Perry Ellis International Inc. is preparing to put both its operations and brand portfolio on a strict diet after reporting preliminary fourth-quarter results that fell well short of Wall Street’s and its own expectations.
Oscar Feldenkreis, president and chief operating officer of the Miami-based firm, said officials at the company are “streamlining our operations and eliminating less productive overhead” after a “highly promotional environment” during the holiday season. They’ve begun a strategic review of its hefty brand portfolio, expected to be completed during the first half of the new fiscal year and implemented beginning in the second half.
“This holiday season, the entire retail industry was faced with a highly promotional environment meant to drive customer purchases, and we were not immune to this activity,” Feldenkreis said. “While we experienced increased traffic in our direct-to-consumer business, we also increased promotions to be in line with the environment to remain competitive.”
He acknowledged “the environment remains challenging.”
While quarterly and full-year results aren’t expected until next month, PEI said that adjusted fourth-quarter earnings for the three months ended Jan. 28 are now expected to land at between 35 and 38 cents a diluted share, below the 44 cents estimated by Wall Street analysts and the company’s earlier guidance, issued in November, for adjusted earnings per share of at least 45 cents. Revenues are now expected to rise about 11 percent to $229 million in the quarter, substantially shy of the $266.5 million projected last year.
While noting strength in the areas of golfwear, women’s dresses and swimwear, and success in controlling expenses, PEI was hurt by retailers seeking later deliveries and greater promotional allowances.
As part of its streamlining effort, the firm intends to consolidate distribution facilities and foreign sourcing offices.
In addition to several licensed names and its namesake Perry Ellis brand, the company maintains a stable of 29 owned brands, ranging from legacy labels, such as Cubavera, to names acquired from various competitors, such as the Laundry by Shelli Segal and C&C California names purchased from Liz Claiborne Inc., and through bankruptcy proceedings, such as Anchor Blue and Farah. Many of its nameplates are focused on midtier distribution, although last year’s acquisition of Rafaella and its move earlier this month to market a new designer collection from Duckie Brown under the Perry Ellis by Duckie Brown label demonstrate the firm’s willingness to move upmarket.
“We will focus more intently on those businesses that offer the best value and the greatest potential for profitable growth,” Feldenkreis said.
In maintaining his “buy” rating on the stock, Eric Beder, analyst at Brean Murray, Carret & Co., said the tie-in with Duckie Brown “could materially raise the profile of the core Perry Ellis brand and highlights the material changes new management is making to Perry Ellis to make the brand even more relevant and aspirational.” He also cited an improved inventory profile at the company in which stock levels are now in better sync with sales growth.
Shares fell 3.5 percent to $16.18 in the aftermath of the news Tuesday but regained some ground Wednesday, rising 2.9 percent to $16.65.
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