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Perry Ellis Shares Tumble on Q4 Warning

Profit, sales expectations reduced sharply as retailers push back orders, reduce fill-ins.

Shares of Perry Ellis International Inc. lost more than a sixth of their value in Nasdaq trading Tuesday after the company reported preliminary fourth-quarter results that were sharply below previous guidance and analysts’ expectations.

“We experienced a very difficult environment,” said Oscar Feldenkreis, president and chief operating officer of the Miami-based sportswear firm, “which required our customers to become more aggressive with promotions and limit new orders. This contributed to much lower sales versus our projections.”

The company now expects adjusted earnings of between 2 and 5 cents a diluted share in the fourth quarter ended Feb. 2, versus previous expectations of between 63 and 69 cents and the analysts’ consensus estimate of 65 cents. Revenues, originally expected to land between $263.9 million and $273.9 million, are now expected to land at about $216 million, 16 percent below the year-ago tally and 21.1 percent below the $273.6 million sum expected, on average, by analysts.

These fourth-quarter results would leave the firm with full-year EPS of between 34 and 37 cents on an adjusted basis with revenues of about $912 million. When Perry Ellis reported third-quarter results in November, expectations were for adjusted EPS of between 95 cents and $1.01 on revenues of between $960 million and $970 million.

The firm provided initial guidance for the new fiscal year for revenues of between $910 million and $920 million with gross margin rising 50 to 60 basis points to between 33.7 and 33.8 percent of sales.

Shares fell 17.5 percent, or $2.75, to $12.93. Their $12.37 low point for the day established a 52-week low.

The firm said late Monday that the shortfall was caused by a combination of factors ranging from inclement weather to poor traffic and heavy promotions among its wholesale clients. Weak traffic contributed to a 4.8 percent decline in same-store sales in its own retail operations. Low demand led to lower replenishment orders and to retailers in some cases pushing back January deliveries into the first quarter.

“We expect our customers to remain cautious and have adjusted our expectations for initial delivery and replenishment orders” for the current year, Feldenkreis said.

Among the growth areas for Perry Ellis during the final three months of the fiscal year were its Original Penguin, Nike performance swim, international and licensing businesses. Also, a shift in its mix to golf apparel, its Rafaella brand and licensing provided for a 170 basis point expansion of quarterly gross margins.

Perry Ellis said it had undertaken an “infrastructure rationalization” to adjust to the uncertainties of the retail environment. Among its goals are a streamlining in the channels in which it currently does business and a redeployment of its resources to businesses “poised for more significant growth.”

Last week, the company said that Alexandra Wilson, cofounder of Gilt, had joined its board of directors. She takes the seat previously occupied by Eduardo Sardiña, the former chief executive officer of Bacardi USA, who’s stepping down after nearly four years as a director.

The company expects to report final, audited fourth-quarter and full-year results the week of April 7.