Perry Ellis International’s earnings benefited from the sale of assets in Asia in the first quarter but revenue took a hit from unseasonably cool spring weather and hesitant consumer spending.
Net income for the three months ended May 4 was $11.3 million, or 74 cents a diluted share, up 17 percent from $9.7 million, or 64 cents, from the year-ago quarter. PEI completed the sale of its John Henry trademarks in Asia during the quarter, resulting in a pretax gain of $6.3 million, or 22 cents a share.
Excluding onetime items, net income was $9.5 million, or 62 cents a share.
The company plans to continue to assess deal opportunities for certain brands. “This transaction highlights the strength our brands carry internationally as well as domestically. We will continue to review our portfolio and take advantage of strategic opportunities,” said Oscar Feldenkreis, president and chief operating officer of PEI.
Total revenues in the quarter dipped 1.2 percent to $262.3 million, from $265.5 million a year ago, in line with guidance. Revenues included net sales of $255.5 million, down 1.4 percent from a year ago, and royalty income of $6.8 million, up 5 percent from a year ago.
Lower sales stemmed from weakness in men’s classification private-label pants and softness in direct-to-consumer channels, offset by increases in golf lifestyle apparel, men’s accessories and Nike performance swim. The company’s direct e-commerce sites saw sales slide a steep 27 percent due to a less promotional sales strategy.
PEI’s stable of owned brands includes Original Penguin, Jantzen, Laundry by Shelli Segal and C&C California. Licensed brands include Callaway in golf apparel and Nike and Jag in swimwear.
Cautious consumer spending in the uncertain economic climate led to reduced store traffic in the U.S. “It remains unclear how discretionary spending for apparel is going to develop in 2013,” said George Feldenkreis, chairman and chief executive officer of PEI, on a conference call with analysts.
On an adjusted basis, full-year earnings per share are forecast at $1.50 to $1.60. Revenue is expected to increase 3 to 5 percent for the year, in line with previous guidance.
International sales in the first quarter, which accounted for 7 percent of total business, were up 4 percent. George Feldenkreis said PEI’s brands are underpenetrated in Europe and opportunities are ripe for growth in those markets as economies improve there. In China, the company recently opened its first Laundry by Shelli Segal store in Beijing.
Commenting on the recent factory collapse tragedy in Bangladesh, Feldenkreis noted PEI made 1.3 percent of its total production in that country.
“During the quarter, we made strong progress on our Perry Ellis and Rafaella collections and managed our inventory tightly to maximize profitability,” said Oscar Feldenkreis, highlighting the new, elevated Perry Ellis men’s collections driven by color and a new slim-fit initiative that rolled out in the quarter. “We expanded gross margin as a total company…despite reduced store traffic that impacted overall transactions and total sales.”
Gross margin increased to 33.8 percent of total sales, up from 33 percent a year ago. At the end of the quarter, inventory was $168.2 million, essentially flat with last April and down 8 percent from the end of last fiscal year.
Asked by an analyst about PEI’s business at J.C. Penney, Oscar Feldenkreis said, “I think bringing Mike Ullman back [as ceo] was great. I hear the business is doing much better.” PEI’s business at the struggling department store continues to be strong both with its Hispanic lifestyle brands and its golf brands.
Feldenkreis expects J.C. Penney to introduce a golf shop, including PEI brands. “Their commitment to golf going forward is a positive,” he said.
On Tuesday, PEI inked a license with Delta Galil to produce and distribute Original Penguin by Munsingwear men’s underwear and sleepwear for the U.S. and Canada. The first product will hit stores for holiday, and the complete collection will be launched for spring 2014. It will be distributed to Original Penguin retail stores, as well as better department stores and specialty retailers.
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