Stockholders on Form 10-K for 2006.




During
      2007, we have announced several rationalization efforts aimed at improving
      our
      operational efficiency.  These 2007 restructuring activities, along
      with other impairment and non-recurring charges, consist of the
      following:




·
            During
                the second quarter of 2007, we announced that we would consolidate
                our
                warehouse operations by closing the Chico, California distribution
                center.  Restructuring charges of approximately $3,500, which
                are primarily comprised of severance and termination benefits and
                contractual obligations, are expected to be incurred through the
                fourth
                quarter of 2007.  Restructuring charges of $2,245 and $2,805
                were incurred during the three and nine months ended November 3,
                2007,
                respectively.  These charges relate to the General Corporate
                segment.





·
            During
                the second quarter of 2007, we determined certain intangibles, including
                trademarks, customer lists and goodwill for certain women’s mainstream
                brands were impaired resulting in a charge of $113,717 ($76,078 after
                tax
                and $2.92 per diluted share).  See Note 6 for more information
                on the impairment charges.  These charges relate to the General
                Corporate segment.





·
            During
                the third quarter of 2007, we announced our Phat Farm men’s wholesale
                business entered into a partnership with Longstreet Industries, a
                division
                of Stretch-O-Rama, Inc., to design and market the sportswear and
                outerwear
                collections under the Phat Farm® and the new XVTM brand names in an effort
                to refocus the Phat Farm business solely on
                licensing.  Restructuring charges of approximately $11,000 which
                are primarily comprised of severance and termination benefits, contractual
                obligations and fixed asset impairment are expected to be incurred
                through
                the fourth quarter of 2007.  Restructuring charges of $9,718
                were incurred in the third quarter of 2007.  These charges
                relate to the Women’s Sportswear segment (see Note 13 for additional
                discussion of the classification of Phat Farm in the Women’s Sportswear
                segment).








7
 KELLWOOD
            COMPANY AND SUBSIDIARIES NOTES
              TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
              (continued)
 (Dollars
              in thousands, except per share data)





·
            During
                the third quarter of 2007, we announced we will reorganize the women’s
                sportswear businesses, creating three operating divisions, from
                seven.  Further, we have undertaken initiatives to streamline
                corporate functions and implement supply chain savings
                initiatives.  Restructuring charges of approximately $26,783
                which are primarily comprised of severance and termination benefits,
                contractual obligations, fixed asset impairment and non-recurring
                systems
                and process redesign costs are expected to be incurred through the
                end of
                fiscal 2008 related to such activities.  Restructuring charges
                of $3,385 were incurred in the third quarter of 2007.  Charges
                of $1,637 and $1,748 relate to the Women’s Sportswear and General
                Corporate segments, respectively.





The
      2007
      impairment, restructuring and non-recurring charges are included within
      continuing operations.  The total expected costs of these actions and
      the provision recorded to date related to our reportable segments (before tax)
      is summarized as follows:






TotalTotal
              
              
              ProvisionExpected
              
              
              RecordedCost
              
              
              to
                  DateWomen’s
                  Sportswear
              
              $
              29,000
              
              
              $
              11,356General
                  Corporate
              
              
              126,000
              
              
              
              119,081Total
              
              $
              155,000
              
              
              $
              130,437




As
      described in Note 13, goodwill and net intangible assets are accounted for
      at
      the corporate level and as a result, the impairment charges related to those
      goodwill and intangible assets are presented below with the General Corporate
      segment.  The impairment charges recorded in the second quarter of
      2007 related to certain of our women’s mainstream
      brands.  Restructuring and other non-recurring charges are presented
      below with the reportable segment to which they relate.  As presented
      in Note 13, segment earnings (loss) excludes those charges recorded within
      the
      impairment, restructuring and other non-recurring charges
      caption.  Impairment, restructuring and other non-recurring charges
      (cost reversals) as they relate to each business segment (before tax) are
      summarized as follows:





Three
                  months ended
              
              
              Nine
                  months endedOctober
                  28, 2006
              
              
              October
                  28, 2006Continuing
              
              
              Discontinued
              
              
              
              
              
              Continuing
              
              
              DiscontinuedOperations
              
              
              Operations
              
              
              Total
              
              
              Operations
              
              
              Operations
              
              
              TotalWomen’s
                  Sportswear
              
              $
              18,767
              
              
              $
              219
              
              
              $
              18,986
              
              
              $
              22,396
              
              
              $
              1,203
              
              
              $
              23,599Men’s
                  Sportswear
              
              
              (351
              )
              
              
              (19
              )
              
              
              (370
              )
              
              
              1,022
              
              
              
              (396
              )
              
              
              626Other
                  Soft Goods
              
              
              17
              
              
              
              (2,301
              )
              
              
              (2,284
              )
              
              
              139
              
              
              
              (3,708
              )
              
              
              (3,569
              )General
                  Corporate
              
              
              608
              
              
              
              125
              
              
              
              733
              
              
              
              2,400
              
              
              
              647
              
              
              
              3,047Total
              
              $
              19,041
              
              
              $
              (1,976
              )
              
              $
              17,065
              
              
              $
              25,957
              
              
              $
              (2,254
              )
              
              $
              23,703




The
      restructuring and other non-recurring charges (cost reversals) for the three
      and
      nine months ended October 28, 2006 were all related to the 2005 Restructuring
      Plan.





Three
                  months ended
              
              
              Nine
                  months endedNovember
                  3, 2007
              
              
              November
                  3, 2007Continuing
              
              
              Discontinued
              
              
              
              
              
              Continuing
              
              
              DiscontinuedOperations
              
              
              Operations
              
              
              Total
              
              
              Operations
              
              
              Operations
              
              
              TotalWomen’s
                  Sportswear
              
              $
              11,017
              
              
              $
              (145
              )
              
              $
              10,872
              
              
              $
              11,017
              
              
              $
              (145
              )
              
              $
              10,872Men’s
                  Sportswear
              
              
              -
              
              
              
              (38
              )
              
              
              (38
              )
              
              
              -
              
              
              
              (38
              )
              
              
              (38
              )Other
                  Soft Goods
              
              
              -
              
              
              
              (536
              )
              
              
              (536
              )
              
              
              -
              
              
              
              (536
              )
              
              
              (536
              )General
                  Corporate
              
              
              4,803
              
              
              
              1,100
              
              
              
              5,903
              
              
              
              119,081
              
              
              
              1,100
              
              
              
              120,181Total
              
              $
              15,820
              
              
              $
              381
              
              
              $
              16,201
              
              
              $
              130,098
              
              
              $
              381
              
              
              $
              130,479





8
 KELLWOOD
              COMPANY AND SUBSIDIARIES
 NOTES
              TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
              (continued)
 (Dollars
              in thousands, except per share data)




The
      impairment, restructuring and other non-recurring charges for the three and
      nine
      months ended November 3, 2007 included provision reversals of $339 in continuing
      operations related to the Women’s Sportswear segment and all charges in
      discontinued operations related to the 2005 Restructuring Plan.  All
      other charges for the three and nine month periods related to the 2007
      restructuring activities, along with impairment and other non-recurring charges
      during 2007.





For
      the
      three and nine months ended October 28, 2006, the costs (cost reversals) related
      to restructuring and other non-recurring charges were recorded as
      follows:





Three
                  months ended
              
              
              Nine
                  months endedOctober
                  28, 2006
              
              
              October
                  28, 2006Continuing
              
              
              Discontinued
              
              
              
              
              
              Continuing
              
              
              DiscontinuedOperations
              
              
              Operations
              
              
              Total
              
              
              Operations
              
              
              Operations
              
              
              TotalNet
                  sales
              
              $
              -
              
              
              $
              -
              
              
              $
              -
              
              
              $
              -
              
              
              $
              (2,192
              )
              
              $
              (2,192
              )Cost
                  of products sold
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (348
              )
              
              
              (348
              )Restructuring
                  and othernon-recurring
                  charges
              
              
              19,041
              
              
              
              (1,976
              )
              
              
              17,065
              
              
              
              25,957
              
              
              
              286
              
              
              
              26,243Total
                  pretax cost
              
              $
              19,041
              
              
              $
              (1,976
              )
              
              $
              17,065
              
              
              $
              25,957
              
              
              $
              (2,254
              )
              
              $
              23,703Total
                  after tax cost
              
              $
              12,092
              
              
              $
              (1,258
              )
              
              $
              10,834
              
              
              $
              16,534
              
              
              $
              (1,437
              )
              
              $
              15,097Diluted
                  loss (income) per share
              
              $
              0.47
              
              
              $
              (0.05
              )
              
              $
              0.42
              
              
              $
              0.64
              
              
              $
              (0.06
              )
              
              $
              0.59




The
      restructuring and other non-recurring charges for the three and nine months
      ended October 28, 2006 were all related to the 2005 Restructuring Plan. Cost
      reversals are primarily a result of the change in estimate related to the
      reversals of amounts originally provided for non-recurring inventory and
      purchase commitment reserves as part of discontinued operations resulted
      primarily from much better than anticipated sales to existing customers without
      significant order cancellations or price concessions.





For
      the
      three and nine months ended November 3, 2007, the costs related to impairment,
      restructuring and other non-recurring charges were recorded as
      follows:





Three
                  months ended
              
              
              Nine
                  months endedNovember
                  3, 2007
              
              
              November
                  3, 2007Continuing
              
              
              Discontinued
              
              
              
              
              
              Continuing
              
              
              DiscontinuedOperations
              
              
              Operations
              
              
              Total
              
              
              Operations
              
              
              Operations
              
              
              TotalImpairment
                  of goodwilland
                  intangible assets
              
              $
              -
              
              
              $
              -
              
              
              $
              -
              
              
              $
              113,717
              
              
              $
              -
              
              
              $
              113,717Restructuring
                  and othernon-recurring
                  charges
              
              
              14,298
              
              
              
              381
              
              
              
              14,679
              
              
              
              14,859
              
              
              
              381
              
              
              
              15,240Fixed
                  asset impairment
              
              
              1,522
              
              
              
              -
              
              
              
              1,522
              
              
              
              1,522
              
              
              
              -
              
              
              
              1,522Total
                  pretax cost
              
              $
              15,820
              
              
              $
              381
              
              
              $
              16,201
              
              
              $
              130,098
              
              
              $
              381
              
              
              $
              130,479Total
                  after tax cost
              
              $
              9,919
              
              
              $
              240
              
              
              $
              10,159
              
              
              $
              86,347
              
              
              $
              240
              
              
              $
              86,587Diluted
                  loss per share
              
              $
              0.38
              
              
              $
              0.01
              
              
              $
              0.39
              
              
              $
              3.33
              
              
              $
              0.01
              
              
              $
              3.34




The
      impairment, restructuring and other non-recurring charges for the three and
      nine
      months ended November 3, 2007 included provision reversals of $339 in continuing
      operations and additional provisions of $381 in discontinued operations related
      to the 2005 Restructuring Plan, each presented in the Restructuring and other
      non-recurring charges caption above.










9
 KELLWOOD
              COMPANY AND SUBSIDIARIES
 NOTES
              TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
              (continued)
 (Dollars
              in thousands, except per share data)




A
      rollforward of the major components of these impairment, restructuring and
      other
      non-recurring charges from August 4, 2007 to November 3, 2007 recorded in
      continuing operations is as follows:





Accrual
                  as of
              
              
              
              
              
              
              
              
              
              
              
              Accrual
                  as ofAugust
                  4,
              
              
              
              
              
              
              
              
              
              
              
              November
                  3,2007
              
              
              Provision
              
              
              Reversals
              
              
              Utilization
              
              
              2007Contractual
                  Obligations
              
              $
              17,359
              
              
              $
              6,593
              
              
              $
              (339
              )
              
              $
              (6,803
              )
              
              $
              16,810Employee
                  Severance andTermination
                  Benefits
              
              
              290
              
              
              
              6,094
              
              
              
              -
              
              
              
              (4,744
              )
              
              
              1,640Systems
                  and Process Redesign Costs
              
              
              -
              
              
              
              1,140
              
              
              
              -
              
              
              
              (870
              )
              
              
              270Fixed
                  Asset Impairment
              
              
              -
              
              
              
              1,522
              
              
              
              -
              
              
              
              (1,522
              )
              
              
              -Other
                  Non-Recurring Charges
              
              
              -
              
              
              
              810
              
              
              
              -
              
              
              
              (60
              )
              
              
              750Total
              
              $
              17,649
              
              
              $
              16,159
              
              
              $
              (339
              )
              
              $
              (13,999
              )
              
              $
              19,470




Amounts
      included above as of November 3, 2007 related to the 2005 Restructuring Plan
      were $15,341 and $289 which are presented in Contractual Obligations and
      Employee Severance and Termination Benefits, respectively.





A
      rollforward of the major components of these restructuring charges from August
      4, 2007 to November 3, 2007 recorded in discontinued operations (see Note 4
      for
      further discussion of discontinued operations) is as follows:





Accrual
                  as of
              
              
              
              
              
              
              
              
              
              
              
              Accrual
                  as ofAugust
                  4,
              
              
              
              
              
              
              
              
              
              
              
              November
                  3,2007
              
              
              Provision
              
              
              Reversals
              
              
              Utilization
              
              
              2007Contractual
                  Obligations
              
              $
              3,935
              
              
              $
              1,100
              
              
              $
              (719
              )
              
              $
              (1,673
              )
              
              $
              2,643Employee
                  Severance andTermination
                  Benefits
              
              
              3,974
              
              
              
              -
              
              
              
              -
              
              
              
              (69
              )
              
              
              3,905Total
              
              $
              7,909
              
              
              $
              1,100
              
              
              $
              (719
              )
              
              $
              (1,742
              )
              
              $
              6,548




Amounts
      included above as of November 3, 2007 were all related to the 2005 Restructuring
      Plan.





Contractual
      Obligations are adverse contractual arrangements under which losses are probable
      and estimable and where there is no future economic benefit.  These
      include leases and minimum payments under license
      agreements.  Employee Severance and Termination Benefits are provided
      for in accordance with SFAS No. 146, *Accounting for Costs Associated with
      Exit or Disposal Activities.*  Total employee severance and
      termination benefits will be recorded as incurred.  Systems and
      process redesign costs include the non-recurring charges associated with
      formulating and evaluating systems alternatives, data conversion costs,
      evaluation and redesign of business processes and training costs directly
      related to the 2007 restructuring activities.  Fixed asset impairment
      related to business systems are included in systems and process redesign
      costs.  Fixed Asset Impairment includes provisions for fixed assets
      that were determined to be impaired in connection with Statement of Financial
      Accounting Standards (SFAS) No. 144, *Accounting for the Impairment or
      Disposal of Long-Lived Assets*, and were written down to their fair values
      less costs to sell.





In
      continuing operations, Contractual Obligations will be settled through 2012
      in
      accordance with the related agreements.  In discontinued operations,
      Contractual Obligations and Employee Severance and Termination Benefits will
      be
      settled through 2009.










10
 KELLWOOD
              COMPANY AND SUBSIDIARIES
 NOTES
              TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
              (continued)
 (Dollars
              in thousands, except per share data)




**Note
      4. Discontinued operations.**In November 2007, we announced
      that Youngor Group Co., Ltd. (Youngor Group) agreed to acquire our Smart Shirts
      business for approximately $120,000 in cash. The transaction, which is subject
      to certain customary closing conditions including foreign regulatory approvals,
      is expected to close by the end of fiscal year 2007.  Separately, in
      November 2007, we sold the Smart Shirts real estate assets in Hong Kong for
      approximately $41,000 in cash.  Neither the potential impact due to
      the sale of the Smart Shirts business nor the sale of the Smart Shirts real
      estate assets have been included in the Condensed Consolidated Financial
      Statements, except to present Smart Shirts as a discontinued
      operation.  Prior to being classified as a discontinued operation,
      Smart Shirts was included in the Men’s Sportswear segment. We do not expect the
      sale of the Smart Shirts business and real estate assets to result in a
      significant gain or loss.





During
      the third quarter of 2006, we commenced reporting our New Campaign and IZOD
      women’s sportswear as discontinued operations.  Reporting New Campaign
      as a discontinued operation resulted from our agreement during the third quarter
      of 2006 to transfer the business and sell business assets to the
      licensor.  We closed on the sale in April 2007.  We received
      $9,984 and recognized a gain on sale of approximately $535.  Reporting
      our IZOD women’s sportswear operation as a discontinued operation resulted from
      our agreement during the third quarter of 2006 to terminate the licensing
      arrangement.  We transitioned this business in the second quarter of
      2007 with no significant gain or loss.  Prior to being classified as a
      discontinued operation, the New Campaign and IZOD operations were included
      in
      the Women’s Sportswear segment.





The
      results of operations and restructuring and other non-recurring charges for
      the
      discontinued operations (as discussed in Note 3) are reported as discontinued
      operations for all periods presented.  Additionally, assets and
      liabilities of the discontinued operations are segregated in the accompanying
      condensed consolidated balance sheets.





Operating
      results for the discontinued operations, including all charges incurred during
      the periods presented for the restructuring and other non-recurring charges
      as
      described in Note 3, are as follows:





Three
                  months ended
              
              
              Nine
                  months endedOctober
                  28,
              
              
              November
                  3,
              
              
              October
                  28,
              
              
              November
                  3,2006
              
              
              2007
              
              
              2006
              
              
              2007Net
                  sales
              
              $
              141,618
              
              
              $
              126,276
              
              
              $
              394,588
              
              
              $
              360,347Restructuring
                  and othernon-recurring
                  charges (cost reversals)
              
              $
              (1,976
              )
              
              $
              381
              
              
              $
              286
              
              
              $
              381Earnings
                  before income taxes
              
              
              12,883
              
              
              
              7,392
              
              
              
              28,196
              
              
              
              18,900Income
                  taxes
              
              
              3,325
              
              
              
              2,525
              
              
              
              2,129
              
              
              
              4,884Net
                  earnings
              
              $
              9,558
              
              
              $
              4,867
              
              
              $
              26,067
              
              
              $
              14,016Earnings
                  per share
              
              $
              0.37
              
              
              $
              0.19
              
              
              $
              1.02
              
              
              $
              0.54




Income
      taxes for the nine months ended October 28, 2006 includes a $6,300 reversal
      of
      allowances for tax exposures related to a 2003 discontinued operation no longer
      deemed necessary due to finalization of an open tax year.










11
 KELLWOOD
              COMPANY AND SUBSIDIARIES
 NOTES
              TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
              (continued)
 (Dollars
              in thousands, except per share data)





Summarized
      assets and liabilities of the discontinued operations are as
      follows:





February
                  3,
              
              
              October
                  28,
              
              
              November
                  3,2007
              
              
              2006
              
              
              2007Receivables,
                  net
              
              $
              79,849
              
              
              $
              74,420
              
              
              $
              80,002Inventories
              
              
              104,056
              
              
              
              103,835
              
              
              
              93,486Current
                  deferred taxes and prepaid expenses
              
              
              7,226
              
              
              
              6,979
              
              
              
              9,774Current
                  assets of discontinued operations
              
              $
              191,131
              
              
              $
              185,234
              
              
              $
              183,262Property,
                  plant and equipment, net
              
              $
              35,197
              
              
              $
              33,416
              
              
              $
              33,241Goodwill
              
              
              2,995
              
              
              
              2,995
              
              
              
              -Other
                  assets
              
              
              5,733
              
              
              
              6,516
              
              
              
              6,050Long-term
                  assets of discontinued operations
              
              $
              43,925
              
              
              $
              42,927
              
              
              $
              39,291Notes
                  payable and current portion of long-term debt
              
              $
              19,556
              
              
              $
              16,556
              
              
              $
              27,056Accounts
                  payable
              
              
              50,230
              
              
              
              48,894
              
              
              
              32,996Accrued
                  liabilities
              
              
              32,610
              
              
              
              33,138
              
              
              
              38,964Current
                  liabilities of discontinued operations
              
              $
              102,396
              
              
              $
              98,588
              
              
              $
              99,016Long-term
                  debt
              
              $
              16,667
              
              
              $
              19,444
              
              
              $
              13,889Deferred
                  income taxes and other
              
              
              346
              
              
              
              -
              
              
              
              5,659Long-term
                  liabilities of discontinued operations
              
              $
              17,013
              
              
              $
              19,444
              
              
              $
              19,548




The
      above
      assets and liabilities are primarily related to the Smart Shirts manufacturing
      operations.  In addition to the New Campaign and IZOD operations,
      which were disposed by November 2007, accrued liabilities reflect charges taken
      in connection with the restructuring activities that have not yet been paid
      and
      primarily relate to contractual obligations.




**Note
        5****.****Inventories.**Inventories
        of
        continuing operations consist of the following:




February
                  3,
              
              
              October
                  28,
              
              
              November
                  3,2007
              
              
              2006
              
              
              2007Inventories:Finished
                  goods
              
              $
              141,951
              
              
              $
              122,148
              
              
              $
              148,726Work
                  in progress
              
              
              7,776
              
              
              
              6,696
              
              
              
              4,954Raw
                  materials
              
              
              2,851
              
              
              
              4,821
              
              
              
              6,928Total
                  inventories
              
              $
              152,578
              
              
              $
              133,665
              
              
              $
              160,608Net
                  of obsolescence reserves of:
              
              $
              20,089
              
              
              $
              19,274
              
              
              $
              23,454





12
 KELLWOOD
              COMPANY AND SUBSIDIARIES
 NOTES
              TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
              (continued)
 (Dollars
              in thousands, except per share data)




**Note
      6****.****Goodwill
      and intangible assets.******Changes
      in goodwill and intangible assets of continuing operations since the beginning
      of 2007 are as follows:




Goodwill
              
              
              IntangiblesBalance
                  at February 3, 2007
              
              $
              228,168
              
              
              $
              202,704Adjustment
                  to estimated contingentpurchase
                  price
              
              
              2,984
              
              
              
              -Purchase
                  price allocation adjustments
              
              
              (1,073
              )
              
              
              1,058Impairment
                  charges
              
              
              (86,111
              )
              
              
              (27,606
              )Acquisitions
              
              
              107,067
              
              
              
              84,000Amortization
                  expense
              
              
              -
              
              
              
              (10,678
              )Balance
                  at November 3, 2007
              
              $
              251,035
              
              
              $
              249,478




We
      acquired Phat Fashions, LLC and Phat Licensing, LLC (together referred to as
      Phat) in 2004, CRL Group, LLC, owner of Vince® brand and trademark (Vince) in
      2006 and HOLLYWOULD, Inc., owner of the HOLLYWOULD® brand and trademark
      (HOLLYWOULD) in 2006.  In connection with the acquisitions of Phat,
      Vince and HOLLYWOULD, additional cash purchase consideration will be due if
      the
      acquired entity achieves certain specified financial performance targets in
      the
      years immediately following the acquisition.  Additional cash purchase
      consideration for Phat, if earned, will be paid out through 2010 and would
      be
      accounted for as additional goodwill.  During 2007, we recognized
      increased additional consideration for Phat for 2006 of $1,684.  The
      Vince and HOLLYWOULD additional cash purchase consideration, if earned, will
      be
      paid out through 2011 and would be accounted for as additional
      goodwill.  In connection with our acquisition of Briggs New York Corp.
      (Briggs) in 2003, additional cash purchase consideration was due if Briggs
      achieved certain annual operating results for each of the four years after
      the
      acquisition (2003 through 2006).  During 2007, we recognized increased
      additional consideration for Briggs for 2006 of $1,300.





Under
      SFAS No. 142, *Goodwill and Other Intangible Assets*, goodwill and other
      indefinite-lived intangible assets are no longer amortized but are reviewed
      for
      impairment at least annually and if atriggering event were
      to
      occur in an interim period.  Our annual impairment testing is
      performed in the fourth quarter.  In the second quarter of 2007,
      changes in the business climate of certain of our mainstream women’s brands were
      a triggering event that required impairment testing of these divisions’ goodwill
      and intangible asset balances.  The impairment resulting from this
      testing was due to the operating results for the first half of 2007 and
      expectations regarding future results of these mainstream women’s brands being
      well below the expectations reflected in the test performed in the fourth
      quarter of 2006.  Expectations reflected in these prior impairment
      tests assumed that the changes in the business climate would not be as negative
      and could be offset with product line adjustments.  The reassessment
      of these mainstream women’s brands performed during the second quarter of 2007
      resulted in the conclusion that an impairment charge was required. This
      evaluation utilized discounted cash flow analyses and multiple analyses of
      the
      historical and updated forecasted operating results.  As a result,
      non-cash impairment charges of $86,111 and $27,606 for goodwill and intangibles
      assets, respectively, including trademarks and customer lists, for certain
      women’s mainstream brands were recorded during the second quarter of
      2007.





The
      purchase price allocation adjustments represent the finalization of the purchase
      price allocation associated with the Vince and HOLLYWOULD
      acquisitions.





Goodwill
      and intangibles have increased during the year by $107,067 and $84,000,
      respectively, due to acquisitions during the year.  These amounts
      relate to Hanna Andersson and Royal Robbins and are net of purchase price
      allocation adjustments.  We are in the process of finalizing such
      allocations (see Note 2).





Amortization
      expense is expected to be approximately $14,500 for 2007 and $15,500 for the
      years 2008 to 2012.







13
 KELLWOOD
              COMPANY AND SUBSIDIARIES
 NOTES
              TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
              (continued)
 (Dollars
              in thousands, except per share data)




**Note
      7. Notes payable and long-term debt.**  At November 3, 2007,
      there were no borrowings outstanding under our Senior Credit Facility (a
      $400,000 five-year secured, syndicated credit facility), and we were in
      compliance with all covenants.  Letters of credit outstanding under
      the Senior Credit Facility were $28,975 at November 3,
      2007.  Additionally, we have $272 in outstanding letters of credit at
      November 3, 2007 related to existing arrangements in place within our recent
      acquisitions.





During
      the third quarter of 2007, the Smart Shirts business is presented as a
      discontinued operation (see Note 4).  The notes payable and long-term
      debt of this business follows.


·
              At
                  November 3, 2007, there were $21,500 and $19,445 of borrowings
                  outstanding
                  under the revolving and term portions of the Asian Credit Facility,
                  respectively. The Asian Credit Facility is a $50,000 five-year
                  unsecured,
                  syndicated term and revolving credit facility agreement to support
                  the
                  working capital needs of our Asian operations.  At November 3,
                  2007, we were in compliance with the covenants of the Asian Credit
                  Facility.




·
            In
                addition to the revolving credit facilities discussed above, our
                Asian
                operations maintain uncommitted lines of credit, which totaled $28,718
                at
                November 3, 2007.  There were no borrowings outstanding under
                these lines at November 3, 2007.  We have $8,751 in outstanding
                letters of credit used by our foreign operations under these lines
                at
                November 3, 2007.





Subsequent
      to the close of the third quarter 2007, the Asian Credit Facility was paid
      in
      full with the proceeds from the sale of the Smart Shirts building (as discussed
      in Note 4) and terminated.





**Note
      8.  Stock Repurchase Program.**In July 2005, we
      announced a stock repurchase program.  The Board of Directors
      authorized us to repurchase, at our discretion, up to ten percent of the
      outstanding shares of our common stock through open market or privately
      negotiated transactions.  The Board of Directors approved the
      investment of up to $75,000 for this purpose.  During fiscal year
      2005, we repurchased 2,218,200 shares at an average price of $24.99 per share,
      totaling $55,430.  During fiscal year 2006, we repurchased 173,600
      shares at an average price of $28.83 per share, totaling
      $5,006.  During the first quarter of 2007, we repurchased 137,100
      shares at an average price of $27.90 per share, totaling $3,825.  We
      repurchased no additional shares prior to the termination of this program,
      as
      described below.





In
      September 2007, we announced that our Board of Directors authorized us to
      repurchase, at our discretion, up to 2,500,000 shares of our common stock
      through open market or privately negotiated transactions.  The Board
      of Directors approved the investment of up to $50,000 for this share
      repurchase.  During the third quarter of 2007, we repurchased 69,900
      shares at an average price of $15.95 per share totaling $1,117.  Payments
      made under the Stock Repurchase Program are recorded in Treasury Stock on the
      condensed consolidated balance sheets.  This new program resulted in
      the termination of the stock repurchase program announced in July
      2005.





**Note
      9. Comprehensive income (loss).** Differences between net
      earnings (loss) and total comprehensive income (loss) resulted from foreign
      currency translation and unrecognized impacts of derivative instruments as
      follows:




Three
                  months ended
              
              
              Nine
                  months endedOctober
                  28,
              
              
              November
                  3,
              
              
              October
                  28,
              
              
              November
                  3,2006
              
              
              2007
              
              
              2006
              
              
              2007Net
                  earnings (loss)
              
              $
              8,075
              
              
              $
              (1,082
              )
              
              $
              24,435
              
              
              $
              (59,513
              )Other
                  comprehensive (loss):Currency
                  translation
              
              
              (279
              )
              
              
              (590
              )
              
              
              (536
              )
              
              
              (639
              )Unrecognized
                  gain (loss) on derivatives
              
              
              102
              
              
              
              (109
              )
              
              
              (161
              )
              
              
              (220
              )Total
                  comprehensive income (loss)
              
              $
              7,898
              
              
              $
              (1,781
              )
              
              $
              23,738
              
              
              $
              (60,372
              )





14
 KELLWOOD
              COMPANY AND SUBSIDIARIES
 NOTES
              TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
              (continued)
 (Dollars
              in thousands, except per share data)




**Note
      10.  Share-based compensation.**  On January 29,
      2006, we adopted SFAS No. 123(R), *Share-Based Payment*, requiring the
      recognition of compensation expense in the Condensed Consolidated Statement
      of
      Operations related to the fair value of our employee share-based
      options.  SFAS No. 123(R) revises SFAS No. 123, *Accounting for
      Stock-Based Compensation*, and supersedes Accounting Principles Board (APB)
      Opinion No. 25, *Accounting for Stock Issued to
      Employees*.  SFAS No. 123(R) is supplemented by Securities and
      Exchange Commission (SEC) Staff Accounting Bulletin (SAB) No. 107,
*Share-Based Payment*.  SAB No. 107 expresses the SEC staff’s
      views regarding the interaction between SFAS No. 123(R) and certain SEC rules
      and regulations including the valuation of share-based payment
      arrangements.  SFAS No. 123(R) amends SFAS No. 95, *Statement of
      Cash Flows*, to require that excess tax benefits be reported as a financing
      cash inflow rather than as a reduction of taxes paid, which is included within
      operating cash flows.





Determining
      the fair value of share-based awards at the grant date requires judgment,
      including estimating the expected term that stock options will be outstanding
      prior to exercise, the associated volatility and the expected
      dividends.  Judgment is also required in estimating the amount of
      share-based awards expected to be forfeited prior to vesting.  If
      actual forfeitures differ significantly from these estimates, share-based
      compensation expense could be materially impacted.  Prior to adopting
      SFAS No. 123(R), we applied APB Opinion No. 25, and related Interpretations,
      in
      accounting for our stock-based compensation plans.  All employee stock
      options were granted at or above the grant date market
      price.  Accordingly, no compensation cost was recognized for fixed
      stock option grants in prior periods.





We
      recognize the cost of all employee stock options on a straight-line attribution
      basis over their respective vesting periods.  Total stock option
      expense recorded in the third quarter of 2006 and 2007 has been reduced by
      an
      estimated forfeiture rate of 5.0%.  This estimate will be revised in
      subsequent periods if actual forfeitures differ from the original
      estimates.





We
      have
      issued stock options and restricted shares to employees under share-based
      compensation plans.  Stock options are issued at the current market
      price, subject to a three to five year vesting period with a contractual term
      of
      10 years.  Shares are issued from treasury stock upon the exercise of
      stock options.





Compensation
      expense for restricted stock awards is measured at fair value on the date of
      grant based on the number of shares granted and the quoted market price of
      our
      common stock.  We awarded 49,734 shares of restricted stock in the
      first quarter of 2007.  No additional shares of restricted stock were
      awarded through the third quarter of 2007.





The
      fair
      value of options granted is estimated on the date of grant using the
      Black-Scholes option-pricing model.  No options have been granted
      since the first quarter of 2005.





A
      summary
      of stock options outstanding as of February 3, 2007 and the plans’ activity
      during the nine months ended November 3, 2007 is presented below:




(Shares
                  in thousands)
              
              Shares
              
              
              Weighted
                    AverageExercise
                  Price
              
              
              Weighted
                        AverageRemainingContractualTerm
                  (Years)
              
              
              AggregateIntrinsicValueOutstanding
                  at February 3, 2007
              
              
              2,152
              
              
              $
              29.60Granted
              
              
              -
              
              
              
              -Exercised
              
              
              (83
              )
              
              
              24.79Forfeited
                  or expired
              
              
              (106
              )
              
              
              34.19Outstanding
                  at November 3, 2007
              
              
              1,963
              
              
              $
              29.55
              
              
              
              4.9
              
              
              $
              1,772Exercisable
                  at November 3, 2007
              
              
              1,746
              
              
              $
              29.78
              
              
              
              4.7
              
              
              $
              1,727




The
      total
      intrinsic value of options exercised during the three and nine month periods
      ended October 28, 2006 was $191 and $2,301, respectively.  The total
      intrinsic value of options exercised during the three and nine month periods
      ended November 3, 2007 were $0 and $453, respectively.  The amount of
      cash received from the exercise of stock options for the three and nine months
      ended November 3, 2007 was $0 and $2,023.





15
 KELLWOOD
              COMPANY AND SUBSIDIARIES
 NOTES
              TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
              (continued)
 (Dollars
              in thousands, except per share
              data)




A
      summary
      of the activity for nonvested stock option awards as of November 3, 2007 and
      changes during the nine months ended November 3, 2007 is presented
      below:




Grant
                  Date(Shares
                  in thousands)
              
              Awards
              
              
              Fair
                  Value per AwardNonvested
                  at February 3, 2007
              
              
              263
              
              
              $
              8.78Granted
              
              
              -
              
              
              
              -Vested
              
              
              (135
              )
              
              
              8.77Cancelled
              
              
              (25
              )
              
              
              8.77Nonvested
                  at November 3, 2007
              
              
              103
              
              
              $
              8.78




For
      the
      three months ended November 3, 2007, we recorded $332 of stock option expense
      and a related deferred tax asset of $121.  For the nine months ended
      November 3, 2007, we recorded $986 of stock option expense and a related
      deferred tax asset of $358.  As of November 3, 2007, there was $388 of
      total unrecognized compensation cost related to nonvested share-based
      compensation awards granted under the stock option plans, which will all be
      expensed in fiscal year 2007.





**Note
      11. Income Taxes.**  Our effective tax benefit rate on
      continuing operations for the three and nine month periods ended November 3,
      2007 was 38.9% and 31.2%, respectively.  The three month rate differs
      from the U.S. statutory tax rate of 35.0% primarily due to state
      taxes.  The nine month rate differs from the U.S. statutory tax rate
      primarily due to the non-deductibility of certain impairment
      charges.





Excluding
      impairment, restructuring and other non-recurring charges, our effective tax
      rate for continuing operations for the three and nine month periods ended
      November 3, 2007 was 34.8% and 44.9%, respectively.  The three and
      nine month rates differ from the U.S. statutory rate of 35.0% primarily due
      to
      state taxes.  We believe our 2007 full year effective tax rate for ongoing
      operations will approximate 39%.  This rate differs from the 35%
      expected after the six months ended August 4, 2007 primarily due to a higher
      percentage of our ongoing earnings now anticipated to come from our domestic
      operations due to the fact that a majority of our foreign earnings are now
      being
      classified as discontinued operations.





We
      adopted the provision of FASB Interpretation 48, *Accounting for Uncertainty
      in Income Taxes – an interpretation of FASB Statement No. 109* (FIN 48), on
      February 4, 2007.  As of this date, we had $38,235 of unrecognized tax
      benefits, including $23,782 which would affect our effective tax rate if
      recognized.  As a result of the implementation of FIN 48, we
      reclassified $30,683 of tax liabilities from current to non-current and $3,018
      to deferred tax assets which had previously been netted against current
      liabilities.  No adjustment was made to retained earnings in adopting
      FIN 48 and there have been no material changes in the amount of unrecognized
      tax
      benefits since adoption.  It is reasonably possible that within the
      next 12 months we could settle some ongoing audits with various taxing
      jurisdictions and/or we could have the statute of limitations expire in various
      jurisdictions.  Should these events occur, our unrecognized tax
      benefits could be reduced by $7,000 to $10,000.





We
      include accrued interest and penalties on underpayments of income taxes in
      our
      income tax provision.  As of February 4, 2007, we had accrued
      approximately $5,266 of gross interest and penalties ($3,884 net of
      tax).  Interest is computed on the difference between the tax position
      recognized in accordance with FIN 48 and the amount previously taken or expected
      to be taken in our tax returns.





All
      amounts related to FIN 48 include continuing and discontinued
      operations.





We
      are no
      longer subject to examination for U.S. federal income tax for 2003 and
      prior.  With limited exceptions, we are no longer subject to state
      income tax examinations for 2001 and prior.  Foreign income tax
      returns are principally no longer subject to examination for 2000 and
      prior.











16
 KELLWOOD
              COMPANY AND SUBSIDIARIES
 NOTES
              TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
              (continued)
 (Dollars
              in thousands, except per share data)




**Note
      12.  Earnings (loss) per share.**The following is a
      reconciliation between basic and diluted earnings (loss) per share:




Three
                  months ended
              
              
              Nine
                  months endedOctober
                  28,
              
              
              November
                  3,
              
              
              October
                  28,
              
              
              November
                  3,2006
              
              
              2007
              
              
              2006
              
              
              2007Numerators:Net
                  (loss) earnings from continuing operations
              
              $
              (1,483
              )
              
              $
              (5,949
              )
              
              $
              (1,632
              )
              
              $
              (73,529
              )Net
                  earnings from discontinued operations
              
              
              9,558
              
              
              
              4,867
              
              
              
              26,067
              
              
              
              14,016Net
                  earnings (loss)
              
              $
              8,075
              
              
              $
              (1,082
              )
              
              $
              24,435
              
              
              $
              (59,513
              )Denominators
                  (000's):Average
                  shares outstanding - Basic
              
              
              25,722
              
              
              
              25,857
              
              
              
              25,682
              
              
              
              25,895Impact
                  of stock options
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -Average
                  shares outstanding - Diluted
              
              
              25,722
              
              
              
              25,857
              
              
              
              25,682
              
              
              
              25,895Earnings
                  (loss) per share:Basic:Continuing
                  operations
              
              $
              (0.06
              )
              
              $
              (0.23
              )
              
              $
              (0.06
              )
              
              $
              (2.84
              )Discontinued
                  operations
              
              
              0.37
              
              
              
              0.19
              
              
              
              1.02
              
              
              
              0.54Earnings
                  (loss) per share
              
              $
              0.31
              
              
              $
              (0.04
              )
              
              $
              0.95
              
              
              $
              (2.30
              )Earnings
                  (loss) per share:Diluted:Continuing
                  operations
              
              $
              (0.06
              )
              
              $
              (0.23
              )
              
              $
              (0.06
              )
              
              $
              (2.84
              )Discontinued
                  operations
              
              
              0.37
              
              
              
              0.19
              
              
              
              1.02
              
              
              
              0.54Earnings
                  (loss) per share
              
              $
              0.31
              
              
              $
              (0.04
              )
              
              $
              0.95
              
              
              $
              (2.30
              )




The
      calculation of diluted earnings per share for the three and nine month periods
      ended October 28, 2006 excludes the impact of the contingent convertible debt
      and 1,247,000 and 1,270,000, shares of stock options, respectively, because
      to
      include them would have been antidilutive.  The calculation of diluted
      earnings (loss) per share for the three and nine month periods ended November
      3,
      2007 excludes the impact of the contingent convertible debt and 1,996,740 and
      1,993,085 shares of stock options, respectively, because to include them would
      have been antidilutive.





**Note
      13. Reportable segments.**  We and our subsidiaries are
      principally engaged in the apparel and related soft goods
      industries.  Our operations are managed in a number of divisions that
      are organized around individual product lines and brands.  These
      divisions are aggregated into two major consumer market product groupings along
      with General Corporate, which represent our reportable
      segments.  These segments are:





·
            **Women's
                Sportswear**designs, merchandises and sells women's sportswear sold through leading
                retailers in all channels of distribution.  The product line
                includes blazers, dresses, sweaters, blouses, vests, other tops,
                skirts,
                pants and skorts.  The business is primarily branded goods sold
                at the popular-to-moderate price points, but the segment does include
                some
                better-to-bridge lines – upper price point women's sportswear sold
                principally to specialty stores, department stores and catalog
                houses.  A partial list of such brands are Vince®, HOLLYWOULD,
                Phat Farm®, Sag Harbor®, Koret®, Jax®, Democracy®, SangriaTM, Jolt®, My
                Michelle® and Briggs New York®.  Calvin Klein, XOXO®, David
                Meister, O Oscar, an Oscar de le Renta Company and Baby Phat®, are
                produced under licensing agreements.





·
            **Other
                Soft Goods** designs, merchandises and sells children’s apparel and
                recreation apparel and products (tents, sleeping bags, backpacks
                and
                related products).  The business is primarily branded goods
                including Royal Robbins, Kelty®, and Sierra Design® for recreation
                products and Hanna Andersson and Gerber® for children’s
                apparel.





17
 KELLWOOD
              COMPANY AND SUBSIDIARIES
 NOTES
              TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
              (continued)
 (Dollars
              in thousands, except per share data)




·
            **General
                Corporate** includes general and administrative expenses at the
                corporate level that are not allocated to the above
                segments.





Prior
      to
      the third quarter of 2007, we also reported a Men’s Sportswear segment in
      continuing operations.  With the announced sale in the third quarter
      of 2007, the Smart Shirts business previously reported in this segment is now
      reported as a discontinued operation (see Note 4) in the Men’s Sportswear
      segment.  Further, we have announced the transformation of the Phat
      Farm men’s wholesale business to solely a licensing model during the third
      quarter of 2007 (see Note 3), which was already in place within the Phat
      Fashions division.   This business, from which the majority of
      revenues are generated by the Baby Phat brand, is now reported within the
      Women’s Sportswear segment in continuing operations.  The factors for
      determining the reportable segments included the manner in which management
      evaluates the performance of the total company with the nature of the individual
      business activities.  In accordance with SFAS No. 131, *Disclosures
      about Segments of an Enterprise and Related Information*, and SFAS No. 144,
*Accounting for the Impairment or Disposal of Long-Lived Assets*, all
      prior period segment information was reclassified to conform to this new
      financial reporting presentation.





Management
      evaluates the performance of our operating segments separately to individually
      monitor the different factors affecting financial
      performance.  Segment earnings (loss) for the two major consumer
      market product segments include substantially all of the segment's costs of
      production, distribution and administration.





Segment
      net assets include net working capital, net fixed assets and other noncurrent
      assets and liabilities of each segment.  Goodwill, net intangibles,
      debt, cash and certain corporate assets, including capitalized software and
      shared distribution centers are accounted for at the corporate level and as
      a
      result are included in the General Corporate segment net
      assets.  Stock option expense and amortization of intangibles are
      accounted for at the corporate level and are not allocated to the
      segments.   Capital expenditures exclude the cost of long-lived
      assets included in acquisitions accounted for under purchase
      accounting.
















18
 KELLWOOD
              COMPANY AND SUBSIDIARIES
 NOTES
              TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
              (continued)
 (Dollars
              in thousands, except per share data)





Sales,
      segment earnings (loss) and net assets for continuing operations by segment
      for
      the three and nine months ended October 28, 2006 and November 3, 2007 are as
      follows:





Three
                  months ended
              
              
              Nine
                  months endedOctober
                  28,
              
              
              November
                  3,
              
              
              October
                  28,
              
              
              November
                  3,2006
              
              
              2007
              
              
              2006
              
              
              2007Net
                  sales:Women's
                  Sportswear
              
              $
              315,034
              
              
              $
              276,222
              
              
              $
              894,358
              
              
              $
              834,499Other
                  Soft Goods
              
              
              81,973
              
              
              
              127,833
              
              
              
              244,673
              
              
              
              308,610Total
                  net sales
              
              $
              397,007
              
              
              $
              404,055
              
              
              $
              1,139,031
              
              
              $
              1,143,109Segment
                  earnings (loss):Women's
                  Sportswear
              
              $
              24,909
              
              
              $
              11,632
              
              
              $
              56,838
              
              
              $
              46,454Other
                  Soft Goods
              
              
              9,374
              
              
              
              16,563
              
              
              
              25,680
              
              
              
              37,488General
                  Corporate
              
              
              (11,869
              )
              
              
              (10,843
              )
              
              
              (38,282
              )
              
              
              (33,384
              )Total
                  segments
              
              
              22,414
              
              
              
              17,352
              
              
              
              44,236
              
              
              
              50,558Stock
                  option expense
              
              
              468
              
              
              
              332
              
              
              
              3,877
              
              
              
              986Amortization
                  of intangible assets
              
              
              2,628
              
              
              
              3,942
              
              
              
              7,692
              
              
              
              10,678Impairment,
                  restructuring andother
                  non-recurring charges
              
              
              19,041
              
              
              
              15,820
              
              
              
              25,957
              
              
              
              130,098Interest
                  expense, net
              
              
              2,903
              
              
              
              7,035
              
              
              
              9,819
              
              
              
              15,667Other
                  income, net
              
              
              (107
              )
              
              
              (46
              )
              
              
              (358
              )
              
              
              (27
              )Loss
                  before income taxes
              
              $
              (2,519
              )
              
              $
              (9,731
              )
              
              $
              (2,751
              )
              
              $
              (106,844
              )Net
                  assets at quarter end:Women's
                  Sportswear
              
              $
              204,559
              
              
              $
              182,465Other
                  Soft Goods
              
              
              49,196
              
              
              
              96,636General
                  Corporate
              
              
              262,365
              
              
              
              178,992Continuing
                  Operations
              
              
              516,120
              
              
              
              458,093Discontinued
                  Operations
              
              
              110,129
              
              
              
              103,989Kellwood
                  total
              
              $
              626,249
              
              
              $
              562,082




**Note
      14. New accounting standards.**  In July 2006, the FASB issued
      Interpretation No. 48, *Accounting for Uncertainty in Income Taxes – an
      interpretation of FASB Statement No. 109* (FIN 48), which clarifies the
      accounting for uncertainty in income tax positions.  This
      Interpretation requires that the financial statement effects of a tax position
      taken or expected to be taken in a tax return are to be recognized in the
      financial statements when it is more likely than not, based on the technical
      merits, that the position will be sustained upon examination, including
      resolution of any related appeals or litigation processes.  We adopted
      this interpretation in the first quarter of 2007.  See Note 11 for
      additional disclosure.





In
      September 2006, the FASB issued SFAS No. 157, Fair Value Measurements, which
      defines fair value, establishes a framework for measuring fair value and expands
      disclosures about fair value measurements.  The statement is effective
      for fiscal years beginning after November 15, 2007.  In November 2007,
      the FASB authorized its staff to draft a proposed FASB Staff Position (FSP)
      that
      would partially defer the effective date of SFAS No. 157 for one year for
      non-financial assets and non-financial liabilities that are recognized or
      disclosed at fair value in the financial statements on a nonrecurring
      basis.  The proposed FSP will not defer recognition and disclosure
      requirements for financial assets and financial liabilities or for non-financial
      assets and non-financial liabilities that are remeasured at least
      annually.  We are currently evaluating the impact of adopting SFAS 157
      on our consolidated financial statements, but do not expect it to have a
      material impact on our financial statements.





19
 KELLWOOD
              COMPANY AND SUBSIDIARIES
 NOTES
              TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
              (continued)
 (Dollars
              in thousands, except per share data)




In
      February 2007, the FASB issued SFAS No. 159, *The Fair Value Option for
      Financial Assets and Financial Liabilities – including an amendment of FASB
      Statement No. 115, Accounting for Certain Investments in Debt and Equity
      Securities.*   This Statement permits entities to choose to
      measure many financial instruments and certain other items at fair value. The
      objective is to improve financial reporting by providing entities with the
      opportunity to mitigate volatility in reported earnings caused by measuring
      related assets and liabilities differently without having to apply complex
      hedge
      accounting provisions.   This Statement is effective for fiscal
      years beginning after November 15, 2007. We are currently evaluating the impact
      of SFAS No. 159 on our financial statements but do not expect it to have a
      material impact on our financial statements.



















20
 MANAGEMENT'S
            DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
              RESULTS OF OPERATIONS
 (Dollars
              in thousands, except per share data)





**Item
      2.Management’s Discussion and Analysis
      of Financial Condition and Results of Operations**





The
      following discussion is focused on significant changes in financial condition
      and results of operations in the condensed consolidated balance sheets at
      October 28, 2006 and November 3, 2007, in the condensed consolidated statements
      of operations for the three and nine month periods ended October 28, 2006 and
      November 3, 2007, and in the condensed consolidated statements of cash flows
      for
      the nine month periods ended October 28, 2006 and November 3, 2007. This
      discussion should be read in conjunction with the audited consolidated financial
      statements and accompanying notes included in our Annual Report to Stockholders
      on Form 10-K for 2006 (the fiscal year ended February 3, 2007).





Our
      internal reporting utilizes net earnings, earnings per share and gross profit
      excluding the impairment, restructuring and other non-recurring
      charges.  Such items, excluding the impairment, restructuring and
      other non-recurring charges, are referred to as ongoing.  Management
      evaluates each of its divisions using these ongoing measures in order to isolate
      the results of operations by excluding these charges, which were
      non-recurring.  Therefore, throughout management’s discussion and
      analysis of financial condition and results of operations, there will be a
      discussion of operating results both including and excluding the impairment,
      restructuring and other non-recurring charges.  The ongoing amounts
      that exclude the impairment, restructuring and other non-recurring charges
      are
      non-GAAP measures and may not be comparable to measures used by other
      entities.





**OPERATING
      RESULTS**





**Impairment,
      restructuring and other non-recurring charges**


Restructuring
      and other non-recurring charges consist of expenses associated with our efforts
      to continuously improve operational efficiency along with other non-recurring
      items.  Impairment, restructuring and other non-recurring charges are
      detailed below.





During
      the second quarter of 2005, we announced a restructuring plan (the 2005
      Restructuring Plan).  We have substantially completed the business
      dispositions and shutdown activities contemplated by the 2005 Restructuring
      Plan. For additional information regarding the 2005 Restructuring Plan, refer
      to
      the footnote accompanying the financial statements contained in the Annual
      Report to Stockholders on Form 10-K for 2006.





During
      2007, we have announced several rationalization efforts aimed at improving
      our
      operational efficiency.  These 2007 restructuring activities, along
      with other impairment and non-recurring charges, consist of the
      following:





·
            During
                the second quarter of 2007, we announced that we would consolidate
                our
                warehouse operations by closing the Chico, California distribution
                center.  Restructuring charges of approximately $3,500, which
                are primarily comprised of severance and termination benefits and
                contractual obligations, are expected to be incurred through the
                fourth
                quarter of 2007.  Restructuring charges of $2,245 and $2,805
                were incurred during the three and nine months ended November 3,
                2007,
                respectively.  These charges relate to the General Corporate
                segment.





·
            During
                the second quarter of 2007, we determined certain intangibles, including
                trademarks, customer lists and goodwill for certain women’s mainstream
                brands were impaired resulting in a charge of $113,717 ($76,078 after
                tax
                and $2.92 per diluted share).  See Note 6 to Condensed
                Consolidated Financial Statements for more information on the impairment
                charges.  These charges relate to the General Corporate
                segment.





·
            During
                the third quarter of 2007, we announced our Phat Farm men’s wholesale
                business entered into a partnership with Longstreet Industries, a
                division
                of Stretch-O-Rama, Inc., to design and market the sportswear and
                outerwear
                collections under the Phat Farm® and the new XVTM brand names in an effort
                to refocus the Phat Farm business solely on
                licensing.  Restructuring charges of approximately $11,000 which
                are primarily comprised of severance and termination benefits, contractual
                obligations and fixed asset impairment are expected to be incurred
                through
                the fourth quarter of 2007.  Restructuring charges of $9,718
                were incurred in the third quarter of 2007.  These charges
                relate to the Women’s Sportswear segment (see Note 13 to Condensed
                Consolidated Financial Statements for additional discussion of the
                classification of Phat Farm in the Women’s Sportswear
                segment).





21
 MANAGEMENT'S
            DISCUSSION AND ANALYSIS OF
            FINANCIAL CONDITION AND
              RESULTS OF OPERATIONS (continued)
 (Dollars
              in thousands, except per share data)




·
            During
                the third quarter of 2007, we announced we will reorganize the women’s
                sportswear businesses, creating three operating divisions, from
                seven.  Further, we have undertaken initiatives to streamline
                corporate functions and implement supply chain savings
                initiatives.  Restructuring charges of approximately $26,783
                which are primarily comprised of severance and termination benefits,
                contractual obligations, fixed asset impairment and non-recurring
                systems
                and process redesign costs are expected to be incurred through the
                end of
                fiscal 2008 related to such activities.  Restructuring charges
                of $3,385 were incurred in the third quarter of 2007.  Charges
                of $1,637 and $1,748 relate to the Women’s Sportswear and General
                Corporate segments, respectively.





The
      2007
      impairment, restructuring and non-recurring charges are included within
      continuing operations.  The total expected costs of these actions and
      the provision recorded to date related to our reportable segments (before tax)
      is summarized as follows:




TotalTotal
              
              
              ProvisionExpected
              
              
              RecordedCost
              
              
              to
                  DateWomen’s
                  Sportswear
              
              $
              29,000
              
              
              $
              11,356General
                  Corporate
              
              
              126,000
              
              
              
              119,081Total
              
              $
              155,000
              
              
              $
              130,437




As
      described in Note 13, goodwill and net intangible assets are accounted for
      at
      the corporate level and as a result, the impairment charges related to those
      goodwill and intangible assets are presented below with the General Corporate
      segment.  The impairment charges recorded in the second quarter of
      2007 related to certain of our women’s mainstream
      brands.  Restructuring and other non-recurring charges are presented
      below with the reportable segment to which they relate.  As presented
      in Note 13, segment earnings (loss) excludes those charges recorded within
      the
      impairment, restructuring and other non-recurring charges
      caption.  Impairment, restructuring and other non-recurring charges
      (cost reversals) as they relate to each business segment (before tax) are
      summarized as follows:





Three
                  months ended
              
              
              Nine
                  months endedOctober
                  28, 2006
              
              
              October
                  28, 2006Continuing
              
              
              Discontinued
              
              
              
              
              
              Continuing
              
              
              DiscontinuedOperations
              
              
              Operations
              
              
              Total
              
              
              Operations
              
              
              Operations
              
              
              TotalWomen’s
                  Sportswear
              
              $
              18,767
              
              
              $
              219
              
              
              $
              18,986
              
              
              $
              22,396
              
              
              $
              1,203
              
              
              $
              23,599Men’s
                  Sportswear
              
              
              (351
              )
              
              
              (19
              )
              
              
              (370
              )
              
              
              1,022
              
              
              
              (396
              )
              
              
              626Other
                  Soft Goods
              
              
              17
              
              
              
              (2,301
              )
              
              
              (2,284
              )
              
              
              139
              
              
              
              (3,708
              )
              
              
              (3,569
              )General
                  Corporate
              
              
              608
              
              
              
              125
              
              
              
              733
              
              
              
              2,400
              
              
              
              647
              
              
              
              3,047Total
              
              $
              19,041
              
              
              $
              (1,976
              )
              
              $
              17,065
              
              
              $
              25,957
              
              
              $
              (2,254
              )
              
              $
              23,703




The
      restructuring and other non-recurring charges (cost reversals) for the three
      and
      nine months ended October 28, 2006 were all related to the 2005 Restructuring
      Plan.





Three
                  months ended
              
              
              Nine
                  months endedNovember
                  3, 2007
              
              
              November
                  3, 2007Continuing
              
              
              Discontinued
              
              
              
              
              
              Continuing
              
              
              DiscontinuedOperations
              
              
              Operations
              
              
              Total
              
              
              Operations
              
              
              Operations
              
              
              TotalWomen’s
                  Sportswear
              
              $
              11,017
              
              
              $
              (145
              )
              
              $
              10,872
              
              
              $
              11,017
              
              
              $
              (145
              )
              
              $
              10,872Men’s
                  Sportswear
              
              
              -
              
              
              
              (38
              )
              
              
              (38
              )
              
              
              -
              
              
              
              (38
              )
              
              
              (38
              )Other
                  Soft Goods
              
              
              -
              
              
              
              (536
              )
              
              
              (536
              )
              
              
              -
              
              
              
              (536
              )
              
              
              (536
              )General
                  Corporate
              
              
              4,803
              
              
              
              1,100
              
              
              
              5,903
              
              
              
              119,081
              
              
              
              1,100
              
              
              
              120,181Total
              
              $
              15,820
              
              
              $
              381
              
              
              $
              16,201
              
              
              $
              130,098
              
              
              $
              381
              
              
              $
              130,479





22
 MANAGEMENT'S
            DISCUSSION AND ANALYSIS OF FINANCIAL
            CONDITION AND
              RESULTS OF OPERATIONS (continued)
 (Dollars
              in thousands, except per share data)




The
      impairment, restructuring and other non-recurring charges for the three and
      nine
      months ended November 3, 2007 included provision reversals of $339 in continuing
      operations related to the Women’s Sportswear segment and all charges in
      discontinued operations related to the 2005 Restructuring Plan.  All
      other charges for the three and nine month periods related to the 2007
      restructuring activities, along with impairment and other non-recurring charges
      during 2007.





For
      the
      three and nine months ended October 28, 2006, the costs (cost reversals) related
      to restructuring and other non-recurring charges were recorded as
      follows:





Three
                  months ended
              
              
              Nine
                  months endedOctober
                  28, 2006
              
              
              October
                  28, 2006Continuing
              
              
              Discontinued
              
              
              
              
              
              Continuing
              
              
              DiscontinuedOperations
              
              
              Operations
              
              
              Total
              
              
              Operations
              
              
              Operations
              
              
              TotalNet
                  sales
              
              $
              -
              
              
              $
              -
              
              
              $
              -
              
              
              $
              -
              
              
              $
              (2,192
              )
              
              $
              (2,192
              )Cost
                  of products sold
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (348
              )
              
              
              (348
              )Restructuring
                  and othernon-recurring
                  charges
              
              
              19,041
              
              
              
              (1,976
              )
              
              
              17,065
              
              
              
              25,957
              
              
              
              286
              
              
              
              26,243Total
                  pretax cost
              
              $
              19,041
              
              
              $
              (1,976
              )
              
              $
              17,065
              
              
              $
              25,957
              
              
              $
              (2,254
              )
              
              $
              23,703Total
                  after tax cost
              
              $
              12,092
              
              
              $
              (1,258
              )
              
              $
              10,834
              
              
              $
              16,534
              
              
              $
              (1,437
              )
              
              $
              15,097Diluted
                  loss (income) per share
              
              $
              0.47
              
              
              $
              (0.05
              )
              
              $
              0.42
              
              
              $
              0.64
              
              
              $
              (0.06
              )
              
              $
              0.59




The
      restructuring and other non-recurring charges for the three and nine months
      ended October 28, 2006 were all related to the 2005 Restructuring Plan. Cost
      reversals are primarily a result of the change in estimate related to the
      reversals of amounts originally provided for non-recurring inventory and
      purchase commitment reserves as part of discontinued operations resulted
      primarily from much better than anticipated sales to existing customers without
      significant order cancellations or price concessions.





For
      the
      three and nine months ended November 3, 2007, the costs related to impairment,
      restructuring and other non-recurring charges were recorded as
      follows:





Three
                  months ended
              
              
              Nine
                  months endedNovember
                  3, 2007
              
              
              November
                  3, 2007Continuing
              
              
              Discontinued
              
              
              
              
              
              Continuing
              
              
              DiscontinuedOperations
              
              
              Operations
              
              
              Total
              
              
              Operations
              
              
              Operations
              
              
              TotalImpairment
                  of goodwilland
                  intangible assets
              
              $
              -
              
              
              $
              -
              
              
              $
              -
              
              
              $
              113,717
              
              
              
              -
              
              
              $
              113,717Restructuring
                  and othernon-recurring
                  charges
              
              
              14,298
              
              
              
              381
              
              
              
              14,679
              
              
              
              14,859
              
              
              
              381
              
              
              
              15,240Fixed
                  asset impairment
              
              
              1,522
              
              
              
              -
              
              
              
              1,522
              
              
              
              1,522
              
              
              
              -
              
              
              
              1,522Total
                  pretax cost
              
              $
              15,820
              
              
              $
              381
              
              
              $
              16,201
              
              
              $
              130,098
              
              
              $
              381
              
              
              $
              130,479Total
                  after tax cost
              
              $
              9,919
              
              
              $
              240
              
              
              $
              10,159
              
              
              $
              86,347
              
              
              $
              240
              
              
              $
              86,587Diluted
                  loss per share
              
              $
              0.38
              
              
              $
              0.01
              
              
              $
              0.39
              
              
              $
              3.33
              
              
              $
              0.01
              
              
              $
              3.34




The
      impairment, restructuring and other non-recurring charges for the three and
      nine
      months ended November 3, 2007 included provision reversals of $339 in continuing
      operations and additional provisions of $381 in discontinued operations related
      to the 2005 Restructuring Plan, each presented in the Restructuring and other
      non-recurring charges caption above.













23
 MANAGEMENT'S
            DISCUSSION AND ANALYSIS OF FINANCIAL
            CONDITION AND
              RESULTS OF OPERATIONS (continued)
 (Dollars
              in thousands, except per share data)




A
      rollforward of the major components of these impairment, restructuring and
      other
      non-recurring charges from August 4, 2007 to November 3, 2007 recorded in
      continuing operations is as follows:





Accrual
                  as of
              
              
              
              
              
              
              
              
              
              
              
              Accrual
                  as ofAugust
                  4,
              
              
              
              
              
              
              
              
              
              
              
              November
                  3,2007
              
              
              Provision
              
              
              Reversals
              
              
              Utilization
              
              
              2007Contractual
                  Obligations
              
              $
              17,359
              
              
              $
              6,593
              
              
              $
              (339
              )
              
              $
              (6,803
              )
              
              $
              16,810Employee
                  Severance andTermination
                  Benefits
              
              
              290
              
              
              
              6,094
              
              
              
              -
              
              
              
              (4,744
              )
              
              
              1,640Systems
                  and Process Redesign Costs
              
              
              -
              
              
              
              1,140
              
              
              
              -
              
              
              
              (870
              )
              
              
              270Fixed
                  Asset Impairment
              
              
              -
              
              
              
              1,522
              
              
              
              -
              
              
              
              (1,522
              )
              
              
              -Other
                  Non-Recurring Charges
              
              
              -
              
              
              
              810
              
              
              
              -
              
              
              
              (60
              )
              
              
              750Total
              
              $
              17,649
              
              
              $
              16,159
              
              
              $
              (339
              )
              
              $
              (13,999
              )
              
              $
              19,470




Amounts
      included above as of November 3, 2007 related to the 2005 Restructuring Plan
      were $15,341 and $289 which are presented in Contractual Obligations and
      Employee Severance and Termination Benefits, respectively.





A
      rollforward of the major components of these restructuring charges from August
      4, 2007 to November 3, 2007 recorded in discontinued operations (see Note 4
      to
      Condensed Consolidated Financial Statements for further discussion of
      discontinued operations) is as follows:





Accrual
                  as of
              
              
              
              
              
              
              
              
              
              
              
              Accrual
                  as ofAugust
                  4,
              
              
              
              
              
              
              
              
              
              
              
              November
                  3,2007
              
              
              Provision
              
              
              Reversals
              
              
              Utilization
              
              
              2007Contractual
                  Obligations
              
              $
              3,935
              
              
              $
              1,100
              
              
              $
              (719
              )
              
              $
              (1,673
              )
              
              $
              2,643Employee
                  Severance andTermination
                  Benefits
              
              
              3,974
              
              
              
              -
              
              
              
              -
              
              
              
              (69
              )
              
              
              3,905Total
              
              $
              7,909
              
              
              $
              1,100
              
              
              $
              (719
              )
              
              $
              (1,742
              )
              
              $
              6,548




Amounts
      included above as of November 3, 2007 were all related to the 2005 Restructuring
      Plan.





Contractual
      Obligations are adverse contractual arrangements under which losses are probable
      and estimable and where there is no future economic benefit.  These
      include leases and minimum payments under license
      agreements.  Employee Severance and Termination Benefits are provided
      for in accordance with SFAS No. 146, *Accounting for Costs Associated with
      Exit or Disposal Activities.*  Total employee severance and
      termination benefits will be recorded as incurred.  Systems and
      process redesign costs include the non-recurring charges associated with
      formulating and evaluating systems alternatives, data conversion costs,
      evaluation and redesign of business processes and training costs directly
      related to the 2007 restructuring activities.  Fixed asset impairment
      related to business systems are included in systems and process redesign
      costs.  Fixed Asset Impairment includes provisions for fixed assets
      that were determined to be impaired in connection with Statement of Financial
      Accounting Standards (SFAS) No. 144, *Accounting for the Impairment or
      Disposal of Long-Lived Assets*, and were written down to their fair values
      less costs to sell.





In
      continuing operations, Contractual Obligations will be settled through 2012
      in
      accordance with the related agreements.  In discontinued operations,
      Contractual Obligations and employee severance and termination benefits will
      be
      settled through 2009.













24
 MANAGEMENT'S
            DISCUSSION AND ANALYSIS OF FINANCIAL
            CONDITION AND
              RESULTS OF OPERATIONS (continued)
 (Dollars
              in thousands, except per share data)




**Discontinued
      operations**


In
      November 2007, we announced that Youngor Group Co., Ltd. (Youngor Group) agreed
      to acquire our Smart Shirts business for approximately $120,000 in cash. The
      transaction, which is subject to certain customary closing conditions including
      foreign regulatory approvals, is expected to close by the end of fiscal year
      2007.  Separately, in November 2007, we sold the Smart Shirts real
      estate assets in Hong Kong for approximately $41,000 in cash.  Neither
      the potential impact due to the sale of the Smart Shirts business nor the sale
      of the Smart Shirts real estate assets have been included in the Condensed
      Consolidated Financial Statements, except to present Smart Shirts as a
      discontinued operation.  Prior to being classified as a discontinued
      operation, Smart Shirts was included in the Men’s Sportswear segment. We do not
      expect the sale of the Smart Shirts business and real estate assets to result
      in
      a significant gain or loss.





During
      the third quarter of 2006, we commenced reporting our New Campaign and IZOD
      women’s sportswear as discontinued operations.  Reporting New Campaign
      as a discontinued operation resulted from our agreement during the third quarter
      of 2006 to transfer the business and sell business assets to the
      licensor.  We closed on the sale in April 2007.  We received
      $9,984 and recognized a gain on sale of approximately $535.  Reporting
      our IZOD women’s sportswear operation as a discontinued operation resulted from
      our agreement during the third quarter of 2006 to terminate the licensing
      arrangement.  We transitioned this business in the second quarter of
      2007 with no significant gain or loss.  Prior to being classified as a
      discontinued operation, the New Campaign and IZOD operations were included
      in
      the Women’s Sportswear segment.





The
      results of operations and restructuring and other non-recurring charges for
      the
      discontinued operations (as discussed in Note 3 to Condensed Consolidated
      Financial Statements) are reported as discontinued operations for all periods
      presented.  Additionally, assets and liabilities of the discontinued
      operations are segregated in the accompanying condensed consolidated balance
      sheets.





Operating
      results for the discontinued operations, including all charges incurred during
      the periods presented for the restructuring and other non-recurring charges
      as
      described in Note 3, are as follows:





Three
                  months ended
              
              
              Nine
                  months endedOctober
                  28,
              
              
              November
                  3,
              
              
              October
                  28,
              
              
              November
                  3,2006
              
              
              2007
              
              
              2006
              
              
              2007Net
                  sales
              
              $
              141,618
              
              
              $
              126,276
              
              
              $
              394,588
              
              
              $
              360,347Restructuring
                  and othernon-recurring
                  charges (cost reversals)
              
              $
              (1,976
              )
              
              $
              381
              
              
              $
              286
              
              
              $
              381Earnings
                  before income taxes
              
              
              12,883
              
              
              
              7,392
              
              
              
              28,196
              
              
              
              18,900Income
                  taxes
              
              
              3,325
              
              
              
              2,525
              
              
              
              2,129
              
              
              
              4,884Net
                  earnings
              
              $
              9,558
              
              
              $
              4,867
              
              
              $
              26,067
              
              
              $
              14,016Earnings
                  per share
              
              $
              0.37
              
              
              $
              0.19
              
              
              $
              1.02
              
              
              $
              0.54




Income
      taxes for the nine months ended October 28, 2006 includes a $6,300 reversal
      of
      allowances for tax exposures related to a 2003 discontinued operation no longer
      deemed necessary due to finalization of an open tax year.



















25
 MANAGEMENT'S
            DISCUSSION AND ANALYSIS OF FINANCIAL
            CONDITION AND
              RESULTS OF OPERATIONS (continued)
 (Dollars
              in thousands, except per share data)




Summarized
      assets and liabilities of the discontinued operations are as
      follows:





February
                  3,
              
              
              October
                  28,
              
              
              November
                  3,2007
              
              
              2006
              
              
              2007Receivables,
                  net
              
              $
              79,849
              
              
              $
              74,420
              
              
              $
              80,002Inventories
              
              
              104,056
              
              
              
              103,835
              
              
              
              93,486Current
                  deferred taxes and prepaid expenses
              
              
              7,226
              
              
              
              6,979
              
              
              
              9,774Current
                  assets of discontinued operations
              
              $
              191,131
              
              
              $
              185,234
              
              
              $
              183,262Property,
                  plant and equipment, net
              
              $
              35,197
              
              
              $
              33,416
              
              
              $
              33,241Goodwill
              
              
              2,995
              
              
              
              2,995
              
              
              
              -Other
                  assets
              
              
              5,733
              
              
              
              6,516
              
              
              
              6,050Long-term
                  assets of discontinued operations
              
              $
              43,925
              
              
              $
              42,927
              
              
              $
              39,291Notes
                  payable and current portion of long-term debt
              
              $
              19,556
              
              
              $
              16,556
              
              
              $
              27,056Accounts
                  payable
              
              
              50,230
              
              
              
              48,894
              
              
              
              32,996Accrued
                  liabilities
              
              
              32,610
              
              
              
              33,138
              
              
              
              38,964Current
                  liabilities of discontinued operations
              
              $
              102,396
              
              
              $
              98,588
              
              
              $
              99,016Long-term
                  debt
              
              $
              16,667
              
              
              $
              19,444
              
              
              $
              13,889Deferred
                  income taxes and other
              
              
              346
              
              
              
              -
              
              
              
              5,659Long-term
                  liabilities of discontinued operations
              
              $
              17,013
              
              
              $
              19,444
              
              
              $
              19,548




The
      above
      assets and liabilities are primarily related to the Smart Shirts manufacturing
      operations.  In addition to the New Campaign and IZOD operations,
      which were disposed by November 2007, accrued liabilities reflect charges taken
      in connection with the restructuring activities that have not yet been paid
      and
      primarily relate to contractual obligations.





**Reconciliation
      of Operating Results – Continuing Operations**


The
      following table provides non-GAAP operating results for the three and nine
      months ended October 28, 2006 and November 3, 2007, for the ongoing operations
      and impairment, restructuring and other non-recurring charges,
      separately.  The table presents this breakdown of our operations in a
      manner that reconciles to our consolidated results as presented in the condensed
      consolidated financial statements.  The non-GAAP results of operations
      for the ongoing operations are presented separately from the impairment,
      restructuring and other non-recurring charges to enhance the user’s overall
      understanding of our current financial performance.  We believe the
      non-GAAP adjusted operating results provide useful information to both
      management and investors by excluding non-recurring expenses that we believe
      are
      not indicative of our core operating results.  Operating results for
      ongoing operations is the primary measure used by management to evaluate our
      performance, as well as the performance of our divisions and
      segments.  The non-GAAP financial information should be considered in
      addition to, not as a substitute for or as being superior to, operating income,
      cash flows or other measures of financial performance prepared in accordance
      with GAAP.  The following reconciliation and analysis is for
      continuing operations only.










26
 MANAGEMENT'S
            DISCUSSION AND ANALYSIS OF FINANCIAL
            CONDITION AND
              RESULTS OF OPERATIONS (continued)
 (Dollars
              in thousands, except per share data)




**Three
      months ended October 28, 2006**


Impairment,restructuring
                  andTotal
              
              
              other
                  non-
              
              
              OngoingContinuing
              
              
              recurring
                  charges
              
              
              OperationsNet
                  sales
              
              $
              397,007
              
              
              $
              -
              
              
              $
              397,007Cost
                  of products sold
              
              
              301,904
              
              
              
              -
              
              
              
              301,904Gross
                  profit
              
              
              95,103
              
              
              
              -
              
              
              
              95,103SG&A
              
              
              72,689
              
              
              
              -
              
              
              
              72,689Stock
                  option expense
              
              
              468
              
              
              
              -
              
              
              
              468Amortization
                  of intangibles
              
              
              2,628
              
              
              
              -
              
              
              
              2,628Impairment,
                  restructuring andother
                  non-recurring charges
              
              
              19,041
              
              
              
              (19,041
              )
              
              
              -Interest
                  expense, net
              
              
              2,903
              
              
              
              -
              
              
              
              2,903Other
                  income, net
              
              
              (106
              )
              
              
              -
              
              
              
              (106
              )(Loss)
                  earnings before taxes
              
              
              (2,520
              )
              
              
              19,041
              
              
              
              16,521Income
                  taxes
              
              
              (1,037
              )
              
              
              6,949
              
              
              
              5,912Net
                  (loss) earnings fromcontinuing
                  operations
              
              $
              (1,483
              )
              
              $
              12,092
              
              
              $
              10,609Effective
                  tax rate
              
              
              41.2
              %
              
              
              36.5
              %
              
              
              35.8
              %






**Three
      months ended November 3, 2007**


Impairment,restructuring
                  andTotal
              
              
              other
                  non-
              
              
              OngoingContinuing
              
              
              recurring
                  charges
              
              
              OperationsNet
                  sales
              
              $
              404,055
              
              
              $
              -
              
              
              $
              404,055Cost
                  of products sold
              
              
              293,260
              
              
              
              -
              
              
              
              293,260Gross
                  profit
              
              
              110,795
              
              
              
              -
              
              
              
              110,795SG&A
              
              
              93,443
              
              
              
              -
              
              
              
              93,443Stock
                  option expense
              
              
              332
              
              
              
              -
              
              
              
              332Amortization
                  of intangibles
              
              
              3,942
              
              
              
              -
              
              
              
              3,942Impairment,
                  restructuring andother
                  non-recurring charges
              
              
              15,820
              
              
              
              (15,820
              )
              
              
              -Interest
                  expense, net
              
              
              7,035
              
              
              
              -
              
              
              
              7,035Other
                  income, net
              
              
              (46
              )
              
              
              -
              
              
              
              (46
              )(Loss)
                  earnings before taxes
              
              
              (9,731
              )
              
              
              15,820
              
              
              
              6,089Income
                  taxes
              
              
              (3,782
              )
              
              
              5,901
              
              
              
              2,119Net
                  (loss) earnings fromcontinuing
                  operations
              
              $
              (5,949
              )
              
              $
              9,919
              
              
              $
              3,970Effective
                  tax rate
              
              
              38.9
              %
              
              
              37.3
              %
              
              
              34.8
              %
































27
 MANAGEMENT'S
            DISCUSSION AND ANALYSIS OF FINANCIAL
            CONDITION AND
              RESULTS OF OPERATIONS (continued)
 (Dollars
              in thousands, except per share data)




**Nine
      months ended October 28, 2006**


Impairment,restructuring
                  andTotal
              
              
              other
                  non-
              
              
              OngoingContinuing
              
              
              recurring
                  charges
              
              
              OperationsNet
                  sales
              
              $
              1,139,031
              
              
              $
              -
              
              
              $
              1,139,031Cost
                  of products sold
              
              
              879,289
              
              
              
              -
              
              
              
              879,289Gross
                  profit
              
              
              259,742
              
              
              
              -
              
              
              
              259,742SG&A
              
              
              215,506
              
              
              
              -
              
              
              
              215,506Stock
                  option expense
              
              
              3,877
              
              
              
              -
              
              
              
              3,877Amortization
                  of intangibles
              
              
              7,692
              
              
              
              -
              
              
              
              7,692Impairment,
                  restructuring andother
                  non-recurring charges
              
              
              25,957
              
              
              
              (25,957
              )
              
              
              -Interest
                  expense, net
              
              
              9,819
              
              
              
              -
              
              
              
              9,819Other
                  income, net
              
              
              (358
              )
              
              
              -
              
              
              
              (358
              )(Loss)
                  earnings before taxes
              
              
              (2,751
              )
              
              
              25,957
              
              
              
              23,206Income
                  taxes
              
              
              (1,119
              )
              
              
              9,423
              
              
              
              8,304Net
                  (loss) earnings fromcontinuing
                  operations
              
              $
              (1,632
              )
              
              $
              16,534
              
              
              $
              14,902Effective
                  tax rate
              
              
              (40.7
              )%
              
              
              36.3
              %
              
              
              35.8
              %






**Nine
      months ended November 3, 2007**


Impairment,restructuring
                  andTotal
              
              
              other
                  non-
              
              
              OngoingContinuing
              
              
              recurring
                  charges
              
              
              OperationsNet
                  sales
              
              $
              1,143,109
              
              
              $
              -
              
              
              $
              1,143,109Cost
                  of products sold
              
              
              847,320
              
              
              
              -
              
              
              
              847,320Gross
                  profit
              
              
              295,789
              
              
              
              -
              
              
              
              295,789SG&A
              
              
              245,231
              
              
              
              -
              
              
              
              245,231Stock
                  option expense
              
              
              986
              
              
              
              -
              
              
              
              986Amortization
                  of intangibles
              
              
              10,678
              
              
              
              -
              
              
              
              10,678Impairment,
                  restructuring andother
                  non-recurring charges
              
              
              130,098
              
              
              
              (130,098
              )
              
              
              -Interest
                  expense, net
              
              
              15,667
              
              
              
              -
              
              
              
              15,667Other
                  income, net
              
              
              (27
              )
              
              
              -
              
              
              
              (27
              )(Loss)
                  earnings before taxes
              
              
              (106,844
              )
              
              
              130,098
              
              
              
              23,254Income
                  taxes
              
              
              (33,315
              )
              
              
              43,751
              
              
              
              10,436Net
                  (loss) earnings fromcontinuing
                  operations
              
              $
              (73,529
              )
              
              $
              86,347
              
              
              $
              12,818Effective
                  tax rate
              
              
              31.2
              %
              
              
              33.6
              %
              
              
              44.9
              %




**Continuing
      Operations – Ongoing Operations:**The following table provides non-GAAP
      summarized financial data for the three and nine month periods ended October
      28,
      2006 and November 3, 2007 (percentages are calculated based on actual data
      and
      columns may not add due to rounding).  This table presents the same
      information for the ongoing operations as presented in the Reconciliation of
      Operating Results – Continuing Operations shown earlier for the three and nine
      month periods ended October 28, 2006 and November 3, 2007.  The
      non-GAAP financial information should be considered in addition to, not as
      a
      substitute for or as being superior to, operating income, cash flows or other
      measures of financial performance prepared in accordance with GAAP.





28
 MANAGEMENT'S
            DISCUSSION AND ANALYSIS OF FINANCIAL
            CONDITION AND
              RESULTS OF OPERATIONS (continued)
 (Dollars
              in thousands, except per share data)





Three
                months ended
            
            
            Nine
                months endedOctober
                28,
            
            
            November
                3,
            
            
            Percent
            
            
            October
                28,
            
            
            November
                3,
            
            
            Percent2006
            
            
            2007
            
            
            Change
            
            
            2006
            
            
            2007
            
            
            ChangeNet
                sales
            
            $
            397,007
            
            
            $
            404,055
            
            
            
            1.8
            %
            
            $
            1,139,031
            
            
            $
            1,143,109
            
            
            
            0.4
            %Cost
                of products sold
            
            
            301,904
            
            
            
            293,260
            
            
            
            (2.9
            )%
            
            
            879,289
            
            
            
            847,320
            
            
            
            (3.6
            )%Gross
                profit
            
            
            95,103
            
            
            
            110,795
            
            
            
            16.5
            %
            
            
            259,742
            
            
            
            295,789
            
            
            
            13.9
            %SG&A
            
            
            72,689
            
            
            
            93,443
            
            
            
            28.6
            %
            
            
            215,506
            
            
            
            245,231
            
            
            
            13.8
            %Operating
                earnings beforestock
                option expenseand
                amortization(1)
            
            
            22,414
            
            
            
            17,352
            
            
            
            (22.6
            )%
            
            
            44,236
            
            
            
            50,558
            
            
            
            14.3
            %Stock
                option expense
            
            
            468
            
            
            
            332
            
            
            
            (29.1
            )%
            
            
            3,877
            
            
            
            986
            
            
            
            (74.6
            )%Amortization
                of intangibles
            
            
            2,628
            
            
            
            3,942
            
            
            
            50.0
            %
            
            
            7,692
            
            
            
            10,678
            
            
            
            38.8
            %Operating
                earnings
            
            
            19,318
            
            
            
            13,078
            
            
            
            (32.3
            )%
            
            
            32,667
            
            
            
            38,894
            
            
            
            19.1
            %Interest
                expense, net
            
            
            2,903
            
            
            
            7,035
            
            
            
            142.3
            %
            
            
            9,819
            
            
            
            15,667
            
            
            
            59.6
            %Other
                income, net
            
            
            (106
            )
            
            
            (46
            )
            
            
            (56.6
            )%
            
            
            (358
            )
            
            
            (27
            )
            
            
            (92.5
            )%Earnings
                before taxes
            
            
            16,521
            
            
            
            6,089
            
            
            
            (63.1
            )%
            
            
            23,206
            
            
            
            23,254
            
            
            
            0.2
            %Income
                taxes
            
            
            5,912
            
            
            
            2,119
            
            
            
            (64.2
            )%
            
            
            8,304
            
            
            
            10,436
            
            
            
            25.7
            %Net
                earnings fromcontinuing
                operations
            
            $
            10,609
            
            
            $
            3,970
            
            
            
            (62.6
            )%
            
            $
            14,902
            
            
            $
            12,818
            
            
            
            (14.0
            )%Effective
                tax rate
            
            
            35.8
            %
            
            
            34.8
            %
            
            
            
            
            
            
            35.8
            %
            
            
            44.9
            %






Three
                    months ended
                
                
                Nine
                    months endedPercentage
                
                
                
                
                
                
                
                
                PercentageOctober
                    28,
                
                
                November
                    3,
                
                
                Point
                
                
                October
                    28,
                
                
                November
                    3,
                
                
                PointAs
                    a percentage of net sales:
                
                2006
                
                
                2007
                
                
                Change
                
                
                2006
                
                
                2007
                
                
                ChangeNet
                    sales
                
                
                100.0
                %
                
                
                100.0
                %
                
                
                0.0
                %
                
                
                100.0
                %
                
                
                100.0
                %
                
                
                0.0
                %Cost
                    of products sold
                
                
                76.0
                %
                
                
                72.6
                %
                
                
                (3.4
                )%
                
                
                77.2
                %
                
                
                74.1
                %
                
                
                (3.1
                )%Gross
                    profit
                
                
                24.0
                %
                
                
                27.4
                %
                
                
                3.4
                %
                
                
                22.8
                %
                
                
                25.9
                %
                
                
                3.1
                %SG&A
                
                
                18.3
                %
                
                
                23.1
                %
                
                
                4.8
                %
                
                
                18.9
                %
                
                
                21.5
                %
                
                
                2.6
                %Operating
                    earnings beforestock
                    option expenseand
                    amortization(1)
                
                
                5.6
                %
                
                
                4.3
                %
                
                
                (1.3
                )%
                
                
                3.9
                %
                
                
                4.4
                %
                
                
                0.5
                %Stock
                    option expense
                
                
                0.1
                %
                
                
                0.1
                %
                
                
                0.0
                %
                
                
                0.3
                %
                
                
                0.1
                %
                
                
                (0.2
                )%Amortization
                    of intangibles
                
                
                0.7
                %
                
                
                1.0
                %
                
                
                0.3
                %
                
                
                0.7
                %
                
                
                0.9
                %
                
                
                0.2
                %Operating
                    earnings
                
                
                4.8
                %
                
                
                3.2
                %
                
                
                (1.6
                )%
                
                
                2.9
                %
                
                
                3.4
                %
                
                
                0.5
                %Interest
                    expense, net
                
                
                0.7
                %
                
                
                1.7
                %
                
                
                1.0
                %
                
                
                0.9
                %
                
                
                1.4
                %
                
                
                0.5
                %Other
                    income, net
                
                
                0.0
                %
                
                
                0.0
                %
                
                
                0.0
                %
                
                
                0.0
                %
                
                
                0.0
                %
                
                
                0.0
                %Earnings
                    before taxes
                
                
                4.1
                %
                
                
                1.5
                %
                
                
                (2.6
                )%
                
                
                2.0
                %
                
                
                2.0
                %
                
                
                0.0
                %Income
                    taxes
                
                
                1.5
                %
                
                
                0.5
                %
                
                
                (1.0
                )%
                
                
                0.7
                %
                
                
                0.9
                %
                
                
                0.2
                %Net
                    earnings fromcontinuing
                    operations
                
                
                2.7
                %
                
                
                1.0
                %
                
                
                (1.7
                )%
                
                
                1.3
                %
                
                
                1.1
                %
                
                
                (0.2
                )%
  (1)
              Operating
                  earnings before stock option expense and amortization is a non-GAAP
                  measure that differs from operating earnings in that it excludes
                  stock
                  option expense and amortization of intangibles.  Operating
                  earnings before stock option expense and amortization should not
                  be
                  considered as an alternative to operating earnings.  Operating
                  earnings before stock option expense and amortization is the primary
                  measure used by management to evaluate our performance, as well
                  as the
                  performance of our divisions and segments.  Management believes
                  the comparison of operating earnings before stock option expense
                  and
                  amortization between periods is useful in showing the interaction
                  of
                  changes in gross profit and SG&A without inclusion of stock option
                  expense and amortization of intangibles, the change in which is
                  explained
                  elsewhere. The subtotal of operating earnings before stock option
                  expense
                  and amortization may not be comparable to any similarly titled
                  measure
                  used by another company.
  29
 MANAGEMENT'S
            DISCUSSION AND ANALYSIS OF FINANCIAL
            CONDITION AND
              RESULTS OF OPERATIONS (continued)
 (Dollars
              in thousands, except per share data)
  **Seasonality:**  Our
        businesses are seasonal and are impacted by the general seasonal trends
        characteristic of the apparel industry.  We generally sell our
        products prior to the principal retail selling seasons: spring, summer, fall
        and
        holiday.  As the timing of shipment of products may vary from year to
        year, the result for any particular quarter may not be indicative of results
        for
        the full year.
 
 **Sales**
        for ongoing operations for the third quarter of 2007 were $404,055, increasing
        $7,048 or 1.8% versus the third quarter of 2006.  Organic sales growth
        was mainly realized from Gerber Childrenswear, XOXO®, My Michelle® and Candies
        juniors and girls businesses, as well as increased licensing revenues from
        Baby
        Phat®.  The impact of acquisitions of Vince®, Hanna Andersson® and
        Royal Robbins® also led to improved sales in the quarter.  This was
        partially offset by the anticipated impact of lower sales volumes of mainstream
        women’s sportswear, including private label sales and the Phat Farm® men’s
        wholesale business, the latter of which is being transitioned to a licensing
        model. Sales for ongoing operations for the nine months ended November 3,
        2007
        were $1,143,109, increasing $4,078 or 0.4% versus the nine months ended October
        28, 2006.  Organic sales growth was mainly realized from Gerber
        Childrenswear, XOXO, My Michelle and Candies juniors and girls businesses,
        Baby
        Phat as well as increased revenues from Calvin Klein women’s better
        sportswear.  The nine month period sales also benefited from the
        impact of the Vince, Hanna Andersson and Royal Robbins
        acquisitions.  This was partially offset by the anticipated impact of
        lower sales volumes of mainstream women’s sportswear, including private label
        sales and the Phat Farm men’s wholesale business.
 
 **Gross
        profit** for ongoing operations for the third quarter of 2007 was
        $110,795 or 27.4% of net sales, increasing $15,692 or 16.5% versus the third
        quarter of 2006.  Gross profit as a percent of net sales rose by
        approximately 3.4 percentage points to 27.4%, from last year.  This
        increase was primarily driven by the acquisitions of Vince, Hanna Andersson
        and
        Royal Robbins, as well as improved performance of the XOXO juniors’
brand.  Gross profit for ongoing operations for the nine months ended
        November 3, 2007 was $295,789 or 25.9% of net sales, increasing $36,047 or
        13.9%
        versus the nine months ended October 28, 2006.  Gross profit as a
        percent of net sales rose by approximately 3.1 percentage points to 25.9%,
        from
        last year.  This increase was primarily driven by the acquisitions of
        Vince, Hanna Andersson and Royal Robbins, as well as improved performance
        of a
        number of our brands.
 
 **SG&A
        expense** for ongoing operations for the third quarter of 2007 was
        $93,443 or 23.1% of net sales, increasing $20,754 or 28.6% versus the third
        quarter of 2006.  The increase in SG&A expense for the three
        months ended November 3, 2007 is primarily due to the acquisitions of Vince,
        Hanna Andersson and Royal Robbins and the addition of 17 new Koret® and Sag
        Harbor® retail stores since the third quarter of last year.  SG&A
        expense for ongoing operations for the nine months ended November 3, 2007
        was
        $245,231 or 21.5% of net sales, increasing $29,725 or 13.9% versus the nine
        months ended October 28, 2006.  The increase was due primarily to the
        acquisitions of Vince, Hanna Andersson and Royal Robbins, the impact of
        additional Koret and Sag Harbor retail stores and activities to fund strategic
        initiatives.  For each of the three month and nine month periods,
        SG&A expense as a percent of net sales has increased primarily driven
        by:
 
 ·
              Lower
                  absorption of corporate overhead resulting from the Smart Shirts
                  business
                  being classified in discontinued operations and lower sales of
                  mainstream
                  women’s sportswear.
 
 ·
              Additions
                  of operations with higher SG&A levels (as well as higher gross
                  margins) including Hanna Andersson and Royal Robbins and 17 new
                  Koret and
                  Sag Harbor retail outlet stores since the third quarter of last
                  year.
 
 **Amortization
        of intangibles**for ongoing operations for the third quarter of 2007 was
        $3,942, an increase of $1,314 versus the third quarter of
        2006.  Amortization of intangibles for ongoing operations for the nine
        months ended November 3, 2007 was $10,678, an increase of $2,986 versus the
        nine
        months ended October 28, 2006.  For each of the three month and nine
        month periods, the increase was due to the acquisitions of Vince, Hanna
        Andersson, Royal Robbins and HOLLYWOULD®.
 
 **Interest
        expense, net**for ongoing operations for the third quarter of 2007 was
        $7,035, an increase of $4,132 versus the third quarter of
        2006.  Interest expense, net for ongoing operations for the nine
        months ended November 3, 2007 was $15,667, an increase of $5,848 versus the
        nine
        months ended October 28, 2006.  For each of the three and nine
        month periods, the increase was due to the reduced level of cash investments
        related to the acquisitions of Vince, Hanna Andersson, Royal Robbins and
        HOLLYWOULD.
  30
 MANAGEMENT'S
            DISCUSSION AND ANALYSIS OF FINANCIAL
            CONDITION AND
              RESULTS OF OPERATIONS (continued)
 (Dollars
              in thousands, except per share data)
  **Income
        taxes:**Our effective tax rate for the three and nine month periods
        ended November 3, 2007 was 34.8% and 44.9%, respectively.  The three
        and nine month rates differ from the U.S. statutory rate of 35.0% primarily
        due
        to state taxes.
  We
        believe our 2007 full year effective tax rate for ongoing operations will
        approximate 39%.  This rate differs from the 35% expected after the
        six months ended August 4, 2007 primarily due to a higher percentage of our
        ongoing earnings now anticipated to come from our domestic operations as
        the
        majority of our foreign earnings are now included in discontinued
        operations.
 
 **Goodwill
        and other intangible assets**
 Under
        SFAS No. 142, *Goodwill and Other Intangible Assets*, goodwill and other
        indefinite-lived intangible assets are no longer amortized but are reviewed
        for
        impairment at least annually and  if a triggering event were to occur
        in an interim period.  Our annual impairment testing is performed in
        the fourth quarter.  In the second quarter of 2007, changes in the
        business climate of certain of our mainstream women’s brands were a triggering
        event that required impairment testing of these divisions’ goodwill and
        intangible asset balances.  The impairment resulting from this testing
        was due to the operating results for the first half of 2007 and expectations
        regarding future results of these mainstream women’s brands being well below the
        expectations reflected in the test performed in the fourth quarter of
        2006.  Expectations reflected in these prior impairment tests assumed
        that the changes in the business climate would not be as negative and could
        be
        offset with product line adjustments.  The reassessment of these
        mainstream women’s brands performed during the second quarter of 2007 resulted
        in the conclusion that an impairment charge was required. This evaluation
        utilized discounted cash flow analyses and multiple analyses of the historical
        and updated forecasted operating results.  As a result, non-cash
        impairment charges of $86,111 and $27,606 for goodwill and intangibles assets,
        respectively, including trademarks and customer lists for certain of our
        women’s
        mainstream brands were recorded during the second quarter of 2007.
 
 **Discontinued
        Operations:**The following table provides summarized
        operating results for the three and nine month periods ended October 28,
        2006
        and November 3, 2007, for the discontinued operations.
 
 Three
                    months ended
                
                
                Nine
                    months endedOctober
                    28,
                
                
                November
                    3,
                
                
                October
                    28,
                
                
                November
                    3,2006
                
                
                2007
                
                
                2006
                
                
                2007Net
                    sales
                
                $
                141,618
                
                
                $
                126,276
                
                
                $
                394,588
                
                
                $
                360,347Cost
                    of products sold
                
                
                117,251
                
                
                
                110,013
                
                
                
                326,597
                
                
                
                313,957Gross
                    profit
                
                
                24,367
                
                
                
                16,263
                
                
                
                67,991
                
                
                
                46,390SG&A
                
                
                13,263
                
                
                
                10,001
                
                
                
                39,464
                
                
                
                31,628Operating
                    earnings before restructuringand
                    other
                    non-recurring charges(1)
                
                
                11,104
                
                
                
                6,262
                
                
                
                28,527
                
                
                
                14,762Restructuring
                    and othernon-recurring
                    charges
                
                
                (1,976
                )
                
                
                381
                
                
                
                286
                
                
                
                381Operating
                    earnings
                
                
                13,080
                
                
                
                5,881
                
                
                
                28,241
                
                
                
                14,381Interest
                    expense, net
                
                
                710
                
                
                
                758
                
                
                
                1,659
                
                
                
                1,945Other
                    income, net
                
                
                (513
                )
                
                
                (2,269
                )
                
                
                (1,614
                )
                
                
                (6,464
                )Earnings
                    before taxes
                
                
                12,883
                
                
                
                7,392
                
                
                
                28,196
                
                
                
                18,900Income
                    taxes
                
                
                3,325
                
                
                
                2,525
                
                
                
                2,129
                
                
                
                4,884Net
                    earnings from discontinued operations
                
                $
                9,558
                
                
                $
                4,867
                
                
                $
                26,067
                
                
                $
                14,016Effective
                    tax rate
                
                
                25.8
                %
                
                
                34.2
                %
                
                
                7.6
                %
                
                
                25.8
                %
  (1)
              Operating
                  earnings before restructuring and other non-recurring charges is
                  a
                  non-GAAP measure that differs from operating earnings in that it
                  excludes
                  restructuring and other non-recurring charges.  Operating
                  earnings before restructuring and other non-recurring charges should
                  not
                  be considered as an alternative to operating
                  earnings.  Operating earnings before restructuring and other
                  non-recurring charges is the primary measure used by management
                  to
                  evaluate our performance, as well as the performance of our divisions
                  and
                  segments.  Management believes the comparison of operating
                  earnings before restructuring and other non-recurring charges between
                  periods is useful in showing the interaction of changes in gross
                  profit
                  and SG&A without inclusion of the restructuring and other
                  non-recurring charges, the changes in which are explained
                  elsewhere.
  31
 MANAGEMENT'S
            DISCUSSION AND ANALYSIS OF FINANCIAL
            CONDITION AND
              RESULTS OF OPERATIONS (continued)
 (Dollars
              in thousands, except per share data)
  The
                  subtotal of operating earnings before restructuring and other
                  non-recurring charges may not be comparable to any similarly titled
                  measure used by another company.
 
 In
        November 2007, we announced that Youngor Group Co., Ltd. (Youngor Group)
        agreed
        to acquire our Smart Shirts business for approximately $120,000 in cash.
        The
        transaction, which is subject to certain customary closing conditions including
        regulatory approvals, is expected to close by the end of fiscal year
        2007.  Separately, in November 2007, we sold the Smart Shirts real
        estate assets in Hong Kong for approximately $41,000 in cash.  As a
        result of these activities, Smart Shirts is now reported as a discontinued
        operation.
 
 During
        the third quarter of 2006, our New Campaign and IZOD women’s sportswear
        operations became discontinued.  The transaction related to New
        Campaign closed in April 2007.  We transitioned the IZOD business in
        the second quarter of 2007 with no significant gain or loss.
 
 Sales
        for
        the third quarter of 2007 were $126,276, decreasing $15,342 or
        10.8%.  Sales for the nine months ended November 3, 2007 were
        $360,347, decreasing $34,241 or 8.7%.  The sales decreases were due to
        the sale of New Campaign and the transition of the IZOD businesses in early
        2007, partially offset by higher sales at Smart Shirts.
 
 Operating
        earnings before restructuring and other non-recurring charges for the third
        quarter of 2007 were $6,262, decreasing $4,842, or 43.6%.  Operating
        earnings before restructuring and other non-recurring charges for the nine
        months ended November 3, 2007 were $14,762, decreasing $13,765 or
        48.3%.  The decreases in operating earnings before restructuring and
        other non-recurring charges were due to the sale of New Campaign and the
        transition of the IZOD businesses in early 2007 and higher costs not fully
        recovered in pricing from more complex styles at Smart Shirts during fiscal
        2007.
 
 Income
        taxes for the nine months ended October 28, 2006 include a $6,300 reversal
        of
        allowances for tax exposures (related to a 2003 discontinued operation) no
        longer deemed necessary due to finalization of an open tax year.
 
 Our
        effective tax rate on discontinued operations for the three and nine months
        ended November 3, 2007 was 34.2% and 25.8%, respectively.  These rates
        are less than the U.S. statutory rate of 35.0% as most of these earnings
        come
        from foreign operations which are taxed at lower statutory rates.
 
 **Segment
        results**
 We
        and
        our subsidiaries are principally engaged in the apparel and related soft
        goods
        industry.  Our divisions are aggregated into the following reportable
        segments:
  ·
              Women's
                  Sportswear,
 ·
              Other
                  Soft Goods, and
 ·
              General
                  Corporate.
 
 Prior
        to
        the third quarter of 2007, we also reported a Men’s Sportswear segment in
        continuing operations.  With the announced sale in the third quarter
        of 2007, the Smart Shirts business previously reported in this segment is
        now
        reported as a discontinued operation (see Note 4 to Condensed Consolidated
        Financial Statements) in the Men’s Sportswear segment.  Further, we
        have announced the transformation of the Phat Farm men’s wholesale business to
        solely a licensing model during the third quarter of 2007 (see Note 3 to
        Condensed Consolidated Financial Statements), which was already in place
        within
        the Phat Fashions division.   These businesses are now reported
        within the Women’s Sportswear segment in continuing operations.  The
        factors for determining the reportable segments included the manner in which
        management evaluates the performance of the total company with the nature
        of the
        individual business activities.  In accordance with SFAS No. 131,
*Disclosures about Segments of an Enterprise and Related Information*,
        and SFAS No. 144, *Accounting for the Impairment or Disposal of Long-Lived
        Assets*, all prior period segment information was reclassified to conform to
        this new financial reporting presentation.
 
 
 
 
 
  32
 MANAGEMENT'S
            DISCUSSION AND ANALYSIS OF FINANCIAL
            CONDITION AND
              RESULTS OF OPERATIONS (continued)
 (Dollars
              in thousands, except per share data)
 
 Segment
        net sales and earnings for the three and nine month periods ended October
        28,
        2006 and November 3, 2007 do not include impairment, restructuring and other
        non-recurring charges; therefore, ongoing operations and continuing operations
        are the same.  Net sales and segment earnings for continuing
        operations by segment for these periods are as follows:
  Three
                    months ended
                
                
                Nine
                    months endedOctober
                    28,
                
                
                November
                    3,
                
                
                Percent
                
                
                October
                    28,
                
                
                November
                    3,
                
                
                PercentNet
                    sales
                
                2006
                
                
                2007
                
                
                Change
                
                
                2006
                
                
                2007
                
                
                ChangeWomen's
                    Sportswear
                
                $
                315,034
                
                
                $
                276,222
                
                
                
                (12.3
                )%
                
                $
                894,358
                
                
                $
                834,499
                
                
                
                (6.7
                )%Other
                    Soft Goods
                
                
                81,973
                
                
                
                127,833
                
                
                
                55.9
                %
                
                
                244,673
                
                
                
                308,610
                
                
                
                26.1
                %Total
                    net sales
                
                $
                397,007
                
                
                $
                404,055
                
                
                
                1.8
                %
                
                $
                1,139,031
                
                
                $
                1,143,109
                
                
                
                0.4
                %
  Three
                    months ended - amounts
                
                
                Three
                    months ended - percentagesOctober
                    28,
                
                
                November
                    3,
                
                
                Percent
                
                
                October
                    28,
                
                
                November
                    3,Segment
                    earnings
                
                2006
                
                
                2007
                
                
                Change
                
                
                2006
                
                
                2007
                
                
                DifferenceWomen's
                    Sportswear
                
                $
                24,909
                
                
                $
                11,632
                
                
                
                (53.3
                )%
                
                
                7.9
                %
                
                
                4.2
                %
                
                
                (3.7
                )%Other
                    Soft Goods
                
                
                9,374
                
                
                
                16,563
                
                
                
                76.7
                %
                
                
                11.4
                %
                
                
                13.0
                %
                
                
                1.6
                %General
                    Corporate
                
                
                (11,869
                )
                
                
                (10,843
                )
                
                
                (8.6
                )%
                
                NM
                
                
                NM
                
                
                NMSegment
                    earnings
                
                $
                22,414
                
                
                $
                17,352
                
                
                
                (22.6
                )%
                
                
                5.6
                %
                
                
                4.3
                %
                
                
                (1.3
                )%
  Nine
                    months ended - amounts
                
                
                Nine
                    months ended - percentagesOctober
                    28,
                
                
                November
                    3,
                
                
                Percent
                
                
                October
                    28,
                
                
                November
                    3,Segment
                    earnings
                
                2006
                
                
                2007
                
                
                Change
                
                
                2006
                
                
                2007
                
                
                DifferenceWomen's
                    Sportswear
                
                $
                56,838
                
                
                $
                46,454
                
                
                
                (18.3
                )%
                
                
                6.4
                %
                
                
                5.6
                %
                
                
                (0.8
                )%Other
                    Soft Goods
                
                
                25,680
                
                
                
                37,488
                
                
                
                46.0
                %
                
                
                10.5
                %
                
                
                12.1
                %
                
                
                1.6
                %General
                    Corporate
                
                
                (38,282
                )
                
                
                (33,384
                )
                
                
                (12.8
                )%
                
                NM
                
                
                NM
                
                
                NMSegment
                    earnings
                
                $
                44,236
                
                
                $
                50,558
                
                
                
                14.3
                %
                
                
                3.9
                %
                
                
                4.4
                %
                
                
                0.5
                %
  NM
–
Not
        meaningful
 
 **Women’s
        Sportswear.**Net sales for the third quarter of 2007 were
        $276,222, decreasing $38,812 or 12.3% versus the third quarter of
        2006.  Sales for the nine months ended November 3, 2007 were $834,499,
        decreasing $59,859 or 6.7% versus the nine months ended October 28,
        2006.  Comparing the quarters, organic sales growth was realized from
        XOXO, My Michelle and Candies juniors and girls businesses as well as licensing
        revenue from Baby Phat.  Sales also rose due to the acquisition of
        Vince.  The anticipated impact of lower sales volume of mainstream
        women’s sportswear, including private label sales and the Phat Farm men’s
        wholesale business which is being transitioned to a licensing model, resulted
        in
        the overall decline in sales.  Comparing the nine month periods,
        organic sales growth was realized from XOXO, My Michelle, Candies juniors
        and
        girls businesses and Baby Phat, as well as increased revenues from
        Calvin Klein women’s better sportswear.  The nine month period sales
        also benefited from the impact of the Vince acquisition.  These sales
        increases were offset by the anticipated impact of lower sales volumes of
        mainstream women’s sportswear, including private label sales and the Phat Farm
        men’s wholesale business.
 
 Segment
        earnings for the third quarter of 2007 were $11,632, decreasing $13,277 or
        53.3%
        versus the third quarter of 2006.  Segment earnings for the nine
        months ended November 3, 2007 were $46,454, decreasing $10,384 or 18.3% from
        the
        nine months ended October 28, 2006.  The decrease in segment earnings
        for the three months ended November 3, 2007 versus last year was primarily
        due
        to the anticipated higher level of markdown allowances for the current retail
        environment, declines in sales of mainstream women’s sportswear, and a decrease
        in earnings from Phat Farm men’s wholesale business as it liquidates
        inventory as part of the conversion to a licensing business, partially
        offset by the impact of the Vince acquisition.  The decrease in
        segment earnings for the nine months ended November 3, 2007 versus last year
        was
        due to promotional pricing at Koret to clear excess inventory, higher
        markdowns for certain brands and a decrease in earnings from Phat Farm men’s
        wholesale business as it liquidates inventory as part of the conversion to
        a
        licensing business, partially offset with strong retail results in our XOXO,
        My
        Michelle and Candies juniors and girls businesses, as well as increased
        licensing revenues from Baby Phat.  Segment earnings also increased
        due to the Vince acquisition.
 
  33
 MANAGEMENT'S
            DISCUSSION AND ANALYSIS OF FINANCIAL
            CONDITION AND
              RESULTS OF OPERATIONS (continued)
 (Dollars
              in thousands, except per share data)
 
 **Other
        Soft Goods.**Net sales for the third quarter of 2007 were
        $127,833, increasing $45,860 or 55.9% versus the third quarter of
        2006.  Sales for the nine months ended November 3, 2007 were $308,610,
        increasing $63,937 or 26.1% versus the nine months ended October 28,
        2006.  For each of the three months and nine months ended November 3,
        2007 versus last year, sales growth was realized from the acquisitions of
        Hanna
        Andersson and Royal Robbins, of  $43,616 and $49,016,
        respectively, along with organic growth from Gerber
        Childrenswear.
 
 Segment
        earnings for the third quarter of 2007 were $16,563, increasing $7,189 or
        76.7%
        versus the third quarter of 2006.  Segment earnings for the nine
        months ended November 3, 2007 were $37,488, increasing $11,808 or 46.0% from
        the
        nine months ended October 28, 2006.  For each of the three months and
        nine months ended November 3, 2007 versus last year, segment earnings growth
        was
        realized from the acquisitions of Hanna Andersson and Royal Robbins, of $6,769
        and $6,845, respectively, along with continued positive performance
        and solid execution of Gerber Childrenswear.
 
 **General
        Corporate.**  Expense for the third quarter of 2007 was
        $10,843, decreasing $1,026 or 8.6% versus the third quarter of
        2006.  Expense for the nine months ended November 3, 2007 was $33,384,
        decreasing $4,898 or 12.8% versus the nine months ended October 28,
        2006.  The decrease in expense for the three and nine months ended
        November 3, 2007 is primarily due to decreases in incentive program
        expenses.
 
 **FINANCIAL
        CONDITION**
 Cash
        flow
        from operations continues to be our primary source of funds to finance operating
        needs, capital expenditures, debt service and acquisitions.  We use
        financial leverage to minimize our overall cost of capital and maintain adequate
        operating and financial flexibility.  We monitor leverage through our
        debt-to-capital ratio (defined as total debt divided by the sum of total
        debt
        and total stockholders’ equity, or total capital).  At November 3,
        2007, our debt-to-capital ratio was 47.6%, up 3.3 percentage points from
        February 3, 2007 and up 2.9 percentage points from October 28,
        2006.  The increase from October 28, 2006 was primarily due to the
        decrease in equity resulting from the impairment of goodwill and intangibles
        recognized during the second quarter of 2007.
 
 In
        July
        2005, we announced a stock repurchase program of up to ten percent or $75,000
        of
        our outstanding shares of common stock.  During fiscal year 2005, we
        repurchased 2,218,200 shares at an average price of $24.99 per share, totaling
        $55,430.  During fiscal year 2006, we repurchased 173,600 shares at an
        average price of $28.83 per share, totaling $5,006.  During the first
        quarter of 2007, we repurchased 137,100 shares at an average price of $27.90
        per
        share, totaling $3,825.  We repurchased no additional shares prior to
        the termination of this program, as described below.
 
 In
        September 2007, we announced that our Board of Directors authorized the
        repurchase of up to 2,500,000 shares or $50,000 of our outstanding shares
        of
        common stock.  During the third quarter of 2007, we repurchased 69,900
        shares at an average price of $15.95 per share totaling $1,117.  This
        new program resulted in the termination of the stock repurchase program
        announced in July 2005.
 
 In
        November 2007, we announced that Youngor Group Co., Ltd. (Youngor Group)
        agreed
        to acquire our Smart Shirts business for approximately $120,000 in
        cash.  The transaction, which is subject to certain customary closing
        conditions including regulatory approvals, is expected to close by the end
        of
        fiscal year 2007.  Separately, in November 2007, we sold the Smart
        Shirts real estate assets in Hong Kong for approximately $41,000 in
        cash.  We expect to utilize the proceeds from the transactions to
        repurchase shares and reduce debt.  Subsequent to the close of the
        third quarter 2007, the Asian Credit Facility was paid in full with the proceeds
        from the sale of the Smart Shirts building and terminated.  We believe
        that the current cash and borrowing availability will provide the capital
        flexibility necessary to fund the remainder of the stock repurchase program
        and
        to meet existing obligations and engage in acquisitions supporting our business
        strategy.
 
 **Net
        cash provided by operating activities** increased $13,371 from $24,382
        for the nine months ended October 28, 2006 to $37,753 for the nine months
        ended
        November 3, 2007.  The increase in net cash provided by operating
        activities is primarily due to improvements in working capital during the
        nine
        months ended November 3, 2007.  The working capital improvements were
        driven by decreases in accounts receivable resulting from improved terms
        management and collection efforts and lower inventory levels due to anticipated
        lower sales volumes of mainstream women’s sportswear and the liquidation of the
        Phat Farm men’s inventory as it is transitioned to a licensing
        model.
 
  34
 MANAGEMENT'S
            DISCUSSION AND ANALYSIS OF FINANCIAL
            CONDITION AND
              RESULTS OF OPERATIONS (continued)
 (Dollars
              in thousands, except per share data)
  *Working
        Capital*
 Working
        capital is significantly influenced by sales patterns, which are highly
        seasonal.  Inventories, accounts payable and accrued expenses are
        highly dependent upon sales levels and order lead times.  Receivable
        levels are driven by recent months’ sales and customer payment
        experience.  The working capital fluctuations from February 3, 2007 to
        November 3, 2007 are primarily a result of seasonality of our
        businesses.  Comparisons of continuing operations from October 28,
        2006 to November 3, 2007 include:
 -
              Accounts
                  receivable decreased $46,251 from $262,394 at October 28, 2006
                  to $216,143
                  at November 3, 2007.  The decrease in accounts receivable is due
                  to improved terms management and collection efforts.  Days sales
                  outstanding decreased to 46.8 at November 3, 2007 from 55.6 at
                  October 28,
                  2006.  Excluding the favorable impact of Hanna Andersson, as
                  they are direct to consumer, results in an improvement of 3.3 days
                  sales
                  outstanding.
 -
              Inventories
                  increased $26,943 from $133,665 at October 28, 2006 to $160,608
                  at
                  November 3, 2007.  Days supply were 57.5 days at October 28,
                  2006 compared to 66.1 days at November 3, 2007.  The largest
                  drivers of the increased amounts and days supply were the acquisitions
                  of
                  Hanna Andersson and Royal Robbins in the second quarter of
                  2007.  Hanna Andersson, as a direct and store-based retailer,
                  carries higher relative levels of inventory compared to our wholesale
                  businesses.
 -
              Accounts
                  payable decreased $24,000 from $118,757 at October 28, 2006 to
                  $94,757 at
                  November 3, 2007 primarily as a result of payment timing and lower
                  sales
                  volume of mainstream women’s sportswear, including private label sales and
                  the Phat Farm men’s wholesale business which is being transitioned to a
                  licensing model.
 -
              Accrued
                  expenses were largely unchanged and were $69,888 at October 28,
                  2006 and
                  $70,261 at November 3, 2007.
 Working
        capital of discontinued operations was relatively flat, with an increase
        of
        $5,305 from $96,223 at October 28, 2006 to $101,528 at November 3,
        2007.
 
 **Net
        cash used in investing activities**increased $218,047 from $19,961 for
        the nine months ended October 28, 2006 to $238,008 for the nine months ended
        November 3, 2007.  The net cash used in investing activities for the
        nine months ending November 3, 2007 primarily relates to the consideration
        paid
        in the acquisitions of Hanna Andersson and Royal Robbins of $225,214 as
        discussed below, additional cash purchase consideration for prior acquisitions
        of $9,834 and capital expenditures.  This was partially offset by
        $9,984 of cash proceeds received during the first nine months of 2007 due
        to the
        closing of the New Campaign transaction to transfer the business and sell
        business assets to the licensor.
 
 On
        July
        2, 2007, we completed the acquisition of Royal Robbins, Inc., a division
        of
        Phoenix Footwear Group, Inc.  Royal Robbins designs and markets
        premium quality active sportswear and travel apparel for men and
        women.  Royal Robbins adds an important label to our portfolio of
        brands.  The purchase price (including acquisition costs) for Royal
        Robbins was $37,610 in cash.
 
 On
        July
        13, 2007, we completed the acquisition of Hanna Andersson
        Corporation.  Hanna Andersson is a leading brand in the specialty
        children’s apparel market and expands our children’s business platform into
        upscale brands with an important direct-to-consumer focus.  The
        purchase price for Hanna Andersson (including acquisition costs) was $187,604
        in
        cash, net of cash acquired.
 
 Cash
        used
        in investing activities for discontinued operations was largely unchanged
        for
        the nine month periods ended October 28, 2006 and November 3, 2007 and primarily
        related to fixed asset additions.
 
 In
        the
        ordinary course of business, we consider various strategic initiatives including
        acquisitions, strategic alliances and divestitures of existing
        businesses.  Management believes that the combined current cash, cash
        generated from operations and availability under credit facilities, as discussed
        below, will continue to provide the capital flexibility necessary to fund
        future
        opportunities and to meet existing obligations.
 
 **Net
        cash used in financing activities**decreased $7,189 from $17,026 for the
        nine months ended October 28, 2006 to $9,837 for the nine months ended November
        3, 2007.  The change was primarily due to an increase in funding of
        notes payable of $10,065, an increase in the bank overdraft of $4,315, partially
        offset by payments on long term debt of $2,778 and a reduction of $4,150
        from
        stock transactions under incentive plans.
  35
 MANAGEMENT'S
            DISCUSSION AND ANALYSIS OF FINANCIAL
            CONDITION AND
              RESULTS OF OPERATIONS (continued)
 (Dollars
              in thousands, except per share data)
 
 At
        November 3, 2007, there were no borrowings outstanding under our Senior Credit
        Facility (a $400,000 five-year secured, syndicated credit facility), and
        we were
        in compliance with all covenants.  Letters of credit outstanding under
        the Senior Credit Facility were $28,975 at November 3,
        2007.  Additionally, we have $272 in outstanding letters of credit at
        November 3, 2007 related to existing arrangements in place within our recent
        acquisitions.
 
 During
        the third quarter of 2007, the Smart Shirts business is presented as a
        discontinued operation (see Note 4 to Condensed Consolidated Financial
        Statements).  The notes payable and long-term debt for Smart Shirts
        follows.
 
 At
        November 3, 2007, there were $21,500 and $19,445 of borrowings outstanding
        under
        the revolving and term portions of the Asian Credit Facility, respectively.
        The
        Asian Credit Facility is a $50,000 five-year unsecured, syndicated term and
        revolving credit facility agreement to support the working capital needs
        of our
        Asian operations.  At November 3, 2007, we were in compliance with the
        covenants of the Asian Credit Facility.
 
 In
        addition to the revolving credit facilities discussed above, our Asian
        operations maintain uncommitted lines of credit, which totaled $28,718 at
        November 3, 2007.  There were no borrowings outstanding under these
        lines at November 3, 2007.  We have $8,751 in outstanding letters of
        credit used by our foreign operations under these lines at November 3,
        2007.
 
 Subsequent
        to the close of the third quarter 2007, the Asian Credit Facility was paid
        in
        full with the proceeds from the sale of the Smart Shirts building and
        terminated.
 
 **Cash
        and cash equivalents** decreased $210,092 for the nine month period ended
        November 3, 2007 primarily due to the acquisitions as noted above compared
        to a
        decrease of $12,605 in cash and cash equivalents for the same period of the
        prior year.
 
  36
 MANAGEMENT'S
            DISCUSSION AND ANALYSIS OF FINANCIAL
            CONDITION AND
              RESULTS OF OPERATIONS (continued)
 (Dollars
              in thousands, except per share data)
  **CAUTIONARY
        NOTE CONCERNING FACTORS THAT MAY AFFECT FUTURE RESULTS**
 This
        Quarterly Report contains statements which, to the extent they are not
        statements of historical or present fact, constitute “forward-looking
        statements” within the meaning of the Securities Act of 1933, the Securities
        Exchange Act of 1934 and the Private Securities Litigation Reform Act of
        1995.  These forward-looking statements represent our expectations or
        beliefs concerning future events and are based on various assumptions and
        subject to a wide variety of risks and uncertainties.  Although we
        believe that our expectations reflected in the forward-looking statements
        are
        reasonable, we cannot and do not give any assurance that such expectations
        will
        prove to be correct.
 
 Our
        forward-looking statements are based on certain assumptions, and our operations
        are subject to various risks and uncertainties.  Any one of these
        factors or any combination of these factors could materially affect the results
        of our operations and cause actual results to differ materially from our
        expectations.  These factors should be read in conjunction with the
        risk factors included in our Annual Report to Stockholders on Form 10-K for
        2006
        (the fiscal year ended February 3, 2007).  These factors include but
        are not limited to:
 
 ·
              intense
                  competition in the apparel industry on many fronts, including the
                  following:
 -     establishing
        and maintaining favorable brand recognition,
 -     developing
        products that appeal to consumers,
 -     pricing
        products appropriately,
 -     obtaining
        access to and sufficient floor space in retail outlets;
  ·
              failing
                  to continually anticipate fashion trends and customer
                  tastes;
  ·
              uncertainties
                  regarding consumer confidence and spending
                  patterns;
  ·
              concentration
                  of our customers;
  ·
              consolidation
                  and change in the retail industry;
  ·
              performance
                  of our retail customers in selling our
                  goods;
  ·
              execution
                  of the long-term corporate
                  strategy;
  ·
              loss
                  of key personnel;
  ·
              impact
                  of the extent of foreign sourcing and manufacturing, such
                  as:
 -     political
        and economic instability in countries where our products are
        manufactured,
 -     imposition
        of regulations and quotas relating to imports,
 -     imposition
        of duties, taxes and other charges on imports,
 -     significant
        fluctuation of the value of the dollar against foreign currencies,
 -     restrictions
        on the transfer of funds to or from foreign countries,
 -     political
        instability, military conflict, or terrorism involving the United
        States,
 -     disease
        epidemics and health related concerns,
 -    
reduced
        manufacturing flexibility because of geographic distance between us and our
        foreign manufacturers,
 -     violations
        by foreign contractors of labor and wage standards;
  ·
              continued
                  value of licensed brands;
  ·
              ability
                  to generate sufficient sales to offset the minimum royalty payments
                  we
                  must pay with respect to these
                  products;
  ·
              inability
                  to protect our intellectual property
                  rights;
  ·
              fluctuations
                  in the price, availability and quality of raw
                  materials;
  ·
              reliance
                  on independent manufacturers;
  ·
              ability
                  to successfully complete the restructuring
                  plans;
  ·
              availability
                  of suitable acquisition candidates and integrating completed acquisitions
                  into our existing business;
  ·
              availability
                  of reasonably priced debt;
  37
 MANAGEMENT'S
            DISCUSSION AND ANALYSIS OF FINANCIAL
            CONDITION AND
              RESULTS OF OPERATIONS (continued)
 (Dollars
              in thousands, except per share data)
  ·
              our
                  estimates of future operating results for certain of our divisions
                  could
                  change adversely and impact the evaluation of the recoverability
                  of the
                  carrying value of goodwill and intangibles and the effect of such
                  changes
                  on our consolidated financial statements could be
                  material.  While we believe that the current recorded carrying
                  value of our goodwill and intangibles is not impaired, there can
                  be no
                  assurance that a significant non-cash write-down or write-off will
                  not be
                  required in the future;
  ·
              potential
                  for Smart Shirts business to be negatively affected if the pending
                  transaction is not completed in a timely manner;
                  and
  ·
              volatility
                  in the market price of our common stock could occur due to the
                  recent
                  unsolicited offer by an investor.
 
 The
        words
“believe”, “expect”, “will”, “estimate”, “project”, “forecast”, “planned”,
“should”, “anticipate” and similar expressions may identify forward-looking
        statements. Additionally, all statements other than statements of historical
        facts included in this Form 10-Q are forward-looking.
 
 Forward-looking
        statements are not guarantees, as actual results could differ materially
        from
        those expressed or implied in forward-looking statements.  We
        specifically disclaim any obligation to publicly update, modify, retract
        or
        revise any forward-looking statements, whether as a result of new information,
        future events or otherwise.  All forward-looking statements contained
        herein, the entire contents of our website, and all subsequent written and
        oral
        forward-looking statements attributable to us or persons acting on our behalf
        are expressly qualified in their entirety by this cautionary
        statement.
 
 **Item
        3.  Quantitative and Qualitative Disclosures about
        Market Risk**
 
 At
        November 3, 2007, our debt portfolio was composed of 100% fixed-rate debt.
        Our
        strategy regarding management of our exposure to interest rate fluctuations
        did
        not change significantly during the quarter.  Management does not
        expect any significant changes in our exposure to interest rate fluctuations
        or
        in how such exposure is managed during 2007.
 
 Based
        on
        quoted market prices obtained through independent pricing sources for the
        same
        or similar types of borrowing arrangements, our long-term debt has a market
        value of approximately $453,267, which compares to the book value of
        $470,262.  Various financial instruments that we issue are sensitive
        to changes in interest rates.  Market interest rate changes would
        result in increases or decreases in the market value of our fixed-rate
        debt.  With respect to our fixed-rate debt outstanding at November 3,
        2007, a 10% increase in interest rates would have resulted in approximately
        a
        $20,284 decrease in the market value of our fixed-rate debt; a 10% decrease
        in
        interest rates would have resulted in approximately a $21,909 increase in
        the
        market value of our fixed-rate debt.
 
 In
        addition, we do not believe that foreign currency risk, commodity price or
        inflation risk are expected to be material to our business or our consolidated
        financial position, results of operations or cash flows.
 
 **Item
        4.  Controls and Procedures**
 
 *Evaluation
        of Disclosure Controls and Procedures*
 
 We
        maintain a system of disclosure controls and procedures which are designed
        to
        ensure that information required to be disclosed by us in the reports filed
        or
        submitted under the Securities Exchange Act of 1934 is recorded, processed,
        summarized and reported within the time periods specified in the SEC’s rules and
        forms and is accumulated and communicated to management, including our
        certifying officers, as appropriate to allow timely decisions regarding required
        disclosure.  Based on an evaluation performed, our certifying officers
        have concluded that the disclosure controls and procedures, as defined in
        Rules
        13a – 15(e) and 15d – 15(e) under the Securities Exchange Act of 1934, as
        amended, were effective as of November 3, 2007, to provide reasonable assurance
        to the achievement of these objectives.
 
 
  38
 MANAGEMENT'S
            DISCUSSION AND ANALYSIS OF FINANCIAL
            CONDITION AND
              RESULTS OF OPERATIONS (continued)
 (Dollars
              in thousands, except per share data)
 
 Notwithstanding
        the foregoing, there can be no assurance that our disclosure controls and
        procedures will detect or uncover all failures of persons within our company
        to
        report material information otherwise required to be set forth in our
        reports.
 
 *Changes
        in Internal Control over Financial Reporting*
 
 There
        were no changes in our internal control over financial reporting during the
        quarter ended November 3, 2007 that have materially affected, or are reasonably
        likely to materially affect, our internal control over financial
        reporting.
  39
  **PART
        II. OTHER INFORMATION**
 
 **Item
        2.  Unregistered Sales of Equity Securities and Use of
        Proceeds**
 
 In
        September 2007, we announced a stock repurchase program (Stock Repurchase
        Program).  The Board of Directors authorized us to repurchase, at our
        discretion, up to 2,500,000 shares of our common stock through open market
        or
        privately negotiated transactions.  The Board of Directors approved
        the investment of up to $50,000 for this share repurchase.  There is
        no expiration date for the Stock Repurchase Program.  During the third
        quarter of 2007, we repurchased 69,900 shares at an average price of $15.95
        per
        share, totaling $1,117.  Payments made under the Stock Repurchase
        Program are recorded in Treasury Stock on the Condensed Consolidated Balance
        Sheets.
 
 Fiscal
                    Month
                
                Total
                        Number ofShares
                      (or Units)Purchased
                
                
                Average
                          Priceas
                        Paidper
                      Share(or
                    Unit)
                
                
                Total
                            Number ofShares
                          (or Units)Purchased
                        as Part ofPublicly
                      AnnouncedPlans
                    or Programs
                
                
                Maximum
                              Number(or
                            ApproximateDollar
                          Value) of Shares(or
                        Units) that May YetBe
                      Purchased Underthe
                    Plan or ProgramsAugust
                    (8/5/07 - 9/8/07)
                
                
                -
                
                
                $
                -
                
                
                
                -
                
                
                
                2,500,000September
                    (9/9/07 - 10/6/07)
                
                
                69,900
                
                
                
                15.95
                
                
                
                69,900
                
                
                
                2,430,100October
                    (10/7/07 - 11/3/07)
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                2,430,100Total
                
                
                69,900
                
                
                $
                15.95
                
                
                
                69,900
                
                
                
                2,430,100
  The
        Stock
        Repurchase Program announced in September 2007 resulted in the termination
        of
        the prior stock purchase program announced in July 2005.
 
 
 
 
 
 
 
 
   40
  
 **Item
        6. Exhibits**
 
 SEC
                  ExhibitReference
                  No.
              Description31.1
              Certification
                  of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
                  Act of 2002, filed herewith.31.2
              Certification
                  of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
                  Act of 2002, filed herewith.32
              Certification
                  of Chief Executive Officer and Chief Financial Officer pursuant
                  to Section
                  906 of the Sarbanes-Oxley Act of 2002, furnished
                  herewith.
  41
  SIGNATURES
 
 Pursuant
        to the requirements of the Securities Exchange Act of 1934, the Registrant
        has
        duly caused this report to be signed on its behalf by the undersigned thereunto
        duly authorized.
 
 KELLWOOD
        COMPANY
 December
                  7, 2007
              /s/
                Gregory
                W. KleffnerGregory
                  W. KleffnerChief
                  Financial Officer(Principal
                  Financial and Accounting Officer)