By  on August 22, 2013

Growth in its Perry Ellis men’s and Rafaella women’s collections wasn’t sufficient to offset weakness in its retail operations as Perry Ellis International Inc. logged wider second-quarter losses.For the three months ended Aug. 3, the Miami-based sportswear firm’s net loss hit $2.8 million, or 19 cents a diluted share, versus a loss of $2.4 million, or 17 cents, in the 2012 quarter. The adjusted loss was 15 cents a share, 1 cent greater than the 14-cent loss expected, on average, by analysts.Revenues grew 1.1 percent to $211.7 million from $209.4 million a year ago, below analysts’ consensus estimate of $214.5 million. Included in the revenue figure was a 13.6 percent increase in royalty income, to $7.2 million.However, PEI’s direct-to-consumer operations registered an 8.8 percent decline, to $19.6 million, including a 5.9 percent dip in same-store sales versus a 12.4 percent increase in the second quarter of last year.RELATED CONTENT: WWD Earnings Tracker >>“In addition to the difficult comparison, we attribute the negative comp to having lighter than optimal inventories in the Original Penguin stores, which was driven by tighter plans,” said Anita Britt, chief financial officer, on a Thursday morning conference call. “We have increased the units per door into August, and we believe that we are in a solid position to drive sales in the third quarter.”The weakness in its retail operations contributed to a 70 basis point decline in gross margin, to 32.4 percent of sales in the most recent quarter from 33.1 percent in the year-ago period. The company said the erosion was blunted by the better results at Perry Ellis and Rafaella.PEI ended the quarter with 69 U.S. stores and five in Europe. Perry Ellis accounted for 43 of the units, Original Penguin for 24 and other concepts for the remainder. As the company has moved to put its e-commerce operations in a less-promotional posture, Web sales were off 18 percent. Britt said the anniversary of those efforts will come in the third quarter. Additionally, same-store sales are expected to return to positive territory in the second half, with midsingle-digit increases in the third quarter and high-single-digit increases in the fourth.Britt noted that the company had exited private-label programs in men’s wholesale, eliminating about $20 million in annual volume, the bulk of it in the first half of the year.The company reiterated its expectations for full-year earnings per share of between $1.50 and $1.60 despite a reduction in sales guidance, to a range of $988.9 million to $998.6 million from the previous estimate of $998.6 million to $1.02 billion. Britt said the adjustments reflect both the first-half weakness in its own stores and caution among its wholesale partners, particularly in the midtier channel.Oscar Feldenkreis, president and chief operating officer, told analysts during the call that the company was “looking at additional brands and potential acquisitions” within the golf market, where, he said, the company already enjoys a U.S. market share of between 75 and 80 percent. The company owns the Ben Hogan brand, and is planning to introduce a premium edition of it, and licenses the Callaway and PGA Tour brands as well. Feldenkreis said the company is exploring opportunities “not only in golf apparel, but also in other product categories that might become an opportunity to enhance our current lifestyle brands, as we feel this is a niche where we have continued to perform. And we feel that not only domestically but internationally, it creates a lot of opportunities.”George Feldenkreis, chairman and chief executive officer, noted that, despite weakness in its own e-commerce efforts, year-to-date Web sales through brick-and-mortar retail customers were up 12 percent and sales with pure-play e-tailers such as Amazon and Zappos moved ahead 30 percent. “Our growth in e-commerce validates the strength of our brands and the connection with the consumer,” the ceo said. “Brands are more important than ever in this highly evolving Internet age. You need brands to be found on search engines, and that is precisely what we will continue to build — solid, recognizable, searchable brands.”For the six months, net income grew 18.4 percent, to $8.5 million, or 55 cents a diluted share, while revenues declined 0.2 percent to $474 million.

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