By  on November 18, 2009

Perry Ellis International Inc.’s third-quarter profits dropped 17.2 percent, but still came in ahead of analysts’ projections as gross margins improved.

The Miami-based vendor said it had made the adjustments needed to take advantage of an economic recovery.

“We firmly believe that the worst is over for us,” said George Feldenkreis, chairman and chief executive officer, on a conference call with analysts. “The changes we have instituted have placed us in a strengthened financial position and are providing us with an opportunity to grow.”

Perry Ellis, which lost business in the liquidations of Mervyns, Goody’s Family Clothing and Gottschalks, has exited unprofitable private label businesses in the mass market, restructured operations and reduced expenses.

Net income for the three months ended Oct. 31 fell to $4.1 million, or 31 cents a diluted share, 10 cents above analysts’ estimates, from $5 million, or 33 cents, a year ago. Revenues retreated 19.9 percent to $178.6 million from $222.8 million. Gross margins expanded slightly to 34.2 percent of sales from 34.1 percent a year ago as inventories fell and chargebacks from its retail clients were reduced.

With sales growth expected to resume in the year ahead, Perry Ellis is gearing up a Top-Flite golf-inspired program that will launch in 800 Kmart stores next year, and is exploring other avenues of growth, including opportunities to license the Laundry by Shelli Segal brand.

“The fact that over 140 million Americans have been able to keep their jobs, and it looks like they will be able to keep moving forward, is very reassuring,” Feldenkreis said. “Companies like ours that have adjusted themselves to the new reality will be able to run a very profitable business, even with lower levels of revenues.”

For the nine months, the firm’s profits fell to $4.7 million, or 36 cents a diluted share, from $8.7 million, or 57 cents. Revenues dropped 15.5 percent to $557.8 million.

Perry Ellis raised its profit guidance for the year to 80 cents to 95 cents a diluted share, up from the 70 cents to 85 cents previously projected, implying fourth-quarter earnings per share of 44 cents to 59 cents.

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