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Perry Ellis Reports Lower Q1 Profits

Operating income fell 30.3 percent.

Shares of Perry Ellis International Inc. jumped 15.3 percent after the company posted first-quarter results that bested Wall Street’s expectations.

The Miami-based firm said net income for the three months ended May 3 fell 31.3 percent to $7.8 million, or 52 cents a diluted share, from $11.3 million, or 74 cents, a year ago. Excluding the year-ago gain on the sale of the John Henry trademark in select international territories in Asia, adjusted diluted earnings per share were 55 cents versus 62 cents a year ago. Analysts were expecting 27 cents a share. Operating income fell 30.3 percent to $15 million from $21.5 million. Total revenues for the quarter slipped 1.9 percent to $257.3 million from $262.3 million. Revenues included a 2.2 percent decline in net sales to $249.9 million, with the balance from royalty income. Wall Street was expecting revenues at $233.7 million.
Shares of Perry Ellis closed at $17.05 Thursday in Nasdaq trading.

Golfwear, the licensed Nike swimwear brand and Original Penguin were among the top performers for the company in the first quarter. Perry Ellis also pointed to an increase in gross margin to 34.1 percent from 33.8 percent the prior year as retail sales of Perry Ellis and Rafaella experienced better sell-throughs.

In a conference call, George Feldenkreis, chairman and chief executive officer, said that in the quarter, “sales of Perry Ellis stores increased by approximately 13 percent with comp stores increasing by 7.7 percent.”

Feldenkreis also pointed to “solid progress in our international expansion both through our direct operations in Canada, Mexico and Europe as well as in new licensing relationships around the globe.” International accounts for around 10 percent of total revenues and sales grew 28 percent in the quarter, Feldenkreis said.

For fiscal 2015, the company upped adjusted diluted EPS to 80 cents to 95 cents, compared with prior guidance of 75 cents to 90 cents. It also said total revenues are expected in the range of $910 million to $920 million.

He said that the men’s wholesale sportswear business, excluding the Perry Ellis brand, has now been consolidated and “this has resulted in [improved] service to the customers, better design direction and an important reduction in expenses.”

He also said that in an attempt to further grow sales, “We’re now making investment to build an accessory business for all our brands, we’ve also started to use some of our brands develop an activewear business and we continue to invest in improving our Internet site and our service to the brick-and-mortar and pure e-com companies that carry our products,” Feldenkreis said.

Oscar Feldenkreis, president and chief operating officer, noted that the second quarter is “off to a strong start” as the weather has improved and “bodes well for our spring and summer offerings.”

Anita Britt, chief financial officer, said men’s wholesale revenue in the quarter fell to $195 million from $198.7 million in the prior year. Increases in “golf lifestyle apparel, Original Penguin and Nike swim were offset by planned decreases in private and exclusive branded products.” Women’s sportswear sales were $34.5 million compared to $39.8 million, she said.

Britt said private label “came in at about 7 percent of our business, versus 9 percent last year. We did a deep dive into all the programs that we were focused on in private label, and we took a step away and exited the programs that carried lower margins [and] weren’t going to drive us to our overall corporate goals of higher gross margins and higher operating margins. So I would say from the standpoint of where we’re sitting today, we’ve exited those lower margin businesses and the private label at 7 percent, give or take 1 percent, should hang in there, in the short term. Longer term as we’re growing, our national brands, it will become a smaller percentage as the business goes forward.”

 

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