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Improved Q4 Results at Perry Ellis Lift Shares

Direct-to-consumer’s share of company revenues rises to 19% for full year.

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Perry Ellis International Inc. earned back some of the respect it had recently put at risk among investors Thursday as it reported a fourth-quarter performance marked by improving trends in sales, profits and margins.

Shares ended the day at $18.51, up $1.11 or 6.4 percent. They had fallen 13.1 percent, to $16.79, on Feb. 19 after the Miami-based sportswear firm provided guidance for the holiday period that fell well below previous analysts’ estimates.

“We feel that the difficult decisions that we made at the end of 2011 and [into] 2012 were the right ones, and we believe last quarter’s performance and the booking for the Perry Ellis, Rafaella and Original Penguin brand are a testament to this,” said George Feldenkreis, chairman and chief executive officer, on a Thursday morning conference call. “The retailers are very enthusiastic about the product that they are receiving and we are experiencing high sell-throughs and great editorial coverage from the media.”

 

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The company pared its brand portfolio in late 2011 and through 2012. Anita Britt, chief financial officer, told analysts, “We do believe that there will be additional businesses that we will streamline as we move through fiscal 2014.”

The company reported that it would relaunch Perry Ellis America as a denim-based casual sportswear collection in about 200 doors, including Dillard’s in the U.S. and The Bay in Canada, for fall.

In the three months ended Feb. 2, net income more than tripled to $4.4 million, or 28 cents a diluted share, from $1.8 million, or 12 cents, in the year-ago period. Excluding impairment charges and other items, adjusted earnings per share were 50 cents, 2 cents above the most recent analyst consensus estimate.

Revenues grew 12.6 percent to $251 million from $222.1 million as men’s wear sales picked up 18 percent, driven by Perry Ellis sportswear and the golf business, while women’s sales declined 7 percent on a low replenishment business at Rafaella. Laundry by Shelli Segal, acquired from Liz Claiborne Inc., now Fifth & Pacific Cos. Inc., in 2008, enjoyed 40 percent growth during the fourth quarter with sales up 30 percent for the year.

Gross margin expanded to 32.6 percent of sales from 31.4 percent a year ago.

Direct-to-consumer business was up 10 percent, with a 5.6 percent increase in same-store sales and a 10 percent rise in average unit retail prices offset by fewer units per transaction. DTC was up 17 percent for the year, giving it a 19 percent share of company revenues, up from 7.5 percent last year.

Feldenkreis tied the improved results to the company’s leaner, stronger brand portfolio, which is essential, he contended, in a tough spending environment.

“Consumers have reduced budgets for apparel purchases in an uncertain economic environment, both in the U.S. and overseas,” he said. “We remain focused on improving the quality of our products, offering merchandise that is fashion forward that consumers want to buy while at the same time we maintain a disciplined approach as a company to growth and expenses.”

The company ended the fiscal year with 71 directly owned stores, including eight in the U.K., and, while focused on Perry Ellis and Original Penguin, it’s “experimenting” with concepts for its Cubavera and Farah brands, according to the ceo.

Eight stores are expected to open during the current year, offset by an unspecified but smaller number of closures.

Eric Beder, analyst at Brean Capital, called the results, which were augmented by a reiteration of guidance for the new year, “a step forward in rebuilding management credibility that took a material hit in February when Perry Ellis provided guidance materially below the Street,” adding he believes “the pieces are in place for a return to prominence for the company to occur.”

The strength of the fourth quarter was underscored by the figures for the full year, when net income fell 42 percent to $14.8 million on a 1.4 percent sales decline to $942.5 million.

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